<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1996
REGISTRATION NO. 333-3972
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 4 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
GENESEE & WYOMING INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4011 06-0984624
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
71 LEWIS STREET
GREENWICH, CT 06830
(203) 629-3722
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MORTIMER B. FULLER, III
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
GENESEE & WYOMING INC.
71 LEWIS STREET
GREENWICH, CT 06830
(203) 629-3722
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
SUSAN MASCETTE BRANDT, ESQ. JOEL S. KLAPERMAN, ESQ.
HARTER, SECREST & EMERY SHEARMAN & STERLING
700 MIDTOWN TOWER 599 LEXINGTON AVENUE
ROCHESTER, NY 14604 NEW YORK, NY 10022
(716) 232-6500 (212) 848-4000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A) MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the offering are estimated as follows:
<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
Registration fee................................................ $ 16,802
NASD fee........................................................ 5,373
Nasdaq National Market application fee.......................... 29,243
Blue sky fees and expenses...................................... 22,000
Printing expenses............................................... 150,000
Legal fees and expenses......................................... 335,000
Accounting fees and expenses.................................... 300,000
Transfer agent and registrar fees............................... 2,500
Miscellaneous expenses.......................................... 14,082
--------
Total......................................................... $875,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Paragraph 10 of the Registrant's Restated Certificate of Incorporation
provides that the Registrant shall indemnify its directors and officers to the
fullest extent authorized by the Delaware General Corporation Law (the
"DGCL").
With respect to indemnification of directors and officers, Section 145 of
the DGCL provides that a corporation shall have the power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Under this provision of
the DGCL, the termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
Furthermore, the DGCL provides that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall
II-1
<PAGE>
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Paragraph 9 of the Registrant's Restated Certificate of Incorporation
contains a provision, authorized by Section 102(b)(7) of the DGCL, which
provides that a director of the Registrant shall not be personally liable to
the Registrant or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except for liability of the director (a) for any
breach of the director's duty of loyalty to the Registrant or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 174 of
the DGCL, relating to the payment of unlawful dividends or unlawful stock
repurchases or redemptions, or (d) for any transaction from which the director
derived an improper personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1993, the Registrant has sold the following shares of
common stock which were not registered under the Securities Act of 1933, as
amended (the "Act") (the following does not give effect to the stock split and
reclassification of the Registrant's common stock referenced in the Prospectus
forming a part of this Registration Statement):
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
DATE OF SALE NAME OF INVESTOR SHARES CONSIDERATION
------------ ---------------- --------- -------------
<S> <C> <C> <C>
10/22/93 John M. Randolph................................ 800 $20,000
11/5/93 Sandra B. Ringo................................. 200 $ 5,000
Mark W. Hastings and Susan M. Hastings, as joint
12/22/93 tenants......................................... 800 $20,000
10/25/94 Mortimer B. Fuller, III......................... 2,400 $30,000
</TABLE>
The sale to Mr. Fuller was upon exercise by him of stock options granted in
1978. All of the other sales were made following the Registrant's repurchase
of the shares from a stockholder. All of the shares listed on the table were
sold for cash except those sold to Mr. and Mrs. Hastings, for which Mr.
Hastings executed a promissory note which has since been paid.
On February 8, 1996, the Registrant issued to The First National Bank of
Boston, for a purchase price of $0, a warrant to purchase 2,262 shares of
common stock at an exercise price of $.01 per share. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
In May 1994, Willamette & Pacific Railroad, Inc., a subsidiary of the
Registrant, issued $990,000 in aggregate principal amount of Subordinated
Secured Promissory Notes, guaranteed by the Registrant, to ten accredited
investors, including four related parties. See "Certain Transactions."
Each of the issuances of securities described above was made by private
offering in reliance on the exemption from the registration provisions of the
Act provided by Section 4(2) of the Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
***1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation and Certificates of Amendment dated
October 12, 1989, February 21, 1991 and May 18, 1995
**3.2 Form of Restated Certificate of Incorporation
3.3 By-laws
4 The exhibits referenced under "3" hereof are incorporated herein by
reference.
***4.1 Specimen stock certificate representing shares of Class A Common
Stock.
**4.2 Form of Class B Stockholders' Agreement dated as of May 20, 1996,
among the Registrant, its executive officers and its Class B
stockholders
4.3 Promissory Note dated December 28, 1989 of GWI Leasing Corporation in
favor of Deutsche Credit Corporation
4.4 Railcar Finance Notes dated July 8, 1991 and November 27, 1991 of GWI
Leasing Corporation in favor of Deutsche Credit Corporation
4.5 Railcar Finance Notes, dated November 27, 1991 and December 31, 1991
of GWI Leasing Corporation in favor of Deutsche Credit Corporation
4.6 Promissory Note dated October 7, 1991 of Buffalo & Pittsburgh
Railroad, Inc. in favor of CSX Transportation, Inc.
4.7 Amended and Restated Loan and Security Agreement dated December 28,
1989 between GWI Leasing Corporation and Deutsche Credit Corporation,
and Amendment No. 1 dated December 28, 1989
4.8 Loan and Security Agreement dated December 27, 1990 between GWI
Leasing Corporation and Deutsche Credit Corporation, and Amendments
dated June 28, 1991 and November 22, 1991
4.9 Guaranty dated December 27, 1990 of the Registrant in favor of
Deutsche Credit Corporation
4.10 Amended and Restated Revolving Credit and Term Loan Agreement dated
as of February 8, 1996 among the Registrant and certain of its
Subsidiaries, The First National Bank of Boston, as agent, and the
Banks party thereto
4.11 Revolving Credit Note dated as of February 8, 1996 of the Registrant
and certain of its subsidiaries in favor of The First National Bank
of Boston
4.12 Term Note dated as of February 8, 1996 of the Registrant and certain
of its Subsidiaries in favor of The First National Bank of Boston
4.13 Amended and Restated Security Agreement dated as of February 8, 1996
among the Registrant, certain of its Subsidiaries and The First
National Bank of Boston
4.14 Amended and Restated Stock Pledge Agreement dated as of February 8,
1996 between the Registrant and The First National Bank of Boston
4.15 Amended and Restated Collateral Assignment of Partnership Interests
dated as of February 8, 1996 of the Registrant and GWI Dayton, Inc.
in favor of The First National Bank of Boston
**4.16 Amendment No. 1 to Amended and Restated Revolving Credit and Term
Loan Agreement dated as of April 26, 1996 among the Registrant and
certain of its Subsidiaries, The First National Bank of Boston, as
agent and the Banks' party thereto.
****5.1 Opinion of Harter, Secrest & Emery
9.1 Voting Agreement and Stock Purchase Option dated March 21, 1980 among
Mortimer B. Fuller, III, Mortimer B. Fuller, Jr. and Frances A.
Fuller, and amendments thereto dated May 7, 1988 and March 29, 1996
10 The exhibits referenced under "4" hereof are incorporated herein by
reference.
**10.1 Form of Genesee & Wyoming Inc. 1996 Stock Option Plan
**10.2 Form of Genesee & Wyoming Inc. Stock Option Plan for Outside
Directors
10.3 Form of Employment Agreement between the Registrant and each of its
executive officers
**10.4 Form of Genesee & Wyoming Inc. Employee Stock Purchase Plan
10.5 Agreement dated December 7, 1994 between Allegheny & Eastern
Railroad, Inc. and its Engineering Department Employees
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.6 Agreement dated March 29, 1995 between Allegheny & Eastern Railroad,
Inc. and its Mechanical Department Employees
10.7 Agreement dated July 1, 1992 between Buffalo & Pittsburgh Railroad,
Inc. and its Car Repair Department Employees, and the proposed changes
thereto dated September 16, 1994
10.8 Agreement dated December 1, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and its Engineering Department Employees
10.9 Agreement dated April 30, 1991 between Buffalo & Pittsburgh Railroad,
Inc. and the American Train Dispatchers Association
10.10 Agreement dated February 9, 1995 between Buffalo & Pittsburgh
Railroad, Inc. and the International Association of Machinists
10.11 Agreement dated August 22, 1994 between Buffalo & Pittsburgh Railroad,
Inc. and the United Transportation Union (Train and Engine Service
Employees)
10.12 Agreement dated November 7, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union (Representing
Clerks and Storekeepers)
10.13 Agreement dated November 1, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union (Representing
Yardmasters)
10.14 Agreement dated September 1, 1990 between Genesee & Wyoming Railroad
Company and the United Transportation Union, and Tentative Agreement
dated February 21, 1995 between Genesee & Wyoming Railroad Company and
United Transportation Union Local Union 982
10.15 United Transportation Union Agreement dated May 1, 1994 between
Rochester & Southern Railroad, Inc. and its employees represented by
United Transportation Union
10.16 Shared Use Agreement for Albany Yard dated February 20, 1993 between
Southern Pacific Transportation Company and Willamette & Pacific
Railroad, Inc.
10.17 Trackage Rights Agreement (Albany-Eugene Yard) dated February 20, 1993
between Southern Pacific Transportation Company and Willamette &
Pacific Railroad, Inc.
10.18 Westside Oregon Lines Cooperative Marketing Agreement dated February
20, 1993 between Willamette & Pacific Railroad, Inc. and Southern
Pacific Transportation Company
10.19 Trackage Rights Agreement dated March 11, 1987 between Southern
Pacific Transportation Company and Louisiana & Delta Railroad, Inc.
10.20 Trackage Rights Agreement dated July 1, 1986 between Rochester &
Southern Railroad, Inc. and Genesee and Wyoming Railroad Company, and
undated Modification
10.21 Master Supplemental Agreement dated October 7, 1991 between CSX
Transportation, Inc., Buffalo, Rochester and Pittsburgh Railway
Company and Buffalo & Pittsburgh Railroad, Inc.
10.22 Assignment and Assumption Agreement for the Allegheny and Western
Railway Company Lease dated October 7, 1991 among CSX Transportation,
Inc., Buffalo, Rochester and Pittsburgh Railway Company and Buffalo &
Pittsburgh Railroad, Inc.
10.23 Mortgage and Assignment of Leases, Rents, Issues and Profits (New
York) dated as of October 7, 1991 by Buffalo & Pittsburgh Railroad,
Inc. in favor of CSX Transportation, Inc.
10.24 Security Agreement (New York) dated as of October 7, 1991 between
Buffalo & Pittsburgh Railroad, Inc. and CSX Transportation, Inc.
10.25 Mortgage and Assignment of Leases, Rents, Issues and Profits
(Pennsylvania) dated as of October 7, 1991 by Buffalo & Pittsburgh
Railroad, Inc. in favor of CSX Transportation, Inc.
10.26 Security Agreement (Pennsylvania) dated as of October 7, 1991 between
Buffalo & Pittsburgh Railroad, Inc. and CSX Transportation, Inc.
10.27 Lease Agreement for Real Property between Butler, Pennsylvania and
Eidenau, Pennsylvania dated as of October 7, 1991 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.28 Lease Agreement for Personal Property associated with Butler to
Eidenau dated as of October 7, 1991 between CSX Transportation, Inc.
and Buffalo & Pittsburgh Railroad, Inc.
10.29 Memorandum of Lease dated October 7, 1991 between CSX Transportation,
Inc. and Buffalo & Pittsburgh Railroad, Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+10.30 Lease Agreement for Real Property on the Northern Subdivision dated as
of October 7, 1991 between CSX Transportation, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
+10.31 Lease Agreement for Personal Property on the Northern Subdivision
dated as of October 7, 1991 between CSX Transportation, Inc. and
Buffalo & Pittsburgh Railroad, Inc.
10.32 Lease Agreement for Real Property at Buffalo Creek Yard dated as of
October 7, 1991 among CSX Transportation, Inc., Buffalo, Rochester and
Pittsburgh Railway Company, Inc. and Buffalo & Pittsburgh Railroad,
Inc.
10.33 Memorandum of Lease dated October 7, 1991 among CSX Transportation,
Inc., Buffalo, Rochester and Pittsburgh Railway Company, Inc. and
Buffalo & Pittsburgh Railroad, Inc.
10.34 Agreement Relating to Interchange at Buffalo, NY dated as of July 18,
1988 between CSX Transportation, Inc. and Buffalo & Pittsburgh
Railroad, Inc.
10.35 Agreement Relating to Interchange at New Castle, PA dated as of July
18, 1988 between CSX Transportation, Inc. and Buffalo & Pittsburgh
Railroad, Inc.
10.36 Agreement Relating to Trackage Rights between New Castle, PA and
Eidenau, PA dated as of July 18, 1988 between CSX Transportation, Inc.
and Buffalo & Pittsburgh Railroad, Inc.
10.37 Agreement Relating to Fallback Trackage Rights between Eidenau and WS
Tower, PA dated as of July 18, 1988 between CSX Transportation, Inc.
and Buffalo & Pittsburgh Railroad, Inc.
*+10.38 Lease Agreement dated December 30, 1992 between Southern Pacific
Transportation Company and Willamette & Pacific Railroad, Inc.
10.39 Lease Agreement dated September 1, 1994 between Railcar, Ltd. and GWI
Leasing Corporation
10.40 Locomotive Lease Agreement and Letter Agreement (Equipment Schedule
01) dated October 17, 1994 between Keycorp Leasing Ltd. and GWI
Leasing Corporation
10.41 Lease Agreement dated May 3, 1994 between Greenbrier Railcar, Inc. and
GWI Leasing Corporation
*+10.42 Allegheny-International Paper Transportation Service Agreement dated
November 24, 1992 between Allegheny & Eastern Railroad, Inc. and
International Paper Company
*10.43 Conrail-Allegheny Operating Contract dated November 24, 1992 between
Consolidated Rail Corporation and Allegheny & Eastern Railroad, Inc.
10.44 Lease recorded December 19, 1881 between The Seneca Nation of New York
Indians and The Great Valley & Bradford Railroad Co.
10.45 Assignment and Agreement dated September 20, 1994 among CMC Railroad
I, Ltd., GWI Switching Services, L.P. and Southern Pacific
Transportation Company
*+10.46 Buffalo Terminal Operating Agreement dated July 18, 1988 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.47 First Amendment to Buffalo Terminal Operating Agreement dated December
, 1990 between CSX Transportation, Inc. and Buffalo & Pittsburgh
Railroad, Inc.
*+10.48 Operating Agreement and Car Storage Yard Agreement Consent to
Assignments dated as of September 20, 1994 between NCC Charlie Company
and GWI Switching Services L.P. with Exhibit I (Amended and Restated
Car Storage Yard Agreement dated September 20, 1994 between Southern
Pacific Transportation Company and CMC Railroad I, Ltd.) and Exhibit
II (Amended and Restated Car Storage Yard Agreement dated September
20, 1994 between Southern Pacific Transportation Company and CMC
Railroad I, Ltd.)
10.49 Trackage Rights Agreement dated March 12, 1994 between Southern
Pacific Transportation Company and GWI Switching Services L.P.
10.50 First Amendment to Trackage Rights Agreement dated September 20, 1994
between Southern Pacific Transportation Company and GWI Switching
Services L.P.
10.51 Indenture of Lease and Option to Purchase Agreement dated January 17,
1992 between Southern Pacific Transportation Company and Louisiana and
Delta Railroad, Inc.
10.52 Lease Agreement dated November 7, 1991 between CIS Corporation and
Buffalo & Pittsburgh Railroad, Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.53 Notice and Acknowledgement of Assignment dated as of November 1,
1993 between James P. Hassett as Trustee for CIS Corporation,
Buffalo & Pittsburgh Railroad, Inc. and ATEL Financial Corporation
10.54 Agreement relating to Trackage Rights dated July 18, 1988 between
CSX Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.55 Commercial Agreement dated March 11, 1987 between Louisiana & Delta
Railroad, Inc. and Southern Pacific Transportation Company
10.56 Assignment and Assumption Agreement dated March 11, 1987 between
Louisiana & Delta Railroad, Inc. and Southern Pacific Transportation
Company
10.57 Administrative Agreement dated as of February 19, 1985 between
Consolidated Rail Corporation and Genesee & Wyoming Railroad Company
10.58 Interchange Agreement (Goodman Street Yard) dated December 13, 1984
between Consolidated Rail Corporation and Genesee & Wyoming Railroad
Company
10.59 Revolver A Note dated June 2, 1995 of the Registrant in favor of The
First National Bank of Boston, as Agent
10.60 Revolver B Note dated June 2, 1995 of the Registrant in favor of The
First National Bank of Boston, as Agent
10.61 Asset Purchase Agreement dated as of February 8, 1996 between
Illinois & Midland Railroad, Inc. and Stanford PRC Acquisition Corp.
10.62 Guaranty dated as of February 8, 1996 of the Registrant in favor of
Stanford PRC Acquisition Corp.
10.63 Assignment and Assumption Agreements dated as of February 8, 1996
between Chicago & Illinois Midland Railway Company and Illinois &
Midland Railroad, Inc. (six)
10.64 Warrant Purchase Agreement dated as of February 8, 1996 between the
Registrant and The First National Bank of Boston
10.65 Agreement dated February 6, 1996 between Illinois & Midland
Railroad, Inc. and the United Transportation Union
*+10.66 Lease Agreement dated as of August 18, 1995 between Southern Pacific
Transportation Company and Portland & Western Railroad, Inc.
*+10.67 Lease Agreement dated September 15, 1995 between Burlington Northern
Railroad Company and Portland & Western Railroad, Inc.
10.68 Lease Agreement dated as of October 1, 1982 between Livingston
County Industrial Development Agency and Genesee and Wyoming
Railroad
10.69 Lease Agreement dated as of February 1, 1995 between Livingston
County Industrial Development Agency and Genesee and Wyoming
Railroad Company
**+10.70 Asset Purchase Agreement dated April 19, 1996 among Pittsburg &
Shawmut Railroad, Inc., Genesee & Wyoming Inc., The Pittsburg &
Shawmut Railroad Company, Red Bank Railroad Company, Mountain Laurel
Railroad Company and Arthur T. Walker Estate Corporation, and
Amendment No. 1 to Asset Purchase Agreement dated April 19, 1996
**10.71 Amendment No. 1 to Warrant Purchase Agreement dated as of May 31,
1996 between the Registrant and FSC Corp.
**11.1 Statement re computation of per share earnings
12.1 Exhibit has been omitted because the required information is
included in the financial statements or notes thereto forming part
of this Registration Statement.
**21.1 Subsidiaries of the Registrant
****23.1 Consent of Arthur Andersen LLP
****23.2 Consent of Harter, Secrest & Emery (contained in Exhibit 5.1)
24.1 Officers' and Directors' Power of Attorney
**27 Financial Data Schedule (EDGAR filed only)
</TABLE>
- --------
* Filed with this Amendment.
** Filed with Amendment No. 1.
*** Filed with Amendment No. 2.
**** Filed with Amendment No. 3.
+ Confidential treatment requested as to certain portions, which have been
filed separately with the Commission pursuant to an application for such
treatment.
II-6
<PAGE>
(b) Financial Statement Schedules:
All schedules have been omitted either as inapplicable or because the
required information is included in the financial statements or notes thereto
forming part of this Registration Statement.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time that it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 4 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW
YORK, STATE OF NEW YORK, ON THE 20TH DAY OF JUNE, 1996.
Genesee & Wyoming Inc.
/s/ Mark W. Hastings
By: _________________________________
MARK W. HASTINGS
SENIOR VICE PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED AND ON THE 20TH DAY OF JUNE, 1996.
SIGNATURE TITLE
* Chairman of the Board, President and
- ------------------------------------- Chief Executive Officer (Principal
MORTIMER B. FULLER, III Executive Officer)
Senior Vice President, Chief
/s/ Mark W. Hastings Financial Officer and Treasurer
- ------------------------------------- (Principal Financial Officer)
MARK W. HASTINGS
* Senior Vice President and Chief
- ------------------------------------- Accounting Officer (Principal
ALAN R. HARRIS Accounting Officer)
* Director
- -------------------------------------
JAMES M. FULLER
* Director
- -------------------------------------
LOUIS S. FULLER
* Director
- -------------------------------------
JOHN M. RANDOLPH
* Director
- -------------------------------------
PHILIP J. RINGO
/s/ Mark W. Hastings
*By: ________________________________
MARK W. HASTINGS
ATTORNEY-IN-FACT
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
***1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation and Certificates of Amendment
dated October 12, 1989, February 21, 1991 and May 18, 1995
**3.2 Form of Restated Certificate of Incorporation
3.3 By-laws
4 The exhibits referenced under "3" hereof are incorporated
herein by reference.
***4.1 Specimen stock certificate representing shares of Class A
Common Stock.
**4.2 Form of Class B Stockholders' Agreement dated as of May 20,
1996, among the Registrant, its executive officers and its
Class B stockholders
4.3 Promissory Note dated December 28, 1989 of GWI Leasing
Corporation in favor of Deutsche Credit Corporation
4.4 Railcar Finance Notes dated July 8, 1991 and November 27, 1991
of GWI Leasing Corporation in favor of Deutsche Credit
Corporation
4.5 Railcar Finance Notes, dated November 27, 1991 and December 31,
1991 of GWI Leasing Corporation in favor of Deutsche Credit
Corporation
4.6 Promissory Note dated October 7, 1991 of Buffalo & Pittsburgh
Railroad, Inc. in favor of CSX Transportation, Inc.
4.7 Amended and Restated Loan and Security Agreement dated December
28, 1989 between GWI Leasing Corporation and Deutsche Credit
Corporation, and Amendment No. 1 dated December 28, 1989
4.8 Loan and Security Agreement dated December 27, 1990 between GWI
Leasing Corporation and Deutsche Credit Corporation, and
Amendments dated June 28, 1991 and November 22, 1991
4.9 Guaranty dated December 27, 1990 of the Registrant in favor of
Deutsche Credit Corporation
4.10 Amended and Restated Revolving Credit and Term Loan Agreement
dated as of February 8, 1996 among the Registrant and certain
of its Subsidiaries, The First National Bank of Boston, as
agent, and the Banks party thereto
4.11 Revolving Credit Note dated as of February 8, 1996 of the
Registrant and certain of its subsidiaries in favor of The
First National Bank of Boston
4.12 Term Note dated as of February 8, 1996 of the Registrant and
certain of its Subsidiaries in favor of The First National Bank
of Boston
4.13 Amended and Restated Security Agreement dated as of February 8,
1996 among the Registrant, certain of its Subsidiaries and The
First National Bank of Boston
4.14 Amended and Restated Stock Pledge Agreement dated as of
February 8, 1996 between the Registrant and The First National
Bank of Boston
4.15 Amended and Restated Collateral Assignment of Partnership
Interests dated as of February 8, 1996 of the Registrant and
GWI Dayton, Inc. in favor of The First National Bank of Boston
**4.16 Amendment No. 1 to Amended and Restated Revolving Credit and
Term Loan Agreement dated as of April 26, 1996 among the
Registrant and certain of its Subsidiaries, The First National
Bank of Boston, as agent and the Banks' party thereto.
****5.1 Opinion of Harter, Secrest & Emery
9.1 Voting Agreement and Stock Purchase Option dated March 21, 1980
among Mortimer B. Fuller, III, Mortimer B. Fuller, Jr. and
Frances A. Fuller, and amendments thereto dated May 7, 1988 and
March 29, 1996
10 The exhibits referenced under "4" hereof are incorporated
herein by reference.
**10.1 Form of Genesee & Wyoming Inc. 1996 Stock Option Plan
**10.2 Form of Genesee & Wyoming Inc. Stock Option Plan for Outside
Directors
10.3 Form of Employment Agreement between the Registrant and each of
its executive officers
**10.4 Form of Genesee & Wyoming Inc. Employee Stock Purchase Plan
10.5 Agreement dated December 7, 1994 between Allegheny & Eastern
Railroad, Inc. and its Engineering Department Employees
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.6 Agreement dated March 29, 1995 between Allegheny & Eastern
Railroad, Inc. and its Mechanical Department Employees
10.7 Agreement dated July 1, 1992 between Buffalo & Pittsburgh
Railroad, Inc. and its Car Repair Department Employees, and the
proposed changes thereto dated September 16, 1994
10.8 Agreement dated December 1, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and its Engineering Department Employees
10.9 Agreement dated April 30, 1991 between Buffalo & Pittsburgh
Railroad, Inc. and the American Train Dispatchers Association
10.10 Agreement dated February 9, 1995 between Buffalo & Pittsburgh
Railroad, Inc. and the International Association of Machinists
10.11 Agreement dated August 22, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union (Train and
Engine Service Employees)
10.12 Agreement dated November 7, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union (Representing
Clerks and Storekeepers)
10.13 Agreement dated November 1, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union (Representing
Yardmasters)
10.14 Agreement dated September 1, 1990 between Genesee & Wyoming
Railroad Company and the United Transportation Union, and
Tentative Agreement dated February 21, 1995 between Genesee &
Wyoming Railroad Company and United Transportation Union Local
Union 982
10.15 United Transportation Union Agreement dated May 1, 1994 between
Rochester & Southern Railroad, Inc. and its employees
represented by United Transportation Union
10.16 Shared Use Agreement for Albany Yard dated February 20, 1993
between Southern Pacific Transportation Company and Willamette &
Pacific Railroad, Inc.
10.17 Trackage Rights Agreement (Albany-Eugene Yard) dated February
20, 1993 between Southern Pacific Transportation Company and
Willamette & Pacific Railroad, Inc.
10.18 Westside Oregon Lines Cooperative Marketing Agreement dated
February 20, 1993 between Willamette & Pacific Railroad, Inc.
and Southern Pacific Transportation Company
10.19 Trackage Rights Agreement dated March 11, 1987 between Southern
Pacific Transportation Company and Louisiana & Delta Railroad,
Inc.
10.20 Trackage Rights Agreement dated July 1, 1986 between Rochester &
Southern Railroad, Inc. and Genesee and Wyoming Railroad
Company, and undated Modification
10.21 Master Supplemental Agreement dated October 7, 1991 between CSX
Transportation, Inc., Buffalo, Rochester and Pittsburgh Railway
Company and Buffalo & Pittsburgh Railroad, Inc.
10.22 Assignment and Assumption Agreement for the Allegheny and
Western Railway Company Lease dated October 7, 1991 among CSX
Transportation, Inc., Buffalo, Rochester and Pittsburgh Railway
Company and Buffalo & Pittsburgh Railroad, Inc.
10.23 Mortgage and Assignment of Leases, Rents, Issues and Profits
(New York) dated as of October 7, 1991 by Buffalo & Pittsburgh
Railroad, Inc. in favor of CSX Transportation, Inc.
10.24 Security Agreement (New York) dated as of October 7, 1991
between Buffalo & Pittsburgh Railroad, Inc. and CSX
Transportation, Inc.
10.25 Mortgage and Assignment of Leases, Rents, Issues and Profits
(Pennsylvania) dated as of October 7, 1991 by Buffalo &
Pittsburgh Railroad, Inc. in favor of CSX Transportation, Inc.
10.26 Security Agreement (Pennsylvania) dated as of October 7, 1991
between Buffalo & Pittsburgh Railroad, Inc. and CSX
Transportation, Inc.
10.27 Lease Agreement for Real Property between Butler, Pennsylvania
and Eidenau, Pennsylvania dated as of October 7, 1991 between
CSX Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.28 Lease Agreement for Personal Property associated with Butler to
Eidenau dated as of October 7, 1991 between CSX Transportation,
Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.29 Memorandum of Lease dated October 7, 1991 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+10.30 Lease Agreement for Real Property on the Northern Subdivision
dated as of October 7, 1991 between CSX Transportation, Inc. and
Buffalo & Pittsburgh Railroad, Inc.
+10.31 Lease Agreement for Personal Property on the Northern
Subdivision dated as of October 7, 1991 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.32 Lease Agreement for Real Property at Buffalo Creek Yard dated as
of October 7, 1991 among CSX Transportation, Inc., Buffalo,
Rochester and Pittsburgh Railway Company, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
10.33 Memorandum of Lease dated October 7, 1991 among CSX
Transportation, Inc., Buffalo, Rochester and Pittsburgh Railway
Company, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.34 Agreement Relating to Interchange at Buffalo, NY dated as of
July 18, 1988 between CSX Transportation, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
10.35 Agreement Relating to Interchange at New Castle, PA dated as of
July 18, 1988 between CSX Transportation, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
10.36 Agreement Relating to Trackage Rights between New Castle, PA and
Eidenau, PA dated as of July 18, 1988 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.37 Agreement Relating to Fallback Trackage Rights between Eidenau
and WS Tower, PA dated as of July 18, 1988 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
*+10.38 Lease Agreement dated December 30, 1992 between Southern Pacific
Transportation Company and Willamette & Pacific Railroad, Inc.
10.39 Lease Agreement dated September 1, 1994 between Railcar, Ltd.
and GWI Leasing Corporation
10.40 Locomotive Lease Agreement and Letter Agreement (Equipment
Schedule 01) dated October 17, 1994 between Keycorp Leasing Ltd.
and GWI Leasing Corporation
10.41 Lease Agreement dated May 3, 1994 between Greenbrier Railcar,
Inc. and GWI Leasing Corporation
*+10.42 Allegheny-International Paper Transportation Service Agreement
dated November 24, 1992 between Allegheny & Eastern Railroad,
Inc. and International Paper Company
*10.43 Conrail-Allegheny Operating Contract dated November 24, 1992
between Consolidated Rail Corporation and Allegheny & Eastern
Railroad, Inc.
10.44 Lease recorded December 19, 1881 between The Seneca Nation of
New York Indians and The Great Valley & Bradford Railroad Co.
10.45 Assignment and Agreement dated September 20, 1994 among CMC
Railroad I, Ltd., GWI Switching Services, L.P. and Southern
Pacific Transportation Company
*+10.46 Buffalo Terminal Operating Agreement dated July 18, 1988 between
CSX Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.47 First Amendment to Buffalo Terminal Operating Agreement dated
December , 1990 between CSX Transportation, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
*+10.48 Operating Agreement and Car Storage Yard Agreement Consent to
Assignments dated as of September 20, 1994 between NCC Charlie
Company and GWI Switching Services L.P. with Exhibit I (Amended
and Restated Car Storage Yard Agreement dated September 20, 1994
between Southern Pacific Transportation Company and CMC Railroad
I, Ltd.) and Exhibit II (Amended and Restated Car Storage Yard
Agreement dated September 20, 1994 between Southern Pacific
Transportation Company and CMC Railroad I, Ltd.)
10.49 Trackage Rights Agreement dated March 12, 1994 between Southern
Pacific Transportation Company and GWI Switching Services L.P.
10.50 First Amendment to Trackage Rights Agreement dated September 20,
1994 between Southern Pacific Transportation Company and GWI
Switching Services L.P.
10.51 Indenture of Lease and Option to Purchase Agreement dated
January 17, 1992 between Southern Pacific Transportation Company
and Louisiana and Delta Railroad, Inc.
10.52 Lease Agreement dated November 7, 1991 between CIS Corporation
and Buffalo & Pittsburgh Railroad, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.53 Notice and Acknowledgement of Assignment dated as of November
1, 1993 between James P. Hassett as Trustee for CIS
Corporation, Buffalo & Pittsburgh Railroad, Inc. and ATEL
Financial Corporation
10.54 Agreement relating to Trackage Rights dated July 18, 1988
between CSX Transportation, Inc. and Buffalo & Pittsburgh
Railroad, Inc.
10.55 Commercial Agreement dated March 11, 1987 between Louisiana &
Delta Railroad, Inc. and Southern Pacific Transportation
Company
10.56 Assignment and Assumption Agreement dated March 11, 1987
between Louisiana & Delta Railroad, Inc. and Southern Pacific
Transportation Company
10.57 Administrative Agreement dated as of February 19, 1985 between
Consolidated Rail Corporation and Genesee & Wyoming Railroad
Company
10.58 Interchange Agreement (Goodman Street Yard) dated December 13,
1984 between Consolidated Rail Corporation and Genesee &
Wyoming Railroad Company
10.59 Revolver A Note dated June 2, 1995 of the Registrant in favor
of The First National Bank of Boston, as Agent
10.60 Revolver B Note dated June 2, 1995 of the Registrant in favor
of The First National Bank of Boston, as Agent
10.61 Asset Purchase Agreement dated as of February 8, 1996 between
Illinois & Midland Railroad, Inc. and Stanford PRC Acquisition
Corp.
10.62 Guaranty dated as of February 8, 1996 of the Registrant in
favor of Stanford PRC Acquisition Corp.
10.63 Assignment and Assumption Agreements dated as of February 8,
1996 between Chicago & Illinois Midland Railway Company and
Illinois & Midland Railroad, Inc. (six)
10.64 Warrant Purchase Agreement dated as of February 8, 1996
between the Registrant and The First National Bank of Boston
10.65 Agreement dated February 6, 1996 between Illinois & Midland
Railroad, Inc. and the United Transportation Union
*+10.66 Lease Agreement dated as of August 18, 1995 between Southern
Pacific Transportation Company and Portland & Western
Railroad, Inc.
*+10.67 Lease Agreement dated September 15, 1995 between Burlington
Northern Railroad Company and Portland & Western Railroad,
Inc.
10.68 Lease Agreement dated as of October 1, 1982 between Livingston
County Industrial Development Agency and Genesee and Wyoming
Railroad
10.69 Lease Agreement dated as of February 1, 1995 between
Livingston County Industrial Development Agency and Genesee
and Wyoming Railroad Company
**+10.70 Asset Purchase Agreement dated April 19, 1996 among Pittsburg
& Shawmut Railroad, Inc., Genesee & Wyoming Inc., The
Pittsburg & Shawmut Railroad Company, Red Bank Railroad
Company, Mountain Laurel Railroad Company and Arthur T. Walker
Estate Corporation, and Amendment No. 1 to Asset Purchase
Agreement dated April 19, 1996
**10.71 Amendment No. 1 to Warrant Purchase Agreement dated as of May
31, 1996 between the Registrant and FSC Corp.
**11.1 Statement re computation of per share earnings
12.1 Exhibit has been omitted because the required information is
included in the financial statements or notes thereto forming
part of this Registration Statement.
**21.1 Subsidiaries of the Registrant
****23.1 Consent of Arthur Andersen LLP
****23.2 Consent of Harter, Secrest & Emery (contained in Exhibit 5.1)
24.1 Officers' and Directors' Power of Attorney
**27 Financial Data Schedule (EDGAR filed only)
</TABLE>
- --------
*Filed with this Amendment.
**Filed with Amendment No. 1.
***Filed with Amendment No. 2.
****Filed with Amendment No. 3.
+ Confidential treatment requested as to certain portions, which have been
filed separately with the Commission pursuant to an application for such
treatment.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED AS TO THOSE PORTIONS MARKED WITH ASTERISKS
---------------------------------------------------------------------------
(***) AND THOSE PORTIONS HAVE BEEN SEPARATELY FILED WITH THE COMMISSION
-----------------------------------------------------------------------
EXHIBIT 10.38
LEASE AGREEMENT
THIS LEASE AGREEMENT, dated as of the 30th day of December, 1992, by and
between SOUTHERN PACIFIC TRANSPORTION COMPANY, A Delaware corporation,
hereinafter called "Lesser," and WILLAMETTE & PACIFIC RAILROAD, INC. a Delaware
corporation, hereinafter called "Lessee";
RECITALS:
The parties desire to enter into this Lease Agreement ("Lease Agreement")
setting forth terms and conditions for the use and management of the real
property together with the Track and Track Support Structures thereon as defined
in Section 1.02 below.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, intending to be legally bound, the parties do hereby
agree as follows:
SECTION I
LEASED PREMISES
SECTION 1.01 -- Lessor does hereby lessee to Lessee and Lessee does hereby
lease from Lessor the real property together with the Track and Track Support
Structures described in SECTION 1.02 (hereinafter called the "Leased Premises").
SECTION 1.02 -- The Leased Premises including all of Lessor's right, title
and interest in that part of the Rail Lines and Additional Facilities listed
below which comprise (1) land and interests in the land (subject to the
exclusions and reservations in Attachment A hereto); (2) "Track" meaning rail
and fastenings, switches and frogs complete, ties, ballast and signals ; (3)
"Track Support Structures" meaning all appurtenances to the track,including
without limitation, bumpers, roadbed, embankment,
1
<PAGE>
bridges, trestles, tunnels culverts or any other structures or things
necessary for support of and entering into construction thereof, and, if any
portion thereof is located in a thoroughfare, the term shall include pavement,
crossing planks and other similar materials or facilities used in lieu of
pavement or other street surfacing material at vehicular crossings of tracks,
culverts, drainage facilities, crossing warning devices, and any and all work
required by lawful authority in connection with construction, renewal,
maintenance and operation of said Track Support Structures and all appurtenances
thereof and Additions thereto now or in the future.
The Rail Lines shall mean the following Branches included in the Leased
Premises:
1) The Toledo Branch from Milepost 691.61 near Albany to end of track at
Milepost 766.70 near Toledo, Oregon; as shown on Exhibit A.
2) That portion of the Newberg Branch from Milepost 738.00 near St. Joseph
to Milepost 749.67 near Newberg; as shown on Exhibit A.
3) That portion of the West Side Branch from Milepost 738.00 near St.
Joseph to end of track at Milepost 671.58 near Monroe, Oregon; as shown on
Exhibit A.
4) The Dallas Branch from Milepost 729.01 near Gerlinger to end of track at
Milepost 733.80 near Dallas; as shown on Exhibit A.
5) The Willamina Branch from Milepost 730.46 near Whiteson to end of track
at Milepost 749.46 near Willamina; as shown on Exhibit A.
6) The Bailey Branch from Milepost 673.21 near Alpine Jct. to Milepost
680.06 near Dawson; as shown on Exhibit A.
Excluding from each Rail Line all parcels shown on Attachment A, attached
hereto.
Further, Lessor reserves unto itself the right to remove any and all land
on the Leased Premises in accordance with provisions of Attachment A retaining
all proceeds thereof while preserving a right that can be exercised by Lessee to
operate a railroad on a corridor thereover that is approximately fifty (50) feet
in width. In the event Lessor requires any trackage to be relocated by Lessee,
such relocation shall be at the expense of Lessor.
2
<PAGE>
The Additional Facilities shall include:
(l) The Albany Yard between milepost 690.10 and milepost 691.24 as shown
B-l but subject to rights and obligations of Lessor and other tenants of Lessor
contained in the Shared Use Agreement for Albany Yard attached as Exhibit I.
(2) The Albany Station at milepost 690.85 as shown on Exhibit B-2 but
subject to all rights and obligations of Lessor contained in its existing
agreement with Amtrak for partial use of the station and platforms and subject
to the Shared Use Agreement for Albany Station attached as Exhibit J.
SECTION 1.03 -- Except as otherwise provided herein, Lessee shall take the
Leased Premises in an "AS IS, WHERE IS" CONDITION AND WITHOUT ANY REPRESENTATION
OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING
WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE LEASED PREMISES, ITS
MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP OF THE LEASED PREMISES OR CONFORMITY OF THE LEASED
PREMISES TO ITS INTENDED USE. LESSEE ALSO AGREES TO TAKE THE LEASED PREMISES
SUBJECT TO:
(a) reservations or exceptions of record of minerals or mineral rights, all
easements, public utility easements and rights-of-way, however created, for
crossings, pipelines, wirelines, fiber optic facilities, roads, streets,
highways and other legal purposes;
(b) existing and future building zoning, subdivision and other applicable
federal, state, county, municipal and local laws, ordinances and
regulation;
(c) encroachments or other conditions that may be revealed by a survey, title
search or inspection of the Property: and
(d) all existing ways, alleys, privileges, rights, appurtenances and
servitudes, howsoever created, any liens of mortgage or deeds of trust
encumbering said property, Lessor's exclusive right to approve or deny any
and all future easements, leases, licenses or rights of occupancy in, on,
under, through, above, across or along the Leased Premises, or any portion
thereof.
SECTION 1.04 -- Lessor and Lessee shall enter into the following related
agreements prior to and only to become effective upon the Commencement Date
which will be attached hereto as exhibits and incorporated by reference hereby.
This Lease
3
<PAGE>
Agreement is subject to Lessor and Lessee finalizing these following
agreements on a basis satisfactory to both parties:
Exhibit C --- Albany-Eugene Yard Trackage Rights Agreement
Exhibit D --- Interchange Agreement
Exhibit E --- Communications Equipment Agreement
Exhibit F --- Radio Frequency Use Agreement
Exhibit G --- PBX Use Agreement
Exhibit H --- Commercial Marketing Agreement
Exhibit I --- Shared Use Agreement for Albany Yard
Exhibit J --- Shared Use Agreement for Albany Station
Exhibit K --- Agreement Covering Handling of Agreement Matters
SECTION II
LEASE TERM
SECTION 2.01 -- Unless this Lease Agreement is terminated earlier in
accordance with SECTION XIV, Lessee shall have and hold the Leased Premises unto
itself, its successors and assigns, for a term ending on December 31, 2012 and
beginning on the "Commencement Date." The Commencement Date shall be five (5)
days after Lessor has notified Lessee in writing that Lessor has satisfactory
evidence of compliance with the conditions precedent provided in SECTION V
unless such notice period is waived by mutual written agreement.
SECTION 2.02 -- This Lease shall be renewed for successive ten (10) year
terms beginning January 1, 2013 unless either party provides the other not less
than six (6) month notice that this Lease shall not be renewed.
SECTION 2.03 -- If, subject to the right of Lessor to evict or remove
Lessee from the Leased Premises by all available legal means, Lessee holds over
and remains in possession of the Leased Premises following expiration of the
then current term, original or extended, or following an early termination of
this Lease Agreement pursuant to SECTION XIV, such holding over will create a
month-to-month tenancy only. If Lessee has obtained all necessary regulatory
approvals to discontinue service and Lessor has not acquiesced in Lessee holding
over, then Lessee agrees to pay to Lessor as rent, a sum equal to ten times the
Rental as defined and as required pursuant to SECTION 4.01. Such monthly
payments shall be due on the same day of the month as the first day of the next
4
<PAGE>
month. Any profits or losses from Lessee's operations during the term hereof
and any hold over period shall enure and accrue to the Lessee
SECTION III
RAIL SERVICE
SECTION 3.01 -- Beginning on the Commencement Date and throughout the term
of this Lease Agreement, Lessee shall be entitled to full and exclusive use of
the Leased Premises for the operation of common carrier rail freight Service
only. Lessee may not use the Leased Premises to provide any type of passenger
service. During the term hereof, Lessor shall not have the right to operate
trains over the Leased Premises or otherwise exercise any rights over the Leased
Premises except as specifically set forth herein, nor shall it grant such right
to any third party without the consent of Lessee. Lessor further warrants that
as of the Commencement Date of this Lease Agreement, there is no other rail
carrier to which Lessor has granted rights to use the Leased Premises except for
interchange agreements with Willamette Valley Railroad at Independence and
Willamina and trackage rights agreements with Burlington Northern Railroad at
Albany.
SECTION 3.02 -- During the term of this Lease Agreement, Lessee shall not
suspend or discontinue its operation as a common carrier by rail over all or any
part of the Leased Premises without first applying for and obtaining from the
Interstate Commerce Commission ("ICC") and any other regulatory agency with
jurisdiction, any necessary certificate of public convenience and necessity or
other approvals or exemptions from regulation for such discontinuance of
operations over the Leased Premises; provided, however, that Lessee shall not
seek such regulatory authority as is needed, take any action to suspend or
discontinue its operations on the Leased Premises, without receiving written
concurrence from Lessor. Such concurrence may be waived by mutual written
consent and shall not be required for a discontinuance resulting from an event
of force majeure or a lawful embargo not resulting from Lessee's failure to
properly maintain the Trackage as outlined in Section 3.03. If Lessor does not
concur with an abandonment or discontinuance requested by Lessee, Lessor will
subsidize Lessee's continued operation of the designated line segment with such
subsidy calculated in accordance with 49 USC 10905. Applications or petitions by
Lessee to the ICC seeking authority to discontinue rail service shall be filed
jointly with Lessor at Lessor's request if Lessor desires concurrent abandonment
authority; if such
5
<PAGE>
applications or petitions are filed jointly, filing fees imposed by the
ICC shall be shared equally between the parties.
SECTION 3.03 -- Lessee shall maintain the Track and Track Support
Structures at not less than their condition existing on the Commencement Date as
shown on Attachment B, ordinary wear and tear excepted, and shall complete or
restore promptly and in good and workmanlike manner any Track or Track Support
Structure or any building which may be constructed, damaged or destroyed
thereon, and shall pay when due all claims for labor performed and material
furnished therefor. Lessor shall own all material replaced in or added to the
Track and Track Support Structures unless otherwise agreed to in writing by the
parties; materials removed from the Track and Track Support Structures and
replaced by Lessee shall become the property of Lessee. No rail that is a part
of the Track shall be replaced with lesser weight rail without prior written
consent of Lessor.
SECTION 3.04 -- Lessee shall maintain all bridges and tunnels on the Leased
Premises in not less than their current condition as set forth in the report of
the joint inspection of the bridges and tunnels by Lessee and Lessor, ordinary
wear and tear excepted, which report shall be prepared not less than 15 days
prior to the Commencement Date and attached to this Lease Agreement as exhibit
B-1.
SECTION 3.05 -- Lessee shall comply with all laws affecting the Leased
Premises or requiring any alterations or improvements to be made thereon; shall
not commit or permit waste thereof; shall not commit, suffer, or permit any act
upon said Leased Premises in violation of law and shall do all other acts which
from the character or use of said Leased Premises may be reasonably necessary,
the specific enumeration herein not excluding the general.
SECTION 3.07 -- Lessor shall have the right at any time upon reasonable
notice and from time to time to inspect the Leased Premises for conformity with
the standards of maintenance contained in this Lease Agreement. In the event
that as a result of Lessor's inspection of the Leased Premises, it is determined
in the reasonable judgment of Lessor that any facility, Track or Track Support
Structure, etc. fails to meet the appropriate standard of maintenance, Lessor
shall so advise Lessee of the steps necessary to bring the facility into
conformity with the applicable standard of maintenance. Thereafter, Lessee shall
have a reasonable period of time, such time to be mutually agreed upon, within
which to take
6
<PAGE>
such corrective action. If Lessee fails to take such corrective action within a
reasonable period of time, Lessor shall the right to terminate this Lease
Agreement in accordance with Section XIV.
SECTION 3.08 -- Lessee shall maintain such full and complete records of all
maintenance, rehabilitation, track relocation or removal performed on the Leased
Premises as shall reasonably be required by Lessor and established by Lessor
upon commencement of the Lease Agreement and shall keep all track profiles and
track charts up to date so as to show all program maintenance and rehabilitation
performed on the Track and Track Support Structures. Copies of updated records
and track charts shall be provided by Lessee to Lessor annually not later than
September 30th of each calendar year and promptly upon any other request of
Lessor.
SECTION 3.09 -- Lessee shall provide a copy of all reports of track
inspections by Federal Railroad Administration ("FRA") or Oregon Public Utility
Commission ("OPUC") inspectors to Lessor promptly upon receipt of said reports;
the term "reports" shall include all notices or citations alleging deficiencies
from FRA track Standards.
SECTION 3.10 -- Subject to the provisions hereinafter set forth, Lessee
shall provide common carrier rail freight service on the Leased Premises
according to the standards shown on Attachment C. Lessee shall not be required
to operate trains on line segments for which there is no demand for service and
lack of train operation under such circumstance shall not be deemed a failure to
provide service under this section.
SECTION IV
RENT
SECTION 4.01 -- In consideration of this Lease Agreement, and subject to
the terms and provisions set forth herein, Lessee agrees to pay Lessor rent for
the Leased Premises in the amount of *** in arrears, payable monthly within ten
(10) days of the last day of each month ("Full Rent").
***
7
<PAGE>
Lessee shall submit certification that all revenue freight cars were
interchanged solely with Lessor or originated AND terminated on the Leased
Premises together with Lessee's rent payments and claim for monthly credit.
Certification shall include the total number of revenue carloads handled by
Lessee during each month.
SECTION 4.02 -- Lessee shall pay all due rent payments, and all other
payments required by this Lease Agreement to Lessor at the following mail
address, or at such other location or individual as may be designated by Lessor
in writing from time to time:
Southern Pacific Transportation Company
P. O. Box 60,000, File 61860
One Market Plaza
San Francisco, CA 94160-1860
SECTION 4.03 -- If Lessee fails to pay any installment of rent when due,
and such failure continues for thirty (30) days, Lessee shall pay interest at
the lower rate of 2% over the prime rate of BANK OF AMERICA, N. A. or the
highest allowed by law, in effect on the day the rent was due, which interest
shall accrue from the date it was due until the date of payment.
SECTION 4.04 -- Acceptance by Lessor, its successors, assigns or designees
of rent or other payments shall not be deemed to constitute a waiver of any
other provision of this Lease Agreement.
SECTION 4.05 -- As additional security for the payment by Lessee to Lessor
of any sums of money required hereunder to be paid by Lessee, it is agreed that
in the event Lessee fails, neglects or refuses to timely pay any sum due and
owing to Lessor hereunder, Lessor may use any and all sums which it may collect
from any third party and which may, in whole or in part, be payable to Lessee,
as an offset against any and all payments for which Lessee is delinquent. In
addition, any sums at any time due and payable to Lessee by Lessor may also be
used by Lessor and credited to Lessor's account to the extent of any delinquent
payment owed by Lessee to Lessor. Lessee does hereby waive any and all claims,
demands and causes of action against Lessor which it may have or claim to have
as a result of Lessor's use or implementation of the provisions of this SECTION
4.05 and/or any offset. Lessor shall provide written notice to Lessee of any
actions taken under this section.
8
<PAGE>
SECTION V
CONDITIONS PRECEDENT
As conditions precedent to either party's obligations hereunder:
SECTION 5.01 -- There shall not be a work stoppage imminent or in effect on
the lines of Lessor or any of its affiliated companies or on the Leased Premises
as a result of the execution and/or implementation of this Lease Agreement.
SECTION 5.02 -- Lessee shall have acquired the right to conduct rail
freight service over the Track and Track Support Structures located on the
Leased Premises from the Interstate Commerce Commission ("ICC") and shall have
obtained such judicial, administrative agency or other regulatory approvals,
authorizations or exemptions as may be necessary to enable it to undertake its
obligations hereunder.
SECTION 5.03 -- Lessor and Lessee shall not be prevented from fulfilling
their respective obligations under this Lease Agreement as a result of
legislative, judicial or administrative action.
SECTION 5.04 -- Lessee shall not have discovered any contract, agreement,
award, judgment, title defect or condition of the Leased Premises which would
prevent Lessee from operating a rail freight operation on the Leased Premises in
substantially the same manner as presently conducted by Lessor. Upon execution
hereof, Lessor shall make available for Lessee's inspection and review all
contracts, agreements, documents, records and correspondence, including but not
limited to items relating to environmental matters, pertaining to or affecting
the Leased Premises. Lessee shall notify Lessor in writing within thirty (30)
days from date of execution hereof whether or not its review of Lessor's records
and the Leased Premises have satisfied this condition precedent. Failure to so
notify Lessor shall be deemed a satisfaction of this condition.
9
<PAGE>
SECTION VI
ACCOUNTING AND REPORTING
SECTION 6.01 -- Lessor shall have the right at any time upon reasonable
notice to inspect Lessee's books, records, statements or any other reports
necessary to determine compliance with any provisions of this Lease Agreement.
Such inspection shall be conducted during normal business hours and Lessee will
make its facilities available to Lessor's inspectors to permit such inspection
without undue interference with Lessee's operations. Any direct expenses arising
from such inspection shall be borne by Lessor.
SECTION VII
MODIFICATIONS AND IMPROVEMENTS
SECTION 7.01 -- Lessee shall not use nor permit the use of the Leased
Premises in any manner that will tend to create waste or a nuisance to the
detriment of continued transportation use of the Leased Premises. It is
understood and agreed that Lessee shall not now, or in the future, generate,
handle, treat, store or dispose of "hazardous waste" or "hazardous substances".
on the Leased Premises other than as may be used by Lessee in its operations or
as may be transported by Lessee in its capacity as a common carrier by rail. In
using the Leased Premises, and in constructing, maintaining operating and using
the Track and Track Support Structures thereon, Lessee shall comply with any and
all requirements imposed by federal or state statutes, or by ordinances, orders
or regulations of any governmental body having jurisdiction thereover,
including, but not limited to, building and zoning ordinances, restricting or
regulating or prohibiting the occupancy, use or enjoyment of the Leased Premises
or regulating the character, dimensions or locations of any Track and Track
Support Structures on the Leased Premises other than in rail freight service.
Should any governmental body having jurisdiction in the matter require Lessor to
dedicate, restrict or otherwise encumber any material portion of the Leased
Premises as a condition to approval of Lessee's use of the Leased Premises,
Lessor may, if said condition is reasonably unacceptable to Lessor, terminate
this Lease Agreement. Lessee
10
<PAGE>
covenants to properly notify Lessor accordingly should any of the above occur.
SECTION 7.02 -- Lessee may construct or relocate sidetracks or industrial
spur tracks on the Leased Premises as required in the ordinary course of
business so long as such work is done in conformity with sections 3.03, 3.04,
3.06, and 3.08 of this Lease Agreement and applicable governmental regulations.
Sidetracks or industrial spur tracks may not otherwise be removed from the
Leased Premises without consent of Lessor, which consent shall not be
unreasonably withheld, and in the event such tracks are removed and track
materials sold for salvage, the net proceeds (after removal costs) of such sale
shall belong to Lessor unless otherwise agreed to in writing.
SECTION 7. 03 -- Lessee shall prepare an initial track upgrading and
rehabilitation plan ("Rehabilitation Plan") attached hereto as Attachment D.
Lessee shall complete the rehabilitation work as described at its expense and
within the schedule specified in the Rehabilitation Plan.
SECTION VIII
REPRESENTATIONS AND WARRANTIES
SECTION 8.01 -- Lessor represents and warrants that:
(a) It is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and able to do business
in the State of Oregon.
(b) It has full statutory power and authority to enter into this Lease
Agreement and to carry out the obligations of Lessor hereunder.
(c) The Lease Agreement and each exhibit agreement thereto have been
duly authorized, executed and delivered and the entering into and
performance by Lessor of this Lease Agreement does not and will not
violate any judgment, order, law or regulation applicable to Lessor or
any provisions of Lessor's certificate of incorporation or by-laws
or result in any breach of, or constitute a default under, or result in
the creation of any lien, charge, security interest or other encumbrance
upon any assets of the Lessor or on the Leased Premises (other than
created by this transaction) pursuant to
11
<PAGE>
any indenture, mortgage, deed of trust, bank loan or credit agreement
or other instrument known to which Lessor is a party.
(d) Its execution of and performance under this Lease Agreement does
not violate any rule, regulation, order, writ, injunction or decree
of any court, administrative agency or governmental body, or any
contract to which Lessor is party.
(e) Lessor shall bear any and all costs of protection of its
current employees arising from any labor protective conditions
imposed by the ICC, any other regulatory agencies, or state as
a result of Lessor entering into this Lease Agreement or
implementing the transactions contemplated hereunder.
(f) Lessor has sufficient title to the Leased Premises to permit
its continued use as a railroad.
(g) To the best of available knowledge that Lessor is in compliance
with applicable federal, state and municipal laws, ordinances
and regulations, including but not limited to all federal, state
and local laws, rules, regulations and ordinances controlling air,
water, noise, hazardous waste, solid waste, and other pollution or
relating to the storage, transport, release or disposal of
hazardous materials, substances, waste or other pollutants. As
of the date of this Lease Agreement, Lessor has not received any
notice from any governmental agency of any alleged violation of
environmental law, rule, regulation or ordinance or any judgment
pursuant to any environmental law, rule, regulation or ordinance
relating to the Leased Premises
SECTION 8.02 -- Lessee represents and warrants that:
(a) It is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware and
able to do business in the State of Oregon.
(b) It has full power and authority to enter into this Lease Agreement,
and subject to necessary judicial and regulatory authority, to
carry out its obligations hereunder.
(c) The Lease Agreement and each exhibit agreement thereto have been
duly authorized, executed and delivered and the entering into
and performance by Lessee of this Lease Agreement does not and
will not violate any judgment, order, law or regulation applicable
to Lessee or any provisions of Lessee's certificate of incorporation
or by-laws or result in any
12
<PAGE>
breach of, or constitute a default under, or result in the creation
of any lien, charge, security interest or other encumbrance upon
any assets of the Lessee or on the Leased Premises (other than
created by this transaction) pursuant to any indenture, mortgage,
deed of trust, bank loan or credit agreement or other instrument
known to which Lessee is a party.
(d) Upon expiration of the original or any extended term of this Lease
Agreement or upon termination hereof by Lessor pursuant to SECTION
XIV, Lessee shall bear any and all costs of protection of its current
or future employees, including former employees of Lessor that may be
employed by Lessee, arising from any labor protective conditions
imposed by the ICC, any other regulatory agency or statute as a result
of Lessee's lease or operation of the Leased Premises and any related
agreements or arrangements, or arising as a result of the termination
of this Lease Agreement. Nothing contained herein is intended to be
for the benefit of any such employee nor should any employee be
considered a third party beneficiary hereunder. Nothing in this Lease
Agreement shall be construed as an assumption by Lessee of any
obligations to Lessor's current or former employees under collective
bargaining or other agreements that may exist or have existed between
Lessor and its employees, or any of them.
SECTION IX
OBLIGATIONS OF THE PARTIES
SECTION 9.01 -- During the term hereof, Lessee shall pay all bills for
utilities including without limitation those for water, sewer, gas and electric
service to the Leased Premises. If Lessor is required to, or does pay, any such
bills, Lessee shall promptly reimburse Lessor within twenty (20) days of receipt
of a bill or bills therefor or interest charge. If the Leased Premises are not
billed separately but as a part of a larger tract or parcel, Lessee shall pay
that portion of such bills as is attributable to usage on or in connection with
Leased Premises.
SECTION 9.02 -- Lessee shall at its sole cost and expense protect and
defend Lessor's title against all persons claiming against or through Lessee and
at all times keeping the Leased Premises free from any legal process or
encumbrance whatsoever,
13
<PAGE>
including without limitation liens, attachments, levies and execution, (except
any placed there by or created through Lessor) and shall give Lessor
immediate written notice of any such legal encumbrance and shall indemnify
Lessor from any loss caused thereby, except those arising prior to Commencement
Date.
SECTION 9.03 -- During the term of the Lease Agreement, Lessee shall
substantially comply with all federal, state, and local laws, rules,
regulations, and ordinances controlling air, water, noise, hazardous waste,
solid waste, and other pollution or relating to the storage, transport, release,
or disposal of hazardous materials, substances, waste, or other pollutants.
Except to the extent that such activities are the responsibility of the Lessor
under SECTION 9.04, Lessee, at its sole cost and expense shall make all
modifications, repairs, or additions to the Leased Premises, and implement and
bear the expense of any and all structures, devices, equipment, or any remedial
actions which may be required under any such laws, rules, regulations,
ordinances, or judgments, which if attached to the real property shall become
owned by Lessor. During the term of this Lease Agreement, Lessee shall not
dispose of any wastes of any kind, whether hazardous or not, on the Leased
Premises.
SECTION 9.04 -- It is the express intention of both Lessee and Lessor that
Lessee assumes the risk of and agrees to indemnify and hold Lessor harmless, and
to defend Lessor against and from any claims, costs, liabilities, expense
(including without limitation court costs and attorneys' fees), or demands of
whatsoever nature or source for any defects or Environmental Problems, latent or
obvious, discovered or undiscovered, in the real and chattel property to be
leased hereunder and for personal injury to or death of persons whomsoever
(including without limitation employees, agents or contractors of Lessor,
Lessee, or any third party), or property damage or destruction of whatsoever
nature (including without limitation property of Lessor or Lessee, or property
in Lessee's care, custody or control, and third party property), when such
defects, Environmental Problems, injury or damage arise out of acts, omissions
or negligence or events occurring on the Leased Premises after the Commencement
Date and before the termination of this Lease Agreement. It is the express
intention of both Lessee and Lessor that Lessor assumes the risk of and agrees
to indemnify and hold Lessee harmless, and to defend Lessee against and from any
claims, costs, liabilities, expenses (including without limitation court costs
and attorney fees), or demands of whatsoever nature or source for any defects or
Environmental Problems, latent or obvious, discovered or undiscovered, in the
real and chattel property to be leased hereunder, for personal injury to or
death of persons whomsoever (including without limitation employees, agents
14
<PAGE>
or contractors of Lessor, Lessee or any third party) or property damage or
destruction of whatsoever nature (including without limitation property of
Lessor or Lessee, or property in its or their care, custody or control, and
third party property) where such defects, Environmental Problems, injury or
damage arise out of acts, omissions or negligence or events occurring on the
Leased Premises prior to the Commencement Date or subsequent to the termination
of the Lease Agreement. "Environmental Problems" means any cause of action under
the federal Comprehensive Environmental Response Compensation and Liability Act
of 1980 (as amended) and any cause or action arising from similar federal, state
or local legislation or other rules of law, and private causes of action of
whatever nature which arise from environmental damage, toxic wastes and like.
SECTION 9.05 -- Lessee shall promptly furnish Lessor written notice of any
and all (i) releases of hazardous wastes or substances of which it becomes aware
which occur during the term of this Lease Agreement whenever such releases are
required to be reported to any federal, state, or local authority and (ii)
alleged water or air permit condition violations. To the extent practicable,
such written notice shall identify the substance released, the amount released,
and the measures undertaken to clean up and remove the released material and any
contaminated soil or water, shall identify the nature and extent of the alleged
violation and the measures taken to eliminate the violation, and shall certify
that Lessee has complied with all applicable regulations, orders, judgments or
decrees in connection therewith, or the date by which such compliance is
expected. Lessee shall also provide Lessor with copies of any and all reports
made to any governmental agency which relate to such releases or such alleged
violations during the term of this Lease Agreement.
SECTION 9.06 -- During the term of this Lease Agreement, Lessor shall have
the right to enter the Leased Premises for the purpose of inspecting the Leased
Premises to ensure compliance with the requirements of this SECTION IX. If
Lessor detects any violation, including any contamination of the Leased Premises
which it deems to be the responsibility of Lessee under this SECTION IX, Lessor
shall notify Lessee in writing of the violation. Upon receipt of such notice
Lessee shall take immediate steps to eliminate the violation or remove the
contamination to the satisfaction of any governmental agency with jurisdiction
over the subject matter of the violation. Should Lessee inadequately remedy or
fail to eliminate the violation, Lessor or its representative shall have the
right, but not the obligation, to enter the Leased Premises and to take whatever
corrective action Lessor deems necessary to eliminate the violation, at the sole
cost and expense
15
<PAGE>
of Lessee. Should it subsequently be determined that the contamination or
violation was the Lessor's responsibility under SECTION 9.04, Lessor shall
promptly reimburse Lessee for any and all amounts expended by Lessee in seeking
to remedy or eliminate the condition or violation.
SECTION 9.07 -- As between the parties, Lessee and Lessor waive and shall
not assert as a defense any statute of limitations applicable to any controversy
or dispute arising between the parties under this SECTION IX.
SECTION 9.08 -- To the maximum extent practical, Lessee shall offer
employment to active employees of Lessor in preference to others. Lessee shall
have no obligation to hire Lessor's employees if;
(a) it has no openings;
(b) in Lessee's sole judgment,
(1) no qualified employee of Lessor applies for an opening or accepts
employment on Lessee's terms;
(2) another applicant is better qualified; or
(c) any law requires Lessee to hire otherwise, including but not limited
to equal opportunity, affirmative action, veterans' right, or the Rock
Island or Milwaukee Road acts.
SECTION 9.09 -- In the event of expiration or termination of this Lease
Agreement by Lessor pursuant to Section XIV, Lessor shall offer employment
preference to active employees of Lessee under conditions consistent with those
in Section 9.08.
SECTION X
EMINENT DOMAIN
SECTION 10.01 -- In the event that at any time during the term of this
Lease Agreement the whole or any part of the Leased Premises shall be taken by
any lawful power by the exercise of the
16
<PAGE>
right of eminent domain for any public or quasi-public purpose the following
provisions shall be applicable:
SECTION 10.02 -- If such proceedings shall result in the taking of the
whole or a portion of the Leased Premises which materially interferes with
Lessee's use of the Leased Premises for railroad purposes, Lessee shall have the
right, upon written notice to Lessor, to terminate this Lease Agreement in its
entirety. In that event, and subject to any necessary regulatory approvals or
exemptions, this Lease Agreement shall terminate and expire on the date title to
the Leased Premises vests in the condemning authority, and the rent and other
sums or charges provided in this Lease Agreement shall be adjusted as of the
date of such vesting.
SECTION 10.03 -- If such proceeding shall result in the taking of less than
all of the Leased Premises which does not materially interfere with Lessee's use
or profitable operation of the Leased Premises for railroad purposes, then the
Lease Agreement shall continue for the balance of its term as to the part of the
Leased Premises remaining, without any reduction, abatement or effect upon the
rent or any other sum or charge to be paid by the Lessee under the provisions of
this Lease Agreement.
SECTION 10.04 -- Except as otherwise expressly provided in this Section,
Lessor shall be entitled to any and all funds payable for the total or partial
taking of the Leased Premises without any participation by Lessee; provided,
however, that nothing contained herein shall be construed to preclude Lessee
from prosecuting any claim directly against the condemning authority for loss of
its leasehold estate.
SECTION 10.05 -- Each party shall provide prompt notice to the other party
of any eminent domain proceeding involving the Leased Premises. Each party shall
be entitled to participate in any such proceeding, at its sole cost and expense,
and to consult with other party, its attorneys, and experts. Lessee and Lessor
shall make all reasonable efforts to cooperate with each other in the defense of
such proceedings and to use their best efforts to ensure Lessee's continued
ability to use the Leased Premises for the conduct of freight railroad
operations.
17
<PAGE>
SECTION XI
INDEMNIFICATION AND INSURANCE
SECTION 11.01 -- It is the express intent of the parties, both Lessor and
Lessee, that Lessee shall protect, defend, hold harmless, and indemnify Lessor
from and against any and all liability, expense, cost, claim or suit, including
attorneys' fees (collectively called "Liability"), incurred by or assessed
against Lessor, its agents, servants, affiliated companies and its successors
and assigns on account of injuries, death, or property loss or damage arising
from Lessee's use, operation or maintenance of the Leased Premises, including
Liability proximately caused or contributed to by the acts, omissions or
negligence of Lessor, except, however, that arising from the sole acts,
omissions or negligence of Lessor or the criminal conduct of Lessor, PROVIDED,
HOWEVER, that all liability, including liability for any injury, death, loss, or
damages arising in connection with toxic waste or environmental conditions shall
be governed by the provisions of SECTION 9.04 hereof. The foregoing
notwithstanding, neither party shall have any claim against the other party for
its acts or omissions or negligence caused by or resulting from interruption of
or delay to such party's business or for special, indirect or consequential
damages or for loss of profit or income.
Each party hereto covenants and agrees that its obligations under this
indemnity will be fulfilled whether or not such liability or claims arises
during the time that this Lease Agreement is in effect or thereafter. The
covenants of indemnity contained in this Lease Agreement shall continue in full
force and effect notwithstanding the full payment of all sums due under this
Lease Agreement, or the satisfaction, discharge or termination of this Lease
Agreement in any matter whatsoever.
Each party hereto may make settlement of any claim for Liability or damage
for which it and the other party hereto may be jointly liable hereunder, but no
payment in excess of Twenty-five Thousand Dollars ($25,000) shall be voluntarily
made by any party in settlement of any such claim without first having obtained
in writing consent of the other party, which consent shall not be unreasonably
withheld, and giving of such consent shall not be deemed an admission that such
claim involves joint liability. The party against which a claim in excess of
Twenty-five Thousand Dollars ($25,000) is made for which the other party hereto
may be jointly liable hereunder shall give written notice thereof to such other
party.
18
<PAGE>
All releases taken pursuant to the settlement of claims or suits involving
joint liability shall include all parties hereto involved, and copies thereof
shall be furnished each of them.
SECTION 11.02 -- Lessee shall, at its sole cost and expense, procure the
following kinds of insurance for the term of this Lease Agreement effective on
Commencement Date and promptly pay when due all premiums for that insurance.
Upon the failure of Lessee to maintain insurance as provided herein, Lessor
shall have the right, after giving Lessee ten days written notice, to obtain
insurance and Lessee shall promptly reimburse Lessor for that expense. The
following minimum insurance coverage shall be kept in force during the term of
this Lease Agreement:
Comprehensive General Liability insurance including contractual liability
providing bodily injury, including death, personal injury and property damage
coverage with a combined single limit of at least Twenty-five Million Dollars
($25,000,000) for each incident and a general aggregate limit of at least
Twenty-five Million Dollars ($25,000,000). This insurance shall contain Broad
Form Liability covering the indemnity provisions contained in this Lease
Agreement, severability of interests and name Lessor as an additional insured
with respect to liabilities arising out of Lessee's obligation to Lessor in this
Lease Agreement. If coverage is purchased on a "claims made" basis it shall
provide for at least a three (3) year extended reporting or discovery period,
which shall be invoked should insurance covering the time period of this Lease
Agreement be canceled unless replaced with a policy containing the same
retroactive date as the policy being replaced.
SECTION 11.03 -- Lessee warrants that this Lease Agreement has been
reviewed with its insurance agent(s)/broker(s) and the agent(s)/broker(s) has
been instructed to procure the insurance coverage required herein and name
Lessor as additional insured with respect to liabilities which arise out of
Lessee's obligation to Lessor.
SECTION 11.04 -- Lessee shall furnish to Lessor the certificates of
insurance evidencing the required coverage and endorsement(s) and upon written
request of Lessor, Lessee shall provide certified duplicate copies of any
policy. The insurance company(ies) issuing such policy(ies) shall notify Lessor
in writing of any material alteration including any change in the retroactive
date in any "claims made" policies or substantial reduction of aggregation
limits, if such limits apply, or cancellation thereof at least thirty (30) days
prior thereto.
19
<PAGE>
SECTION 11.05 -- The insurance policy(ies) shall be written by a reputable
insurance company or companies acceptable to Lessor or with current Best's
Insurance Guide Rating of B and Class VII or better. Such insurance company
shall be authorized to transact business in the State of Oregon. If requested,
Lessee must furnish a certified copy all insurance policy(ies) and
endorsement(s) to Lessor within seven (7) days of such request.
SECTION 11.06 -- Insurance coverage provided in the amounts set forth
herein shall not be construed to otherwise relieve Lessee from liability
hereunder in excess of such coverage, nor shall it preclude Lessee or Lessor
from taking such other action as is available to it under any other provision of
this Lease Agreement or otherwise in law.
SECTION 11.07 -- The limits of liability required under SECTION 11.02 shall
be adjusted every five (5) years during the term or any extended term hereof
based on any increases or decreases in the Consumer Price Index, or any
successor index.
SECTION XII
TAXES
SECTION 12.01 -- It is understood and agreed that the Leased Premises shall
be used by the Lessee in its freight railroad operations and shall be a part of
Lessee's operating property. Lessor shall retain ownership of the real property
and pay all real property taxes, assessments general, special or otherwise which
may be levied, accrued, assessed or imposed upon the real property during the
lease agreement term.
SECTION 12.02 -- Lessee shall reimburse Lessor for any taxes and
assessments, general, special or otherwise, which may be levied, accrued,
assessed or imposed upon any improvements located upon the Leased Premises and
owned by Lessee during the Lease Agreement term. Lessor shall provide bills to
Lessee covering any such taxes or assessments.
20
<PAGE>
SECTION XIII
EASEMENTS, LEASES AND LICENSES
SECTION 13.01 -- From and after the Commencement Date, Lessor shall
continue to manage all existing and future leases, easements, agreements, and
licenses of portions of the Leased Premises involving the real property. Lessor
shall assign existing leases, industrial track, private crossing and other
agreements involving the Track or Track Support Structure to Lessee. Lessor
shall continue to pay any per car reimbursements required under existing
industrial track agreements.
SECTION 13.02 -- Notwithstanding anything to the contrary in this Lease
Agreement, Lessor reserves the exclusive right to grant easements or other
occupations for fiber optic or other communications systems. Any requests for
such permit or easement shall be referred to Lessor for appropriate action.
Revenues from the granting by Lessor of easements or other occupations by fiber
optic facilities shall accrue solely to Lessor. Lessor shall grant no easement,
license, or other occupation the exercise of which would interfere with Lessee's
operations over the Leased Premises without concurrence of Lessee. Lessee shall
be entitled to compensation for any direct expenses incurred as a result of the
foregoing.
SECTION 13.03 -- Notwithstanding the provisions of Section 13.01, Lessee
shall be responsible for administering agreements for designing and installing
Track and Track Support Structure relating to projects initiated by public
agencies, including but not limited to modification of existing or creation of
new pedestrian, roadway, drainage and flood control facilities upon, over, under
or across the Leased Premises. Lessor shall not be liable for any costs
associated with such projects.
SECTION 13.04 -- Lessee shall be permitted to enter into agreements
designated in or in compliance with Exhibit K, Agreement Covering Handling of
Agreement Matters, without Lessor's prior consent.
21
<PAGE>
SECTION XIV
TERMINATION
SECTION 14.01 -- This Lease Agreement may be terminated as follows: (a) By
Lessee or Lessor:
1. on or at any time prior to the Commencement Date if any substantive
condition unacceptable to Lessee or to Lessor is imposed upon the regulatory
approvals or exemptions contemplated by SECTION 5.02 of this Lease Agreement for
Lessee's lease and operations of the Leased Premises;
2. upon the occurrence of an Event of Default as provided in SECTION XVII;
3. upon not less than forty-five (45) days' written notice to Lessor,
following Lessee's obtaining all necessary regulatory approvals or exemptions to
permit Lessee to abandon or discontinue rail operations; and
(b) by Lessor:
1. pursuant to SECTION XVIII;
2. upon acquisition of ownership or control of Lessee by any other railroad
or transportation related company (other than Genesee & Wyoming Industries, Inc.
or its affiliates) without prior consent of Lessor.
SECTION 14.02 -- In the event this Lease Agreement is terminated, Lessee
shall cooperate with Lessor and/or its designee to assign any leases, easements,
licenses, and all other agreements affecting the Leased Premises to Lessor.
SECTION 14.03 -- In the event of termination of this Lease Agreement,
Lessee shall vacate the Leased Premises in an orderly manner. Upon any
terminations resulting from an Event of Default by Lessee, Lessor, or its
designated agent, at any time thereafter and subject to all necessary prior
regulatory approvals or exemptions, may re-enter and take possession of the
Leased Premises by affording thirty (30) days' written notice to Lessee
specifying such Event of Default and that this Lease Agreement has terminated.
22
<PAGE>
SECTION 14.04 -- Lessee shall be able to cure an Event of Default (other
than lack of insurance) by remedying the Event of Default within the respective
notice period.
SECTION 14.05 -- In the event Lessor terminates this Lease Agreement for
any reason, or if this Lease has run its full term and is not renewed, Lessor
shall pay Lessee (i) an amount equal to the non-depreciated portion of all
capital improvements made by Lessee on the Leased Premises and (ii) startup
costs not exceeding *** if terminated within *** of the date hereof. This amount
shall be determined by total capitalized improvement expenditures reported on
Lessee's federal income tax records depreciated on a straight-line basis over
the twenty year term of this Lease Agreement. Lessor's obligation shall be
limited to
(l) all of the capital improvements shown on the Rehabilitation Plan
attached hereto as Attachment D, and
(2) additional annual capital expenditures on the Leased Premises not
exceeding one million dollars ($1,000,000) adjusted annually by the previous
year's change in the Consumer Price Index published by the U.S. Department of
Labor.
SECTION 14.06 -- In the event Lessee terminates this Lease for any reason,
Lessor shall pay Lessee an amount equal to *** of the amount
calculated under the provisions of Section 14.05 above.
SECTION XV
ARBITRATION
SECTION 15.01 -- If Lessee or Lessor (the "non-defaulting party)')
considers the other (the "defaulting party") to be in default with respect to
any of its obligations under this Lease Agreement, the non-defaulting party
shall give the defaulting party written notice of the alleged default and 30
days from the date of the notice to cure such default (unless such default is
not reasonably curable within such 30 day period, in which event the defaulting
party must commence to cure such default within such 30 day period and must
diligently prosecute such cure). If the defaulting party fails, refuses or
neglects to cure the default (or to commence cure of the default in the case of
a default which is not reasonably curable within 30 days and thereafter
diligently
23
<PAGE>
prosecute such cure) within such time to the satisfaction of the non-defaulting
party, the non-defaulting party shall have the right to (i) cure the default,
and charge the expenses thereof to the defaulting party; provided however, that
in emergency situations, the non-defaulting party, immediately and in reasonable
manner, may act to cure the default or mitigate losses, or (ii) submit the
matter to arbitration pursuant to the procedures set forth in this Section XV.
SECTION 15.02 -- Arbitration in accordance with the procedures set forth
in this Section XV shall be the only available recourse for any disputes with
respect to this Lease Agreement. If at any time a question or controversy shall
arise between the parties hereto in connection with the Lease Agreement upon
which the parties cannot agree, such question or controversy shall be submitted
to arbitration hereunder. The party demanding arbitration (the "Demanding
Party") shall notify the other party or parties (the "Noticed Party") in writing
of such demand stating the question or questions to be submitted for decision
and nominating one arbitrator. To be qualified hereunder, an arbitrator must be
a person with at least five years exposure to the concepts of administration,
interpretation, and application of railroad operating agreements. Within twenty
(20) days of receipt of such demand by the Noticed Party, the parties shall
agree on the single arbitrator nominated by the Demanding Party or any other
qualified single arbitrator person. If no agreement is reached in said twenty
(20) day period, then the Noticed Party shall have an additional ten (10) days
in which to nominate a qualified arbitrator by giving notice of such nomination
to the Demanding Party. Should any Noticed Party fail within twenty (20) days
after receipt of such notice to name its similarly qualified arbitrator, the
arbitrator for the Demanding Party and the arbitrators for the other Noticed
Parties, if any, shall select one for the Noticed Party so failing and, if they
cannot agree, said arbitrator may be appointed by the Chief Judge (or acting
Chief Judge) of the United States District Court for the District in which the
headquarters office of the Demanding Party is located upon application by any
party after ten (10) days' written notice to all other parties. The arbitrators
so chosen, if an even number, shall select one similarly qualified additional
arbitrator, to complete the board. If they fail to agree upon an additional
arbitrator, the same shall, upon application of any party, be appointed by said
judge in the manner heretofore stated.
Upon selection of the arbitrator(s), said arbitrator(s) shall with
reasonable diligence determine the questions as disclosed in said notice of
demand for arbitration, shall give all parties reasonable notice of the time and
place (of which the
24
<PAGE>
arbitrator(s) shall be the judge) of hearing evidence and argument, may take
such evidence as they deem reasonable or as either party may submit with
witnesses required to be sworn, and may hear arguments of counsel or others. If
any arbitrator declines or fails to act, the party (or parties in the case of a
single arbitrator) by whom he was chosen or said judge shall appoint another to
act in his place. After considering all evidence, testimony, and arguments, said
single arbitrator or the majority of said board of arbitrators shall promptly
state such decision or award in writing which shall be final, binding, and
conclusive on all parties to the arbitration when delivered to them. Until the
arbitrator(s) shall issue the first decision or award upon any question
submitted for arbitration, performance under the Agreement shall continue in the
manner and form existing prior to the rise of such question. After delivery of
said first decision or award, each party shall forthwith comply with said first
decision or award immediately after receiving it.
Each party to the arbitration shall pay the compensation, costs, and
expenses of the arbitrator appointed in its behalf and all fees and expenses of
its own witnesses, exhibits, and counsel. The compensation, cost, and expenses
of the single arbitrator or the additional arbitrator in the board of
arbitrators shall be paid in equal shares by all parties to the arbitration.
SECTION 15.02 -- The books and papers of all parties, as far as they relate
to any matter submitted for arbitration, shall be open to the examination of the
arbitrator(s).
SECTION XVI
FORCE MAJEURE
SECTION 16.01 -- Lessee shall have no obligation to operate over any
portion of the Leased Premises as to which it is prevented or hindered from
operating due to Acts of God, public authority, strikes, riots, labor disputes,
or any cause beyond its control; PROVIDED, HOWEVER, Lessee shall use reasonable
efforts to take whatever action is necessary or appropriate to be able to resume
its operations.
25
<PAGE>
SECTION XVII
DEFEASANCE
SECTION 17.01 -- Lessee shall not make any use of the Leased Premises which
is inconsistent with Lessor's right, title and interest therein and which may
cause the right to use and occupy the Leased Premises to revert to any party
other than Lessor. So long as the Leased Premises are sufficient to permit
Lessee to profitably operate, this Lease Agreement shall not be affected by any
determination, whether by judicial order, decree or otherwise, that the
ownership of any portion of the Leased Premises is vested in a person other
than Lessor and there shall be no abatement of rent on account of such
determination. Lessor and Lessee shall make all reasonable efforts to defend
Lessor's title to the Leased Premises against any adverse claims.
SECTION XVIII
EVENTS OF DEFAULT
SECTION 18.01 -- The following shall be Events of Default:
(a) Failure by Lessee to make payments of rent when due, and such failure
continues for thirty (30) days following written demand therefor.
(b) Filing of petition for bankruptcy, reorganization or arrangement of
Lessee by Lessee pursuant to the bankruptcy laws or any similar
proceeding, which petition is not dismissed within thirty (30) days.
(c) Failure by Lessee
(1) to maintain the Leased Premises as required in Section III,
(2) to provide common carrier rail freight service as required in
Section 3.10,
(3) to complete track rehabilitation work as provided in Section
7.03, or
(4) Lessee breaches any provision of the Lease Agreement other than
for the payment of rent which is subject to subparagraph (a)
above, and fails to cure such breach
26
<PAGE>
within forty-five (45) days after receipt of written notice of
such breach from the Lessor or fails to commence to cure such
default within forty-five (45) days, or, once commenced, fails to
use due diligence to complete the cure.
(d) The filing of any involuntary bankruptcy, receivership or arrangement
proceeding, against Lessee which filing is not dismissed within sixty
(60) days.
SECTION XIX
BREACHES; REMEDIES
SECTION 19.01 -- Notwithstanding Section XV, in the event that Lessee fails
to maintain the Leased Premises as required in Section III or to provide common
carrier freight service as required in Section 3.10, the provisions of Section
3.01 preventing Lessor from operating trains on the Leased Premises is vacated
and Lessor may enter the Leased Premises and assume all common carrier duties
(including but not limited to the provision of freight service and dispatching).
SECTION XX
MISCELLANEOUS
SECTION 20.01 -- This Lease Agreement expresses the entire agreement
between the parties and supersedes all prior oral or written agreements,
commitments, or understanding with respect to the matters provided for herein,
and no modification of this Lease Agreement shall be binding upon the party
affected unless set forth in writing and duly executed by the affected party.
SECTION 20.02 -- All notices, demands, requests, or other communications
which may be or are required to be given, served or sent by either party to the
other pursuant tO this Lease Agreement shall be in writing and shall be deemed
to have been properly given or sent:
27
<PAGE>
(a) If intended for Lessor, by mailing by registered or certified mail,
return receipt requested, with postage prepaid, addressed to Lessor
at:
Mr. G. P. Michael
Vice President - Operations
Southern Pacific Transportation Company
One Market Plaza
San Francisco, CA 94105
With a copy to:
Mr. W. E. Fowler
Director - Contract & Joint Facilities
Southern Pacific Transportation Company
One Market Plaza, Room 1004P
San Francisco, CA 94105
(b) If intended for Lessee, by mailing by registered or certified mail,
return receipt requested, with postage prepaid, addressed to Lessee
at:
Mr. Mortimer B. Fuller, III
President
Willamette and Pacific Railroad, Inc.
71 Lewis Street
Greenwich, Connecticut 06830
SECTION 20.03 -- Each notice, demand, request or communication which shall
be mailed by registered or certified mail to either party in the manner
aforesaid shall be deemed sufficiently given, served or sent for all purposes at
the time such notice, demand, request, or communication shall be either received
by the addressee or refused by the addressee upon presentation. Either party may
change the name of the recipient of any notice, or his or her address, at any
time by complying with the foregoing procedure.
SECTION 20.04 -- This Lease Agreement shall be binding upon and inure to
the benefit of Lessor and Lessee, and shall be binding upon the successors and
assigns of Lessee, subject to the limitations hereinafter set forth. Lessee may
not assign its right under this Lease Agreement or any interest therein, or
attempt to have any other person (except wholly owned affiliates) assume its
obligations under this Lease Agreement, without the prior written consent of
Lessor, which consent shall not unreasonably be withheld; PROVIDED, HOWEVER, in
the event Lessee elects to assign, Lessee shall first secure any necessary
approvals of the ICC
28
<PAGE>
and/or, such other regulatory approvals as may be then required; and PROVIDED
FURTHER, that Lessor has approved the financial condition and operational
ability of the successor Lessee, which approval will not be unreasonably
withheld and which evaluation of the successor Lessee will be consistent with
then existing practices in the industry.
SECTION 20.05 -- If fulfillment of any provision hereof or any transaction
related hereto shall involve transcending the limit of validity; prescribed by
law, then the obligation to be fulfilled shall be reduced to the limit of such
validity; and if any clause or provision herein contained operates or would
prospectively operate to invalidate this Lease Agreement in whole in part, then
such clause or provision only shall be held ineffective, as though not herein
contained, and the remainder of this Lease Agreement shall remain operative and
in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Lease Agreement to be
executed in duplicate as of the day and year first herein written
SOUTHERN PACIFIC TRANSPORTATION
COMPANY
By: /s/ M.D. Ongerten
---------------------------
Title: Vice President Strategic Development
------------------------------------
WILLIAMETTE & PACIFIC RAILROAD, INC.
By: /s/ Mortiner B. Fuller, III
---------------------------
Title: Chairman
------------
29
<PAGE>
Attachment A
Real Property Releases
1. Parcel Releases. After the Commencement Date, Lessor shall designate in
writing to Lessee thirty (30) days in advance those parcels or parcel not being
used by Lessee for rail operations that Lessor desires to remove from the Leased
Premises. Upon receipt of such notice, Lessee shall determine whether the
designated parcel(s) are being used by it for rail operations and, if not,
Lessee shall vacate the designated parcel(s) by the thirtieth (30th) day
specified in the designation notice. If the designated parcel is used by Lessee
for rail operations, the parties shall confer about the scope of the parcel
release.
Lessee shall execute such documents as are necessary to formalize the
release of parcels.
2. Reservations. Lessor reserves all of its subsurface rights and
interests, the utilization of which shall not unreasonably interfere with
Lessee's rail operations.
<PAGE>
Attachment B
Track Conditions on Commencement Date
(Section 3.03)
Track Conditions on the Leased Premises as of the Commencement Date of the
Lease Agreement are as follows:
<TABLE>
<CAPTION>
Line Segment Milepost Limits FRA Class/(1)/
------------ --------------- --------------
<S> <C> <C>
Toledo Branch 691.61 - 692.40 1
692.40 - 702.10 3
702.10 - 703.30/(2)/ 2
703.30 - 703.60 1
703.60 - 703.40 (Milepost equation)
703.40 - 704.30 2
704.30 - 708.40 3
708.60 - 762.00 2
762.00 - 766.71 Excepted
Newberg Branch 738.00 - 749.67 1
Westside Branch 671.58 - 685.90 Excepted
685.90 - 688.70 1/(3)/
688.70 - 689.80 2
689.80 - 690.48 1
690.48 - 709.30 3
709.30 - 738.00 Excepted
Dallas Branch 728.50 - 733.80 Excepted
Willamina Branch 730.60 - 749.50 Excepted
Bailey Branch 672.90 - 680.06 Excepted
</TABLE>
(1) FRA Class refers to track classifications established by the Federal
Railroad Administration (49 CFR 213) in effect on the Commencement Date.
(2) Same as Westside Branch mileposts 688.70-689.80 due to previous line
change.
(3) May be reduced to Excepted at descretion of Lessee.
<PAGE>
Attachment C
Minimum Service Standards
(Section 3.10)
<TABLE>
<CAPTION>
Station Base Volume/(1)/ Minimum Service Frequency
------- -------------- -------------------------
<S> <C> <C>
Toledo 11,000 7 days per week
McMinnville 7,000 7 days per week
Newberg 5,000 7 days per week
All Others N/A No minimum
</TABLE>
(1) Base Volume is annual revenue carloads originating or terminating at the
listed station.
The minimum service frequency requirement set forth above may be reduced by
Lessee upon any of the following events:
1. The monthly base volume (the Base Volume, above, divided by 12)
declines by 20% for any of the stations listed above.
2. The Lessee agrees to reduce the Minimum Service Freqency with either
the Lessor or the principal shipper located at the stations listed
above.
3. A circumstance arises, such as a plant closing for maintenance, a
force majeure at a shipper's facility or similar occurrence, where
service by Lessee is either unnecessary or impractical.
<PAGE>
Attachment D
Rehabilitation Plan
(Section 7.03)
Track rehabilitation shall be performed by Lessee to include the following:
1. Westside Branch: within six (6) months of the date Lessee takes possession of
the Leased Premises, a minimum of twelve thousand six hundred (12,600) crossties
shall be installed and track resurfaced between milepost 709.55 near
Independence and milepost 730.50 near Whiteson sufficient to permit handling of
all traffic from Newberg and McMinnville to Eugene via this segment.
2. Westside Branch: between milepost 709.55 near Independence and milepost
738.00 near St. Joseph, all 75 lb rail shall be replaced with 100 lb or heavier
rail. A minimum of five (5.0) miles of rail is to be replaced each calendar year
until all 75 lb rail has been replaced on this segment.
3. Toledo Branch: between milepost 705.00 near Corvallis and milepost 766.71
near Toledo, a minimum of 18,000 crossties shall be installed within twelve (12)
months of the date Lessee takes possession of the Leased Premises.
<PAGE>
MAP 1
[GRAPHIC]
----------------------
SOUTHERN PACIFIC LINES
----------------------
EXHIBIT A
LEASE TO WILLAMETTE & PACIFIC R.R. CO.
TOLEDO BRANCH
MP. 891.61 TO MP. 766.70
<PAGE>
MAP 2
[GRAPHIC]
----------------------
SOUTHERN PACIFIC LINES
----------------------
EXHIBIT A
LEASE TO WILLAMETTE & PACIFIC R.R. CO.
NEWBERG BRANCH
MP. 738.00 TO MP. 749.87
<PAGE>
MAP 3
[GRAPHIC]
----------------------
SOUTHERN PACIFIC LINES
----------------------
EXHIBIT A
LEASE TO WILLAMETTE & PACIFIC R.R. CO.
WEST SIDE BRANCH
MP. 738.00 TO MP. 871.58
<PAGE>
MAP 4
[GRAPHIC]
----------------------
SOUTHERN PACIFIC LINES
----------------------
EXHIBIT A
LEASE TO WILLAMETTE & PACIFIC R.R. CO.
DALLAS BRANCH
MP. 729.01 TO MP. 733.80
<PAGE>
MAP 5
[GRAPHIC]
----------------------
SOUTHERN PACIFIC LINES
----------------------
EXHIBIT A
LEASE TO WILLAMETTE & PACIFIC R.R. CO.
WILLAMINA BRANCH
MP. 730.48 TO MP. 749.46
<PAGE>
MAP 6
[GRAPHIC]
----------------------
SOUTHERN PACIFIC LINES
----------------------
EXHIBIT A
LEASE TO WILLAMETTE & PACIFIC R.R. CO.
BAILEY BRANCH
MP. 673.21 TO MP. 680.06
<PAGE>
ALBANY YARD
[GRAPHIC]
EXHIBIT B-1
LEASE TO
WILLAMETTE & PACIFIC RAILROAD, INC.
<PAGE>
MAP
EXHIBIT B-2
LEASE TO WILLAMETTE & PACIFIC R.R. CO.
ALBANY STATION
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED AS TO THOSE PORTIONS MARKED WITH ASTERISKS
---------------------------------------------------------------------------
(***) AND THOSE PORTIONS HAVE BEEN SEPARATELY FILED WITH THE COMMISSION
-----------------------------------------------------------------------
EXHIBIT 10.42
ALLEGHENY - INTERNATIONAL PAPER
TRANSPORTATION SERVICE AGREEMENT
(49 USC 10713)
This AGREEMENT ("Agreement") entered into this 24th day of November 1992
between ALLEGHENY RAILROAD ("Allegheny"), a corporation of the Commonwealth of
Pennsylvania, and INTERNATIONAL PAPER COMPANY ("IP"), a corporation of the state
of New York.
WHEREAS, Hammermill Paper Company, predecessor of IP, in 1985 acquired from
Consolidated Rail Corporation ("Conrail") and others, a line of railroad which
runs from milepost 2.8 at Erie, Pennsylvania to Milepost 149.9 at Emporium,
Pennsylvania ("Erie-Emporium Line") and certain ancillary trackage connecting
thereto;
WHEREAS, Hammermill Paper Company, upon acquisition of all properties that
form the Erie-Emporium Line, formed a subsidiary, the Allegheny Railroad, to
rehabilitate the line and provide rail service to shippers on and via said
Erie-Emporium Line;
WHEREAS, Hammermill Paper Company, also executed a Transportation Service
Agreement (ICC-CR-C-1991) with Conrail for the provision of unit train service
("Unit Train") between points in the state of Pennsylvania via said
Erie-Emporium Line for account of Hammermill Paper Company;
WHEREAS, Hammermill Paper Company, as owner of the Allegheny, granted
Conrail a Unit Train operating easement over the Erie-Emporium Line to
facilitate that Unit Train operation;
WHEREAS, International Paper Company, and Allegheny as successors to
Hammermill Paper Company, now wish to clearly
-1-
<PAGE>
delineate Allegheny as railroad versus IP as shipper/receiver of commodities via
the Unit Train, and want to set forth the rights and duties of the parties to
facilitate a continuation of that Unit Train operation.
The parties hereto, intending to be legally bound, agree as follows:
1. EFFECTIVE DATE; TERM OF AGREEMENT. Subject to execution of the
Conrail-Allegheny Operating Contract, and if this Agreement is approved by the
Interstate Commerce Commission (ICC), then its terms and conditions shall be
effective from date of filing (the day following the issue date shown on the
Contract title Page, i.e., Effective Date), as authorized by 49 CFR 1313.3(a).
Prior to January 1, 1992, the parties reached an agreement (which they now
ratify) that, once the Agreement has been approved by the Interstate Commerce
Commission, its provisions including the rates charged herein will be applied to
all Unit Train movements hereunder on or after January 1, 1992, (Application
Date) to the extent authorized by 49 CFR 1313.3(c).
Subject to Section 5(b), the term of this Agreement, hereinafter referred
to as the "Contract Term", is six (6) years from the Application Date through
and including December 31, 1997. This Agreement is subject to termination or
annual suspension by IP at the end of any applicable calendar year commencing
-2-
<PAGE>
on December 31, 1993, upon at least sixty (60) days prior written notice to
Allegheny.
Notwithstanding the foregoing, however, Allegheny may terminate this
Agreement by thirty (30) days written notice to IP in the event that Allegheny
(after obtaining any necessary regulatory approval) abandons or discontinues
service on all or a part of the Erie-Emporium Line, and IP may terminate this
Agreement by thirty (30) days' written notice to Allegheny in the event that
Conrail (after obtaining any necessary regulatory approval) abandons or
discontinues service on all or a part of the Erie City or Port Allegany-Lock
Haven lines; in either such event the parties hereto shall be relieved of all
unaccrued obligation remaining under this Agreement after the date of
termination, including a pro rata reduction in the Appendix A-1 annual revenue
commitment between the parties with respect to Unit Train Operations over the
Erie Emporium Line. Allegheny shall serve IP with copies of all notices or
applications which Allegheny files with the ICC for the purpose of obtaining
such abandonment approval. IP shall provide Allegheny with copies of all notices
which Conrail provides relative to any involved abandonment, etc.
2. TRANSPORTATION SERVICE.
(a) Unit Train Hours of Operation and Commodities to be Hauled.
Subject to the terms set forth in this Agreement, Allegheny shall
facilitate the movement of the IP-Conrail Unit Train on and via its
Erie-Emporium Line, and subject to the terms
-3-
<PAGE>
set forth in the Conrail-Allegheny Operating Contract ("Contract"), Conrail
shall provide Unit Train rail service solely for IP on or via the
Erie-Emporium Line owned by Allegheny (including stops at two points for
pick up and drop off of loaded and empty cars) between the hours of 7 P.M.
and 7 A.M., with Unit Train operation on said Erie-Emporium Line outside
said hours permitted at the discretion of Allegheny's dispatcher, for the
transportation of wood fiber (STCC 24-11) and woodpulp (STCC 26-111)
between points in Pennsylvania on the Allegheny and Conrail via named
lines.
(b) Scheduling. Conrail will provide crews, locomotives, and all
boxcar equipment necessary for it to establish round trip transportation
service for unit trains between Erie and Lock Haven as ordered by IP up to
three times per week in each direction together with local service between
Emporium and Port Allegany sufficient to deliver loaded and empty IP cars
between the wood fiber sourcing operations at Port Allegany and each
connecting Unit Train passing through Emporium. Allegheny has granted
Conrail an easement to operate the Unit Train over the Erie-Emporium Line
and will provide all maintenance necessary to insure that the Unit Train
can transit the Erie-Emporium Line in eight (8) hours or less inclusive of
two 30-minute stops on line. Allegheny shall conduct its railroad
operations and roadbed construction and repairs so as not to interfere with
Conrail's performance of its Unit Train contractual obligations.
-4-
<PAGE>
(c) Billing. IP will provide Conrail with a Uniform Commercial
Straight Bill of Lading ("Bill of Lading") indicating the number of loaded
and empty cars that are to move on each round-trip Unit Train. The Bill of
Lading will segment the carload movements by commodity and origination
(i.e. Woodpulp - Erie to Lock Haven and Wood Fiber - Emporium to Erie, Kane
to Erie and Port Allegany to Erie). In addition, IP will provide Conrail
and Allegheny with a "Unit Train Billing Summary" for each Unit Train
movement. The Unit Train Billing Summary in addition to providing the
detail of the loaded and empty car movements will also provide the
calculation of carload weights and the basis of charges assessed for each
Unit Train for 1992. The Uniform Commercial Straight Bill of Lading and
Unit Train Billing Summary are incorporated herein and are shown in
Exhibits 1 and 2, respectively. Payment for years 1993 and thereafter shall
be rendered monthly as provided in Appendix A-1.
(d) Contract Carrier Service. IP recognizes and agrees that when
providing service pursuant to this Agreement and while operating under this
Agreement on any portion of the Erie-Emporium Line in the performance of
such service, Allegheny shall be acting solely as a non-regulated, contract
carrier and not as a common carrier subject to regulation by the ICC or
other Federal or State regulatory agencies.
(e) Unit Train Coordinating Team. A Unit Train Coordinating Team shall
be established and shall consist of at
-5-
<PAGE>
least one representative each from Allegheny, Conrail, and IP. The Team
shall meet at least quarterly to discuss the expected scope of operations;
i.e., number of trains, train start and finish times, the number of
trailing cargo units, maintenance of track, seasonal shutdowns or any other
item that might impact the Unit Train operation during the next three to
six weeks.
(f) Unit Train Transit Performance Standard. Each Unit Train operating
via the Erie-Emporium Line, covered by this Agreement is scheduled to
complete the full trip between Lock Haven and Erie within twelve (12) hours
(determined by the interval between the time when Conrail's road crew comes
on duty at Lock Haven and goes off duty at Erie, or vice versa for the
return trip), with a transit time allowance of eight (8) hours over the
Erie-Emporium Line including stops of 30 minutes each for pick up and drop
off of loaded and empty cars at two points on the Erie-Emporium Line
("Allegheny Unit Train Transit Standard"), and a transit time allowance of
four (4) hours over the remainder of the trip between Lock Haven and Erie,
including one 30 minute stop for pick up and drop off of loaded and empty
cars at Emporium on the Port Allegany-Lock Haven Line.
(g) Deviation From Unit Train Transit Performance Standard. If a Unit
Train does not complete the trip between Lock Haven and Erie or vice-versa
within *** but not more than *** due in whole or in part to failure to
traverse the Erie-Emporium Line within *** inclusive
-6-
<PAGE>
of *** on Line, resulting from circumstances within Allegheny's control,
then IP may assess Allegheny Liquidated Damages of *** for each hour (or
fraction thereof) attributable to Allegheny that said Unit Train is delayed
in excess of that eight (8) hour Allegheny Unit Train Transit Standard.
If a Unit Train does not complete the trip between Lock Haven and Erie
or vice-versa within *** hours due to failure to traverse the Erie-Emporium
Line, inclusive of *** on Line, within *** resulting from circumstances
within Allegheny's control, then IP shall have the right to reroute the
Unit Train over Buffalo. In that event Allegheny shall be obligated to move
loaded and empty IP cars between Kane and Erie, Pennsylvania connections
with Conrail without charge to Conrail and at a charge to IP of *** per
loaded car mile and without compensation under Appendix A hereto. Where
appendix A-1 applies the annual revenue commitment shall be reduced by ***
for each such round trip Unit Train rerouted over Buffalo. The reroute
shall continue until such time as Allegheny remedies the transit situation
to safely permit Unit Train operations within the Allegheny Unit Train
Transit Standard to the satisfaction of IP and Conrail.
3. PAYMENTS BY INTERNATIONAL PAPER
(a) Transportation Charges. As compensation for the service Allegheny
provides under this Agreement, IP shall pay
-7-
<PAGE>
shall be based on rates and charges found in Appendices A and A-1 and will
be made by IP in the following manner as applicable:
Appendix A: (i) On the first Friday of the month for Unit Train
traffic for the 1st through the 15th of the
previous month.
(ii) On the second Friday of the month for Unit Train
traffic from the 16th through the end of the
previous month.
Appendix A-1: Monthly payment in arrears.
IP shall remit all payments due Allegheny to such address of which
Allegheny notifies IP in writing.
The procedures involved in processing claims by Allegheny or IP to
recover charges are identical to standards imposed in common carriage
specified in 49 U.S.C. 11706.
4. MAINTENANCE AND INSPECTION OF ERIE-EMPORIUM LINE. Allegheny agrees, for
consideration named in Appendix A and without expense to Conrail or further
expense to IP, to maintain the Erie-Emporium Line in such condition as will
permit the continuing satisfaction of the Allegheny Unit Train Transit standard.
Allegheny, at its own expense and no less frequently than annually, shall
engage the services of a track geometry inspection service to run over the
entire Erie-Emporium Line for the express purpose of definitively establishing
(i) the actual FRA track classification of each segment of the Erie-
-9-
<PAGE>
Emporium Line and (ii) whether said Erie-Emporium Line meets the Section 2(f)
Allegheny Unit Train Transit Standard. One (1) original complete copy of the
inspection report shall be mailed to Conrail (at the following address:
Consolidated Rail Corp., 2001 Market Street 17NO, P. O. Box 41417, Philadelphia,
PA 19101-1417, Attn: Senior Vice President - Operations) at the same time said
report is mailed to Allegheny and IP. Failure to perform said inspection at
least annually but not more than fifteen (15) months apart shall be considered a
material default of this Agreement and IP, upon 30 days' written notice to
Allegheny and without further liability, may either cancel this Agreement or
reduce the charges due Allegheny under Appendix A or A-1, as applicable by ten
percent for the duration of the default. In the event of termination IP shall
not be liable to compensate Allegheny for any foregone Unit Train revenue under
Appendix A and any Appendix A-1 annual revenue guarantee shall be reduced pro
rata for the remainder of the annual period or for the duration of the default
as applicable. Allegheny may cure this default if, within said 30 day notice
period, the required full inspection is performed and Allegheny promptly
provides Conrail and IP a copy of the inspection results for the entire
Erie-Emporium Line.
5. EXCUSES FROM PERFORMANCE UNDER THE CONTRACT.
(a) Definition of Force Majeure. For purposes of this Agreement force
majeure shall include, but nor be limited to acts of God, floods, storms,
earthquakes, hurricanes, tornadoes, or other severe weather or climatic
conditions; acts of public
-10-
<PAGE>
enemy, war, blockade, insurrection, vandalism or sabotage; fire, accident,
wreck, derailment, washout or explosion; any strike or labor dispute
experienced by the parties or by third parties; embargoes or Association of
American Railroads service orders; or governmental laws, orders or
regulations; any of which events require the shutdown of any portion of the
involved Allegheny or Conrail lines or of any portion of IP's pulp or paper
manufacturing facilities in Erie or Lock Haven, Pennsylvania, or related
wood fiber sourcing operations in Pennsylvania, or otherwise prevent either
party from fulfilling its obligations hereunder.
(b) Suspension of Obligations. If occurrences outside the control of
the parties, including force majeure, as set forth in Section 5(a), but not
limited thereto, prevent either of the parties from meeting its obligations
hereunder, then the obligations of such party under this Agreement shall be
abated to the extent, but only to the extent made necessary by such force
majeure and during its continuance, provided that reasonable efforts are
made to eliminate the effect of such force majeure and neither party shall
be liable to the other for loss, damage, or delay caused by such force
majeure. In the event that either party invokes force majeure, the annual
term of this Agreement shall be extended for a period of time equivalent to
the force majeure period(s) during said term.
(c) Allegheny Notices Concerning Force Majeure. (i) Where possible
Allegheny shall provide IP and Conrail with written notice concerning any
situation of which Allegheny is
-11-
<PAGE>
aware which may require Allegheny to invoke force majeure and the
anticipated duration thereof; (ii) written notice of the event and a short
description of the impact (including anticipated duration) shall accompany
the actual invocation of force majeure by Allegheny; (iii) as soon as it
appears that the force majeure situation is coming to an end, Allegheny
shall provide IP and Conrail verbal and written notice of the date on which
it expects the situation giving rise to force majeure to be corrected and
full service to resume; (iv) Allegheny shall not forfeit any right to
proceed under the force majeure provisions of this Agreement by not
invoking such provisions at the time it first learns of a force majeure
situation.
(d) IP Notices Concerning Force Majeure. (i) Where possible IP shall
provide Allegheny and Conrail with written notice concerning any situation
of which IP is aware which may require IP to invoke force majeure and the
anticipated duration thereof; (ii) written notice of the event and a short
description of the impact (including anticipated duration) shall accompany
the actual invocation of force majeure by IP; (iii) as soon as it appears
that the force majeure situation is coming to an end, IP shall provide
Alleqheny and Conrail verbal and written notice of the date on which it
expects the situation giving rise to force majeure to be corrected and full
service to resume; (iv) IP shall not forfeit any right to proceed under the
force majeure
-12-
<PAGE>
provisions of this Agreement by not invoking such provisions at the time it
first learns of a force majeure situation.
(e) Rerouting of Unit Train Over Buffalo. In the event of force
majeure on the Allegheny, the Allegheny shall move loaded and empty IP cars
between Kane, Pennsylvania and either the Erie or Emporium, Pennsylvania
connections with Conrail, as appropriate, at a charge to IP of two dollars
($2.00) per loaded car mile and without compensation under Appendices A or
A-1 hereto.
(g) Right of Termination After Extended Suspension. Should force
majeure result in the suspension of performance by one or both parties to
this Agreement for a period of one hundred and eighty (180) consecutive
days or more, either party may terminate this Agreement upon 30 days
advance written notice to the other.
6. LIABILITY; INDEMNITY.
(a) General. As between the parties hereto responsibility for loss of
or damage to property (hereinafter referred to as damage) and injury to or
death of persons (hereinafter referred to as injury) shall be governed by
Paragraphs (b) and (c) of this Section. Except as otherwise provided in
Paragraph (b), the party which is responsible shall release the other party
from responsibility for such injury or damage and shall defend, indemnify,
protect, and save harmless the other party (and its officers, agents, and
employees) from and against all claims,
-13-
<PAGE>
actions, liability, judgements, loss, and expenses (including legal
expenses and attorneys' fees) in connection with, or arising out of, such
injury or damages.
(b) Allocation of Liability. Without limiting any remedies to which IP
or Allegheny would be entitled as a matter of law or equity, the Parties
hereby agree that all liability, loses, costs, or expenses (including
death) and property damage shall be borne by the Parties as follows:
(i) Negligence of IP. IP shall be solely responsible for, and
shall bear all liability, losses, costs, or expenses (including
reasonable attorneys' fees) resulting from personal injury (including
death arising therefrom) and loss and damage to property caused by the
negligence of IP, its agents or employees, or by the violation by IP,
its agents or employees of any term or provision of this Agreement. IP
hereby agrees to indemnify and hold Allegheny harmless from all such
liability, losses, costs, or expenses including reasonable attorneys'
fees.
(ii) Negligence of Alleqheny. Allegheny shall be solely
responsible for, and shall bear all liability, losses, costs, or
expenses (including reasonable attorneys' fees) resulting from
personal injury (including death arising therefrom) and loss and
damage to property caused by the negligence of Allegheny, its agents
or employees, or by the violation by Allegheny, its agents or
employees of any term or provision of this Agreement. Allegheny hereby
agrees to indemnify and hold IP harmless from all
-14-
<PAGE>
such liability, losses, costs, or expenses, including reasonable
attorneys' fees.
(iii) Joint or concurrent Negligence. Notwithstanding the
provisions of Section (i) or (ii) hereof, all liability, losses,
costs, or expenses (including reasonable attorneys' fees) resulting
from personal injury (including death arising therefrom) or loss or
damage to property caused by the joint or concurrent negligence of IP
and Allegheny shall be borne by them to the extent each is determined
to be negligent either by agreement between the Parties or by final
judgment of a court of competent jurisdiction. In the event that
negligence is not apportioned by agreement between the Parties or by a
court of competent jurisdiction, such liability, losses, costs, or
expenses shall be shared by Allegheny and IP equally.
(c) IP Lading and Rail Equipment. Allegheny shall be liable to IP for
loss or damage to lading or to IP's rail equipment when it results from
Allegheny's fault or negligence while supporting the Unit Train
transportation service here involved, provided however, that Allegheny
shall not be liable for consequential, special, indirect or punitive
damages, interest, or for attorneys' fees, or for any amount in excess of
IP's full actual loss on the commodities shipped or to IP's equipment.
Except to the extent they conflict with the above provisions, all loss and
damage claims shall be handled in accordance with, and subject to, Title 49
of the Code of Federal Regulations Part 1005;
-15-
<PAGE>
the Contract Terms and Conditions of the Uniform Straight Bill of Lading in
the form of Exhibit 1 attached hereto and incorporated herein by reference;
and Title 49 United States Code, Section 11707.
(d) Acts of Third Parties. Unless otherwise specifically agreed in
writing by the parties hereto, the acts or omission of any tenant,
licensee, or grantee of Allegheny (other than Conrail or its successors or
assigns) occurring on the Erie-Emporium Line shall, for the purposes of
this Section, be deemed the acts or omissions of Allegheny. Unless
otherwise specifically agreed in writing by the parties hereto, the acts or
omission of any tenant, licensee, or grantee of IP shall, for the purpose
of this Section, be deemed the acts or omissions of IP.
(e) Allegheny Insurance Coverage. Allegheny agrees promptly after
execution of this Agreement to take steps (including notification of its
respective insurance carriers) to assure that the indemnities and waivers
of recovery provided for in this Section shall not invalidate, or preclude
recovery under, any applicable policies of insurance which Allegheny may
have; and upon its request, Allegheny shall furnish IP copies of the
certificate from its insurance carriers to such effect.
(f) Wrecking or Rerailinq Service. Notwithstanding Section 6(b) and in
the event that negligence of Allegheny is not the proximate cause of the
derailment then upon IP request Allegheny shall perform and IP shall pay
for wrecking
-16-
<PAGE>
and rerailing service for all cars and equipment owned or leased by IP that
are involved in a Unit Train derailment or wreck while on the Erie-Emporium
Line. Allegheny shall arrange for delivery to or deliver to IP all cars and
equipment, and salvage from the same, so picked up and removed from the
Erie-Emporium Line in the course of performing wrecking or rerailing
service.
7. ASSIGNMENTS.
(a) General. Neither IP nor Allegheny shall assign its rights under
this Agreement without the prior written consent of the other. Neither
party shall withhold its consent unreasonably.
(b) Transfer of Rail Service to Other Carrier. In the event that all
or a portion of the Erie-Emporium Line involved in the provision of Unit
Train transportation service under this Agreement is sold or transferred to
another carrier, Allegheny shall require the acquiring entity to
participate in this Agreement on terms not materially different from those
of this Agreement. Allegheny may terminate this Agreement upon one hundred
eighty (180) days written notice to IP if a sale or transfer renders
Allegheny operations hereunder impossible or substantially more burdensome.
Termination of the Agreement by Allegheny in accordance with this provision
shall not relieve or release either party hereto from any obligation
assumed or from any liability which may have arisen or been incurred by
either party under any provision of this Agreement prior to the termination
thereof,
- 17 -
<PAGE>
except that any Appendix A-1 annual revenue guarantee shall be reduced pro
rata for the remainder of the annual period.
8. NOTICES. Unless otherwise specified herein, all notices, requests,
consents, demands, or other communications desired or required to be given by
one party to the other shall have been deemed to have been given only when
received via United States mail, certified, return receipt requested, directed
to the recipient as follows (or at such other addresses as either of the parties
hereto may designate by written notice to the other party hereto):
If to Allegheny:
President
Allegheny Railroad
316 Pine Street
Warren, Pennsylvania 16365
If to International Paper Company:
Manager, U. S. Distribution Operations
International Paper Company
6400 Poplar Avenue
Memphis, Tennessee 38197
Matters of an emergency or operating nature may be communicated by
telephone, telegraph or other reasonable means and shall be confirmed in writing
as soon as practicable thereafter.
9. GENERAL.
(a) Entirety of Agreement. This Agreement, together with the Unit
Train Easement Operating Agreement and the Short Line Operating Agreement
executed in May 1985 by Conrail and Hammermill, predecessor to Allegheny,
sets forth the entire
- 18 -
<PAGE>
understanding of the parties hereto with respect to the transactions
contemplated hereby and may not be amended except by further written
instrument executed by the parties hereto. Except as just noted, any
previous agreements or understandings between the parties regarding the
subject matter hereof are merged into and superseded by this Agreement.
Section headings and captions shall not be considered in interpreting this
Agreement.
(b) Statements in Documents. All statements or undertakings contained
in any certificate, instrument or document delivered by or on behalf of
either party pursuant to this Agreement shall be deemed, respectively,
representations and warranties by the party responsible for such statement
or undertaking.
(c) Survival of Obligations. Obligations of either party arising or
accruing prior to the expiration or termination of this Agreement shall
survive such expiration or termination and shall be binding upon and inure
to the benefit of, and be enforceable by, the successors and assigns of the
respective parties.
(e) Governinq Law. This Agreement and the rights and obligations
accruing hereunder shall be construed and enforced in accordance with the
laws of Pennsylvania.
(f) Appendices and Exhibits. All appendices and exhibits referred to
in this Agreement are intended to be, and are hereby, specifically made a
part of this Agreement.
(g) Waiver. No waiver by either party of any right or of any failure
of, or refusal by, the other party to comply with its obligations under
this Agreement shall be deemed a waiver
- 19 -
<PAGE>
of any right or of any other or subsequent failure or refusal to so comply.
(h) Best Efforts. Each party shall use its best efforts to expedite
the obtaining of any governmental approvals required in connection with any
of the transactions contemplated by this Agreement.
(i) Right of Audit. In case of a dispute or disagreement as to the
proper application of any provision of this Agreement, both Allegheny and
IP shall have the right to audit the pertinent books and records of the
other party, insofar as permitted by law, at the expense of the party
requesting such audit.
(j) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(k) Time. Time shall be of the essence of this Agreement.
(1) Equitable Adjustment of Open Items Upon Termination. In the event
that Unit Train shipments under this Agreement are in transit at the time
of its expiration, termination or suspension for reasons other than the
events of force majeure provided for in Section 5, as determined by the
waybill for such Unit Train shipments being dated prior to such expiration,
termination or suspension, then such shipments and the charges therefor
shall be subject to the terms and conditions hereof. In the event that
charges for shipments under this Agree-
- 20 -
<PAGE>
subsidiary companies.
IN WITNESS WHEREOF, the authorized officials of the parties hereto have
caused this Transportation Service Agreement to be duly executed as of the day
and year first above written.
ALLEGHENY RAILROAD INTERNATIONAL PAPER COMPANY
By: /s/ W.V. Gentilman By: /s/ W.P. Crawford
----------------------- -----------------------------
President Vice President - Logistics
CEM:ALY--IP.CTR
- 22 -
<PAGE>
APPENDIX A
1992
Allegheny - IP Transportation Service Agreement
For maintenance of the Erie-Emporium Line to the Allegheny Unit Train
Transit Standard and for a continued grant of the Unit Train Operation Easement
(at no charge to Conrail) in support of the Unit Train operation during 1992, IP
shall pay Allegheny as full compensation for the aforesaid for each round trip
Unit Train transiting the Erie-Emporium Line the following round trip train
charge based on the number of billable locomotives necessary to handle the
tonnage parameters listed:
<TABLE>
<CAPTION>
Number of
Locomotives Tonnage Round Trip
(4 Axles) Parameters* Train Cost
--------- ----------- ----------
<S> <C> <C>
3 3,637 $12,559
4 4,980 $15,561
5 6,323 $17,879
6 7,549 $20,535
</TABLE>
* Tonnage Parameters (cars and lading only) can be increased by 10% from Kane
to Erie Westbound and from Erie to Lock Haven Eastbound.
- 23 -
<PAGE>
APPENDIX A-1
1993 - 1997
Allegheny - IP Transportation Service Agreement
For maintenance of the Erie-Emporium Line to the Allegheny Unit Train
Transit Standard and for a continued grant of the Unit Train Operation Easement
(at no charge to Conrail) in support of the Unit Train operation during the
calendar years 1993 through 1997 IP shall pay Allegheny as full and complete
compensation for the aforesaid, subject to Sections 2(g), 4, 5, and 7(b), an
annual fee in the amount of $1,250,000.00 payable in monthly installments in
arrears. If annual inflation as measured by the Producer Price Index exceeds 5%,
Allegheny may reopen discussions with IP on an upward adjustment of the
$1,250,000 annual fee. Should annual Unit Train movements over the Allegheny
generate more than 8,000 loaded cars, IP shall pay Allegheny $125.00 per car for
all loaded cars in excess of the initial 8,000 loaded cars moved annually via
the Erie-Emporium Line in Unit Train service.
- 24 -
<PAGE>
APPENDIX B
Specifications of IP Cars
Gondola Car Type 1: Outside length of 63 feet, 9
inches, loaded capacity of 190,000 pounds
and 6500 cubic feet, designated HPAX in the
Official Railway Equipment Register.
Gondola Car Type 2: Outside length of 58 feet, 2
inches, loaded capacity of 154,000 pounds
and 4,629 cubic feet level full, designated
"TPPX or IPCX" in the Official Railway
Equipment Register.
Rack Car Type 1: Outside length of 75 feet, 7 inches, loaded
capacity of 199,000 pounds, designated "HPAX"
in the Official Railway Equipment Register.
Specifications of Conrail Cars
Box Car Type: Inside length not exceeding 52 feet, 8
inches, designated "XM" in the Official
Railway Equipment Register, or any other box
car supplied by Conrail to IP into which IP
can load a minimum of 110,000 pounds of wood
pulp and which is otherwise acceptable to
IP.
- 25 -
<PAGE>
EXHIBIT 1
BILL OF LADING
- 26 -
<PAGE>
EXHIBIT 2
UNIT TRAIN BILLING SUMMARY
DATE: / / UT # _________________
<TABLE>
<CAPTION>
INBOUND OUTBOUND
(LOCK HAVEN TO KANE) (ERIE TO LOCK HAVEN)
-------------------- --------------------
<S> <C> <C> <C> <C> <C>
# HPAX TONS TOTAL # HPAX TONS TOTAL
# BXS TONS TOTAL # BXS TONS TOTAL
# RACKS TONS TOTAL # RACKS TONS TOTAL
----- -----
</TABLE>
TOTAL TONS
POWER TONS
VARIANCE XXXX
----- -----
(KANE TO ERIE) ---------------------------------
REMARKS:
# RACKS TONS TOTAL
TOTAL TONS
POWER TONS
VARIANCE
- --------------------------------------------------------------------------------
LOADED CARS
<TABLE>
<S> <C> <C>
KANE ----------------- HPAX LAP -----------------
EMPORIUM ----------------- HPAX BL -----------------
PORT ALY ----------------- BOXES -----------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LOCOMOTIVE TONNAGE LIMITS APPLICABLE
POWER LH to KANE BALANCE BILLING (X)
----- ---------- ------- -----------
<C> <C> <C> <C>
3 UNITS 3637 4001 ______________
4 UNITS 4980 5478 ______________
5 UNITS 6323 6955 ______________
6 UNITS 7549 8303 ______________
</TABLE>
SIGNED: ______________________
DATE: ______________________
- 27 -
<PAGE>
EXHIBIT 10.43
CONRAIL-ALLEGHENY OPERATING CONTRACT
THIS CONTRACT is made this 24th day of November 1992 by and between
CONSOLIDATED RAIL CORPORATION ("Conrail"), a corporation of the Commonwealth of
Pennsylvania, and ALLEGHENY RAILROAD ("Allegheny"), a corporation of the
Commonwealth of Pennsylvania.
WHEREAS, Hammermill Paper Company ("Hammermill"), predecessor of
International Paper Company ("IP"), in 1985 acquired from Conrail and others, a
line of railroad which runs from milepost 2.8 at Erie, Pennsylvania to Milepost
149.9 at Emporium, Pennsylvania ("Erie-Emporium Line") and certain ancillary
trackage connecting thereto;
WHEREAS, Hammermill upon acquisition of all properties that form the
Erie-Emporium Line formed a corporation of the Commonwealth of all properties
subsidiary, the to rehabilitate the line and provide rail service to shippers on
and via said Erie-Emporium Line;
WHEREAS, Hammermill also executed a Transportation Service Agreement
(ICC-CR-C-1991) with Conrail for the provision of Unit Train Service ("Unit
Train") between points in the state of Pennsylvania via said Erie-Emporium Line
for account of Hammermill;
WHEREAS, Hammermill, as owner of the Allegheny, granted Conrail a unit
train operating easement over the Erie-Emporium Line to facilitate that Unit
Train operation;
WHEREAS, Allegheny, as successor to Hammermill, now wishes to clearly
delineate Allegheny as railroad versus IP as shipper/receiver of commodities
via the Unit Train;
-1-
<PAGE>
WHEREAS, the parties to the 1985 Transportation Service Agreement desire to
continue the Unit Train operation, and to that end, they desire, except as
provided in Section 11(a), to terminate and restate the Transportation Service
Agreement in its entirety by dividing the terms and obligations thereof into two
separate agreements: one between Conrail and IP ("Conrail/IP Transportation
Service Agreement") and this Contract between Conrail and Allegheny.
NOW, THEREFORE, in consideration of the promises and the covenants
hereinafter contained, the parties agree as follows:
1. EFFECTIVE DATE; TERM OF AGREEMENT. This Contract shall take effect on
---------------------------------
January 1, 1992. This Contract and the service provided for herein shall then
remain in effect until December 31, 1993 with year to year renewals by mutual
consent for a period of four (4) years from the Effective Date; however, either
party has the right to suspend this Contract for annual periods if IP notifies
either of the parties of its intention not to renew the Transportation Service
Agreement. Either party shall notify the other of its intention to suspend this
Contract at least sixty (60) days prior to December 31 of each year.
Notwithstanding the foregoing, however, Conrail may terminate this Contract at
any time by thirty (30) days' written notice to Allegheny and IP in the event
that Conrail (after obtaining any necessary regulatory approval) abandons or
discontinues service on all or part of the Erie City or all or part of the Port
Allegany-Lock Haven lines. Conrail shall serve Allegheny and IP with
-2-
<PAGE>
copies of all notices or applications which Conrail files with the ICC for the
purpose of obtaining such abandonment approval.
Upon expiration or termination of this Contract and the related Conrail-IP
Transportation Service Agreement, Conrail agrees to execute and deliver to
Allegheny releases suitable for recording of its Unit Train Attachment and Unit
Train Operation Easements reserved and granted pursuant to the 1985 Conrail
Hammermill Transportation Service Agreement (ICC CR-C-l991). In the event of
Conrail's formalized abandonment of the Southern Tier Line in Pennsylvania,
Conrail agrees to execute and deliver to Allegheny releases suitable for
recording of its Erie-Corry Easement reserved and granted pursuant to the 1985
Conrail Hammermill Sale Agreement.
Notwithstanding the foregoing, however, Allegheny may terminate this
Contract at any time by thirty (30) days' written notice to Conrail and IP in
the event that Allegheny (after obtaining any necessary regulatory approval)
abandons or discontinues service on all or part of the Erie-Emporium Line.
Allegheny shall serve Conrail and IP with copies of all notices or applications
which Allegheny files with the ICC for the purpose of obtaining such abandonment
approval.
2. TRANSPORTATION SERVICE.
----------------------
(a) Limitations on Service. Subject to the terms set forth in this Contract
----------------------
and without charge by Allegheny except as provided elsewhere herein, Conrail
shall be permitted to provide only exempt contract rail service on the
Erie-Emporium Line owned by Allegheny, solely for the account of IP pursuant to
a Contract approved by the Interstate Commerce Commission pursuant
-3-
<PAGE>
to 49 U.S.C. Section 10713. The rail service shall be limited to Unit Train
service (including stops at selected points for pick up and drop off of loaded
and empty cars), conducted between the hours of 7 P.M. and 7 A.M. (except that
Unit Train operation outside said hours may be permitted at the discretion of
Allegheny's dispatcher) for the transportation of wood fiber (STCC 24-11) and
woodpulp (STCC 26-111) between points in Pennsylvania, located on the Allegheny
or Conrail. Allegheny may conduct railroad operations and roadbed construction
and repairs on the Erie-Emporium Line between the hours of 7 P.M. and 7 A.M.
only in such a manner that will not interfere with Conrail's performance of its
obligations to IP under the Conrail-International Paper Transportation Service
Agreement.
(b) Operations after 7 A.M. If the westbound Conrail Unit Train operation
-----------------------
to Erie does not complete its trip and exit the Erie-Emporium Line by 7 A.M. on
two occasions per calendar month, as evidenced by written notification from
Allegheny to Conrail, then Conrail shall pay to Allegheny $100 per hour, or
fraction thereof, that the Unit Train is on the Erie-Emporium Line after 8 A.M.
for each additional occasion during that calendar month provided that:
(i) conrail is solely at fault for all delays, and
(ii) Conrail has had exclusive, unencumbered access to the
Erie-Emporium Line within the last 8 hours of the 12
hour window, and
-4-
<PAGE>
(iii) IP has ordered and Conrail has operated three
round-trip Unit Train Operations during each week in
which there was a delay.
(c) Operating Rules. Conrail crews shall be governed by Allegheny Operating
---------------
Rules, timetables, and special instructions while operating over the
Erie-Emporium Line. This provision shall supersede any other provisions that may
be contained elsewhere in this Contract or in related agreements. Conrail
employees qualified on physical characteristics need not be requalified.
(d) Procedures for Investigating Violations of Operating Rules. Allegheny
----------------------------------------------------------
may conduct an investigation at its option if a Conrail employee working on
Allegheny's property is alleged to have violated Allegheny's rules, regulations,
orders, practices or instructions, or if an incident occurs which requires an
investigation under applicable agreement rules. To exercise its option,
Allegheny will schedule the investigation and notify Conrail's Local
Transportation Officer in the territory thereof, who will, in turn, arrange to
issue proper notice to Conrail's employee(s) of the investigation. Allegheny's
scheduling of the investigation must comply with the time limits provided in the
applicable agreement on Conrail's railroad. Allegheny will provide its
regulations, supplements, and safety rules to Conrail at no cost.
If Allegheny conducts an investigation, Allegheny shall have the right to
exclude from their Erie-Emporium Line any employee of Conrail, except officers,
determined by
-5-
<PAGE>
Allegheny as the result of Allegheny's investigation or hearing described below,
to be in violation of Allegheny's rules, regulations, orders, practices or
instructions.
In a major offense such as violation of Conrail's Rule G, dishonesty,
insubordination, or a serious violation of operating rules, wherein Allegheny
desires to bar Conrail's employee from service on Allegheny's Erie-Emporium Line
pending an investigation by Allegheny, immediate verbal notification will be
given to the appropriate Transportation Officer of Conrail so that proper
written notice can be issued to the employee.
If Allegheny conducts an investigation, its officer will conduct the
investigation, but an officer of Conrail may be present to assure compliance
with Conrail's labor agreement and practices with respect to investigation
procedures. After the investigation is concluded, Allegheny will promptly
furnish Conrail with two copies of the transcript and a recommendation as to the
discipline to be assessed. Conrail's Transportation Officer will arrange to
assess discipline, subject to receipt of Allegheny's recommended discipline,
within the applicable time limits. If Allegheny recommends dismissal, Conrail
reserves the right to change the recommendation to the extent of barring the
individual from operating over Allegheny's territory.
It is understood that Allegheny shall reimburse Conrail for all payments
that Conrail might be required to make as a result of a challenge being made by
the employee or his representative as to the discipline recommended by Allegheny
and assessed by Conrail. Conrail agrees to notify Allegheny before
-6-
<PAGE>
committing itself to making payment of any claim. In the event a claim is
progressed to an Adjustment Board, Allegheny will be given an opportunity to
review Conrail's submission. Any payments made to employees, as a result of an
investigation being "overturned", shall include not only actual wages, but in
addition, shall include expenses which Conrail may be required to pay covering
vacation allowances, Railroad Retirement taxes, unemployment insurance taxes and
any other payroll tax or fringe benefits.
(e) Scheduling. Conrail shall be permitted round trip Unit Train
----------
transportation service for service to IP between Erie and Lock Haven at least
three (3) times per week in each direction.
(f) Unit Train Coordinating Team. A Unit Train Coordinating Team shall be
----------------------------
established and shall consist of at least one representative each from
Allegheny, Conrail, and IP. The parties shall meet at least quarterly to discuss
the expected scope of operations; i.e., number of trains, train start and finish
times, the number of trailing cargo units, maintenance of track, seasonal
shutdowns or any other item that might impact the Unit Train operation during
the next three to six weeks.
(g) Performance Standard. Each Unit Train performing the rail service
--------------------
permitted by Section 2(a) is scheduled to complete the trip between Erie and
Lock Haven within twelve (12) hours ("Conrail Unit Train Operating Standard")
(determined by the interval between the time when Conrail's crew comes on duty
at Lock Haven and goes off duty at Erie, or vice versa for the return trip),
with a transit time allowance of eight (8) hours over the Erie-Emporium Line,
including stops of thirty (30) minutes each
-7-
<PAGE>
for pick up and drop off of loaded and empty cars at two points on the
Erie-Emporium Line ("Allegheny Unit Train Transit Standard"), and a transit
time allowance of four (4) hours over the remainder of the trip between Lock
Haven and Erie, including one thirty (30) minute stop for pick up and drop off
of loaded and empty cars at Emporium on the Port Allegany-Lock Haven line.
(h) Deviation from Unit Train Performance Standard.
----------------------------------------------
(1) If Conrail incurs two (2) recrews pursuant to Section 3(a), as
evidenced by notification pursuant to Section 3(e), during a time period of
fourteen (14) consecutive calendar days, then Conrail shall not be obligated to
route Unit Train traffic over the Erie-Emporium Line until problems have been
rectified and the Allegheny Unit Train Transit Standard has been restored by
Allegheny, as evidenced in writing by Allegheny to Conrail. Further, in the
event that Conrail does not route the Unit Train traffic via the Erie-Emporium
Line, Allegheny shall have the obligation to handle loaded and empty cars
destined to or originating from the Erie-Emporium Line to/from Conrail at Erie
and/or Emporium as appropriate, at no charge to Conrail.
(2) In the event the Erie-Emporium Line cannot be transited within twelve
(12) hours, Conrail shall have the obligation to route the Unit Train over its
railroad via Buffalo, and the Allegheny shall have the obligation to bring
loaded and empty cars destined to or originating from the Erie-Emporium Line
to/from Conrail at Erie and/or Emporium as appropriate, at no charge to Conrail.
-8-
<PAGE>
(i) Conrail's Breakdowns on the Erie-Emporium Line. If by reason of any
----------------------------------------------
mechanical failure or for any other cause not resulting from an accident or
derailment, a train or locomotive of Conrail becomes stalled and unable to
proceed under its own power, or fails to maintain normal operating speed over
the Erie-Emporium Line, or if in emergencies crippled or otherwise defective
cars are set out of Conrail's trains on any portion of the Erie-Emporium Line or
on other Allegheny property, Allegheny shall have the option to furnish motive
power or such other assistance as may be necessary to haul, help, or push such
trains, locomotives, or cars, or to properly move the disabled equipment off the
Erie-Emporium Line, and Conrail shall reimburse Allegheny for the cost of
rendering any such assistance. In the event that Allegheny fails to agree within
fifteen minutes after receipt of Conrail's request for help that it will provide
the motive power necessary to move Conrail's disabled equipment off the
Erie-Emporium Line, or in the event that Allegheny fails to provide such motive
power at the site of Conrail's disabled equipment as soon as practicable
following receipt of Conrail's request for same, then Conrail shall be free to
provide its own motive power to move its disabled equipment. If it becomes
necessary to make repairs to, or adjust or transfer, the lading of such crippled
or defective cars in order to move them off the Erie-Emporium Line, Conrail
shall reimburse Allegheny for the cost of any such work done by Allegheny.
3. TRAIN RECREW
(a) Allegheny Default. If a Unit Train does not meet the Conrail Unit Train
-----------------
Operating Standard due to failure to
-9-
<PAGE>
traverse the Erie-Emporium Line within eight (8) hours resulting from
circumstances within Allegheny's control, and Conrail is required to employ
additional crews to complete the trip to comply with the Federal 12 hour law,
then Conrail will assess Allegheny and Allegheny will pay a crew recall charge
which shall be $1,500.00 for each additional crew needed to complete the trip
between Erie and Lock Haven.
(b) Conrail Default. If a Unit Train does not meet the Conrail Unit Train
---------------
Operating Standard resulting from circumstances within Conrail's control, and
Conrail is required to employ additional crews to complete the trip to comply
with the Federal 12 hour law, then Conrail shall crew the Unit Train at its own
expense.
(c) Joint Default. If the failure to meet the Conrail Unit Train Operating
-------------
Standard is partially attributable to Allegheny and to Conrail, Conrail will
assess and Allegheny shall pay a crew recall charge of $750.00 for each
additional crew needed to complete the trip between Erie and Lock Haven.
(d) Renegotiation of Train Recrew. In the event that train recrew charges
-----------------------------
arising under this Section 3 become burdensome to either party, then at the
request of the burdened party, the other party agrees to negotiate in good faith
the addition of a second crew to operate the Unit Trains performing the rail
service permitted by Section 2(a) hereof, with appropriate adjustment of the
applicable terms and conditions of this Contract. In the event the parties fail
to reach agreement upon such renegotiation, such failure shall not constitute a
breach of this
-10-
<PAGE>
Contract and it shall continue in force in accordance with its terms
(e) Allocation of Responsibility. In order to fairly allocate
----------------------------
responsibility between the parties for crew recall charges, Conrail shall advise
Allegheny's dispatcher by telephone (at the telephone number which Allegheny
designates from time to time) after each incident requiring a train recrew for
which Conrail intends to hold Allegheny responsible for all or part of a recrew
charge, to be followed within seven days of such incident with a copy of
Conrail's complete report relating to the trip including its Freight Conductor's
Delay Reports, covering the entire Erie-Lock Haven trip which required more than
twelve (12) hours of transit time and for which Conrail intends to hold
Allegheny responsible for all or any portion of resulting recrew charges.
Conrail shall issue appropriate orders to its train crews to enter into their
record relating to each trip the times at which they pass Mileposts 2.8 and
149.9.
4. MAINTENANCE.
-----------
(a) Maintenance of Erie-Emporium Line. Allegheny shall at its own expense
---------------------------------
and without expense to Conrail, maintain the Erie-Emporium Line to the Allegheny
Unit Train Transit Standard which will permit the Unit Train to traverse the
Erie-Emporium Line in 8 hours or less and meet Allegheny's obligations under
this Contract and the International Paper-Allegheny Transportation Service
Agreement, subject to Allegheny's right to abandon all or any portion of said
Line upon obtaining any necessary regulatory approval.
-11-
<PAGE>
(b) Track Inspection. Allegheny, at its sole expense, shall engage the
----------------
services of a track geometry car inspection service at least annually, and
Conrail, at its sole expense, may engage the services of a track geometry car
inspection service up to three times per year, and said contractor for each
party shall provide a copy of the detailed inspection reports directly to the
other party at the following addresses:
Consolidated Rail Corporation
2001 Market Street 17N0
P. O. Box 41417
Philadelphia, Pennsylvania 19101-1417
Attention: Senior Vice President - Operations
Buffalo & Pittsburg Railroad, Inc.
201 North Penn Street
Punxsutawney, PA 15767
Attention: Vice President - Operations
Allegheny shall use the detailed results to cure defects that would impact
its ability to meet the Allegheny Unit Train Transit Standard.
5. CHANGES TO THE ERIE-EMPORIUM LINE.
---------------------------------
(a) Additions or Retirements by Allegheny. From time to time and at its
-------------------------------------
sole cost and expense, Allegheny may make such changes in, additions and
betterments to, or retirements from, the Erie-Emporium line as shall, in its
judgment, be necessary or desirable for the economical or safe operations
thereof, provided that such changes do not adversely affect Conrail's ability to
perform its obligations under the Transportation Service Agreement, or such
further changes as Allegheny may be required by any law, rule, regulation or
ordinance promulgated by any governmental body having jurisdiction. Such
-12-
<PAGE>
additions and betterments shall be subject to this Contract and such retirement
shall be excluded from the terms of this Contract.
(b) Changes Requested by Conrail. If the parties agree (which agreement
----------------------------
shall not be unreasonably withheld by Allegheny) that changes in or additions
and betterments to the Erie-Emporium Line, including changes in communication or
signal facilities, are required to accommodate Conrail's operations beyond those
required by Allegheny to accommodate its own operations, Allegheny shall
construct the additional or altered facilities and Conrail shall pay to
Allegheny the cost thereof, including the annual expense of maintaining,
repairing and renewing such additional or altered facilities.
6. FORCE MAJEURE.
-------------
(a) Definition. For purposes of this Contract force majeure shall include,
----------
but not be limited to acts of God, floods, storms, earthquakes, hurricanes,
tornadoes, or other severe weather or climatic conditions; acts of public enemy,
war, blockade, insurrection, vandalism or sabotage; fire, accident, wreck,
derailment, washout or explosion; any strike, lockout or labor dispute
experienced by the parties or by third parties; embargoes or Association of
American Railroads service orders; or governmental laws, orders or regulations;
any of which events require the shutdown of any portion of the Erie-Emporium
Line, involved Conrail lines, or any portion of IP's pulp or paper manufacturing
facilities in Erie or Lock Haven, Pennsylvania, or related wood fiber sourcing
operations in Pennsylvania, or otherwise prevent any party from fulfilling its
obligations hereunder.
-13-
<PAGE>
(b) Suspension of Obligations. If occurrences outside the control of the
-------------------------
parties, including force majeure as set forth in Section 6(a), but not limited
thereto, prevent either of the parties from meeting its obligations hereunder,
then the obligations of such parties under this Contract shall be abated to the
extent, but only to the extent made necessary by such force majeure and during
its continuance, provided that reasonable efforts are made to eliminate the
effect of such force majeure and neither party shall be liable to the other for
loss, damage, or delay caused by such force majeure.
(c) Conrail Notices Concerning Force Majeure. (i) Where possible Conrail
----------------------------------------
shall provide Allegheny and IP with written notice concerning any situation of
which Conrail is aware which may require Conrail to invoke force majeure and the
anticipated duration thereof; (ii) written notice of the event and a short
description of the impact (including anticipated duration) shall accompany the
actual invocation of force majeure by Conrail; (iii) as soon as it appears that
the force majeure situation is coming to an end, Conrail shall provide Allegheny
and IP verbal and written notice of the date on which it expects the situation
giving rise to force majeure to be corrected and full service to resume; (iv)
Conrail shall not forfeit any right to proceed under the force majeure
provisions of this Contract by not invoking such provisions at the time it first
learns of a force majeure situation.
(d) Allegheny Notices Concerning Force Majeure. (i) Where possible
------------------------------------------
Allegheny shall provide Conrail and IP with written notice concerning any
situation of which Allegheny is
-14-
<PAGE>
aware which may require Allegheny to invoke force majeure and the anticipated
duration thereof; (ii) written notice of the event and a short description of
the impact (including anticipated duration) shall accompany the actual
invocation of force majeure by Allegheny; (iii) as soon as it appears that the
force majeure situation is coming to an end, Allegheny shall provide Conrail and
IP verbal and written notice of the date on which it expects the situation
giving rise to force majeure to be corrected and full service to resume; (iv)
Allegheny shall not forfeit any right to proceed under the force majeure
provisions of this Contract by not invoking such provisions at the time it first
learns of a force majeure situation.
(e) Rerouting of Unit Train Via Buffalo in the Event of an Allegheny Force
----------------------------------------------------------------------
Majeure. In the event of force majeure and the Erie-Emporium Line is not
- -------
passable, Conrail shall route the Unit Train over its railroad via Buffalo, and
the Allegheny shall bring cars to the Emporium or Erie interchange as possible
at no charge to Conrail.
7. ALLOCATION OF LIABILITY; INDEMNITY.
----------------------------------
(a) General. As between the parties hereto responsibility for loss of or
-------
damage to property (hereinafter referred to as damage) and injury to or death of
persons (hereinafter referred to as injury) shall be governed by Paragraphs (b)
through (e) of this Section. The party which is responsible shall release the
other party from responsibility for such injury or damage and shall defend,
indemnify, protect, and save harmless the other party (and its officers, agents,
and employees) from and against all claims, actions, liability, judgements,
loss, and
-15-
<PAGE>
expenses (including legal expenses and attorneys' fees) in connection with, or
arising out of, such injury or damages.
(b) FELA. In the event Conrail is held to be liable under the Federal
----
Employers Liability Act (or any amendments thereto) based on a finding that
Conrail failed to provide a safe place to work or failed to correct or guard
against an unsafe condition on the Erie-Emporium Line which occurs with the
trains, locomotives, cars, or equipment of, or in the account of, only Conrail
being involved, then Allegheny shall be responsible for such injury, EXCEPT
where it is established that the damage or injury was proximately caused by
defective locomotives, cars or equipment of Conrail or of acts or omissions
which, under the common law of Pennsylvania, would constitute actionable fault
or negligence on the part of Conrail, in which case Conrail shall be responsible
for such injury. Failure by Conrail to make complaint to Allegheny with respect
to unsafe working conditions or with respect to Allegheny's failure to carry out
its obligations under this Contract, or knowledge of such matters on the part of
Conrail, shall not constitute acquiescence therein by Conrail or actionable
negligence on the part of Conrail.
(c) Operations Over and Condition of Erie-Emporium Line. In the event of
---------------------------------------------------
loss of or damage to property including damage to or destruction of the
environment, (hereinafter "damage"), or injury to or death of persons
(hereinafter "injury"), whether incurred by the parties hereto or by third
parties, arising out of the activities covered by this Contract or the acts or
omissions of the parties in connection therewith, the responsibility of the
parties shall be as follows:
-16-
<PAGE>
(1) Each party shall be responsible for damage or injury, solely
caused by the gross negligence or willful misconduct of its
own officers, agents or employees, with no concurring fault
or negligence of the other party.
(2) Except as provided in Paragraph (1) of this Subsection (c),
(i) Each party shall be responsible for damage or injury to
its own property, equipment, and employees and to
freight and equipment in its possession. For purposes
of this subsection, the property, equipment and
employees of any agent, contractor, grantee or licensee
of a party hereto (except a person having only farm or
other private rights to cross the track) shall be
deemed to be the property, equipment and employee of
such party; and
(ii) Responsibility for all other damage or injury
(including that incurred by third parties) shall be
borne by the party whose train was involved in the
cause of the loss, except that neither party shall be
responsible to the other for damage to
-17-
<PAGE>
equipment or freight owned by or being transported for
International Paper Co.
(d) Parties' Insurance Coverage. Conrail and Allegheny each agree promptly
---------------------------
after execution of this Contract to take steps (including notification of their
respective insurance carriers) to assure that the indemnities and waivers of
recovery provided for in this Section shall not invalidate, or preclude recovery
under, any applicable policies of insurance which Allegheny and Conrail may
have; and upon request each party shall furnish the other party copies of the
certificates from its insurance carriers to such effect, which in the case of
Allegheny shall not be less than $5 Million.
(e) Wrecking, Rerailing and Roadbed Restoration Service. Whenever Conrail's
---------------------------------------------------
use of the Erie-Emporium Line results in a derailment or wreck which requires
rerailing, wrecking, or wrecking train service, Allegheny shall arrange or
perform such service, including the repair and restoration of roadbed, track,
and structures damaged as a result of any wreck or derailment. The cost and
expense thereof, including without limitation loss of, damage to, and
destruction of any property whatsoever and injury to or death of any person or
persons whomsoever resulting therefrom, shall be apportioned in accordance with
the provisions of Section 7(c) hereof. Allegheny shall arrange for delivery to
or deliver to Conrail all locomotives, cars, and equipment, and salvage from the
same, so picked up and removed from the Erie-Emporium Line in the course of
performing wrecking or rerailing service which are owned by or under the
management and control of
-18-
<PAGE>
or used by Conrail at the time of such wreck or derailment, except for cars and
equipment owned or leased by Allegheny or IP. Custody, control and
responsibility for such cars and equipment shall be assumed by the owning or
leasing party, either Allegheny or IP.
8. INVESTIGATION ADJUSTMENT AND DEFENSE OF CLAIMS.
----------------------------------------------
(a) General. All claims, injuries, deaths, property damage, and losses
-------
arising out of or connected with this Contract shall be investigated, adjusted
and defended by the party bearing the liability, cost, and expense therefor,
under the provisions of this Contract, provided that prior to the determination
of the responsible party, the parties shall cooperate in such investigation,
adjustment and defense. In the event a claim or suit is asserted against
Allegheny or Conrail which is the other's duty hereunder to investigate, adjust,
or defend, then, unless otherwise agreed, such other party shall, upon request,
take over the investigation, adjustment, and defense of such claim or suit.
(b) Allocation of Costs of Investigation, Adjustment and Defense. All costs
------------------------------------------------------------
and expenses in connection with the investigation, adjustment, and defense of
any claim or suit under this Contract shall be included as costs and expenses in
applying the liability provisions set forth in this Contract, except that
salaries or wages of full-time claim agents, full-time attorneys, and other
full-time employees of any party engaged directly or indirectly in such work
shall be borne by such party.
(c) Settlement of Claims Involving Both Parties. Neither party shall settle
-------------------------------------------
or compromise any claim, demand, suit,
-19-
<PAGE>
or cause of action for which any other party has any liability under this
Contract without the concurrence of such other party if the consideration for
such settlement or compromise exceeds Ten Thousand Dollars ($10,000).
9. ASSIGNMENTS. Neither Allegheny nor Conrail shall assign its rights under
-----------
this Contract without the prior written consent of the other, except that
Allegheny may assign this Contract to Allegheny & Eastern Railroad, Inc. in
connection with the sale of the assets of Allegheny to Allegheny & Eastern
Railroad, Inc. Neither party shall withhold its consent unreasonably.
10. NOTICES. Any notice, election or other correspondence required or
-------
permitted hereunder shall be in writing and shall become effective upon receipt.
However, matters of an emergency or operating nature may be communicated by
telephone, telegraph or other reasonable means and shall as soon as practicable
be confirmed in writing.
If to Conrail:
Consolidated Rail Corporation
Room C24A
Two Commerce Square
Philadelphia, Pennsylvania 19101-1424
Attention: Assistant Vice President -
Forest Products
With a copy to:
Consolidated Rail Corporation
Two Commerce Square
17th Floor
Philadelphia, Pennsylvania 19101-1417
Attention: Senior Vice President - Development
and a copy to:
Consolidated Rail Corporation
17th Floor
Two Commerce Square
Philadelphia, Pennsylvania 19101-1417
-20-
<PAGE>
Attention: Senior Vice President - Operations
If to Allegheny:
President, Allegheny Railroad
316 Pine Street
Warren, PA 16365
If matter of an emergency nature:
Consolidated Rail Corporation
Room 9C
Two Commerce Square
Philadelphia, PA 17101-1409
Attention: Director - Unit Train Operation
11. GENERAL.
-------
(a) Entirety of Agreement. This Contract, together with the Easement
---------------------
Operating Agreement, the Short Line Operating Agreement, Interlocking Agreement,
and the Interchange Agreement executed by Conrail and Hammermill in 1985, sets
forth the entire understanding of the parties hereto with respect to the
operations contemplated hereby and may not be amended except by further written
instrument executed by the Parties hereto. In the event of conflict between the
Easement Operating Agreement, the Short Line Operating Agreement, the
Interlocking Agreement and the Interchange Agreement on the one hand and this
Contract on the other, this Contract shall prevail. Except as just noted, any
previous agreements or understandings between the parties reqarding the subject
matter hereof are merged into and superseded by this Contract. Section headings
and captions shall not be considered in interpreting this Contract.
(b) Statements in Documents. All statements or undertakings contained in
-----------------------
any certificate, instrument or document delivered by or on behalf of either
party pursuant to this Contract shall be deemed, respectively, representations
and
-21-
<PAGE>
warranties by the party responsible for such statement or undertaking.
(c) Survival of Obligations. Obligations of either party arising or
-----------------------
accruing prior to the expiration or termination of this Contract shall survive
such expiration or termination and shall be binding upon and inure to the
benefit of, and be enforceable by, the successors and assigns of the respective
parties.
(d) Governing Law. This Contract and the rights and obligations accruing
-------------
hereunder shall be construed and enforced in accordance with the laws of
Pennsylvania.
(e) Waiver. No waiver by either party of any right or of any failure of, or
------
refusal by, the other party to comply with its obligations under this Contract
shall be deemed a waiver of any right or of any other or subsequent failure or
refusal to so comply.
(f) No Third Party Rights Hereunder. The terms set forth herein, and each
-------------------------------
and every provision hereof, are for the exclusive benefit of the parties hereto
and not for the benefit of any third party other than IP. Nothing herein
contained shall be taken as creating or increasing any right in any third person
to recover by way of damages or otherwise against any of the parties hereto.
(g) Counterparts. This Contract may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-22-
<PAGE>
12. ARBITRATION. Any controversy or claim arising out of or relating to
-----------
this Contract, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator(s) may be
entered in any Court having jurisdiction. The arbitration shall be heard before
a panel of three (3) arbitrators. All expenses of the arbitration shall be borne
by the parties equally; however, each party shall bear the expense of its own
counsel and experts.
13. CONFIDENTIALITY. Each party agrees to be bound by the standards
---------------
contained in 49 USC 11910 of the Interstate Commerce Act (Unlawful Disclosure of
Information) and to limit the disclosure of any provisions of this Contract to
information required by statute or government regulations, or necessary to
properly conduct their business, and to only those employees of the parties
hereto necessary to execute the express provisions of this Contract.
Notwithstanding the foregoing, either party may disclose the provisions of this
Contract to its parent, affiliate and subsidiary companies.
IN WITNESS WHEREOF, the authorized officials of the Parties hereto have
caused this Contract to be duly executed as of the day and year first above
written.
ALLEGHENY RAILROAD CONSOLIDATED RAIL CORPORATION
By: /s/ W.V. Gentilman By: /s/ R. Paul Carey
-------------------------------- ---------------------------
General Manger
Contracts and Asset Utilization
-23-
<PAGE>
EXHIBIT 10.46
CONFIDENTIAL TREATMENT REQUESTED AS TO THOSE PORTION MARKED WITH ASTERISKS
--------------------------------------------------------------------------
(***) AND THOSE PORTIONS HAVE BEEN SEPARATELY FILED WITH THE COMMISSION
-----------------------------------------------------------------------
BUFFALO TERMINAL OPERATING AGREEMENT
THIS TERMINAL OPERATING AGREEMENT, made and executed, in duplicate, this
18th day of July, 1988, by and between CSX TRANSPORTATION, INC., hereinafter
called "CSXT", and BUFFALO & PITTSBURGH RAILROAD, INC., hereinafter called
"B&P",
WITNESSETH THAT:
WHEREAS, By Agreement for Purchase and Sale of Assets dated July 18, 1988
between the parties, CSXT and The Buffalo, Rochester and Pittsburgh Railway
Company (BR&P), collectively known as Sellers, intends to sell to B&P on or
before July 18, 1988, most of their property between Buffalo, NY and Eidenau,
PA; and
WHEREAS, Subsequent to the aforesaid sale, CSXT will continue to operate
certain of its trains into and out of Buffalo, NY, and will require that B&P
perform for it, certain terminal services at CSXT's Buffalo Creek Yard to be
acquired by B&P; and
WHEREAS, B&P is agreeable to performing certain services for CSXT at
Buffalo, as hereinafter specified.
NOW, THEREFORE, in consideration of the benefits to each and the mutual
covenants herein contained, the parties agree as follows:
<PAGE>
1. For the purpose of this agreement, CSXT's Buffalo Creek Yard to be
acquired by B&P is defined as all of B&P's main, yard and appurtenant
tracks between B&P's connection with Buffalo Creek Railroad on the north,
and the southerly limit of said Buffalo Creek Yard in the vicinity of the
McKinley Parkway overhead bridge, as well as connection with Conrail's City
Branch; all as more particularly indicated on CSXT's Drawing No. INT-BP4,
dated April 1, 1988 marked "Appendix A" attached hereto and made a part
hereof.
Except for CSXT's operation of its Canadian Subdivision road trains and its
Canadian National transfer trains with its own locomotives and crews into
and out of B&P's Buffalo Creek Yard, CSXT does hereby employ 8&P to perform
all work in connection with the handling of such CSXT locomotives, cars,
and equipment within the above described yard and to and from CSXT's
interchange connections at Buffalo, as CSXT's agent. Such work by B&P will
be as described in "Appendix B" attached hereto and made a part hereof.
2. B&P shall perform the aforementioned work for CSXT at a charge of
*** , hereinafter referred to as the "Base Charge",
for each loaded and empty CSXT car and each CSXT locomotive moved in CSXT
Canadian Subdivision road trains into or out of B&P's Buffalo Creek Yard.
The Base Charge shall apply to cars moving between CSXT and connections
other than B&P in Buffalo. The Base Charge shall
-2-
<PAGE>
be the only charge except as otherwise hereinafter specified, B&P shall
make to CSXT for the services herein described. The Base Charge shall be
paid by CSXT promptly upon receipt of B&P's bill therefor. All bills shall
be paid in full, with necessary adjustments to the bill being made on a
current basis, to the extent practicable.
The Base Charge shall be subject to change to reflect any increases or
decreases in labor, material and other costs subsequent to the base year,
as hereinafter provided.
The Base Charge shall be revised effective July 1 of each year, beginning
July 1, 1988, to compensate for (75%) of the increase or decrease in the
cost of labor and material, including fuel, as reflected in the Annual
Indexes of Charge-Out Prices and Wage Rates (1977=100), Table A, included
in "AAR Railroad Cost Indexes" and supplements thereto, issued by the
Association of American Railroads. In making such determination, the final
"Material prices wage rates and supplements combined (incl. fuel)" index
figure for the East District (Former Eastern and Southern Districts
combined) for the calendar year 1986, hereinafter referred to as the "Base
Calendar Year" shall be taken as the base. The Base Charge shall be revised
by calculating the percentage of increase, or decrease, in the index of the
year to be escalated as related to the Base Calendar Year; then
-3-
<PAGE>
multiplying this percentage of increase or decrease by 75%, and applying that
percentage to the Base Charge.
By way of example, assuming "A" to be the "Material prices, wage rates and
supplements combined (incl. fuel)" final index figure for the Base Calendar
Year, "B" to be the "Material prices, wage rates and supplements combined (incl.
fuel)" final index figure for the calendar year to be escalated; "C" to be the
Base Charge; "D" to be the percentage of increase or decrease; and "F" to be
adjusted revised percentage of increase or decrease, the revised Base Charge
would be determined by the following formula:
(1) B - A = D
-----
A
(2) D X 75% = E
(3) (C X E) + C = revised Base Charge rounded to the nearest cents
(5 mills or more up to next cent), effective July 1
of the year being escalated.
In the event the base for the annual Indexes of Charge-Out Prices and Wage
Rates issued by the Association of American Railroads shall be changed from the
year 1977, appropriate revision shall be made in the Base Calendar Year. If the
Association of American Railroads or any successor organization discontinues
publication of the Annual Indexes of Charge-Out Prices and Wage Rates, an
appropriate
-4-
<PAGE>
substitute for determining the percentage of increase or decrease shall be
negotiated by the parties hereto.
For the first five (5) years of the term of this Agreement, the Base Charge as
adjusted shall remain in effect unless and until the total number of cars
exchanged between CSXT and B&P shall fall below fifty (50) percent of 32,000
cars, that total number of cars moved by CSXT in its Canadian Subdivision trains
during the calendar year 1987, to and from Buffalo Creek Yard. Should such drop
in volume occur during the first five (5) years of this Agreement, the parties
may renegotiate the Base Charge at the end of the calendar year in which such
drop occurs, in accordance with the provisions renegotiation at five (5) year
intervals as specified in the sub-paragraph immediately following.
At the option of either party hereto, the Base Charge may be renegotiated every
five (5) years from the effective date of this Agreement, as hereinafter
defined. In the event the parties fail to reach agreement upon such negotiation,
such failure shall not constitute a breach of this Agreement, and the then
existing Base Charge shall continue to apply for the remainder of the term of
this Agreement.
In addition to the Base Charge, B&P will charge CSXT for the cost
of materials, fuel and supplies furnished CSXT and for repairs required by
CSXT's locomotives and cars. Such charges
-5-
<PAGE>
will be billed against CSXT in accordance with the then current edition of
Interchange Rules, Mechanical Division AAR, for cars and B&P's costs or the
costs of others as hereinafter provided (including their additives) for
furnishing labor and material for locomotives.
Should CSXT trains, while on Conrail tracks in the Buffalo area,
need to be relieved on account of the hours of service law, and should CSXT have
no relief crews available, B&P will perform such service when requested, and to
the extent permitted by Conrail, and CSXT will accept all charges related to
work necessary to bring CSXT train or trains into B&P's Buffalo Creek Yard.
Should B&P not be permitted to relieve CSXT trains on the trackage of Conrail,
CSXT shall arrange directly with Conrail for such relief, at the sole cost and
expense of CSXT.
3. All revenues on cars handled by B&P or a designee of B&P, for CSXT in B&P
intermediate switch service accounts, as herein provided, shall accrue to
CSXT.
The foregoing shall not be construed as opening to the direct service of
CSXT, the exclusive industries of B&P or as requiring amendments of
applicable tariff provisions.
4. For the purpose of determining liability between the parties hereto
for damage to any property, including lading and other property in
their care, custody and control, and injury or
-6-
<PAGE>
death to persons, hereinafter referred to collectively as "damage", arising out
of the operations contemplated by this Agreement, the following provisions shall
apply, without regard to considerations of fault or negligence:
a) Whenever any damage occurs with only a CSXT train or trains being
involved, or with only B&P trains hauling cars in B&P's account
being involved, each party shall assume all liability for such
damage, and all cost and expense in connection therewith.
b) Whenever any damage occurs with the trains of both parties hereto
being involved, and all of the cars in the B&P train are in B&P's
account, each party shall assume all liability for or loss or
damage to said trains operated by it, and for injury to or death of
its sole employees and persons in its cars and custody. The parties
hereto further agree that all other damage (including but not
limited to B&P trackage) so occurring shall be borne equally by them.
c) Whenever any damage occurs with only a B&P train or trains being
involved, and cars in CSXT's account are being handled by one or
more of such trains, B&P agrees to assume all liability for loss of
or damage to all trains operated by it and for injury to or death
of its sole employees and person in its care and custody,
-7-
<PAGE>
except that each party shall assume liability for all cars in its own
account in such train or trains.
d) Whenever any damage occurs with trains of both parties hereto being
involved, and the B&P train or trains is or are handling cars in
CSXT's account, each party shall assume all liability for loss of or
damage to the trains operated by it, except that each party agrees
to assume liability for all cars in its own account hauled in such
trains, and for injury to or death of its sole employees and persons
in its care and custody. The parties hereto further agree that all
other damage (including but not limited to B&P trackage) so occurring
shall be borne by the parties hereto as follows:
The total liability for damage not otherwise borne separately by the
parties hereto, as provided above, shall be first equally apportioned by the
number of trains involved, and then that portion of the damage which is
apportioned to the train or trains hauling cars in the account of both parties
hereto shall be shared by each of the parties in proportion to the number of
cars which each party has in its own account in such train or trains. In all
cases, for purposes of apportioning liability, a train of others than the
parties hereto, shall be considered as a train of B&P.
e) B&P shall assume liability and responsibility for all damage,
injury or death occurring on or about its repair
-8-
<PAGE>
tracks, including any damage, injury or death occurring in
connection with the performance of engine, car and equipment
repairs for CSXT, as set forth in Exhibit B.
f) Each party hereto agrees to indemnify, protect, defend and save
harmless the other with respect to all damage assumed by it under
the provisions of this Section 4.
g) For the purpose of this Section 4, (i) the expression "train"
shall include a light locomotive or light locomotives or a
locomotive or locomotives hauling cars, cabooses or work
equipment; and (ii) the expression "cars" shall include revenue
and non-revenue cars and loaded and empty cars, and the lading
contained in revenue and loaded cars.
h) The foregoing provisions shall govern the liability between
only the parties hereto and shall not operate for the
benefit of any other party.
5. In case any suit, action or proceeding shall be brought or instituted
against either party for which the parties hereto may be jointly liable,
the party against which the same is brought shall promptly notify the other
of the pendency thereof.
-9-
<PAGE>
6. In the event any suit, action or preceeding shall be brought or instituted
against either party hereto for any damage for which the other party is, as
between the parties hereto, solely liable hereunder, the party against
which such suit, action or proceeding shall have been brought or instituted
shall promptly give the other party notice of the pendency thereof, and
thereupon and thereafter, it shall be the duty of the party so notified to
assume the defense and conduct the same and to pay all expenses thereof,
including attorneys' and counsel fees, and to pay, discharge or perform any
judgment, decree or order as may be rendered therein. In the event the
party solely liable shall fail or refuse to assume the defense of such
suit, action or proceeding, the party against whom it was brought or
instituted shall have the right, if it so elects, to defend the same at the
sole risk, cost and expense of such other party, and the latter shall
reimburse, indemnify and hold harmless the other party for all damage it
may sustain by reason of such failure or refusal.
7. Any irreconcilable dispute arising between the parties with respect to this
Agreement shall be settled through binding arbitration by a sole,
disinterested arbitrator to be selected jointly by the parties. If the
parties fail to select such arbitrator within sixty (60) days after demand
for arbitration is made by either party hereto, then they shall jointly
submit the matter to binding arbitration under the
-10-
<PAGE>
Commercial Arbitration Rules of the American Arbitration Association. The
decision of the arbitrator shall be final and conclusive upon the parties
hereto. Each party to the arbitration shall pay the compensations, cost,
fees and expenses of its own witnesses, experts and counsel. The
compensation, costs and expense of the arbitrator, if any, shall be borne
equally by the parties hereto.
8. This Agreement is solely for the benefit of the parties hereto, and neither
party shall assign or transfer this Agreement or any of its rights
hereunder to any person, firm or corporation without obtaining the prior
written consent of the other party.
9. Subject to the obtaining of such prior governmental approval or approvals
as may be required, this agreement shall become effective between the
parties hereto on the date when they commence the operations hereinbefore
referred to (which beginning date shall be evidenced by exchange of letters
between the proper Officers of the parties hereto) and, subject to any
modification of the Base charge pursuant to Section 2 hereof, shall
continue in effect for a period of one year from said date and thereafter
from year to year, provided, however, that the same may be terminated at
the end of any year by either party, giving to the other party not less
than ninety (90) days' advance written notice of termination.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement
to be duly executed, in duplicate, as of the day and year first above written.
WITNESS: CSX TRANSPORTATION, INC.
/s/ [ILLEGIBLE] By: /s/ K.C. Dufford
-------------------------------- --------------------------------
Senior Vice President
Transportation
WITNESS: BUFFALO & PITTSBURGH RAILROAD. INC.
/s/ [ILLEGIBLE] By: /s/ Mortimer B. Fuller, III
--------------------------------- --------------------------------
(Title) Chairman
(Seal)
-12-
<PAGE>
Appendix A
[ Map of Buffalo & Pittsburgh Railroad, Inc.
Buffalo Creek Yard ]
<PAGE>
Appendix B
Yard and transfer services to be performed by B&P for CSXT at Buffalo, NY
in connection with Terminal Operating Agreement between the parties.
1. B&P shall provide certain designated yard track(s) for the arrival of
CSXT's Canadian Subdivision road train(s), currently numbered 320, inbound
from St. Thomas, ON and points west thereof, and for CSXT Canadian National
transfer trains, inbound from Fort Erie. Designation of track(s) shall be
at the time of arrival of CSXT's train(s) at north entrance of yard, and
shall be by radio transmission from B&P's yardmaster or operating officer
in charge to CSXT's conductor on said train(s).
2. The handling of cars in said trains to be interchanged as between CSXT and
B&P (other than cars interchanged to or from B&P intermediate switch
service) shall be governed by the terms and provisions of agreement of even
date herewith between the parties, covering interchange. The handling of
cars moving between CSXT and Buffalo connections other than B&P via the
aforesaid B&P intermediate switch service shall be as hereinafter
specified.
3. CSXT shall be responsible to uncouple CSXT locomotives from said trains,
and forward units together with CSXT caboose from said trains to ready
track or other layover track of B&P's choosing. B&P will inspect said units
and caboose for subsequent movement by CSXT. It is the intent of the
parties that CSXT equipment will usually be of a condition to not require
servicing by B&P. B&P agrees however, that in emergency, it will arrange
for fueling, servicing and minor repairs to CSXT locomotives and cabooses
at the sole cost and expense of CSXT. B&P will provide water, towels, sand
and sweeping service as required for locomotives without additional charge
to CSXT.
The parties acknowledge that from time to time, B&P may need to contract
the aforesaid services to other parties, and agree to such contracting as
required, provided, however that any additional cost or delay in
availability of equipment associated with such contracting shall be the
sole responsibility of B&P.
4. In its crew quarters, B&P will provide lockers in quantity sufficient to
accommodate the temporary layover needs of CSXT crews. B&P will also
arrange for taxi transportation of CSXT crews to and from the motel of
CSXT's choosing, and will call crews at said motel as directed by CSXT's
crew callers. CSXT
<PAGE>
shall maintain sole responsibility for charges and documentation related
to taxi and motel services.
5. a) All cars delivered by CSXT to B&P for forwarding by B&P and others,
and all cars handled by B&P for forwarding by CSXT shall be switched
and classified by B&P. Classifications provided for B&P and CSXT shall
be of a number and type as may be mutually agreed upon from time to
time by the respective operating officers in charge.
b) As required, B&P shall inspect cars and trains it switches on behalf
of CSXT, and shall perform minor repairs to same at the sole cost and
expense of CSXT.
6. a) B&P shall be solely responsible for the movement of cars between CSXT
on the one hand, and CSXT Buffalo area connections on the other.
Such cars shall be handled by B&P or a B&P designee (other than CSXT)
between B&P's Buffalo Creek Yard and the yards of the respective CSXT
connections, said cars to move in B&P accounts on an intermediate
switch basis as between CSXT and B&P.
The interchange of cars governed by this Agreement from B&P to CSXT
shall occur after cars are placed on B&P's Buffalo Creek yard tracks
and are accompanied or preceded by necessary data for forwarding and
to insure delivery by CSXT, providing the tracks containing such cars
have been made solid by B&P, at the time the tracks containing such
cars are pulled by CSXT. In the event CSXT shall fail to pick up cars
made available by B&P as aforesaid, within twenty-four (24) hours of
such availability, then such cars shall be considered to be
interchanged to CSXT twenty-four (24) hours subsequent to such
availability. In all cases of interchange from B&P to CSXT of cars
moving to CSXT from Buffalo area connections other than B&P, B&P shall
be entitled on a current basis, to reclaim from CSXT, twelve (12)
hours car hire per car.
The interchange of such cars governed by this Agreement from CSXT to
B&P shall occur at the time of arrival of said cars on B&P's
designated Buffalo Creek yard tracks, when the locomotive(s) of CSXT
handling such cars are uncoupled, and B&P is in possession of
documentation sufficient to assure its forwarding and delivery.
b) The foregoing shall apply without regard to any interchange
understandings existing or made between B&P and its connections, or to
any previous understandings as between CSXT and its connections, Each
party shall be responsible solely and exclusively for the
- 2 -
<PAGE>
administration of any of its specific contractual relationship with
its various interchange connections.
c) Acknowledging that the delivering road in interchange is obligated to
physically transfer cars to the receiving road, it is the intent of
the parties that CSXT shall pay to B&P, any trackage charges incurred
by B&P or D&H, or billed by Conrail to B&P or D&H for B&P's forwarding
in interchange of cars moving from CSXT to CSXT's Buffalo connections.
Similarly it is expected that B&P will pay to Conrail or require D&H
to pay to B&P, any trackage charges incurred by or billed to B&P or
D&H for B&P's receiving of cars moving in interchange from other
connections to CSXT.
7. With respect to cars moving in interchange between CSXT and CN, it is
understood that CSXT will transfer such cars with its own engines and crews
between Buffalo Creek Yard and CN's Fort Erie Yard. In such transfer runs,
CSXT will serve as intermediate switch carrier for cars moving in
interchange between B&P and CN, moving such latter cars in CSXT accounts.
The charges made by CSXT for this transfer service shall be equal to those
charged by B&P for the terminal services covered herein, and shall be
published in public tariff. The terms and conditions governing interchange
of such cars between B&P and CSXT shall be as provided in Interchange
Agreement of even date herewith between the parties. In switching the cars
moved by CSXT between B&P's Buffalo Creek Yard, and CN's Fort Erie Yard,
B&P will provide blocking as agreed upon from time to time by the parties,
for CSXT's interchange to and from CN. B&P shall couple CSXT's engine(s) to
cars to be moved by CSXT to Fort Erie, prior to CSXT's crew reporting for
said movement. Upon return to Buffalo Creek from Fort Erie, CSXT crew shall
uncouple from inbound train, and re-couple to CSXT cars awaiting outbound
movement by CSXT to St. Thomas and points beyond.
8. B&P shall build the agreed upon blocks for CSXT's departing Fort Erie
transfer and Canadian Subdivision road train(s), the latter currently
designated 321, in a track(s) of its choosing, making the track(s) solid.
In addition, B&P will perform mandatory air test with CSXT's locomotives,
prior to CSXT's crew mounting said Fort Erie transfer.
9. It shall be the responsibility of B&P, to prepare as required, and to
transmit to CSXT's Division Manager at Detroit, MI, all preliminary
information required for CSXT's preparation of documentation pertaining to
agency services and train movements. B&P solely, shall be responsible for
preparation of customs documentation. For a reasonable period of time on or
about the effective date of this Agreement, CSXT will provide at no expense
to B&P, instruction in data preparation and transmission procedures.
- 3 -
<PAGE>
CSXT shall lease at no expense to B&P for a period of one year from the
effective date of the Agreement, its data equipment and data communications
facilities for the nonexclusive use of B&P. At the end of said first year
of this Agreement, CSXT shall evaluate the extent of B&P's use of its data
equipment and facilities, and shall reserve to itself the right thereafter,
without notice, to remove such equipment and facilities from the premises
of B&P.
10. This Exhibit B is intended to serve as a general guideline as to the
services to be performed by B&P on behalf of CSXT at Buffalo, and the
methods employed by the parties in carrying out such services. From time to
time, as operating conditions in Buffalo necessitate rearrangement of the
provisions of this Exhibit B, the parties shall use their best efforts to
mutually agree upon equitable alternative arrangements, which alternate
operations shall be covered subsequently by a revised Exhibit B. Failure of
the parties to reach agreement on alternative arrangements shall not be
cause for nullification of the terms of this Agreement, but shall cause
perpetuation of then existing arrangements, until the parties mutually
agree to do otherwise.
- 4 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED AS TO THOSE PORTIONS MARKED WITH ASTERISKS
---------------------------------------------------------------------------
(***) AND THOSE PORTIONS HAVE BEEN SEPARATELY FILED WITH THE COMMISSION
-----------------------------------------------------------------------
EXHIBIT 10.48
================================================================================
Operating Agreement and Car Storage Yard
Agreement
Consent to Assignments
dated as of September 20, 1994
between
NCC Charlie Company
as Consenting Party
and
GWI Switching Services, L.P.
as Assignee
================================================================================
Dayton Rail Car Storage Yard Facility
<PAGE>
OPERATING AGREEMENT
AND
CAR STORAGE YARD AGREEMENT
CONSENT TO ASSIGNMENTS
----------------------
Consent to Assignments (this "Consent"), dated as of September 20, 1994, is
made between NCC Charlie Company, a Delaware corporation (the "Consenting
Party") and GWI Switching Services, L.P., a Texas limited partnership (the
"Assignee").
Whereas, CMC Railroad I, Ltd., a Texas limited partnership (the "Company"),
proposes to develop and operate a rail car storage facility (the "Facility") in
the vicinity of Dayton, Texas.
Whereas, Southern Pacific Transportation Company, a Delaware corporation
("SPT") and the Company have entered into a Car Storage Yard Agreement dated
March 12, 1994, as amended and restated as of September 20, 1994, (the "Storage
Agreement") (copy of which is attached hereto as Exhibit I).
Whereas, the Company and SPT have entered into an Operating Agreement dated
March 12, 1994, as amended and restated as of September 20, 1994, (the
"Operating Agreement"). (A copy of which is attached hereto as Exhibit II).
Whereas, the Company, pursuant to an Assignment and Agreement dated
September 20, 1994 (the "GWISS Assignment"), is assigning to Assignee all the
Company's rights in and to the Operating Agreement and certain specified rights
of the Company in and to the Storage Agreement. The Operating Agreement and
that portion of the Storage Agreement assigned by the GWISS Assignment are
hereinafter collectively referred to as the "Assigned Agreement."
Whereas, the Company is, pursuant to an Assignment and Security Agreement,
dated as of the date hereof (as amended or supplemented from time to time, the
"Security Agreement"), among the Company, the Consenting Party (in its capacity
as Secured Party thereunder), and First Security Bank of Utah, National
Association, not in its individual capacity but solely as Collateral Trustee
under the Security Agreement (the "Collateral Trustee"), assigning all of its
present and future right, title and interest in, to and under the Storage
Agreement and the Operating Agreement to the Consenting Party is, subject to the
Security Agreement, reassigning certain rights, title and interest back to the
Company.
Whereas, the Company is, pursuant to the Security Agreement, assigning all
of its present and future right, title, and interest in, to and under the
Storage Agreement and the Operating Agreement to the Consenting Party as
security for the obligations of the Company secured by the Security Agreement.
Whereas, the Company and the Consenting Party (in its capacity as the Lessor
thereunder the "Lessor"), are entering into a Master Lease Agreement dated as of
September 20, 1994 (the "Lease Agreement").
-2-
<PAGE>
Whereas, it is a condition precedent to the obligations of the Assignee
under the GWISS Assignment that the Consenting Party execute and deliver this
Consent.
Capitalized terms used but not defined herein have the respective meaning
set forth in the Lease Agreement.
Accordingly, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
Section 1. Consent to Assignments.
The Consenting Party hereby:
(a) irrevocably consents to the assignment by the Company of all of its
rights and responsibilities in and to the Operating Agreement to the Assignee as
on the terms and conditions set forth in the GWISS Assignment;
(b) irrevocably consents to the assignment by the Company of (i) all rights
of the Company in connection with the establishment and negotiation of the
Operation Fee and adjustments thereof, pursuant to Section 1.3(b) and Section
3.5 of the Storage Agreement and (ii) all rights of the Company to avail itself
of arbitration procedures set forth in Article 6 of the Storage Agreement to
settle issues not agreed to in Section 1.3(b) and Section 3.5, subject to the
terms and conditions set forth in the GWISS Assignment;
(c) acknowledges the right of the Assignee to make all demands, give all
notices, take all actions and exercise and enforce all rights of the Company
under the Assigned Agreement;
(d) acknowledges and agrees, notwithstanding anything to the contrary
contained in the Assigned Agreement, that none of the following shall
constitute, in and of itself, a default by the Company under the Assigned
Agreement or shall result in a termination thereof: (1) the assignment of the
Assigned Agreement pursuant to the GWISS Assignment; or (2) the operation of the
Facility by the Assignee.
Section 2. Representations and Warranties of Consenting Party.
The Consenting Party represents and warrants that:
(a) Organization. The Consenting Party is duly organized, validly existing
------------
and in good standing under the laws of the State of Delaware, and has the full
corporate power and authority to execute, deliver and perform the terms of this
Consent.
(b) Authorization; Binding Agreement. The Consenting Party has the
--------------------------------
corporate power and authority under all applicable laws of the State of Delaware
to enter into this Consent and to perform and carry out the transactions
contemplated hereby and thereby and all covenants and obligations on its part to
be performed under and pursuant to this Consent.
-3-
<PAGE>
The execution, delivery and performance of this Consent have been duly
authorized by proper action of the Consenting Party. The Consent constitutes a
valid and binding agreement of the Consenting Party, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, or other similar
laws applicable to creditors' rights generally, and also subject to any
limitations on enforceability that may be imposed by application of equitable
principles.
(c) Litigation. No litigation, proceeding or governmental investigation is
----------
pending in or before any Governmental Authority, relating to the Consenting
Party that, if adversely determined, would materially and adversely affect the
enforceability of this Consent or the Consenting Party's ability to perform
thereafter.
(d) Restrictive Documents. The execution and delivery of this Consent, and
---------------------
the consummation of the transactions contemplated hereunder, (i) will not result
in any material breach of, constitute a material default under or result in the
creation of any encumbrance in respect of any material property of the
Consenting Party pursuant to its certificate of incorporation or its by-laws or
any agreement, instrument, judgment, decree, order, statute, rule or regulation
applicable to the Consenting Party or by which it is bound and (ii) will not
conflict or be inconsistent with or result in the termination of any agreement
or other instrument to which the Consenting Party is a party or violate any
applicable law.
(e) No Consent or Approval. No consent, approval or authorization of, or
----------------------
declaration or filing with, any Governmental Authority is required for the valid
execution, delivery and performance by the Consenting Party of this Consent.
Section 3. Notices.
All notices and other communication hereunder shall be in writing, shall
refer on their face to the Assigned Agreement (although failure to so refer
shall not render any such notice or communication ineffective), shall be sent by
first class mail, by hand or by overnight courier service or by facsimile, shall
be effective upon receipt (or when proffered to, if receipt is not accepted) and
shall be directed:
(a) if to the Consenting Party, addressed to:
NCC Charlie Company
200 Park Avenue, 33rd Floor
New York, New York 10166
Attention: Asset Administrator
Telecopy: (212) 682-7246
(b) If to the Assignee, addressed to:
GWI Switching Service, L.P.
c/o Genesee & Wyoming Industries, Inc.
71 Lewis Street
Greenwich, Connecticut, 06830
-4-
<PAGE>
or to such other address as the Consenting Party or the Assignee may designate
by prior written notice given pursuant hereto.
Section 4. Miscellaneous.
(a) Separate Counterparts; Amendments, Waiver. This Consent may be executed
-----------------------------------------
in separate counterparts, each of which when so executed and delivered shall be
an original but all such counterparts shall constitute one and the same
instrument. This Consent may not be amended, waived or modified except by an
instrument in writing signed by the Consenting Party and the Assignee.
(b) Severability. Any provision of this Consent which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or enforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(c) Successors and Assigns. This Consent shall be binding upon the
----------------------
Consenting Party and its permitted successors and assigns and shall inure to the
benefit of the Assignee and its successors and permitted assigns.
(d) Governing Law; Submission to Jurisdiction.
-----------------------------------------
(i) This Consent Shall be Governed by, and Construed in Accordance with,
the laws of The State of New York Without Respect to Principles of Conflicts of
Law.
(ii) Any Legal Action or Proceeding with Respect to This Consent may be
Brought in Any Supreme Court of the State of New York Sitting in New York County
or in United States Federal District Court for the Southern District of New
York, and Each Party Hereby Accepts for Itself and in Respect of its Property,
Generally and Unconditionally, the Non-Exclusive Jurisdiction of the Aforesaid
Courts. Each Party Hereby Irrevocably Waives any Objection to the Laying of
Venue or Based on the Grounds of Forum Non Conveniens, Which it may now or
----- --- ----------
Hereafter Have to the Bringing of any Such Action or Proceeding in Such
Respective Jurisdictions.
(iii) Each Party Irrevocably Consents to the Service of Process of any
of the Aforementioned Courts in any Such Action or Proceeding by the Mailing of
Copies Thereof by Registered or Certified Mail, Postage Prepaid, to Each Party
at its Address Set Forth in Section 3 of this Consent, Such Service to Become
Effective Four Days After Such Mailing.
-5-
<PAGE>
(iv) Nothing Herein Shall Affect the Right of any Party to Serve Process
in any Other Manner Permitted by Law or to Commence Legal Proceedings or
Otherwise Proceed Against Another Party in any Other Jurisdiction.
(e) Further Assurances. The parties hereby agree to execute and deliver all
------------------
such instruments and take all such action as may be reasonably necessary to
effectuate fully the purposes of this Consent.
(f) Captions. The captions to the various provisions of this Consent are
--------
for convenience only and shall not be considered in construing the provisions
hereof.
In Witness Whereof, the parties hereto have executed this Consent as of the
day and year first above written.
NCC Charlie Company
By: /s/ [Illegible]
----------------------------------
Its: Assistant Secretary
GWI Switching Services L.P.
By: GWI Dayton, Inc., General Partner
By:
----------------------------------
Its:
-6-
<PAGE>
EXHIBIT I
AMENDED AND RESTATED
CAR STORAGE YARD AGREEMENT
--------------------------
THIS AMENDED AND RESTATED CAR STORAGE YARD AGREEMENT (this "Agreement") is
made as of the 20th day of September, 1994 by and between SOUTHERN PACIFIC
TRANSPORTATION COMPANY, a Delaware corporation ("SPT") and CMC RAILROAD I, LTD.,
a Texas limited partnership ("CMC").
RECITALS:
--------
A. SPT desires to have available to it a storage yard in the vicinity of
Dayton, Texas for the storage of empty covered hopper rail cars and covered
hopper rail cars containing plastic pellets bearing Standard Transportation
Commodity Code 28-211 Series (collectively, the "Rail Cars").
B. CMC owns land in the vicinity of Dayton, Texas that is suitable for the
construction, operation and maintenance of a storage yard with a storage
capacity of 3,000 or more Rail Cars.
C. SPT, CMC and GWI Switching Services L.P., a Texas limited partnership
("GWISS"), executed and delivered a Car Storage Yard Agreement on March 12, 1994
(the "Storage Agreement") for the construction, operation and maintenance of a
storage yard on CMC's land in the vicinity of Dayton, Texas with a storage
capacity of 1,500 Rail Cars.
D. SPT now desires to have available to it, and CMC now is willing to
construct, operate and maintain, a storage yard on CMC's land in the vicinity of
Dayton, Texas with a capacity of 3,000 Rail Cars.
E. Concurrently herewith, CMC has agreed to sell to NCC Charlie Company, a
Delaware corporation ("NCC"), the Yard (defined below), exclusive of the Site
(defined below) and inclusive of the SPT Materials (defined below), as it is
completed in stages for a total price of up to *** and to lease the same back
from NCC. In addition, CMC has agreed to lease the Site to NCC and sublease the
same back from NCC.
F. SPT and CMC have agreed to amend certain provisions of the Storage
Agreement to accommodate the transaction with NCC and to reflect other changes
negotiated by SPT, CMC, GWISS and NCC.
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth below, SPT and CMC agree to amend and restate the Storage Agreement,
effective as of the date first set forth above, as follows:
<PAGE>
ARTICLE 1
CONSTRUCTION OF THE YARD
------------------------
Section 1.1 Design and Location. CMC shall design and construct a car
----------- -------------------
storage yard with a 3,000 Rail Car storage capacity in the configuration shown
on the drawing attached hereto as SCHEDULE 1.1 (the "Yard") located on the land
------------
more particularly identified and described on said drawing (the "Site"). Each
"Rail Car Slot" shall be sixty-five feet in length.
Section 1.2 Specifications and Standards. CMC shall construct the Yard to
----------- ----------------------------
FRA Class 1 standards.
Section 1.3 Title to Site.
----------- -------------
(a) CMC hereby represents, warrants and covenants to SPT as follows:
(i) CMC owns the fee interest in the entire Site free and clear of all
liens, security interests, mortgages, deeds of trust, claims or other
encumbrances, except for such as may be required to secure financing for the
Yard and such as would not have an adverse effect on CMC's ability to perform
its obligations hereunder and under the other agreements contemplated hereby
("Permitted Liens");
(ii) During the initial term and any renewal term of this Agreement, CMC
shall not sell, assign, transfer or convey any of its interests in the portion
of the Site underlying the Yard or subject such portion of the Site underlying
the Yard to any encumbrances other than Permitted Liens without the prior
written consent of SPT; provided, that SPT hereby consents to a ground lease
between CMC and NCC of the Site for an initial term ending on the twentieth
anniversary of the Completion Date, with an option for NCC to extend said lease
for four additional five (5) year periods and further consents to the execution
of a Deed of Trust dated September 20, 1994 pursuant to which CMC shall grant a
security interest in the Site to NCC;
(iii) Any Permitted Liens required to secure financing for the Yard shall
contain attornment provisions reasonably satisfactory to SPT that recognize the
rights of (A) CMC's general contractor and subcontractors to enter onto the Site
for purposes of constructing the Yard up to, but not including, the Completion
Date, (B) SPT under this Agreement and the Operating Agreement referenced in
Section 2.2 of this Agreement, and (C) CMC and the Operator (defined in
-2-
<PAGE>
Section 2.1 of this Agreement) under such Operating Agreement;
(iv) CMC has obtained all permits (including, without limitation, all
required approvals from the ICC) which are required by public agencies for
construction and operation of the Yard and shall pay any and all taxes or fees
that are required by public agencies to reclassify the Site from agricultural to
industrial use;
(v) The Site and adjacent property, together more particularly described on
Schedule 1.3 (the "Property"), are sufficient for adding another 1,000 Rail Car
- ------------
Slots (the "Option Slots") adjacent to the Yard; and
(vi) Until September 30, 1994, CMC or an affiliate of CMC shall own and hold
the Property (exclusive of the Site) free and clear of all liens and other
encumbrances other than Permitted Liens.
(b) By written notice delivered to CMC on or before September 30, 1994, SPT
may elect to require the addition of the Option Slots adjacent to the Yard.
Upon delivery of such notice, the parties shall diligently proceed to negotiate
and prepare such amendments, agreements, instruments and other documents as may
be required to provide for construction and funding of the Option Slots and for
their operation and maintenance.
Section 1.4 SPT Materials. Simultaneously with the sale of the Yard to
----------- -------------
NCC by CMC as contemplated by the Master Lease Agreement, dated as of September
20, 1994, by and between CMC and NCC, the Assignment and Security Agreement,
dated as of September 20, 1994, by and among CMC, NCC and First Security Bank of
Utah, National Association and the Ground Lease, dated as of September 20, 1994
by and between CMC and NCC (collectively, the "Lease Documents"), SPT hereby
agrees to sell to NCC rail, tie plates, anchors and other used materials (the
"SPT Materials") as evidenced by one or more bills of sale executed and
delivered on or before the date of each closing for NCC's purchase of the Yard.
Section 1.5 Construction.
----------- ------------
(a) Construction Schedule. CMC's general contractor for construction of
---------------------
the Yard, W. T. Byler Co., Inc. ("Byler"), shall provide crews and equipment
for up to two (2) ten-hour shifts per day as needed to meet the construction
schedule set forth on Schedule 1.6 attached hereto (the "Construction
------------
Schedule"). The Construction Schedule shall be subject to timely delivery of
materials (including the SPT Materials) to be delivered by SPT and to the force
majeure provisions set forth in Section 7.1 of this Agreement.
-3-
<PAGE>
(b) Projections and Progress Reports. CMC shall provide SPT with oral or
--------------------------------
written weekly progress reports until the Completion Date (defined below).
Based upon the weekly progress reports, SPT and CMC shall make a good faith
effort to reach agreement as to whether any construction delays are caused by
late delivery of material (including the SPT Materials) to be delivered
by SPT or by force majeure events as provided in Section 7.1 of this Agreement.
(c) Commencement Date. Operation of the Yard commenced on April 1, 1994
-----------------
(the "Commencement Date").
(d) Completion Date. Construction of the Yard shall be completed on the
---------------
date (the "Completion Date") that CMC notifies SPT in writing that CMC is ready
to make available 3,000 Rail Car Slots in the Yard for receipt and storage of
Rail Cars from SPT, which date shall be the same date as the date of the sale of
the entire Yard by CMC to NCC and the lease of the entire Yard by NCC back to
CMC pursuant to the transactions contemplated by the Lease Documents.
(e) Late Fees. If for any reason, other than late delivery of materials
----------
(including the SPT Materials) to be delivered by SPT or force majeure events as
provided in Section 7.1 of this Agreement, CMC fails to deliver the designated
Rail Car Slots in the Yard on or before the designated dates as set forth on
Schedule 1.6 (the "Milestones"), CMC shall be obligated to pay to SPT a late fee
- ------------
equal to $10,000.00 per day (the "Late Fee") for each day, other than days of
delay resulting from late delivery of materials (including the SPT Materials) to
be delivered by SPT or force majeure events as provided in Section 7.1 of this
Agreement, after the applicable Milestone date until the actual date of delivery
of the number of Rail Car Slots in the Yard required to be delivered on that
Milestone date.
ARTICLE 2
OPERATIONS
----------
Section 2.1 Operator. CMC shall be responsible for the operation,
----------- --------
maintenance and control of the Yard and may contract with a financially and
operationally responsible operator reasonably acceptable to SPT for performance
of all such activities (the "Operator"). SPT hereby acknowledges and agrees
that GWISS, of which GWI Dayton, Inc. is the general partner, is acceptable to
SPT as the initial Operator of the Yard. SPT hereby consents to an assignment
to GWISS of CMC's rights under the Operating Agreement (defined below) and the
assumption by GWISS of CMC's obligations under the Operating Agreement;
provided, that CMC shall remain primarily responsible to SPT for the operation,
maintenance and control of the Yard.
-4-
<PAGE>
Section 2.2 Operating Agreement. Operation of the Yard shall be governed
----------- -------------------
by the Operating Agreement in the form attached hereto as EXHIBIT A and executed
---------
by SPT, and CMC prior to the Commencement Date.
Section 2.3 Trackage Rights Agreement. Prior to the Commencement Date,
----------- -------------------------
SPT and GWISS executed a Trackage Rights Agreement in the form attached hereto
as EXHIBIT B, and GWISS obtained, prior to the Commencement Date, authorization
---------
to the extent necessary from the Interstate Commerce Commission to exercise such
trackage rights.
ARTICLE 3
PAYMENTS
--------
Section 3.1 Interim Capacity Fee. Through the date first set forth above,
----------- --------------------
SPT shall pay CMC a monthly capacity fee of *** per available Rail Car Slot
(the "Interim Capacity Fee"). All Interim Capacity Fees accrued and unpaid
through the date first set forth above shall be paid in full on or before
October 31, 1994. For purposes of determining the Interim Capacity Fee, the
number of available Rail Car Slots for any given calendar month shall be deemed
to be the average daily availability. A Rail Car Slot shall be deemed to be
available for use by SPT on a given day if the Rail Car Slot is available for
use in accordance with the Operating Agreement, as determined jointly by CMC and
SPT. Unavailability or inaccessibility of Rail Car Slots because of any force
majeure event provided for in Section 7.1 shall not excuse SPT's obligation to
pay the Interim Capacity Fee with respect to such Rail Car Slots. In addition,
Rail Car Slots shall not be deemed to be unavailable if, through no fault of
CMC, operation of the Yard ceases because the Operator willfully terminates
engagement with CMC for operation and maintenance of the Yard.
Section 3.2 Capacity Fee. Commencing on the date hereof and for each
----------- ------------
calendar month thereafter during the term of this Agreement, SPT shall be
obligated to pay CMC a capacity fee (the "Capacity Fee") equal in amount to the
monthly Interim Rent or Basic Rent, as applicable, and Supplemental Rent, if
any, due and owing by CMC to NCC, as defined in, and determined from time to
time in accordance with, the Lease Documents and the transactions contemplated
thereby. SPT's obligation to pay the Capacity Fee shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which SPT may have against CMC, NCC or the Operator, including, without
limitation, any breach by CMC of its warranties, agreements and covenants
contained in any of the Lease Documents, (ii) any failure of the Yard to operate
in accordance with specifications or any failure by CMC or the Operator to
operate the Yard in accordance with the terms of the Operating Agreement, (iii)
any restriction, loss,
-5-
<PAGE>
theft, prevention or interference with any or all use of the Yard or the Rail
Car Slots, (iv) any change, waiver, extension, indulgence or other action or
omission in respect of any obligation or liability of SPT, CMC or any other
person, (v) any insolvency, bankruptcy, reorganization or similar case or
proceedings by or against SPT, CMC, NCC or any other person, (vi) any claim,
counterclaim or set-off that SPT or any other person has or might have against
CMC, or any other person, (vii) any misrepresentation or failure on the part of
CMC or any other person to perform or comply with any of the terms hereof or of
any other agreement, (viii) any invalidity, unenforceability, disaffirmance or
lack of binding effect of this Agreement or any provision hereof by operation of
law or through arbitration, (ix) any force majeure event provided for in Section
7.1, or (x) any other occurrence whatsoever, whether similar or dissimilar to
the foregoing, whether or not SPT shall have notice or knowledge of any of the
foregoing. SPT, to the extent permitted by law, waives all rights now or
hereafter conferred by applicable law or otherwise to quit, terminate or
surrender this Agreement or to any deferment, diminution or reduction of the
Capacity Fee. If for any reason whatsoever, this Agreement shall be terminated
in whole or in part by operation of law or otherwise (including pursuant to any
arbitration proceeding), SPT nonetheless agrees to pay to CMC the Capacity Fees
in accordance with the terms hereof had this Agreement not been terminated in
whole or in part.
Section 3.3 Access Fee. Commencing on the date hereof and for each
----------- ----------
calendar month thereafter during the term of this Agreement, SPT shall be
obligated to pay CMC a monthly access fee of *** per available Rail Car Slot
(the "Access Fee"). Prior to the Completion Date, the number of available Rail
Car Slots for any calendar month shall be determined in the same manner as set
forth in Section 3.1. On and after the Completion Date until expiration or
termination of this Agreement, SPT shall be obligated to pay the Access Fee with
respect to 3,000 Rail Car Slots unless SPT can demonstrate that (i) Rail Car
Slots were taken out of service for all or part of a given month due to the
negligence or willful acts or omissions of CMC or its operator with the effect
that less than 3,000 Rail Car Slots were available to SPT or (ii) entrance into
or exit from the Yard was precluded during a given day due to the negligent or
willful acts or omissions of CMC or the Operator. Unavailability or
inaccessibility of Rail Car Slots on or after the Completion Date because of any
force majeure event provided for in Section 7.1 shall not excuse SPT's
obligation to pay the Monthly Fee with respect to such Rail Car Slots. In
addition, Rail Car Slots shall not be deemed to be unavailable if, through no
fault of CMC, operation of the Yard ceases because the Operator willfully
terminates its engagement with CMC for operation and maintenance of the Yard.
Section 3.4 Operations Fee. SPT shall be obligated to pay CMC a monthly
----------- --------------
operations fee (the "Operations Fee"). CMC hereby
-6-
<PAGE>
acknowledges receipt of all Operations Fees due and owing for April through July
1994. The Operations Fee of *** due and owing for August 1994 shall be
paid in full by SPT to CMC on the date of this Agreement. The Operations Fee
shall be *** for September 1994 and each calendar month thereafter until
the first full calendar month during which there are at least 1,500 Rail Car
Slots available for use in accordance with the Operating Agreement. Commencing
with that month, the Operations Fee shall be *** until the first full
calendar month during which there are at least 1,800 Rail Car Slots available
for use in accordance with the Operating Agreement. Commencing with that month
and thereafter until the first full calendar month following the Completion
Date, the Operations Fee shall be as follows:
First Full Calendar Month
During Which Number of
the Operating Agreement Operations Fee
----------------------------------------------
***
Commencing with the first full calendar month after the Completion
Date, the Operations Fee shall be *** per available Rail Car Slot.
In addition, SPT shall pay an incremental Operations Fee of *** for
each Rail Car in excess of 3,000 that is released from the Yard during
any calendar month. The number of available Rail Car Slots shall be
determined in the manner set forth in Section 3.1 prior to the
Completion Date and Section 3.3 thereafter.
Section 3.5 Operations Fee Adjustments.
----------- --------------------------
(a) Within thirty (30) days after each of the third, sixth, ninth and
twelfth anniversaries of the Completion Date (and within thirty (30) days after
the fifteenth anniversary of the Completion Date if this Agreement is renewed),
CMC shall deliver to SPT a written statement of operating and maintenance costs
actually incurred by CMC with respect to operation and maintenance of the Yard
during each of the three prior contract years, which statement shall be subject
to audit by SPT in accordance with Article 4. The Operations Fee for the next
three (3) succeeding contract years shall be the budgeted operation and
maintenance costs which have been negotiated and agreed to by SPT, CMC and its
Operator, if any,
-7-
<PAGE>
during the third year of each adjustment period for the next three (3)
succeeding contract years divided by 3,000 Rail Car Slots. In negotiating
budgeted costs, SPT, CMC, and the Operator shall take into consideration such
factors as actual costs incurred in prior years, the effect of aging of the Yard
on maintenance requirements and planned repairs. If an Operator is to be
replaced by a new Operator, new budgeted operations and maintenance costs shall
be as determined by mutual agreement of CMC, SPT and the new Operator.
(b) If CMC or the Operator releases (outbound) more than 3,600 Rail
Cars from the Yard for each of three (3) consecutive calendar months, CMC and
the Operator shall have the right to initiate, by delivery of written notice to
SPT, renegotiation of the O&M Budget. If CMC or the Operator releases (outbound)
less than 2,700 Rail Cars from the Yard during each of six (6) consecutive
calendar months or less than 2,400 Rail Cars for each of four (4) consecutive
calendar months, SPT shall have the right to initiate, by delivery of written
notice, renegotiation of the O&M Budget. Such renegotiations shall be based on a
turnaround time for Rail Cars and the factors set forth in paragraph (a) of this
Section 3.5. If CMC, the Operator and SPT cannot reach agreement on a
renegotiated O&M Budget within thirty (30) days after the date of the applicable
notice delivered under this Section 3.5(b), the renegotiated O&M Budget shall be
determined by arbitration pursuant to Article 6 hereof.
Section 3.6 Payment of Fees.
----------- ---------------
(a) Payment Dates. CMC and SPT hereby agree that the accrued and
-------------
unpaid Interim Capacity Fees due and payable on or before October 31, 1994 are
*** . The Capacity Fee, Access Fee and Operations Fee for September
1994 and each month thereafter until the month in which the Completion Date
occurs shall be due and owing on the last business day of each such month (the
"Interim Payment Date"). Not less than five (5) days prior to each Interim
Payment Date, CMC shall provide SPT with a written statement of the Capacity
Fee, Access Fee and Operations Fee due and owing on such Interim Payment Date.
The Capacity Fee, Access Fee and Operations Fee for the month immediately
following the month in which the Completion Date occurs and for each month
thereafter during the term of this Agreement shall be due and owing on the first
business day of the next succeeding month (the "Payment Date"). The amount of
the Capacity Fee, Access Fee and Operations Fee due on each Payment Date shall
be as determined by the parties on the Completion Date (and based on the
assumption that 3,000 Rail Car Slots are available in the Yard) and remain
unchanged until delivery by CMC to SPT, not less than five (5) days prior to the
applicable Payment Date, of a change in the Basic Rent payable under the Lease
Documents or the accrual of incremental Operations Fees under Section 3.4.
Notwithstanding the other provisions of this Section 3.5(a), any portion of the
Capacity Fee attributable, from time to time, to Supplemental Rent payable by
-8-
<PAGE>
CMC under the Lease Documents shall be due and owing on the part of SPT as and
when such amount is due and owing on the part of CMC under the Lease Documents.
For purposes of this Agreement, the term "business day" shall mean any day that
is not a Saturday, Sunday or legal holiday in the State of New York or the State
of Texas or the State of Utah or a day on which banking institutions chartered
by the State of New York or the State of Texas or the State of Utah or the
United States and located in the State of New York or the State of Texas or the
State of Utah are legally required or authorized to close.
(b) Payment. Payment of Capacity Fees, Access Fees and Operations
-------
Fees shall be made by bank check or by wire transfer to the Collateral Trustee
pursuant to the Lease Documents. All late payments shall bear interest at an
annual rate equal to the prime rate of Citibank, N.A. plus two (2) percent
accruing from the due date until paid and calculated on the basis of a year of
three hundred sixty-five (365) days and the actual number of days elapsed.
(c) Default. In the event SPT fails to make a payment when it becomes
-------
due and owing under Section 3.6(a), and such default continues for a period of
five (5) business days after delivery by CMC to SPT of written notice of such
default (the "Cure Period"), CMC or its authorized agent may without further
notice or demand declare at once due and payable all Capacity Fees and Access
Fees accrued up to the date of default plus such Capacity Fees and Access Fees
as are required to be paid by SPT during the period following the default until
the fifteenth anniversary of the Completion Date; provided, that the first three
(3) times that SPT fails to make a payment when it becomes due and owing under
Section 3.6(a) CMC shall have the right to accelerate the Capacity Fees and
Access Fees only if such default continues for the Cure Period plus a period of
five (5) business days after delivery to SPT of written notice of expiration of
the Cure Period. If default is made in the payments required of SPT in this
Agreement, whether by scheduled maturity or by acceleration, and the same is
placed in the hands of an attorney for collection, or suit is filed hereon, or
proceedings are had in bankruptcy, receivership or other judicial proceedings
for the establishment or collection of any amount called for hereunder, SPT
agrees to pay to CMC or its authorized agent a reasonable amount as attorney's
or collection fees.
(d) Refund. After the Completion Date, SPT may make a written demand
------
on CMC for a refund with respect to any Access Fee paid in accordance with
Section 3.6(a) if it reasonably believes that the number of available Rail Car
Slots, determined in accordance with the provisions of Section 3.3, for the
month with respect to which the
-9-
<PAGE>
Access Fee was paid was less than 3,000 Rail Car Slots. Such written demand
shall be delivered to CMC within ninety (90) days after the end of the calendar
month in which the Access Fee payment was made and set forth therein the size of
the refund being sought by SPT and a brief statement of the facts upon which SPT
bases its assertion. If SPT and CMC cannot reach agreement on the amount of the
refund, if any, to which SPT is entitled within fifteen (15) days after delivery
of the written demand for refund, either party may submit the matter to
arbitration in accordance with Article 6. In lieu of payment of the refund
amount in cash by CMC, SPT may recover any and all refund amounts by set-off
against Access Fees accruing.
ARTICLE 4
AUDITS
------
Section 4.1 Records. For each three-year period during the term of this
----------- -------
Agreement, CMC shall maintain records pertaining to this Agreement. Such records
shall include but not be limited to accounting records, car records, written
policies and procedures, and any other supporting evidence necessary to
substantiate charges related to this Agreement (collectively, the "records").
The records shall be open to inspection and subject to audit and/or reproduction
at SPT's cost and expense during normal working hours by SPT's agent or its
authorized representative to the extent necessary to adequately permit
evaluation and verification of any invoices, payment or claims submitted by CMC
or any of its payees pursuant to this Agreement.
Section 4.2 Access. For the purposes of such audits, inspections,
----------- ------
examinations and evaluations, SPT's agent or authorized representative shall
have access to said records from the effective date of this Agreement until the
lesser of the three (3) years or the last SPT audit after the date of
termination hereof. SPT's agent or its authorized representative shall have
access to CMC's facilities during normal business hours. In order to conduct
audits in compliance with this Section 4.2, SPT's agent or its authorized
representative shall give CMC reasonable advance notice of intended audits.
ARTICLE 5
TERM AND PURCHASE OPTIONS
-------------------------
Section 5.1 Initial Term. The initial term of this Agreement shall
----------- ------------
commence on March 12, 1994 and end on the day immediately preceding the
fifteenth anniversary of the Completion Date, which date shall be the last day
of the Basic Lease Term under the Lease Documents.
Section 5.2 Renewal Term. By written notice delivered to CMC not less
----------- ------------
than one hundred and ninety (190) days prior to the fifteenth anniversary of the
Completion Date, SPT may elect to renew this Agreement, if not terminated early
pursuant to Section
-10-
<PAGE>
5.3, for one additional five-year term commencing on the fifteenth anniversary
of the Completion Date and ending on the day immediately preceding the twentieth
anniversary of the Completion Date. The Capacity Fee, Access Fee and Operations
Fee for the additional term shall be determined by mutual agreement of the
parties at that time, or, in the absence of agreement, submitted to arbitration
pursuant to Article 6; provided, that the Capacity Fee during the renewal term
shall not be less than the Basic Rent and Supplemental Rent, if any, payable by
CMC to NCC under the Lease Documents.
Section 5.3 Purchase Option. SPT shall have the right to exercise, on
----------- ---------------
its own behalf, any and all buyout and/or purchase options with respect to the
Yard granted by NCC to CMC under and pursuant to the Lease Documents. If no
default of SPT under Section 3.6(a) has occurred and is continuing, SPT may
elect to exercise the Early Buy-Out Option of CMC provided for in the Lease
Documents upon written notice given to CMC not less than five (5) days prior to
the EBO Date provided for in the Lease Documents. If no default of SPT under
Section 3.6(a) has occurred and is continuing, SPT also may indicate to CMC an
interest in determining the purchase price for the purchase option at the end of
the lease term of CMC provided for in the Lease Documents upon written notice
given to CMC not less than three hundred sixty-five (365) days prior to the end
of the Basic Lease Term or Renewal Term provided for in the Lease Documents, and
may exercise such option upon written notice given to CMC not less than one
hundred eighty-five (185) days prior to the end of the Basic Lease Term or
Renewal Term provided for the in the Lease Documents. Upon, and in conjunction
with any such exercise by SPT, CMC shall sell, assign, transfer and convey the
Site to SPT, free and clear of all liens, security interests, mortgages, deeds
of trust, claims or other encumbrances other than Permitted Liens, in
consideration for the payment by SPT to CMC of $5,000 per acre on the Site. In
no event shall exercise of the Early Buy-Out Option by SPT terminate or
discontinue SPT's obligations with respect to the accrual and payment of Access
Fees in accordance with Sections 3.3 and 3.6(b).
ARTICLE 6
ARBITRATION
-----------
Section 6.1 Arbitrable Matters. If at any time a question or
----------- ------------------
controversy shall arise between the parties hereto in connection with this
Agreement upon which the parties cannot agree, such question or controversy
shall be submitted to and settled by a single arbitrator, selected by mutual
agreement of the parties, within twenty (20) days after written notice by one
party of its desire for arbitration to the other party or parties; provided,
that the amount and time for payment of Capacity Fees shall not be subject to
arbitration under this Article 6. If within the twenty
-11-
<PAGE>
(20) day period the parties do not agree on a single arbitrator, the party
demanding such arbitration (the "Demanding Party") shall notify the other party
or parties (the "Noticed Party") in writing of such demand, stating the question
or questions to be submitted for decision and nominating one arbitrator. Within
twenty (20) days after receipt of said notice, the Noticed Party shall appoint
an arbitrator and notify the Demanding Party in writing of such appointment.
Should the Noticed Party fail within twenty (20) days after such receipt of such
notice to name its arbitrator, said arbitrator may be appointed by J*A*M*S,
Judicial Arbitration & Mediation Service, or, if J*A*M*S is no longer in
business, then by the Chief Judge (or acting Chief Judge) of the United States
District Court for the District of Columbia upon application by any party after
ten (10) days' written notice to all other parties. The arbitrators so chosen
shall select one additional arbitrator to complete the board. If they fail to
agree upon an additional arbitrator, the same shall, upon application of any
party, be appointed by said judge in the manner heretofore stated.
Section 6.2 Arbitration Proceedings. Upon selection of the
----------- -----------------------
arbitrator(s), said arbitrator(s) shall within reasonable diligence determine
the questions as disclosed in said notice of demand for arbitration, shall give
all parties reasonable notice of the time and place (of which the arbitrator(s)
shall be the judge) of hearing evidence and argument, may take such evidence as
they deem reasonable or as either party may submit with witnesses required to be
sworn, and may hear arguments of counsel or others. If any arbitrator declines
or fails to act, the party (or parties in the case of a single arbitrator) by
whom he was chosen or said judge shall appoint another to act in his place.
After considering all evidence, testimony, and arguments, said single arbitrator
or the majority of said board of arbitrators shall promptly state such decision
or award in writing which shall be final, binding, and conclusive on all parties
to the arbitration when delivered to them. Until the arbitrator(s) shall issue
the first decision or award upon any question submitted for arbitration,
performance under the Agreement shall continue in the manner and form existing
prior to the rise of such question. After delivery of said first decision or
award, each party shall forthwith comply with said first decision or award
immediately after receiving it.
Section 6.3 Costs and Fees. Each party to the arbitration shall pay the
----------- --------------
compensation, costs, and expenses of the arbitrator appointed in its behalf and
all fees and expenses of its own witnesses, exhibits, and counsel. The
compensation, cost and expenses of the single arbitrator or the additional
arbitrator in the board of arbitrators shall be paid in equal shares by all
parties to the arbitration.
Section 6.4 Access to Records. The books and papers of all parties, as
----------- -----------------
far as they relate to any matter submitted for arbitration, shall be open to the
examination of the arbitrator(s).
-12-
<PAGE>
ARTICLE 7
MISCELLANEOUS
-------------
Section 7.1 Force Majeure. No party shall be liable to the others in
----------- -------------
damages nor shall a default be deemed to have occurred, and each party shall be
excused from performance of any of its obligations hereunder (except obligations
involving the payment hereunder of money to the other party or to a third
party), during the time when such non-performance is occasioned by fire,
earthquake, strike, lock out, unavoidable accident, riot, insurrection, civil
disturbance, acts of civil or military authorities, act of public enemy,
embargo, war, act of God (including, without limitation, adverse weather
conditions to the extent that they give rise to mud or standing water conditions
that make earth moving or other construction work on the Yard impractical),
inability to obtain labor, materials or supplies or any other similar cause
beyond the party's reasonable control; provided, that if either party suffers a
work stoppage due to a labor dispute, such party shall make such reasonable
efforts, if practicable, to staff its operations so as to minimize disruptions
to the Project. Each party agrees to notify promptly the other party when the
non-performance of its obligations hereunder is the result of any of the
circumstances described above in this Section 7.1 and, except when the
circumstances involves a labor dispute, shall use all reasonable efforts to
remedy the situation. Each party further agrees to provide the other party with
periodic reports describing in reasonable detail the current condition of such
circumstance for so long as such circumstance prevents the performance of an
obligation required hereunder.
Section 7.2 Taxes. CMC agrees to pay, and indemnify and hold SPT
----------- -----
harmless from, all taxes, fees, assessments, charges or withholdings of any
nature whatsoever, together with any penalties, additions to tax or interest
thereon imposed against CMC, SPT, the Yard or underlying property or any portion
thereof by any Federal, state or local government or taxing authority in the
United States or by any foreign country or subdivision thereof upon or with
respect to the transactions contemplated by this Agreement or any related
operative document and upon or with respect to the Yard, the underlying property
or any portion thereof, the ownership, sale or other disposition, financing,
refinancing, leasing or operation of the Yard or the underlying property or any
portion thereof, or any payment to be made by SPT pursuant to the terms of the
Agreement or any related operative document (all such taxes, fees, assessments,
charges or withholdings, and all penalties, additions to tax and interest
imposed in connection therewith being hereinafter called "Taxes"). In the event
any reports or returns are required to be made with regard to any Taxes, CMC
shall prepare and file timely such reports or returns. CMC further agrees that,
with respect to any payment or indemnity under this Section 7.2, CMC's indemnity
obligations shall include any amount necessary to hold SPT harmless on an after-
tax basis from all Taxes required to
-13-
<PAGE>
be paid by SPT with respect to such payment or indemnity (including
any payments under this sentence). Payment shall be made by CMC no later than
the date on which SPT must pay such Taxes.
Section 7.3 Property Taxes. Notwithstanding the provisions of Section
----------- --------------
7.2 of this Agreement, during the term of this Agreement, SPT shall be
responsible for paying all property taxes imposed by the State of Texas or by
any Texas local taxing authority upon or with respect to the Yard and underlying
real property (however these taxes are denominated).
Section 7.4 Other Taxes.
----------- -----------
(a) SPT shall reimburse the Operator for all taxes directly
attributable to Operator's operation of the Yard and the transactions
contemplated by this Agreement and imposed on and paid by Operator pursuant to
Texas Tax Code Section 171.001 (hereinafter, "Franchise Taxes"). SPT's
obligation pursuant to this Section 7.4 shall not include any penalties,
additions to tax or interest imposed on Operator in connection with Franchise
Taxes and shall not include reimbursement for any taxes imposed on Operator as a
result of its receipt of any payment pursuant to this Section 7.4.
(b) All reports or returns with regard to Franchise Taxes, or any
other taxes that are required to be made with respect to the transactions
contemplated by the Agreement or by any related operative document, shall be
made and filed timely by CMC or Operator, as applicable.
(c) The accuracy of all amounts to be paid by SPT pursuant to Section
7.4(a) shall be subject to verification by SPT. In order to enable such
verification, Operator or CMC, as applicable, shall provide to SPT, at SPT's
request, all returns or reports required to be filed pursuant to Section 7.4(b)
of this Agreement, all auditors reports and any other Operator or CMC records
which SPT deems reasonably necessary to determine the accuracy of the purported
tax liability.
(d) All payments to be made by SPT pursuant to this Section 7.4 shall
be made after the later of thirty (30) days from the date of SPT's receipt of
written notice and reasonably proof of Operator's payment of Franchise Taxes or
SPT's completion to its reasonable satisfaction of verification pursuant to
Section 7.4(c) of this Agreement.
(e) If any claim is made against Operator, by commencement of
proceedings against Operator or otherwise, for any Franchise Taxes for which SPT
would have a reimbursement obligation pursuant to this Section 7.4, Operator
shall promptly notify SPT of such claim in writing. SPT may, at its expense, in
good faith and by appropriate legal or administrative proceedings, contest or
defend such asserted claim or liability. Any contest or
-14-
<PAGE>
defense conducted pursuant to this paragraph may be conducted by SPT either on
its own behalf or, if required by the applicable jurisdiction, in Operator's
name on Operator's behalf.
(f) If any refund is paid to Operator of any Franchise Taxes regarding
which SPT has made a payment to Operator pursuant to Section 7.4(a) of this
Agreement, Operator shall promptly notify SPT of such refund and pay over to SPT
the entire refunded amount including interest received thereon.
(g) Notwithstanding any other provision of this Agreement or of any
other related operative document, as between SPT and CMC, SPT shall not be
required to pay, reimburse, indemnify or hold harmless CMC or Operator from, any
taxes, together with any penalties, additions to tax or interest thereon, in
excess of SPT's obligations pursuant to Section 7.3 and Section 7.4(a) through
7.4(e) of this Agreement, as between SPT and CMC, SPT's entire obligation with
respect to taxes being fully set forth in such Sections 7.3 and Section 7.4(a)
through 7.4(e) of this Agreement. Notwithstanding the foregoing, SPT shall not
be relieved of its obligations to pay Capacity Fees attributable to Supplemental
Rent in accordance with the terms of Section 3.2.
(h) CMC hereby assigns to SPT any and all rights of CMC under the
Lease Documents to control contests regarding tax matters arising from the
transactions contemplated by the Lease Documents.
Section 7.5 Assignment. This Agreement shall inure to the sole benefit
----------- ----------
of and be binding upon the successors and permitted assigns of CMC and SPT.
Neither party shall assign its rights and interests in this Agreement without
the prior written consent of the other party, which consent shall not be
unreasonably withheld, provided, that SPT hereby irrevocably consents to the
collateral and absolute assignment of CMC's right, title and interest in, to and
under this Agreement to NCC as collateral security for the obligations of CMC
under the Lease Documents.
Section 7.6 Public Disclosure. Except as may be required by law or to
----------- -----------------
obtain financing for the Yard, neither party to this Agreement shall disclose
the terms and conditions of this Agreement to third parties without the prior
written consent of the non-disclosing party.
Section 7.7 Whole Agreement. This Agreement, including the Schedules
----------- ---------------
and Exhibits attached hereto and hereby incorporated by reference, constitutes
the entire agreement between the parties and may not be amended, modified or
supplemented except by mutual written agreement of the parties.
Section 7.8 Notices. All notices, demands, request, submissions and
----------- -------
other communications which are required or
-15-
<PAGE>
permitted to be given pursuant to this Agreement shall be given by one party to
the other parties in writing and shall be deemed properly served if delivered by
hand to the other parties to whose attention it is directed, or same shall be
deemed to have been properly served and delivered when mailed by registered or
certified mail, return receipt requested, with postage prepaid and addressed as
follows:
If intended for SPT:
Vice President and
Chief Transportation Officer
Southern Pacific Transportation Company
1860 Lincoln Street - 14th Floor
Denver, Colorado 80295
Fax: (303) 812-5098
With a copy to:
Director-Contracts & Joint Facilities
Southern Pacific Transportation Company
One Market Plaza, Room 1004P
San Francisco, California 94105
Fax: (415) 541-1024
If intended for CMC:
CMC Railroad I Ltd.
P.O. Box 247
Dayton, Texas 77535
Attn: Bill Sjolander
And in all cases with a copy to:
NCC Charlie Company
200 Park Avenue, 33rd Floor
New York, New York 10166
Attention: Asset Administrator
or such other address as may be designated by the parties.
Section 7.9 Waiver of Remedies. If any party fails to enforce any right
----------- ------------------
or remedy available under this Agreement, that failure shall not be construed as
a waiver of any right or remedy with respect to any other matter.
Section 7.10 Governing Law. This Agreement shall be construed in
------------ -------------
accordance with and governed by the local laws of the State of Texas.
Section 7.11 GWISS. GWISS is a third party beneficiary solely for
------------ -----
purposes of enforcing all rights of CMC in connection
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be duly executed.
SOUTHERN PACIFIC TRANSPORTATION
COMPANY
By: /s/ L.I. Yarberry
------------------------------
Name: L.I. Yarberry
------------------------------
Title: Vice President - Finance
------------------------------
CMC RAILROAD I, LTD.
BY: CMC RAILROAD-A, INC.,
GENERAL PARTNER
By: /s/ Bill Sjolander
---------------------------
Name: Bill Sjolander
---------------------------
Title: President
---------------------------
CONSENTED TO ON SEPTEMBER ___, 1994 BY:
GWI SWITCHING SERVICES L.P
BY: GWI DAYTON, INC.,
GENERAL PARTNER
By: /s/ Mark W. Hastings
---------------------------
Name: Mark W. Hastings
---------------------------
Title: Treasurer
---------------------------
-17-
<PAGE>
SCHEDULE 1.1
THE YARD AND THE SITE
---------------------
-18-
<PAGE>
SCHEDULE 1.3
THE PROPERTY
------------
-19-
<PAGE>
SCHEDULE 1.6
CONSTRUCTION SCHEDULE MILESTONES
--------------------------------
<TABLE>
<CAPTION>
CUMULATIVE NUMBER
RAILCAR SLOTS OF RAILCAR SLOTS
DATE DELIVERED AVAILABLE
<S> <C> <C>
============================================================
4/1/94 100 100
- ------------------------------------------------------------
5/1/94 300 400
- ------------------------------------------------------------
6/1/94 300 700
- ------------------------------------------------------------
7/1/94 300 1,000
- ------------------------------------------------------------
8/1/94 300 1,300
- ------------------------------------------------------------
9/1/94 200 1,500
- ------------------------------------------------------------
10/1/94 200 1,700
- ------------------------------------------------------------
11/1/94 300 2,000
- ------------------------------------------------------------
12/1/94 300 2,300
- ------------------------------------------------------------
1/1/95 200 2,500
- ------------------------------------------------------------
2/1/95 200 2,700
- ------------------------------------------------------------
3/1/95 300 3,000
============================================================
</TABLE>
-20-
<PAGE>
THE STATE OF TEXAS)
COUNTY OF LIBERTY)
FIELD NOTES of a 151.7228 acre tract of land surveyed for Bill Sjolander and
situated in the T.C. RR. Co. Survey, Section No. 39, Abstract No. 474 and in the
J.W. Davis Survey, Section No. 40, Abstract No. 537, Liberty County, Texas, and
being the same tract of land described as Four tracts of land in a deed dated
February 19, 1987, from Roy Seaberg, Jr., at al, to Bill Sjolander and recorded
in Volume 1160 at Page 402 of the Deed Records of Liberty County, Texas. This
151.7228 acre tract of land is more particularly described by metas and bounds
as follows, to-wit:
NOTE: BEARING BASIS IS THE WEST RIGHT OF WAY LINE OF STATE HIGHWAY NO. 146 AS
CALLED IN THE ABOVE MENTIONED DEED, S 20 DEG 42 MIN 55 SEC WEST. REFERENCE IS
MADE TO THE PLAT OF EVEN DATE ACCCOMPANYING THIS DESCRIPTION.
BEGINNING at a 1 inch iron pipe found for the Southeast corner of this tract of
land, the Southeast corner of said Four tracts of land and the Northeast corner
of a 40 foot strip of land conveyed to Jim Sterling by A.J. Otto by deed dated
December 13, 1956, and recorded in Volume 455 at Page 296 of the Deed Records of
Liberty County, Texas. This BEGINNING corner is in the West right of way line of
State Highway No. 146, 120 foot right of way, and in the center of a 60 foot
private road easement.
THENCE North 89 deg 12 min 00 sec West with the South line of this tract, the
centerline of said 60 foot private road easement and the North line of said 40
foot strip a distance of 884.88 feet to a 1/2 inch iron rod set for the
Southwest corner of this tract and the Southeast corner of a so-called 33.003
acre tract of land found to contain 33.3281 acres that was described in a
Memorandum of Lease form Bill Sjolander to Redland Stone Products Co. recorded
in Volume 1324 at Page 716 of the Deed Records of Liberty County, Texas.
THENCE North 13 deg 44 min 30 sec East with the West line of this tract and the
East line of said 33.3281 acre tract of land a distance of 3418.31 feet to a 1/2
inch iron rod found for the Northeast corner of said 33.3281 acre tract of land
and a corner of this tract of land.
THENCE North 43 deg 17 min 17 sec West with the South line of this tract and the
North line of said 33.3281 acre tract of land a distance of 478.24 feet to a 1/2
inch iron rod set for the Northwest corner of said 33.3281 acre tract and the
most Northern Southwest corner of this tract of land in the East right of way
line of the Southern Pacific Railroad Co. 100 foot right of way as described in
a deed from R.E. Armstrong to R.S. Sterling dated July 16, 1917, and recorded in
Volume 69 at Page 193 of the deed Records of Liberty County, Texas.
<PAGE>
PAGE NO. 2 - BILL SJOLANDER 151.7228 ACRE TRACT
THENCE North 13 deg 47 min 14 sec East with the West line of this tract and the
East right of way line of the railroad right of way, a distance of 2746.59 feet
to a point for the Northwest corner of this tract of land and the Southwest
corner of a 40 foot strip of land conveyed to Floyd R. Fouts by A.J. Otto by
deed recorded in Volume 408 at Page 571 of the Deed Records of Liberty County,
Texas. From this corner an iron pipe found bears North 89 deg 13 min 00 sec West
0.25 feet and a fence corner post at the Northwest corner of said Fouts 40 foot
strip and in the North line of the T. C. RR Co. Survey bears North 13 deg 47 min
14 sec East 39.99 feet.
THENCE South 89 deg 13 min 00 sec East with the North line of this tract and the
South line of the Fouts 40 foot strip a distance of 762.08 feet to a 1/2 inch
iron set for the most Northern Northeast corner of this tract of land and a
corner of a tract of land conveyed to M.F. Cooper, et al, by Floyd M. Fouts by
deed recorded in Volume 542 at Page 207 of the Deed Records of Liberty County,
Texas.
THENCE South 02 deg 46 min 00 sec West with the East line of this tract and the
West line of the Cooper tract a distance of 3785.84 feet to a 1/2 inch iron rod
set for a corner of this tract of land and the Southwest corner of the Cooper
tract of land.
THENCE South 69 deg 43 min 10 sec East with the South line of the Cooper tract
and the North line of this tract a distance of 125.06 feet to a 3/4 inch
galvanized iron pipe found for the most Eastern Northeast corner of this tract
of land and the Southeast corner of the Cooper tract of land in the West right
of way line of State Highway No. 146.
THENCE Southern 20 deg 42 min 55 sec West with the East line of this tract and
the West right of way line of State Highway No. 146, at 59.9 feet found a 1 inch
galvanized iron pipe in line, in all a total distance of 2686.91 feet to the
PLACE OF BEGINNING, containing within said boundaries 151.7228 acres of land.
SURVEYED: December, 1993
<PAGE>
PAGE NO. 3 - BILL SJOLANDER 151.7228 ACRE TRACT
SURVEYOR'S CERTIFICATE
I, Robert L. Hall, Jr., Reg. Professional Land Surveyor No. 1610, do hereby
certify that the foregoing field notes were prepared from a survey made on the
ground on the date shown and that all lines, boundaries and landmarks are
accurately described therein.
WITNESS may hand and seal at Baytown, Texas, this the 14th., day of December,
A.D., 1993.
/s/ Robert L. Hall, Jr.
______________________________
REG. PROFESSIONAL LAND SURVEYOR
No. 1610
93-0654H.FDN
[SEAL]
<PAGE>
SUBJECT PROPERTY
[GRAPH APPEARS HERE]
<PAGE>
EXHIBIT II
AMENDED AND RESTATED
OPERATING AGREEMENT
-------------------
THIS AMENDED AND RESTATED OPERATING AGREEMENT (this "Agreement"), made this
20th day of September, 1994, by and between SOUTHERN PACIFIC TRANSPORTATION
COMPANY, A Delaware corporation ("SPT"), and CMC RAILROAD I LTD., a Texas
limited partnership, ("CMC")
RECITALS:
--------
A. SPT, CMC and GWI Switching Services L.P., a Texas limited partnership
("GWISS"), executed and delivered a Car Storage Yard Agreement on March 12, 1994
(the "Storage Agreement") for the construction, operation and maintenance of a
storage yard on CMC's land in the vicinity of Dayton, Texas with a storage
capacity of 1,500 rail cars.
B. SPT and CMC executed and delivered an Operating Agreement on March 12, 1994
(the "Operating Agreement") to set forth certain understandings with respect to
the storage of SPT's rail cars on trackage controlled by CMC in the storage yard
in the vicinity of Dayton, Texas, including the transfer of such cars to and
from trackage of SPT in the vicinity of Dayton, Texas.
C. CMC and GWISS have executed and delivered an Assignment and Agreement dated
September 20, 1994, whereby CMC assigned certain of its rights hereunder to
GWISS.
D. Concurrently herewith, CMC has agreed to sell to NCC Charlie Company, a
Delaware corporation ("NCC"), the Storage Tracks (defined below) exclusive of
underlying real estate, as it is completed in stages for a total price of up to
$22,600,000 and to lease the same back from NCC.
E. Concurrently herewith, CMC and SPT have executed and delivered, and GWISS
has consented to, an Amended and Restated Car Storage Yard Agreement (the
"Amended Storage Agreement") to accommodate the transaction with NCC and to
reflect other changes neqotiated by SPT, CMC and NCC.
F. SPT and CMC have agreed to amend certain provisions of the Operating
Agreement to accommodate the transaction with NCC and to reflect other changes
negotiated by SPT, CMC and NCC.
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth below, SPT and CMC agree to amend and restate the Operating Agreement,
effective as of the date first set forth above, as follows:
SECTION 1. CMC hereby permits SPT (or its agent), and SPT hereby agrees, to
store empty covered hopper rail cars and covered
<PAGE>
hopper rail cars containing plastics bearing Standard Transportation Commodity
Code ("STCC"), No. 28-211-Series (the "Rail Car") on rail trackage operated,
maintained and controlled by CMC in the vicinity of Dayton, Texas as more
particularly described on Schedule 1 attached hereto (hereinafter referred to as
--------
"Storage Tracks"):
Section 2. Notwithstanding anything to the contrary in otherwise applicable
tariffs or circulars, CMC shall not be entitled to a division of revenue nor
shall it assess storage in transit charges against the loaded Rail Cars stored
on the Storage Tracks pursuant to this Agreement. The storage referred to in
this Agreement includes the following services performed for SPT, without
additional cost or expense to SPT:
(a) Moving the Rail Car to be stored from SPT's trackage located in the
vicinity of Dayton, Texas as more particularly described on Schedule 1 attached
----------
hereto (hereinafter referred to as "SPT Yard") to the Storage Tracks;
(b) Unlimited (as to time) storage of the Rail Car on the Storage Tracks and
any switching required while said Rail Car is in storage;
(c) Moving the stored Rail Car back to the SPT Yard within a reasonable amount
of time, but not more than 24 hours, after SPT's authorized representative
notifies CMC of shipping orders, except Sundays and holidays; provided, however,
that the time shall be tolled for any period during which CMC is unable to gain
access to any SPT tracks that are necessary to provide the service;
(d) Protecting Rail Cars stored hereunder and the contents thereof from,
without limitation, theft, fire and damage;
(e) Maintaining the Storage Tracks at all times at no less than Federal
Railroad Administration Class I standards, as the same may be amended from time
to time.
(f) Arranging the previously stored Rail Car for east or west movement
according to the directions given by SPT's authorized representative or as
listed by the TCC computer system.
CMC shall perform, or cause to be performed, the services set forth above in
all material respects in accordance with (i) applicable contractor and vendor
warranties, (ii) any applicable operating plans and budgets, (iii) all
applicable laws (including environmental laws), regulations, codes, permits, and
licenses, (iv) prudent operating and maintenance practices, and (v) this
Agreement, but in any event in compliance with the Master Lease Agreement dated
as of September 20, 1994 (the "Lease Agreement"), by and between CMC and NCC.
CMC or its contractor shall obtain and maintain in effect all licenses and
permits
-2-
<PAGE>
required to allow CMC or its contractor to do business or perform its services
hereunder in the jurisdictions where such services are to be performed.
Section 3. CMC shall be responsible for the operation, maintenance and control
of the Storage Tracks and performance of the services referred to in Section 2
of this Agreement. Such responsibilities of CMC shall be performed by CMC or its
contractor; provided, however, the hiring of such contractor (or any successor)
shall have prior written approval of SPT, which approval shall not be
unreasonably withheld. SPT hereby approves the selection by CMC of GWISS.
Upon the assumption by GWISS of CMC's obligations under this Agreement, GWISS
shall be bound by all of the terms and conditions contained herein. In addition,
GWISS shall consent to the absolute assignment of this Agreement and the Amended
Storage Agreement to NCC as security for the obligations of CMC under and
pursuant to the Lease Agreement, the Ground Lease, dated September 20, 1994 by
and between NCC and CMC and the Assignment and Security Agreement, dated as of
September 20, 1994, among NCC, CMC and First Security Bank of Utah, National
Association, as the Collateral Trustee (collectively, the "Lease Documents").
Upon the replacement of GWISS with any replacement operator or any successor
operator thereto, such replacement operator shall be similarly bound by all of
the terms and conditions contained herein prior to the commencement of any
activity by such party and, in addition, such replacement operator shall execute
and deliver a consent to the absolute assignment of this Agreement and the
Amended Storage Agreement to NCC and shall also execute and deliver any other
document which CMC or NCC shall reasonablv request.
Section 4. For all purposes, including responsibility for loss of or damage to
the Rail Cars or contents thereof, the Rail Cars shall be considered in the
possession and control of CMC while on the Storage Tracks.
Section 5. CMC shall not be responsible for paying per diem, mileage payout or
other accessorial charges on Rail Cars stored on the Storage Tracks pursuant to
this Agreement. Should any fine, penalty, liability, cost or expense be incurred
by CMC, or any of its agents, contractors, subcontractors or operators, as a
result of SPT's payment or nonpayment of accessorial charges, SPT shall promptly
and fully reimburse and indemnify CMC therefor. Neither CMC nor its operator
shall be required to pay SPT any fee, charge or reimbursement for expense in
connection with the separate grant of trackage rights by SPT to CMC's operator
other than as specifically provided in the Trackage Riqhts Aqreement.
-3-
<PAGE>
Section 6. In order to provide an updated and current inventory of Rail Cars
in the Storage Tracks, SPT shall provide CMC the following:
(a) limited access to SPT's TCC computer system;
(b) a CRT and associated printer; and
(c) a modem.
SPT shall arrange for installation (and subsequent maintenance and removal) of
a leased telephone circuit from Dayton, Texas to the Storage Tracks to interface
the CRT, associated printer, and modem with SPT's TCC system.
CMC shall provide SPT access at all time to the CRT, associated printer, and
modem so that SPT can evaluate, troubleshoot, and repair the same.
Section 7. CMC agrees to and shall indemnify and hold harmless SPT, its
officers, agents and employees from and against any and all claims, demands,
losses, damages, causes of action, suits and liabilities of every kind
(including reasonable attorneys' fees, court costs and other expenses related
thereto) for death of or injury to any person, or for loss of or damage to any
property, arising out of or in connection with the storage of Rail Cars on the
Storage Tracks and premises of CMC, except to the extent that such death,
injury, loss or damage is attributable to the negligence or willful misconduct
of SPT, its officers, agents or employees. The term "SPT" as used in this
paragraph shall include the affiliated companies of SPT.
Section 8. CMC shall procure the following types of insurance for the term of
this Agreement and promptly pay when due all premiums for that insurance. CMC
shall bill SPT for the cost of the insurance. Upon the failure of CMC to
maintain insurance as provided herein, SPT shall have the right, after giving
CMC ten (10) days written notice, to obtain insurance. The following minimum
insurance coverage shall be kept in force during the term of this Agreement:
Comprehensive General Liability insurance providing bodily injury, including
death, personal injury and property damage coverage with a combined single limit
of at least Twenty-Five Million Dollars ($25,000,000) for each incident and a
general aggregate limit of at least Twenty-Five Million Dollars ($25,000,000)
and all risk property insurance covering physical loss or damage to the Yard.
This insurance shall contain Broad Form Liability covering the indemnity
provisions contained in this Agreement, including, without limitation,
contractual liability, severability of interests and name SPT and NCC as
additional insureds with respect to liabilities arising out of CMC's
-4-
<PAGE>
obligation to SPT in this Agreement and with respect to all risk property
insurance name SPT and NCC as loss payees. If coverage is purchased on a
"claims made" basis it shall provide for at least a three (3) year extended
reporting or discovery period, which shall be invoked should insurance covering
the time period of this Agreement be canceled unless replaced with a policy
containing the same time period as the policy being replaced.
CMC warrants that this Agreement has been reviewed with its insurance
agent(s)/broker(s) and the agent(s)/broker(s) has been instructed to procure the
insurance coverage required herein and name SPT and NCC as additional insureds
with respect to liabilities which arise out of CMC's obligation to SPT hereunder
and to NCC under the Lease Documents (as defined in the Amended Storage
Agreement).
CMC shall furnish to SPT and NCC the certificate(s) of insurance evidencing
the required coverage and endorsement(s), and upon request a certified duplicate
of any of those policies. The insurance company(ies) issuing such policy(ies)
shall notify SPT and NCC in writing of any material alteration including any
change in the retroactive date in any 'claims made' policies or substantial
reduction of aggregation limits, if such limits apply, or cancellation thereof
at least thirty (30) days prior thereto.
The insurance coverage policy(ies) shall be written by a reputable insurance
company or companies reasonably acceptable to SPT and NCC or with current Best's
Insurance Guide Rating of B and Class X or better. Such insurance company shall
be authorized to transact business in the State of Texas.
Insurance coverage provided in the amounts set forth herein shall not be
construed to otherwise relieve CMC from liability hereunder in excess of such
coverage, nor shall it preclude CMC or SPT from taking such other action as is
available to it under any other provision of this Agreement or otherwise in law.
The limits of liability required under this Section 8 shall be adjusted every
five (5) years during the term or any extended term hereof based on any
increases or decreases in the Consumer Price Index, or any successor index.
Each insurance coverage policy shall provide:
(a) that each of SPT and NCC shall be notified promptly in writing of any
default in the payment of premiums and that the insurance company or companies,
upon their knowledge of any other act or omission on the part of any person
which might invalidate or render unenforceable such policy, will promptly so
notify each of SPT and NCC in writing; each policy shall also provide that no
cancellation, lapse, reduction in amount or material change in coverage thereof
shall be effective until at least 30 days (or ten
-5-
<PAGE>
days in the case of cancellation or lapse for non-payment of premiums) after
receipt by each of SPT and NCC of written notice thereof (which 30-day period or
10-day period, as the case may be, shall not commence until each of SPT and NCC
has received such written notice by certified mail);
(b) except with respect to policies of workers' compensation insurance, that
the interests of each of SPT and NCC will be insured regardless of any action or
inaction of CMC or its contractor or another insured under such policy or any
breach or violation by CMC or any other person of any warranties, declarations
or conditions contained therein (except with respect to the interests of the
Person which causes such breach or violation);
(c) that other than CMC, neither SPT nor NCC shall have any obligation or
liability for premiums, commissions, assessments or calls in connection with
such insurance (but that SPT or NCC shall have the right to pay any such
premium);
(d) that the insurance company or insurance companies, in the event of any
payment under such policy, waives its rights of recovery against any person to
which or to whom coverage is afforded under such policy, any person with
majority ownership interest of or by SPT or NCC, and any person to whom a
written waiver has been granted by SPT or NCC prior to loss, but the insurance
company's waiver shall apply only in respect of operations insured by such
policy and shall not be construed to be a waiver in respect of other operations
of such person in which SPT or NCC has no contractual interest;
(e) that such insurance shall be primary without right of contribution from
any other insurance carried by or on behalf of SPT or NCC:
(f) except with respect to the limits of the insurance under each policy, and
any rights or duties specifically assigned in the coverage part thereof to CMC,
the insurance applies as if each of SPT and NCC were the only named insured; and
(g) that neither CMC nor each of SPT or NCC shall be or become a co-insurer of
any loss under any co-insurance provisions contained therein.
Section 9. CMC's remuneration for the services provided hereunder shall be the
Operations Fees, plus any related penalties and interests determined and paid in
accordance with the terms and provisions of the Amended Storage Agreement. If a
payment of such Operations Fees is not made by SPT when due under the Amended
Storage Agreement and remains outstanding more than five (5) days after receipt
of written notice from CMC of such non-payment, then CMC directly or through its
contractor, may withhold the services
-6-
<PAGE>
to be provided hereunder and SPT shall pay to CMC the greater of such amount as
may be required to bring the payment of Operations Fees, including any related
penalties and interest, current or Operations Fees for four (4) calendar months
calculated in accordance with Section 3.5 of Storage Agreement on the assumption
that the average daily availability of Rail Car Slots per each of the four (4)
calendar months is 3,000 Rail Car Slots. This remedy shall be in addition to any
other remedies available to CMC or its contractor at law or in equity.
Section 10. During the term of this Agreement and for the lesser of three (3)
years or the last SPT audit, CMC shall maintain records pertaining to this
Agreement. Such records shall include but not be limited to accounting records,
car records, written policies and procedures, and any other supporting evidence
necessary to substantiate charges related to this Agreement (all the foregoing
hereinafter referred to as "records"). The records shall be open to inspection
and subject to audit and/or reproduction at SPT's sole cost and expense, during
normal working hours, by SPT's agent or its authorized representative to the
extent necessary to adequately permit evaluation and verification of any
invoices, payment or claims submitted by CMC or any of its payees pursuant to
the execution of the Agreement.
For the purpose of such audits, inspections, examinations and evaluations,
SPT's agent or authorized representative shall have access to said records from
the effective date of this Agreement until the lesser of three (3) years or the
last SPT audit.
SPT's agent or its authorized representative shall have access to CMC's
facilities during normal business hours. In order to conduct audits in
compliance with this Section, SPT's agent or its authorized representative shall
give CMC reasonable advance notice of intended audits.
Section 11.
(a) If not terminated early pursuant to Section 11 (c), the initial term of
this Agreement shall commence on the date first set forth above and end on the
day immediately preceding the fifteenth anniversary of the Completion Date (as
defined in the Amended Storage Agreement).
(b) By written notice delivered to CMC not less than one hundred and ninety
(190) days prior to the fifteenth anniversary of the Completion Date, SPT may
elect to renew this Agreement, if not terminated early pursuant to Section 11
(c), for one additional five-year term commencing on the fifteenth anniversary
of the Completion Date and ending on the day immediately preceding the twentieth
anniversary of the Completion Date.
-7-
<PAGE>
(c) This Agreement may be terminated early by mutual agreement of SPT and CMC.
(d) Termination of this Agreement shall not affect any liabilities or
obligations of the parties which occurred prior to such termination.
Section 12. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the parties.
Section 13. Except as may be required by law or to obtain financing for the
Storage Tracks, no party to this Agreement shall disclose the terms and
conditions of this Agreement to third parties without first obtaining written
consent of the nondisclosing parties.
Section 14. No party shall be liable to the others in damages nor shall a
default be deemed to have occurred, and each party shall be excused from
performance of any of its obligations hereunder (except obligations involving
the payment hereunder of money to the other party or to a third party), during
the time when such non-performance is occasioned by fire, earthquake, strike,
lock out, unavoidable accident, riot, insurrection, civil disturbance, acts of
civil or military authorities, act of public enemy, embargo, war, act of God;
provided, that if either party suffers a work stoppage due to a labor dispute,
such party shall make such reasonable efforts, if practicable, to staff its
operations so as to minimize disruptions to the Project. Each party agrees to
notify promptly the other party when the nonperformance of its obligations
hereunder is the result of any of the circumstances described above in this
Section 14 and, except when the circumstances involves a labor dispute, shall
use all reasonable efforts to remedy the situation. Each party further agrees to
provide the other party with periodic reports describing in reasonable detail
the current condition of such circumstance for so long as such circumstance
prevents the performance of an obligation required hereunder.
Section 15. This Agreement constitutes the entire agreement between the
parties and may not be modified except by written agreement of the parties.
Section 16. All notices, demands, requests, submissions and other
communications which are required or permitted to be given pursuant to this
Agreement shall be given by one party to the other parties in writing and shall
be deemed properly served if delivered by hand to the other parties to whose
attention it is directed, or same shall be deemed to have been properly served
and delivered when mailed by registered or certified mail, return receipt
requested, or by a nationally recognized next-day mail service, with postage
prepaid and addressed as follows:
-8-
<PAGE>
If intended for SPT:
Vice President and
Chief Transportation Officer
Southern Pacific Transportation Company
1860 Lincoln Street
14th Floor
Denver, Colorado 80295
Fax: (303) 812-S098
With a copy to:
Director-Contracts & Joint Facilities
Southern Pacific Transportation Company
One Market Plaza, Room 1004P
San Francisco, CA 94105
Fax: (415) 541-1024
If intended for CMC:
CMC Railroad I Ltd.
P.O. Box 247
Dayton, Texas 77535
Attn: Bill Sjolander
and in all cases with a copy to:
NCC Charlie Company
200 Park Avenue, 33rd Floor
New York, New York 10166
Attention: Asset Administrator
or such other address as may be designated by the parties.
Section 17. If any party fails to enforce any right or remedy available under
this Agreement, that failure shall not be construed as a waiver of any right or
remedy with respect to any other matter.
Section 18. This Agreement shall be construed in accordance with and governed
by the local laws of the State of Texas.
Section 19. Mutually agreed performance standards and goals shall be set
annually within the confines of this Agreement. Joint teams comprising members
from both parties shall work on projects as mutually agreed upon to reduce life
cycle cost and make process improvements. These joint teams shall set specific
improvement goals and implement processes to identify, analyze and correct
operational and quality problems and take steps to prevent future occurrences.
Such corrective actions are also applicable to any deficiencies as measured
against any performance standards specified elsewhere herein. The contractor
shall utilize
-9-
<PAGE>
continuous quality improvement principles and tools, as applicable, during the
execution of this contract.
SPT shall make available to the contractor any SPT provided quality
improvement or management training at no cost to the contractor on a space
available basis. CMC shall be solely responsible for any associated
transportation and personal expenses.
If SPT reasonably believes that CMC or its contractor have repeatedly
been in material noncompliance with agreed upon performance standards, SPT shall
have the right to give written notice thereof to CMC and its contractor.
Thereafter, SPT, CMC and the contractor shall work together in good faith to
improve the performance of CMC or its contractor, as applicable. If such
performance of the contractor has not improved to a level mutually acceptable to
SPT, CMC and the contractor within six (6) months after SPT's written notice
delivered under this Section 19, CMC shall take such actions as may be required
to promptly terminate the contractor's engagement for providing the services
hereunder and engage a replacement contractor with SPT's and NCC's consent,
which consent shall not be unreasonably withheld.
In addition, if CMC's contractor withholds the services to be provided
hereunder for a period of seven consecutive days or more except in accordance
with Section 9, or due to force majeure events or due to actions taken by SPT,
CMC shall take such actions as may be required to promptly terminate the
contractor's engagement for providing the services to be provided hereunder and
engage a replacement contractor with SPT's consent, which consent shall not be
unreasonably withheld.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed as of the day and year first herein written.
SOUTHERN PACIFIC TRANSPORTATION COMPANY
By /s/ E.C. Marberry
--------------------------
(Title)
CMC RAILROAD I, LTD.
By: CMC RAILROAD-A, INC.,
General Partner
By: /s/ Bill Sjolander
--------------------------
Name: Bill Sjolander
Title: President
-10-
<PAGE>
SCHEDULE I
Storage Tracks and SPT Yard
---------------------------
-11-
<PAGE>
[GRAPH APPEARS HERE]
====================================================
SOUTHERN PACIFIC LINES
- ---------------------------------------------------
DAYTON, TEXAS
Liberty County, Texas
JOINT TRACKAGE AGREEMENT
with GWI SWITCHING SERVICES, L.P.
====================================================
SCALE: NTS | DATE: 3-11-94
BRANCH: ML. & BAYTOWN BR. | VAL. SEC. 1 & 2
OPP. MP: | MAP NO. 1, 2, 7 & 8
DRAWN BY: TLE, TLG | ROUTE NO. TBA
per: DRD | DWG. NO. D-883
=====================================================
<PAGE>
EXHIBIT 10.66
CONFIDENTIAL TREATMENT REQUESTED AS TO THOSE PORTIONS MARKED WITH ASTERISKS
--------------------------------------------------------------------------
(***) AND THOSE PORTIONS HAVE BEEN SEPARATELY FILED WITH THE COMMISSION
-----------------------------------------------------------------------
LEASE AGREEMENT
Newberg, Westside-Seghers, and Tillamook Branches
THIS LEASE AGREEMENT ("Lease Agreement"), dated as of 12:01 p.m., Pacific
Standard Time, August 18, 1995, is by and between SOUTHERN PACIFIC
TRANSPORTATION COMPANY, a Delaware corporation, hereinafter called "SPTCo" in
its non-lessor capacity or "Lessor" and PORTLAND & WESTERN RAILROAD, INC., a
Delaware corporation, hereinafter called "Lessee";
RECITAL:
A. SPTCo has had negotiations with the Tri-County Metropolitan
Transportation District ("Tri-Met") to sell the Leased Premises (as defined in
Section 1.02 below) to Tri-Met and Tri-Met has advised that as a condition
precedent to a sale, that it desires SPTCo to enter into this Lease Agreement.
1
<PAGE>
B. Lessor desires to lease the Leased Premises to Lessee, and
Lessee desires to lease the Leased Premises from Lessor, upon and subject to all
of the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
SECTION I
LEASED PREMISES
SECTION 1.01 -- LEASE -- Lessor does hereby lease to Lessee and Lessee
does hereby lease from Lessor the Leased Premises. In the event that the Tri-Met
Agreements close a sale occurs, and this Lease Agreement is assigned by Lessor
to Tri-Met, SPTCo shall be a third party beneficiary of this Lease Agreement
able to enforce the terms hereof.
SECTION 1.02 -- LEASED PREMISES -- The "Leased Premises" shall mean all of
Lessor's right, title and interest in and to the following (subject to the
exclusions and reservations contained in this Lease Agreement): (a) the Land
(as defined below); (b) "Track" meaning all rail and fastenings, switches and
frogs
2
<PAGE>
complete, ties, ballast and signals located on the Land; (c) "Track
Support Structures" meaning all appurtenances to the Track, including without
limitation bumpers, roadbed, embankment, bridges, trestles, tunnels, culverts
and any other structures or things necessary for support or construction
thereof, and, if any portion thereof is located in a thoroughfare, pavement, any
crossing planks and other similar materials or facilities used in lieu of
pavement or other street surfacing material at vehicular crossings of tracks,
culverts, drainage facilities, crossing warning devices; and (d) any and all
work required by lawful authority in connection with construction, renewal,
maintenance and operation of said Track and Track Support Structures and all
additions thereto.
The "Land" shall mean all of the land of Lessor generally described as
follows:
1. The TILLAMOOK BRANCH, from Milepost 741.59 near Willsburg Jct., Oregon to
Milepost 770.50, near Schefflin, Oregon, as shown on Exhibit A; and
---------
2. The WESTSIDE-SEGHERS BRANCH, from Milepost 764.80 near Hillsboro, Oregon to
Milepost 754.57 near Seghers, Oregon, as shown on Exhibit A; and
---------
3. The NEWBERG BRANCH, from Milepost 763.99 near Cook, Oregon, to Milepost
749.67, near Newberg, Oregon, as shown on Exhibit A.
---------
EXCLUDING from the Leased Premises all Land described on Exhibit B hereto,
---------
and
RESERVING unto Lessor the rights specified in Section XV hereof.
SECTION 1.03 "AS IS, WHERE IS" -- EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, LESSEE SHALL LEASE THE LEASED PREMISES IN "AS IS, WHERE IS" CONDITION
AND WITHOUT ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO ANY
MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION THE DESIGN OR CONDITION OF THE
LEASED PREMISES, ITS MERCHANTABILITY OR ITS FITNESS OR SUITABILITY FOR ANY
PARTICULAR PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE LEASED
PREMISES OR CONFORMITY OF THE LEASED PREMISES TO ITS INTENDED USE. LESSEE ALSO
AGREES TO LEASE THE LEASED PREMISES SUBJECT AND SUBORDINATE TO ALL:
(a) reservations or exceptions of minerals or mineral rights, and all
private and public easements, licenses, fencing requirements, permits and
rights-of-way, however created, for crossings, pipelines, wirelines, fiber optic
facilities, roads, streets, highways and other legal purposes;
(b) existing and future building, zoning, subdivision and other applicable
federal, state, county, municipal and local laws, ordinances and regulations;
3
<PAGE>
(c) encroachments or other conditions that may be revealed by a survey,
title search or inspection;
(d) all existing ways, alleys, privileges, rights, appurtenances and
servitudes, agreements and matters of record, however created, liens of mortgage
or deeds of trust, and Lessor's exclusive right to approve or deny any and all
future easements, leases, licenses or rights of occupancy in, on, under,
through, above, across or along the Leased Premises, or any portion thereof so
long as such future easements, leases, licenses or rights of occupancy do not
unreasonably interfere with Lessee's rail operations;
(e) Lessor's reserved rights described in Article XV below, including
without limitation, Lessor's reservation of the right to admit other operators
to provide commuter or rail passenger service; and
(f) the terms and provisions of a sale to Tri-Met, as the same may be
entered into, assigned or amended from time to time, and the closing of the
transactions contemplated thereby.
(g) all existing leases, licenses or rights previously granted by Lessor
and the income, rental and all other payments thereunder are exclusively
reserved by Lessor, unless assigned in writing to Lessee.
SECTION 1.04 -- RELATED AGREEMENTS -- Concurrently herewith, SPTCo and
Lessee have entered into the following related agreements (the "Related
Agreements"). The Related Agreements shall be effective on the Commencement
Date (as defined in Section 2.01 below) and shall be executed in the form of the
exhibits attached hereto.
Exhibit C -- Trackage Rights Agreement: Willsburg Jct. -
Brooklyn
Exhibit D -- Interchange Agreement
Exhibit E -- Radio Frequency Use Agreement
Exhibit F -- Cooperative Marketing Agreement
Exhibit G -- Agreement Covering Handling of Agreement
Matters
Exhibit H -- Track Conditions
Exhibit I -- Bridge and Tunnel Condition
Exhibit J -- Release of Parcel Form
Exhibit K -- Assignment, Assumption and Indemnification
Agreement
Exhibit L -- Dispatch Agreement
4
<PAGE>
SECTION II
LEASE TERM
SECTION 2.01 -- TERM -- Lessee shall commence freight rail operations
on the Leased Premises on or prior to the third day following approval or
exemption of this transaction by the Interstate Commerce Commission or its
successor ("ICC") ("Commencement Date"). The initial term for this Lease
Agreement shall commence on the Commencement Date and shall end at midnight on
December 31, 2015; provided, however, that if Lessee has not commenced freight
rail operations on the Leased Premises on or prior to September 30,
1995 this Lease Agreement shall automatically terminate without any further act
of either party.
SECTION 2.02 -- EXTENSION -- This Lease Agreement shall automatically
be extended for one ten-year period commencing at 12:01 a.m. on January 1, 2015,
unless either party notifies the other that this Lease Agreement shall not be so
extended at least six (6) months prior to the commencement date of such extended
term.
SECTION 2.03 -- HOLDOVER -- If, subject to the right of Lessor to
evict or remove Lessee from the Leased Premises by all available legal or
equitable means, Lessee holds over and remains in possession of the Leased
Premises following expiration of the initial or the extended term, or following
termination of this Lease Agreement as to the Tillamook, Westside-Seghers,
and/or the Newberg Branch pursuant to Section XIV, such holding over will create
a month-to-month tenancy only. Any profits or losses from Lessee's railroad
operations during the term hereof and any hold over period shall enure and
accrue to Lessee.
SECTION III
RAIL SERVICE
SECTION 3.01 -- USE OF LEASED PREMISES -- Beginning on the
Commencement Date and throughout the term of this Lease Agreement, Lessee shall
be entitled to full and exclusive use of the Leased Premises for the operation
of common carrier rail freight service only and excursion and/or dinner trains
on such schedules as permitted by the Lessor and not during times that commute
or passenger service is provided ("E&D Service"). Lessee may not use the Leased
Premises to provide any type of passenger or commuter service (other than E&D
Service), unless SPTCo and any subsequent owner of the Leased Premises has
provided its prior written consent to Lessee. Any such written consent by SPTCo
and any subsequent owner of the Leased Premises may be withheld at its sole
discretion
5
<PAGE>
or conditioned, in part, upon Lessee obtaining additional insurance coverage (at
its sole cost and expense) and the assumption by Lessee of any additional
liability arising from such passenger service. During the term hereof, Lessor
shall not have the right to operate rail freight trains over the Leased Premises
or otherwise exercise rights over the Leased Premises except as specifically set
forth herein, nor shall it grant such rights to any third party without the
consent of Lessee. Lessor warrants that as of the Commencement Date of this
Lease Agreement, there is no other freight rail carrier to which Lessor has
granted rights to operate upon the Leased Premises, except as shown on Schedule
--------
3.01.
- -
SECTION 3.02 -- DISCONTINUANCE OR SUSPENSION OF OPERATION --During the
term of this Lease Agreement, Lessee shall not suspend or discontinue its
operation as a common carrier by rail over all or any part of the Leased
Premises without first applying for and obtaining from the ICC and any other
regulatory agency with jurisdiction, any necessary certificate of public
convenience and necessity or other approvals or exemptions from regulation for
such discontinuance of operations over the Leased Premises; provided, however,
that Lessee shall not seek such regulatory authority as is needed, take any
action to suspend or discontinue its operations on the Leased Premises, without
first receiving written concurrence from Lessor. Such concurrence may be waived
by mutual written consent and shall not be required for a discontinuance
resulting from an event of force majeure or a lawful embargo not resulting from
Lessee's failure to properly maintain the Trackage as outlined in Section 3.03.
If Lessor does not concur with an abandonment or discontinuance requested by
Lessee, Lessor will subsidize Lessee's continued operation of the designated
line segment with such subsidy calculated in accordance with 49 USC 10905.
Applications or petitions by Lessee to the ICC seeking authority to discontinue
rail service shall be filed jointly with Lessor at Lessor's request if Lessor
desires concurrent abandonment authority; if such applications or petitions are
filed jointly, filing fees imposed by the ICC shall be shared equally between
the parties, with each party bearing its own costs.
SECTION 3.03 -- MAINTENANCE OF TRACK AND TRACK SUPPORT STRUCTURES --
Lessee shall maintain the Track and Track Support Structures (other than as
provided in Section 3.04 hereof) as required by applicable law and, in any
event, at not less the FRA Class on the Commencement Date shown on Exhibit H,
---------
incorporated by reference hereby, ordinary wear and tear excepted, and shall
complete or restore promptly and in good and workmanlike manner to at least such
condition any Track or Track Support Structure or any building which may be
constructed, damaged or destroyed thereon, (unless approval from Lessor
regarding disposition of structures was obtained), and shall pay when due all
claims for labor performed and material furnished therefor. Lessor shall own
all material replaced in or added to the Track and Track Support Structures
unless otherwise agreed to in writing by Lessor; materials removed from the
Track and Track Support Structures shall
6
<PAGE>
become the property of Lessee provided that such materials are replaced by
Lessee. No rail that is a part of the Track shall be replaced with lesser
weight rail without the prior written consent of Lessor. Notwithstanding the
above requirements, in the event of major damage or catastrophic destruction
caused by forces of nature, Lessee after obtaining the requisite ICC authority
may terminate its lease of the destroyed portion of the leasehold without any
requirement to repair or remove damaged property, unless required by law or
reasons of safety.
SECTION 3.04 -- MAINTENANCE OF BRIDGES AND TUNNELS -- Lessee shall
maintain all bridges and tunnels on the Leased Premises as required by
applicable law and, in any event, in not less than the current condition as set
forth in the report of the joint inspection of the bridges and tunnels by Lessee
and Lessor, ordinary wear and tear excepted, which report shall be prepared not
less than fifteen (15) days prior to the Commencement Date and attached to this
Lease Agreement as Exhibit I.
---------
SECTION 3.05 -- COMPLIANCE WITH LAWS -- Lessee shall comply with all
laws affecting the Leased Premises or requiring any alterations or improvements
to be made thereon; shall not commit or permit waste thereof; shall not commit,
suffer, or permit any act upon the Leased Premises in violation of law and shall
do all other acts which from the character or use of the Leased Premises may be
reasonably necessary. Without limiting the generality of the foregoing, Lessee
expressly agrees that it shall perform all trash, waste and weed abatement
required by law or as reasonably necessary in connection with the Leased
Premises.
SECTION 3.06 -- LESSOR'S RIGHT TO INSPECT -- Lessor shall have the
right at any time upon reasonable notice and from time to time to inspect the
Leased Premises. In the event that as a result of Lessor's inspection of the
Leased Premises it is determined in the reasonable judgment of Lessor that any
Track or Track Support Structure or any other facility fails to meet the
appropriate standard of maintenance, Lessor shall so advise Lessee of the steps
necessary to bring the Track, Track Structure or other facility into conformity
with the applicable standard of maintenance. Thereafter, Lessee shall have a
reasonable period of time, such time to be mutually agreed upon in writing,
within which to take such corrective action.
SECTION 3.07 -- RECORDS MAINTAINED -- Lessee shall maintain such full
and complete records of all maintenance, rehabilitation, track relocation or
removal performed on the Leased Premises as shall reasonably be required by
Lessor and established by Lessor upon commencement of this Lease Agreement and
shall keep all track profiles, bridge and tunnel records, and track charts up to
date so as to show all program maintenance and rehabilitation performed on the
Track and Track Support Structures; provided, however, Lessee shall not be
responsible for updates to records retained by Lessor. Copies of updated
records and track charts shall be provided by
7
<PAGE>
Lessee to Lessor annually not later than September 30th of each calendar year
and promptly upon any other request of Lessor.
SECTION 3.08 -- COPIES OF REPORTS -- Lessee shall provide a copy of
all reports of track inspections by Federal Railroad Administration ("FRA") or
Oregon Public Utility Commission ("OPUC") or inspectors to Lessor promptly upon
receipt of said reports; the term "reports" shall include any notices or
citations alleging deficiencies from FRA track standards.
SECTION 3.09 -- FUTURE PASSENGER SERVICE -- In the event that Tri-Met
or any subsequent owner of the Leased Premises undertakes to provide passenger
operations on the Leased Premises, either directly or through the designation of
a passenger service operator, such service shall be permitted in accordance with
the terms of the shared use agreement described in the Letter of Intent, as the
same maybe entered into, assigned or amended from time to time. Lessor will use
reasonable efforts to address Lessee's comments and concerns in any negotiations
with Tri-Met or any subsequent owner of the Leased Premises.
SECTION IV
RENT
SECTION 4.01 -- RENTAL -- In consideration for the terms of this Lease
Agreement and subject to the terms and conditions set forth herein, Lessee
agrees to pay SPTCo annual rent for the Leased Premises in the amount described
in Table I, in arrears, calculated as of January 1 of each new year and payable
on the last day of February of such year ("Full Rent"), beginning on the last
calendar day of the year in which the Commencement Date occurred without
deduction, counterclaim or offset.
Table I
Tillamook ................. ***
Seghers ................... ***
Newberg ................... ***
So long as Lessee (i) continues to interchange all revenue freight cars
originating or terminating on the Leased Premises solely with SPTCo or
Williamette & Pacific Railroad, Inc., and the Port of Tillamook Bay Railroad
("Permitted Interchange Carriers")/1/ Listed on Schedule 4.01, or another
Permitted Interchange Carrier for origination or termination only and (ii)
interchanges all
- --------------
/1/ Note: The Permitted Interchange Carrier must originate or terminate
cars interchanged. The use of a Permitted Interchange Carrier
to perform intermediate switching to deliver revenue freight
cars to a carrier other than SPTCO or another Permitted
Interchange Carrier or origination or termination only will
be considered the same as Lessee directly interchanging
revenue freight cars with that carrier for the purposes of
assessing Annual Rent and Additional Rent.
8
<PAGE>
revenue freight cars originating or terminating on the Leased Premises to or
from SPTCo's lines at Brooklyn, Oregon (or other location designated by SPTCo)
with a routing that provides for a SPTCo linehaul routing (a) solely over
SPTCo's lines if such revenue freight cars are moving to or from destination or
origin points served by SPTCo or (b) over SPTCo's long haul route if such
revenue freight cars are moving to or from destination or origin points not
served by SPTCo, except as otherwise provided in SPTCo's rail transportation
contracts or tariffs, SPTCo will grant annual lease credits ("Annual Credits")
as outlined in Table II, so long as Lessee continues to interchange all revenue
freight cars originating and terminating on the Leased Premises solely with
SPTCo, or its successor or assign. In no event shall the Annual Credits exceed
the original Full Rent, as adjusted. Any Annual Credits calculated in excess of
Full Rent have no value and cannot be applied to another Segment or carried
forward against another year. Lessee shall submit certification to SPTCo that
all revenue freight cars were interchanged as provided above, together with
Lessee's rental payments and claim for Annual Credits (if any) no later than
February 1 of each calendar year. Annual Rent will be calculated and reported
during the first partial calendar year, but will not be assessed.
Table II
Tillamook Annual Credit ....... ***
Seghers Annual Credit.......... ***
Newberg Annual Credit.......... ***
Example:
Branch Segment Carloads Total Credit Rent Due
Tillamook *
Seghers ***
Newberg *
*includes bridge or overhead traffic from Permitted Interchange
Carriers delivered to SPTCo.
- ----------------------
Annual Rent shall be temporarily suspended for the appropriate segment during
that period of time that Lessee has applied to the Interstate Commerce
Commission, or appropriate regulatory agency for permission to abandon common
carrier operation, and it is understood that such applications may be made
repeatedly, however, should such authority not be granted, then full rent is due
retroactively and payable within ten (10) days of the decision date, if no
appeal or reapplication is pending.
Should Lessee (i) interchange any revenue freight cars, trailers,
containers, intermodal cars or other types of equipment
9
<PAGE>
used in revenue intermodal service (each, a "revenue freight car") with a
carrier other than Lessor or a Permitted Interchange Carrier as specified on
Schedule 4.01 attached hereto and made a part hereof, (ii) interchange any
revenue freight car to or from SPTCo's lines at Brooklyn, Oregon or at a
location mutually agreed upon with a routing that does not provide for a SPTCo
linehaul routing (a) solely over SPTCo lines if such revenue freight cars are
moving to or from destination or origin points served by SPTCo or (b) over SPTCo
long haul route if such revenue freight cars are moving to or from destination
or origin points not served by SPTCo, except as
otherwise provided in SPTCo 's rail transportation contracts or tariffs, Lessee
shall pay to SPTCo, additional rent ("Additional Rent") of *** per
revenue freight car (for each revenue freight car, other than center beam flat
cars) and *** per car for center beam flat revenue freight cars.
Notwithstanding the foregoing, in the event that Lessee is charged Additional
Rent for any trailer, container, or other type of equipment that was transported
by a rail car, Lessee shall not also be charged for the rail car itself.
Notwithstanding any other provision of this Agreement, such payment shall be
made by Lessee within thirty (30) days after any such interchange is effected
and all such payments shall be accompanied by a listing of any cars
interchanged, the dates thereof and such other information regarding each such
car as SPTCo may require.
Additional Rents shall be subject to annual increase or decrease on
each July 1, commencing July 1, 1995, based on the relationship of the
Association of American Railroads (or successor organization) Indices of
Railroad Material Prices and Wage Rates for Railroads of Class I, Western
District (material prices, wage rates and supplements combined, excluding fuel).
Statistics for the year 1993 shall be used as the base year statistics, and the
change effective July 1, 1995 shall be based on the relationship between 1994
statistics and 1993 statistics. Subsequent changes also shall be made on the
basis of subsequent year to year changes in these statistics, pursuant to this
Agreement. To the extent that Lessee pays to SPTCo either (i) an Interchange
Charge (as defined in the Trackage Rights Agreement between the parties of even
date herewith), or (ii) an Additional Rents payment, SPTCo may elect whether to
treat such payment as either an Interchange Charge, or Additional Rents, but
Lessee shall not owe duplicate (or triplicate) payments to SPTCo.
10
<PAGE>
SECTION 4.02 -- LATE PAYMENT RATE -- If Lessee fails to pay any
installment of rent or any other payment required hereunder when due, and such
failure continues for thirty (30) days, Lessee shall pay interest at the lower
annual rate of 2% over the prime rate of BANK OF AMERICA N.A. or the highest
annual rate allowed by law in effect on the day the rent or other payment was
due, which interest shall accrue from the due date until the date of payment.
SECTION 4.03 -- NO WAIVER -- Acceptance by SPTCo, it's successor,
assigns or designees of rent or other payments shall not be deemed to constitute
a waiver of any provision of the Lease Agreement.
SECTION 4.04 -- PAYMENTS ADDRESS -- All payments under this Lease
Agreement shall be sent to:
Managing Director - Shortline Relations
Southern Pacific Transportation Company
1860 Lincoln Street, 12th Floor
Denver, CO 80295
with copies to:
Managing Director
Plant Rationalization
Southern Pacific Transportation Company
Southern Pacific Building
One Market Plaza
San Francisco, CA 94105
Real Estate Department
Assistant Vice President, Room 870
Southern Pacific Building
One Market Plaza
San Francisco, CA 94105
SECTION 4.05 -- ADDITIONAL SECURITY -- As additional security for the
payment by Lessee to Lessor of any sums of money required hereunder to be paid
by Lessee, it is agreed that in the event Lessee fails, neglects or refuses to
timely pay any sum due and owing to Lessor hereunder, Lessor may use any and all
sums which it may collect from any third party and which may, in whole or in
part, be payable to Lessee, as an offset against any and all payments for which
Lessee is delinquent. In addition, any sums at any time due and payable to
Lessee by Lessor may also be used by Lessor and credited to Lessor's account to
the extent of any delinquent payment owed by Lessee to Lessor. Lessee does
hereby waive any and all claims, demands and causes of action against Lessor
which it may have or claim to have as a result of Lessor's use or implementation
of the provisions of this SECTION 4.05 and/or any offset. Lessor shall provide
written notice to Lessee of any actions taken under this section.
11
<PAGE>
SECTION 4.06 -- ADJUSTMENTS -- Full Rent, Additional Rent and the Annual
Credit shall be adjusted upwards or downwards, on the same percentage basis as
any adjustment made to the Switch Charge in the Cooperative Marketing Agreement
in Exhibit F. Such adjustment affects the dollar charge for rental and not the
---------
number of revenue carloads required for credit.
SECTION 4.07 -- RENTAL -- Rental shall include three percent (3%) of
the gross amount paid to Lessee for each E&D Service. Ten (10) days after the
end of each quarter, Lessee shall provide Lessor with a certificate specifying
the date during the calendar quarter of the E&D Service the sponsor of the E&D
Service and the gross amount paid to Lessee or stating that no E&D Service was
provided during that calendar quarter.
SECTION V
CONDITIONS PRECEDENT
As conditions precedent to either party's obligations hereunder:
SECTION 5.01 -- No Material, Adverse Change, No Work Stoppage -- Prior
---------------------------------------------
to the Commencement Date there has not been any material adverse change to the
physical condition of or in the business relating to the Leased Premises that
would preclude Lessee from conducting rail freight operations in substantially
the same manner as presently conducted by Lessor. There shall not be a work
stoppage imminent or in effect on the lines of Lessor or any of its affiliated
companies or on the Leased Premises as a result of the execution and/or
implementation of this Lease Agreement.
SECTION 5.02 -- EXEMPTION OR REGULATORY APPROVAL -- Lessee shall have
acquired the right to conduct rail freight service over the Track and Track
Support Structures located on the Leased Premises from the ICC and shall have
obtained such judicial, administrative agency or other regulatory approvals,
authorizations or exemptions as may be necessary to enable it to undertake its
obligations hereunder.
SECTION 5.03 -- NO IMPEDIMENT -- Lessor and Lessee shall not be
prevented from fulfilling their respective obligations under this Lease
Agreement as a result of legislative, judicial or administrative action.
SECTION 5.04 -- NO BAR -- Lessee shall not have discovered any
contract, agreement, award, judgment, title defect or condition of the Leased
Premises which would prevent Lessee from operating a rail freight operation on
the Leased Premises in substantially the same manner as presently conducted by
Lessor.
12
<PAGE>
SECTION VI
ACCOUNTING AND REPORTING
SECTION 6.01 -- INSPECTION -- Lessor and its agents shall have the
right at any time upon reasonable notice to inspect Lessee's books, records, or
any other reports or supporting documents or materials necessary to determine
compliance with any provisions of this Lease Agreement. Such inspection shall
be conducted during normal business hours and Lessee shall make its facilities
available to Lessor's inspectors to permit such inspection without undue
interference with Lessee's operations. Any direct expense arising from the
inspection shall be borne by Lessor.
SECTION VII
MODIFICATIONS AND IMPROVEMENTS
SECTION 7.01 -- PROPER USES OF LEASED PREMISES -- Lessee shall not use
nor permit the use of the Leased Premises in any manner that would tend to
create waste or a nuisance or would materially interfere with the continued
commercial, industrial or transportation corridor uses of the Leased Premises.
In using the Leased Premises, and in constructing, maintaining, operating and
using the Track and Track Support Structures, Lessee shall comply with any and
all requirements imposed by federal or state statutes, or by ordinances, orders
or regulations or any governmental body having jurisdiction thereover,
including, but not limited to, building and zoning ordinances regulating the
occupancy, use or enjoyment of the Leased Premises or regulating the character,
dimensions or location of any Track and Track Support Structures on the Leased
Premises.
SECTION 7.02 -- CONSTRUCTION OR RELOCATION OF TRACKS --Subject to
Section III hereof, Lessee may construct or relocate sidetracks or industrial
spur tracks on the Leased Premises as required in the ordinary course of
business so long as such work is done in conformity with applicable governmental
regulations. Sidetracks or industrial spurs may not be removed from the Leased
Premises without the prior written consent of Lessor, which consent will not be
unreasonably withheld and in the event any tracks are removed and track
materials sold for salvage, the net proceeds (after deducting the removal costs)
of such sale shall belong to Lessor unless otherwise agreed to in writing.
13
<PAGE>
SECTION VIII
REPRESENTATIONS AND WARRANTIES
SECTION 8.01 -- LESSOR -- Lessor represents and warrants that, as of
the date hereof and of the Commencement Date:
(a) It is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and able to do business in the
State of Oregon.
(b) It has full statutory and corporate power and authority to enter
into this Lease Agreement, subject to necessary regulatory authority, and to
carry out the obligations of Lessor hereunder.
(c) The Lease Agreement and each Related Agreement thereto have been
duly authorized, executed and delivered and the entering into and performance by
Lessor of this Lease Agreement does not and will not violate any judgment,
order, law or regulation applicable to Lessor or any provisions of Lessor's
certificate of incorporation or by-laws or result in any breach of, or
constitute a default under, or result in the creation of any lien, charge,
security interest or other encumbrance upon any assets of the Lessor or on the
Leased Premises (other than created by this transaction) pursuant to any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument known to which Lessor is a party.
(d) Its execution of and performance under this Lease Agreement does
not violate any rule, regulation, order, writ, injunction or decree of any
court, administrative agency or governmental body, or any contract to which
Lessor is party.
(e) Lessor shall bear any and all costs of protection of its current
employees arising from any labor protective conditions imposed by the ICC, any
other regulatory agencies, or state as a result of Lessor entering into this
Lease Agreement or implementing the transactions contemplated hereunder.
(f) Provided that Lessee continues to comply with all the conditions
and restrictions contained within the instruments and documents that vested an
interest in, or title to, the Property in Lessor, Lessor has sufficient title to
the Leased Premises to permit its continued use as a freight railroad corridor
by Lessee, sufficient to allow Lessee to operate rail freight trains in
substantially the same manner as freight train operations have been conducted by
Lessor.
(g) To Lessor's actual knowledge without any obligation to inquire or
investigate, Lessor has not received any notice from any governmental agency of
any alleged violation of environmental law, rule, regulation or ordinance or any
judgment pursuant to any
14
<PAGE>
environmental law, rule, regulation or ordinance relating to the Leased
Premises, except as disclosed in Schedule 8.01(g).
----------------
SECTION 8.02 -- LESSEE -- Lessee represents and warrants that, as of
the date hereof and as of the Commencement Date:
(a) It is a corporation duly organized, validly existing, and in good
standing under the laws of the State of New York and able to do business in the
State of Oregon.
(b) It has full statutory and corporate power and authority to enter
into this Lease Agreement, and subject to necessary judicial and regulatory
authority, to carry out its obligations hereunder.
(c) The Lease Agreement and each Related Agreement thereto have been
duly authorized, executed and delivered and the entering into and performance by
Lessee of this Lease Agreement does not and will not violate any judgment,
order, law or regulation applicable to Lessee or any provisions of Lessee's
certificate of incorporation or by-laws or result in any breach of, or
constitute a default under, or result in the creation of any lien, charge,
security interest or other encumbrance upon any assets of the Lessee or on the
Leased Premises (other than created by this transaction) pursuant to any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument to which Lessee is a party.
(d) Upon expiration of the original or any extended term of this Lease
Agreement or upon termination hereof by Lessor pursuant to SECTION XIV, Lessee
shall bear any and all costs of protection of its current or future employees,
including former employees of Lessor that may be employed by Lessee, arising
from any labor protective conditions imposed by the ICC, any other regulatory
agency or statute as a result of Lessee's lease or operation of the Leased
Premises and any related agreements or arrangements, or arising as a result of
the termination of this Lease Agreement. Nothing contained herein is intended
to be for the benefit of any such employee nor should any employee be considered
a third party beneficiary hereunder. Nothing in this Lease Agreement shall be
construed as an assumption by Lessee of any obligations to Lessor's current or
former employees under collective bargaining or other agreements that may exist
or have existed between Lessor and its employees, or any of them.
(e) Lessee and its affiliates have filed or caused to be filed all
Federal, state, local and foreign tax returns required to be filed and have paid
or caused to be paid all taxes shown to be due and payable on such returns or
any assessments received by Lessee or any of its affiliates, to the extent such
taxes are due and payable except to the extent (i) such taxes are being
contested in good faith, or (ii) such failure to file tax returns or pay
15
<PAGE>
taxes would not have any material adverse effect on the properties, business,
prospects, profits, or condition of Lessee.
SECTION IX
COVENANTS OF THE PARTIES
SECTION 9.01 -- UTILITY BILLS -- Except as provided below, during the
term hereof, Lessee shall pay prior to delinquency all bills for utilities,
including without limitation those for water, weed abatement, sewer, gas and
electric service to the Leased Premises. If any bill is paid by Lessee on or
after the Commencement Date applicable to any period prior to the Commencement
Date, or is attributable to properties of Lessor that are not a part of the
Leased Premises and owned by Lessor, Lessor shall promptly reimburse Lessee for
the amounts attributable to such periods or properties within thirty (30) days
after receipt of Lessee's request for reimbursement and a copy of the bill in
question. If Lessor is required to, or does pay, any such bill, Lessee shall
promptly reimburse Lessor within thirty (30) days of receipt of a bill or bills
therefor. If the Leased Premises are not billed separately but as a part of a
larger tract or parcel, Lessee and Lessor shall each pay that portion of such
bills as is attributable to its usage on or in connection with Leased Premises.
SECTION 9.02 -- DEFENSE OF TITLE --
(a) Lessee shall at its sole cost and expense protect and defend
Lessor's title against all persons claiming through Lessee and at all times keep
the Leased Premises free from any legal process or encumbrance whatever arising
through Lessee, including without limitation mechanics' and execution liens,
attachments and levies (except any created by or under or through Lessor), and
shall give Lessor immediate written notice of any such legal process or
encumbrance and shall indemnify, defend, protect and hold harmless Lessor from
same and from any loss caused thereby, except those arising prior to the
Commencement Date. Lessee shall notify Lessor of any and all encroachments on
the Leased Premises.
(b) Subject to its sell the Leased Premises, Lessor shall at its sole
cost and expense protect and defend its title against all persons and shall at
all times keep the Leased Premises free from any legal process against Lessor or
encumbrance by Lessor that could materially and adversely affect Lessee's
operations.
SECTION 9.03 -- COMPLIANCE WITH LAWS; WASTES AND POLLUTION -- During
the term of the Lease Agreement, Lessee shall comply with all federal, state,
and local laws, rules, regulations, and
16
<PAGE>
ordinances applicable to the Leased Premises, including but not limited to those
controlling air, water, weed abatement, noise, hazardous waste, solid waste, and
other pollution or relating to the storage, transport, release, or disposal of
hazardous materials, substances, waste, or other pollutants. Except to the
extent that such activities are the responsibility of Lessor under Section 9.04,
Lessee, at its sole cost and expense shall make all modifications, repairs, or
additions to the Leased Premises, and implement and bear the expense of any and
all structures, devices, equipment, or any remedial or monitoring actions which
may be required under any such laws, rules, regulations, ordinances, or
judgments, which if attached to the Land shall become owned by Lessor. During
the term of this Lease Agreement, Lessee shall not dispose of any wastes of any
kind, whether hazardous or not, on the Leased Premises. Lessee shall not handle
or store hazardous waste or hazardous substances on the Leased Premises other
than as may be used by Lessee in its operations in the normal course of business
or as may be transported by Lessee in its capacity as a common carrier by rail.
Without limiting the generality of the foregoing, at each location that Lessee
parks its locomotives, Lessee shall install drip pans and a recovery system for
fuel drippings that meet or exceed legal requirements within six (6) months
after the Commencement Date.
SECTION 9.04 -- HAZARDOUS MATERIALS --
(a) Hazardous Materials, as used herein, shall mean any material or
substance that is defined or classified, as of the Commencement Date, as a
"hazardous substance" pursuant to Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. (S) 9601(14)) or Section 311
of the Federal Water Pollution Control Act (33 U.S.C. (S) 1321); a "hazardous
waste" pursuant to Section 1004 or Section 3001 of the Resources Conservation
and Recovery Act (42 U.S.C. (S)(S) 6903, 6921); a toxic pollutant under Section
207(a)(1) of the Federal Water Pollution Control Act (33 U.S.C. (S) 1317(a)(1);
a "hazardous air pollutant" under Section 112 of the Clean Air Act (42 U.S.C.
(S) 7412); or a "hazardous material" under the Hazardous Materials
Transportation Uniform Safety Act of 1990 (49 U.S.C. (S) 1802(4)).
(b) Lessee acknowledges that it is being afforded extensive access to
the Leased Premises in order to make an on-site inspection thereof and have
independent Consultants prepare environmental studies regarding the presence of
Hazardous Materials. Lessee, however, does not hereby waive any right it may
have against Lessor for contribution or indemnification under applicable federal
and state law as a result of liability for the presence of any Hazardous
Materials on, in or under the Property on the Commencement Date, whether or not
Lessee has knowledge of the presence of such Hazardous Materials. To the extent
that Lessor is held liable by any federal or state agency or a court of
competent jurisdiction for the presence of any Hazardous Materials on, in or
under the Leased Premises on the Commencement Date, Lessor may
17
<PAGE>
elect to assume all responsibility for correspondence and negotiations with any
governmental or quasi-governmental agency with jurisdiction over the
environmental condition of the Leased Premises, and to draft, coordinate and
implement any remedial action plan that may be required for the Leased Premises.
If Lessor does not so elect, Lessor shall be liable to Lessee for all costs and
expenses, if any, that Lessee may incur in drafting, coordinating and/or
implementing any such remedial action plan that is required for the Leased
Premises.
(c) Upon expiration or earlier termination of the term of this Lease
Agreement, Lessee shall cause all hazardous substances to be removed from the
Leased Premises (except such hazardous substances, if any, as were located in
the Leased Premises prior to the commencement of Lessee's occupancy thereof) and
to be transported for use, storage, or disposal in accordance and compliance
with all applicable hazardous substances laws; provided, however, that Lessee
shall not take any remedial action in response to the presence of any hazardous
substances in or about the Leased Premises, nor enter into any settlement
agreement, consent decree, or other compromise in respect to any claims relating
to any hazardous substances in any way connected with the Leased Premises,
without first notifying Lessor of Lessee's intention to do so and affording
Lessor ample opportunity to appear, intervene, or otherwise appropriately assert
and protect Lessor's interest with respect thereto.
SECTION 9.05 -- NOTICE OF RELEASES OF HAZARDOUS MATERIALS --Lessee
shall promptly furnish Lessor written notice of any and all:
(a) releases of Hazardous Materials affecting the Leased Premises or
any adjacent property of which it becomes aware which occur during the term of
this Lease Agreement regardless of whether such releases are required to be
reported to any federal, state, or local authority; and
(b) alleged water or air permit condition violations. Such written
notice shall identify the substance released, the amount released and the
measures undertaken to clean up and remove the released material and any
contaminated soil or water, the nature and extent of the alleged violation and
the measures taken to eliminate the violation, and shall certify that Lessee has
complied with all applicable regulations, orders, judgments or decrees in
connection therewith, or the date by which such compliance is anticipated to be
effected. Lessee shall also provide Lessor with copies of any and all reports
made to any governmental agency which relate to such releases or such alleged
violations during the term of this Lease Agreement.
SECTION 9.06 -- RIGHT TO INSPECT AND CORRECT -- During the term of
this Lease Agreement, Lessor shall have the right to enter, inspect and test the
Leased Premises for the purpose of inspecting the Leased Premises to ensure
compliance with the requirements of
18
<PAGE>
this Section IX. If Lessor detects any violation, including any contamination
of the Leased Premises which is the responsibility of Lessee under this Section
IX, Lessor shall notify Lessee in writing of the violation. Upon receipt of
such notice Lessee shall take immediate steps to eliminate the violation or
remove the contamination to the satisfaction of any governmental agency with
jurisdiction over the subject matter of the violation. Should Lessee
inadequately remedy or fail to eliminate the violation, Lessor or its
representative shall have the right, but not the obligation, to terminate this
Lease Agreement and/or to enter the Leased Premises and to take whatever
corrective action Lessor deems necessary to eliminate the violation, at the sole
cost and expense of Lessee. Lessee shall reimburse Lessor for any and all
amounts expended by Lessor promptly following Lessor's demand. Should it
subsequently be determined that the contamination or violation was Lessor's
responsibility under Section 9.03, Lessor shall promptly reimburse Lessee for
any and all amounts expended by Lessee in seeking to remedy or eliminate the
condition or violation.
SECTION 9.07 -- NO STATUTE OF LIMITATIONS -- As between the parties,
Lessee and Lessor waive and shall not assert as a defense any statute of
limitations applicable to any controversy or dispute arising between the parties
under this Section IX.
SECTION 9.08 -- EMPLOYMENT OF SPTCO'S EMPLOYEES -- To the maximum
extent practical, Lessee shall offer employment to active employees of SPTCo in
preference to others. Lessee shall have no obligation to hire SPTCo's employees
if:
(a) it has no openings;
(b) in Lessee's sole judgment,
(1) no qualified employee of SPTCo applies for an opening or accepts
employment on Lessee's terms; or
(2) another applicant is better qualified; or
(c) any law requires Lessee to hire otherwise, including but not limited to
equal opportunity, affirmative action, veterans' right, or the Rock Island or
Milwaukee Road Acts.
SECTION 9.09 -- EMPLOYMENT UPON EXPIRATION OR TERMINATION OF LEASE -- Upon
expiration of the original or any extended term of this Lease Agreement or upon
termination hereof by Lessor pursuant to Section XIV, Lessor shall offer
employment preference to active employees of Lessee subject to the limitations
contained in Section 9.08 and Lessee shall bear any and all costs of protection
of its current or future employees, including former employees of Lessor that
may be employed by Lessee, arising from any labor protective conditions imposed
by the ICC, any other regulatory agency or statute as a result of Lessee's lease
or operation of the Leased Premises and any Related Agreements or arrangements,
or arising as
19
<PAGE>
a result of the termination of this Lease Agreement. Nothing contained herein
is intended to be for the benefit of any such employee nor should any employee
be considered a third party beneficiary hereunder. Nothing in this Lease
Agreement shall be construed as an assumption by Lessee of any obligations to
Lessor's current or former employees under collective bargaining or other
agreements that may exist or have existed between Lessor and its employees, or
any of them.
SECTION 9.10 -- NO ASSIGNMENT -- Except as provided by Exhibit K, Lessee
covenants not to assign, sublease or in any other manner admit another party to
possession or use of any or all of the Leased Premises without Lessor's prior
written consent which consent Lessor may withhold in its sole discretion.
SECTION 9.11 -- OTHER COMPANIES -- Lessee covenants not to enter into any
commercial arrangement with any other transportation company with respect to the
Leased Premises, including but not limited to joint operations and haulage,
interchange, without Lessor's prior written consent, which consent Lessor may
withhold in its sole discretion. All requests under this Section 9.11 to Lessor
shall be directed to Director-Short Line Relations, 1860 Lincoln, Denver, CO
80295.
SECTION 9.12 -- INTERCHANGE -- Revenue freight cars originating or
terminating on the Leased Premises shall be interchanged with the Permitted
Interchange Carriers or SPTCo at Brooklyn or such other location as maybe agreed
upon by SPTCo and the Lessee.
SECTION X
EMINENT DOMAIN
SECTION 10.01 -- EMINENT DOMAIN PROCEDURES -- In the event that at any time
during the term of this Lease Agreement the whole or any part of the Leased
Premises shall be taken by any lawful power by the exercise of the right of
eminent domain for any public or quasi-public purpose the following provisions
shall be applicable.
SECTION 10.02 -- MATERIAL INTERFERENCE -- If such proceedings shall result
in the taking of the whole of the Leased Premises or a portion of the Leased
Premises which materially interferes with Lessee's use of the Leased Premises
for freight railroad purposes, Lessee shall have the right, upon written notice
to Lessor, to terminate this Lease Agreement in its entirety. In that event,
and subject to any necessary regulatory approvals or exemptions, this Lease
Agreement shall terminate and expire on the date title to the Leased Premises
vests in the condemning authority, and the rent and
20
<PAGE>
other sums or charges provided in this Lease Agreement shall be adjusted as of
the date of such termination.
SECTION 10.03 -- NON-MATERIAL INTERFERENCE -- If such proceeding shall
result in the taking of a portion of the Leased Premises which does not
materially interfere with Lessee's use of the Leased Premises for freight
railroad purposes, then this Lease Agreement shall continue for the balance of
its term as to the part of the Leased Premises remaining, without any deduction,
abatement or offset in respect of rent or any other sum or charge to be paid by
the Lessee under the provisions of this Lease Agreement.
SECTION 10.04 -- ALLOCATION -- Lessor shall be entitled to any and all
funds payable for the total or partial taking of the Leased Premises without any
participation by Lessee; provided, however, that nothing contained herein shall
be construed to preclude Lessee from prosecuting any claim directly against the
condemning authority for loss of its leasehold estate.
SECTION 10.05 -- NOTICE OF EMINENT DOMAIN -- Each party shall provide
prompt notice to the other party of any eminent domain proceeding involving the
Leased Premises. Each party shall be entitled to participate in any such
proceeding, at its sole cost and expense, and to consult with other party, its
attorneys, and experts. Lessee and Lessor shall make all reasonable efforts to
cooperate with each other in the defense of such proceedings and to use best
efforts to ensure Lessee's continued ability to use the Leased Premises for the
conduct of freight railroad operations.
SECTION XI
INDEMNIFICATION AND INSURANCE
SECTION 11.01 -- INDEMNIFICATION ALLOCATION OF RISK --
(a) It is the express intent of Lessor and Lessee that Lessee shall
protect, defend, hold harmless, and indemnify Lessor and/or SPTCo from and
against any and all liability, damage, expense, cost, claim or suit of any kind
whatsoever, including attorney's fees (collectively, "Liability"), incurred by
or assessed against Lessor and/or SPTCo, its agents, employees, affiliated
companies and its successors and assigns on account of injuries, death, or
property loss or damage or government assessment or penalty or any other matter
arising on or after the Commencement Date from Lessee's use, operation or
maintenance of the Leased Premises, including, Liability proximately caused or
contributed to by the acts, omissions or negligence of Lessor and/or SPTCo,
except, however, Liability arising from the sole acts, omissions or negligence
of Lessor and/or SPTCo or the criminal conduct of Lessor and/or SPTCo. All
Liability, including Liability for any injury,
21
<PAGE>
death, or property loss or damages, arising in connection with hazardous
substances or environmental conditions shall be governed by the provisions of
Section 9.04 hereof. The foregoing notwithstanding, neither party shall have
any claim against the other party for interruption of or delay to such party's
business or for loss of profit or income.
(b) Except as otherwise provided herein, it is the express intent of
Lessor and Lessee that Lessor shall protect, defend, hold harmless, and
indemnify Lessee from and against any and all Liability incurred by or assessed
against Lessee, its agents, employees, affiliated companies and its successors
and assigns on account of events occurring on the Leased Premises prior to the
Commencement Date except, however, Liability arising from the sole acts,
omissions or negligence of Lessee or its affiliates or the criminal conduct of
Lessee or its affiliates. All Liability, including Liability for any injury,
death, or property loss or damages, arising in connection with hazardous
substances or environmental conditions shall be governed by the provisions of
Section 9.04 hereof. The foregoing notwithstanding, no party shall have any
claim against any other party for interruption of or delay to such party's
business or for loss of profit or income.
(c) Each party hereto covenants and agrees that its obligations under this
indemnity will be fulfilled whether or not such Liability arises during the time
that this Lease Agreement is in effect or thereafter. The covenants of
indemnity contained in this Lease Agreement shall continue in full force and
effect notwithstanding the full payment of all sums due under this Lease
Agreement, or the satisfaction, discharge or termination of this Lease Agreement
in any matter whatsoever.
SECTION 11.02 -- INSURANCE -- Lessee shall, at its sole cost and expense,
procure the following kinds of insurance to be effective during the term of this
Lease Agreement, beginning on Commencement Date and promptly pay when due all
premiums for that insurance. Upon the failure of Lessee to maintain insurance
as provided herein, Lessor shall have the right, in addition to all other
remedies available to Lessor under this Lease Agreement or in law or equity,
after giving Lessee ten (10) days written notice to obtain insurance and Lessee
shall promptly reimburse Lessor for that expense. The following minimum
insurance coverage shall be kept in force during the term of this Lease
Agreement:
Comprehensive General Liability insurance including contractual liability
providing bodily injury, including death, personal injury and property damage
coverage with a combined single limit of at least Twenty-five Million Dollars
($25,000,000) for each incident and a general aggregate limit of at least
Twenty-five Million Dollars ($25,000,000) with self-insured retention or
deductibles no greater than One Hundred Thousand Dollars ($100,000). This
insurance shall contain Broad Form Liability covering the indemnity provisions
contained in this Lease
22
<PAGE>
Agreement, severability of interests and name Lessor and SPTCo as an additional
insured with respect to liabilities arising out of Lessee's obligation to Lessor
and SPTCo in this Lease Agreement. If coverage is purchased on a "claims made"
basis it shall provide for at least a three (3) year extended reporting or
discovery period, which shall be invoked should insurance covering the time
period of this Lease Agreement be canceled unless replaced with a policy
containing the same retroactive date as the policy being replaced. Should the
aggregate limit be eroded by forty (40) percent or more, Lessee shall
immediately restore the aggregate limit to Twenty-Five Million Dollars
($25,000,000).
SECTION 11.03 -- INSURANCE COMPANY -- The insurance policy(ies) shall be
written by a reputable insurance company or companies acceptable to Lessor or
with current Best's Insurance Guide Rating of B and Class VII or better. Such
insurance company shall be authorized to transact business in the State of
Oregon. If requested, Lessee must furnish a certified copy of all insurance
policy(ies) and endorsement(s) to Lessor and/or SPTCo within seven (7) days of
such request.
SECTION 11.04 -- NO RELIEF OF LIABILITY -- Insurance coverage provided in
the amounts set forth herein shall not relieve Lessee from liability hereunder
in excess of such coverage, nor shall it preclude Lessee or Lessor and SPTCo
from taking such other action as is available to it under any other provision of
this Lease Agreement or otherwise in law or equity.
SECTION 11.05 -- ADJUSTMENT OF INSURANCE COVERAGE -- The limits of
insurance coverage required under Section 11.02 shall be adjusted every three
(3) years during the term or any extended term hereof based on any increases or
decreases in the Consumer Price Index, or any successor index of insurance at
such adjusted level is available from any reputable carrier. If the adjusted
amount is not available, Lessee shall obtain the highest amount of coverage
available.
SECTION 11.06 -- LESSOR IS ADDITIONAL INSURED -- On or prior to the
Commencement Date, Lessee shall have provided to SPTCo a certificate from its
insurance company evidencing that Lessee has procured the insurance coverage
required herein and named Lessor and SPTCo as an additional insured with respect
to liabilities which arise out of Lessee's obligation to Lessor and SPTCo.
SECTION 11.07 -- INSURANCE CERTIFICATE -- Lessee shall furnish to Lessor
and SPTCo annually not later than July 1 of each year, certificate(s) of
insurance evidencing the required coverage and endorsement(s), and upon request
a certified duplicate of any of those policies. The insurance company(ies)
issuing such policy(ies) shall notify Lessor and SPTCo in writing of any
material alteration including any change in the retroactive date in any 'claims
made' policies or substantial reduction of aggregation
23
<PAGE>
limits, if such limits apply, or cancellation thereof at least thirty (30) days
prior thereto.
SECTION XII
TAXES
SECTION 12.01 -- GENERAL TAX INDEMNITY --
(a) Lessee shall pay and shall reimburse, indemnify, protect and hold
harmless Lessor and SPTCo from and against all taxes, fees, governmental
charges, withholdings and assessments, of any nature whatsoever, including any
interest, fines, additions to tax, and penalties thereon, imposed against
Lessor, SPTCo, Lessee, the Lease Agreement or any of the Related Agreements, or
the Leased Premises by any Federal, state or local government or taxing
authority in the United States or by any foreign government or any subdivision
or taxing authority thereof upon, with respect to, as a result of, arising out
of, measured by, or in any way relating to the Leased Premises, the possession,
use or operation of the Leased Premises, the payment of Full Rent, Annual Rent,
Additional Rent or any other amount paid pursuant to the Lease Agreement or any
of the Related Agreements, the granting of Annual Credits, any act required or
permitted pursuant to the Lease Agreement or any of the Related Agreements, or
any transaction contemplated by the Lease Agreement or any of the Related
Agreements (all such taxes, fees, governmental charges and assessments, and
penalties, interest, fines and additions to tax imposed in connection therewith,
being hereinafter called "Taxes"); provided, however, that the foregoing
agreement to pay and indemnify shall not apply to: i) any income, franchise, or
capital taxes that are on or measured by net income, capital or net worth; and
iii) any taxes imposed as a result of Lessor's activities in connection with its
rights and reservations described in Article XV hereof. With respect to Taxes
in the nature of property taxes, responsibility for payment of such taxes shall
be prorated on a daily basis as of the Commencement Date and the lease
termination date with Lessee being responsible, in accordance with the
provisions of this Section 12, for the payment of such taxes applicable to the
period beginning with the Commencement Date and ending with the lease
termination date.
(b) All reports and returns (including but not limited to any reports or
returns with respect to Taxes in the nature of property taxes) required to be
made with regard to Taxes shall be prepared and filed timely by Lessee.
(c) Any Taxes subject to payment or indemnification under this Section
12.01 shall be paid directly by the Lessee when due to the applicable taxing
authority if permitted. Lessee shall furnish to Lessor and/or SPTCo photocopies
of official receipts evidencing
24
<PAGE>
Lessee's direct payment of such Taxes within five (5) days of payment thereof.
If direct payment is not permitted or otherwise is not made, any amount payable
to Lessor under this Section 12.01 shall be paid by the Lessee within 10 days
after receipt of a written demand therefor from Lessor and/or SPTCo. All such
payments shall be made to the Lessor and/or SPTCo by certified mail, return
receipt requested at the address specified in Section 20.02(b) hereof.
Notwithstanding the foregoing, where a contest is being conducted by Lessor
and/or SPTCo pursuant to Section 12.01(d), Lessee shall not be required to make
any payments with regard to Taxes at issue in such contest until a final
decision has been rendered with regard to such contest.
(d) If any claim is made against Lessor and/or SPTCo for any Taxes as to
which Lessee would have a payment or indemnification obligation pursuant to
Section 12.01 in an amount exceeding $25,000.00, and if Lessor and/or SPTCo
reasonably determines that there is substantial authority (within the meaning of
Treasury Regulation section 1.6662-4(d)(2)) supporting a legal position upon
which Lessor and/or SPTCo may rely in contesting or defending against such
claim, Lessor and/or SPTCo shall in good faith and by appropriate legal or
administrative proceedings, contest or defend against such asserted claim.
SPTCo shall have full control over any contest or defense conducted pursuant to
this Section 12.01(d) and shall not be obligated to appeal any adverse
determination by any court. At any time, whether before or after commencing to
take the action set forth in this Section 12.01(d), SPTCo may decline to take
any such action with respect to all or any portion of a claim by notifying the
Lessee in writing that the Lessee is relieved of its obligation to indemnify
SPTCo with respect to the claim or portion thereof, as the case may be. SPTCo
shall make reasonable efforts to advise the Lessee of all action taken or
proposed to be taken by the applicable taxing authority and of all action
proposed to be taken by the SPTCo, and shall permit the Lessee upon written
request reasonable opportunity to review the content of documentation,
petitions, memoranda of fact and law, briefs and stipulations of fact, each
relating exclusively to a claim for which the Lessee would have a payment or
indemnification obligation pursuant to this Section 12.01; provided, however,
that no failure by SPTCo to advise the Lessee of any such action or to permit
such review shall prejudice or in any way affect the rights of SPTCo hereunder.
Lessee shall pay to SPTCo on demand all reasonable costs and expenses (including
but not limited to attorneys' fees) which SPTCo shall from time to time have
incurred in connection with contesting or defending a claim pursuant to this
Section 12.01(d).
(e) If any taxing authority furnishes to Lessee a claim or notice of
liability for any Taxes as to which Lessee would have a payment or
indemnification obligation under this Section 12, Lessee shall notify Lessor
promptly in writing regarding such claim or liability and shall furnish to the
Lessor promptly copies of the
25
<PAGE>
claim or notice of liability and all other writings received from the applicable
taxing authority.
SECTION 12.02 -- AFTER-TAX BASIS -- Lessee agrees that, with respect to any
payment or indemnity to Lessor under Section 12.01(a), and notwithstanding the
proviso in Section 12.01(a)(i), Lessee's indemnity obligations shall include any
amount necessary to hold Lessor harmless on an after-tax basis from all taxes
required to be paid by Lessor with respect to such payment or indemnity
(including any payments under this Section 12.03).
SECTION 12.03 -- SURVIVAL -- Lessee agrees that its obligations under this
Section XII will be fulfilled whether or not any applicable liability arises
during the time that this Lease Agreement is in effect or thereafter. Lessee's
obligations under this Section XII shall continue in full force and effect
notwithstanding the full payment of all sums due under this Lease Agreement, or
the satisfaction, discharge or termination of this Lease Agreement in any manner
whatsoever.
SECTION XIII
LESSEE'S MANAGEMENT RESPONSIBILITIES
SECTION 13.01 -- NEW TRACK AND OTHER AGREEMENTS -- From and after the
Commencement Date, Lessee shall manage all existing industrial track, private
crossing and other agreements involving the Track or Track Support Structure.
Lessor shall continue to pay any per car reimbursements required under existing
industrial track agreements. From and after the Commencement Date, Lessee shall
have the right to enter into new industrial track, and other agreements
involving the use of the Track or Track Support Structure, provided that in each
such case Lessee complies with Exhibit G, Agreement For Handling Agreements
---------
between Lessor and Lessee of each date herewith.
SECTION 13.02 -- PUBLIC PROJECTS -- Provided that the applicable agreement
has been approved in advance in writing by Lessor, Lessee shall be responsible
for administering agreements for designing and installing Track and Track
Support Structures relating to projects initiated by public agencies, including
but not limited to modification of existing or creation of new pedestrian,
roadway, drainage and flood control facilities upon, over, under or across the
Leased Premises. Lessee shall be deemed the railroad for purposes of paying any
railroad share of projects. Lessor shall not be liable for any costs associated
with such projects, except to the extent the project was approved and the
project funds paid to Lessor.
26
<PAGE>
SECTION XIV
TERMINATION
SECTION 14.01 -- TERMINATION EVENTS -- This Lease Agreement may be
terminated as follows:
(a) Lessee:
(1) upon not less than forty-five (45) days' written notice to
Lessor, following Lessee's obtaining all necessary regulatory
approvals or exemptions to permit Lessee to discontinue rail
operations and has otherwise complied with Section 3.02; and
(2) upon occurrence of an event of default by Lessor as set forth in
Section XVIII
(b) Lessor:
(1) upon occurrence of an event of default by Lessee as set forth in
Section XVIII;
(2) upon acquisition of ownership or control of Lessee by any company
or entity, including without limitation any railroad or
transportation related company other than Genesee & Wyoming, Inc.
or its affiliates without prior written consent of Lessor; and
(3) upon the conditions set forth in Section 9.06 above.
(c) Tri-Met:
(1) pursuant to the terms of a sale agreement.
SECTION 14.02 -- VACATION OF LEASED PREMISES -- In the event of expiration
or termination of this Lease Agreement, Lessee shall vacate the Leased Premises
in an expeditious, orderly manner subject to any necessary regulatory approval
or exemption within fifteen (15) days of termination or expiration and, in
addition, Lessor shall be entitled to all of its remedies under Section XIX
hereof.
SECTION 14.03 -- HOLDOVER PAYMENTS -- If Lessee holds over after having
obtained an appropriate ICC discontinuance of service order and SPTCo has not
acquiesced in Lessee holding over, then Lessee agrees to pay to SPTCo as monthly
liquidated damages and not
27
<PAGE>
as a penalty, a sum equal to two times the monthly Full Rent as defined and
without any application of any Annual Credits and as required pursuant to
Section 4.01. All hold-over monthly payments shall be payable in advance on the
first day of each calendar month.
SECTION XV
RESERVED RIGHTS
SECTION 15.01 -- LESSOR -- Lessor hereby expressly excepts from the lease
of the Leased Premises and reserves unto itself, its lessees, licensees,
permitees, sublessees, agents, successors and assigns, all of its common law
rights as lessor, including without limitation the following exclusive rights
with respect to the Leased Premises provided (i) that Lessor or any person or
entity claiming through Lessor, shall not materially interfere with Lessee's
freight railroad operations on the Leased Premises or materially increase the
expenses or costs to Lessee in the exercise of such rights (ii) that Lessor
shall meet with Lessee to discuss the proposed exercise of Lessor's reserved
rights so as to minimize the effect of such exercise on rail freight operations
on the Leased Premises and (iii) Lessor shall be entitled to all revenues
derived from all current and future agreements to which Lessor is a party
affecting the Leased Premises:
(a) -- TIMBER AND MINERAL RIGHTS -- The right to use all timber and timber
rights, all minerals and mineral rights, interests, and royalties, including,
but not limited to, oil, gas, sulfur, iron ore, coal, lignite, uranium,
limestone, building stone, caliche, gravel, sand and other hydrocarbon
substances, and metallic or other solid minerals, in and under the Leased
Premises;
(b) -- PIPELINE AND COMMUNICATIONS SYSTEMS -- The right to own, construct,
reconstruct, maintain, operate, use and remove existing and future pipelines,
communication systems, signboards and related facilities of every kind and
nature, including, but not limited to, all existing pipelines and telephone,
telegraph, television, microwave facilities and fiber optic lines, signboard
structures and related equipment and appurtenances;
(c) -- OTHER USES -- The right to use the Leased Premises for any other
commercial, industrial, utility-related or lawful purpose, including, without
limitation the right to enter into leases, easements or licenses affecting the
Leased Premises for longitudinal or transverse occupancies or crossings;
provided, however, Lessee may administer such agreements as specified in Exhibit
-------
G, Agreement for Handling of Agreement Matters;
- -
28
<PAGE>
(d) -- RIGHT OF ACCESS -- A limited right-of-way and right of access across
the Leased Premises, for purposes of the exercising any rights with respect to
the Leased Premises as set forth in this Section 15.01;
(e) -- IMPROVEMENTS -- Except as expressly set forth in this Lease
Agreement, all improvements presently existing on or hereafter constructed on
the Leased Premises shall remain the property of Lessor. Lessor reserves the
right to remove from the Leased Premises signals and signal control devices not
required for Lessee's operations;
(f) -- DESIGNATION OF PARCELS TO BE REMOVED FROM LEASED PREMISES -- The
right, upon thirty (30) days' prior written notice, to designate to Lessee those
parcels or parcel of land (collectively referred to herein as "Parcels") not
then used by Lessee for freight rail operations or determined by Lessee not to
be reasonably needed for future freight rail operations that Lessor desires to
remove from the Leased Premises. Upon receipt of such notice, Lessee shall
determine in good faith whether the designated Parcel(s) are being used by it
for freight rail operations and, if not, Lessee shall vacate the designated
Parcel(s) by the thirtieth (30th) day specified in the designation notice. If
the designated Parcel is partially used by Lessee for freight rail operations,
the parties shall confer and agree about the scope of the Parcel release.
Lessee shall execute such documents in the form of Exhibit J attached to
---------
formalize the release of Parcels. Any Parcel vacated by Lessee shall, from and
after such thirtieth (30th) day, be deemed to have been added to Exhibit B
---------
hereto, and this Lease Agreement shall terminate as to such Parcel from and
after such date. Lessor and Lessee shall promptly execute an addendum to this
Lease Agreement confirming such termination;
(g) -- WATER RIGHTS -- The right to use all water, water rights and
interests in and under the Leased Premises; and
(h) -- OTHER LESSOR RIGHTS -- Except as to matters that relate to Lessee's
use of the Leased Premises for freight rail operations and except as expressly
set forth in this Lease Agreement, Lessor shall have the exclusive right to
lease, operate, manage and control the Leased Premises and to take all action in
connection therewith deemed appropriate by Lessor, at Lessor's sole cost and
expense, including without limitation the right to:
(i) negotiate or renew leases of the Leased Premises upon such terms
and leasing rates as Lessor deems appropriate;
(ii) execute all lease documents, collect rents, security deposits,
utility payments and other monies due or to become due from the Leased Premises
or its use or possession;
29
<PAGE>
(iii) terminate tenancies and sign and serve such notices to tenants
as are deemed necessary or appropriate by Lessor;
(iv) institute and prosecute actions to evict tenants as Lessor deems
necessary or appropriate;
(v) sue to recover rents and other sums due, and otherwise to enforce
the rights of Lessor with respect to the Leased Premises;
(vi) settle, compromise and release claims or legal proceedings
involving Lessor in respect of the Leased Premises; provided, however, Lessor
shall have no right to settle, compromise or release claims affecting Lessee or
Lessee's use of the Leased Premises; and
(vii) admit other operators to provide commuter or rail passenger
service.
Except as to matters that relate to Lessee's use of the Leased Premises for
freight rail operations and except as expressly set forth in this Lease
Agreement, Lessor shall receive and be entitled to all of the rents, income,
receipts, revenues, issues and profits derived from the Leased Premises that
have accrued during the term of this Lease Agreement. Lessee is expressly
prohibited from using the Leased Premises for any of the uses reserved to Lessor
in this Section 15.01.
SECTION XVI
FORCE MAJEURE
SECTION 16.01 -- Lessee shall have no obligation to operate over any
portion of the Leased Premises as to which it is prevented or hindered from
operating due to Acts of God, public authority, strikes, riots, or any cause
beyond its control; provided, however, Lessee shall use reasonable efforts to
take whatever action is necessary or appropriate to be able to resume its
operations.
SECTION XVII
DEFEASANCE
SECTION 17.01 -- Lessee shall not make any use of the Leased Premises which
is inconsistent with Lessor's right, title and interest therein or which may
cause the right to use and occupy the Leased Premises to revert to any party
other than Lessor. So long
30
<PAGE>
as the Leased Premises are sufficient to permit Lessee to operate, this Lease
Agreement shall not be affected by any determination, whether by judicial order,
decree or otherwise, that the ownership of any portion of the Leased Premises is
vested in a person other than Lessor and there shall be no abatement of rent on
account of such determination.
SECTION XVIII
EVENTS OF DEFAULT
SECTION 18.01 -- The following shall be Events of Default:
(a) Lessee fails to make payments of Full Rent, Additional Rent or Taxes
when due, and such failure continues for thirty (30) days after written notice
from Lessor to Lessee;
(b) Lessee files a petition for bankruptcy, reorganization or other
arrangement by Lessee pursuant to the bankruptcy laws or any similar proceeding,
which petition is not dismissed within thirty (30) days;
(c) Lessee fails to maintain the insurance coverage required by this Lease
Agreement, or Lessee violates any provision of Sections 9.06, 9.10, 9.11, 9.12,
or 11.02; and Lessee shall have no grace period for any such default; or
(d) Lessee fails:
(1) to maintain the Leased Premises as required in Section III,
(2) to perform fully any other provision of the Lease Agreement or
the Related Agreements (other than failure to make payments of
rent which are subject to subparagraph (a) above;
and fails to cure any such breach described in this subsection (d) within forty-
five (45) days after receipt of written notice of such breach from Lessor or
fails to commence to cure such default within forty-five (45) days, or, once
commenced, fails to use due diligence to complete the cure, and complete such
cure within 90 days thereafter;
(e) The filing of any involuntary bankruptcy, receivership or arrangement
proceeding or any similar proceeding, against Lessee which filing is not
dismissed within sixty (60) days or filing of a voluntary bankruptcy,
reorganization or arrangement or any similar proceeding by Lessee; and/or
31
<PAGE>
(f) Default by Lessee under any of the Related Agreements or any other
agreement to which Lessor and Lessee are a party, with Lessee having the
opportunity to cure any such default as set forth in such other agreements.
SECTION XIX
REMEDIES
SECTION 19.01 -- If an Event of Default shall have occurred, Lessor and/or
SPTCo (to the extent permitted by and subject to compliance with any mandatory
requirements of applicable law then in effect) shall have the following rights
and remedies, in addition to all other remedies at law or in equity, or as
expressly set forth herein, including without limitation, Lessor's and/or
SPTCo's rights to terminate under Section XIV, and none of the following,
whether or not exercised by Lessor and/or SPTCo, shall preclude the exercise of
any other right or remedy whether set forth in this Lease Agreement or existing
at law or in equity.
(a) -- TERMINATION NOTICE -- Lessor and/or SPTCo may terminate this Lease
Agreement by giving Lessee notice in writing at any time. No act by or on
behalf of Lessor and/or SPTCo other than giving Lessee written notice of
termination (such as entry onto the Leased Premises by Lessor and/or SPTCo to
perform maintenance and repairs and efforts to relet the Leased Premises) shall
terminate this Lease Agreement. If Lessor and/or SPTCo gives such notice, this
Lease Agreement, the term and the right, title and interest of Lessee under this
Lease Agreement shall wholly cease and expire in the same manner and with the
same force and effect (except as to Lessee's liability) on the date specified in
such notice as if such date were the expiration date of the term without the
necessity of reentry or any other act on Lessor's and/or SPTCo's part. Upon
termination of this Lease Agreement pursuant to this Section 19.01(a), Lessee
shall surrender to Lessor the Leased Premises as set forth herein. If this
Lease Agreement is terminated pursuant to this Section 19.01(a), Lessor and/or
SPTCo shall be entitled to recover forthwith from Lessee as damages all amounts
allowed under applicable law including, but not limited to, all costs (including
reasonable attorneys' fees and disbursements) of repossession, removing persons
or removing property from the Leased Premises, reletting and reasonable repairs
in connection with reletting, if any.
(b) -- REENTER AND TAKE POSSESSION -- Lessor and/or SPTCo may, without
demand or notice of any kind to Lessee, terminate Lessee's right of possession
(but not this Lease Agreement, except, that Lessee shall NOT incur new
liabilities under Sections III, IV, IX and XI after Lessor and/or SPTCo has
reentered and taken possession of the Leased Premises) and reenter and take
possession of the
32
<PAGE>
Leased Premises or any part thereof, and repossess the same as of Lessor's
and/or SPTCo's former estate and expel Lessee and those claiming through or
under Lessee, and remove the effects of any and all such persons without being
deemed guilty of any manner of trespass, without prejudice to any remedies for
arrears of rent or other sums payable under this Lease Agreement or preceding
breach of covenants and without terminating this Lease Agreement or otherwise
relieving Lessee of any obligation hereunder. Should Lessor and/or SPTCo elect
to reenter as provided in this Section 19.01(b), or should Lessor and/or SPTCo
take possession pursuant to legal proceedings or pursuant to any notice provided
for by law, Lessor and/or SPTCo, from time to time, without terminating this
Lease Agreement, shall use reasonable efforts to relet the Leased Premises and
each part thereof for such term or terms and at such rental or rentals, and upon
such other conditions as Lessor and/or SPTCo may in its reasonable discretion
deem advisable, with the right to make reasonable repairs to the Leased
Premises. No such reentry, repossession or reletting of the Leased Premises by
Lessor and/or SPTCo shall be construed as an election on Lessor's and/or SPTCo's
part to terminate this Lease Agreement unless a written notice of termination is
given to Lessee by Lessor and/or SPTCo, nor shall it relieve Lessee of its
liability and obligation under this Lease Agreement, all of which shall survive
such reentry, repossession or reletting. Upon the occurrence of such reentry or
repossession, SPTCo shall be entitled to the amount of rent, Additional Rents,
and all other sums payable under this Lease Agreement which would be payable
hereunder if such reentry or repossession had not occurred, less the net
proceeds, if any, of any reletting of the Leased Premises after deducting all of
SPTCo's reasonable expenses in connection with such reletting, including, but
not limited to, all repossession costs, legal expenses, attorneys' fees, repair
costs and expenses of preparation for such reletting, and lessee shall pay such
amount to SPTCo on the days on which rent, Additional Rents, and all other sums
payable under this Lease Agreement would have been payable hereunder if
possession had not been retaken. In no event shall Lessee be entitled to
receive the excess, if any, of net rent collected by SPTCo as a result of such
reletting over the sums payable by Lessee to SPTCo hereunder, and if this Lease
Agreement is terminated by operation of law as a result of SPTCo's actions under
this Section 19.01(b), then SPTCo shall be entitled to recover damages from
Lessee as provided in Section 19.01(a) above.
(c) -- LESSEE'S RIGHT TO POSSESSION MAINTAINED -- Lessor and/or SPTCo may
maintain Lessee's right to possession, in which case this Lease Agreement shall
continue in effect whether or not Lessee shall have abandoned the Leased
Premises. In such event, Lessor and/or SPTCo shall be entitled to enforce all
of Lessor's and/or SPTCo's rights and remedies under this Lease Agreement,
including the right to recover rent and all other sums payable under this Lease
Agreement as they become due hereunder.
33
<PAGE>
(d) -- LESSOR'S AND/OR SPTCO'S RIGHT TO SUE -- Lessor and/or SPTCo shall
have the right to collect from Lessee the rents, Additional Rents, and damages
provided for above by suit or suits or proceedings brought from time to time on
one or more occasions without Lessor and/or SPTCo being obligated to wait until
the expiration of the term, or if this Lease Agreement is terminated, the date
on which such expiration would have occurred.
(e) -- LESSOR'S AND/OR SPTCO'S RIGHT TO PERFORM -- If an Event of Default
shall have occurred with respect to any payment required to be made by Lessee
(other than payment of rent or Additional Rents) or with respect to any other
obligations of Lessee under this Lease Agreement, Lessor and/or SPTCo may, but
shall not be obligated to, make such payment or, on behalf of Lessee, expend
such sum as may be reasonably necessary to perform such obligation. All sums so
expended by Lessor and/or SPTCo with interest thereon at the lower of 10% per
annum or the highest rate allowed by law from the date of such Event of Default
shall be repaid by Lessee to Lessor and/or SPTCo on demand. No such payment or
expenditure by Lessor and/or SPTCo shall be deemed a waiver of such Event of
Default nor shall it affect any other remedy of Lessor and/or SPTCo by reason of
such Event of Default.
(f) -- COMMON CARRIER DUTIES -- If an Event of Default shall have occurred,
anything in this Lease Agreement to the contrary notwithstanding, Lessor may
enter the Leased Premises and assume all common carrier duties (including but
not limited to the provision of freight service and dispatching), regardless of
whether or not this Lease Agreement has been terminated.
SECTION XX
MISCELLANEOUS
SECTION 20.01 -- ENTIRE AGREEMENT -- This Lease Agreement and Related
Agreements referenced herein contain the entire agreement between the parties
and supersede all prior oral or written agreements, commitments, or
understanding with respect to the matters provided for herein, and no
modification of this Lease Agreement shall be binding upon the party affected
unless set forth in writing and duly executed by the party to be charged.
SECTION 20.02 -- NOTICES -- All notices, demands, requests, or other
communications which may be or are required to be given, served or sent by
either party to the other pursuant to this Lease Agreement shall be in writing
and shall be deemed to have been properly given or sent:
34
<PAGE>
(a) If intended for Lessor, by mailing by registered or certified mail,
return receipt requested, with postage prepaid, addressed to Lessor at:
Vice President - Transportation
Southern Pacific Transportation Company
1860 Lincoln Street, 14th Floor
Denver CO 80295
With a copy to:
Director-Contract & Joint Facilities
Southern Pacific Transportation Company
1860 Lincoln Street, 12th Floor
Denver CO 80295
Vice President, Real Estate
Southern Pacific Transportation Company
One Market Plaza, Room 870
San Francisco, CA 94105
Director, Short Line Relations
Southern Pacific Lines
1860 Lincoln Street, 12th Floor
Denver CO 80295
(b) If intended for Lessor with regard to Taxes, by certified mail, return
receipt requested with postage prepaid and by facsimile to Lessor to:
Southern Pacific Transportation Company
Southern Pacific Building
One Market Plaza, Room 250
San Francisco, California 94105
Attention: William E. Saul, Tax Department
Facsimile: (415) 541-1075
(c) If intended for Lessee, by mailing by registered or certified mail,
return receipt requested, with postage prepaid, addressed to Lessee at:
General Manager
Portland & Western Railroad, Inc.
110 W. 10th Avenue
Albany, OR 97321
SECTION 20.03 -- RECEIPT OF NOTICES -- Each notice, demand, request or
communication which shall be mailed by registered or certified mail to either
party in the manner aforesaid shall be deemed sufficiently given, served or sent
for all purposes at the time such notice, demand, request, or communication
shall be either received by the addressee or refused by the addressee upon
presentation. Either party may change the name of the recipient of
35
<PAGE>
any notice, or his or her address, at any time by complying with the foregoing
procedure.
SECTION 20.04 -- ATTORNEY'S FEES -- If any action is brought to enforce the
terms of this Lease Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees from the other party as part of the prevailing
party's costs, the amount of which fees shall be fixed by the court and shall be
made a part of any judgment rendered. The "prevailing party" will be the party
that prevails in obtaining the remedy or relief that most nearly reflects the
remedy or relief that such party sought.
SECTION 20.05 -- HEADINGS -- All Tables of Contents, Section and Paragraph
headings are inserted for convenience only and shall not affect any construction
of interpretation of the Agreement.
SECTION 20.06 --INTERPRETATION -- If any term, covenant, or provision of
this Agreement, or the application thereof to any person or circumstance, shall
ever be held to be invalid or unenforceable, then, in such event, the remainder
of this Agreement or the application of such terms, covenant, and provision
hereof shall remain valid and enforceable to the fullest extent permitted by
law, provided, however, if any such invalidity or unenforceability results in a
reduction or loss to Lessor of the anticipated economic benefits anticipated by
Lessor to be derived from the transportation-related revenues that Lessor would
receive from the interchanging of traffic with Lessee, then to the extent
permitted by law, Lessee shall indemnify Lessor for any such lost or reduced
economic benefits in an amount not to exceed the total amount payable to Lessor
as the "Additional Rent" which would result in Lessor's realization of its
anticipated economic benefits.
IN WITNESS WHEREOF, the parties have caused this Lease Agreement to be executed
in duplicate as of the day and year first herein written.
SOUTHERN PACIFIC TRANSPORTATION COMPANY
/s/ M.D. Ongerten
BY _________________________________
V.P. Strategic Development
(TITLE)_____________________________
PORTLAND & WESTERN RAILROAD, INC.
/s/ Anthony W. Mogytycht
BY __________________________________
President
(TITLE)_____________________________
36
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A Land (omitted)
EXHIBIT B Exclusion from Leased Premises (omitted
EXHIBIT C Trackage Rights Agreement (appended)
EXHIBIT D Interchange Agreement (appended)
EXHIBIT E Radio Frequency Use Agreement (omitted)
EXHIBIT F Cooperative Marketing Agreement (appended)
EXHIBIT g Agreement Covering the Handling of Agreement Matters
(omitted)
EXHIBIT H FRA Class Commencement Dates (omitted)
EXHIBIT I Maintenance Report (omitted)
EXHIBIT J Form of Authorization of Release of Parcels (omitted)
The Registrant will provide copies of any referenced omitted Exhibits upon
written request.
37
<PAGE>
SCHEDULE 3.01
to Lease Agreement -
Tillamook, Westside-Seghers, and Newberg Branches
Burlington Northern Railroad Company has trackage rights from (1) St.
Mary's to Hillsboro, (2) St. Mary's to Tigard, and (3) milepost 741.59 to Tigard
and Hillsboro to Schefflin.
Port of Tillamook Bay has trackage rights from Schefflin to Hillsboro.
<PAGE>
SCHEDULE 4.01
to Lease Agreement -
Tillamook, Westside-Seghers, and Newberg Branches
PERMITTED INTERCHANGE CARRIERS
Carrier Initials Carrier Name
---------------- ------------
WPRR Willamette & Pacific Railroad
POTB Port of Tillamook Bay Railroad
HLSC Hampton Railroad, Inc.
WVRD Willamina & Grande Ronde Railway
Company
<PAGE>
SCHEDULE 8.01(G)
to Lease Agreement -
Tillamook, Westside-Seghers, and Newberg Branches
ENVIRONMENTAL NOTICES
(see Section 8.01(g))
none
<PAGE>
EXHIBIT C
TRACKAGE RIGHTS AGREEMENT
WILLSBURG, OREGON - BROOKLYN YARD
THIS AGREEMENT, made this 18th day of August, 1995, between SOUTHERN
PACIFIC TRANSPORTATION COMPANY, a Delaware corporation, hereinafter "SP", and
PORTLAND & WESTERN RAILROAD, INC., a Delaware corporation, hereinafter "PNWR".
RECITALS:
- --------
WHEREAS, SP owns a line of railway known as the Valley Line between SP's
Brooklyn Yard, Portland, Oregon, in the vicinity of SP's Milepost 766.9, and
Willsburg Jct., Oregon, in the vicinity of SP's Milepost 765.18, and a line of
railway known as the Tillamook Branch between SP's Milepost 740.72 and SP's
Milepost 741.59, at Willsburg Jct., Oregon, as shown on Exhibit "A", dated
August 18, 1995, attached hereto and made a part hereof, which lines of railway,
including all operating sidings used for the purpose of meeting and passing
trains, and SP owned portions of existing connections, shall be referred to
herein as the "Joint Trackage" (as defined in Exhibit "B" of this Agreement);
and
WHEREAS, SP and PNWR have entered into a Lease Agreement ("Lease
Agreement"), dated August 18, 1995, wherein SP leased to PNWR its Westside-
Segher Branch which connects to the Tillamook Branch at Hillsboro, Oregon, and
the Newberg Branch which connects to the Tillamook Branch at Cook, Oregon, and
the Tillamook Branch ("Trackage of PNWR") which connects to the Joint Trackage
at Milepost 741.59, Willsburg Jct., Oregon, as shown on Exhibit "A" to this
Agreement; and
WHEREAS, PNWR desires that SP grant to PNWR bridge trackage rights over
the Joint Trackage for the sole purpose of operating its Equipment (as that term
is defined in Exhibit "B" of this Agreement) between Willsburg Jct., Oregon and
SP's
1
<PAGE>
Brooklyn Yard, Portland, Oregon to effecting interchange between the
parties pursuant to a separate agreement between SP and PNWR of even date; and
WHEREAS, SP is willing to allow such use of the Joint Trackage on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, it is mutually agreed by and between the parties:
1. GENERAL CONDITIONS. The General Conditions as set forth in Exhibit "B"
attached hereto are hereby made a part of this Agreement. If any conflict
between the General Conditions and this Agreement shall arise, the provisions of
this Agreement shall prevail.
2. USE OF TRACKAGE.
(a) SP hereby grants to PNWR, subject to the terms and conditions set forth
or referenced herein, the non-exclusive right to use the Joint Trackage for the
sole purpose of performing interchange of Equipment in freight carload and
intermodal service in the account of PNWR with SP at Brooklyn Yard solely for
revenue freight cars having an SP line haul movement routed (I) only over the
lines of SP, if such revenue freight cars are moving to or from destination or
origin points served by SP, or (ii) via long haul route of SP, if such revenue
freight cars are moving to or from destination or origin points not served by SP
except as other wise provided in rail transportation contracts of SP or tariffs.
The rights granted to PNWR for the use of the Joint Trackage are the only rights
granted to PNWR, and PNWR shall have no other rights to use the Joint Trackage
other than pursuant to and in accordance with the grant herein. For the purpose
of this Agreement, "revenue freight cars" shall include trailers, containers,
intermodal cars, and all other types of Equipment used in revenue intermodal
service.
(b) SP is agreeable to permitting Willamette & Pacific Railroad, Inc.
("WPRR"), a common carrier, to act as an agent for PNWR ("Agent") pursuant to
this Agreement provided that WPRR shall comply with all the terms and conditions
of this Agreement as they relate to the operation of the Equipment of PNWR on
and over the Joint Trackage. The naming by PNWR of any other Agent during the
2
<PAGE>
term of this Agreement must be approved in writing by an authorized
representative of SP before such Agent may operate on or upon the Joint
Trackage. However, PNWR shall not be permitted to use more than one (1) agent
at any given time.
Pursuant to the grant of rights by SP to PNWR described in Section
2(a) above, PNWR shall have the non-exclusive right to use the Joint Trackage
for the limited operation of its Equipment with its own employees or its Agent
and Equipment in its account in bridge operations only over the Joint Trackage
in common with SP and such other railroad company or companies as SP has
heretofore admitted or may hereafter at any time in the future admit to the
joint use of all or part of the Joint Trackage, such other railroad company or
companies to hereinafter be considered SP for the purposes of this Agreement, it
being understood and agreed that PNWR shall not have the right to:
(I) Set out, pick up or store freight cars, trailers, containers or other
Equipment, upon the Joint Trackage, or any part thereof, except as necessary for
handling Equipment that is bad ordered enroute; or
(ii) Serve or switch any industry, team or house track now existing or
hereafter located along the Joint Trackage; or
(iii) Permit any other person, party or rail carrier to use the Joint
Trackage, either directly or indirectly. Specifically, but not by way of
limitation, PNWR shall not:
(1) engage in any haulage arrangement for any other carrier, except for
WPRR between Newberg, Oregon and Brooklyn, Oregon; or
(2) transport Equipment on or over the Joint Trackage which is in the
accounts of any other railroad, except WPRR; or
(3) allow any other railroad to hold itself out to the public by tariff,
advertising, or solicitation as providing service on the Joint Trackage; except
however, PNWR shall have the right to handle Equipment of Burlington Northern
Railroad Company ("BN") which originates or terminates on trackage of BN leased
by PNWR
3
<PAGE>
for the purpose of interchanging such Equipment to BN at Brooklyn Yard;
or
(4) authorize, allow, or permit any other railroad to claim points on the
Joint Trackage, or which can only be reached via the Joint Trackage, as points
served by such railroad, whether in tariffs filed with regulatory agencies, in
trade publications, advertising, or otherwise; or
(5) authorize, allow or permit any other railroad to act as a forwarder or
shippers' agent to ship commercial freight via PNWR over the Joint Trackage; or
(6) grant to any other railroad blanket pricing authority over the Joint
Trackage;
provided, however, that the foregoing shall not prevent PNWR, pursuant to a run-
through agreement with any other railroad, from using the locomotives and
cabooses of such other railroad as its own under this Agreement.
(iv) Handle Equipment loaded with revenue freight for which SP has not or
shall not receive line haul revenues (either under tariff, exempt, or contract
arrangements); except that PNWR may handle Equipment both originating and
terminating on Trackage of PNWR.
(v) Provide passenger service. Passenger service shall mean use of
Equipment utilized for the transportation of persons who are not officers,
employees or invitees of PNWR.
(vi) Interchange, directly or indirectly, revenue freight cars or other
Equipment for origination or termination only with any railroad other than SP or
any shortline railroad connecting solely to Trackage of PNWR and listed on
Schedule 4.01 of the Lease Agreement ("Permitted Interchange Carriers". A
Permitted Interchange Carrier must originate or terminate cars interchanged to
and from SP. The use of a Permitted Interchange Carrier to perform intermediate
switching to deliver revenue freight cars to a railroad other than SP or another
Permitted Interchange Carrier or origination or termination only will be
considered the same as PNWR directly interchanging revenue freight cars with
that railroad for the
4
<PAGE>
Exhibit A
[ Map of Trackage Rights for
Portland & Western Railroad, Inc. ]
15
<PAGE>
EXHIBIT "B"
GENERAL CONDITIONS
SECTION 1. DEFINITIONS
-----------
1.1 "Agreement" shall mean that certain agreement to which these
General Conditions is appended. The term "Agreement" will include these General
Conditions.
1.2 "Owner" shall mean SP, the party granting the right to use the Joint
Trackage (as that term is hereinafter defined).
1.3 User" shall mean PNWR, the party granted by the Agreement the right to
use the Joint Trackage.
1.4 "Joint Trackage" shall mean track structure of Owner as described in
the Agreement including necessary right-of-way and appurtenances and support
facilities thereof, including but not limited to signals, signal systems,
communications, rail and fastenings, switches and frogs complete, bumpers, ties,
ballast, roadbed, embankments, bridges, trestles, culverts and other structures
or things necessary for support of and entering into construction thereof, and
if any portion thereof is located in a thoroughfare, the terms shall include
pavement, crossing planks and other similar materials or facilities used in lieu
of pavement or other street surfacing material at vehicular crossings of tracks,
culverts, drainage facilities, crossing warning facilities, and all Changes in
and/or Additions to (as that term is hereinafter defined), thereto now or in the
future located as are required or desirable for the operation of the trains of
the parties hereto.
1.5 "Equipment" shall mean trains, locomotives, cars (loaded or empty),
cabooses, vehicles, and machinery which are capable of being operated on
railroad tracks, or operated on right-of-way for purpose of the maintenance or
repair thereof.
1.6 "Light Engines" shall mean one or more locomotive units not coupled to
cars.
1.7 "Caboose Hop" shall mean one or more locomotive units coupled to one
or more cabooses with no cars attached.
1
<PAGE>
1.8 "Changes in and/or Additions to" and "Additions" shall mean work
projects (including retirements), the cost of which is chargeable in whole or in
part to Property Accounts as defined by Uniform System of Accounts for Railroad
Companies as prescribed by the Interstate Commerce Commission ("ICC") or any
successor agency as of the effective date of this Agreement.
1.9 "Car Miles" shall mean the car miles operated by the parties over the
Joint Trackage. Car Miles for any third party, which Owner admits to the use
of the Joint Trackage, shall be
deemed to be Car Miles of Owner. Switch engines while performing yard service,
switch movements on Joint Trackage while setting out and picking up cars at
intermediate stations, business cars and hy-rail and inspection cars, Equipment
engaged in work service pertaining to maintenance or operation of and Changes in
and/or Additions to the Joint Trackage shall not be counted. Each passenger
car, freight car, and caboose shall be counted as one car. Each locomotive
shall be counted as two (2) cars. Each platform in an articulated unit of two
or more platforms shall be counted as one car.
SECTION 2. MAINTENANCE, CHANGES IN AND/OR ADDITIONS, OPERATION, AND
--------------------------------------------------------
CONTROL
-------
2.1 The construction, maintenance, repair, and renewal of the Joint
Trackage shall be under the exclusive direction and control of Owner. Owner
shall make any Changes in and/or Additions to the Joint Trackage which may be
required by law, and progressively during construction these shall become part
of the Joint Trackage. Owner may make any Changes and/or Additions to the Joint
Trackage which Owner deems necessary or desirable for the safe, efficient, and
economical use of the Joint Trackage by the parties, and these shall
progressively during construction become part of the Joint Trackage. User may
request Changes in and/or Additions to the Joint Trackage which User shall deem
necessary or desirable for the safe, efficient, and economical use of the Joint
Trackage by the parties, and Owner shall, if it concurs, construct the same upon
such terms and conditions as may be agreed upon and they shall become part of
the Joint Trackage.
2.2 The management and operation of the Joint Trackage shall be under the
exclusive direction and control of Owner. Owner shall have the unrestricted
power to change the management and operations
2
<PAGE>
on and over the Joint Trackage as in its judgment may be necessary, expedient,
or proper for the operations thereof herein intended.
2.3 Owner shall employ all persons necessary to construct, operate,
maintain, repair, and renew the Joint Trackage. Owner shall be bound to use
only reasonable and customary care, skill, and diligence in the construction,
operation, maintenance, repair, and renewal of the Joint Trackage and in
managing same. The Joint Trackage shall be kept in a state of reasonable repair
and reasonably suitable for the combined requirements of the parties and of such
other railroad companies as Owner has heretofore admitted or may hereafter admit
to use of the Joint Trackage. Notwithstanding anything to the contrary contained
in this Agreement, User shall not, by reason of Owner's performing or failing
or neglecting to perform any operation, maintenance, repair, renewal, or
management of the Joint Trackage, have or make against Owner any claim or demand
for any loss, damage, destruction, injury, or death whatsoever resulting
therefrom.
2.4 All officers, agents, and employees of Owner engaged in the
management, operation, and maintenance of the Joint Trackage shall perform their
duties in a fair, impartial, and just manner.
2.5 User, at its expense, shall install and maintain upon its Equipment
such equipment, radios, or devices as may now or in the future be necessary or
appropriate, in the reasonable judgment of Owner, for operation of trains upon
the Joint Trackage. User will not, however, be required to install any
equipment or devices not in use on Equipment of Owner. Owner shall consult with
User prior to the adoption of new communication or signaling systems to be
employed on the Joint Trackage which have not theretofore been generally adopted
in the railroad industry.
2.6 If the use of the Joint Trackage shall at any time be interrupted or
traffic thereon or thereover be delayed for any cause, neither party shall have
or make any claim against the other for loss, damage, or expense of any kind,
caused by or resulting from such interruption or delay.
2.7 Owner may from time to time substitute any track or tracks for those
delineated in the Agreement for use by User. When such tracks which are not
part of the Joint Trackage are used as provided herein, the Agreement shall
govern for purposes of
3
<PAGE>
direction and control and liability as if all movement had been made over the
Joint Trackage.
2.8 Each party shall be responsible for furnishing, at its own expense,
all labor, fuel, and train supplies necessary for the operation of its own
Equipment over the Joint Trackage. In the event a party hereto does furnish
such labor, fuel, or supplies to another party hereto, the party receiving same
shall promptly, upon receipt of billing therefor, reimburse the party furnishing
same for its reasonable costs thereof.
2.9 The operation by User of Equipment on or along the Joint Trackage
shall at all times be in accordance with the rules, instructions, and
restrictions of Owner, but such rules, instructions, and restrictions shall be
reasonable, just, and fair between all parties using the Joint Trackage and
shall not unjustly discriminate against any of them. Owner shall provide User
with copies of its rules, instructions and restrictions and all amendments
thereto.
2.10 With respect to operation of Equipment on and over the Joint
Trackage, User shall comply with all applicable laws, rules, regulations and
orders promulgated by any municipality, board, commission, or governmental
agency having jurisdiction thereover and, if any failure on the part of User to
so comply shall result in a fine, penalty, cost, or charge being imposed or
assessed on or against Owner, Owner shall give prompt notice to User and User
shall promptly reimburse and indemnify Owner for such fine, penalty, cost or
charge, and all expenses and attorneys' fees incurred in connection therewith,
and shall, upon request of Owner, defend such action free of cost, charge, and
expense to Owner.
2.11 User shall be responsible for the reporting and payment of any
mileage, per diem, use, or rental charges accruing on Equipment in User's
account on the Joint Trackage. Except as may be specifically provided for in
the Agreement, nothing herein contained is intended to change practices with
respect to interchange of traffic between the parties.
2.12 All employees of User engaged in or connected with the operations of
User on or along the Joint Trackage shall be required to pass periodic
examinations on the rules of Owner related to the Joint Trackage, provided, with
respect to such examinations that, upon request of User, Owner shall qualify one
or more of User's
4
<PAGE>
supervisory officers on said rules and such supervisory officer or officers so
qualified shall examine all employees of User engaged in or connected with
User's operations on or along the Joint Trackage. Pending qualification of train
and engine crews of User, Owner shall furnish a pilot at the expense of User, as
deemed necessary by Owner to assist in operating trains of User over the Joint
Trackage.
2.13 If any employee of User shall neglect, refuse, or fail to abide by
Owner's rules, instructions, and restrictions governing the operation on or
along the Joint Trackage, such employee shall, upon written request of Owner, be
prohibited by User from working on the Joint Trackage. If either party shall
deem it necessary to hold a formal investigation to establish such neglect,
refusal, or failure on the part of any employee of User, then upon such notice
presented in writing, Owner and User shall promptly hold a joint investigation
in which all parties concerned shall participate and bear the expense for its
officers, counsel, witnesses, and employees. Notice of such investigations to
employees of User shall be given by User's officers, and such investigation
shall be conducted in accordance with the terms and conditions of schedule
agreements between User and its employees, if any. If, in the judgment of
Owner, the result of such investigation warrants, such employee shall, upon
written request of Owner, be withdrawn by User from service on the Joint
Trackage, and User shall release and indemnify Owner from and against any and
all claims and expenses because of such withdrawal.
If the disciplinary action is appealed by an employee of User to the
National Railroad Adjustment Board or other tribunal lawfully created to
adjudicate such cases, and if the decision of such board or tribunal sustains
the employee's position, such employee shall not thereafter be barred from
service on the Joint Trackage by reason of such occurrence.
2.14 If any Equipment of User is bad ordered en route on the Joint
Trackage and it is necessary that it be set out, such bad ordered Equipment
shall, after being promptly repaired, be promptly picked up by User. Unless
otherwise agreed, Owner may, upon request of User and at User's expense, furnish
the required labor and material and perform light repairs to make such bad
ordered Equipment safe for movement. The employees and Equipment of Owner while
in any manner so engaged or while en route to or returning to Owner's terminal
from such an assignment shall be considered Sole
5
<PAGE>
Employees (as hereinafter defined) of User and Sole Property (as hereinafter
defined) of User. However, should Owner after repairing such Equipment for User,
move directly to perform service for Owner's benefit rather than return to
Owner's terminal, then User's exclusive time and liability will end when Owner's
employees depart for work to be performed for Owner's benefit. In the case of
repairs to freight cars, billing therefor shall be in accordance with the Field
and Office Manuals of the Association of American Railroads ("AAR") Interchange
Rules and Code of Car Service Rules adopted by the AAR, hereinafter collectively
called "Interchange Rules", in effect at the date of performance of the repairs.
Owner shall then prepare and submit billing directly to and collect from the car
owner for car-owner responsibility items as determined under said Interchange
Rules. Owner shall also submit billing to and collect from User any charges for
repair to freight cars that are car-owner responsibility items, as determined
under said Interchange Rules, should said car owner refuse or otherwise fail to
make payment therefor, and for any reasonable costs and expenses incurred by
Owner in furnishing labor and material to make repairs to Equipment in User's
account which are not recollectible under such Interchange Rules. Repairs to
locomotive units shall be billed as provided for in Section 3 of these General
Conditions.
2.15 If Equipment of User shall become derailed, wrecked, or otherwise
disabled while upon the Joint Trackage, it shall be rerailed or cleared by
Owner, except that employees of User may rerail User's derailed Equipment on the
Joint Trackage whenever use of motorized on or off track equipment is not
required and prior permission has been granted by Owner. The costs and expenses
of clearing derailments and wrecks shall be at User's expense unless otherwise
provided for in allocation of liability in Section 5 of these General
Conditions.
2.16 In the event Equipment of User shall be forced to stop on Joint
Trackage, and such stoppage is due to insufficient hours of service remaining
among User's employees, or due to mechanical failure of User's Equipment, or any
other cause not resulting from an accident or derailment, and such Equipment is
unable to proceed, or if a train of User fails to maintain the speed required by
Owner on the Joint Trackage, or if in emergencies, crippled or otherwise
defective Equipment is set out of User's trains on the Joint Trackage, Owner
shall have the option to furnish motive power or such other assistance
(including but not limited to the right to recrew User's train) as may be
necessary to haul, help or push such
6
<PAGE>
Equipment, or to properly move the disabled Equipment off the Joint Trackage.
The reasonable costs and expenses of furnishing motive power or of rendering
such other assistance shall be at User's expense.
2.17 User shall be responsible for reporting monthly, to Owner, the
statistical data called for in the Agreement, which may include, but is not
limited to, number of cars, trains, car miles, train miles, and gross ton miles,
operated on the Joint Trackage.
SECTION 3. BILLING, DEFAULT
----------------
3.1 Billing shall be accomplished on the basis of data contained in a
billing form mutually agreed to between the parties. Such billing forms shall
contain sufficient detail to permit computation of payments to be made
hereunder. Billing shall be prepared according to the rules, additives, and
equipment rental rates as published by the Owner. User shall pay to Owner at
the Office of the Treasurer of Owner or at such other location as Owner may from
time to time designate, all the compensation and charges of every name and
nature which in and by the Agreement User is required to pay in lawful money of
the United States within sixty (60) days after the rendition of bills therefor.
Bills shall contain a statement of the amount due on account of the expenses
incurred and services rendered during the billing period.
3.2 Errors or disputed items in any bill shall not be deemed a valid
excuse for delaying payments, shall be paid subject to subsequent adjustment;
provided no exception to any bill shall be honored, recognized, or considered if
filed after the expiration of three (3) years from the last day of the calendar
month during which the bill is rendered and no bill shall be rendered later than
three (3) years (a) after the last day of the calendar month in which the
expense covered thereby is incurred, or (b) in the case of claims disputed as to
amount or liability, after the amount is settled and/or the liability is
established. This provision shall not limit the retroactive adjustment of
billing made pursuant to exception taken to original accounting by or under
authority of the ICC or retroactive adjustment of wage rates and settlement of
wage claims.
3.3 So much of the books, accounts, and records of each party hereto as
are related to the subject matter of the Agreement shall
7
<PAGE>
at all reasonable times be open to inspection by the authorized representatives
and agents of the parties hereto.
All books, accounts, and records shall be maintained to furnish readily
full information for each item in accordance with 49 U.S.C. Section 11161 et
--
seq. and the related regulations of the ICC in 49 C.F.R. Part 1201, 1-3, et
- --- --
seq., or their successor laws or regulations.
- ---
3.4 Should any amount become payable by Owner to User under the
Agreement, the provisions of Section 3.1 through 3.3 of these General
Conditions shall apply with User as the billing party and Owner as the paying
party.
3.5 Should User fail to make any payment when due which User is obligated
to make under the Agreement, or fail in any other respect to perform as required
under the Agreement, and such default shall continue for a period of six (6)
months after notice in writing of such default is given by Owner to User, Owner
may at its election exclude User from the use of the Joint Trackage. Thereupon
User shall surrender to Owner all said Joint Trackage and shall have no claim or
demand upon it, by suit at law or otherwise, on account of said exclusion,
provided that failure to make any payment which is the subject of arbitration or
litigation between the parties shall not be deemed, pending the decision in such
arbitration or litigation, cause of forfeiture hereunder.
Owner may waive such default, but no action of Owner in waiving any default
shall affect any subsequent default of User or impair any rights of Owner
resulting therefrom.
SECTION 4. COMPLIANCE WITH LAWS
--------------------
4.1 User shall not treat, store or dispose of petroleum products or
hazardous waste or hazardous substances, as defined in (a) the Resource
Conservation and Recovery Act, as amended, or (b) the Comprehensive
Environmental Response Compensation and Liability Act, as amended, or (c)
subsequent legislation regulating discharges into the environment, on the Joint
Trackage.
4.2 Responsibility for Environmental Claims (as defined in Section 4.6,
below) as between the parties shall be borne as follows:
8
<PAGE>
a. User shall be responsible for Environmental Claims to the extent they
result from (i) the use of, or presence upon, the Joint Trackage by User or its
contractors or invitees, or (ii) the negligence or willful misconduct of User,
its contractors or invitees in operations on or over the Joint Trackage;
provided, that User shall not be responsible for Environmental Claims that
result from releases of hazardous waste or substances if all the following
conditions are met: (i) Owner or its contractors or invitees caused the
hazardous waste or substances to be present on or about the Joint Trackage, (ii)
the release of the hazardous waste or substance is caused by the negligence or
wrongful misconduct of Owner or its contractors or invitees, and (iii)
negligence or wrongful misconduct of User is not a contributing factor to the
release.
b. Owner shall be responsible for Environmental Claims to the extent that
User is not responsible for such claims pursuant to Section 4.2.a, above.
4.3 Each party shall release the other party to the extent it is
responsible for an Environmental Claim, and, to the extent of such
responsibility, shall defend, indemnify, protect and save harmless such other
party from and against such Environmental Claim and costs associated therewith,
including, but not limited to, environmental consultant fees, attorneys' fees,
monitoring and testing costs, permitting costs, and third party claims.
4.4 In the event of any incident, accident, derailment, or vehicle
striking or being struck by Equipment (hereinafter "Derailment") involving
Equipment operated by a party hereto carrying (i) hazardous materials,
substances or wastes, as defined pursuant to Federal or State Law, or (ii)
pollutants (hereinafter collectively referred to as "Hazardous Materials") shall
occur on the Joint Trackage, any report required by Federal, State or local
authorities shall be the responsibility of such party. Each party shall advise
the other party immediately of the occurrence of a Derailment involving
Equipment operated by the party carrying Hazardous Materials.
Unless otherwise agreed by the parties, Owner shall undertake any Response
Action (as defined in Section 4.5, below) in accordance with all Federal, State,
or local regulatory requirements necessitated by a release of Hazardous
Materials on
9
<PAGE>
Owner's right-of-way underlying the Joint Trackage from Equipment operated by
either party hereto upon the occurrence of a Derailment. User shall have data or
a representative available at the scene of any Derailment involving Equipment
operated by it to provide information concerning the characteristics of
Hazardous Materials released.
If following a Derailment upon the Joint Trackage Hazardous Materials must
be transferred to undamaged cars or other vehicles, unless otherwise agreed by
the parties, the party whose Equipment was involved in such Derailment shall
perform the transfer; provided, however, that if the Hazardous Materials are in
damaged cars of a train of User that are blocking the Joint Trackage, Owner
shall transfer the Hazardous Materials; provided further that transfers of
Hazardous Materials by User shall only be conducted after being authorized by
Owner.
4.5 In the event any cleanup, response, removal or remediation of any
environmental condition on the Joint Trackage is necessary (collectively
referred to herein as "Response Action"), neither party shall be entitled to any
damages, actual or consequential, by reason of the Response Action's
interference with the other party's use of the Joint Trackage. Owner and its
contractors shall have full, unrestricted and unconditional access to the Joint
Trackage for the purpose of completing or engaging in a Response Action for
which Owner has any responsibility or, at Owner's option, a Response Action
which Owner has undertaken should User fail to diligently pursue and complete
such Response Action to the satisfaction of Owner; provided, however, that any
Response Action (a) shall be undertaken and completed pursuant to a work plan
(including a schedule) submitted to the other party for its review and, in the
case of Owner, approval, and (b) shall not unreasonably, in terms of duration or
otherwise, restrict the other party's use of the Joint Trackage. Either party's
completion of any of the other party's obligations hereunder shall not be deemed
a waiver of such obligations under the Agreement. Owner shall have the right,
but not the obligation, to conduct reasonable inspections of any Response Action
of User and User shall provide Owner all information requested by Owner
regarding any Response Action of User or any Environmental Claims for which User
is responsible.
4.6 The term "Environmental Claims" means the direct costs of any cleanup,
response, removal, remediation, natural resource
10
<PAGE>
damage, closure and/or post-closure required by any environmental conditions
affecting the air, soil, surface waters, ground waters, streams, sediments and
similar environmental conditions caused by, resulting from, arising out of, or
occurring in connection with the Agreement.
4.7 The liability and indemnity provisions of this Section 4 shall
continue in full force and effect regardless of whether the Agreement is
terminated pursuant to any other provision, or the Joint Trackage is abandoned
and vacated by User; provided, that the liability and indemnity provisions shall
apply only as to those facts and circumstances prior to the termination of the
Agreement.
4.8 The total cost of clearing a Derailment, cleaning up any Hazardous
Materials released during such Derailment, and/or repairing the Joint Tracks or
any other property damaged thereby shall be borne by the party or parties liable
therefor pursuant to the allocation of liability in Section 5 of these General
Conditions and Environmental Claims shall be allocated in accordance with
Section 4.2 of these General Conditions.
SECTION 5. LIABILITY
---------
5.1 For the purpose of this Section 5, the following definitions shall
apply:
"Loss or Damage" shall mean without limitation all claims, liability, cost,
and expense of every character including amounts paid under any State or Federal
compensation law incident to loss or destruction of or damage to property and
injury to and death of persons arising from the performance or existence of the
Agreement.
"Joint Employees" shall mean one or more officers, agents, employees, or
contractors of Owner while actually engaged in maintaining, repairing,
constructing, renewing, removing, inspecting, or operating the Joint Property or
in making Changes in and/or Additions thereto for the benefit of both of the
parties hereto, or while preparing to engage in, en route to or from, or
otherwise on duty incident to performing such service. Such officers, agents,
employees, or contractors shall not be deemed "Joint Employees" while en route
from the performance of such work as hereinbefore described to perform service
for the benefit of one of the parties hereto.
11
<PAGE>
"Joint Property" shall mean the Joint Trackage and all Equipment while
engaged in maintaining, repairing, constructing, renewing, removing, inspecting,
or operating the Joint Trackage or in making Changes in and/or Additions thereto
for the benefit of both parties hereto, or while preparing to engage in, en
route to or from, or otherwise incident to performing such service. Such
Equipment shall not be deemed "Joint Property" while en route from the
performance of such work as hereinbefore described to perform service for the
benefit of less than all of the parties hereto.
"Sole Employees" and "Sole Property" shall mean one or more officers,
agents, employees, contractors, or Equipment, while engaged in, en route to or
from, or otherwise on duty incident to performing service for the benefit of one
of the parties hereto. All such officers, agents, employees, contractors, or
Equipment, while engaged in, en route to or from, or otherwise incident to
repairing Equipment, rerailing, or clearing wrecks or derailments or engaged in
the repair or renewal of the Joint Property subsequent to any such wreck or
derailment shall, for the purpose of this Section 5, be deemed the Sole
Employees and/or Sole Property of the party bearing the cost of repair or of the
other Loss or Damage of the wreck or derailment. Such officers, agents,
employees, contractors, or Equipment while en route from performing such repair,
rerailing, or clearing of wrecks or derailments or renewing the Joint Property
to perform another type of service shall not be deemed to be performing service
incident to the instant repair, rerailing, or clearing of a wreck or derailment.
5.2 As between the parties hereto only, each party shall bear all cost of
Loss or Damage to (a) its Sole Employees, (b) its patrons, (c) its invitees,
(d) others on its Equipment, and (e) others on or about the Joint Property in
transaction of business for or with such party, its Sole Property, or property
in its care, custody, or control; except when the Loss or Damage is contributed
to by the acts or omissions, negligent or otherwise, of the Sole Employees
and/or Sole Property of the other party hereto, with or without the concurring
acts, omissions or negligence of Joint Employees and/or Joint Property, in which
event the party whose Sole Employees and/or Sole Property contributed to the
same shall bear all of the costs, or equally if more than one party's Sole
Employees and/or Sole Property shall have contributed to the same.
Loss or Damage to third parties, Joint Employees, or Joint Property
contributed to by the acts or omissions, negligent
12
<PAGE>
or otherwise of Sole Employees and/or Sole Property of one or more of the
parties hereto, with or without the concurring acts, omissions or negligence of
Joint Employees and/or Joint Property, shall be borne by the party whose Sole
Employees and/or Sole Property contributed to the same, or equally if more than
one party's Sole Employees and/or Sole Property shall have contributed to the
same. Loss or Damage to third parties, Joint Employees, or Joint Property
involving only Joint Employees, Joint Property, or occurring in such a way that
it cannot be determined how such Loss or Damage came about shall be born equally
by the Parties.
5.3 It is understood and agreed that a number of vehicular and pedestrian
crossings ("Crossings") of the Joint Trackage presently exist, or may be
constructed. User agrees to accept all Crossings in whatever condition they may
be during the term of the Agreement and will not assert any claim, demand, or
cause of action against Owner and will hold Owner harmless from any claim,
demand, or cause of action arising out of any Crossing accident on the Joint
Trackage in which the engines, cars, or train of a User only is involved.
5.4 For the purpose of this Section 5, Equipment of any third party
railroad company or companies present on the Joint Trackage and all persons
other than Joint Employees engaged in moving such Equipment, shall be
considered the Equipment and employees of Owner.
Equipment, and other property being handled for or used by any party hereto
shall, unless Joint Property, be considered the Sole Property of that party for
purposes of this Section 5.
Each party hereto agrees that the acts and decisions of the party hereto
performing any management, maintenance, repair, renewal, removal, improvement,
operation, or similar function of or for the Joint Property shall be deemed acts
and decisions of a Joint Employee.
5.5 Each party shall pay all Loss and Damage for which such party shall be
liable under the provisions of this Section 5, and shall indemnify and save
harmless the other party against such Loss and Damage, including any such
damages awarded in any court action. Each party hereto shall have the right to
settle, or cause to be settled for it, all claims for damages for which such
party shall
13
<PAGE>
be liable under the provisions of this Section 5 and to defend or cause to be
defended all suits for recovery of any such damages.
In case a suit shall be commended against any party for or on account of
Loss or Damage for which the party is solely or jointly liable under the
provisions of this Section 5, the party so sued shall give to the other party
notice in writing of the pendency of such suit, and thereupon the other party
shall assume or join in the defense of such suit.
In case a suit shall be commenced against either party hereto for or on
account of damages for which the other party hereto is solely or jointly liable
under the provisions of this Section 5, the party so sued shall give prompt
notice to such other party of the pendency of such suit and thereupon such other
party may assume (if it is solely liable hereunder) or join (if it is jointly
liable hereunder) in the defense of such suit.
In the event that both of the parties shall be liable hereunder for any
damages and the same shall be settled by a voluntary payment of money or other
valuable consideration by one of the parties so jointly liable therefor, release
from liability shall be taken for and in the name of both parties so liable. In
the event of any settlement in excess of Twenty-Five Thousand Dollars ($25,000),
the settling party shall notify the other party prior to settlement. Failure of
the settling party to so notify the other party prior to settlement shall not
relieve the other party of its obligation under the settlement agreement, so
long as the settling party's failure to notify did not prejudice the other party
and then only to the extent of such prejudice.
If a judgment shall be recovered against and satisfied by one party
involving a liability which should under the Agreement be borne entirely or
participated in by the other party, then all expenses of whatsoever nature,
including costs and fees connected with such judgment and with the prosecution
of the suit upon which it was based, shall be settled between the parties in
strict accordance with the provision of the Agreement and the party against
which such judgment shall have been recovered shall be promptly reimbursed by
such other party to the extent to which the latter is indebted.
5.6 The foregoing not withstanding, neither party shall have any claim
against the other party for its acts, omissions or
14
<PAGE>
negligence giving rise to Loss or Damage caused by or resulting from
interruption of or delay to such party's business or for special, indirect or
consequential damages or for loss of profit or income.
SECTION 6. ARBITRATION
-----------
6.1 If at any time a question or controversy shall arise between the
parties hereto in connection with the Agreement upon which the parties cannot
agree, such question or controversy shall be submitted to and settled by a
single arbitrator within twenty (20) days after written notice by one party of
its desire for arbitration to the other party or parties. The arbitrator so
selected shall be a person with at least five (5) years of exposure to the
concepts of administration, interpretation, and application of joint facility
contracts or agreement. If the parties are unable to agree on a single
arbitrator, the party demanding such arbitration (the "Demanding Party") shall
notify the other party (the "Noticed Party") in writing of such demand, stating
the question or questions to be submitted for decision and nominating one
similarly qualified arbitrator. Within twenty (20) days after receipt of said
notice, the Noticed Party shall appoint an arbitrator and notify the Demanding
Party in writing of such appointment. Should the Noticed Party fail within
twenty (20) days after receipt of such notice to name its similarly qualified
arbitrator, the arbitrator for the Demanding Party shall select one for the
Noticed Party so failing. The arbitrators so chosen shall select one similarly
qualified additional arbitrator, to complete the board. If they fail to agree
upon an additional arbitrator, the same shall, upon application of any party, be
appointed by the Chief Judge (or acting Chief Judge) of the United States
District Court for the District in which the headquarters office of the
Demanding Party is located.
Upon selection of the arbitrator(s), said arbitrator(s) shall with
reasonable diligence determine the questions as disclosed in said notice of
demand for arbitration, shall give all parties reasonable notice of the time and
place (of which the arbitrator(s) shall be the judge) of hearing evidence and
argument, may take such evidence as they deem reasonable or as either party may
submit with witnesses required to be sworn, and may hear arguments of counsel or
others. If any arbitrator declines or fails to act, the party (or parties in
the case of a single arbitrator) by whom he was chosen or said judge shall
appoint
15
<PAGE>
another to act in his place. After considering all evidence, testimony, and
arguments, said single arbitrator or the majority of said board of arbitrators
shall promptly state such decision or award in writing which shall be final,
binding, and conclusive on all parties to the arbitration when delivered to
them. Until the arbitrator(s) shall issue the first decision or award upon any
question submitted for arbitration, performance under the Agreement shall
continue in the manner and form existing prior to the rise of such question.
After delivery of said first decision or award, each party shall forthwith
comply with said first decision or award immediately after receiving it.
Each party to the arbitration shall pay the compensation, costs, and
expenses of the arbitrator appointed in its behalf and all fees and expenses of
its own witnesses, exhibits, and counsel. The compensation, cost, and expenses
of the single arbitrator or the additional arbitrator in the board of
arbitrators shall be paid in equal shares by all parties to the arbitration.
6.2 The books and papers of all parties, as far as they relate to any
matter submitted for arbitration, shall be open to the examination of the
arbitrator(s).
SECTION 7. GOVERNMENTAL APPROVAL, ABANDONMENT
----------------------------------
7.1 User shall, at its own cost and expense, initiate by appropriate
application, petition or notice and thereafter diligently prosecute proceedings
for the procurement of all necessary consent, approval, exception, or authority
from any governmental agency for the sanction of the Agreement and the
operations to be carried on by User thereunder. Owner, at its expense, shall
assist and support said application or petition and will furnish such
information and execute, deliver, and file such instrument or instruments in
writing as may be necessary or appropriate to obtain such governmental consent,
approval, or authority. User and Owner agree to cooperate fully to procure all
such necessary consent, approval, or authority.
7.2 In the event Owner shall be involuntarily dispossessed or under threat
of condemnation by competent public authority of the right to operate upon and
maintain any portion of its Joint Trackage, Owner shall have no obligation
hereunder to provide tracks for User's use, and User shall have and shall make
no claim
16
<PAGE>
of any kind, legal or otherwise, against Owner for failure to provide such Joint
Trackage for User's use.
7.3 Upon termination of the Agreement, or any partial termination, as the
applicable case may be, however the same may occur, User shall be released from
any and all manner of obligations and shall be deemed to have forever
relinquished, abandoned, surrendered, and renounced any and all right possessed
by User to operate over that part of the Joint Trackage to which such
termination applied, and as to such part, User shall forever release and
discharge Owner of and from any and all manner of obligations, claims, demands,
causes of action, or suits which User might have, or which might subsequently
accrue to User growing out of or in any manner connected with, directly or
indirectly, the contractual obligations of Owner under the Agreement, in all
events provided, however, the aforesaid relinquishment, abandonment, surrender,
renunciation, release, and discharge of User shall not in any case affect any of
the rights and obligations of either Owner or User which may have accrued, or
liabilities accrued or otherwise, which may have arisen prior to such
termination or partial termination. Upon any termination, Owner will remove from
Owner's right-of-way any connecting track, and any exclusive facility of User,
at User's expense with salvage to be delivered to and retained by User. Upon any
partial termination of the Agreement, however the same may occur, the terms and
conditions hereof shall continue and remain in full force and effect for the
balance of the Joint Trackage.
7.4 Each party shall be responsible for any labor claims of, and shall
bear the cost of employee protection payable to, its own employees, and the
employees of companies affiliated with it, to the extent resulting from the
entry into or operation of the Agreement. However, in the event the parties
agree that Owner should retain employees or provide additional employees for the
sole benefit of User, the parties shall enter into a separate written agreement.
SECTION 8. OTHER CONSIDERATIONS
--------------------
8.1 Nothing in the Agreement contained shall limit the right of Owner to
admit other companies to the use of the Joint Trackage or any part thereof on
such terms and conditions as are satisfactory to Owner provided such admittance
shall not materially hinder or obstruct the fair and reasonable exercise of the
rights
17
<PAGE>
granted herein. User shall have no right to admit any company, person, firm, or
corporation to the use of the Joint Trackage.
8.2 The Agreement shall be binding upon and inure to the benefit of the
parties hereto, their respective successors, lessees, and assigns, but no sale,
assignment, mortgage, or lease by User of any interest or right given it under
the Agreement, shall be valid or binding without the prior written consent of
Owner. No sale, assignment, mortgage or lease by User to a Class 1 railroad or
an affiliate thereof may take place without Owner's prior written consent that
may be withheld at the sole discretion of Owner.
8.3 The Agreement and each and every provision hereof is for the exclusive
benefit of the parties hereto and not for the benefit of any third party.
Nothing herein contained shall be taken as creating or increasing any right in
any third person to recover by way of damages or otherwise against any of the
parties hereto.
8.4 If any covenant or provision of the Agreement not material to the
right of User to use the Joint Trackage shall be adjudged void, such
adjudication shall not affect the validity, obligation, or performance of any
other covenant or provision which is in itself valid. No controversy concerning
any covenant or provision shall delay the performance of any other covenant or
provision. Should any covenant or provision of the Agreement be adjudged void,
the parties will make such other arrangements as, under the advice of counsel,
will effect the purposes and intent of the Agreement.
8.5 In the event there shall be any conflict between the provisions of
these General Conditions and the Agreement, the provisions of the Agreement
shall prevail.
8.6 All Section headings are inserted for convenience only and shall not
affect any construction or interpretation of the Agreement.
* * *
18
<PAGE>
EXHIBIT D
INTERCHANGE AGREEMENT
THIS AGREEMENT, made and entered into as of the 18th day of August, 1995
by and between SOUTHERN PACIFIC TRANSPORTATION COMPANY, a Delaware corporation,
hereinafter "SP," and PORTLAND & WESTERN RAILROAD, INC., a Delaware corporation,
hereinafter "PNWR"; SP and PNWR being sometimes referred to individually as
"Party" and collectively called "Parties";
RECITALS:
- --------
WHEREAS, SP and PNWR desire to enter into and set forth in writing an
agreement with respect to the interchange between them of Equipment, as
defined in Section 2 hereof, at SP's Brooklyn Yard, Portland, Oregon.
AGREEMENT:
- ---------
NOW, THEREFORE, it is mutually agreed as follows:
SECTION 1.
a. Unless it shall be otherwise agreed between the authorized
representatives of SP and PNWR to designate other trackage, SP and PNWR agree to
effect the interchange of Equipment at Brooklyn Yard, in the vicinity of SP's
Milepost 766.9, Portland, Oregon, on trackage owned by SP, hereinafter termed
"Interchange Trackage" as shown on Exhibit "A", dated__________, 1995, attached
and made a part hereof. PNWR is granted the right to use, on a non-exclusive
basis, all trackage owned and controlled by SP as necessary to effect such
interchange; provided, however, PNWR's use of the Interchange Trackage shall be
exclusively under the direction and control of the authorized representative of
SP who shall specify the exact location within the Interchange Trackage where
such interchange shall occur.
1
<PAGE>
b. Unless otherwise provided by separate written agreement or agreements,
PNWR shall not use any track or tracks, or parts thereof of SP that PNWR is not
entitled to use by virtue of this Agreement.
SECTION 2.
a. The Parties desire, during the term hereof, to use the Interchange
Trackage in or incident to the delivery of cars, locomotives, cabooses or other
equipment (hereinafter collectively called "Equipment") to be interchanged
between the Parties. No Equipment of either Party shall be so placed on the
Interchange Trackage in such manner as to interfere in any way with the
operation of other Equipment on tracks adjacent to and or connecting with the
Interchange Trackage.
b. Unless it shall be otherwise agreed between the authorized
representatives of the Parties hereto, if Equipment of PNWR shall become
derailed, wrecked, bad ordered, shifted, stalled, or otherwise disabled while
upon the Interchange Trackage, it shall be rerailed, repaired or cleared by SP.
The reasonable costs and expenses of such rerailing, repairing or clearing,
including any Loss and/or Damage, as defined in Section 6 herein, shall be at
PNWR's sole cost and expense, unless otherwise provided for in the allocation of
liability in Section 6 of this Agreement.
SECTION 3.
a. PNWR shall, with its own employees and at its sole cost and expense,
operate its Equipment incident to handling of interchange traffic over the
Interchange Trackage but subject, however, to such rules, regulations, and
orders as SP may issue. All such rules, regulations and orders shall be
reasonable and fair and shall not discriminate against either Party hereto in
the use thereof. No employee of PNWR shall engage in or be connected with the
operation of Equipment hereunder until he or she shall have been examined
successfully on SP's Operating Rules and Regulations applicable to said
Interchange Trackage which shall be furnished from time to time by SP.
b. If any employee of PNWR shall neglect, refuse, or fail to abide by
SP's rules, instructions, and restrictions governing the operation on or along
the Interchange Trackage, such employee shall, upon written request of SP, be
prohibited by PNWR from
2
<PAGE>
operating on the Interchange Trackage. If SP shall deem it necessary to hold a
formal investigation to establish such neglect, refusal, or failure on the part
of any such employee, then upon such notice presented in writing, SP and PNWR
shall promptly hold a joint investigation in which all Parties concerned shall
participate and each Party shall bear the expense for its officers, counsel,
witnesses, and employees. Notice of such investigations to employees of PNWR
shall be given by PNWR's officers, and such investigation shall be conducted in
accordance with the terms and conditions of labor agreements, if applicable,
between PNWR and its employees. If, in the judgment of SP, the result of such
investigation warrants, such employee shall, upon written request of SP, be
withdrawn by PNWR from service on the Interchange Trackage, and PNWR shall
release and indemnify SP from and against any and all claims and expenses
because of such withdrawal.
If the disciplinary action is appealed by such employee of PNWR to the
National Railroad Adjustment Board or other tribunal lawfully created to
adjudicate such cases, and if the decision of such board or tribunal sustains
the employee's position, such employee shall not thereafter be barred from
service on the Interchange Trackage by reason of such occurrence.
SECTION 4. Interchange of Equipment between the Parties shall be in
accordance with the Field and Office Manuals of the AAR Interchange Rules and
Code of Car Service Rules adopted by the Association of American Railroads
("Interchange Rules"). Equipment shall be considered interchanged between the
Parties when the Equipment is placed on designated Interchange Trackage and the
locomotive or locomotives of the delivering Party have been uncoupled from such
Equipment and the delivering Party has delivered billing to the receiving Party.
Notwithstanding the foregoing, if PNWR is not a subscriber to the Interchange
Rules the following shall apply:
a. If Equipment has been interchanged to PNWR and it is lost or damaged,
responsibility for such loss or damage shall be the responsibility of PNWR and
not SP, and
b. All Equipment repairs performed by PNWR, its employees, officers,
agents or outside contractors shall be done in compliance with Federal Railway
Administration Railroad Freight Car Safety Standards, Safety Appliance and Power
Brake Laws and the Interchange Rules.
3
<PAGE>
SECTION 5. PNWR undertakes and agrees, in respect to the use hereunder of
the Interchange Trackage and the operation of Equipment thereon and thereover,
to comply with all applicable Federal and State laws or regulations, and all
applicable rules, regulations, and orders promulgated by any Municipality, Board
or Commission with respect thereto for the protection of employees or other
persons or parties, and if any failure on its part to comply therewith shall
result in any fine, penalty, cost or charge being assessed, imposed or charged
against SP, PNWR shall promptly reimburse and indemnify SP for or on account of
such fine, penalty, cost or charge; and further agrees in the event of any such
action, upon notice thereof being given by SP, to defend such action free of
cost, charge or expense to SP.
SECTION 6. It is the express intention of the Parties that the indemnity
provided for in this Agreement shall be as follows:
a. "Loss and/or Damage" shall mean all damage to any property and injury
to or death of any person and all liability therefor, and shall embrace all
payments made on account thereof, including, without limitation, expense of
rerailing the Equipment and clearing wrecks, amounts paid or payable for
environmental cleanup, fines or penalties, amounts paid or payable under all
applicable laws and shall also embrace all cost and expense incident to any such
injury, death, loss or damage arising in connection with operations under this
Agreement. Loss and/or Damage shall also include attorneys' fees and costs in
defending against all such claims or alleged claims.
b. i. It is understood and agreed that SP shall maintain the Interchange
Trackage in a state of reasonable repair which is reasonably suited for the
combined requirements of the Parties hereof; provided, however, PNWR, in
operating its Equipment over and upon the Interchange Trackage, shall accept
such trackage as it shall find it and shall not, by reason of any failure,
deficiency or defect therein or failure or neglect in the maintenance, have or
make against SP any claim or demand for any loss, damage, injury or death
whatsoever arising from or incident to such deficiency, defect, failure or
neglect.
ii. It is understood and agreed that a number of vehicular and pedestrian
crossings ("Crossings) of the
4
<PAGE>
Interchange Trackage to be used for operations hereunder presently exist or may
in the future be constructed. PNWR agrees to accept all Crossings in whatever
condition they may be during the term of this Agreement and will not assert any
claim, demand, or cause of action against SP and will hold SP harmless from any
claim, demand, or cause of action arising out of any Crossing accident on the
Interchange Trackage in which the Equipment of PNWR only is involved.
c. Subject to the provisions of Section 6b of this Agreement, liability
for Loss and/or Damage shall be fixed between the Parties as follows:
i. When caused by the acts, omissions or negligence of the employees of
only one Party or the defective property of only one Party (other than
Interchange Trackage), whether or not in conjunction with the acts, omissions,
negligence or defective property of a third party, such Loss and/or Damage shall
be borne solely by such Party.
ii. When caused by the acts, omissions or negligence of the employees of
one Party or defective property (other than Interchange Trackage) of one Party
in combination with the acts, omissions or negligence of the employees of the
other Party or the defective property (other than Interchange Trackage) of the
other Party, then, whether or not in conjunction with the acts, omissions or
negligence or defective property of a third party, such Loss and/or Damage shall
be borne solely by each such Party as to its own employees, contractors, agents,
invitees, Interchange Trackage and property other than real property owned by
it, and property in its possession, care, custody or control, and equally as to
Loss and/or Damage to real property underlying or surrounding the Interchange
Trackage, third parties and their property.
iii. When caused by the sole liability of third parties, without negligence
or concurring fault on the part of the Parties, unknown causes, acts of God or
any other cause, such Loss and/or Damage shall be borne solely by each Party as
to its own employees, contractors, agents, invitees, Interchange Trackage and
property, including real property owned by it, and property in its possession,
care, custody or control, and equally as to Loss and/or Damage suffered by third
parties and their property.
5
<PAGE>
The foregoing notwithstanding, if such Loss and/or Damage involves only one
Party, or the Equipment in the possession or custody of only one Party, that
Party shall bear all Loss and/or Damage.
The foregoing notwithstanding, neither Party shall have any claim against
the other Party for its acts, omissions or negligence giving rise to Loss and/or
Damage caused by or resulting from interruption of or delay to such Party's
business or for special, indirect or consequential damages, for loss of profit,
savings, or revenue of any kind whether or not the other Party has been advised
of the possibility of such damages.
Each Party hereto covenants and agrees that it shall forever investigate,
release, defend, indemnify and save harmless the other Party, its successors and
assigns, from and against any and all liability or claims for damages, costs and
expenses herein assumed by it, whether or not such liability or claims arises
during the time that this Agreement is in effect or thereafter; provided,
however, that the Party liable, in whole or in part, as to any claim or suit
filed against the other Party, shall be given prompt written notice thereof and
an opportunity to join in or take over, as may be appropriate, the defense and
settlement of such claim or suit.
Each Party hereto may make settlement of any claim for Loss and/or Damage
for which it and the other Party hereto may be jointly liable hereunder, but no
payment in excess of Twenty-Five Thousand Dollars ($25,000) shall be voluntarily
made by any Party in settlement of any such claim without first having obtained
in writing consent of the other Party, which consent shall not be unreasonably
withheld, and giving of such consent shall not be deemed an admission that such
claim involves joint liability. The Party against which a claim in excess of
Twenty-Five Thousand Dollars ($25,000) is made for which the other Party hereto
may be jointly liable hereunder shall give written notice thereof to such other
Party and such Party may join in the defense.
All releases taken pursuant to the settlement of claims or suits involving
joint liability shall include all Parties hereto involved, and copies thereof
shall be furnished each of them.
For the purpose of this Section 6, reference to SP or any term which
includes SP, shall include SP and any invitee, permittee or
6
<PAGE>
other party using the Interchange Trackage pursuant to a written agreement with
SP.
SECTION 7. Either Party shall be relieved from its performance of this
Agreement without penalty if at any time due to reason of any cause or causes
beyond either Party's control, including, but not limited to, flood, earthquake,
hurricane, tornado or other severe heat or climatic conditions, acts of God,
acts of a public enemy, war, blockade, insurrection, vandalism, sabotage,
strike, lockout, or other labor disturbance, or governmental law, order, or
regulation, or other similar events, either Party is unable to provide the other
Party of any or all of the services provided for in this Agreement.
SECTION 8. PNWR shall, at its sole cost and expense, procure the
following kinds of insurance for the term of this Agreement and promptly pay
when due all premiums for that insurance. Upon the failure of PNWR to maintain
insurance as provided herein, SP shall have the right, after giving PNWR ten
(10) days written notice, to obtain insurance and PNWR shall promptly reimburse
PNWR for that expense or, notwithstanding anything to the contrary in Section 8
hereof, to cancel this Agreement. The following minimum insurance coverage
shall be kept in force during the term of this Agreement:
Comprehensive General Liability insurance providing bodily injury,
including death, personal injury and property damage coverage with a combined
single limit of at least Twenty-Five Million Dollars ($25,000,000) for each
incident and a general aggregate limit of at least Twenty-Five Million Dollars
($25,000,000). This insurance shall contain Broad Form Liability covering the
indemnity provisions contained in this Agreement, including, without limitation,
contractual liability, severability of interests and name SP as an additional
insured with respect to liabilities arising out of PNWR's obligation to SP in
this Agreement. If coverage is purchased on a "claims made" basis it shall
provide for at least a three (3) year extended reporting or discovery period,
which shall be invoked should insurance covering the time period of this
Agreement be canceled unless replaced with a policy containing the same time
period as the policy being replaced. Should the aggregate limit be eroded by
forty (40) per cent or more, PNWR shall immediately restore the aggregate limit
to Twenty-Five Million Dollars ($25,000,000).
7
<PAGE>
PNWR warrants that this Agreement has been reviewed with its insurance
agent(s)/broker(s) and the agent(s)/broker(s) has been instructed to procure the
insurance coverage required herein and name SP as additional insured with
respect to liabilities arising out of PNWR's obligation to SP.
PNWR shall furnish to SP the certificate(s) of insurance evidencing the
required coverage and endorsement(s), and upon request of SP, PNWR shall provide
certified duplicate of any of those policies. The insurance company(ies)
issuing such policy(ies) shall notify SP in writing of any material alteration
including any change in the retroactive date in any "claims made" policies or
substantial reduction of aggregation limits, if such limits apply, or
cancellation thereof at least thirty (30) days prior thereto.
The insurance coverage policy(ies) shall be written by a reputable
insurance company or companies reasonably acceptable to SP or with current
Best's Insurance Guide Rating of B and Class VII or better. Such insurance
company shall be authorized to transact business in the State of Oregon. If
requested, PNWR must furnish a certified copy of all insurance policy(ies) and
endorsement(s) to SP within seven (7) days of such request.
Insurance coverage provided in the amounts set forth herein shall not be
construed to otherwise relieve PNWR from liability hereunder in excess of such
coverage, nor shall it preclude PNWR or SP from taking such other action as is
available to it under any other provision of this Agreement or otherwise in law
or equity.
The insurance coverage limits required under this Section 8 shall be
adjusted every five (5) years during the term or any extended term hereof based
on any increases or decreases in the Consumer Price Index, or any successor
index if insurance at such adjusted level is available from any reputable
carrier. If the adjusted amount is not available, PNWR shall obtain the highest
amount of coverage available.
SECTION 9. In the event either Party breaches any part of this Agreement,
the other Party shall be entitled to all its lawful remedies under this
Agreement or at law or equity.
8
<PAGE>
SECTION 10. This Agreement supersedes all prior negotiations or agreements
between the Parties, whether written or oral, relating to the subject matter
hereof, and is intended to be the entire and complete statement of the terms of
this Agreement between the Parties and, except for the designation of track
provided in Section 1 hereof, may be amended or modified only by a written
instrument executed by the Parties.
SECTION 11. This Agreement shall take effect as of the Lease Commencement
date first hereon written and shall remain in effect thereafter until terminated
by either Party upon giving not less than thirty (30) days' written notice to
the other Party to at effect. Termination of this Agreement for any reason
shall not affect any liability or obligations of the Parties which accrued
hereunder prior to such termination.
SECTION 12. This Agreement is exclusively for the benefit of the Parties
hereto and not for the benefit of any third party. This Agreement shall inure to
the benefit of and shall be binding upon Parties, their successors and assigns.
Either Party may waive any default at any time without affecting or impairing
any right arising from any other default.
SECTION 13. All notices, demands, requests, or other communications which
may be or are required to be given, served or sent by either Party to the other
pursuant to this Agreement shall be in writing and shall be deemed to have been
properly given or sent:
a. If intended for SP, send registered or certified mail, return receipt
requested, with postage prepaid, and address to SP as follows:
Executive Vice President - Operations
Southern Pacific Transportation Company
1860 Lincoln Street, Suite 1400
Denver, CO 80295
With a copy to:
Director Contracts and Joint Facilities
9
<PAGE>
Southern Pacific Transportation Company
1860 Lincoln Street, Suite 1200-911
Denver, CO 80295
b. If intended for PNWR, send registered or certified mail, return
receipt requested, with postage prepaid, and address to PNWR as follows:
General Manager
Portland & Western Railroad, Inc.
110 W. 10th Avenue
Albany, OR 97321
or such other address as may be designated by either Party.
SECTION 14. The parties agree that a separate interchange agreement that
includes the Burlington Northern Railroad Company is necessary and both agree to
diligently pursue such an agreement on terms substantially similar to those
contained herein.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed in duplicate as of the date first above written.
SOUTHERN PACIFIC TRANSPORTATION COMPANY
/s/ M.D. Ongerten
By__________________________________
V.P. Strategic Development
_______________________________
(Title)
PORTLAND & WESTERN RAILROAD, INC.
/s/ Anthony W. Mogytycht
By_________________________________
President
______________________________
(Title)
10
<PAGE>
Exhibit A
[ Map of Brooklyn Yard Interchange
Trackage for Portland & Western
Railroad, Inc.]
11
<PAGE>
EXHIBIT F
COOPERATIVE MARKETING AGREEMENT
This Cooperative Marketing Agreement ("CMA") is made this 18th day of August
1995, by and between the PORTLAND & WESTERN RAILROAD, INC. hereinafter called
"Carrier" and SOUTHERN PACIFIC TRANSPORTATION COMPANY, a Delaware Corporation,
hereinafter called "SPT."
RECITALS:
This CMA is part of the Lease Agreement ("Lease") between the parties. This CMA
describes the agreement between Carrier and SPT with respect to their joint
commercial efforts to market rail transportation to and from the Rail Lines (as
"Rail Lines" is defined in the Lease).
AGREEMENT
1. Term:
The effective period of this CMA will run concurrent with the Lease. In the
event the Lease is terminated, this (CMA shall terminate simultaneously.
2. Switching Carrier:
Carrier will operate the Rail Lines as a switching carrier for interchange
traffic. Carrier's initial charges for interchange switching service will
be published by Carrier in public tariffs at the amounts shown on Exhibit A
and SPT will fully absorb these charges. The charges in Exhibit A do not
apply on TOFC or COFC traffic. SPT will be responsible for billing
customers for line haul transportation services on interchange traffic.
(a) By operating as a switching carrier, Carrier grants to SPT Carrier's
automatic concurrence to any pricing action that SPT may wish to take
for line haul services to and from Rail Lines.
(b) Carrier and SPT intend that Carrier's switch charges and SPT's
absorptions will remain equal to each other. Should Carrier elect to
establish charges higher than the amounts absorbed by SPT, Carrier shall
be responsible for billing and collecting the unabsorbed charges from
customers served by Rail Lines.
1
<PAGE>
(c) In the event that specific switching charges and absorptions are
negotiated between SPT and Carrier that differ from those in Exhibit A,
then those negotiated arrangements will apply and will take precedence
over the charges and absorptions contained herein or those published in
tariff form. Letters of Agreement naming the agreed upon charges and
absorptions will be signed by Carrier and SPT to document the
agreements reached.
(d) Except as provided in Section 2(c) above, SPT's absorption of Carrier
switching charges shall not be adjusted for a period of two (2) years
from the date first herein written, unless mutually agreed upon by
both parties.
(e) SPT shall not raise its line haul rates solely to recover SPT's
absorption of Carrier's switching charges.
(f) Carrier shall establish, collect, and retain charges for shipments and
services wholly on the Rail Lines. Carrier will establish, collect, and
retain demurrage charges on Rail Lines.
3. RENEGOTIATION:
After the first two years, the parties may agree to review the charges and
absorptions on an annual basis. Any adjustment resulting from the review
will be recorded as an amendment to the CMA and reflected in the appropriate
tariffs.
4. EQUIPMENT:
(a) The Code of Rules of the Association of American Railroads ("AAR")
governing the interchange and accounting of freight vehicles between
railroads then in effect shall apply. SPT and Carrier will jointly
determine whether this Agreement should be amended to accommodate the
Interstate Commerce Commission's ruling on car hire deprescription.
(b) Carrier and SPT intend that SPT will be the sole provider of railroad
marked freight cars for loading on line for interchange to SPT.
Accordingly, Carrier will not acquire or make any separate arrangements
for freight cars for loading in interchange service on the Rail Lines
without SPT's specific written agreement for each such arrangement or
acquisition, which SPT will not unreasonably withhold.
(c) Carrier will not use SPT-owned or leased freight cars for shipments
moving wholly on the Rail Lines, except as agreed in writing by Carrier
and SPT.
2
<PAGE>
(d) Carrier will not grant OT-5 authority for private freight cars
without SPT's agreement, in writing, for each such grant, which SPT
will not unreasonable withhold.
(e) Carrier and SPT will meet periodically to plan for the equipment needs
of the shippers on the Rail Lines, and to review the availability of
freight cars on SPT to meet those needs.
(f) To the extent possible, Carrier will order equipment from SPT at least
seven (7) days in advance of date equipment is requested for delivery
by SPT to Carrier. Carrier will contact appropriate SPT Customer
Service center personnel to request the equipment type required and the
number of cars for each equipment type. SPT reserves the right to
substitute suitable equipment types to satisfy specific equipment
orders.
(g) Except as required by AAR interchange rules, Carrier shall not make
repairs to freight equipment bearing SP, DRGW, SSW, VCY, GVSR, or CRLE
reporting marks (or, after a merger between SPT and another railroad,
the reporting marks of the mergering partners and their constituent
companies reporting marks) in labor dollars exceeding $500 plus
appropriate AAR material prices for any car without advance authority
from SPT's Mechanical Department.
5. Car Hire
(a) Carrier is responsible for car hire owed to car owners (including SPT)
for freight vehicles while on the lines of Carrier.
(b) Irrespective of the Code of Car Hire Rules - Freight as it applies to
switching carriers, or as it may apply in the future, Carrier may not
reclaim from SPL hourly car hire for freight cars used in interchange
service, and freight cars will be in Carriers's car hire accounts for
the entire time the freight cars are on the Rail Lines, subject to the
following exceptions:
(1) On loaded freight cars delivered to Carrier in error, Carrier will
be relieved of the obligation to pay car hire for the time such
freight cars are on the lines of Carrier for actual time up to but
not to exceed 48 hours.
(2) On empty freight cars delivered to Carrier that are delivered to
Carrier without car orders, as reflected in SPT Car Order System,
the freight cars
3
<PAGE>
must be returned in interchange to SPT. Carrier will be relieved of
obligation to pay car hire for the time such freight cars are on the
lines of Carrier for actual time up to but not to exceed 48 hours.
In the event Carrier elects to load cars delivered under this
paragraph (2), Carrier must place a valid car order with a want date
the same as the car order date and no reclaim will be allowed.
(3) On empty freight cars ordered by Carrier and delivered early to
Carrier, as supported by the difference between interchange delivery
records of SPT in TOPS for Carrier, Carrier will be relieved of the
car hire obligation for the time period between the interchange
delivery time, and the car order want date.
(4) On empty freight cars ordered by Carrier and subsequently found to
be unsuitable for loading and returned empty to SPT, subject to the
provisions of Section 4 (g), Carrier will be relieved of car hire
obligation from the time delivered empty to Carrier until delivered
empty to SPT for actual time up to but not to exceed 48 hours.
(5) Carrier must document each of the claims for per diem relief under
this subsection with the following information as applicable to
Carrier's claim for relief under subsection (1) through (4) hereof:
car number, time and date of interchange to Carrier, time and date
of interchange to SPT, and number of hours reclaimed by Carrier. A
car order number for each car claimed, car order delivery date
requested, time and date of car rejection for mechanical reasons
(subject to Section 4 (g))and reason for rejection. A claim for
relief with respect to any car shall be denied for such car unless
the complete data as described in this subsection for such car is
provided to SPL and accompanies the claim.
6. Charges of Connecting Railroads
Carrier will not be required to absorb the switching charges of the Port of
Tillamook Bay Railroad (POTB). These charges will continue to be absorbed
in whole or in part by SPT.
4
<PAGE>
7. Claims:
Association of American Railroads ("AAR") Freight Claim Rules shall govern
the distribution of payments for loss and damage to cargo.
B. Billing for Switching:
Unless otherwise agreed upon by both parties, the procedures outlined below
will be used for payment for switching services:
Carrier shall, on a monthly basis, bill SPT for payment of authorized
absorbed switching charges, submitting a switching settlement statement
showing the name of shipper/consignee, date of interchange, car initial
and number, commodity, origin and destination city and state.
Two copies of the switching settlement statements for the previous month's
switching activities shall be sent by the 5th of the month, one to each of
the addresses indicated below:
Manager of Revenue Reports
ATTN: Freight Revenue Bureau-Switching Settlement Desk
Southern Pacific Transportation Company
P. 0. Box 7990
San Francisco, CA 94120-7990
Southern Pacific Transportation Company
Customer Service Center
Attn: Switching Settlement Desk
P. 0. Box 5482
Denver, Colorado 80217-5482
SPT shall process the switching settlement statements by the 10th of the
month. Carrier may draft on SPT's bank account for payment no sooner than
the 20th of the month for the previous month's switching activities.
In the event exceptions to the switching settlement statement occur, SPT
shall deduct from the following month's switching settlement statement,
the difference between the billed amount and the correct amount.
5
<PAGE>
9. NOTICES:
Any notice, election, proposal, payment or objection or other document
required or permitted to be given pursuant to this CMA shall be put in
writing and hand delivered to the addressee or deposited first class or
overnight, postage prepaid, in the United States mail addressed as follows:
TO CARRIER: General Manager
Portland & Western Railroad Inc.
110 West 10th Avenue
Albany, OR 97321
Carbon Copy: Executive Department
Genesee & Wyoming Industries, Inc.
71 Lewis Street
Greenwich, CT 06830
TO SPT: Director - Short Line Relations
Southern Pacific Transportation Company
P.O. Box 5482
Denver, CO 80217-5482
(303) 812-7415
Any party, from time to time, by written notice to the other, may change its
address for further notices hereunder. In case of emergency or where
circumstances do not reasonably permit waiting for delivery of written
notice by mail, oral notice or notice by telephone may be communicated to
the appropriate person and shall be effective when thus given, if and
provided such notice is promptly confirmed and repeated in substance in
writing in accordance with this paragraph.
10. SCOPE:
This CMA constitutes the entire CMA between the parties with respect to the
subject matter hereof, and no modification or alteration of the terms hereof
shall be binding unless such modification or alteration shall be in writing
executed by the parties. If any term, covenant, or provision of this CMA, or
the application thereof to any person or circumstance, shall ever be held to
be invalid or unenforceable, then in such event the remainder of this CMA or
the application of such terms, covenant, and provision hereof shall remain
valid and enforceable to the fullest extent permitted by law.
6
<PAGE>
11. Non-disclosure:
No party hereto shall disclose any information regarding any part of the CMA
except co affiliates, agents and its auditors, or as may be required by law,
or upon written approval of all parties hereto.
12. Assignment:
This CMA may not be assigned, subleased, or transferred by Carrier without
the prior written consent of SPT whose consent shall not be unreasonably
withheld.
IN WITNESS WHEREOF, the parties have executed this CMA as of the date first
above written.
SOUTHERN PACIFIC TRANSPORTATION COMPANY
/s/ M. D. Ongerten
_______________________________________
Signature
V.P - Strategic Development
_______________________________________
Title
PORTLAND AND WESTERN RAILROAD INC.
Anthony W. Mogytycht
_______________________________________
Signature
President
_______________________________________
Title
7
<PAGE>
================================================================================
EXHIBIT A
COOPERATIVE MARKETING AGREEMENT
================================================================================
SWITCHING CHARGES
PORTLAND & WESTERN RAILROAD INC.
- --------------------------------------------------------------------------------
TRAFFIC INTERCHANGE SWITCH CHARGE
DESCRIPTION POINT PER LOADED CAR
================================================================================
Willamette & Pacific
Railroad (WPRR) N/A No Charge
Traffic
Port of Tillamook Bay Brooklyn, Oregon $100.00
Railroad (POTB) Eugene, Oregon
Traffic
Inbound Boxcars Brooklyn, Oregon $160.00
Eugene, Oregon
Woodchips Brooklyn, Oregon $100.00
Eugene, Oregon
Outbound Boxcars Brooklyn, Oregon $250.00
Eugene, Oregon
Grain Brooklyn, Oregon $175.00
Outbound Eugene, Oregon
All Other Brooklyn, Oregon $280.00
Eugene, Oregon
================================================================================
8
<PAGE>
[ 7 Pages of charts and graphics ]
<PAGE>
S2104 APPLICATION FOR LEASE, LICENSE OR EASEMENT Date: __/__/__
cc:__________________________ _________________________ ( ____ )
__________________________ _________________________
o Full and correct name of Applicant: ______________________________________
__________________________________________________________________________
o Applicant DBA: __Individual __ Corporation __Partnership __Public Body
o Billing address: (1) _____________________________________________________
Billing address: (2) _____________________________________________________
o Railroad Station _________________________ Mile post _____________________
City __________________________ County _________________ State ___________
o Location shown on Drawing No. _________________________ Dated ____________
o Ground used for: _________________________________________________________
o Commodity(ies) handled: ________________ If dangerous, chemical names:
__________________________________________________________________________
o If ascertainable, give description of kind and approximate value of
structure applicant proposes to erect on premises: _______________________
o Kind of existing improvements on premises, and by whom owned: ____________
__________________________________________________________________________
0. Effective date of agreement: ______________________ Term desired: ________
__________________________________________________________________________
1. Takes place of __ Lease __ Document __ Deed Audit _____ In favor of:____
______________________________________________ Annual rent: $ ____________
Plus taxes __ Yes __ No ______________________ Annual rent: $ ____________
2. Are there any existing easement, leases, licenses on the property that will
affect Lessee's, Licensee's, Grantee's use: __ yes _ no
(If yes, show on drawing)
3. Lease, License, Easement should contain special clause or clauses to the
following effect: ________________________________________________________
__________________________________________________________________________
4. Does property deed, of which this lease or license forms a part, contain
covenant or condition prohibiting any use. If so, state deed reference:__
5. Are there any unusual facts which might have a bearing on rental or do you
have any recommendations as to rental? ___________________________________
TRACKAGE
6. To be served from existing track? __ Feet of trackage to serve proposed
Lessee ____________ By whom owned? _______________________________________
Kind of track __ team __ yard __ industrial __ other Derails required?___
Kind of track (team, yard, industrial, etc.) ________________ Spins #_____
EMARKS: _____________________________________________________________________
- -----------------------------------------------------------------------------
<PAGE>
CS-2104
xxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Copies to: ________________________ DATE: _______________________
________________________ FILE: _______________________
________________________ DOC AUD NO: _________________
________________________
1. Full and correct name of applicant: ______________________________________
2. Applicant doing business as: __ individual __ corporation __ partner-
ship
3. Billing address: number and street ______________________________________
City ______________________ State ______________________ Zip Code ________
4. Railroad Station: ________________________ xxxxxx ________________________
City _______________________ County ___________________ State ____________
5. Location(s) illustrated on Drawing No: ___________________________________
6. xxxxxxxxxxxxxxxxxxxxxxxxxxx ______________________________________________
7. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx ____________
8. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx __________________________
9. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx: _________________
10. Commodity(ies) handled: __________________________________________________
__________________________________________________________________________
11. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx _________________________
12. xxxxxxxxxxxxxxx __ Yes __ No; if yes, at whose expense? _________________
13. xxxxxxxxxxx ______________________________________________________________
__________________________________________________________________________
14. Effective date of agreement: ___________________ Term desired: ___________
15. Takes place of Document/Lease Audit No: __________________________________
16. Proposed agreement should contain special provision(s) to following
effect:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
REMARKS
-------
17. _______________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
RECOMMENDED: ___________________________ RECOMMENDED:_________________________
<PAGE>
APPLICATION FOR PRIVATE ROADWAY CORSSING
FILE: ___________________________
DATE: ___ - ___ - 94
ORIGINAL TO: MR. E. P. REILLY - SAN FRANCISCO
COPIES TO: MR. W. E. FOWLER - SAN FRANCISCO
1. NAME AND BILLING ADDRESS OF APPLICANT:
_______________________________________________
_______________________________________________
_______________________________________________
2. RAILROAD STATION: _______________________ DIVISION: ___________________
ROUTE SYMBOL AND MILEPOST: ___ - ____ - ___
CITY: _________________________ COUNTY: _______________ STATE: ____
CONGRESSIONAL GRANT PROPERTY: YES __ NO __
3. ACCOMPANYING DRAWING: ___ - _____ DATED: __ - __ - __
VIEW CONDITIONS: LOOKING WEST: LEFT SIDE: ____ FEET
RIGHT SIDE: ___ FEET
LOOKING EAST: LEFT SIDE: ____ FEET
RIGHT SIDE: ____ FEET
M.P. TO NEAREST PUBLIC CROSSING: WEST: ___ - ___ - ___
EAST: ___ - ___ - ___
4. CHECK ONE:
NEW CROSSING __ WIDTH OF NEW/EXISTING CROSSING: ___ FEET
EXISTING PROTECTION: STOP SIGNS __ OTHER __ (EXPLAIN UNDER REMARKS)
ADDITIONAL USER OF EXISTING CROSSING __ TO COVER EXISTING USE BY
AGREEMENT __ OTHER __ (EXPLAIN UNDER REMARKS)
5. IF EXISTING CROSSING, NAME OF LICENSEE: ____________________________
AUDIT NUMBER OF AGREEMENT: ____________
AGREEMENT OF RECORD: YES __ NO __
6. IS THE CROSSING, EXISTING OR PROPOSED, NECESSARY TO PROVIDE
ACCESS: YES __ NO __ CAN EXISTING CROSSING BE CLOSED: YES __ NO __
IF THERE IS A NEARBY EXISTING CROSSING, WHY CANNOT IT BE USED:
____________________________________________________________________
____________________________________________________________________
7. IS ALTERNATE ACCESS AVAILABLE: YES __ NO __. CAN IT REASONABLY
BE MADE AVAILABLE: YES __ NO __
8. IS THE CROSSING REQUIRED AS A CONDITION OF RIGHT OF WAY ACQUISITION
DEED: YES __ NO __. IF SO, SHOW DEED AUDIT NUMBER ________________
9. TYPE OF VEHICULAR USAGE: ___________________________________________
ESTIMATED AVERAGE DAILY TRAFFIC: _________________
10. MAIN TRACK __ SINGLE __ DOUBLE __ SIDING __ BRANCH MAIN TRACK __
DRILL TRACK __ SPUR TRACK __ OTHER __
AVERAGE NUMBER OF TRAIN MOVEMENTS: __ DAILY, OR __ WEEKLY.
MAXIMUM AUTHORIZED SPEED: __ MPH
11. DO YOU RECOMMEND AUTOMATIC WARNING DEVICES: YES __ NO __
IF SO WHAT TYPE? ____________________________________________________
WHO IS TO PAY COST OF INSTALLATION: _________________________________
12. REMARKS: ____________________________________________________________
________________________________________________________________
____________________________________________________________________
13. DO YOU RECOMMEND APPROVAL: YES __ NO __
14. IF COST ESTIMATES ARE INVOLVED, SUBMIT ENGINEER'S REPORT.
- -------------------------------------- ---------------------------------
DIVISION ENGINEER SUPERINTENDENT
<PAGE>
EXHIBIT 10.67
CONFIDENTIAL TREATMENT REQUESTED AS TO THOSE PORTIONS MARKED WITH ASTERISKS
---------------------------------------------------------------------------
(***) AND THOSE PORTIONS HAVE BEEN SEPARATELY FILED WITH THE COMMISSION
-----------------------------------------------------------------------
LEASE AGREEMENT
BETWEEN
BURLINGTON NORTHERN RAILROAD COMPANY
AND
PORTLAND & WESTERN RAILROAD, INC.
Finance Docket Number: 32766
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
<S> <C> <C>
1 Definitions 5
2. Lease of Subject Line and Rail Facilities 6
3. Taxes 7
4. Non-Essential Properties 8
5. Property-Related Agreements 9
6. Locomotive and Rail Equipment Transportation 9
7. Possession and Use 9
8. Equipment 11
9. Maintenance of Rail Facilities 13
10. Rate and Allowance 15
11. Administration 19
12. Financial Statements 22
13. Term 22
14. Liability and Insurance 23
15. Labor 26
16. Governmental Approvals 26
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS (Cont.)
-------------------------
Section Page
- ------- ----
<S> <C> <C>
17. Conditions Precedent to Transfer of Possession 27
18. Default 28
19. Catastrophic Event 29
20. Arbitration 30
21. Notices 31
22. Governing Law 32
23. Amendment 32
24. Assignment 32
25. Interpretation 33
APPENDICES
- ----------
A. Description of Rail Facilities
B. Non-Essential Properties.
C. Interchange Agreement
D. Power of Attorney for BN to Make Freight Rates
</TABLE>
3
<PAGE>
LEASE AGREEMENT
---------------
This Agreement is made on the 15 day of September, 1995, between BURLINGTON
NORTHERN RAILROAD COMPANY (BN), a Delaware corporation, duly qualified to do
business in the State of Oregon, and PORTLAND & WESTERN RAILROAD, INC. (PNWR), a
Delaware corporation, duly qualified to do business in the State of Oregon.
RECITALS:
---------
BN, an interstate common carrier by rail, is the operator of three railroad
lines in the State of Oregon. 1) One is known as the OE Subdivision broken down
into three parts; Milepost (MP) 16.87 near Bowers Junction to MP 18.83 near
Bendemeer; MP 25.52 near St. Marys Junction to MP 26.71 near St. Marys (also
known as Beaverton Spur) and MP 31.28 near Greton to MP 64.70 near Hopmere. 2)
Another line is known as the Banks Spur of the OE Subdivision; MP 17.07 near
Bowers Junction to MP 27.84 near Banks and the 3) third line is known as the
Forest Grove Branch from MP 4.68 near Hillsboro to MP 10.28 near Forest Grove.
All of these lines are collectively known as the Subject Line; and
BN desires to lease the Subject Line and Rail Facilities and PNWR desires to
operate the Subject Line and Rail Facilities for the purpose of offering Rail
Freight Service to shippers and industries located on the Subject Line. BN is
willing to lease the Subject Line together with the Rail Facilities upon the
terms and conditions of this Agreement:
THEREFORE, in consideration of the following mutual promises and covenants and
any funds paid by PNWR to BN this day and other consideration, the parties
agree:
4
<PAGE>
Section 1. Definitions
-----------
Agreement. This Lease Agreement between Burlington Northern Railroad Company and
- ----------
Portland & Western Railroad, Inc.
Agreement Year. The period commencing on the date of Transfer and ending on
- ---------------
December 3l of the same calendar year is the first Agreement Year. And each
subsequent calendar year, or portion, within the Term of the Agreement is also
an Agreement Year.
Base Per Car Allowance. Payment made by BN to PNWR as compensation to provide
- -----------------------
Rail Freight Service on behalf of BN.
Event of Default. An event that has occurred under Section 18.
- -----------------
Lessee. Portland & Western Railroad, Inc.
- -------
Lessor. Burlington Northern Railroad Company.
- -------
Maintenance. The normal and regular work whether capitalized or expensed, to
- ------------
keep the Rail Facilities in condition necessary for continued safe operation.
Non-Essential Properties. Assets not required for the operation of the Subject
- -------------------------
Line as identified in Appendix B.
Rail Facilities. The track and related railbed structures but excluding
- ----------------
underlying real estate, leased to PNWR as described in Appendix A.
5
<PAGE>
Rail Freight Service. The common carrier, contract or exempt rail service to be
- ---------------------
provided by PNWR.
Standard of Maintenance. In the case of track it is the FRA classification and
- ------------------------
for all other Rail Facilities it is the condition existing at Transfer as
defined in Section 9.
Subject Line. The following railroad lines in the State of Oregon between MP
- -------------
16.87 near Bowers Junction and MP 18.83 near Bendemeer; between MP 25.52 near
St. Marys Junction and MP 26.71 near St. Marys (Beaverton Spur) and between MP
31.28 near Greton and MP 64.70 near Hopmere. These lines are part of the OE
Subdivision. The other two lines in the State of Oregon are the Banks Spur of
the OE Subdivision between MP 17.07 near Bowers Junction and MP 27.84 near Banks
and the Forest Grove Branch between MP 4.68 near Hillsboro and MP 10.28 near
Forest Grove. These lines are further described in Appendix A.
Transfer. The date of Transfer of possession of the Rail Facilities and Subject
- ---------
Line as required by Section 17.
Term. The term of this Agreement as specified in Section 13.
- -----
Section 2. Lease of Subject Line and Rail Facilities
-----------------------------------------
A. BN agrees to lease to PNWR, and PNWR agrees to lease from BN, for the price
established in Section 2C all of BN's right, title and interest in the Subject
Line and Rail Facilities as more particularly defined in Appendix A.
6
<PAGE>
B. The parties will jointly Inspect the Subject Line and Rail Facilities within
sixty (60) days of the date of this Agreement to make an inventory of material
associated with BN's operation of the Subject Line lo determine which material
is not integral to the continued use of the Rail Facilities for railroad
purposes. BN has the right to remove all such non integral materials and
supplies prior to Transfer.
C. BN will lease the Subject Line to PNWR for *** annually and
other good and valuable consideration, receipt of which is acknowledged. BN will
pay the fee for trackage rights described in Appendix A.
D. Any leasehold improvement made to the Rail Facilities will become property of
BN at the termination of this Agreement. Subject to Section 3C it is understood
PNWR can depreciate any improvements it makes to the Rail Facilities
E. PNWR shall not have the right to admit any third party to use the Subject
Line and Rail Facilities without the prior written consent of BN.
Section 3. Taxes
-----
A. Except as provided in Section 3B regarding property taxes, PNWR will be
responsible for all federal, state, and local taxes, levies, assessments,
withholdings and other governmental charges levied or assessed and payable
because of the leasing, use, repair, maintenance, substitution, and consumption
of the Subject Line and Rail Facilities by PNWR, including, but not limited to,
any taxes or other charges which are on, based on, measured by or with respect
to receipts, gross or net income, capital, franchises, excess profits or conduct
of business of PNWR ("Taxes"). These Taxes will be paid by PNWR, and all returns
and reports in connection with such Taxes wil1 be
7
<PAGE>
made by PNWR, and further, PNWR will indemnify and hold harmless BN against all
such Taxes, and all expenses associated with the Taxes.
B. BN will pay all property taxes owed in the State of Oregon as assessed by
each county in which PNWR operates. BN's Property Tax Department will prepare
and file all returns and reports in connection with Ad Valorem taxes and BN's
Property Tax Department will also make payment of all property taxes for both BN
and PNWR.
C. The parties intend that this Agreement will be treated as a lease and not a
sale for federal, state and local tax purposes. Each party agrees it will not
take any reporting position with any federal, state or local taxing authority or
agency on any tax return or other filling, or make any oral or written statement
before such authorities or agencies or before any quasi-judicial administrative
body or court which is inconsistent with this intent.
Section 4. Non-Essential Properties
------------------------
A. BN and PNWR shall compile a list of Non-Essential Property within sixty (60)
days of Transfer which shall be attached as Appendix B. PNWR may, at any time,
identify to BN those Rail Facilities which are not required for the operation of
the Subject Line. Those Rail Facilities are considered Non-Essential Properties
and will be added to Appendix B.
B. PNWR is not required to maintain Non-Essential Properties. BN may remove
Non-Essential Properties at its own expense or PNWR may, with BN's written
consent, remove any Non-Essential Properties from their existing position and
redeploy them on the Rail Facilities subject to the requirements of Section 9.
All materials salvaged by operation of this Section will be the property of BN.
8
<PAGE>
Section 5. Property-Related Agreements
---------------------------
A. BN will administer and remain responsible for all records, and is entitled to
all rent or other income relating to term leases, indefinite term leases,
permits, licenses, easements, track construction agreements, property
acquisition agreements, track leases, and other property-related agreements on
the Subject Line both existing at Transfer or entered into after Transfer. PNWR
shall not be entitled to enter into or receive rents for property related
agreements defined above.
B. PNWR will pay all utility bills on the Subject Line after Transfer.
Section 6. Locomotive and Rail Equipment Transportation
--------------------------------------------
BN will move locomotives and other rail equipment to or from Albany or Brooklyn
Yard, OR under a separate transportation contract for on-going operations on the
Subject Line.
Section 7. Possession and Use
------------------
A. During the Term, PNWR will have exclusive possession of the Rail Facilities
and Subject Line for the purpose of providing Rail Freight Service. PNWR
covenants that (1) it will not use, or allow others to use, the Rail Facilities
for the storage, manufacture, reprocessing or disposal of hazardous or toxic
substances as defined by state and federal law without BN's prior written
consent, except for materials stored or used by PNWR as necessary in the
ordinary course of its business and in compliance with law or materials or
commodities of others being handled by PNWR in the ordinary course of its rail
freight operations and in compliance with law and (2) will
9
<PAGE>
not make the Rail Facilities or Subject Line available for use by third parties
for any purpose without the prior written consent of BN. BN retains the right to
inspect the Rail Facilities and the Subject Line on twenty-four (24) hours
notice at BN's expense to verify PNWR's compliance with this Agreement.
B. In connection with BN's inspection of the Subject Line and Rail Facilities,
BN will pay all loss, cost, damage, or injury which its own employees, agents or
property may suffer as a result of any willful misconduct or gross negligence by
BN's agents or employees. In connection with BN's inspection, PNWR will pay all
loss, cost, damage or injury which its own employees, agents or property may
suffer, except if such is the result of the sole gross negligence of BN's agents
or employees, or which any other person or property may suffer as a result of
any act or omission by PNWR's agents or employees.
C. During the Term, PNWR has the exclusive responsibility to provide Rail
Freight Service to and from points on the Rail Facilities and Subject Line. PNWR
will be capable of providing five (5) day per week service to industries on the
Subject Line. The parties will enter into the attached Interchange Agreement
which is incorporated by reference prior to Transfer which establishes the
rights and obligations of the parties with respect to the interchange of cars.
D. BN retains the right during the Term to operate unit coal trains over the
Rail Facilities and Subject Line with BN's own motive power and crews at no
expense to PNWR, provided (a) loss or damage caused by unit train operations
will be apportioned in the same manner specified in the Interchange Agreement
between BN and PNWR and (b) BN will observe all rules and timetable speeds of
PNWR.
10
<PAGE>
E. Section 10 covers rates and allowances. That section will govern the payment
BN is obligated to make to PNWR for loaded cars interchanged with BN. That
section will also govern the rental PNWR must pay BN on traffic moving locally
on PNWR.
F. Prior to Transfer, BN will identify and assign to PNWR all joint facility
agreements related to the Rail Facilities that are assignable by their terms.
Section 8. Equipment
---------
A. Car Supply: During the Term, PNWR will be responsible for providing
locomotives, cars and other equipment with the exception that BN will provide
all freight cars for interline service with BN. BN will respond to PNWR's
request for freight cars when those requests are placed under established BN car
ordering procedures. However, BN has no higher obligation to provide PNWR with
equipment than it does any customer directly served by BN. BN will supply
equipment to PNWR only under terms specified in the Interstate Commerce Act, or
any other applicable legislation, and as ruled on by the Interstate Commerce
Commission, federal courts or any other entity having jurisdiction. BN will have
no obligation to supply equipment for any PNWR originated traffic that BN does
not participate in as a line haul carrier. PNWR may, but only with BN's prior
written consent, provide its own cars or grant OT-5 authority for equipment used
to transport traffic interchanged with BN.
11
<PAGE>
B. Car Repairs:
1. Types of Repairs Permitted
--------------------------
PNWR may make minor running repairs and replacements of a safety appliance
nature to cars interchanged to PNWR by BN to comply with FRA/AAR standards to
permit their continued use in transportation service. Any other repairs must
have prior written approval by BN.
2. Repair Standards
----------------
All repairs and replacements to cars by PNWR will conform to standards of the
Association of American Railroads and regulations of the Federal Railroad
Administration for the type of repair performed.
3. Repair Rates and Charges
------------------------
Repairs for BN's account will be billed at 50% of the applicable charge for
labor and 100% of the applicable charge for materials established by the
Association of American Railroads (AAR). All car repair bills must be submitted
in accordance with the format established in AAR Rule 83 in the Field Manual of
the AAR Interchange Rules.
4. Records
-------
PNWR will maintain an adequate record of all repairs and replacements to
substantiate the nature of the work performed and materials used along with the
charges billed BN. BN has the right to audit, at its own expense, the records of
PNWR regarding repairs made to freight cars.
12
<PAGE>
C. Customer Related Detention Charges: PNWR will file its own demurrage,
detention and storage tariffs and collect the associated charges.
D. Car Hire: 1) PNWR shall pay car hire on all cars interchanged to PNWR by BN.
2) PNWR shall perform all car hire accounting required under applicable
Association of American Railroads ("AAR") Code of Car Hire Rules and Standards.
3) BN shall pay PNWR an amount equal to the actual car hire charges paid by PNWR
on both a mileage and per diem basis, but not to exceed a maximum of seventy two
(72) hours, computed on each car interchanged to PNWR by BN and received back
from PNWR. 4) To recover car hire PNWR must file a monthly bill with BN
providing sufficient information for BN to make payment. BN agrees to pay PNWR
within thirty (30) days from receipt of the bill. This bill should be sent to
Director Equipment Service Accounting
P.O. Box 64958
St. Paul, MN 55164-0958
5) If PNWR has negotiated deprescribed rates with any carrier other than BN,
PNWR shall bill BN at the default rate in the "CHARM" file.
Section 9. Maintenance of Rail Facilities
------------------------------
A. During the Term, PNWR will perform Maintenance on the Rail Facilities to
provide Rail Freight Service over the Subject Line. The Rail Facilities and
Subject Line must meet Standard of Maintenance applicable to that particular
type of rail facility or structure as set forth in Section 9B.
13
<PAGE>
B. PNWR agrees the Standard of Maintenance for mainline track and structures
will be FRA Class III with the following exceptions: 1) FRA Class II from MP
51.5 to MP 57.4 between Greton and Hopmere; 2) FRA Class II between MP 16.87
near Bowers Junction and MP 18.83 near Bendemeer; 3) FRA Class II between MP
17.07 at Bowers Junction and MP 27.84 near Banks; 4) FRA Class I on the Forest
Grove Branch between MP 4.68 near Hillsboro and MP 10.28 near Forest Grove; and
5) FRA Class I on the Beaverton Spur between MP 25.52 near St Marys Junction and
MP 26.71 near St. Marys. The Standard of Maintenance for all other track and
structures will be the condition in which the track and structures was delivered
to PNWR at Transfer.
C. BN must approve, in writing, all capital outlays to maintain the right of way
and structures prior to such capital outlays.
D. The Standard of Maintenance for all bridges located on the Rail Facilities or
the Subject Line will be the bridge condition determined by a joint inspection
conducted prior to Transfer.
E. PNWR may identify to BN track or other structures which it wishes to maintain
at less than the designated Standard of Maintenance. Upon that notice, BN will
determine whether it is willing to permit PNWR to maintain the facility or
structure at less than the applicable Standard of Maintenance. Unless a written
waiver is granted by BN the Rail Facilities and Subject Line, other than
Non-Essential Properties, will be maintained to the Standard of Maintenance
designated in Section 9B and 9D.
F. The parties will make an annual joint inspection of the Rail Facilities and
Subject Line to determine whether all facilities were maintained according to
the Standard of Maintenance. If it is determined solely in the reasonable
judgment of BN that any facility, structure, or portion of the
14
<PAGE>
Rail Facilities fails to meet the appropriate Standard of Maintenance, BN will
advise PNWR of the steps necessary to bring the facility into compliance.
Thereafter, PNWR will have sixty (60) days to take corrective action to bring
the non-complying facility up to the applicable Standard of Maintenance. If PNWR
does not take the required corrective action BN has the right, after a thirty
(30) day notice, to take the necessary corrective action at PNWR's expense. BN
is then authorized, without advance notice, to deduct those expenses from the
Base Per Car Allowance to PNWR.
G. PNWR agrees to keep adequate records for the Rail Facilities and Subject Line
during the Term to permit a determination of the existing maintenance level for
the Rail Facilities. By December 15 of each Agreement Year, PNWR will submit to
BN its proposed maintenance plan for the upcoming Agreement Year. BN will
communicate to PNWR by January 30 of the following year any concerns it may have
relative to the adequacy of the proposed maintenance plan.
H. PNWR will not remove any of the existing Rail Facilities without the consent
of BN. BN's consent to remove track material from the Rail Facillties in the
course of PNWR's performance of routine Maintenance is not required when
material removed from the Rail Facilities is replaced by material of equal or
superior quality, in which event, PNWR may retain for its own account the
material it removed
Section 10. Rate and Allowance
------------------
A. BN agrees to pay PNWR a Base Per Car Allowance of *** for each loaded car
it receives from PNWR in interchange at Brooklyn Yard, OR or forwards to PNWR in
interchange at Brooklyn Yard, OR or movement over the Subject Line.
15
<PAGE>
BM will pay no Base Per Car Allowance on such non-revenue movements as the
return of pallets, empty bottles, etc. BN will pay a Base Per Car Allowance on
company material only when BN moves company material in revenue service.
B. PNWR will pay BN a fee of *** on every loaded
car interchanged with Southern Pacific, or successor company, that originate or
terminate on the Subject Line. For traffic moving locally on the Subject Line,
or between the Subject Line and originating or terminating points on WPRR, POTB,
WGR and WVRD, PNWR will pay BN a royalty of *** . The method of payment of
this royalty will be handled by a supplementary agreement.
C. The *** fee in Section 10B can be waived by BN on a case by case basis.
If PNWR Interchanges traffic with Southern Pacific, Burlington Northern is
authorized, with advance notice, to collect the fee through a reduction in the
monthly Base Per Car Allowance to PNWR until the full fee is paid. Section 12
requires PNWR to provide BN with information to assure PNWR compliance with this
provision.
D. The Base Per Car Allowance will increase or decrease annually at seventy
(70%) percent of the Western Railroad Cost Recovery Index published by the AAR
The change in the Base Per Car Allowance will take effect January 1 of each
Agreement Year based on the previous year's AAR Index.
E. PNWR agrees it will grant BN power of attorney to make, enter into, change,
or otherwise establish tariff charges and contracts relative to the
transportation of commodities to or from the Subject Line. PNWR may establish
its own tariffs or contracts for transportation of local and specified interline
traffic permitted in Section 10B. PNWR may establish its own demurrage tariff.
16
<PAGE>
F. BN agrees it will issue all waybills on traffic originating on the Rail
Facilities and Subject Line operated by PNWR and interchanged to BN. BN also
agrees it will handle all freight billing and accounting on traffic BN
interlines with PNWR.
G. BN agrees to make the Base Per Car Allowance payments to PNWR as required
under this Rate and Allowance section twice monthly postmarked on the fifteenth
(15th) and last day of each month by written check to PNWR. The parties
understand and agree that the check for interchanged carloads postmarked on the
fifteenth (15th) of any given month represents the estimated payment for
carloads interchanged during the preceding month between the first (1st) and
fifteenth (15th) of the month. The parties understand and agree that the check
postmarked on the last day of each month to PNWR represents payment for carloads
interchanged during the preceding month between the sixteenth (16th) and last
day of the month, including any adjustments of payments made on the fifteenth
(15th) of the month. BN will not pay any bill tendered later than one year after
the last day of the period in which the allowance payment was incurred
PNWR will invoice BN twice monthly with the following information:
1. Car Initial and Number
2. Interchange Date
3. Whether car is delivered loaded to BN or received loaded from BN.
4. Amount Due for each carload
5. Commodity if available
17
<PAGE>
PNWR will send this invoice to BN at the following address and also note the
contact at PNWR should BN have any questions:
Customer Revenue Support
Burlington Northern Railroad
Attn: Manager Handling Carriers
P. O. Box 64955
St. Paul, MN 55164
H. Burlington Northern will consult with PNWR on marketing programs for rail
transportation services provided by PNWR over the Subject Line, but all
marketing programs are the ultimate responsibility and at the sole discretion of
BN except for local and specified interline traffic permitted by Section 10B.
I. With respect to traffic subject to this Rate and Allowance Agreement, BN and
PNWR understand and agree that all claims for loss and damage to the lading of
any cars, other than those moving local and specified interline traffic
permitted in Section 10B, which occurred when those cars were on the Subject
Line, will be handled exclusively by BN and PNWR will be liable to BN for any
loss and damage not attributable to the sole negligence of BN.
18
<PAGE>
Section 11. Administration
--------------
A. This section is applicable to traffic on the Subject Line handled in
interline service by BN.
B. BN will process all waybills for interline traffic with BN including freight
billing. Customers will pay freight bills to BN. PNWR will not be shown in the
route.
C. At Transfer BN will prepare an inventory of all cars located on the Subject
Line by car number, so that revenue for shipments en route at Transfer can be
identified and properly distributed. This inventory will consist of three
categories: A. all cars on the Subject Line identified as being loaded or empty;
B. all cars on the Subject Line identified by station; and C. all cars on the
Subject Line identified by consignee and consignor. This inventory will be made
available to PNWR for audit.
D. For purposes of this section, revenue attributable to PNWR will be determined
by the Rate and Allowance Section. However, BN will pay PNWR one-half of the
Base Per Car Allowance on all cars either loaded or empty on the Subject Line at
11:59 p.m. of Transfer.
E. Miscellaneous bills relating to items such as storage, detention, weighing,
etc. will be prepared by BN for service provided up to Transfer.
F. All BN demurrage records for the month in which Transfer of the Subject Line
to PNWR occurs will be transferred to PNWR as of 11:59 p.m. Transfer. All
demurrage charges for the month in which Transfer occurs will be assessed and
collected by PNWR. All demurrage revenue for cars released prior to 11:59 p.m.
Transfer will be remitted to BN by PNWR within thirty (30) days after the close
of the month.
19
<PAGE>
G. Revenue earned for switching service performed by BN up to Transfer for
another road or a shipper will be billed by BN and will constitute BN revenue.
Revenue earned for switching service performed by PNWR after Transfer will be
billed by PNWR and constitute PNWR revenue. Switching service performed either
by PNWR or BN will be at the expense of the party performing the switching
service without any attempt to associate the service with the line-haul move.
H. Charges for switching performed by another carrier up to Transfer will be
paid by BN. Charges for switching performed by another carrier after Transfer
will be paid by BN. No attempt will be made to allocate the switching charges to
the revenue movement.
I. Pursuant to Section 11C an inventory of both loaded and empty equipment on
the Subject Line at Transfer will be taken by BN. BN will paper interchange this
equipment to PNWR at 11:59 p.m., Transfer. Mileage payments will be calculated
on the basis of the actual interchange (i.e., location of the car at 11:59
p.m., Transfer) and not on the paper interchange. BN will be responsible for
car-hire payments up to and including 11:59 p.m. Transfer. PNWR will be
responsible for car hire payments after 11:59 p.m. Transfer.
J. All billing and collection on line-haul transportation service performed for
customers on the Subject Line and interchanged with BN will be made by BN. In
the event PNWR erroneously receives payment for BN billing, PNWR will pay the
amount of these payments to BN within thirty (30) days of receipt of the payment
from the customer.
K. Prior to Transfer BN will abolish all employee positions in connection with
its operation of the Subject Line effective 11:59 p.m., Transfer. Prior to
Transfer, BN will be exclusively responsible for all aspects of employment on
the Subject Line. After Transfer, BN will not be responsible for
20
<PAGE>
any wages, fringe benefits or other elements of compensation attributable to
operation on the Subject Line. If PNWR is requested by the Railroad Retirement
Board, or determines that its own employment procedures require, PNWR may
request, in writing, specific information on former BN employees employed by
PNWR after Transfer, and BN will, subject to applicable legal restrictions,
provide that information.
L. Freight loss and damage claims will be identified specifically as to pre- or
post-Transfer based on the date of the incident. BN will be responsible for
claims which are specifically identified as having taken place on or prior to
Transfer and PNWR will be responsible for claims subsequent to Transfer, subject
to provisions of Section 10I.
M. Foreign cars damaged on the Subject Line on or prior to Transfer will be the
responsibility of BN and those damaged subsequent to Transfer will be the
responsibility of PNWR.
N. All interline settlement of freight revenue for traffic originating or
terminating on the Subject Line will be performed in accordance with the
Association of American Railroads' Mandatory Railway Accounting Rules except for
local and specified interline traffic permitted by Sections 10B and 10E.
O. In the case of a dispute or disagreement as to the proper application of
specific sections of this Agreement, both BN and PNWR have the right to audit,
on reasonable written notice during normal business hours, the pertinent records
of the other party at the expense of the party requesting the audit.
21
<PAGE>
Section 12. Financial Statements
--------------------
PNWR will provide, within one hundred twenty (120) days after the close of each
Agreement Year, an unaudited income statement, balance sheet and statement of
changes in financial status as of the end of the Agreement Year prepared by an
independent certified public accountant in accordance with Generally Accepted
Accounting Principles. In addition to the financial statements, PNWR will also
include a record of all traffic handled by PNWR on the Subject Line which is
intended to provide documentation to assure compliance with the traffic terms
specified in Section 10. BN has the right to audit these accounts.
Section 13. Term
----
A. This Agreement will be effective upon execution by both parties. The Term of
the Agreement will expire three years from the earlier of the date of last
execution, subject to earlier termination as provided in Section 18. Three
months prior to the third anniversary, or subsequent third year anniversary,
either party may request termination of this Agreement. If termination does
occur BN will resume the service it provided on the Subject Line prior to this
Agreement after receiving regulatory approval from the Interstate Commerce
Commission (ICC) or other governmental agency having jurisdiction. The expense
in seeking ICC approval will be paid by BN. This Agreement will remain in effect
until the actual date BN resumes service.
B. If this Agreement is not terminated after three (3) years then it will be
automatically extended in a series of additional three (3) year intervals.
22
<PAGE>
Section 14. Liability and Insurance
-----------------------
A. During the Term, PNWR will indemnify, defend, protect and hold harmless BN,
its parent and subsidiaries, their officers, employees, agents, contractors,
successors, and assigns (1) from all suits, actions, or claims of any character
brought because of any injuries or damage received or sustained by any person,
or property, because of any act, omission, or misconduct of PNWR, its
representatives, officers, employees or agents, or (2) from any claims of PNWR's
agent's or contractor's employees or their successors arising or recovered under
any "Workers' Compensation Act," or any other law, ordinance, or (3) from liens,
fines, penalties, or claims for which PNWR might be or become liable, or to
which the PNWR's property or the Rail Facilities might be or become subject as a
result of some act or omission by PNWR, or (4) from all other liability of
whatever kind or nature arising out of PNWR's use or occupation of the Subject
Line except as may otberwise be specifically declared in this Agreement or any
Appendix to be the liability of BN or some other party.
B. PNWR shall, at its own expense, obtain and maintain in force during the term
of this Agreement the following insurance. Evidence of this insurance
(certificate of insurance or policy) must be provided prior to Transfer and BN
shall not be named insured under these policies with the exception of Section
14B(4).
(1) Commercial General Liability Insurance, including contractual liability and
products completed/operations, against claims arising out of bodily injury,
illness and death and from damage to or destruction of property of others,
including loss or use thereof, and including liability of BN, with minimum
limits for bodily injury and property damage of $5,000,000 for each occurrence.
This policy shall contain a "Waiver of Transfer Rights" endorsement to waive any
23
<PAGE>
right of recovery that the insurance company may have against BN because of
payments made for bodily injuries and properly damage.
(2) Business Automobile Policy Insurance, including owned, non-owned and hired
vehicles with minimum limits for bodily injury and property damage of $1,000,000
per occurrence, on all vehicles that PNWR or any of its agents or employees may
use at any time in connection with the performance of this Agreement.
(3) Worker's Compensation Insurance or coverage as required under the Worker's
Compensation Act of the applicable state, if appropriate. The policy should
include occupational disease to required statutory limits, employer's liability
of $1,000,000 to include FELA, if appropriate, and an "all states" endorsement.
This policy shall contain a "Waiver of Transfer Rights" endorsement to waive any
right of recovery that the insurance company may have against BN because of
payments made for bodily injures and property damage.
(4) In the event of construction on the leased premises or work or services
within fifty (50) feet of the leased railroad tracks, PNWR shall provide advance
written notice to BN and either PNWR or their contractor or subcontractors
performing the construction work or service shall, prior to such construction
work or services procure insurance as set forth in Section 14.B.(1) through (3)
and, in addition, a Railroad Protective Liability Insurance policy issued in the
name of BN with limits of $2,000,000 for bodily injury and property damage per
occurrence, with an aggregate of $6,000,000. The requirement for Railroad
Protective Liability Insurance shall not apply to day-to-day operation and
routine maintenance of track.
C. The parties will review the insurance requirements of this Section prior to
each Agreement Year.
24
<PAGE>
D. PNWR shall not create or permit any condition on the Subject Line and Rail
Facilities that could present a threat to human health or to the environment.
PNWR shall be responsible for and shall indemnify and hold harmless BN from any
suit or claim growing out of any damages alleged to have been caused, in whole
or in part, by an unhealthful, hazardous, or dangerous condition caused by
PNWR's presence on and use of the Subject Line and Rail Facilities or PNWR's
violation of any laws, ordinances, regulations, or requirements pertaining to
solid or other wastes, chemicals, oil and gas, toxic, corrosive, or hazardous
materials, air, water (surface or groundwater) or noise pollution, and the
storage, handling, use, or disposal of any such material. PNWR shall bear the
expense of all practices or work, preventive or remedial, which may be required
because of the condition or use of the Subject Line and Rail Facilities during
PNWR's occupancy, by PNWR or those claiming by, through or under PNWR, during
the Term. BN shall be responsible for, and shall indemnify and hold harmless
PNWR for any environmental conditions existing prior to Transfer. PNWR and BN
each expressly agree that the indemnification and hold harmless obligations it
hereby assumes shall survive cancellation of this Agreement. PNWR and BN each
agree that statutory limitation periods on actions to enforce these obligations
shall not be deemed to commence until the other party discovers any such health
or environmental impairment, and PNWR and BN each hereby knowingly and
voluntarily waives the benefits of any shorter limitation period.
E. BN may at its option prior to cancellation of this Agreement and before
Transfer from PNWR to BN, conduct an environmental audit of the Subject Line and
Rail Facilities, at BN's cost and expense, to determine if any environmental
damage to the Subject Line and Rail Facilities, has occurred during the Term.
PNWR shall pay all expenses for any remedial action that may be required as a
result of the audit to correct any environmental damage, and all necessary work
shall be performed by PNWR prior to termination or cancellation of this
Agreement.
25
<PAGE>
F. PNWR may at its option prior to Transfer, or thereafter, conduct an
environmental audit of the Subject Line and Rail Facilities, at PNWR's expense,
to determine if any environmental damage to the Subject Line or Rail Facilities
has occurred.
Section 15. Labor
-----
In addition to any other rights of termination provided by this Agreement,
either party will have the right to terminate this Agreement if unacceptable
labor protection is imposed on either party by the ICC as a result of obtaining
governmental approval or exemption from governmental approval for the lease of
the Subject Line and Rail Facilities by PNWR. Subject to the right of
termination set forth above, if any employee because of this agreement (1) has a
valid claim under employee protection arrangements under orders of the ICC or
(2) elects to make a claim against his/her employer pursuant to any other
employee protection arrangements, the employer will be solely responsible for
any costs of labor protection for its employee(s) and will not seek contribution
from the other party to this Agreement, except that PNWR will not be responsible
for any claim by an employee of PNWR previously employed by BN where the claim
is based upon employee protection imposed on or agreed to by BN.
Section 16. Governmental Approvals
----------------------
A. After execution of this Agreement, PNWR will be responsible at its sole
expense for promptly preparing and filing with any regulatory agency having
jurisdiction over this transaction all applications, petitions, requests,
notices or other filings and PNWR will take all action necessary to obtain the
approval, authorization or exemption from approval to permit this transaction at
the earliest practicable date. BN will cooperate at its expense with PNWR in
obtaining regulatory
26
<PAGE>
approval. Securing regulatory approval, authorization or exemption from approval
of this transaction is a condition precedent to Transfer.
B. Prior to Transfer the parties will have received approval, other
authorization or exemption necessary to permit this transaction to be carried
out; except that any terms or conditions placed upon such approval,
authorization or exemption that materially affect the rights and obligations
established by the Agreement must be acceptable to the party on whom they are
imposed. PNWR may not terminate this Agreement because of conditions imposed on
it because it is under common control with another rail carrier
Section 17. Conditions Precedent to Transfer of Possession
----------------------------------------------
A. The obligation of BN to transfer possession of the Rail Facilities and
Subject Line is subject to the following conditions:
(1) PNWR will have obtained a final order or exemption from the ICC under 49
C.F.R. 11343 authorizing it to lease and operate the Subject Line as required
under Section 16. However, the parties will operate under a trackage rights
agreement pending final ICC authorization for the Lease Agreement. This Lease
Agreement will serve as the trackage rights agreement until receipt of the final
order or exemption as provided in this paragraph. The final order must not
impose unacceptable labor protection on either party except as permitted under
Section 15.
(2) PNWR has obtained and placed into effect the insurance policy or policies
described in Section 14; and
27
<PAGE>
B. Upon satisfaction of all of conditions set forth in this Section, PNWR will
take possession of theS Rail Facilities and commence operation of the Subject
Line pursuant to Sections 11 and 13.
Section 18. Default
-------
A. Should PNWR substantially fail to perform its obligations under this
Agreement and continue such failure for sixty (60) days, BN may issue written
notice to PNWR of its intent to terminate this Agreement. If PNWR continues the
failure to perform for thirty (30) days after receiving notice of intent and has
not elected to submit the matter to binding mediation, an Event of Default will
have occurred. Upon default BN will have the right to terminate this Agreement
by issuing PNWR a written notice of termination. The exercise of such right will
be in addition to and not a waiver of any other rights of the terminating party.
B. A substantial failure to perform on the part of PNWR will include failure to
provide five (5) day per week rail service on the Subject Line if requested by
either customers or BN, failure to make payments under Section 10, PNWR being
bankrupt or insolvent, appointment of a receiver for any part of the property of
PNWR, making a general assignment by PNWR without the consent of BN as
required under Sections 2E and 7A, the filng of a petition under bankruptcy laws
or any law relating to the relief of debtors, the failure of PNWR to submit an
annual plan of maintenance that PNWR reasonably believes will sustain the
Standard of Maintenance for the Rail Facilities required under Section 9, and
the failure of PNWR to maintain the Rail Facilities to the required Standard of
Maintenance contemplated by Section 9, the unreasonable withholding of consent
a material matter requested in accordance with this Agreement.
C. If this Agreement is terminated for any reason, PNWR will expeditiously file
an application to discontinue and abandon its operation over the Rail Facilities
and Subject Line with the ICC under
28
<PAGE>
49 U.S.C. ss.10903 if requested by Burlington Northern. BN agrees to support
the application. In the event of a termination of this Agreement, BN may
transfer the right to acquire and operate the Rail Facilities and Subject Line
to another party. PNWR will cooperate as necessary in the application of that
party for authority or exemption from authority from the ICC to permit the
substitution of another party to perform Rail Freight Service. If PNWR fails to
take the action outlined in this Section within the thirty (30) days specified
in Section 20A, BN, may at its option, cease, without advance notice, making the
monthly Base Per Car Allowance payment to PNWR.
D. On termination, BN and PNWR will settle all accounts as of the date of
transfer of possession to BN or BN's designate. The transfer will take place
immediately after PNWR has obtained authority, or exemption from authority for
PNWR to discontinue service on the Subject Line. The transfer will be generally
consistent with the terms of Section 11. PNWR will have thirty (30) days to
remove its property from the Subject Line.
Section 19. Catastrophic Event
------------------
A. This provision governs the rights and obligations of the parties under
circumstances in which PNWR's performance of Rail Freight Service is prevented
by an event beyond its control and is not the fault or negligence of PNWR or any
of its employees, including, but not limited to, acts of God, explosions, fires,
vandalism, flood or any other severe weather disturbance. If an event occurs
that substantially impairs PNWR's ability to provide Rail Freight Service, PNWR
will use reasonable diligence to perform its obligations. If PNWR fails to
perform any obligation due to a catastrophic event, the failure will not be an
Event of Default under Section 18 so long as the failure is caused by that event
and PNWR exercises reasonable diligence to perform. In the event of loss or
damage to Rail Facilities covered by property insurance, PNWR agrees to make the
29
<PAGE>
necessary claims for insurance proceeds and use those proceeds to repair the
damaged Rail Facilities or defray expenses incurred as a result of making those
repairs.
B. In the event of loss or damage to the Rail Facilities not covered by or in
excess of insurance coverage, PNWR may (i) seek additional funds from BN or
others, or (ii) terminate this Agreement and remit all insurance claims to BN.
Section 20. Arbitration
-----------
A. Any controversy or claim (whether such claim sounds in contract, tort or
otherwise) arising out of or relating to this Agreement, or the breach thereof,
or the commercial or economic relationship of the parties hereto, shall be
settled by binding arbitration in accordance with the Commercial Arbitration
Rules and the Guidelines for Expediting Larger Complex Commercial Arbitrations
of the American Arbitration Association. Judgment of the award by the
arbitrator(s) may be entered in any court having jurisdiction. The arbitration
shall be governed by the U.S. Arbitration Act, 9 U.S.C. Sections 1--16, to the
exclusion of any provisions of state law inconsistent therewith or which would
produce a different result. The arbitration shall also be governed by the
Federal Rules of Civil Procedure 26 - 307 and Federal Rules of Evidence 101 -
103.
B. The arbitration shall be heard by three disinterested individuals unless the
parties can agree on a single arbitrator. The party desiring arbitration shall
name its appointed arbitrator in its notice of arbitration and the noticed party
shall appoint its arbitrator within twenty (20) days of receipt of the notice of
arbitration. The two appointed arbitrators shall meet within twenty (20) days
thereafter and appoint a neutral third arbitrator. Each party shall bear the
cost and expense of its appointed arbitrator and shall share equally the cost
and expense of the third arbitrator and any other costs and expenses necessary
for the arbitration.
30
<PAGE>
Section 21. Notices
-------
All notices will be in writing and are deemed given if delivered in person or by
certified mail to the person(s) specified to receive the notice. The date of the
notice will be the date of delivery.
For BN:
Director Line Rationalization
2600 Lou Menk Drive
P.O. Box 961034
Fort Worth, TX 76161-0034
For PNWR:
General Manager
Portland & Western Railroad, Inc.
110 West 10th Avenue
Albany, OR 97321
31
<PAGE>
Section 22. Governing Law
-------------
This Agreement will be construed and enforced in accordance with the laws of
Oregon.
Section 23. Amendment
---------
No amendment to this Agreement is effective unless it is in writing and executed
by officers or agents of each party.
Section 24. Assignment
----------
This Agreement is binding on and for the benefit of the successors and assigns
of each party. Assignment by PNWR requires the prior written consent of BN and
any purported assignment by PNWR without the prior written consent of BN is void
and is an Event of Default under Section 18.
32
<PAGE>
Section 25. Interpretation
--------------
A. In the event any position of this Agreement is determined or adjudged
invalid, illegal, or otherwise unenforceable, that determination will not affect
the other positions of this Agreement, and it will remain in full force and
effect as if the portion determined or adjudged invalid, illegal, or otherwise
unenforceable was not originally a part of the Agreement unless the invalidity
of that portion has the effect of substantially impairing the benefits of this
transaction or frustrating the intent of this Agreement.
B. The headings and titles to provisions contained in this Agreement are for
convenience only, and do not modify or affect the rights and duties of the
Parties.
C. This Agreement and its appendices represent the entire agreement between the
parties concerning this transaction and all previous communications,
understandings, or agreements between the parties are abrogated and withdrawn
except as provided in this Agreement.
BN PNWR
BURLINGTON NORTHERN RAILROAD PORTLAND & WESTERN RAILROAD
By: /s/ William E. Glavin By: /s/ Anthony W. Mogytycht
-------------------------- ------------------------
Title: General Manager Title: President
Date: September 21, 1995 Date: September 20, 1995
33
<PAGE>
STATE OF TEXAS )
) SS:
COUNTY OF TARRANT )
Personally appeared before me the undersigned witness and made oath that she saw
William E. Glavin of BURLINGTON NORTHERN RAILROAD COMPANY, a Delaware
corporation, sign, seal and, as the act and deed of that corporation, deliver
the foregoing written instrument and that he with the other witness subscribed
above witnessed the execution.
Sworn to before me this 21st
day of Sept., 1995
/s/ [ILLEGIBLE]
Witness
/s/ A. Lisa Templeton A. Lisa Templeton
- ------------------------
Notary Public for Terrant Co., TX [seal] Notary Public
My Commission expires 9-18-97 State of Texas
Comm. Exp. 09-18-97
STATE OF OREGON )
) SS:
COUNTY OF LINN )
Personally appeared before me the undersigned witness and made oath that he/she
saw Anthony W. Magytych of PORTLAND & WESTERN RAILROAD, INC, a Delaware
corporation sign, seal and, as the act and deed of that corporation, deliver the
foregoing written instrument and that he with the other witness subscribed above
witnessed the execution.
Sworn to before me this 20th
day of September, 1995
[SEAL] OFFICIAL SEAL
MARY ALICE BARRON /s/ Mary Alice Barron
NOTARY PUBLIC -- OREGON ------------------------
COMMISSION NO. 027213 Witness
MY COMMISION EXPIRES AUGUST 22, 1997
34
<PAGE>
APPENDIX A
DESCRIPTION OF RAIL FACILITIES AND SUBJECT LINE
-----------------------------------------------
A. BN will provide a copy of the condensed profile as its description of the
Rail Facilities and Subject Line to be leased to PNWR pursuant to Section 2.
Where necessary, right of way maps will also be provided to describe the
property.
B. The Subject Line includes the following segments in the State of Oregon: (1)
Approximately 1.96 miles of BN owned line between Burlington Northern Milepost
(BN MP) 16.87 near Bowers Junction and BN MP 18.83 near Bendemeer; approximately
10.77 miles of BN owned line between BN MP 17.07 at Bowers Junction and BN MP
27.84 near Banks. PNWR access to this line is via trackage rights over the Port
of Tillamook Bay Railroad between Hillsboro located at old Southern Pacific
Milepost (SP MP) 765.5 and SP MP 774.7 near Banks.
(2) Approximately 5.60 miles of BN owned line between BN MP 4.68 near Hillsboro
and BN MP 10.28 near Forest Grove. PNWR access to this line is via its lease
from Southern Pacific between SP MP 756.9 near St. Marys and SP MP 765.5 near
Hillsboro.
(3) Approximately 1.19 miles of BN owned line between BN MP 25.52 near St. Marys
Junction and BN MP 26.71 near St. Marys. PNWR access to this line is via its
lease from Southern Pacific between BN MP 26.71 near St. Marys (SP MP 756.9) and
BN MP 31.28 near Greton (SP MP 751.9).
(4) Approximately 33.42 miles of BN owned track between BN MP 31.28 near Greton
and BN MP 64.70 near Hopmere.
35
<PAGE>
C. PNWR access to this entire network will be via trackage rights over Southern
Pacific between Brooklyn Yard near Portland and Greton on the Southern Pacific
line via Lake Oswego, OR.
D. Burlington Northern will pay all trackage rights fees charged by Southern
Pacific or Port of Tillamook Bay Railroad operated on by PNWR under terms of
this Agreement.
APPENDIX B
NON-ESSENTIAL PROPERTIES
A list of Non-Essential Properties, if any, will be maintained and incorporated
into this Appendix pursuant to Section 4.
At Transfer there were no Non-Essential Properties.
36
<PAGE>
APPENDIX C
INTERCHANGE AGREEMENT
---------------------
APPENDIX D
POWER OF ATTORNEY FOR BN TO MAKE FREIGHT RATES
----------------------------------------------
37
<PAGE>
Page 1 of 9
APPENDIX C
INTERMEDIATE INTERCHANGE AGREEMENT
THIS AGREEMENT, made and entered into as of 21st day of Sept, 1995 by and
between Southern PACIFIC TRANSPORTATION COMPANY, a Delaware corporation,
hereinafter "SP," BURLINGTON NORTHEN RAILROAD COMPANY, a Delaware corporation,
hererinafter "BN," and PORTLAND & WESTERN RAILROAD, INC., a Delaware
corporation, hereinafter "PNWR"; BN and PNWR being sometimes referred to
collectively as "Users",
RECITALS:
- --------
WHEREAS, SP and BN are parties to an interchange agreement dated
September 24, 1982, at Portland, Oregon, wherein each party delivers
to and pulls interchange rail cars from the other party for six (6) month
periods; and
WHEREAS, SP and PNWR are parties to an interchange agreement dated
August 19, 1995, at SP's Brooklyn Yard, Portland, Oregon, wherein PNWR
delivers rail cars to SP and pulls rail cars from SP at Brooklyn Yard; and
WHEREAS, BN and PNWR desire to establish an arrangement whereby BN and
PNWR shall use SP's Brooklyn Yard as an intermediate interchange location
for the interchange of rail cars with each other; and
WHEREAS, SP is willing to provide such intermediate interchange trackage
at its Brooklyn Yard to BN and PNWR under the terms and conditions
hereinafter set forth.
NOW, THEREFORE, it is mutually agreed as follows:
Section 1.
a. Unless it shall be othewise agreed between the authorized
representatives of SP, BN, and PNWR to designate other trackage, the parties
agree to effect the intermediate interchange of Equipment of BN and PNWR (as
defined in Section 2(a) of this Agreement) at Brooklyn Yard, in the vicinity of
SP's Milepost 766.9, Portland, Oregon, on trackage owned by SP, hereinafter
termed "Interchange Trackage" as shown on Exhibit "A", dated ______________,
1995, attached hereto and made a part hereof BN and PNWR are permitted the right
to use, on a non-exclusive basis, all trackage
<PAGE>
Page 2 of 9
owned and controlled by SP as necessary to effect such intermediate interchange;
provided, however, BN's and PNWR's use of the Interchange Trackage shall be
exclusively under the direction and control of the authorized representative of
SP who shall specify the exact location within the Interchange Trackage where
such intermediate in interchange shall occur.
b. Unless otherwise provided by separate written agreement or agreements
Users shall not use any track or tracks, or parts thereof of SP that Users are
not entitled to use by virtue of this Agreement.
Section 2.
a. The parties agree, during the term hereof, to use the Interchange
Trackage in or incident to the delivery of rail cars, locomotives, cabooses or
other equipment (hereinafter collectively called "Equipment") to be interchanged
between the Users. No Equipment of Users shall be so placed on the Interchange
Trackage in such manner as to unreasonably interfere in any way with the
operation of other Equipment on tracks adjacent to and or connecting with the
Interchange Trackage.
b. Unless it shall be otherwise agreed between the authorized
representatives of the parties hereto, if Equipment of BN or PNWR shall become
derailed, wrecked, bad ordered, shifted, stalled, or otherwise disabled while
upon the Interchange Trackage, it shall be rerailed, repaired or cleared by SP.
The reasonable costs and expenses of such rerailing, repairing or clearing,
including any Loss and/or Damage, as defined in Section 8 of this Agreement,
shall be at sole cost and expense of BN or PNWR, unless otherwise provided for
in the allocation of liability in Seceion 8 of this Agreement
Section 3. Services provided by SP shall include, but shall not be limited
to, performing any mechanical inspection and repair required by the American
Association of Railroads ("AAR") Interchange Rules ("Interchange Rules") and
shall be at the sole cost and expense of BN and/or PNWR. Billing for any repairs
performed by SP to the Equipment of Users, shall be in accordance with the Field
and Office Manuals of the Interchange Rules in effect at the date of performance
of the repairs. SP shall then prepare and submit billing directly to and collect
from the car owner for car-owner responsibility items as determined under said
Interchange Rules. SP shall also submit billing to and collect from BN or PNWR
any charges for repair to Equipment that is car-owner responsibility items, as
determined under said Interchange Rules, should said car owner refuse or
otherwise fail to make payment therefor
Section 4. Equipment of Users relative to this Agreement shall not be taken
into the car hire or mileage accounts of SP.
Section 5.
a. Users shall, with their own employees and at their sole cost and
expense, operate their Equipment incident to handling of interchange Equipment
over the Interchange Trackage, subject, however, to such reasonable rules,
regulations, and orders as SP may issue. All such rules,
<PAGE>
Page 3 of 9
regulations and orders shall be reasonable and fair and shall not discriminate
against any party hereto in the use thereof. No employee of Users shall engage
in or be connected with the operation of Equipment hereunder until he or she
shall have been examined successfully on SP's Operating Rules and Regulations
applicable to said Interchange Trackage which shall be furnished from time to
time by SP to Users.
b. If any employee of BN or PNWR shall neglect, refuse, or fail to abide by
SP's rules, instructions, and restrictions governing the operation on or along
the Interchange Trackage, such employee shall, upon written request of SP, be
prohibited by BN or PNWR from operating on the Interchange Trackage. If SP shall
deem it necessary to hold a formal investigation to establish such neglect,
refusal, or failure on the part of any such employee, then upon such notice
presented in writing, SP and BN or PNWR shall promptly hold a joint
investigation in which all parties concerned shall participate and each party
shall bear the expense for its officers, counsel, witnesses, and employees.
Notice of such investigations to employees of BN or PNWR shall be given by BN's
or PNWR's officers, and such investigation shall be conducted in accordance with
the terms and conditions of labor agreements, if applicable, between BN or PNWR
and its employees. If, in the judgment of SP, the result of such investigation
warrants, such employee shall, upon written request of SP, be withdrawn by BN or
PNWR from service on the Interchange Trackage, and BN or PNWR shall release and
indemnify SP from and against any and all claims and expenses because of such
withdrawal.
If the disciplinary action is appealed by such employee of BN or PNWR tO
the National Railroad Adjustment Board or other tribunal lawfully created to
adjudicate such cases, and if the decision of such board or tribunal sustains
the employee's position, such employee shall not thereafter be barred from
service on the Interchange Trackage by reason of such occurrence.
Section 6. Interchange of Equipment between the BN and PNWR shall be in
accordance with the Field and Office Manuals of the AAR Interchange Rules and
Code of Car Service Rules adopted by the Association of American Railroads
("Interchange Rules"). Equipment shall be considered interchanged between the BN
and PNWR when the Equipment is placed on the designated Interchange Trackage at
Brooklyn Yard by or for the account of one User and the locomotive or
locomotives of such delivering party have been uncoupled from such Equipment and
the delivering User has provided movement instructions to the receiving User.
Notwithstanding the foregoing, if PNWR is not a subscriber to the Interchange
Rules the following shall apply:
a. If Equipment has been interchanged to PNWR and it is lost or damaged,
responsibility for such loss or damage shall be the responsibility of PNWR and
not SP or BN; and
b. All Equipment repairs performed by PNWR, its employees, officers, agents
or outside contractors shall be done in compliance with Federal Railroad
Administration Railroad Freight Car Safety Standards, Safety Appliance and Power
Brake Laws and the Interchange Rules.
Section 7. BN and PNWR undertake and agree, in respect to the use hereunder
of the Interchange Trackage and the operation of Equipment thereon and
thereover, to comply with all
<PAGE>
Page 4 of 9
applicable Federal and State laws or regulations, and all applicable rules,
regulations, and orders promulgated by any Municipality, Board or Commission
with respect thereto for the protection of employees or other persons or
parties, and if any failure on its part to comply therewith shall result in any
fine, penalty, cost or charge being assessed, imposed or charged against SP, BN
or PNWR shall promptly reimburse and indemnify SP for or on account of such
fine, penalty, cost or charge; and further agrees in the event of any such
action, upon notice thereof being given by SP, to defend such action free of
cost, charge or expense to SP.
Section 8. It is the express intention of the parties that the indemnity
provided for in this Agreement shall be as follows:
a. "Loss and/or Damage" shall mean all damage to any property and injury to
or death of any person and all liability therefor, and shall embrace all
payments made on account thereof, including, without limitation, expense of
rerailing the Equipment and clearing wrecks, amounts paid or payable for
environmental cleanup, fines or penalties, amounts paid or payable under all
applicable laws and shall also embrace all cost and expense incident to any such
injury, death, loss or damage arising in connection with operations under this
Agreement. Loss and/or Damage shall also include attorneys' fees and costs in
defending against all such claims or alleged claims.
b. i. It is understood and agreed that SP shall maintain the Interchange
Trackage in a state of reasonable repair which is reasonably suited for the
combined requirements of the parties hereof; provided, however, Users, in
operating their Equipment over and upon the Interchange Trackage, shall
accept such trackage as they shall find it and shall not, by reason of any
failure, deficiency or defect therein or failure or neglect in the
maintenance, have or make against SP any claim or demand for any loss,
damage, injury or death whatsoever arising from or incident to such
deficiency, defect, failure or neglect.
ii. It is understood and agreed that a number of vehicular and
pedestrian crossings ("Crossings) of the Interchange Trackage to be used
for operations hereunder presently exist or may in the future be
constructed. Users agree to accept all Crossings in whatever condition
they may be during the term of this Agreement and will not assert any
claim, demand, or cause of action against SP and each User shall hold SP
harmless from any claim, demand, or cause of action arising out of any
Crossing accident on the Interchange Trackage in which the Equipment of
such User only is involved.
c. Subject to the provisions of Section 8b of this Agreement, liability for
Loss and/or Damage shall be fixed between the parties as follows:
i. When caused by the acts, omissions or negligence of the employees
of only one party or the defective property of only one party (other than
Interchange Trackage), whether or not in conjunction with the acts,
omissions, negligence or defective property of a third party, such Loss
and/or Damage shall be borne solely by such party.
<PAGE>
Page 5 of 9
ii. When caused by the acts, omissions or negligence of the employees
of one party or defective property (other than Interchange Trackage) of one
party in combination with the acts, omissions or negligence of the
employees of the other party or the defective property (other than
Interchange Trackage) of the other party, then, whether or not in
conjunction with the acts, omissions or negligence or defective property of
a third party, such Loss and/or Damage shall be borne solely by each such
party as to its own employees, contractors, agents, invitees, Interchange
Trackage and property other than real property owned by it, and property in
its possession, care, custody or control, and equally as to Loss and/or
Damage to real property underlying or surrounding the interchange Trackage,
third parties and their property.
iii. When caused by the acts, omissions or negligence of third
parties, without negligence or concurring fault on the part of the parties,
unknown causes, acts of God or any other cause, such Loss and/or Damage
shall be borne solely by each party as to its own employees, contractors,
agents, invitees, Interchange Trackage and property, including real
property owned by it, and property in its possession, care, custody or
control, and equally as to Loss and/or Damage suffered by third parties and
their property.
The foregoing notwithstanding, no party to this Agreement shall have any
claim against another party to this Agreement for its acts, omissions or
negligence giving rise to Loss and/or Damage caused by or resulting from
interruption of or delay to such other party's business or for special, indirect
or consequential damages, for loss of profit, savings, or revenue of any kind
whether or not another party has been advised of the possibility of such
damages.
Each party hereto covenants and agrees that it shall forever investigate,
release, defend, indemnify and save harmless the other parties, their successors
and assigns, from and against any and all liability or claims for damages, costs
and expenses herein assumed by it, during the time that this Agreement is in
effect; provided, however, that the party liable, in whole or in part, as to any
claim or suit filed against the other party, shall be given prompt written
notice thereof and an opportunity to join in or take over, as may be
appropriate, the defense and settlement of such claim or suit
Each party hereto may make settlement of any claim for Loss and/or Damage
for which it and another party hereto may be jointly liable hereunder, but no
payment in excess of Twenty-Five Thousand Dollars ($25,000) shall be voluntarily
made by any party in settlement of any such claim without first having obtained
in writing consent of the other parties, which consent shall not be unreasonably
withheld, delayed or communicated, and giving of such consent shall not be
deemed an admission that such claim involves joint liability. The party against
which a claim in excess of Twenty-Five Thousand Dollars ($25,000) is made for
which the another party hereto may be jointly liable hereunder shall give
written notice thereof to such other party(ies) and such party(ies) may join in
the defense.
All releases taken pursuant to the settlement of claims or suits involving
joint liability shall include all parties hereto involved' and copies thereof
shall be furnished each of them.
<PAGE>
Page 6 of 9
For the purpose of this Section 8, reference to SP or any term which
includes SP, shall include SP and any invitee, permittee or other party using
the Interchange Trackage pursuant to a written agreement with SP other than the
parties hereto.
Section 9. Any party hereto shall be relieved from its performance of this
Agreement without penalty if at any time due to reason of any cause or causes
beyond that party's control, including, but not limited to, flood, earthquake,
hurricane, tornado or other severe heat or climatic conditions, acts of God,
acts of a public enemy, war, blockade, insurrection, vandalism, sabotage,
strike, lockout, or other labor disturbance, or governmental law, order, or
regulation, or other similar events, that party is unable to provide the other
party(ies) of any or all of the services provided for in this Agreement.
Section 10. PNWR shall, at its sole cost and expense, procure the following
kinds of insurance for the the term of this Agreement and promptly pay when due
all premiums for that insurance. Upon the failure of PNWR to maintain insurance
as provided herein. SP shall have the right, after giving PNWR ten (10) days
written notice, to obtain insurance and PNWR shall promptly reimburse PNWR for
that expense or, notwithstanding anything to the contrary in this Section 8, to
cancel this Agreement. The following minimum insurance coverage shall be kept in
force during the term of this Agreement:
Comprehensive General Liability insurance providing bodily injury,
including death, personal injury and property damage coverage with a combined
single limit of at least Twenty-Five Million Dollars ($25,000,000) for each
incident and a general aggregate limit of at least Twenty-Five Million Dollars
($25,000,000). This insurance shall contain Broad Form Liability covering the
indemnity provisions contained in this Agreement, including, without limitation,
contractual liability, severability of interests and name SP and BN as
additional insured with respect to liabilities arising out of PNWR's obligation
to SP and BN in this Agreement. If coverage is purchased on a "claims made"
basis it shall provide for at least a three (3) year extended reporting or
discovery period, which shall be invoked should insurance covering the time
period of this Agreement be canceled unless replaced with a policy containing
the same time period as the policy being replaced. Should the aggregate limit
be eroded by forty (40) percent or more, PNWR shall immediately restore the
aggregate limit to Twenty-Five Million Dollars ($25,000,000).
PNWR warrants that this Agreement has been reviewed with its insurance
agent(s)/broker(s) and the agent(s)/broker(s) has been instructed to procure the
insurance coverage required herein and name SP and BN additional insured with
respect to liabilities arising out of PNWR's obligation to SP and BN.
PNWR shall furnish to SP the certificate(s) of insurance evidencing the
required coverage and endorsement(s), and upon request of SP or BN, PNWR shall
provide certified duplicate of any of those policies. The insurance company(ies)
issuing such policy(ies) shall notify SP and BN in writing of any material
alteration including any change in the retroactive date in any "claims made"
policies or substantial reduction of aggregation limits, if such limits apply,
or cancellation thereof at least thirty (30) days prior thereto.
<PAGE>
Page 7 of 9
The insurance coverage policy(ies) shall be written by a reputable
insurance company or companies reasonably acceptable to SP or with current
Best's Insurance Guide Rating of B and Class VII or better. Such insurance
company shall be authorized to transact business in the State of Oregon. If
requested, PNWR must furnish a certified copy of all insurance policy(ies) and
endorsement(s) to SP and BN within seven (7) days of such request.
Insurance coverage provided in the amounts set forth herein shall not be
construed to otherwise relieve PNWR from liability hereunder in excess of such
coverage, nor shall it preclude PNWR, SP or BN from taking such other action as
is available to it under any other provision of this Agreement or otherwise in
law or equity.
The insurance coverage limits required under this Section 8 shall be
adjusted every five (5) years during the term or any extended term hereof based
on any increases or decreases in the Consumer Price Index, or any successor
index if insurance at such adjusted level is available from any reputable
carrier. If the adjusted amount is not available, PNWR shall obtain the highest
amount of coverage available.
Section 11. In the event any party breaches any part of this Agreement, the
other parties shall be entitled to all their lawful remedies under this
Agreement or at law or equity.
Section 12. This Agreement supersedes all prior negotiations or agreements
between the parties, whether written or oral, relating to the subject matter
hereof, and is intended to be the entire and complete statement of the terms of
this Agreement between the parties and, except for the designation of track
provided in Section I of this Agreement, may be amended or modified only by a
written instrument executed by the Parties.
Section 13. This Agreement shall take effect as of the date first hereon
written and shall remain in effect thereafter until terminated by either party
upon giving not less than thirty (30) days' written notice to the other parties
to that effect. Termination of this Agreement for any reason shall not affect
any liability or obligations of the parties which accrued hereunder prior to
such termination.
Section 14. This Agreement is exclusively for the benefit of the parties
hereto and not for the benefit of any third party. This Agreement shall inure to
the benefit of and shall be binding upon parties, their successors and assigns.
Any party hereto may waive any default at any time without affecting or
impairing any right arising from any other default.
Section 15. All notices, demands, requests, or other communications which
may be or are required to be given, served or sent by either party to the other
pursuant to this Agreement shall be in writing and shall be deemed to have been
properly given or sent
a. If intended for SP, send registered or certified mail, return receipt
requested, with postage prepaid, and address to SP as follows:
<PAGE>
Page 8 of 9
Executive Vice President - Operations
Southern Pacific Transportation Company
1860 Lincoln Street, Suite 1400
Denver, CO 80295
With a copy to:
Managing Director Contracts and Joint Facilities
Southern Pacific Transportation Company
1860 Lincoln Street, Suite 1200-911
Denver CO 80295
b. If intended for BN. send registered or certified mail, return receipt
requested, with postage prepaid, ant address to BN as follows:
Vice President ~ Network Design
Burlington Northern Railroad Company
2600 Lou Menk Drive
Fort Worth, TX 76161-0034
With a copy to:
Director Contracts and Joint Facilities
Burlington Northern Railroad Company
2600 Lou Menk Drive
Fort Worth TX 76161-0034
c. If intended for PNWR, send registered or certified mail return receipt
requested with postage prepaid, and address to PNWR as follows;
General Manager
Portland & Western Railroad, Inc.
110 W. 10th Avenue
Albany, OR 97321
or such other address as may be designated by either Party.
<PAGE>
Page 9 of 9
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be duly executed in triplicate as of the date first above written.
SOUTHERN PACIFIC TRANSPORTATION COMPANY
By /s/ [ILLEGIBLE]
------------------------------------
Managing Director
Contracts and Joint Facilities
------------------------------------
(Title)
BURLINGTON NORTHERN RAILROAD COMPANY
By /s/ William E. Glavin
------------------------------------
General Manager
------------------------------------
(Title)
PORTLAND & WESTERN RAILROAD, INC.
By /s/ Anthony W. Mogytycht
------------------------------------
President
------------------------------------
(Title)
