SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 23, 1997
CSX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of
incorporation or organization)
2-63273 62-1051971
(Commission (I.R.S. Employer
File No.) Identification No.)
One James Center, 901 East Cary Street, Richmond, VA 23219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(804) 782-1400
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ITEM 5. OTHER EVENTS
On May 23, 1997, the joint tender offer (the "Joint Tender Offer") of CSX
Corporation (the "Company") and Norfolk Southern Corporation ("NSC") expired.
The Joint Tender Offer was made pursuant to an agreement between the Company and
NSC dated as of April 8, 1997 (the "CSX/NSC Agreement"). It was effected through
Green Acquisition Corp. ("Green", a subsidiary jointly owned by the Company and
NSC) for the outstanding shares of Conrail Inc. ("Conrail") not already owned by
Green, the Company and NSC. Most of such outstanding shares were acquired in the
Joint Tender Offer. The Company's joint press release with NSC announcing the
expiration of the Joint Tender Offer is included as Exhibit 99.1 hereto and is
incorporated herein by reference.
On June 2, 1997, a subsidiary company wholly-owned by Green merged with and
into Conrail. In the merger, all Conrail shares not already owned by Green, the
Company and NSC were converted into the right to receive $115 cash per share and
the remaining Conrail shares were cancelled. The Company's joint press release
with NSC announcing the completion of the merger is included as Exhibit 99.2
hereto and is incorporated herein by reference.
The Company entered into a $2,500,000,000 Amended and Restated Credit
Agreement, dated as of May 20, 1997, among the Company, the lenders parties
thereto, Bank of America National Trust and Savings Association and Nationsbank,
N.A., as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent,
and The Chase Manhattan Bank, as Administrative Agent. The Amended and Restated
Credit Agreement is included as Exhibit 10.1 hereto and is incorporated herein
by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are filed as a part of this report.
10.1 Amended and Restated Credit Agreement, dated as of
May 20, 1997, among the Company, the lenders parties
thereto, Bank of America National Trust and Savings
Association and Nationsbank, N.A., as Co-Syndication
Agents, The Bank of Nova Scotia, as Documentation
Agent, and The Chase Manhattan Bank, as
Administrative Agent.
15.1 Awareness letter of Price Waterhouse LLP, Independent
Accountants.
23.1 Consent of Price Waterhouse LLP, Independent
Accountants.
99.1 Joint press release issued by the Company and NSC on
May 27, 1997.
99.2 Joint press release issued by the Company and NSC on
June 3, 1997.
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99.3 The audited Consolidated Statements of Income,
Consolidated Statements of Stockholders' Equity and
Consolidated Statements of Cash Flows of Conrail for
each of the years in the three-year period ended
December 31, 1996, and the Consolidated Balance
Sheets of Conrail at December 31, 1996 and December
31, 1995.
99.4 The unaudited Condensed Consolidated Statements of
Income and Condensed Consolidated Statements of Cash
Flows of Conrail for each of the quarters ended March
31, 1997 and 1996, and the Condensed Consolidated
Balance Sheets of Conrail at March 31, 1997 and
December 31, 1996.
99.5 Pro forma condensed consolidated financial statements
of the Company as of and for the fiscal quarter ended
March 28, 1997 and the fiscal year ended December 27,
1996, adjusted to reflect its acquisition of an
interest in Conrail.
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Signature
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
CSX CORPORATION
By: /s/ MARK G. ARON
Mark G. Aron
Executive Vice President -
Law and Public Affairs
Date: June 4, 1997
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EXHIBIT LIST
Exhibit Description
10.1 Amended and Restated Credit Agreement, dated as of May 20, 1997,
among the Company, the lenders parties thereto, Bank of America
National Trust and Savings Association and Nationsbank, N.A., as
Co-Syndication Agents, The Bank of Nova Scotia, as Documentation
Agent, and The Chase Manhattan Bank, as Administrative Agent.
15.1 Awareness letter of Price Waterhouse LLP, Independent Accountants.
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
99.1 Joint press release issued by the Company and NSC on May 27, 1997.
99.2 Joint press release issued by the Company and NSC on June 3, 1997.
99.3 The audited Consolidated Statements of Income, Consolidated
Statements of Stockholders' Equity and Consolidated Statements of
Cash Flows of Conrail for each of the years in the three-year period
ended December 31, 1996, and the Consolidated Balance Sheets of
Conrail at December 31, 1996 and December 31, 1995.
99.4 The unaudited Condensed Consolidated Statements of Income and
Condensed Consolidated Statements of Cash Flows of Conrail for each
of the quarters ended March 31, 1997 and 1996, and the Condensed
Consolidated Balance Sheets of Conrail at March 31, 1997 and
December 31, 1996.
99.5 Pro forma condensed consolidated financial statements of the Company
as of and for the fiscal quarter ended March 28, 1997 and the fiscal
year ended December 27, 1996, adjusted to reflect its acquisition of
an interest in Conrail.
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Exhibit 10.1
CSX CORPORATION
$2,500,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
May 20, 1997
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
NATIONSBANK, N.A.
as Co-Syndication Agents
THE BANK OF NOVA SCOTIA
as Documentation Agent
THE CHASE MANHATTAN BANK
as Administrative Agent
TABLE OF CONTENTS
Page
ARTICLE I
Definitions 2
SECTION 1.01. Defined Terms 2
SECTION 1.02. Classification of Loans and Borrowings 19
SECTION 1.03. Terms Generally 19
SECTION 1.04. Accounting Terms; GAAP 20
ARTICLE II
The Credits 20
SECTION 2.01. Commitments 20
SECTION 2.02. Loans and Borrowings 20
SECTION 2.03. Requests for Revolving Borrowings 21
SECTION 2.04. Competitive Bid Procedure 22
SECTION 2.05. Letters of Credit 24
SECTION 2.06. Funding of Borrowings 28
SECTION 2.07. Interest Elections 29
SECTION 2.08. Expiration, Termination and Reduction of
Commitments 30
SECTION 2.09. Repayment of Loans; Evidence of Debt 31
SECTION 2.10. Optional and Mandatory Prepayment of
Loans 31
SECTION 2.11. Fees 32
SECTION 2.12. Interest 34
SECTION 2.13. Alternate Rate of Interest 34
SECTION 2.14. Increased Costs 35
SECTION 2.15. Break Funding Payments 36
SECTION 2.16. Taxes 37
SECTION 2.17. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs 38
SECTION 2.18. Mitigation Obligations; Replacement of
Lenders 39
ARTICLE III
Representations and Warranties 40
SECTION 3.01. Organization; Powers 40
SECTION 3.02. Authorization; Enforceability 41
SECTION 3.03. Governmental Approvals; No Conflicts 41
SECTION 3.04. Financial Condition; No Material Adverse
Change 41
SECTION 3.05. Properties 42
SECTION 3.06. Litigation and Environmental Matters 42
SECTION 3.07. Compliance with Laws and Agreements 42
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Page
SECTION 3.08. Investment and Holding Company Status 42
SECTION 3.09. Taxes 42
SECTION 3.10. ERISA 43
SECTION 3.11. Disclosure 43
ARTICLE IV
Conditions 43
SECTION 4.01. Effective Date 43
SECTION 4.02. Each Credit Event 44
ARTICLE V
Affirmative Covenants 45
SECTION 5.01. Financial Statements and Other
Information 45
SECTION 5.02. Notices of Material Events 46
SECTION 5.03. Existence; Conduct of Business 47
SECTION 5.04. Payment of Obligations 47
SECTION 5.05. Maintenance of Properties; Insurance 47
SECTION 5.06. Books and Records; Inspection Rights 47
SECTION 5.07. Compliance with Laws 48
SECTION 5.08. Use of Proceeds, Commitments and Letters
of Credit 48
SECTION 5.09. Federal Regulations 48
ARTICLE VI
Negative Covenants 48
SECTION 6.01. Limitation on Share Purchase Debt 48
SECTION 6.02. Limitation on Subsidiary Debt 48
SECTION 6.03. Liens 49
SECTION 6.04. Limitation on Sale/Leaseback
Transactions 50
SECTION 6.05. Fundamental Changes 51
SECTION 6.06. Financial Covenant52
SECTION 6.07. Ownership of Railroad Subsidiaries 52
SECTION 6.08. Sales of Unrestricted Margin Stock 52
SECTION 6.09. Limitation on Guarantees and Liens of
CSX/NS Entities 52
SECTION 6.10. CSX/NS Agreement 53
ARTICLE VII
Events of Default 53
ARTICLE VIII
The Agents 55
ARTICLE IX
Miscellaneous 57
SECTION 9.01. Notices 57
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Page
SECTION 9.02. Waivers; Amendments 58
SECTION 9.03. Expenses; Indemnity; Damage Waiver 59
SECTION 9.04. Successors and Assigns 60
SECTION 9.05. Survival 62
SECTION 9.06. Counterparts; Integration;
Effectiveness 62
SECTION 9.07. Severability 62
SECTION 9.08. Right of Setoff 63
SECTION 9.09. Governing Law; Jurisdiction; Consent to
Service of Process 63
SECTION 9.10. WAIVER OF JURY TRIAL 63
SECTION 9.11. Headings 64
SECTION 9.12. Confidentiality 64
SCHEDULES:
Schedule 2.01 -- Commitments
Schedule 3.06 -- Disclosed Matters
Schedule 6.03 -- Certain Transactions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance Exhibit B-1 -- Form of
Revolving Loan Note Exhibit B-2 -- Form of Competitive Loan Note Exhibit
C -- Form of Opinion of Wachtell, Lipton, Rosen & Katz
Exhibit D -- Form of Opinion of General Counsel or an Assistant
General Counsel
iii
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 20, 1997, among CSX
CORPORATION, a Virginia corporation, as Borrower, the LENDERS parties hereto,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION and NATIONSBANK, N.A., as
Co- Syndication Agents, THE BANK OF NOVA SCOTIA, as Documentation Agent, and THE
CHASE MANHATTAN BANK, as Administrative Agent.
W I T N E S S E T H :
WHEREAS, the Borrower initially entered into the Credit Agreement, dated as
of November 15, 1996 (the "Existing Credit Agreement"), in order to obtain
financing in connection with the acquisition by Green Acquisition Corp., a
wholly-owned subsidiary of the Borrower ("Green"), of all of the issued and
outstanding shares of common stock and Series A ESOP Convertible Junior
Preferred Stock (collectively, the "Conrail Shares") of Conrail Inc., a
Pennsylvania corporation ("Conrail"); WHEREAS, as of the date hereof, Green
owns, through a voting trust, 17,775,124 Conrail Shares (the "CSX Conrail
Shares"); WHEREAS, the Borrower and Norfolk Southern Corporation ("NS") have
entered into a Letter Agreement dated April 8, 1997 (the "CSX/NS Agreement")
pursuant to which the Borrower and NS will together, through a newly formed
entity (together with its successors, "CSX/NS Acquisition Sub"), acquire and own
all of the Conrail Shares;
WHEREAS, pursuant to the CSX/NS Agreement, concurrently with the formation
of CSX/NS Acquisition Sub, the Borrower will contribute to CSX/NS Acquisition
Sub all of the outstanding capital stock of Green and NS and its subsidiaries
will contribute to Green or CSX/NS Acquisition Sub all of the voting trust
certificates currently owned by them representing the beneficial ownership
interest in the 8,200,000 Conrail Shares acquired by NS and its subsidiaries
prior to the date hereof (collectively, the "Stock Contributions");
WHEREAS, Green will then acquire the Conrail Shares not acquired in the
Stock Contributions pursuant to an amended $115 per share all cash tender offer
(the "Joint Tender Offer") followed by a merger (the "Merger") in which any
Conrail Shares not acquired pursuant to the Joint Tender Offer and the Stock
Contributions will be converted into the right to receive $115 per Conrail
Share, without interest thereon (the Stock Contributions, the Joint Tender Offer
and the Merger being collectively called the "CSX/NS Acquisition");
WHEREAS, to finance the Joint Tender Offer and the Merger, the Borrower and
NS will make cash contributions to Green in accordance with the CSX/NS
Agreement;
2
WHEREAS, following the CSX/NS Acquisition, (a) the Borrower and NS will
have equal voting interests in CSX/NS Acquisition Sub, (b) Conrail will be an
indirect wholly-owned subsidiary of CSX/NS Acquisition Sub and (c) the Borrower
and NS will have economic interests in Conrail and CSX/NS Acquisition Sub of
approximately 42% and 58%, respectively;
WHEREAS, following the date when control of Conrail by the Borrower and NS
is approved by the Surface Transportation Board and assumed by the Borrower and
NS (the "Control Date"), Conrail will divide all or most of its railroad assets
in accordance with the CSX/NS Agreement and make them available for the separate
use and benefit of the Borrower and NS pursuant to certain operating
arrangements (the "Initial Asset Division");
WHEREAS, effective on May 6, 1997, the Borrower reduced the aggregate
Commitments of the Lenders under the Existing Credit Agreement from
$4,800,000,000 to $2,500,000,000; and
WHEREAS, the Borrower has requested that the Administrative Agent and the
Lenders amend certain provisions of the Credit Agreement in connection with the
CSX/NS Agreement and the transactions contemplated thereby, and the
Administrative Agent and the Lenders have agreed to so amend the Credit
Agreement, but only on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, the parties hereto agree, subject to the satisfaction of
the conditions set forth in Section 4.01, to amend and restate the Existing
Credit Agreement in its entirety as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms.
As used in this Agreement, the following terms have the meanings specified
below:
"ABR", when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by refere nce to the Alternate Base Rate.
"Acquisition Transactions" means (a) the execution, delivery and
performance by the Borrower of the CSX/NS Agreement, (b) the execution, delivery
and performance by the Borrower and the CSX/NS Entities of the definitive
documentation referred to in the CSX/NS Agreement and (c) the transactions
contemplated by the CSX/NS Agreement and such definitive documentation,
including but not limited to the Stock Contributions, the Joint Tender Offer,
the Merger, the Initial Asset Division, the Final Asset Division, the creation
of the new or consolidated voting trust
3
contemplated by the CSX/NS Agreement, and the issuance of equity interests by
CSX/NS Acquisition Sub to the Borrower.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Revolving
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity as
administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an administrative questionnaire in a
form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agents" means the collective reference to the Administrative Agent, the
Co-Syndication Agents and the Documentation Agent.
"Aggregate Outstanding Extensions of Credit" means,at any time, an amount
equal to the sum of (a) the aggregate Revolving Credit Exposure of the Lenders
at such time and (b)the aggregate principal amount of outstanding Competitive
Loans of the Lenders at such time.
"Agreement" means this Amended and Restated Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Allocable CSX/NS Attributable Debt" means the allocable portion of any
obligation of any CSX/NS Acquisition Sub Entity which would be "Attributable
Debt" of the Borrower and the Subsidiaries if such CSX/NS Acquisition Sub Entity
were a Subsidiary of the Borrower, with such allocable portion being equal to a
percentage of such obligations equal to the percentage of the capital stock of
such CSX/NS Acquisition Sub Entity which is directly or indirectly owned by the
Borrower, provided that (a) the Allocable CSX/NS Attributable Debt with respect
to any obligations which constitute CSX Conrail Attributable Debt shall be the
entire amount of such obligations, (b) the Allocable CSX/NS Attributable Debt
with respect to any obligations which constitute NS Conrail Attributable Debt
shall be zero and (c)the Allocable CSX/NS Attributable Debt with respect to any
obligations of any CSX/NS Acquisition Sub Entity which would be included as
"Attributable Debt" of the Borrower and the Subsidiaries if such CSX/NS
Acquisition Sub Entity were a Subsidiary of the Borrower and which would be
permitted under Sections 6.04(a) and 6.04(b) shall be zero.
4
"Allocable CSX/NS Debt" means the allocable portion of any obligation of
any CSX/NS Acquisition Sub Entity which would be included as "Debt" of the
Borrower if such CSX/NS Acquisition Sub Entity were a Subsidiary of the
Borrower, with such allocable portion being equal to a percentage of such
obligations equal to the percentage of the capital stock of such CSX/NS
Acquisition Sub Entity which is directly or indirectly owned by the Borrower,
provided that (a) the Allocable CSX/NS Debt with respect to any obligations
which constitute CSX Conrail Debt shall be the entire amount of such
obligations, (b) the Allocable CSX/NS Debt with respect to any obligations which
constitute NS Conrail Debt shall be zero and (c) the Allocable CSX/NS Debt with
respect to any obligations of any CSX/NS Acquisition Sub Entity which would be
included as "Debt" of the Borrower if such CSX/NS Acquisition Sub Entity were a
Subsidiary of the Borrower and which would be permitted under Sections 6.02(a),
6.02(b), 6.02(c) and 6.02(d) (assuming all CSX/NS Acquisition Sub Entities were
Subsidiaries) shall be zero.
"Allocable Railroad Revenues" means a percentage of any Railroad Revenues
of any CSX/NS Entity equal to the percentage of the capital stock of such CSX/NS
Entity which is directly or indirectly owned by the Borrower, provided that the
Allocable Railroad Revenues with respect to the Railroad Revenues of any CSX
Conrail Subsidiary shall be the entire amount of such Railroad Revenues.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Lender, the percentage
of the total Commitments represented by such Lender's Commitment. If the
Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Applicable Rate" means, for any day, with respect to any Eurodollar
Revolving Loan, or with respect to the facility fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under the caption
"LIBOR Margin" or "Facility Fee", as the case may be, based upon the ratings by
Moody's and S&P, respectively, applicable on such date to the Index Debt:
5
Index Debt Facility Fee LIBOR Margin
Ratings (basis points (basis points
(S&P/Moody's) per annum) per annum)
------------- ---------- ----------
Category 1 A/A2 or higher 6.0 14.0
Category 2 A-/A3 7.0 13.0
Category 3 BBB+/Baa1 8.5 16.5
Category 4 BBB/Baa2 10.0 20.0
Category 5 BBB-/Baa3 12.5 22.5
Category 6 BB+/Bal or 15.0 35.0
lower
For purposes of the foregoing, (i) if neither Moody's nor S&P shall have in
effect a rating for the Index Debt (other than by reason of the circumstances
referred to in the last two sentences of this definition), then both such rating
agencies shall be deemed to have established a rating in Category 6; (ii) if
only one of Moody's or S&P shall have in effect a rating for the Index Debt,
then the Borrower and the Lenders will negotiate in good faith to agree upon
another rating agency to be substituted by an amendment to this Agreement for
the rating agency which shall not have a rating in effect, and in the absence of
such amendment the Applicable Rate will be determined by reference to the
available rating; (iii) if the ratings established or deemed to have been
established by Moody's and S&P for the Index Debt shall fall within different
Categories, the Applicable Rate shall be based on the higher of the two ratings
unless one of the two ratings is two or more Categories lower than the other, in
which case the Applicable Rate shall be determined by reference to the Category
next below that of the higher of the two ratings; and (iv) if the ratings
established or deemed to have been established by Moody's and S&P for the Index
Debt shall be changed (other than as a result of a change in the rating system
of Moody's or S&P), such change shall be effective as of the date on which it is
first announced by the applicable rating agency. Each change in the Applicable
Rate shall apply during the period commencing on the effective date of such
change and ending on the date immediately preceding the effective date of the
next such change. If the rating system of Moody's or S&P shall change, the
Borrower and the Lenders shall negotiate in good faith to amend this definition
to reflect such changed rating system or the unavailability of ratings from such
rating agency and, pending the effectiveness of any such amendment, the
Applicable Rate shall be determined by reference to the rating or ratings most
recently in effect prior to such change or cessation. If both Moody's and S&P
shall cease to be in the business of rating corporate debt obligations, the
Borrower and the Lenders shall negotiate in good faith to agree upon a
substitute rating agency
6
and to amend the references to specific ratings in this definition to reflect
the ratings used by such substitute rating agency, and in the absence of such
amendment then both such rating agencies shall be deemed to have established a
rating in Category 6.
"Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent and the
Borrower.
"Attributable Debt" means, at any date with respect to any Sale/Leaseback
Transaction in respect of which the obligations of the Borrower, any Subsidiary
or any CSX Conrail Subsidiary do not constitute Capital Lease Obligations, the
aggregate amount of rental payments due from the Borrower, such Subsidiary or
such CSX Conrail Subsidiary, as the case may be, under the lease entered into in
connection with such Sale/Leaseback Transaction during the remaining term of
such lease, net of rental payments which have been defeased or secured by
deposits, discounted from the respective due dates thereof to such date using a
discount rate equal to the discount rate that would then be used to calculate
the amount of Capital Lease Obligations with respect to a comparable capital
lease.
"Availability Period" means the period from and including the Effective
Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"Board" means the Board of Governors of the Federal Reserve System of the
United States of America.
"Borrower" means CSX Corporation, a Virginia corporation.
"Borrowing" means (a) Revolving Loans of the same Type made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect or (b) a Competitive Loan or group of
Competitive Loans of the same Type made on the same date and as to which a
single Interest Period is in effect.
"Borrowing Request" means a request by the Borrowerfor a Revolving
Borrowing in accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
7
"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Cash Collateral Account" has the meaning assigned to such term in Section
2.10(c).
"Change in Control" means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of shares
representing more than 30% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Borrower, (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated,or (c) the acquisition
of direct or indirect Control of the Borrower by any Person or group.
"Change in Law" means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender or any Issuing Bank
(or, for purposes of Section 2.14(b), by any lending office of such Lender or by
such Lender's or Issuing Bank's holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Class" refers, when used in reference to any Loan or Borrowing, to whether
such Loan, or the Loans comprising such Borrowing, are Revolving Loans or
Competitive Loans.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means, with respect to each Lender, the commitment of such
Lender to make Revolving Loans and to acquire participations in Letters of
Credit hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender's Revolving Credit Exposure hereunder, as such commitment
may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04. The initial amount of each Lender's Commitment is set
forth on Schedule 2.01, or in
8
the Assignment and Acceptance pursuant to which such Lender shall have assumed
its Commitment, as applicable.
"Competitive Bid" means an offer by a Lender to make a Competitive Loan in
accordance with Section 2.04.
"Competitive Bid Rate" means, with respect to any Competitive Bid, the
Margin or the Fixed Rate, as applicable, offered by the Lender making such
Competitive Bid.
"Competitive Bid Request" means a request by the Borrower for Competitive
Bids in accordance with Section 2.04.
"Competitive Loan" means a Loan made pursuant to Section 2.04.
"Competitive Loan Note" has the meaning assigned to such term in Section
2.09(e).
"Conrail" has the meaning assigned to such term in the recitals to this
Agreement.
"Conrail Shares" has the meaning assigned to such term in the recitals to
this Agreement.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Control Date" has the meaning assigned to such term in the recitals to
this Agreement.
"Co-Syndication Agents" means the collective reference to Bank of America
National Trust and Savings Association and NationsBank, N.A., in their
respective capacities as co- syndication agents hereunder.
"CSX Conrail Assets" means any assets of any CSX/NS Acquisition Sub Entity
made available for the separate use and benefit of the Borrower and/or any
Subsidiary pursuant to the CSX/NS Agreement (or the definitive documentation
referred to therein).
"CSX Conrail Attributable Debt" means any Attributable Debt of any CSX/NS
Acquisition Sub Entity which is to be paid in full directly or indirectly by the
Borrower and the Subsidiaries and/or by any CSX Conrail Subsidiaries.
"CSX Conrail Debt" means, as to any CSX/NS Acquisition Sub Entity at any
date of determination thereof, any obligation of such CSX/NS Acquisition Sub
Entity to the extent that (a) such obligation should be reflected in "Short Term
Debt" or "Long Term
9
Debt" on a consolidated balance sheet or statement of financial position of such
CSX/NS Acquisition Sub Entity at such date in accordance with GAAP and (b) such
obligation is to be paid in full directly or indirectly by the Borrower and the
Subsidiaries and/or by any CSX Conrail Subsidiaries.
"CSX Conrail Railroad Subsidiary" means any CSX/NS Entity which is a Class
I common carrier by rail under the rules of the Surface Transportation Board or
has Allocable Railroad Revenues for the most recent period of four fiscal
quarters of the Borrower that exceed an amount equal to 5% of the sum of,
without duplication, (a) the aggregate Railroad Revenues of the Borrower and the
Subsidiaries for such period and (b) the aggregate Allocable Railroad Revenues
of the CSX/NS Entities for such period, provided that neither Conrail nor any of
its subsidiaries shall be a "CSX Conrail Railroad Subsidiary" prior to the
Control Date.
"CSX Conrail Shares" has the meaning assigned to such term in the recitals
to this Agreement.
"CSX Conrail Subsidiary" means any CSX/NS Acquisition Sub Entity whose sole
assets consist of CSX Conrail Assets, provided that neither Conrail nor any of
its subsidiaries shall be a "CSX Conrail Subsidiary" prior to the Control Date.
"CSX/NS Acquisition" has the meaning assigned to such term in the recitals
to this Agreement.
"CSX/NS Acquisition Sub" has the meaning assigned to such term in the
recitals to this Agreement.
"CSX/NS Acquisition Sub Entity" means CSX/NS Acquisition Sub or any of its
subsidiaries, provided that neither Conrail nor any of its subsidiaries shall be
a "CSX/NS Acquisition Sub Entity" prior to the Control Date.
"CSX/NS Agreement" has the meaning assigned to such term in the recitals to
this Agreement.
"CSX/NS Entity" means CSX/NS Acquisition Sub or any of its subsidiaries
(other than any NS Conrail Subsidiaries), provided that neither Conrail nor any
of its subsidiaries shall be a "CSX/NS Entity" prior to the Control Date.
"Debt" means, as to the Borrower, any Subsidiary or any CSX Conrail
Subsidiary at any date of determination thereof, any obligation of the Borrower,
such Subsidiary or such CSX Conrail Subsidiary, as the case may be, to the
extent that such obligation should be reflected in "Short Term Debt" or "Long
Term Debt" on a consolidated balance sheet or statement of financial position of
the Borrower, such Subsidiaries and such CSX Conrail Subsidiaries at such date
in accordance with GAAP and, for such purposes, the amount of any obligation of
any CSX Conrail
10
Subsidiary which shall be included as "Debt" of the Borrower shall be equal to
the Allocable CSX/NS Debt of such CSX Conrail Subsidiary (except that, for
purposes of Section 6.06, the Allocable CSX/NS Debt of any CSX Conrail
Subsidiary shall be calculated without giving effect to clause (c) of the
proviso to the definition of Allocable CSX/NS Debt).
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"Documentation Agent" means The Bank of Nova Scotia, in its capacity as
documentation agent hereunder.
"dollars" or "$" refers to lawful money of the United States of America.
"Effective Date" means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"Environmental Laws" means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources or the
management, release or threatened release of any Hazardous Material.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower, any Subsidiary or any CSX/NS Entity
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumedor imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer under Section
414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of
11
the Code, is treated as a single employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate (or, in the case of
a Competitive Loan, the LIBO Rate).
"Event of Default" has the meaning assigned to such term in Article VII.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, any Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) income and any branch profits taxes imposed as
a result of a present or former connection between the Administrative Agent, any
Lender, any Issuing Bank or other recipient of such payment and the jurisdiction
of the governmental authority imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from the Administrative Agent, such Lender or such Issuing Bank having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement) and (b) in the case of a Foreign Lender (other than an
assignee pursuant to a request by the Borrower under Section 2.18(b)), any
withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign
12
Lender becomes a party to this Agreement or is attributable to such Foreign
Lender's failure or inability to comply with Section 2.16(e), except to the
extent that such Foreign Lender's assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from the Borrower with respect to such
withholding tax pursuant to Section 2.16(a).
"Existing Credit Agreement" has the meaning assigned to such term in the
recitals to this Agreement.
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Final Asset Division" means any transfer of the ownership of any assets of
Conrail or any of its subsidiaries to the Borrower and/or any Subsidiary not
materially inconsistent with the terms of the CSX/NS Agreement.
"Financial Officer" means the chief financial officer, principal accounting
officer, treasurer or controller of the Borrower.
"Fixed Rate" means, with respect to any Competitive Loan (other than a
Eurodollar Competitive Loan), the fixed rate of interest per annum specified by
the Lender making such Competitive Loan in its related Competitive Bid.
"Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed
Rate.
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than the United States of America, any State thereof or the
District of Columbia.
"Foreign Subsidiary" means any Subsidiary that is organized under the laws
of a jurisdiction other than the United States of America, any State thereof or
the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank
13
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.
"Green" has the meaning assigned to such term in the recitals to this
Agreement.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any collateral security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all payment
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all payment obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all payment
obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (e) all payment
obligations of such Person in respect of the deferred purchase price of property
or services (excluding current accounts payable incurred in the ordinary course
of business), (f) all Indebtedness of others secured by (or for which the holder
of
14
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such Person,
(i)all payment obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty and (j)
all payment obligations, contingent or otherwise, of such Person in respect of
bankers' acceptances. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.
"Indemnified Taxes" means Taxes arising directly from any payment made
hereunder or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement other than Excluded Taxes and Other Taxes.
"Index Debt" means senior, unsecured, long-term indebtedness for borrowed
money of the Borrower that is not guaranteed by any other Person or subject to
any other credit enhancement.
"Information" has the meaning assigned to such term in Section 9.12.
"Initial Asset Division" has the meaning assigned to such term in the
recitals to this Agreement.
"Interest Election Request" means a request by the Borrower to convert or
continue a Revolving Borrowing in accordance with Section 2.07.
"Interest Payment Date" means (a) with respect to any ABR Loan, the last
day of each March, June, September and December, (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period and (c) with respect to any Fixed
Rate Loan, the last day of the Interest Period applicable to the Borrowing of
which such Loan is a part and, in the case of a Fixed Rate Borrowing with an
Interest Period of more than 90 days' duration (unless otherwise specified in
the applicable Competitive Bid Request), each day prior to the last day of such
Interest Period that occurs at intervals of 90 days' duration after the first
day of such Interest Period, and any other dates that are specified
15
in the applicable Competitive Bid Request as Interest Payment Dates with respect
to such Borrowing.
"Interest Period" means (a) with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect, and (b) with respect to any Fixed Rate
Borrowing, the period (which shall not be less than 7 days or more than 360
days) commencing on the date of such Borrowing and ending on the date specified
in the applicable Competitive Bid Request; provided, that (i) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless, in the case of a
Eurodollar Borrowing only, such next succeeding BusinessDay would fall in the
next calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end onthe last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and, in
the case of a Revolving Borrowing, thereafter shall be the effective date of the
most recent conversion or continuation of such Borrowing.
"Issuing Bank" means each of Bank of America National Trust and Savings
Association, The Bank of Nova Scotia, The Chase Manhattan Bank, NationsBank,
N.A. and their respective Affiliates, in their respective capacities as issuers
of Letters of Credit hereunder, and their respective successors in such capacity
as provided in Section 2.05(i).
"Joint Tender Offer" has the meaning assigned to such term in the recitals
to this Agreement.
"LC Disbursement" means a payment made by an Issuing Bank pursuant to a
Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time. The LC Exposure of any Lender at any time shall be
its Applicable Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.01 and any other Person
that shall have become a party hereto pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Acceptance or pursuant to Section 2.18.
16
"Letter of Credit" means any letter of credit issued pursuant to this
Agreement.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, (a) with respect to any asset, (i) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, or (ii) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (b) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities (other than with respect to the capital stock of any Foreign
Subsidiary, any such option or right granted consistent with the past practice
of the Borrower and the Subsidiaries).
"Loans" means the loans made by the Lenders to the Borrower pursuant to
this Agreement.
"Majority Lenders" means, at any time, Lenders having Revolving Credit
Exposures and unused Commitments representing at least 51% of the sum of the
total Revolving Credit Exposures and unused Commitments at such time; provided
that, for purposes of declaring the Loans to be due and payable pursuant to
Article VII, and for all purposes after the Loans become due and payable
pursuant to Article VII or the Commitments expire or terminate, the outstanding
Competitive Loans of the Lenders shall be included in their respective Revolving
Credit Exposures in determining the Majority Lenders.
"Margin" means, with respect to any Competitive Loan bearing interest at a
rate based on the LIBO Rate, the marginal rate of interest, if any, to be added
to or subtracted from the
17
LIBO Rate to determine the rate of interest applicable to such Loan, as
specified by the Lender making such Loan in its related Competitive Bid.
"Margin Stock" has the meaning assigned to such term in Regulation U
(including, so long as the same constitute Margin Stock under Regulation U, the
Shares).
"Material Adverse Effect" means an adverse effect on the business, assets,
operations or condition, financial or otherwise, of the Borrower and the
Subsidiaries, taken as a whole, in an aggregate amount in excess of an amount
equal to 3% of Total Shareholders' Equity.
"Material Indebtedness" means Indebtedness (other than the Loans and
Letters of Credit) of any one or more of the Borrower, the Subsidiaries and the
CSX/NS Entities in an aggregate principal amount exceeding $75,000,000.
"Maturity Date" means November 15, 2001.
"Merger" has the meaning assigned to such term in the recitals to this
Agreement.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
October 14, 1996, by and among Conrail, Green and the Borrower, as amended by
the First Amendment thereto, dated as of November 5, 1996, by the Second
Amendment thereto, dated as of December 18, 1996, the Third Amendment thereto,
dated as of March 7, 1997, and the Fourth Amendment thereto, dated as of April
8, 1997.
"Moody's" means Moody's Investors Service, Inc. or any successor to its
corporate debt ratings business.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Cash Proceeds" means, with respect to any sale or other disposition of
Shares, the cash proceeds (including cash equivalents and any cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received) of such sale or other disposition received by the
Borrower or any Subsidiary, net of all attorneys' fees, accountants' fees,
investment banking fees and other customary fees actually incurred by the
Borrower or any Subsidiary and documented in connection therewith and net of
taxes paid or reasonably expected to be payable by the Borrower or any
Subsidiary as a result thereof.
"Notes" means the collective reference to any Competitive Loan Notes and
Revolving Loan Notes.
18
"NS" has the meaning assigned to such term in the recitals to this
Agreement.
"NS Conrail Assets" means any assets of any CSX/NS Acquisition Sub Entity
made available for the separate use and benefit of NS or any of its subsidiaries
pursuant to the CSX/NS Agreement (or the definitive documentation referred to
therein).
"NS Conrail Attributable Debt" means any Attributable Debt of any CSX/NS
Acquisition Sub Entity which is to be paid in full directly or indirectly by NS
and its subsidiaries and/or by any NS Conrail Subsidiaries.
"NS Conrail Debt" means, as to any CSX/NS Acquisition Sub Entity at any
date of determination thereof, any obligation of such CSX/NS Acquisition Sub
Entity to the extent that (a) such obligation should be reflected in "Short Term
Debt" or "Long Term Debt" on a consolidated balance sheet or statement of
financial position of such CSX/NS Acquisition Sub Entity at such date in
accordance with GAAP and (b) such obligation is to be paid in full directly or
indirectly by NS and its subsidiaries and/or by any NS Conrail Subsidiaries.
"NS Conrail Subsidiary" means any CSX/NS Acquisition Sub Entity whose sole
assets consist of NS Conrail Assets, provided that neither Conrail nor any of
its subsidiaries shall be a "NS Conrail Subsidiary" prior to the Control Date.
"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
directly from any payment made hereunder or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement.
"Participant" has the meaning assigned to such term in Section 9.04(e).
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means: (a) Liens imposed by law for taxes that are
not yet due or are being contested in compliance with Section 5.04; (b)
carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like
Liens imposed by law, arising in the ordinary course of business; (c) pledges
and deposits made in the ordinary course of business in compliance with workers'
compensation, unemployment insurance and other social security laws or
regulations (other than ERISA);
19
(d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;
and (e) easements, zoning restrictions, rights-of-way and similar encumbrances
on real property imposed by law or arising in the ordinary course of business
that do not secure any monetary obligations and do not materially detract from
the value of the affected property or interfere with the ordinary conduct of
business of the Borrower or any Subsidiary (or, with respect to any CSX Conrail
Assets, any CSX Conrail Subsidiary); provided that the term "Permitted
Encumbrances" shall not include any Lien securing Debt.
"Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Railroad Revenues" means, with respect to any Person for any period, all
revenues of such Person from third parties which should, in accordance with
GAAP, be included in operating revenues of such Person's railroad subsidiaries
as reflected in the consolidated financial statements (or in the "Management's
Discussion and Analysis" section of the report on Form 10-K or 10-Q related
thereto) of such Person for such period.
"Railroad Subsidiary" means any Subsidiary that is a Class I common carrier
by rail under the rules of the Surface Transportation Board or any other
Subsidiary the Railroad Revenues of which for the most recent period of four
fiscal quarters of the Borrower exceed an amount equal to 5% of the sum of,
without duplication, (a) the aggregate Railroad Revenues of the Borrower and the
Subsidiaries for such period and (b) the aggregate Allocable Railroad Revenues
of the CSX/NS Entities for such period.
20
"Register" has the meaning assigned to such term in Section 9.04(c).
"Regulation G" means Regulation G of the Board.
"Regulation U" means Regulation U of the Board.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Restricted Margin Stock" means Margin Stock owned by the Borrower or any
Subsidiary which represents not more than 33- 1/3% of the aggregate value
(determined in accordance with Regulation U), on a consolidated basis, of the
property and assets of the Borrower and the Subsidiaries (other than any Margin
Stock) that is subject to the provisions of Article 6 (including Section 6.03).
"Revolving Credit Exposure" means, with respect to any Lender at any time,
the sum of the outstanding principal amount of such Lender's Revolving Loans and
its LC Exposure at such time.
"Revolving Loan" means a Loan made pursuant to Section 2.03.
"Revolving Loan Note" has the meaning assigned to such term in Section
2.09(e).
"Sale/Leaseback Transaction" has the meaning assigned to such term in
Section 6.04.
"S&P" means Standard & Poor's Ratings Group or any successor to its
corporate debt ratings business.
"SEC" means the Securities and Exchange Commission,or any Governmental
Authority succeeding to any or all of the functions of said Commission.
"Shares" means (a) prior to the Merger, the Conrail Shares and (b) after
the Merger, the issued and outstanding shares of common stock of Conrail and of
CSX/NS Acquisition Sub and any subsidiary of CSX/NS Acquisition Sub which
directly or indirectly owns the common stock of Conrail.
"Significant CSX/NS Entity" means any CSX/NS Entity (other than any CSX
Conrail Subsidiary) that, assuming such CSX/NS Entity were a Subsidiary, would
be a "significant subsidiary" of the Borrower within the meaning of the SEC's
Regulation S-X (based upon the Borrower's direct or indirect proportionate
beneficial ownership of the assets and income of such CSX/NS Entity) and any
other CSX/NS Entity that the Borrower
21
may from time to time designate as a "Significant CSX/NS Entity" by written
notice to such effect to the Administrative Agent.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" of the Borrower within the meaning of the SEC's Regulation S-X, any
CSX Conrail Subsidiary that, if such CSX Conrail Subsidiary were a Subsidiary,
would be a "significant subsidiary" of the Borrower within the meaning of the
SEC's Regulation S-X and any other Subsidiaries that the Borrower may from time
to time designate as a "Significant Subsidiary" by written notice to such effect
to the Administrative Agent.
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"Stock Contributions" has the meaning assigned to such term in the recitals
to this Agreement.
"subsidiary" means, with respect to any Person (the "parent") at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date.
"Subsidiary" means any subsidiary of the Borrower, provided that no CSX/NS
Acquisition Sub Entity shall be a Subsidiary for purposes of this Agreement.
"Successor Corporation" has the meaning assigned to such term in Section
6.05.
"Taxes" means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
"Total Capitalization" means, at any date of determination thereof, the sum
of Total Debt at such date plus Total Shareholders' Equity at such date.
22
"Total Debt" means, at any date of determination thereof, without
duplication, (a) all Debt of the Borrower and the Subsidiaries at such date plus
(b) the Allocable CSX/NS Debt of the CSX/NS Acquisition Sub Entities at such
date (calculated without giving effect to clause (c) of the proviso to the
definition of Allocable CSX/NS Debt).
"Total Shareholders' Equity" means, as to the Borrower at any date of
determination thereof, (a) the sum of all items which would be included under
shareholders' equity on a consolidated balance sheet or statement of financial
position of the Borrower at such date in accordance with GAAP plus, in the case
of any such date after the Control Date, (b) the excess, if any, of (i) the
aggregate purchase price of all CSX Conrail Shares and all Conrail Shares
directly or indirectly purchased by the Borrower and the Subsidiaries pursuant
to the CSX/NS Acquisition over (ii) the Allocable CSX/NS Debt of the CSX/NS
Acquisition Sub Entities at such date (calculated without giving effect to
clause (c) of the proviso to the definition of Allocable CSX/NS Debt).
"Transactions" means the execution, delivery and performance by the
Borrower of this Agreement and any Notes, the borrowing of Loans, the use of the
proceeds thereof and the request for the issuance of Letters of Credit
hereunder.
"Type", when used in reference to any Loan or Borrowing, refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate or,
in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate.
"Unrestricted Margin Stock" means any Margin Stock owned by the Borrower or
any Subsidiary which is not Restricted Margin Stock.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings.
For purposes of this Agreement, Loans may be classified and referred to by
Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by
Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be
classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type
(e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar
Revolving Borrowing").
SECTION 1.03. Terms Generally.
The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any
23
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "but not limited to". The word "will" shall be construed to have
the same meaning and effect as the word "shall". Unless the context requires
otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein),
(b) any reference herein to a ny Person shall be construed to include such
Person's successors and assigns,
(c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and
not to any particular provision hereof,
(d) all references herein to Articles, Sections, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, this Agreement and
(e) the words "asset" and "property" shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract
rights.
SECTION 1.04. Accounting Terms; GAAP.
Except as otherwise expressly provided herein, all terms of an accounting
or financial nature shall be construed in accordance with GAAP, as in effect
from time to time; provided that, if the Borrower notifies the Administrative
Agent that the Borrower requests an amendment to any provision hereof to
eliminate the effect of any change occurring after the date hereof in GAAP or in
the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Majority Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith.
ARTICLE II
The Credits
SECTION 2.01. Commitments.
Subject to the terms and conditions set forth herein, each Lender agrees to
make Revolving Loans to the Borrower from time to time during the Availability
Period in an aggregate principal amount that will not result in (a) such
Lender's Revolving Credit Exposure exceeding such Lender's Commitment or (b) the
Aggregate Outstanding Extensions of Credit exceeding the total Commitments.
Within the foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, prepay and reborrow Revolving Loans.
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SECTION 2.02. Loans and Borrowings.
(a) Each Revolving Loan shall be made as part of a Borrowing consisting of
Revolving Loans made by the Lenders ratably in accordance with their
respective Commitments. Each Competitive Loan shall be made in accordance
with the procedures set forth in Section 2.04. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender
of its obligations hereunder; provided that the Commitments and Competitive
Bids of the Lenders are several and no Lender shall be responsible for any
other Lender's failure to make Loans as required.
(b) Subject to Section 2.13, (i) each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodoll ar Loans as the Borrower may
request in accordance herewith, and (ii) each Competitive Borrowing shall
be comprised entirely of Eurodollar Loans or Fixed Rate Loans as the
Borrower may request in accordance herewith. Each Lender at its option may
make any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of
such option shall not affect the obligation of the Borrower to repay such
Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Revolving Borrowing, such Borrowing shall be in an aggregate amount that is
an integral multiple of $1,000,000 and not less than $10,000,000. At the
time that each ABR Revolving Borrowing is made, such Borrowing shall be in
an aggregate amount that is an integral multiple of $1,000,000 and not less
than $5,000,000; provided that an ABR Revolving Borrowing may be in an
aggregate amount that is equal to the entire unused balance of the total
Commitments or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.05(e). Each Competitive Borrowing
shall be in an aggregate amount that is an integral multiple of $1,000,000
and not less than $5,000,000. Borrowings of more than one Type and Class
may be outstanding at the same time; provided that there shall not at any
time be more than a total of 20 Eurodollar Revolving Borrowings
outstanding.
(d) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
SECTION 2.03. Requests for Revolving Borrowings.
To request a Revolving Borrowing, the Borrower shall notify the
Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before the date of the proposed Borrowing; provided that any such
25
notice of an ABR Revolving Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.05(e) may be given not later than
10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in a form approved by the Administrative Agent and signed by
the Borrower. Each such telephonic and written Borrowing Request shall specify
the following information in compliance with Section 2.02: (i) the aggregate
amount of the requested Borrowing ; (ii) the date of such Borrowing, which shall
be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period contemplated
by the definition of the term "Interest Period"; and (v) the location and number
of the Borrower's account to which funds are to be disbursed, which shall comply
wi th the requirements of Section 2.06. If no election as to the Type of
Revolving Borrowing is specified, then the requested Revolving Borrowing shall
be an ABR Borrowing. If no Interest Period is specified with respect to any
requested Eurodollar Revolving Borrowing, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Competitive Bid Procedure.
(a) Subject to the terms and conditions set forth herein, from time to time
during the Availability Period the Borrower may request Competitive Bids
and may (but shall not have any obligation to) accept Competitive Bids and
borrow Competitive Loans; provided that the Aggregate Outstanding
Extensions of Credit at any time shall not exceed the total Commitments at
such time. To request Competitive Bids, the Borrower shall notify the
Administrative Agent of such request by telephone, in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, four
Business Days before the date of the proposed Borrowing and, in the case of
a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, one
Business Day before the date of the proposed Borrowing; provided that the
Borrower may submit up to (but not more than) three Competitive Bid
Requests at the same
26
time on the same day, but a Competitive Bid Request shall not be made
within three Business Days after the date of any previous Competitive Bid
Request, unless any and all such previous Competitive Bid Requests shall
have been withdrawn or all Competitive Bids received in response thereto
rejected. Each such telephonic Competitive Bid Request shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a
written Competitive Bid Request in a form approved by the Administrative
Agent and signed by the Borrower. Each such telephonic and written
Competitive Bid Request shall specify the following information in
compliance with Section 2.02: (i) the aggregate amount of the requested
Borrowing; (ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be a Eurodollar Borrowing or a Fixed
Rate Borrowing; (iv) the Interest Period to be applicable to such
Borrowing, which shall be a period contemplated by the definition of the
term "Interest Period"; and (v) the location and number of the Borrower's
account to which funds are to be disbursed, which shall comply with the
requirements of Section 2.06. Promptly following receipt of a Competitive
Bid Request in accordance with this Section, the Administrative Agent shall
notify the Lenders of the details thereof by telecopy, inviting the Lenders
to submit Competitive Bids.
(b) Each Lender may (but shall not have any obligation to) make one or more
Competitive Bids to the Borrower in response to a Competitive Bid Request.
Each Competitive Bid by a Lender must be in a form approved by the
Administrative Agent and must be received by the Administrative Agent by
telecopy, in the case of a Eurodollar Competitive Borrowing, not later than
9:30 a.m 2E, New York City time, three Business Days before the proposed
date of such Competitive Borrowing and, in the case of a Fixed Rate
Borrowing, not later than 9:30 a.m., New York City time, on the proposed
date of such Competitive Borrowing. Competitive Bids that do not conform
substantially to the form approved by the Administrative Agent may be
rejected by the Administrative Agent, and the Administrative Agent shall
notify the applicable Lender as promptly as practicable. Each Competitive
Bid shall specify (i) the principal amount (which shall be a minimum of
$5,000,000 and an integral multiple of $1,000,000 and which may equal the
entire principal amount of the Competitive Borrowing requested by the
Borrower) of the Competitive Loan or Loans that the Lender is willing to
make, (ii) the Competitive Bid Rate or Rates at which the Lender is
prepared to make such Loan or Loans (expressed as a percentage rate per
annum in the form of a decimal to no more
27
than four decimal places) and (iii) the Interest Period applicable to each
such Loan and the last day thereof.
(c) The Administrative Agent shall promptly notify the Borrower by telecopy
of the Competitive Bid Rate and the principal amount specified in each
Competitive Bid and the identity of the Lender that shall have made such
Competitive Bid.
(d) Subject only to the provisions of this paragraph, the Borrower may
accept or reject any Competitive Bid. The Borrower shall notify the
Administrative Agent by telephone, confirmed by telecopy in a form approved
by the Administrative Agent, whether and to what extent it has decided to
accept or reject each Competitive Bid, in the case of a Eurodollar
Competitive Borrowing, not later than 10:30 a.m., New York City time, three
Business Days before the date of the proposed Competitive Borrowing and, in
the case of a Fixed Rate Borrowing, not later than 10:30 a.m., New York
City time, on the proposed date of the Competitive Borrowing; provided that
(i) the failure of the Borrower to give such notice shall be deemed to be a
rejection of each Competitive Bid, (ii) the Borrower shall not accept a
Competitive Bid made at a particular Competitive Bid Rate if the Borrower
rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the
aggregate amount of the Competitive Bids accepted by the Borrower shall not
exceed the aggregate amount of the requested Competitive Borrowing
specified in the related Competitive Bid Request, (iv) to the extent
necessary to comply with clause (iii) above, the Borrower may accept
Competitive Bids at the same Competitive Bid Rate in part, which
acceptance, in the case of multiple Competitive Bids at such Competitive
Bid Rate, shall be made pro rata in accordance with the amount of each such
Competitive Bid, and (v) except pursuant to clause (iv) above, no
Competitive Bid shall be accepted for a Competitive Loan unless such
Competitive Loan is in a minimum principal amount of $5,000,000 and an
integral multiple of $1,000,000; provided further that, if a Competitive
Loan must be in an amount less than $5,000,000 because of the provisions of
clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000
or any integral multiple thereof, and in calculating the pro rata
allocation of acceptances of portions of multiple Competitive Bids at a
particular Competitive Bid Rate pursuant to clause (iv) the amounts shall
be rounded to integral multiples of $1,000,000 in a manner determined by
the Borrower. A notice given by the Borrower pursuant to this paragraph
shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding Lender by
telecopy whether or not its Competitive Bid has been accepted (and, if so,
the amount and Competitive Bid Rate so accepted), and each successful
bidder will thereupon become bound, subject to the terms and conditions
hereof, to make the Competitive Loan in respect of which its Competitive
Bid has been accepted.
28
(f) If the Administrative Agent shall elect to submit a Competitive Bid in
its capacity as a Lender, it shall submit such Competitive Bid directly to
the Borrower at least one quarter of an hour earlier than the time by which
the other Lenders are required to submit their Competitive Bids to the
Administrative Agent pursuant to paragraph (b) of this Section.
SECTION 2.05. Letters of Credit.
(a) General. Subject to the terms and conditions set forth herein, the
Borrower (and, if a Letter of Credit is issued for the benefit of any
Subsidiary, such Subsidiary) may request the issuance of Letters of Credit
for the account of the Borrower (and, if such Letter of Credit is issued
for the benefit of any Subsidiary,for the account of the Borrower and such
Subsidiary, jointly and severally), in a form reasonably acceptable to the
Administrative Agent and the relevant Issuing Bank, at any time and from
time to time during the Availability Period. In the event of any
inconsistency between the terms and conditions of this Agreement and the
terms and conditions of any form of letter of credit application or other
agreement submitted by the Borrower to, or entered into by the Borrower
with, the Issuing Bank with respect to any Letter of Credit, the terms and
conditions of this Agreement shall control. (b) Notice of Issuance,
Amendment, Renewal, Extension; Certain Conditions. To request the issuance
of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the Borrower shall hand deliver or telecopy
(or transmit by electronic communication, if arrangements for doing so have
been approved by the relevant Issuing Bank) to the relevant Issuing Bank
and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the
issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, the date of issuance, amendment, renewalor
extension, the date on which such Letter of Credit is to expire (which
shall comply with paragraph (c) of this Section), the amount of such Letter
of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit. If requested by the relevant Issuing Bank, the Borrower
also shall submit a letter of credit application on the relevant Issuing
Bank's standard form in connection with any request for a Letter of Credit.
A Letter of Credit shall be issued, amended, renewed or extended only if
(and upon issuance, amendment, renewal or extension of each Letter of
Credit the Borrower shall be deemed to represent and warrant that), after
giving effect to such issuance, amendment, renewal or extension, (i) the LC
Exposure shall not exceed $50,000,000 and (ii) the Aggregate Outstanding
Extensions of Credit shall not exceed the total Commitments. (c) Expiration
Date. Each Letter of Credit shall expire at or prior to the close of
business on the earlier of
29
(i) the date that is five Business Days prior to the Maturity Date and (ii)
the date one year after the date of the issuance of such Letter of Credit,
provided that, subject to clause (i) above, any Letter of Credit may, at
the request of the Borrower as set forth in the applicable application for
such Letter of Credit, be automatically renewed on each anniversary of the
issuance thereof for an additional period of one year unless the Issuing
Bank which issued such Letter of Credit shall have given prior written
notice to the Borrower and the beneficiary of such Letter of Credit that
such Letter of Credit will not be renewed.
(d) Participations. By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit increasing the amount thereof) by an Issuing Bank and
without any further action on the part of such Issuing Bank or the Lenders,
such Issuing Bank hereby grants to each Lender, and each Lender hereby
acquires from such Issuing Bank, a participation in such Letter of Credit
equal to such Lender's Applicable Percentage of the aggregate amount
available to be drawn under such Letter of Credit. In consideration and in
furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account
of such Issuing Bank, such Lender's Applicable Percentage of each LC
Disbursement made by such Issuing Bank and not reimbursed by the Borrower
on the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Borrower for any
reason. Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit
is absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever. (e)
Reimbursement. If an Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit issued by it, the Borrower shall reimburse such LC
Disbursement by paying to the Administrative Agent an amount equal to such
LC Disbursement not later than 12:00 noon, New York City time, on the date
that such LC Disbursement is made, if the Borrower shall have received
notice of such LC Disbursement prior to 10:00 a.m., New York City time, on
such date, or, if such notice has not been received by the Borrower prior
to such time on such date, then not later than 12:00 noon, New York City
time, on the Business Day immediately following the day that the Borrower
receives such notice; provided that the Borrower may, subject to the
conditions to borrowing set forth herein, request in accordance with
Section 2.03 that such payment be financed with an ABR Revolving Borrowing
in an equivalent amount and, to the extent so financed, the Borrower's
obligation to make such payment shall be discharged and replaced by the
resulting ABR Revolving Borrowing. If the Borrower fails to make such
payment when due, the
30
Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and
such Lender's Applicable Percentage thereof. Promptly following receipt of
such notice, each Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the
same manner as provided in Section 2.06 with respect to Loans made by such
Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly
pay to the relevant Issuing Bank the amounts so received by it from the
Lenders. Promptly following receipt by the Administrative Agent of any
payment from the Borrower pursuant to this paragraph, the Administrative
Agent shall distribute such payment to the relevant Issuing Bank or, to the
extent that Lenders have made payments pursuant to this paragraph to
reimburse the relevant Issuing Bank, then to such Lenders and the relevant
Issuing Bank as their interests may appear. Any payment made by a Lender
pursuant to this paragraph to reimburse an Issuing Bank for any LC
Disbursement (other than the funding of ABR Revolving Loans as contemplated
above) shall not constitute a Loan and shall not relieve the Borrower of
its obligation to reimburse such LC Disbursement. (f) Obligations Absolute.
The Borrower's obligation to reimburse LC Disbursements as provided in
paragraph (e) of this Section shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms
of this Agreement under any and all circumstances whatsoever and
irrespective of: (i) any lack of validity or enforceability of any Letter
of Credit or this Agreement, or any term or provision therein; (ii) any
amendment or waiver of or any consent to departure from all or any of the
provisions of any Letter of Credit or this Agreement; (iii) the existence
of any claim, setoff, defense or other right that the Borrower, any other
party guaranteeing, or otherwise obligated with, the Borrower, any
Subsidiary or other Affiliate thereof or any other Person may at any time
have against the beneficiary under any Letter of Credit,any Issuing Bank,
the Administrative Agent or any Lender or any other Person, whether in
connection with this Agreement or any other related or unrelated agreement
or transaction; (iv) any draft or other document presented under a Letter
of Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect; (v) payment by
any Issuing Bank under a Letter of Credit against presentation of a draft
or other document
31
that does not comply with the terms of such Letter of Credit; and (vi) any
other act or omission to act or delay of any kind of any Issuing Bank, the
Lenders, the Administrative Agent or any other Person or any other event or
circumstance whatsoever, whether or not similar to any of the foregoing,
that might, but for the provisions of this Section, constitute a legal or
equitable discharge of the Borrower's obligations hereunder. Neither the
Administrative Agent, the Lenders nor any Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or
in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder, including any of the
circumstances specified in clauses (i) through (vi) above, as well as any
error, omission, interruption, loss or delay in transmission or delivery of
any draft, notice or other communication under or relating to any Letter of
Credit (including any document required to make a drawing thereunder), any
error in interpretation of technical terms or any consequence arising from
causes beyond the control of such Issuing Bank; provided that the foregoing
shall not be construed to excuse any Issuing Bank from liability to the
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to
the extent permitted by applicable law) suffered by the Borrower that are
caused by such Issuing Bank's failure to exercise the agreed standard of
care (as set forth below) in determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The
parties hereto expressly agree that each Issuing Bank shall have exercised
the agreed standard of care in the absence of gross negligence or wilful
misconduct on the part of such Issuing Bank, except to the extent that
applicable law requires a different standard of care. Without limiting the
generality of the foregoing, it is understood that an Issuing Bank may
accept documents that appear on their face to be in substantial compliance
with the terms of a Letter of Credit, without responsibility for further
investigation, regardless of any notice or information to the contrary, and
may make payment upon presentation of documents that appear on their face
to be in substantial compliance with the terms of such Letter of Credit;
provided that such Issuing Bank shall have the right, in its sole
discretion, to decline to accept such documents and to make such payment if
such documents are not in strict compliance with the terms of such Letter
of Credit.
(g) Disbursement Procedures. Each Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand
for payment under a Letter of Credit. Each Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether such Issuing
32
Bank has made or will make an LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse such Issuing Bank and the Lenders
with respect to any such LC Disbursement.
(h) Interim Interest. If an Issuing Bank shall make any LC Disbursement,
then, unless the Borrower shall reimburse such LC Disbursement in full on
the date such LC Disbursement is made, the unpaid amount thereof shall bear
interest, payable on demand, for each day from and including the date such
LC Disbursement is made to but excluding the date that the Borrower
reimburses such LC Disbursement, at the rate per annum then applicable to
ABR Revolving Loans; provided that, if the Borrower fails to reimburse such
LC Disbursement when due pursuant to paragraph (e) of this Section, then
Section 2.12(d) shall apply. Interest accrued pursuant to this paragraph
shall be for the account of the relevant Issuing Bank, except that interest
accrued on and after the date of payment by any Lender pursuant to
paragraph (e) of this Section to reimburse an Issuing Bank shall be for the
account of such Lender to the extent of such payment.
(i) Replacement of the Issuing Banks. Each Issuing Bank may be replaced at
any time by written agreement among the Borrower, the Administrative Agent,
the replaced Issuing Bank and the successor Issuing Bank, provided that the
successor Issuing Bank must be a Lender or an Affiliate of a Lender. The
Administrative Agent shall notify the Lenders of any such replacement of an
Issuing Bank. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.11(b). From and after the effective date
of any such replacement, (i) the successor Issuing Bank shall have all the
rights and obligations of an Issuing Bank under this Agreement with respect
to Letters of Credit to be issued by it thereafter and (ii) references
herein to the term "Issuing Bank" shall be deemed to refer to such
successor Issuing Bank, any other Issuing Bank, or any previous Issuing
Bank, or to such successor Issuing Bank, all other Issuing Banks and all
previous Issuing Banks,as the context shall require. After the replacement
of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a
party hereto and shall continue to have all the rights and obligations of
an Issuing Bank under this Agreement with respect to Letters of Credit
issued by it prior to such replacement, but shall not be required to issue
additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Majority Lenders (or, if the maturity of the
Loans has been accelerated, Lenders with LC Exposure representing at least
51% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit
33
in an account with the Administrative Agent, in the name of the
Administrative Agent and for the benefit of the Lenders, an amount in cash
equal to the LC Exposure as of such date plus any accrued and unpaid
interest thereon; provided that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall
become immediately due and payable, without demand or other notice of any
kind, upon the occurrence of any Event of Default with respect to the
Borrower described in clause (f) or (g) of Article VII. Such deposit shall
be held in New York by the Administrative Agent as collateral for the
payment and performance of the obligations of the Borrower under this
Agreement. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account.
Investment of such deposits shall, to the extent reasonably practicable, be
made at the direction of the Administrative Agent and at the Borrower's
risk and expense. Unless invested in accordance with the preceding
sentence, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such
account shall be applied by the Administrative Agent to reimburse the
relevant Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated
(but subject to the consent of Lenders with LC Exposure representing at
least 51% of the total LC Exposure), be applied to satisfy other
obligations of the Borrower under this Agreement. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of
the occurrence of an Event of Default, such amount (to the extent not
applied as aforesaid) shall be returned to the Borrower within three
Business Days after all Events of Default have been cured or waived.
SECTION 2.06. Funding of Borrowings.
(a) Each Len der shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds by
12:00 noon, New York City time, to the account of the Administrative Agent
most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of
the Borrower maintained with the Administrative Agent in New York City and
designated by the Borrower in the applicable Borrowing Request or
Competitive Bid Request; provided that ABR Revolving Loans made to finance
the reimbursement of an LC Disbursement as provided in Section 2.05(e)
shall be remitted by the Administrative Agent to the relevant Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the
34
Administrative Agent may assume that such Lender has made such share
available on such date in accordance with paragraph (a)of this Section and
may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its
share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is
made available to the Borrower to but excluding the date of payment to the
Administrative Agent, at(i) in the case of such Lender, the Federal Funds
Effective Rate or (ii) in the case of the Borrower, the interest rate
applicable to ABR Loans. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing and the Administrative Agent shall promptly
return to the Borrower any amount (including interest) paid by the Borrower
to the Administrative Agent pursuant to the immediately preceding sentence,
together with any interest thereon paid by such Lender for any day not
covered by the Borrower's payment.
SECTION 2.07. Interest Elections.
(a) Each Revolving Borrowing initially shall be of the Type specified in
the applicable Borrowing Request and, in the case of a Eurodollar Revolving
Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrower may elect to convert such
Borrowing to a different Type or to continue such Borrowing and, in the
case of a Eurodollar Revolving Borrowing, may elect Interest Periods
therefor, allas provided in this Section. The Borrower may elect different
options with respect to different portions of the affected Borrowing, in
which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each
such portion shall be considered a separate Borrowing. This Section shall
not apply to Competitive Borrowings, which may not be converted or
continued.
(b) To make an election pursuant to this Section, the Borrower shall notify
the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Revolving Borrowing of the Type resulting from such election
to be made on the effective date of such election. Each such telephonic
Interest Election Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a
written Interest Election Request in a form approved by the Administrative
Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:
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(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing
(in which case the information to be specified pursuant to clauses (iii)
and (iv) below shall be specified for each resulting Borrowing); (ii) the
effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day; (iii) whether the resulting
Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if
the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to
be applicable thereto after giving effect to such election, which shall be
a period contemplated by the definition of the term "Interest Period". If
any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of
such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request
with respect to a Eurodollar Revolving Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid
as provided herein, at the end of such Interest Period such Borrowing shall
be converted to an ABR Borrowing. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Majority Lenders, so notifies
the Borrower, then, so long as an Event of Default is continuing (i) no
outstanding Revolving Borrowing may be converted to or continued as a
Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Revolving
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.08. Expiration, Termination and Reduction of Commitments.
(a) Unless previously terminated, the Commitments shall expire on the
Maturity Date.
(b) Upon any direct or indirect sale or other disposition of Shares (other
than Shares constituting Unrestricted Margin Stock) directly or indirectly
beneficially owned by the Borrower (other than (i) pursuant to the Stock
36
Contributions, (ii) to the Borrower's direct or indirect Subsidiaries,
(iii) to any wholly-owned subsidiary of CSX/NS Acquisition Sub so long as
the Borrower's direct or indirect proportionate beneficial ownership of the
Shares shall not be reduced as a result thereof, or (iv) to NS or its
subsidiaries or any CSX/NS Acquisition Sub Entity in consideration of the
acquisition of any assets of Conrail or any of its subsidiaries by the
Borrower or any Subsidiary), the Commitments shall be automatically reduced
in an amount equal to 100% of the Net Cash Proceeds to the Borrower and the
Subsidiaries of any such sale or other disposition of Shares (other than
Shares constituting Unrestricted Margin Stock). Each such reduction shall
become effective on the fifth Business Day following receipt by the
Borrower or any Subsidiary, as the case may be, of any such Net Cash
Proceeds.
(c) The Borrower may at any time terminate, or from time to time reduce,
the Commitments; provided that (i) each reduction of the Commitments shall
be in an amount that is an integral multiple of $1,000,000 and not less
than $10,000,000 and (ii) the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the
Loans in accordance with Section 2.10, the Aggregate Outstanding Extensions
of Credit would exceed the total Commitments.
(d) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Commitments under paragraph (d) of this Section at
least three Business Days prior to the effective date of such termination
or reduction, specifying such election and the effective date thereof.
Promptly following receipt of any notice, the Administrative Agent shall
advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; provided that a
notice of termination of the Commitments delivered by the Borrower may
state that such notice is conditioned upon the effectiveness of other
credit facilities, in which case such notice may be revoked by the Borrower
(by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied. Any termination or
reduction of the Commitments shall be permanent. Each reduction of the
Commitments shall be made ratably among the Lenders in accordance with
their respective Commitments.
SECTION 2.09. Repayment of Loans; Evidence of Debt.
(a) The Borrower hereby unconditionally promises to pay (i) to the
Administrative Agent for the account of each Lender the then unpaid
principal amount of each Revolving Loan on the Maturity Date and (ii) to
the Administrative Agent for the account of each applicable Lender the then
unpaid principal amount of each Competitive Loan on the last day of the
Interest Period applicable to such Loan.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness
37
of the Borrower to such Lender resulting from each Loan made by such
Lender, including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received
by the Administrative Agent hereunder for the account of the Lenders and
each Lender's share thereof. In case of any discrepancy between the entries
made by the Administrative Agent pursuant to this paragraph and the entries
made by any Lender pursuant to paragraph (b) of this Section, such Lender's
entries shall be considered correct, in the absence of manifest error.
(d) In case of any dispute, action or proceeding relating to any Loan, the
entries made in the accounts maintained pursuant to paragraph (b) or (c) of
this Section shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein
shall not in any manner affect the obligation of the Borrower to repay the
Loans in accordance with the terms of this Agreement.
(e) Any Lender may request of the Borrower that (i) Revolving Loans made by
it be evidenced by a promissory note, substantially in the form of Exhibit
B-1 (a "Revolving Loan Note") and (ii) Competitive Loans made by it be
evidenced by a promissory note, substantially in the form of Exhibit B-2 (a
"Competitive Loan Note"). In such event, the Borrower shall prepare,
execute and deliver to such Lender promissory notes in such forms payable
to the order of such Lender (or, if requested by such Lender, to such
Lender and its registered assigns). Thereafter, the Loans evidenced by such
promissory notes and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more
promissory notes in such forms payable to the order of the payee named
therein (or, if any such promissory note is a registered note, to such
payee and its registered assigns).
SECTION 2.10. Optional and Mandatory Prepayment of Loans.
(a) The Borrower shall have the right at any time and from time to time to
prepay any Borrowing in whole or in part, subject to prior notice in
accordance with paragraph (b) of this Section; provided that the Borrower
shall not have the right to prepay any Competitive Loan without the prior
written consent of the Lender thereof.
(b) The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment to be made pursuant to paragraph
(a) of this Section (i) in the case of
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prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m.,
New York City time, three Business Days before the date of prepayment or
(ii) in the case of prepayment of an ABR Revolving Borrowing, not later
than 11:00 a.m., New York City time, one Business Day before the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion
thereof to be prepaid; provided that, if a notice of prepayment is given in
connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.08, then such notice of prepayment may be revoked
if such notice of termination is revoked in accordance with Section 2.08.
Promptly following receipt of any such notice relating to a Revolving
Borrowing, the Administrative Agent shall advise the Lenders of the
contents thereof. Each partial prepayment of any Revolving Borrowing shall
be in an amount that would be permitted in the case of an advance of a
Revolving Borrowing of the same Type as provided in Section 2.02. Each
prepayment of a Revolving Borrowing shall be applied ratably to the Loans
included in the prepaid Borrowing. Prepayments shall be accompanied by
payment of accrued interest to the extent required by Section 2.12.
(c) If, following any reduction of the total Commitments in connection with
any sale or other disposition of Shares by the Borrower or any Subsidiary,
the Aggregate Outstanding Extensions of Credit exceed the total
Commitments, the Borrower shall, without notice or demand, immediately
repay Revolving Loans in an aggregate principal amount equal to the lesser
of (i) the amount of such excess and (ii) the aggregate principal amount of
Revolving Loans then outstanding, together with interest accrued to the
date of such payment or prepayment on the principal so prepaid and any
amounts payable under Section 2.15 in connection therewith. To the extent
that after giving effect to any prepayment of Revolving Loans required by
the preceding sentence, the Aggregate Outstanding Extensions of Credit
still exceed the total Commitments, the Borrower shall, without notice or
demand, immediately deposit in a Cash Collateral Account upon terms
reasonably satisfactory to the Administrative Agent an amount equal to the
amount of such remaining excess. The Administrative Agent shall apply any
ca sh deposited in the Cash Collateral Account (to the extent thereof) to
repay the principal of each Competitive Loan on the date such principal
becomes due and payable hereunder and/or to reimburse, pursuant to Section
2.05(e), any LC Disbursement made thereafter, provided that the
Administrative Agent shall release to the Borrower from time to time such
portion of the amount on deposit in the Cash Collateral Account which is
equal to the amount by which the total Commitments at such time plus the
amount on deposit in the Cash Collateral Account exceeds the Aggregate
Outstanding Extensions of Credit at such time. "Cash Collateral Account"
means an account, in the name of the Administrative Agent for the benefit
of the Lenders, established by the Borrower with the Administrative Agent
and over which the Administrative Agent shall have exclusive dominion and
control, including the
39
exclusive right of withdrawal for application in accordance with this
Section.
SECTION 2.11. Fees.
(a) The Borrower agrees to pay to the Administrative Agent for the account
of each Lender a facility fee, which shall accrue at the Applicable Rate on
the daily amount of the Commitment of such Lender (whether used or unused)
during the period from and including the Effective Date to but excluding
the date on which such Commitment expires or is terminated; provided that,
if such Lender continues to have any Revolving Credit Exposure after its
Commitment terminates, then such facility fee shall continue to accrue on
the daily amount of such Lender's Revolving Credit Exposure from and
including the date on which its Commitment terminates to but excluding the
date on which such Lender ceases to have any Revolving Credit Exposure.
Accrued facility fees shall be payable in arrears on the last day of March,
June, September and December of each year and on the date on which the
Commitments terminate, commencing on the first such date to occur after the
date hereof; provided that any facility fees accruing after the date on
which the Commitments terminate shall be payable on demand. All facility
fees shall be computed on the basis of a year of 365 (or 366 in the case of
a leap year) days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative Agent for the
account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at a rate per annum
equal to the Applicable Rate applicable to interest on Eurodollar Revolving
Loans on the average daily amount of such Lender's LC Exposure (excluding
any portion thereof attributable to unreimbursed LC Disbursements) during
the period from and including the Effective Date to but excluding the later
of the date on which such Lender's Commitment terminates and the date on
which such Lender ceases to have any LC Exposure, and (ii) to each Issuing
Bank a fronting fee, which shall accrue at the rate or rates per annum
separately agreed upon between the Borrower and such Issuing Bank on the
average daily amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) relating to the Letters of
Credit issued by such Issuing Bank during the period from and including the
Effective Date to but excluding the later of the date of termination of the
Commitments and the date on which there ceases to be any such LC Exposure,
as well as such Issuing Bank's standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Participation fees and fronting fees accrued through
and including the last day of March, June, September and December of each
year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date;
provided that all such fees shall be payable on the date on which the
Commitments terminate and any such fees accruing after the date
40
on which the Commitments terminate shall be payable on demand. Any other
fees payable to any Issuing Bank pursuant to this paragraph shall be
payable within 10 days after demand. All participation fees and fronting
fees shall be computed on the basis of a year of 365 (or 366 in the case of
a leap year) days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its own
account, fees payable in the amounts and at the times separately agreed
upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to an Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
facility fees and participation fees, to the Lenders. Fees paid shall not
be refundable under any circumstances.
SECTION 2.12. Interest.
(a) The Loans comprising each ABR Borrowing shall bear interest at a rate
per annum equal to the Alternate Base Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at a
rate per annum equal to (i) in the case of a Eurodollar Revolving Loan, the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Rate or (ii) in the case of a Eurodollar Competitive
Loan, the LIBO Rate for the Interest Period in effect for such Borrowing
plus (or minus, as applicable) the Margin applicable to such Loan.
(c) Each Fixed Rate Loan shall bear interest at a rate per annum equal to
the Fixed Rate applicable to such Loan.
(d) Notwithstanding the foregoing, if any principal of or interest on any
Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise,
such overdue amount shall bear interest, after as well as before judgment,
from and including the date such amount shall become due, but excluding the
date such amount shall be paid in accordance with Section 2.17, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2%
plus the rate otherwise applicable to such Loan as provided above or (ii)
in the case of any other amount, 2% plus the rate applicable to ABR Loans
as provided above.
(e) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued
pursuant to paragraph (d) of this Section shall be payable on demand, (ii)
in the event of any repayment or prepayment of any Loan (other than a
prepayment of
41
an ABR Revolving Loan prior to the end of the Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the
date of such repayment or prepayment, (iii) in the event of any conversion
of any Eurodollar Revolving Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shallbe payable on the
effective date of such conversion and (iv) all accrued interest shall be
payable upon termination of the Commitments.
(f) All interest hereunder shall be computed on the basis of a year of 360
days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year),
andin each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable
Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by
the Administrative Agent, and such determination shall be presumptively
correct absent manifest error.
SECTION 2.13. Alternate Rate of Interest.
If prior to the commencement of any Interest Period for a Eurodollar
Borrowing:
(a) the Administrative Agent determines (which determination shall be
presumptively correct, absent manifest error) that adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO
Rate, as applicable, for such Interest Period; or (b) the Administrative
Agent is advised by the Majority Lenders (or, in the case of a Eurodollar
Competitive Loan, the Lender that is required to make such Loan) that the
Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period will not adequately and fairly reflect the cost to such Lenders (or
Lender) of making or maintaining their Loans (or its Loan) included in such
Borrowing for such Interest Period; then the Administrative Agent shall
give notice thereof to the Borrower and the Lenders by telephone or
telecopy as promptly as practicable thereafter and, until the
Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing
to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing
shall be ineffective, (ii) if any Borrowing Request requests a Eurodollar
Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing and
(iii) any request by the Borrower for a Eurodollar Competitive Borrowing
shall be ineffective; provided that (A) if the circumstances giving rise to
such notice do not affect all the Lenders, then requests by
42
the Borrower for Eurodollar Competitive Borrowings may be made to Lenders
that are not affected thereby and (B) if the circumstances giving rise to
such notice affect only one Type of Borrowings, then the other Type of
Borrowings shall be permitted.
SECTION 2.14. Increased Costs.
(a) If any Change in Law shall: (i) impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (except any
such reserve requirement reflected in the Adjusted LIBO Rate) or any
Issuing Bank; or (ii) impose on any Lender or any Issuing Bank or the
London interbank market any other condition affecting this Agreement or
Eurodollar Loans or Fixed Rate Loans made by such Lender or any Letter of
Credit or participation therein; and the result of any of the foregoing
shall be to increase the cost to such Lender of making or maintaining any
Eurodollar Loan or Fixed Rate Loan or to increase the cost to such Lender
or any Issuing Bank of participating in, issuing or maintaining any Letter
of Credit or to reduce the amount of any sum received or receivable by such
Lender or such Issuing Bank hereunder in respect of such Loan or Letter of
Credit by an amount deemed by such Lender to be material, then the Borrower
will pay to such Lender or such Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or such Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.
(b) If any Lender or any Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or such Issuing Bank's capital or on the
capital of such Lender's or such Issuing Bank's holding company, if any, as
a consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued by
such Issuing Bank, to a level below that which such Lender or such Issuing
Bank or such Lender's or such Issuing Bank's holding company could have
achieved but for such Change in Law (taking into consideration such
Lender's or such Issuing Bank's policies and the policies of such Lender's
or such Issuing Bank's holding company with respect to capital adequacy) by
an amount deemed by such Lender or such Issuing Bank to be material, then
from time to time the Borrower will pay to such Lender or such Issuing
Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or such Issuing Bank or such Lender's or such
Issuing Bank's holding company for any such reduction suffered.
43
(c) A certificate of a Lender or an Issuing Bank setting forth the amount
or amounts (including the basis there for and the calculation thereof)
necessary to compensate such Lender or such Issuing Bank or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower and shall be presumptively
correct absent manifest error. The Borrower shall pay such Lender or such
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or any Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver
of such Lender's or such Issuing Bank's right to demand such compensation;
provided that the Borrower shall not be required to compensate a Lender or
an Issuing Bank pursuant to this Section for any increased costsor
reductions incurred more than three months prior to the date that such
Lender or such Issuing Bank, as the case may be, notifies the Borrower of
the Change in Law giving rise to such increased costs or reductions and of
such Lender's or such Issuing Bank's intention to claim compensation
therefor; provided further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the three-month period
referred to above shall be extended to include the period of retroactive
effect thereof.
(e) Notwithstanding the foregoing provisions of this Section, a Lender
shall not be entitled to compensation pursuant to this Section in respect
of any Competitive Loan if the Change in Law that would otherwise entitle
it to such compensation shall have been publicly announced prior to
submission of the Competitive Bid pursuant to which such Loan was made.
SECTION 2.15. Break Funding Payments.
In the event of
(a) the payment of any principal of any Eurodollar Loan or Fixed Rate Loan
other than on the last day of an Interest Period applicable thereto
(including as a result of an Event of Default), (b) the conversion of any
Eurodollar Loan other than on the last day of the Interest Period
applicable thereto, (c) the failure to borrow, convert, continue or prepay
any Revolving Loan on the date specified in any notice delivered pursuant
hereto (regardless of whether such notice is permitted to be revocable
under Section 2.10(b) and is revoked in accordance herewith), (d) the
failure to borrow any Competitive Loan after accepting the Competitive Bid
to make such Loan, or (e) the assignment of any Eurodollar Loan or Fixed
Rate Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.18,
then, in any such event, the Borrower shall compensate each Lender for the
loss and the actual cost and expense attributable to such event. In the
case of a Eurodollar Loan, the loss to any Lender attributable to any such
event shall be deemed to include an amount reasonably determined by such
Lender to be equal to the excess, if any, of (i) the amount of interest
that such Lender
44
would pay for a deposit equal to the principal amount of such Loan for the
period from the date of such payment, conversion, failure or assignment to
the last day of the then current Interest Period for such Loan (or, in the
case of a failure to borrow, convert or continue, the duration of the
Interest Period that would have resulted from such borrowing, conversion or
continuation) if the interest rate payable on such deposit were equal to
the Adjusted LIBO Rate (in the case of a Eurodollar Revolving Loan) or the
LIBO Rate (in the case of a Eurodollar Competitive Loan) for such Interest
Period, over (ii) the amount of interest that such Lender would earn on
such principal amount for such period if such Lender were to invest such
principal amount for such period at the interest rate that would be bid by
such Lender (or an Affiliate of such Lender) for dollar deposits from other
banks in the eurodollar market at the commencement of such period. A
certificate of any Lender setting forth any amount or amounts that such
Lender is entitled to receive (including the basis therefor and the
calculation thereof) pursuant to this Section shall be delivered to the
Borrower and shall be presumptively correct absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.
SECTION 2.16. Taxes.
(a) Any and all payments by or on account of any obligation of the Borrower
hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, each
Lender or each Issuing Bank (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each Lender and
each Issuing Bank, within 30 days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts
payable under this Section) paid by the Administrative Agent, such Lender
or such Issuing Bank, as the case may be, and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto to the extent
such penalties, interest and expenses shall not result from any action or
inaction on the part of the Administrative Agent, such Lender or such
Issuing Bank, as the case may be, whether or not such Indemnified Taxes or
Other
45
Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability (including the basis therefor and the calculation thereof)
delivered to the Borrower by a Lender or an Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or an
Issuing Bank, shall be presumptively correct absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a
copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Unless after the date any Foreign Lender becomes a Lender hereunder
there is a Change in Law which would prevent such Foreign Lender from duly
completing and delivering such documentation and such Foreign Lender so
advises the Administrative Agent and the Borrower, such Foreign Lender
shall deliver to the Borrower (with a copy to the Administrative Agent), at
the time or times prescribed by applicable law or reasonably requested by
the Borrower, such properly completed and executed documentation prescribed
by applicable law as will permit payments made under this Agreement to be
made without withholding.
(f) If the Borrower determines in good faith that a reasonable basis exists
for contesting a Tax, the relevant Lender or the Administrative Agent, as
applicable, shall cooperate with the Borrower in challenging such Tax at
the Borrower's expense if requested by the Borrower. If any Lender or the
Administrative Agent, as applicable, obtains a credit against or receives a
refund or reduction (whether by way of direct payment or by offset) of any
Tax for which payment has been made pursuant to this Section, which credit,
refund or reduction in the good faith judgment of such Lender or the
Administrative Agent, as the case may be, (and without any obligation to
disclose its tax records) is allocable to such payment made under this
Section, the amount of such credit, refund or reduction (together with any
interest received thereon) promptly shall be paid to the Borrower to the
extent payment has been made in full by the Borrower pursuant to this
Section.
SECTION 2.17. Payments Generally; Pro Rata Treatmen t; Sharing of Set-offs.
(a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or under Section 2.14, 2.15 or 2.16, or otherwise) prior to
12:00 noon, New York City time, on the date when due, in immediately
available funds, without set-off or counterclaim. Any amounts received
after such time on any date may, in the discretion of
46
the Administrative Agent, be deemed to have been received on the next
succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at
270 Park Avenue, New York, New York, except payments to be made directly to
an Issuing Bank as expressly provided herein and except that payments
pursuant to Sections 2.14, 2.15, 2.16 and 9.03 shall be made directly to
the Persons entitled thereto. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable
for the period of such extension at the same applicable rate. All payments
hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, to pay interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, to pay
principal and unreimbursed LC Disbursements then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or counterclaim
or otherwise, obtain payment in respect of any principal of or interest on
any of its Revolving Loans or participations in LC Disbursements resulting
in such Lender receiving payment of a greater proportion of the aggregate
amount of its Revolving Loans and participations in LC Disbursements and
accrued interest thereon than the proportion received by any other Lender,
then the Lender receiving such greater proportion shall purchase (for cash
at face value) participations in the Revolving Loans and participations in
LC Disbursements of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest
on their respective Revolving Loans and participations in LC Disbursements;
provided that (i) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest, and (ii) the provisions of this
paragraph shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other
than to the Borrower or any Subsidiary or
47
Affiliate thereof (as to which the provisions of this paragraph shall
apply). The Borrower consents to the foregoing and agrees, to the extent it
may effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may, subject to
Section 9.08, exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or an Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute
to the Lenders or such Issuing Bank, as the case may be, the amount due. In
such event, if the Borrower has not in fact made such payment, then each of
the Lenders or such Issuing Bank, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender or such Issuing Bank with interest thereon, for
each day from and including the date such amount is distributed to it to
but excluding the date of payment to the Administrative Agent, at the
Federal Funds Effective Rate.
(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.05(d) or (e), 2.06(b) or 2.17(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such
Lender's obligations under such Sections until all such unsatisfied
obligations are fully paid.
SECTION 2.18. Mitigation Obligations; Replacement of Lenders.
(a) If any Lender or a Participant in such Lender's Loans requests
compensation under Section 2.14, or if the Borrower is required to pay any
additional amount to any Lender or a Participant in such Lender's Loans or
any Governmental Authority for the account of any Lender or Participant
pursuant to Section 2.16, then such Lender or Participant shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or Affiliates, if, in the
reasonable judgment of such Lender or Participant, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to
Section 2.14 or 2.16, as the case may be, in the future and (ii) would not
subject such Lender or Participant to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender or Participant. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by
any Lender or Participant in connection with any such designation or
assignment. Without
48
limiting the generality of the foregoing, each Lender and Participant shall
use all reasonable efforts to mitigate the effect upon the Borrower of any
increased capital requirement and shall assess any cost related to such
increased capital on a nondiscriminatory basis among the Borrower and other
borrowers of such Lender or Participant to which such cost applies and such
Lender or Participant shall not be entitled to be compensated for any
increased capital requirement unless it is, as a result of such law,
regulation, guideline or request, such Lender's or Participant's policy
generally to seek to exercise such rights, where available, against other
borrowers of such Lender or Participant.
(b) If any Lender or a Participant in such Lender's Loans requests
compensation under Section 2.14, or if the Borrower is required to pay any
additional amount to any Lender or Participant or any Governmental
Authority for the account of any Lender or Participant pursuant to Section
2.16, or if any Lender defaults in its obligation to fund Loans hereunder,
or if any Lender shall have a credit rating of C/D (or its equivalent) or
lower by Thomson BankWatch, Inc. (or any successor thereto), then the
Borrower shall have the right, at its sole expense, upon notice to such
Lender and the Administrative Agent, to require such Lender to assign and
delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 9.04), all its interests, rights and
obligations under this Agreement (other than any outstanding Competitive
Loans held by it) to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment);
provided that (i) the Borrower shall have received the prior written
consent of the Administrative Agent (and, if a Commitment is being
assigned, each Issuing Bank) which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal
to the outstanding principal of its Loans (other than Competitive Loans)
and participations in LC Disbursements, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder, from the assignee (to
the extent of such outstanding principal and accrued interest and fees) or
the Borrower (in the case of all other amounts) and (iii) in the case of
any such assignment resulting from a claim for compensation under Section
2.14 or payments required to be made pursuant to Section 2.16, such
assignment will result ina reduction in such compensation or payments. A
Lender shall not be required to make any such assignment and delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and
delegation cease to apply.
49
ARTICLE III
Representations and Warranties
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers.
Each of the Borrower and the Significant Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to
carry on its business as now conducted and, except where the failure to do
so, individually or in the aggregate, would not result in a Material
Adverse Effect, is qualified to do business in, and is in good standing in,
every jurisdiction where such qualification is required.
SECTION 3.02. Authorization; Enforceability.
The Transactions and, upon consummation of any of the Acquisition
Transactions, the Borrower's participation in such Acquisition
Transactions, are within the Borrower's corporate powers and have been duly
authorized by all necessary corporate action and, if required, action by
shareholders of the Borrower. Upon consummation of any of the Acquisition
Transactions, such Acquisition Transactions are within the corporate powers
of CSX/NS Acquisition Sub and the other CSX/NS Entities party thereto and
have been duly authorized by all necessary corporate action and, if
required, all necessary shareholder action. This Agreement has been duly
executed and delivered by the Borrower and constitutes, and each Note when
executed and delivered by the Borrower will constitute, a legal, valid and
binding obligation of the Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject
to general principles of equity, regardless of whether considered in a
proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts.
The Transactions and, upon consummation by the Borrower, any
Subsidiary or any CSX/NS Entity party thereto of any of the Acquisition
Transactions, such Acquisition Transactions,
(a) do not require any consent or approval of, registration or filing with,
or any other action by, any Governmental Authority, except such as have
been obtained or made and are in full force and effect and such filings
which may be made following the consummation of the Acquisition
Transactions to reflect or evidence the consummation thereof,
(b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of the Borrower, any Subsidiary
or any CSX/NS Entity or any order of any Governmental Authority,
(c) will not violate or result in a default, or give rise to a right to
require any material payment, under any indenture, agreement or other
instrument binding upon the Borrower, any Subsidiary or any of their
respective assets (or, in the case of CSX/NS
50
Acquisition Sub (from and after the date the Borrower acquires any of the
equity interests of CSX/NS Acquisition Sub pursuant to the Acquisition
Transactions) or Conrail or any of its subsidiaries (from and after the
date that it becomes a subsidiary of CSX/NS Acquisition Sub, but excluding
any NS Conrail Subsidiaries), any indenture, agreement or other instrument
a violation, default or required payment under which would result in a
Material Adverse Effect), and (d) will not result in the creation or
imposition of any Lien on any material asset of the Borrower or any
Subsidiary (or, in the case of CSX/NS Acquisition Sub (from and after the
date the Borrower acquires any of the equity interests of CSX/NS
Acquisition Sub pursuant to the Acquisition Transactions) or Conrail or any
of its subsidiaries (from and after the date it becomes a subsidiary of
CSX/NS Acquisition Sub, but excluding any NS Conrail Subsidiaries), any
Lien on any of its assets if such Lien would result in a Material Adverse
Effect).
SECTION 3.04. Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Lenders its consolidated
statement of financial position, and statements of earnings, changes in
shareholders' equity and cash flows (i) as of and for the fiscal year ended
December 27, 1996, reported on by Ernst & Young LLP, independent public
accountants, and (ii) except for statements of changes in shareholders'
equity, as of and for the fiscal quarter ended March 28, 1997, certified by
a Financial Officer. Such financial statements present fairly, in all
material respects, the financial position and results of operations and
cash flows of the Borrower and its consolidated Subsidiaries as of such
dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the
statements referred to in clause (ii) above.
(b) Since December 27, 1996 there has been no Material Adverse Effect.
SECTION 3.05. Properties.
(a) Each of the Borrower and the Subsidiaries has good title to, or valid
leasehold interests in or rights to use, all its real and personal property
material to its business, except for such irregularities that, individually
or in the aggregate, would not result in a Material Adverse Effect.
(b) Each of the Borrower and the Subsidiaries owns, or is licensed to use,
all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Borrower and
the Subsidiaries does not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the aggregate,
would not result in a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters.
(a) There is no pending litigation or administrative proceeding
51
or other legal or regulatory development (other than with respect to the
CSX/NS Acquisition) that would be reasonably likely to result in a Material
Adverse Effect or to materially adversely affect the rights and remedies of
the Lenders hereunder.
(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, would not result in a
Material Adverse Effect, neither the Borrower nor any Subsidiary nor any
CSX/NS Entity (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with
respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.
SECTION 3.07. Compliance with Laws and Agreements.
Each of the Borrower, the Subsidiaries and the CSX/NS Entities is in
compliance with all laws, regulations and orders of any Governmental
Authority applicable to it or its property (including Regulation U) and all
indentures, agreements and other instruments binding upon it or its
property, except where the failure to do so, individually or in the
aggregate, would not result in a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status.
Neither the Borrower nor any Subsidiary is (a) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act
of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
SECTION 3.09. Taxes.
Each of the Borrower, the Subsidiaries and the CSX/NS Entities has
timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to
have been paid by it, except (a) Taxes that are being contested in good
faith by appropriate proceedings and for which the Borrower, such
Subsidiary or such CSX/NS Entity, as applicable, has set aside on its books
adequate reserves or (b) to the extent that the failure to do so would not
result in a Material Adverse Effect.
SECTION 3.10. ERISA.
No ERISA Event has occurred or is reasonably expected to occur that,
when taken together with all other such ERISA Events for which liability is
reasonably expected to occur, would result in a Material Adverse Effect.
SECTION 3.11. Disclosure.
None of the reports, financial statements, certificates or other
information furnished by or on behalf of the Borrower to the Administrative
Agent or any Lender in connection with the negotiation of the Existing
Credit Agreement or this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished)
52
contains any material misstatement of fact or omits to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that,
with respect to projected or pro forma financial information, the Borrower
represents only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time, it being understood that
such pro forma statements or projections are inherently subjective and are
subject to significant uncertainties and contingencies many of which are
beyond the control of the Borrower and that no assurance can be given that
such projections or pro forma financial statements will be realized.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date.
This Agreement shall not become effective until the date on which each
of the following conditions is satisfied (or waived in accordance with
Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received from the
Borrower and the Majority Lenders either (i) counterparts of this Agreement
signed on behalf of such parties or (ii) written evidence satisfactory
tothe Administrative Agent (which may include telecopy transmission of a
signed signature page of this Agreement) that such parties have each signed
a counterpart of this Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of (i) Wachtell, Lipton, Rosen & Katz, special counsel
for the Borrower, substantially in the form of Exhibit C, and (ii) the
General Counsel or an Assistant General Counsel of the Borrower,
substantially in the form of Exhibit D. The Borrower hereby requests such
counsel to deliver such opinions.
(c) The Administrative Agent shall have received (i) a certificate of the
Borrower, dated the Effective Date, as to the incumbency and signature of
the officers of the Borrower executing this Agreement and authorized to
execute Notes reasonably satisfactory in form and substance to the
Administrative Agent and (ii) true and complete copies of the certificate
of incorporation and by-laws of the Borrower, certified as of the Effective
Date as complete and correct copies thereof by the Secretary or an
Assistant Secretary of the Borrower.
53
(d) The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a Financial
Officer of the Borrower, confirming compliance with the conditions set
forth in paragraphs (a) and (b) of Section 4.02. The Administrative Agent
shall notify the Borrower and the Lenders of the Effective Date, and such
notice shall be conclusive and binding.
SECTION 4.02. Each Credit Event.
The obligation of each Lender to make a Loan on the occasion of any
Borrowing, and of each Issuing Bank to issue, amend, renew or extend any
Letter of Credit, is subject to the satisfaction of the following
conditions:
(a) The representations and warranties of the Borrower set forth in this
Agreement shall be true and correct on and as of the date of such Borrowing
or the date of issuance, amendment, renewal or extension of such Letter of
Credit, as applicable.
(b) At the time of and immediately after giving effect to such Borrowing or
the issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.
(c) There shall be no pending litigation or administrative proceedings or
other legal or regulatory developments with respect to the CSX/NS
Acquisition that, in the reasonable judgment of at least three of the
Agents, would be reasonably likely to prohibit the CSX/NS Acquisition or to
result in a Material Adverse Effect and the Agents shall have received a
certificate of a Financial Officer to the effect that no such litigations,
proceedings or developments exist in such Financial Officer's reasonable
judgment; provided that the proposal for or the pendency of proceedings for
approval of the CSX/NS Acquisition before the Surface Transportation Board,
or any administrative, judicial or other contest with respect to such
approval process at the Surface Transportation Board, shall not violate
this Section.
Each Borrowing and each issuance, amendment, renewal or extension of a
Letter of Credit shall be deemed to constitute a representation and
warranty by the Borrower on the date thereof as to the matters specified in
paragraphs (a) and (b) of this Section.
54
ARTICLE V
Affirmative Covenants
Until the Commitments shall have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or been
terminated and all LC Disbursements shall have been reimbursed, the
Borrower covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information.
The Borrower will furnish to each Lender through the Administrative
Agent:
(a) as soon as available but in any event within 120 days after the end of
each fiscal year of the Borrower, its audited consolidated statement of
financial position and related statements of earnings, changes in
shareholders' equity and cash flows as of the end of and for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on by Ernst & Young LLP or other independent
public accountants of recognized national standing (without a "going
concern" or like qualification or exception and without any qualification
or exception as to the scope of such audit) to the effect that such
consolidated financial statements present fairly in all material respects
the financial position, results of operations and cash flows of the
Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP; provided, however, that the Borrower may deliver, in
lieu of the foregoing, the annual report of the Borrower for such fiscal
year on Form 10-K filed with the SEC, but only so long as the financial
statements contained in such annual report on Form 10-K are substantially
the same in content as the financial statements referred to in the
preceding provisions of this paragraph (a);
(b) as soon as available but in any event within 60 days after the end of
each of the first three fiscal quarters of each fiscal year of the
Borrower, its consolidated statement of financial position and related
statements of earnings and cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial position, results
of operations and cash flows of the Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP, subject to
normal year-end audit adjustments and the absence of
55
footnotes; provided, however, that the Borrower may deliver, in lieu of the
foregoing, the quarterly report of the Borrower for such fiscal quarter on
Form 10-Q filed with the SEC, but only so long as the financial statements
contained in such quarterly report on Form 10-Q are substantially the same
in content as the financial statements referred to in the preceding
provisions of this paragraph (b);
(c) concurrently with each delivery of financial statements under clause
(a) or (b) above, a certificate of a Financial Officer of the Borrower (i)
certifying as to whether, to the best knowledge of such Financial Officer,
a Default has occurred and is continuing and, if a Default has occurred and
is continuing, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 6.06 and (iii)
stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect of
such change on the financial statements accompanying such certificate;
(d) concurrently with each delivery of financial statements under clause
(a) above, a letter signed by the accounting firm that reported on such
financial statements to the effect that, in the course of the examination
upon which their report for such fiscal year was based (but without any
special or additional audit procedures for that purpose other than review
of the terms and provisions of this Agreement), nothing came to their
attention that caused them to believe that there were any Defaults or
Events of Default involving accounting matters or, if such accountants
became aware of any such Defaults or Events of Default, specifying the
nature thereof;
(e) promptly after the same become publicly available, copies of all
periodic and other reports on Forms 8-K, 10-Q and 10-K and all proxy
statements filed by the Borrower or any Subsidiary with the SEC or any
other documents distributed by the Borrower to its shareholders generally
which contain the equivalent information to that contained in such Forms or
proxy statements;
(f) upon any sale or other disposition of Shares by the Borrower or any
Subsidiary, a certificate of a Financial Officer setting forth in
reasonable detail the calculations required to determine the portion of
such Shares which constitute Restricted Margin Stock, the portion of such
Shares which constitute Unrestricted Margin Stock and the Net Cash Proceeds
attributable to each such portion; and
(g) promptly following any request therefor, such other information
regarding the operations and financial condition
56
of the Borrower or any Subsidiary, or compliance with the terms of this
Agreement, as the Administrative Agent or any Lender may reasonably
request.
SECTION 5.02. Notices of Material Events.
The Borrower will furnish to each Lender through the Administrative
Agent prompt written notice of the following:
(a) within three Business Days after any Financial Officer obtains
knowledge of the occurrence of any Default which is continuing, the
occurrence of such Default;
(b) (i) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any Subsidiary that would, in the reasonable judgment of the
Borrower, result in a Material Adverse Effect and (ii) without limiting the
foregoing, the filing or commencement of, or any material development in,
any litigation or administrative proceeding with respect to the CSX/NS
Acquisition prior to the consummation thereof;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, would, in the reasonable judgment of
the Borrower, result in a Material Adverse Effect;
(d) the final denial (after exhaustion of all available appeals) of any
governmental approval required for the CSX/NS Acquisition; and
(e) any other development that results in, or would in the reasonable
judgment of the Borrower result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a
statement of a Financial Officer or other executive officer of the Borrower
setting forth the details of the event or development requiring such notice
and any action taken or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business.
The Borrower will, and will cause each Significant Subsidiary to, do
or cause to be done all things necessary to preserve, renew and keep in
full force and effect its legal existence and the rights, licenses,
permits, privileges and franchises it reasonably deems necessary to the
conduct of its business; provided that the foregoing shall not prohibit any
merger, consolidation or disposition not prohibited under Section 6.05 or
prohibit the Borrower or any Significant Subsidiary from discontinuing any
business or forfeiting any right, license, permit, privilege or franchise
to the extent it reasonably deems appropriate in the ordinary course of its
business.
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SECTION 5.04. Payment of Obligations.
The Borrower will, and will cause each Subsidiary and each CSX Conrail
Subsidiary to, pay its obligations, including Tax liabilities, that, if not
paid, would result in a Material Adverse Effect before the same shall
become delinquent or in default, except where the validity or amount
thereof is being contested in good faith by appropriate proceedings.
SECTION 5.05. Maintenance of Properties; Insurance.
The Borrower will, and will cause each Significant Subsidiary to, (a)
keep and maintain all property material to the conduct of its business in
good working order and condition, ordinary wear and tear excepted, and (b)
maintain insurance with financially sound insurance companies (including
captive or affiliated insurance companies) or, to the extent consistent
with prudent business practice, programs of self-insurance, in each case in
such amounts, with such deductibles and against such risks as are
reasonably appropriate.
SECTION 5.06. Books and Records; Inspection Rights.
The Borrower will, and will cause each Significant Subsidiary to, keep
and maintain proper books of record and account in accordance with GAAP.
The Borrower will, and will cause each Subsidiary and each CSX Conrail
Subsidiary to, permit any representatives designated by the Administrative
Agent or any Lender, upon reasonable prior notice and coordinated with the
Administrative Agent, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants, all
during normal business hours and at such reasonable times and as often as
reasonably requested.
SECTION 5.07. Compliance with Laws.
The Borrower will, and will cause each Subsidiary and CSX Conrail
Subsidiary to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, would not result in a
Material Adverse Effect.
SECTION 5.08. Use of Proceeds, Commitments and Letters of Credit.
The proceeds of the Loans may be used to finance the CSX/NS
Acquisition and for working capital and other general corporate purposes,
and a portion of the Commitments may be used to support commercial paper
issued by the Borrower. Letters of Credit will be issued only to support
obligations of the Borrower and the Subsidiaries, contingent or otherwise,
incurred or arising in the ordinary course of business.
SECTION 5.09. Federal Regulations.
No part of the proceeds of any Loan will be used for "purchasing" or
"carrying" (within the respective meanings of each of the quoted terms
under Regulation G or Regulation U of the Board as now and from time to
time hereafter in effect) any Margin Stock in violation of the applicable
requirements of such Regulations. If requested by any
58
Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-3 or FR Form U-1 referred to
in said Regulation G or Regulation U, as the case may be.
ARTICLE VI
Negative Covenants
Until the Commitments shall have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or been
terminated and all LC Disbursements shall have been reimbursed, the
Borrower covenants and agrees with the Lenders that:
SECTION 6.01. Limitation on Share Purchase Debt.
The Borrower will not, and will not permit any Subsidiary to, create,
incur or assume Debt in an aggregate principal amount for the Borrower and
the Subsidiaries (together with any Allocable CSX/NS Debt of CSX/NS
Acquisition Sub and/or Green incurred to finance the direct or indirect
purchase of Conrail Shares) in excess of $4,400,000,000 the proceeds of
which are used to finance (a) the direct or indirect purchase of Shares,
(b) the making of contributions and/or loans to any CSX/NS Entity for the
purchase of Shares or (c) any payments in respect of the sale or transfer
by Conrail or any of its subsidiaries of any of their assets to the
Borrower and the Subsidiaries pursuant to the Final Asset Division (other
than Debt incurred to refinance any existing Indebtedness or other payment
obligations of Conrail or any of its subsidiaries not incurred in
anticipation of such sale or transfer).
SECTION 6.02. Limitation on Subsidiary Debt.
The Borrower will not permit any Subsidiary or any CSX Conrail
Subsidiary to create, incur or assume any Debt (other than Debt
substantially secured by a Lien or Liens on assets of such Subsidiary or
such CSX Conrail Subsidiary permitted under Section 6.03) after the
Effective Date (or, in the case of any CSX Conrail Subsidiary, after the
Control Date), except:
(a) extensions, renewals and replacements of any Debt existing on the date
hereof (or, in the case of any CSX/NS Acquisition Sub Entity, existing on
the Control Date) that do not increase the outstanding principal amount
thereof (other than to finance payments made in connection therewith);
(b) Debt of any Subsidiary or CSX Conrail Subsidiary to the Borrower or any
other Subsidiary or CSX Conrail Subsidiary;
59
(c) Debt of any Person that becomes a Subsidiary after the date hereof;
provided that such Debt exists at the time such Person becomes a Subsidiary
and is not created in contemplation of or in connection with such Person
becoming a Subsidiary;
(d) Debt of any Subsidiary or CSX Conrail Subsidiary as an account party in
respect of letters of credit; and
(e) other Debt; provided that (i) at the time of the creation, incurrence
or assumption of such Debt and after giving effect thereto, the aggregate
principal amount of all such Debt of the Subsidiaries does not exceed an
amount equal to 10% of Total Capitalization at such time and (ii) any
Allocable CSX/NS Debt of the CSX/NS Acquisition Sub Entities incurred after
the Effective Date (or, in the case of Conrail and its subsidiaries,
incurred after the Control Date) shall, without duplication, be treated as
"Debt" of a Subsidiary for purposes of clause (i) of this proviso.
SECTION 6.03. Liens.
The Borrower will not, and will not permit any Subsidiary or CSX
Conrail Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it (other than
Unrestricted Margin Stock) to secure Debt of the Borrower, any Subsidiary
or any CSX Conrail Subsidiary, except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Borrower or any Subsidiary or
Conrail or any of its subsidiaries existing on the date hereof (or, in the
case of any CSX/NS Acquisition Sub Entity, existing on the Control Date);
provided that (i) such Lien shall not apply to any other property or asset
of the Borrower, any Subsidiary or any CSX Conrail Subsidiary and (ii) such
Lien shall secure only those obligations which it secures on the date
hereof (or, in the case of any CSX/NS Acquisition Sub Entity, on the
Control Date) and extensions, renewals and replacements thereof that do not
increase the outstanding principal amount thereof (other than to finance
payments made in connection therewith);
(c) any Lien existing on any property or asset prior to the acquisition
thereof by the Borrower, any Subsidiary or any CSX/NS Entity or existing on
any property or asset of any Person that becomes a Subsidiary or CSX/NS
Entity after the date hereof prior to the time such Person becomes a
Subsidiary or CSX/NS Entity; provided that (i) such Lienis not created in
contemplation of or in connection with such acquisition or such Person
becoming a Subsidiary or CSX/NS Entity, as the case may be, (ii) such Lien
shall not apply to any other property or assets of the Borrower, any
Subsidiary or any CSX Conrail Subsidiary and (iii) such Lien
60
shall secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Subsidiary or CSX/NS Entity,
as the case may be, and extensions, renewals and replacements thereof that
do not increase the outstanding principal amount thereof (other than to
finance payments made in connection therewith);
(d) Liens on railroad locomotives, auto racks, rolling stock, vessels,
barges, containers, vehicles, terminals and other fixed or capital assets
acquired, constructed, improved or refurbished by or for the Borrower, any
Subsidiary or any CSX Conrail Subsidiary; provided that (i) such Liens and
the Debt secured thereby are incurred (A) prior to or within two years
after such acquisition or the completion of such construction, improvement
or refurbishment or (B) with respect to the assets of Conrail or any of its
subsidiaries, prior to or within two years after the Control Date, (ii) the
Debt secured thereby does not exceed 100% of the cost of acquiring,
constructing, improving or refurbishing such assets and (iii) such Liens
shall not apply to any other property or assets of the Borrower, any
Subsidiary or any CSX Conrail Subsidiary;
(e) Liens securing Debt in respect of the transactions described in
Schedule 6.03; and
(f) Liens not otherwise permitted hereunder; provided that, at the time of
the creation, incurrence or assumption of any Debt secured by any such Lien
and after giving effect thereto, the aggregate principal amount of Debt of
the Borrower and the Subsidiaries secured by Liens permitted under this
clause (f), together with, without duplication, the sum of (i) the
Attributable Debt then outstanding in respect of Sale/Leaseback
Transactions permitted under Section 6.04(c) in respect of which the
obligations of the Borrower or any Subsidiary do not constitute Capital
Lease Obligations, (ii) the aggregate then outstanding principal amount of
Allocable CSX/NS Debt of the CSX/NS Acquisition Sub Entities incurred after
the Effective Date (or, in the case of Conrail and its subsidiaries,
incurred after the Control Date) then secured by Liens on the assets of any
CSX/NS Entity (other than Liens which would be permitted under paragraphs
(a) through (e) of this Section assuming the CSX/NS Acquisition Sub
Entities were Subsidiaries) and (iii) the aggregate then outstanding
Allocable CSX/NS Attributable Debt of the CSX/NS Acquisition Sub Entities
incurred after the Effective Date (or, in the case of Conrail and its
subsidiaries, incurred after the Control Date), does not exceed an amount
equal to 10% of Total Capitalization at such time.
SECTION 6.04. Limitation on Sale/Leaseback Transactions.
The Borrower will not, and will not permit any Subsidiary or any CSX
Conrail Subsidiary to, enter into any
61
arrangement with any Person providing for the leasing by the Borrower, any
Subsidiary or any CSX Conrail Subsidiary of real or personal property
(other than Unrestricted Margin Stock) which has been or is to be sold or
transferred by the Borrower, such Subsidiary or such CSX Conrail Subsidiary
to such Person or to any other Person to whom funds have been or are to be
advanced by such Person on the security of such property or rental
obligations of the Borrower, such Subsidiary or such CSX Conrail Subsidiary
(a "Sale/Leaseback Transaction"), except:
(a) any Sale/Leaseback Transaction described in Schedule 6.03;
(b) any arrangement with respect to any railroad locomotive, auto rack,
rolling stock, vessel, barge, container, vehicle, terminal or other fixed
or capital asset; provided that such arrangement is entered into (A) prior
to or within two years after the acquisition, construction, improvement or
refurbishment of such railroad locomotive, auto rack, rolling stock,
vessel, barge, container, vehicle, terminal or other fixed or capital asset
or (B) with respect to the assets of Conrail or any of its subsidiaries,
prior to or within two years after the Control Date; and
(c) Sale/Leaseback Transactions not otherwise permitted hereunder; provided
that, (i) if the obligations of the Borrower, any Subsidiary or any CSX
Conrail Subsidiary in respect of any such Sale/Leaseback Transaction
constitute Capital Lease Obligations, the Liens created in respect of such
Sale/Leaseback Transactions are permitted under Section 6.03 and (ii) if
the obligations of the Borrower, any Subsidiary or any CSX Conrail
Subsidiary in respect of any such Sale/Leaseback Transaction do not
constitute Capital Lease Obligations, at the time of the creation,
incurrence or assumption of any Attributable Debt in connection with such
Sale/Leaseback Transaction and after giving effect thereto, the aggregate
principal amount of Attributable Debt of the Borrower and the Subsidiaries
then outstanding in respect of leases entered into in connection with
Sale/Leaseback Transactions permitted under this clause (ii), together
with, without duplication, the aggregate principal amount of Debt of the
Borrower and the Subsidiaries then secured by Liens permitted under Section
6.03(f), the aggregate principal amount of Allocable CSX/NS Debt of the
CSX/NS Acquisition Sub Entities incurred after the Effective Date (or, in
the case of Conrail and its subsidiaries, incurred after the Control Date)
then secured by Liens on the assets of any CSX/NS Entity (other than Liens
which would be permitted under paragraphs (a) through (e) of Section 6.03
assuming the CSX/NS Acquisition Sub Entities were Subsidiaries) and the
aggregate then outstanding Allocable CSX/NS Attributable Debt of the CSX/NS
Acquisition Sub Entities incurred after the Effective Date
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(or, in the case of Conrail and its subsidiaries, incurred after the
Control Date), does not exceed an amount equal to 10% of Total
Capitalization at such time.
SECTION 6.05. Fundamental Changes.
The Borrower will not merge into or consolidate with any other Person,
or permit any other Person to merge into or consolidate with it, or sell,
transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned
or hereafter acquired), unless
(a) the surviving corporation in any such merger or consolidation or the
Person which acquires all or substantially all of the assets of the
Borrower shall be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia
(the "Successor Corporation") and shall expressly assume, by amendment to
this Agreement executed by the Borrower, the Successor Corporation and the
Administrative Agent, the due and punctual payment of the principal of and
interest on the Loans and all other amounts payable under this Agreement
and any Notes and the payment and performance of every covenant hereof on
the part of the Borrower to be performed or observed,
(b) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing and
(c) the Borrower shall have delivered a certificate of a Financial Officer
and a written opinion of counsel reasonably satisfactory to the
Administrative Agent (who may be counsel to the Borrower), each stating
that such transaction and amendment comply with this Section and that all
conditions precedent herein provided for relating to such transaction have
been satisfied; provided that the Borrower and the Subsidiaries will be
permitted to sell, transfer and otherwise dispose of Unrestricted Margin
Stock without regard to the foregoing restrictions.
SECTION 6.06. Financial Covenant.
The Borrower shall not permit the ratio of Total Debt to Total
Capitalization to exceed (a) at any time prior to the Control Date, 0.65 to
1.00, and (b) at any time thereafter, 0.55 to 1.00. Neither the
Indebtedness nor the shareholders' equity of Conrail and its subsidiaries
shall be included in computing compliance with this Section prior to the
Control Date.
SECTION 6.07. Ownership of Railroad Subsidiaries.
The Borrower shall not
(a) permit any Railroad Subsidiary to cease to be a wholly-owned Subsidiary
of the Borrower or
(b) directly o r indirectly, sell, transfer or otherwise dispose of any
capital stock of any CSX Conrail Railroad Subsidiary; provided that (i)
neither the Borrower nor any Subsidiary shall be in any way restricted
under this Section from selling or otherwise disposing of Unrestricted
Margin Stock and (ii) neither the Borrower nor any Subsidiary shall be
prohibited pursuant to clause (b) from transferring the capital stock of
any CSX Conrail Railroad Subsidiary (A) to the Borrower's direct or
indirect Subsidiaries, (B) to any wholly-owned subsidiary of CSX/NS
Acquisition Sub so long as the Borrower's direct or indirect proportionate
63
beneficial ownership of such capital stock shall not be reduced as a result
thereof or (C) to NS or its subsidiaries or any CSX/NS Acquisition Sub
Entity in consideration of the acquisition of any assets of Conrail or any
of its subsidiaries by the Borrower or any Subsidiary.
SECTION 6.08. Sales of Unrestricted Margin Stock.
The Borrower shall not, and shall not permit any Subsidiary or CSX/NS
Entity to,
(a) sell or otherwise dispose of any Conrail Shares constituting
Unrestricted Margin Stock other than in exchange for cash or cash
equivalents or
(b) fail to maintain the proceeds of any such sale or other disposition as
cash, cash equivalents or short-term investments; provided that (i) to the
extent that the Borrower shall elect to reduce the Commitments pursuant to
Section 2.08(d) at any time after any such sale or other disposition, the
requirements of clause (b) above shall cease to apply to the portion of
such proceeds as shall be equal to the aggregate amount of any such
reductions and (ii) this Section shall not apply to sales or other
dispositions of Unrestricted Margin Stock (A) pursuant to the Stock
Contributions, (B) to the Borrower's direct or indirect Subsidiaries, (C)
to any wholly- owned subsidiary of CSX/NS Acquisition Sub so long as the
Borrower's direct or indirect proportionate beneficial ownership of the
Shares shall not be reduced as a result thereof, or (D) to NS or its
subsidiaries or any CSX/NS Acquisition Sub Entity in consideration of the
acquisition of any assets of Conrail or any of its subsidiaries by the
Borrower or any Subsidiary.
SECTION 6.09. Limitation on Guarantees and Liens of CSX/NS Entities.
The Borrower shall not permit any CSX/NS Entity to create, incur,
assume or suffer to exist any Guarantee in respect of, or Liens upon any of
the property, assets or revenues, whether now owned or hereafter acquired,
of such CSX/NS Entity to secure, Indebtedness of NS or any of its
subsidiaries (other than CSX/NS Entities).
SECTION 6.10. CSX/NS Agreement.
The Borrower shall not
(a) consummate the CSX/NS Acquisition other than substantially in
accordance with the terms of the CSX/NS Agreement, and
(b) agree to any material modification or amendment of any of the terms of
the CSX/NS Agreement if, in the reasonable judgment of at least three of
the Agents, such modification or amendment would be reasonably likely to
result in a Material Adverse Effect (it being agreed that the execution of
the definitive documentation contemplated by the CSX/NS Agreement shall not
be a material modification or amendment of the CSX/NS Agreement to the
extent that the terms of such definitive documentation are not materially
inconsistent with the terms of the CSX/NS Agreement).
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ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise; provided that, if any such
failure shall result from the malfunctioning or shutdown of any wire
transfer or other payment system reasonably employed by the Borrower to
make such payment or from an inadvertent error of a technical or clerical
nature by the Borrower or any bank or other entity reasonably employed by
the Borrower to make such payment, no Event of Default shall result under
this paragraph (a) during the period (not in excess of two Business Days)
required by the Borrower to make alternate payment arrangements;
(b) the Borrower shall fail to pay any interest on any Loan or any fee or
any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of
ten days;
(c) any representation or warranty made or deemed made by or on behalf of
the Borrower or any Subsidiary in or in connection with this Agreement or
any amendment or modification hereof, or in any report, certificate,
financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof,
shall prove to have been incorrect in any material respect when made or
deemed made;
(d) the Borrower shall fail to observe or perform any covenant, condition
or agreement contained in this Agreement (other than those specified in
clause (a), (b) or (c) of this Article), and such failure shall continue
unremedied for a period of 30 days after notice thereof from the
Administrative Agent (given at the request of any Lender) to the Borrower;
(e) any event of default or similar event or condition occurs (and
continues after any applicable grace period) under any mortgage, indenture
or instrument under which there may be issued, or by which there may be
secured or evidenced, any Material Indebtedness, whether such Material
Indebtedness now exists or shall hereafter be created and shall result in
any Material Indebtedness becoming due prior to its scheduled maturity
(other than any such event or
65
condition arising solely out of the violation by the Borrower or any
Subsidiary of any covenant in any way restricting the Borrower's, or any
such Subsidiary's, right or ability to sell, pledge or otherwise dispose of
Unrestricted Margin Stock) and such acceleration shall not be rescinded or
annulled in accordance with the terms of such mortgage, indenture or
investment, as the same case may be; provided that (i) this clause (e)
shall not apply to secured Indebtedness that becomes due as a result of the
voluntary permitted sale or transfer of the property or assets securing
such Indebtedness and (ii) any acceleration of Indebtedness of any CSX/NS
Entity (other than a CSX Conrail Subsidiary) shall not be included for
purposes of determining if an Event of Default has occurred under this
paragraph so long as such acceleration (x) does not result from a breach by
the Borrower of its obligations under the CSX/NS Agreement (or the
definitive documentation referred to therein) or (y) would not result in a
Material Adverse Effect;
(f) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Borrower or any Significant Subsidiary or Significant CSX/NS
Entity or its debts, or of a substantial part of its assets, underany
Federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or any Significant Subsidiary or Significant CSX/NS Entity or for
a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(g) the Borrower or any Significant Subsidiary or Significant CSX/NS Entity
shall (i) voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, (ii) consent to the institution of, or fail to contest
in a timely and appropriate manner, any proceeding or petition described in
clause (f) of this Article, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any Significant Subsidiary or Significant
CSX/NS Entity or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the foregoing;
66
(h) the Borrower or any Significant Subsidiary or Significant CSX/NS Entity
shall become unable, admit in writing or fail generally to pay its debts as
they become due;
(i) one or more judgments for the payment of money in an aggregate amount
(to the extent not covered by insurance) in excess of $75,000,000 shall be
rendered against the Borrower, any Subsidiary, any CSX/NS Entity or any
combination thereof and the same shall remain unpaid or undischarged for a
period of 60 consecutive days during which execution shall not be
effectively stayed, provided that any judgment rendered against any CSX/NS
Entity (other than a CSX Conrail Subsidiary) shall not be included for
purposes of determining if an Event of Default has occurred under this
paragraph so long as such judgment (x) does not result from a breach by the
Borrower of its obligations under the CSX/NS Agreement (or the definitive
documentation referred to therein) or (y) would not result in a Material
Adverse Effect;
(j) an ERISA Event shall have occurred that, in the reasonable opinion of
the Majority Lenders, when taken together with all other ERISA Events that
have occurred, would result in a Material Adverse Effect; or
(k) a Change in Control shall occur and on the date which is four months
after the occurrence of such Changein Control the Applicable Rate shall be
determined by reference to Category 6; then, and in every such event (other
than an event with respect to the Borrower described in clause (f) or (g)
of this Article as a result of which the Administrative Agent and the
Lenders shall not be permitted, without special relief, to exercise their
rights or remedies under clause (i) or (ii) below), and at any time
thereafter during the continuance of such event, the Administrative Agent
(with the consent of the Majority Lenders) may, and at the request of the
Majority Lenders shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or
in part, in which case any principal not so declared to be due and payable
may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with
accrued interest thereon and all fees and other obligations of the Borrower
accrued hereunder, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; and in case of any event with respect to the
Borrower described in clause (f) or (g) of this Article described above,
the Commitments shall automatically terminate and the principal of the
Loans then outstanding,
67
together with accrued interest thereon and all fees and other obligations
of the Borrower accrued hereunder, shall automatically become due and
payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
ARTICLE VIII
The Agents
Each of the Lenders and Issuing Banks hereby irrevocably appoints The
Chase Manhattan Bank as its agent and authorizes The Chase Manhattan Bank
to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof, together with
such actions and powers as are reasonably incidental thereto. Each Lender
acknowledges that Bank of America National Trust and Savings Association
and NationsBank, N.A. shall be Co-Syndication Agents with respect to this
Agreement and that The Bank of Nova Scotia shall be the Documentation Agent
with respect to this Agreement.
Each bank serving as an Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the
same as though it were not an Agent, and such bank and its Affiliates may
accept deposits from, lend money to and generally engage in any kind of
business with the Borrower or any Subsidiary or other Affiliate thereof as
if it were not an Agent hereunder.
No Agent shall have any duties or obligations except those expressly
set forth herein. Without limiting the generality of the foregoing, (a) no
Agent shall be subject to any fiduciary or other implied duties, regardless
of whether a Default has occurred and is continuing, (b) no Agent shall
have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that the Administrative Agent is required to exercise
in writing by the Lenders entitled to so require, and (c) except as
expressly set forth herein, no Agent shall have any duty to disclose, nor
shall such Agent be liable for the failure to disclose, any information
relating to the Borrower or any of the Subsidiaries that is communicated to
or obtained by such Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken
by it with the consent or at the request of the Lenders entitled to so
require or in the absence of its own gross negligence or wilful misconduct.
No Agent shall be deemed to have knowledge of any Default unless and until
written notice thereof is given to the Administrative Agent by the Borrower
or a Lender, and no Agent shall be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation
made to any Lender in or in connection with this
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Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii)the performance or
observance by the Borrower of any of the covenants, agreements or other
terms or, except as provided in clause (v) below, conditions set forth
herein, (iv) with respect to parties other than such Agent, the validity,
enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, or (v) the satisfaction of any condition
set forth in Article IV or elsewhere herein, other than to confirm receipt
of items expressly required to be delivered to the Administrative Agent.
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it in good
faith to be genuine and to have been signed or sent by the proper Person.
Each Agent also may rely upon any statement made to it orally or by
telephone and believed by it in good faith to be made by the proper Person,
and shall not incur any liability for relying thereon. Each Agent may
consult with legal counsel (who may be counsel for the Borrower),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in good faith in accordance
with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent and for which it is responsible. The
Administrative Agent and any such sub-agent may perform any and all its
duties and exercise its rights and powers through their respective Related
Parties. The exculpatory provisions of the preceding paragraphs shall apply
to any such sub-agent reasonably selected by the Administrative Agent and
to the Related Parties of the Agents and any such sub- agent, and shall
apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative
Agent may resign at any time by notifying the Lenders, the Issuing Banks
and the Borrower. Upon any such resignation, the Majority Lenders shall
have the right, with the consent of the Borrower (which consent shall not
be required if at the time of such appointment any Default or Event of
Default shall have occurred and be continuing), to appoint a successor. If
no successor shall have been so appointed by the Majority Lenders and shall
have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders and the Issuing Banks,
appoint a successor Administrative Agent which shall be a commercial bank
with an office in New York, New York and having a combined capital and
69
surplus of at least $1,000,000,000. Upon the acceptance of its appointment
as Administrative Agent hereunder by a successor, such successor shall
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative
Agent shall be the same as those payable to its predecessor unless
otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this
Article and Section 9.03 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was
acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance
upon any Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender represents that it has
not relied upon the Unrestricted Margin Stock in its credit analysis or its
decision to enter into this Agreement. Each Lender also acknowledges that
it will, independently and without reliance upon any Agent or any other
Lender and based on such documents and information as it shall from time to
time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or
any document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices.
Except in the case of notices and other communications expressly
permitted to be given by telephone, all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent
by telecopy, as follows:
(a) if to the Borrower, to it at CSX Corporation, One James Center, 901
East Cary Street, Richmond, VA 23219, Attention of Treasurer (Telecopy No.
(804) 783-1346);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Agent Bank
Services, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081,
Attention of Sandra Miklave (Telecopy No. (212) 552-5658), with a copy to
The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017,
Attention of Julie Long (Telecopy No. (212) 972- 9854); and
70
(c) if to any Issuing Bank or any other Lender, to it at its address (or
telecopy number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices
and other communications hereunder by notice to the other parties hereto.
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have
been given on the date of receipt.
SECTION 9.02. Waivers; Amendments.
(a) No failure or delay by the Administrative Agent, any Issuing Bank or
any Lender in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Issuing Banks and the Lenders hereunder are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or consent to
any departure by the Borrower therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b)of this Section, and
then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter
of Credit shall not be construed as a waiver of any Default, regardless of
whether the Administrative Agent, any Lender or any Issuing Bank may
havehad notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Majority Lenders or by the Borrower
and the Administrative Agent with the consent of the Majority Lenders;
provided that no such agreement shall (i) increase the Commitment of any
Lender without the written consent of such Lender, (ii) reduce the
principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the scheduled date
of payment of the principal amount of any Loan or LC Disbursement, or any
interest thereon, or any fees payable hereunder, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of
expiration of any Commitment, without the written consent of each Lender
affected thereby, (iv) change Section 2.10(c) or change 2.17(b) or (c) in a
manner that would alter the pro rata sharing of payments required thereby,
in either case without the written consent of each Lender, or (v) change
any of the provisions of this Section or the definition of "Majority
Lenders" or any other provision hereof specifying the number or percentage
of Lenders required to waive, amend or modify any
71
rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent or any Issuing Bank hereunder without the prior
written consent of the Administrative Agent or such Issuing Bank, as the
case may be.
SECTION 9.03. Expenses; Indemnity; Damage Waiver.
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the
Administrative Agent, in connection with the syndication of the credit
facilities provided for herein, the preparation and administration of this
Agreement or any amendments, modifications or waivers of the provisions
hereof (whether or not the transactions contemplated hereby or thereby
shall be consummated), (ii) all out-of-pocket expenses incurred by each
Issuing Bank in connection with the issuance, amendment, renewal or
extension by it of any Letter of Credit or any demand for payment
thereunder and (iii) all out-of-pocket expenses incurred by the
Administrative Agent, any Issuing Bank or any Lender, including the
reasonable fees, charges and disbursements of any counsel for the
Administrative Agent, any Issuing Bank or any Lender, in connection with
the enforcement or protection of its rights in connection with this
Agreement or any Note, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder,
including in connection with any workout, restructuring or negotiations in
respect thereof.
(b) The Borrower shall indemnify the Administrative Agent, each Issuing
Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and hold
each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the reasonable fees, charges
and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement or any agreement
or instrument contemplated hereby, the performance by the parties hereto of
their respective obligations hereunder or thereunder or the consummation of
the Transactions or any other transactions contemplated hereby, (ii) any
Loan or Letter of Credit or the use of the proceeds therefrom (including
any refusal by an Issuing Bank to honor a demand for payment under a Letter
of Credit issued by it if the documents presented in connection with such
demand do not strictly comply with the terms of such Letter of Credit), or
(iii) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract,
tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses resulted from the gross
72
negligence or wilful misconduct of such Indemnitee. The foregoing
indemnification shall not cover any such claims, damages, losses,
liabilities or expenses relating to (i) any Taxes or (ii) any costs or
capital requirements (whenever imposed) to any Lender or any corporation
controlling such Lender as a result of such Lender's Commitment or its
Loans or participations in Letters of Credit, but in each case without
prejudice to Sections 2.14, 2.15, 2.16 and 9.03.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent or an Issuing Bank under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay
to the Administrative Agent or such Issuing Bank, as the case may be, such
Lender's Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was
incurred by or asserted against the Administrative Agent or such Issuing
Bank in its capacity as such.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable promptly after
written demand therefor, accompanied by such documentation as the Borrower
may reasonably request to evidence the basis for, and calculation of, such
amount.
SECTION 9.04. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior
written consent of each Lender (and any attempted assignment or transfer by
the Borrower without such consent shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and
assigns permitted hereby and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Banks
and the Lenders) any legal or equitable right, remedy or claim under or by
reason of this Agreement.
(b) Any Lender may, at no additional cost to the Borrower, assign to one or
more assignees all or a portion of its
73
rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it); provided that (i)
except in the case of an assignment to a Lender or an Affiliate of a
Lender, each of the Borrower, the Administrative Agent and the Issuing
Banks must give its prior written consent to such assignment (which consent
shall not be unreasonably withheld), (ii) except in the case of an
assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender's Commitment, the amount of
the Commitment of the assigning Lender subject to each such assignment and
the amount of its Commitment remaining thereafter (determined in each case
as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent) shall not be less than
$25,000,000 unless each of the Borrower and the Administrative Agent
otherwise consent, (iii) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement (including its Revolving Loans), except
that this clause (iii) shall not apply to rights in respect of outstanding
Competitive Loans, (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance, together
with a processing and recordation fee of $3,500, and (v) the assignee, if
it shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire; provided further that any consent of the
Borrower otherwise required under this paragraph shall not be required if
an Event of Default under clause (f)or (g) of Article VII has occurred and
is continuing. Upon acceptance and recording pursuant to paragraph (d) of
this Section, from and after the effective date specified in each
Assignment and Acceptance, the assignee thereunder shall be a party hereto
and, to the extent of (but not greater than) the interest assigned by such
Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party
hereto but shall continue to be entitled to the benefits of Sections 2.14,
2.15, 2.16 and 9.03 and be subject to Section 9.12). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that
does not comply with this paragraph shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the
Commitment of, and principal amount of the Loans and LC Disbursements owing
to, each
74
Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be prima facie evidence thereof absent
manifest error, and the Borrower, the Administrative Agent, the Issuing
Banks and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection during normal business hours by
the Borrower at any reasonable time and from time to time upon reasonable
advance notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b)
of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in
the Register. No assignment shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in this
paragraph.
(e) Any Lender may, without the consent of, and at no additional cost to,
the Borrower, the Administrative Agent or the Issuing Banks, sell
participations to one or more banks or other entities (a "Participant") in
all or a portion of such Lender's rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing
to it); provided that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to
the other parties hereto for the performance of such obligations and (iii)
the Borrower, the Administrative Agent, the Issuing Banks and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement.
Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of
the Participant, agree to any amendment, modification or waiver described
in the first proviso to Section 9.02(b) that affects such Participant.
Subject to paragraph (f) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.14, 2.15 and
2.16 to the same (but no greater) extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this
Section.
(f) A Participant shall not be entitled to receive any greater payment
under Section 2.14, 2.15 or 2.16 than the
75
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant.
(g) Any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement to secure obligations of
such Lender, including any such pledge or assignment to a Federal Reserve
Bank, and this Section shall not apply to any such pledge or assignment of
a security interest; provided that no such pledge or assignment of a
security interest shall release a Lender from any of its obligations
hereunder or substitute any such assignee for such Lender as a party
hereto.
SECTION 9.05. Survival.
All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement shall be considered to have
been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement and the making of any Loans and
issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that any Agent,
any Issuing Bank or any Lender may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.14, 2.15, 2.16, 9.03
and 9.12 and Article VIII shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Letters of
Credit and the Commitments or the termination of this Agreement or any
provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness.
This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute
an original, but all of which when taken together shall constitute a single
contract. This Agreement and any separate letter agreements with respect to
fees payable to the Administrative Agent or any Issuing Bank constitute the
entire contract among the parties relating to the subject matter hereof and
supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear
the signatures of each of the other parties hereto, and thereafter shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Delivery of an executed
counterpart of a
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signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 9.07. Severability.
Any provision of this Agreement held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof; and the invalidity of a
particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
SECTION 9.08. Right of Setoff.
If an Event of Default shall have occurred and be continuing, each
Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held
and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement
held by such Lender, irrespective of whether or not such Lender shall have
made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff) which such
Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by
the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of the Supreme Court of
the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any
judgment resulting therefrom, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York
State court or, to the extent permitted by law, in such Federal court. Each
of the parties hereto agrees that a final and non-appealable judgment in
any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement shall affect any right that the
Administrative Agent, any Issuing Bank or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement against the
Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and
77
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any court referred to in paragraph (b) of
this Section. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION.
SECTION 9.11. Headings.
Article and Section headings and the Table of Contents used herein are
for convenience of reference only, are not part of this Agreement and shall
not affect the construction of, or be taken into consideration in
interpreting, this Agreement.
SECTION 9.12. Confidentiality.
Each of the Administrative Agent, the Issuing Banks and the Lenders
agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees, representatives and agents,
including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to
keep such Information confidential), (b) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
or requested by any regulatory authority, but only, except with respect to
bank examiners, after the Administrative Agent or the relevant Issuing Bank
or Lender provides such written notice to the Borrower of such proposed
disclosure as is reasonable under the circumstances and permitted by law,
(c) to any other party to this Agreement, (d) in connection with the
exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or any Note or the enforcement of rights
hereunder or thereunder, (e) subject to an agreement containing provisions
78
substantially the same as those of this Section, to any assignee of or
Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement, (f) with the consent of the
Borrower or (g) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section, (ii) becomes
available to the Administrative Agent, any Issuing Bank or any Lender on a
nonconfidential basis from a source other than the Borrower (other than a
source known to be disclosing such Information in violation of a
confidentiality agreement with the Borrower) or (iii) was available to the
Administrative Agent or the relevant Issuing Bank or Lender prior to such
Person becoming a Lender. For the purposes of this Section, "Information"
means all information received from the Borrower relating to the Borrower
or its business, other than any such information that is available to the
Administrative Agent, any Issuing Bank or any Lender on a nonconfidential
basis prior to disclosure by the Borrower; provided that, in the case of
information received from the Borrower after the date hereof, such
information is clearly identified at the time of delivery as confidential.
Any Person required to maintain the confidentiality of Information as
provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CSX CORPORATION,
as Borrower
By: /s/ Gregory R.Weber
Title: Vice President and
Treasurer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Co-Syndication Agent and as a
Lender,
By: /s/ Craig S.Munro
Title: Managing Director
THE BANK OF NOVA SCOTIA,
as Documentation Agent and as a
Lender,
By: /s/ J. R. Trimble
Title: Senior Relationship Manager
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a
Lender,
By: /s/ Julie S. Long
Title: Vice President
NATIONSBANK, N.A.,
as Co-Syndication Agent and as a
Lender,
By: /s/ E. Turner Coggin
Title: Senior Vice President
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PNC BANK, NATIONAL ASSOCIATION
By: /s/ Daniel K. Fitzpatrick
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: /s/ Randy Glass
Title: Vice President
ABN AMRO BANK N.V., NEW YORK BRANCH
By: /s/ John W. Deegan
Title: Vice President
By: /s/ George M. Dugan
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Gregory L. Batson
Title: Vice President
CITIBANK, N.A.
By: /s/ David L. Harris
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ Robert N. Finney
Title: Managing Director
By: /s/ Christian Bourqui
Title: Associate
FIRST NATIONAL BANK OF CHICAGO
By: /s/ Gregory J. Sjullie
Title: Vice President
81
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
By: /s/ Toshiaki Yakura
Title: Senior Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED NEW YORK BRANCH
By: /s/ John Veltri
Title: Deputy General Manager
MELLON BANK, N.A.
By: /s/ Martin J. Randal
Title: Banking Officer
ROYAL BANK OF CANADA
By: /s/ Michael J. Madnick
Title: Manager
BANK OF MONTREAL
By: /s/ Cecily M. Mistarz
Title: Managing Director
BARNETT BANK N.A. - JACKSONVILLE
By: /s/ Cindy S. Stover
Title: Vice President
CORESTATES BANK, N.A.
By: /s/ Beverly J. Coller
Title: Vice President
82
CAISSE NATIONALE DE CREDIT
AGRICOLE
By: /s/ Craig Welch
Title: First Vice President
DEUTSCHE BANK A.G., NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By: /s/ Stephan A. Wiedemann
Title: Director
By: /s/ Thomas A. Foley
Title: Assistant Vice President
THE DAI-ICHI KANGYO BANK, LTD.,
NEW YORK BRANCH
By: /s/ David J. McCann
Title: Account Officer
FLEET NATIONAL BANK
By: /s/ Dorothy E. Bambach
Title: Senior Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By: /s/ Patricia Loret De Mola
Title: Senior Vice President
83
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED, NEW YORK
BRANCH
By: /s/ Margaret Holloway
Title: Vice President & Manager
NATIONAL AUSTRALIA BANK LIMITED
By: /s/ R. A. Perry III
Title: Senior Vice President
THE NORINCHUKIN BANK NEW YORK
BRANCH
By: /s/ Takeshi Akimoto
Title: General Manager
THE NORTHERN TRUST COMPANY
By: /s/ James F. T. Monhart
Title: Vice President
THE SAKURA BANK, LIMITED
By: /s/ Yasumasa Kikuchi
Title: Senior Vice President
THE SANWA BANK, LIMITED
By: /s/ Christian Kambour
Title: Vice President
STANDARD CHARTERED BANK
By: /s/ Christopher R. Knight
Title: Vice President
By: /s/ Jacob H. Yahiayan
Title: Assistant Vice President
84
THE YASUDA TRUST & BANKING CO.,
LTD.
By: /s/ Rohn Laudenschlager
Title: Senior Vice President
CRESTAR BANK
By: /s/ Keith A. Hubbard
Title: Senior Vice President
<PAGE>
Exhibit 15.1
AWARENESS LETTER OF PRICE WATERHOUSE LLP,
INDEPENDENT ACCOUNTANTS
June 2, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that CSX Corporation has included our report dated April 16, 1997
related to Conrail Inc. (issued pursuant to the provisions of Statement on
Auditing Standards No. 71) in its Current Report on Form 8-K to be filed on June
4, 1997. We are also aware of our responsibilities under the Securities Act of
1933.
Very truly yours,
/s/ PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
<PAGE>
Exhibit 23.1
CONSENT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in the Current Report on Form 8-K of CSX
Corporation dated June 4, 1997 of our report dated January 21, 1997, except as
to Note 2, which is as of March 7, 1997, on the consolidated financial
statements of Conrail Inc. for the year ended December 31, 1996, which appears
in Exhibit 99.3 of this Form 8-K.
/s/ PRICE WATERHOUSE LLP
Philadelphia, PA 19103
June 2, 1997
<PAGE>
Exhibit 99.1
CONTACT: CSX Norfolk Southern
Thomas E. Hoppin Robert Fort
(804) 782-1450 (757) 629-2710
FOR IMMEDIATE RELEASE
CSX AND NORFOLK SOUTHERN CLOSE
TENDER OFFER FOR CONRAIL SHARES
RICHMOND and NORFOLK, Va., May 27, 1997 -- CSX Corporation (NYSE: CSX) and
Norfolk Southern Corporation (NYSE: NSC) today announced that their jointly
owned acquisition company, Green Acquisition Corp., has accepted for payment
more than 94 percent of Conrail Inc.'s outstanding shares not already owned by
CSX and Norfolk Southern. Based on a preliminary count, approximately 57,407,389
Conrail shares had been tendered (including 8,937,900) shares by notice of
guaranteed delivery) into the joint tender offer that expired at 5:00 p.m. EDT
on Friday, May 23. Payment for shares will be made promptly.
These shares, together with the Conrail shares already owned by CSX and Norfolk
Southern, represent approximately 96 percent of the outstanding Conrail shares.
In connection with the tender offer and subsequent merger, Norfolk Southern will
have contributed 58 percent, and CSX 42 percent, toward the aggregate purchase
price for all shares. All Conrail shares acquired will be placed in a joint
voting trust pending Surface Transportation Board approval of the proposed
transaction. Conrail shares not purchased in the tender offer will be converted
into the right to receive $115 per share in cash in a merger that will occur as
soon as practicable following the payment for the shares received in the tender
offer.
"With the successful completion of this tender offer, we move another step
closer to delivering the benefits of this transaction to all parties," said John
W. Snow, CSX's chairman, president and chief executive officer. "At CSX, our
management team is focused on continuing to improve our existing railroad
operations, while preparing for the smooth and efficient integration into CSX of
the Conrail assets we will operate."
David R. Goode, Norfolk Southern's chairman, president and chief executive
officer, said, "With the financial part of this transaction nearly completed, we
will now present to the Surface Transportation Board our plan for improving the
rail system in the East. Norfolk Southern eagerly looks forward to the day when
we can put that plan into action and begin delivering its many benefits to
customers, communities and the nation's economy."
CSX and Norfolk Southern expect to file their joint application with the STB in
mid-June. Management of both companies are confident the application will win
support from customers and the public.
CSX Corporation, headquartered in Richmond, Va, is an international
transportation company offering a variety of rail, container-shipping,
intermodal, trucking, barge and contract logistics management services. CSX's
home page can be reached at http://www.CSX.com.
Norfolk Southern is a Virginia-based holding company with headquarters in
Norfolk, Va. It owns a major freight railroad, Norfolk Southern Railway Company,
which operates more than 14,300 miles of road in 20 states, primarily in the
Southeast and Midwest, and the Province of Ontario, Canada. The corporation also
owns North American Van Lines, Inc., and Pocahontas Land Corporation, a natural
resources company. Norfolk Southern's home page can be reached at
http://www.nscorp.com.
<PAGE>
Exhibit 99.2
CONTACTS: Thomas E. Hoppin
CSX
(804) 782-1450
Robert Fort
Norfolk Southern
(757) 629-2710
FOR IMMEDIATE RELEASE
June 3, 1997
CSX AND NORFOLK SOUTHERN ANNOUNCE
CONSUMMATION OF CONRAIL MERGER
RICHMOND and NORFOLK, Va. -- CSX Corporation (NYSE: CSX) and Norfolk Southern
Corporation (NYSE: NSC) announced today that a jointly controlled company has
been merged with and into Conrail Inc. The merger was effective June 2. Pursuant
to the merger, all Conrail shares not owned by CSX, Norfolk Southern, Conrail,
or their respective affiliates were converted into the right to receive $115
cash per share, and the remaining Conrail shares were cancelled. Transmittal
documents will be mailed promptly to shareholders entitled to receive the merger
payment. Following the merger, CSX and Norfolk Southern indirectly own all of
the shares of the surviving corporation (named Conrail Inc.) which will be held
in a joint voting trust pending federal regulatory approval.
<PAGE>
Exhibit 99.3
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and Board of Directors
Conrail Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Conrail Inc.
and subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 21, 1997,
except as to Note 2, which is as of March 7, 1997
<PAGE>
CONRAIL INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
---------------------------
($ In Millions Except Per Share Data) 1996 1995 1994
------ ------ ------
Revenues $3,714 $3,686 $3,733
------ ------ ------
Operating expenses
Way and structures 462 485 499
Equipment 803 766 815
Transportation 1,385 1,324 1,379
General and administrative 328 370 350
Voluntary separation programs (Note 3) 135
Asset disposition charge (Note 10) 285
Early retirement program (Note 11) 84
------ ------ ------
Total operating expenses 3,113 3,230 3,127
------ ------ ------
Income from operations 601 456 606
Interest expense (182) (194) (192)
Other income, net (Note 12) 112 130 118
------ ------ ------
Income before income taxes 531 392 532
Income taxes (Note 7) 189 128 208
------ ------ ------
Net income $ 342 $ 264 $ 324
====== ====== ======
Net income per common share (Note 1)
Primary $ 4.25 $ 3.19 $ 3.90
Fully diluted 3.89 2.94 3.56
Ratio of earnings to fixed charges
(Note 1) 3.19x 2.51x 3.19x
See accompanying notes.
<PAGE>
CONRAIL INC.
CONSOLIDATED BALANCE SHEETS
December 31,
----------------
($ In Millions) 1996 1995
------ ------
ASSETS
Current assets
Cash and cash equivalents $ 30 $ 73
Accounts receivable 630 614
Deferred tax assets (Note 7) 293 333
Material and supplies 139 158
Other current assets 25 28
------ ------
Total current assets 1,117 1,206
Property and equipment, net (Note 4) 6,590 6,408
Other assets 695 810
------ ------
Total assets $8,402 $8,424
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 99 $ 89
Current maturities of long-term debt (Note 6) 130 181
Accounts payable 135 113
Wages and employee benefits 143 183
Casualty reserves 141 110
Accrued and other current liabilities (Note 5) 444 494
------ ------
Total current liabilities 1,092 1,170
Long-term debt (Note 6) 1,876 1,911
Casualty reserves 190 217
Deferred income taxes (Note 7) 1,478 1,393
Special income tax obligation (Note 7) 346 440
Other liabilities 313 316
------ ------
Total liabilities 5,295 5,447
------ ------
Commitments and contingencies (Note 13)
Stockholders' equity (Notes 2 and 9)
Preferred stock (no par value; 15,000,000
shares authorized; no shares issued)
Series A ESOP convertible junior preferred
stock (no par value; 10,000,000 shares
authorized; 7,303,920 and 9,770,993 shares
issued and outstanding, respectively) 211 282
Unearned ESOP compensation (222) (233)
Common stock ($1 par value; 250,000,000
shares authorized; 87,768,428 and 85,392,392
shares issued, respectively; 82,244,973 and
82,094,675 shares outstanding, respectively) 88 85
Additional paid-in capital 2,404 2,187
Employee benefits trust, at market (3,394,988
and 4,706,665 shares, respectively) (384) (329)
Retained earnings 1,357 1,176
------ ------
3,454 3,168
Treasury stock, at cost (5,523,455 and
3,297,717 shares, respectively) (347) (191)
------ ------
Total stockholders' equity 3,107 2,977
------ ------
Total liabilities and stockholders' equity $8,402 $8,424
====== ======
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
CONRAIL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Series A Unearned Additional Employee
Preferred ESOP Common Paid-in Benefits Retained Treasury
($ In Millions Except Per Share Data) Stock Compensation Stock Capital Trust Earnings Stock
--------- ------------ ------ ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $286 $(253) $80 $1,819 $ 857 $ (5)
Amortization 10
Net income 324
Common dividends, $1.40 per share (111)
Preferred dividends, $2.165 per share (21)
Common shares acquired (94)
Exercise of stock options 14
Other (3) 15 7
------ ------ ------ ------ ------ ------ ------
Balance, December 31, 1994 283 (243) 80 1,848 1,056 (99)
Amortization 10
Net income 264
Common dividends, $1.60 per share (129)
Preferred dividends, $2.165 per share (21)
Common shares acquired (92)
Exercise of stock options 6
Establishment of employee benefits trust 5 245 $(250)
Employee benefits trust transactions, net 84 (79)
Other (1) 4 6
------ ------ ------ ------ ------ ------ ------
Balance, December 31, 1995 282 (233) 85 2,187 (329) 1,176 (191)
Amortization 11
Net income 342
Common dividends, $1.80 per share (146)
Preferred dividends, $2.165 per share (20)
Common shares acquired (156)
Exercise of stock options 29 53
Employee benefits trust transactions, net 128 (116)
Effects of voluntary separation programs (8) 8
Effects of CSX tender offer (Note 2) (63) 3 60
Other 5
------ ------ ------ ------ ------ ------ ------
Balance, December 31, 1996 $211 $(222) $88 $2,404 $(384) $1,357 $(347)
====== ====== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes.
<PAGE>
CONRAIL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
------------------------
($ In Millions) 1996 1995 1994
----- ----- -----
Cash flows from operating activities
Net income $ 342 $ 264 $ 324
Adjustments to reconcile net income to
net cash provided by operating activities:
Voluntary separation programs 135
Asset disposition charge 285
Early retirement program 84
Depreciation and amortization 283 293 278
Deferred income taxes 183 108 150
Special income tax obligation (94) (73) (62)
Gains from sales of property (24) (27) (18)
Pension credit (46) (43) (46)
Changes in:
Accounts receivable (16) 32 (2)
Accounts and wages payable (18) 8 41
Settlement of tax audit (39)
Other (37) (74) (52)
----- ----- -----
Net cash provided by operating
activities 669 773 697
----- ----- -----
Cash flows from investing activities
Property and equipment acquisitions (387) (415) (490)
Proceeds from disposals of properties 34 38 32
Other (46) (59) (23)
----- ------ -----
Net cash used in investing activities (399) (436) (481)
----- ----- -----
Cash flows from financing activities
Repurchase of common stock (156) (92) (94)
Net proceeds from (repayments of)
short-term borrowings 10 (23) 33
Proceeds from long-term debt 26 85 114
Payment of long-term debt (184) (134) (158)
Loans from and redemptions of
insurance policies 95
Dividends on common stock (146) (129) (111)
Dividends on Series A preferred stock (25) (21) (16)
Proceeds from stock options and other 67 7 21
----- ----- -----
Net cash used in financing
activities (313) (307) (211)
----- ----- -----
Increase (decrease) in cash and cash equivalents (43) 30 5
Cash and cash equivalents
Beginning of year 73 43 38
----- ----- -----
End of year $ 30 $ 73 $ 43
===== ===== =====
See accompanying notes.
CONRAIL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
------------------------------------------
Industry
--------
Conrail Inc. ("Conrail") is a holding company of which the principal
subsidiary is Consolidated Rail Corporation ("CRC"), a freight
railroad which operates within the northeast and midwest United States
and the Province of Quebec.
Principles of Consolidation
---------------------------
The consolidated financial statements include Conrail and majority-owned
subsidiaries. Investments in 20% to 50% owned companies are accounted for by
the equity method.
Cash Equivalents
----------------
Cash equivalents consist of commercial paper, certificates of deposit and
other liquid securities purchased with a maturity of three months or less,
and are stated at cost which approximates market value.
Material and Supplies
---------------------
Material and supplies consist mainly of fuel oil and items for maintenance of
property and equipment, and are valued at the lower of cost, principally
weighted average, or market.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Depreciation is provided using
the composite straight-line method. The cost (net of salvage) of depreciable
property retired or replaced in the ordinary course of business is charged to
accumulated depreciation and no gain or loss is recognized.
Asset Impairment
----------------
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Expected future cash flows from the use and disposition of
long-lived assets are compared to the current carrying amounts to determine
the potential impairment loss.
Revenue Recognition
-------------------
Revenue is recognized proportionally as a shipment moves on the Conrail
system from origin to destination.
Earnings Per Share
------------------
Primary earnings per share are based on net income adjusted for the effects
of preferred dividends net of income tax benefits, divided by the weighted
average number of shares outstanding during the period, including the
dilutive effect of stock options. Fully diluted earnings per share assume
conversion of Series A ESOP Convertible Junior Preferred Stock ("ESOP Stock")
into Conrail common stock. Net income amounts applicable to fully diluted
earnings per share have been adjusted by the increase, net of income tax
benefits, in ESOP-related expenses assuming conversion of all ESOP Stock to
common stock.
Shares in the Conrail Employee Benefits Trust are not considered outstanding
for computing earnings per share. The weighted average number of shares of
common stock outstanding during each of the most recent three years are as
follows:
1996 1995 1994
---------- ---------- ----------
Primary weighted
average shares 77,628,825 78,733,947 79,674,781
Fully diluted weighted
average shares 87,325,575 88,702,712 89,562,721
Ratio of Earnings to Fixed Charges
----------------------------------
Earnings used in computing the ratio of earnings to fixed charges represent
income before income taxes plus fixed charges, less equity in undistributed
earnings of 20% to 50% owned companies. Fixed charges represent interest
expense together with interest capitalized and a portion of rent under
long-term operating leases representative of an interest factor.
New Accounting Standards
------------------------
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS 121) and SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS
123), which are both effective in 1996. The Company has decided to adopt only
the disclosure provisions of SFAS 123 in 1996 and continues to apply APB
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations in accounting for its stock-based compensation plans.
The Company adopted SFAS 121 in the first quarter of 1996 and determined that
it did not have a material effect on its financial statements.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Proposed Merger
---------------
On October 14, 1996, Conrail, CSX Corporation ("CSX") and a subsidiary of CSX
entered into an Agreement and Plan of Merger (as amended, the "Merger
Agreement"), pursuant to which Conrail was to be merged with a subsidiary of
CSX in a merger-of-equals transaction.
On October 24, 1996, Norfolk Southern Corporation ("Norfolk") commenced an
unsolicited tender offer for all outstanding Conrail voting stock at $100 per
share in cash. Norfolk has since increased its offer to $115 per share in
cash.
On November 20, 1996, CSX concluded its first tender offer and purchased
approximately 19.9% of Conrail's outstanding shares for $110 per share.
On December 18, 1996, CSX and Conrail entered into a second amendment to the
Merger Agreement (the "Second Amendment") that would, among other things, (i)
increase the consideration payable pursuant to the merger, (ii) accelerate
the consummation of the merger to immediately following the receipt of
applicable shareholder approvals and prior to the Surface Transportation
Board ("STB") approval and (iii) extend until December 31, 1998 an
exclusivity period during which the Conrail Board agreed not to withdraw or
modify its recommendations of the CSX transactions, approve or recommend any
takeover proposal or cause Conrail to enter into any agreement related to any
takeover proposal.
On January 13, 1997, Norfolk issued a press release announcing that it would
offer to purchase shares representing 9.9% of the outstanding shares for $115
per share, in the event that Conrail shareholders did not approve a proposal
to opt out of a Pennsylvania statute (the "Opt Out Proposal") at the meeting
of shareholders to be held on January 17, 1997 (the "Special Shareholders
Meeting").
On January 17, 1997, Conrail shareholders voted at the Special Shareholders
Meeting against the Opt Out Proposal.
On February 4, 1997, the amended Norfolk tender offer expired, and Norfolk
subsequently purchased approximately 8.2 million shares pursuant thereto.
On March 7, 1997, Conrail and CSX entered into a Third Amendment (the "Third
Amendment") to the Merger Agreement. Pursuant to the Third Amendment, (i) the
price per share has been increased from $110 to $115, and the number of
shares to be purchased in the tender offer has been increased to all
outstanding shares. The tender offer is scheduled to close April 18, 1997
(subject to extension by CSX to June 2, 1997 whether or not the conditions
have been satisfied), (ii) the consideration paid per share in the merger for
all remaining outstanding shares following consummation of the offer has been
increased to $115 in cash and (iii) the conditions to the offer relating to
certain provisions of Pennsylvania law becoming inapplicable to Conrail and
relating pending governmental actions or proceedings have been deleted.
The Third Amendment also provides that CSX will have sole control over the
regulatory approval process and will be free to conduct by itself discussions
with other railroads, including Norfolk, relating to competitive issues
raised by the CSX transactions, and to enter into any resulting agreement. It
is anticipated that CSX and Norfolk will negotiate an appropriate division of
Conrail's assets; however, neither the pending CSX tender offer nor the
merger is conditioned on CSX's reaching an agreement with Norfolk.
Pursuant to the Third Amendment, three members of Conrail's Board of
Directors approved by CSX shall be invited to join the CSX Board of Directors
and a transition team will be established, the leadership of which will
include senior executive officers of CSX and Conrail to ensure the orderly
operation of Conrail during the regulatory approval process and an orderly
transition thereafter.
Under the Third Amendment, Conrail and CSX agreed to reduce from December 31,
1998 to December 31, 1997 the period of time during which the Conrail Board
is prohibited from (i) withdrawing or modifying, or publicly proposing to
withdraw or modify, its approval or recommendation of the CSX transactions,
in a manner adverse to CSX, (ii) approving or recommending, or publicly
proposing to approve or recommend, any competing proposal or (iii) causing
Conrail to enter into any agreement related to any such competing proposal.
Under the Merger Agreement as amended, Conrail may terminate the Merger
Agreement in the event that after June 2, 1997, CSX fails to consummate the
tender offer for any reason other than the non-occurrence of any condition to
the tender offer. In the event that CSX fails to consummate the tender offer
under such circumstances, Conrail will be entitled to exercise any additional
remedies it may have.
The full terms and conditions of the CSX and Norfolk offers and Conrail's
position with respect to the CSX and Norfolk offers are set forth in
documents filed by Conrail with the Securities and Exchange Commission.
Pending approval by the Surface Transportation Board ("STB"), 100% of
Conrail's voting stock will be held by CSX in a voting trust. The combination
of the railroad operations of the two companies is contingent upon the
approval of the merger by the STB.
3. Voluntary Separation Programs
-----------------------------
During the second quarter of 1996, the Company recorded a charge of $135
million (before tax benefits of $52 million) consisting of $102 million in
termination benefits to be paid to non-union employees participating in the
voluntary retirement and separation programs ("voluntary separation
programs") and losses of $33 million on non-cancelable leases for office
space no longer required as a result of the reduction in the Company's
workforce. Over 840 applications were accepted from eligible employees under
the voluntary separation programs. Approximately $90 million of the
termination benefits are being paid from the Company's overfunded pension
plan.
4. Property and Equipment
----------------------
December 31,
-----------------
1996 1995
------- -------
(In Millions)
Roadway $ 7,021 $ 6,828
Equipment 1,231 1,213
Less: Accumulated depreciation (1,654) (1,572)
Allowance for disposition (408) (439)
------- -------
6,190 6,030
------- -------
Capital leases (primarily equipment) 908 908
Accumulated amortization (508) (530)
------- -------
400 378
------- -------
$ 6,590 $ 6,408
======= =======
Conrail acquired equipment and incurred related long-term debt under various
capital leases of $82 million in 1996, $71 million in 1995 and $8 million in
1994. In 1995 (Note 10) and 1991, the Company recorded allowances for
disposition for the sale or abandonment of certain under-utilized rail lines
and other facilities.
<PAGE>
5. Accrued and Other Current Liabilities
-------------------------------------
December 31,
--------------
1996 1995
---- ----
(In Millions)
Freight settlements due others $ 48 $ 54
Equipment rents (primarily car hire) 74 71
Unearned freight revenue 79 56
Property and corporate taxes 49 66
Other 194 247
---- ----
$444 $494
==== ====
6. Long-Term Debt
--------------
Long-term debt outstanding, including the weighted average interest rates at
December 31, 1996, is composed of the following:
December 31,
------------------
1996 1995
------ ------
(In Millions)
Capital leases $ 491 $ 489
Medium-term notes payable,
6.70%, due 1997 to 1999 109 208
Notes payable, 9.75%, due 2000 250 250
Debentures payable, 7.88%, due 2043 250 250
Debentures payable, 9.75%, due 2020 544 544
Equipment and other obligations, 6.55% 262 251
Commercial paper, 5.53% 100 100
------ ------
2,006 2,092
Less current portion (130) (181)
------ ------
$1,876 $1,911
====== ======
Using current market prices when available, or a valuation based on the yield
to maturity of comparable debt instruments having similar characteristics,
credit rating and maturity, the total fair value of the Company's long-term
debt, including the current portion, but excluding capital leases, is $1,685
million and $1,870 million at December 31, 1996 and 1995, respectively,
compared with carrying values of $1,515 million and $1,603 million at
December 31, 1996 and 1995, respectively.
The Company's noncancelable long-term leases generally include options to
purchase at fair value and to extend the terms. Capital leases have been
discounted at rates ranging from 3.09% to 14.26% and are collateralized by
assets with a net book value of $400 million at December 31, 1996.
<PAGE>
Minimum commitments, exclusive of executory costs borne by the Company, are:
Capital Operating
Leases Leases
------- ---------
(In Millions)
1997 $ 107 $ 115
1998 96 104
1999 86 87
2000 64 76
2001 57 68
2002 - 2017 273 523
----- -----
Total 683 $ 973
=====
Less interest portion (192)
-----
Present value $ 491
=====
Operating lease rent expense was $127 million in 1996, $130 million in 1995
and $118 million in 1994.
In June 1993, the Company and CRC filed a shelf registration statement on
Form S-3 to enable CRC to issue up to $500 million in debt securities or the
Company to issue up to $500 million in convertible debt and equity
securities. The remaining balance under this shelf registration was $312
million at December 31, 1996.
In April 1996, CRC issued $50 million of Pass-Through Certificates at a rate
of 6.96% to finance equipment. Although the certificates are not direct
obligations of, or guaranteed by CRC, amounts payable under related capital
leases will be sufficient to pay principal and interest on the certificates.
In July 1996, CRC issued $26 million of 1996 Equipment Trust Certificates,
Series A, with interest rates ranging from 6.0% to 7.48%, maturing annually
from 1997 to 2011. The certificates were used to finance approximately 85% of
the purchase price of twenty locomotives.
In June 1996, CRC borrowed $69 million against the cash surrender value of
the company-owned life insurance policies which it maintains on certain of
its non-union employees.
Equipment and other obligations mature in 1997 through 2043 and are
collateralized by assets with a net book value of $253 million at December
31, 1996. Maturities of long-term debt other than capital leases and
commercial paper are $65 million in 1997, $46 million in 1998, $46 million in
1999, $266 million in 2000, $17 million in 2001 and $975 million in total
from 2002 through 2043.
CRC had $199 million of commercial paper outstanding at December 31, 1996. Of
the total amount outstanding, $100 million is classified as long-term since
it is expected to be refinanced through subsequent issuances of commercial
paper and is supported by the long-term credit facility mentioned below.
CRC maintains a $500 million uncollateralized bank credit agreement with a
group of banks which is used for general corporate purposes and to support
CRC's commercial paper program. The agreement matures in 2000 and requires
interest to be paid on amounts borrowed at rates based on various defined
short-term rates and an annual maximum fee of .125% of the facility amounts.
The agreement contains, among other conditions, restrictive covenants
relating to a debt ratio and consolidated tangible net worth. During 1996,
CRC had no borrowings under this agreement.
Interest payments were $170 million in 1996, $177 million in 1995 and $174
million in 1994.
7. Income Taxes
------------
The provisions for income taxes are composed of the following:
1996 1995 1994
---- ---- -----
(In Millions)
Current
Federal $ 90 $ 78 $104
State 10 15 16
---- ---- ----
100 93 120
---- ---- ----
Deferred
Federal 151 110 125
State 32 (2) 25
---- ---- ----
183 108 150
---- ---- ----
Special income tax obligation
Federal (80) (61) (53)
State (14) (12) (9)
---- ---- ----
(94) (73) (62)
---- ---- ----
$189 $128 $208
==== ==== ====
In conjunction with the public sale in 1987 of the 85% of the Company's
common stock then owned by the U.S. Government, federal legislation was
enacted which resulted in a reduction of the tax basis of certain of the
Company's assets, particularly property and equipment, thereby substantially
decreasing tax depreciation deductions and increasing future federal income
tax payments. Also, net operating loss and investment tax credit
carryforwards were canceled. As a result of the sale-related transactions, a
special income tax obligation was recorded in 1987 based on an estimated
effective federal and state income tax rate of 37.0%.
As a result of a decrease in a state income tax rate enacted during 1995,
income tax expense for that year was reduced by $21 million representing the
effects of adjusting deferred income taxes and the special income tax
obligation for the rate decrease as required by SFAS 109, "Accounting for
Income Taxes".
In November 1996, the Company reached a settlement with the Internal Revenue
Service related to the audit of the Company's consolidated federal income tax
returns for the fiscal years 1990 through 1992. The Company made a payment of
$39 million pending resolution of the final interest determination related to
the settlement. Federal and state income tax payments were $145 million in
1996 (excluding tax settlement), $109 million in 1995 and $80 million in
1994.
<PAGE>
Reconciliations of the U.S. statutory tax rates with the effective tax
rates are as follows:
1996 1995 1994
---- ---- ----
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes,
net of federal benefit 3.4 3.5 3.9
Effect of state tax decrease
on deferred taxes (5.3)
Other (2.8) (.5) .2
---- ---- ----
Effective tax rate 35.6% 32.7% 39.1%
==== ==== ====
Significant components of the Company's special income tax obligation and
deferred income tax liabilities and (assets) are as follows:
December 31,
-----------------
1996 1995
------ ------
(In Millions)
Current assets (primarily accounts
receivable) $ (9) $ (27)
Current liabilities (primarily accrued
liabilities and casualty reserves) (245) (265)
Tax benefits related to disposition of
subsidiary (30) (30)
Net operating loss carryforwards (9) (11)
------ ------
Current deferred tax asset, net $ (293) $ (333)
====== ======
Noncurrent liabilities:
Property and equipment 1,939 1,936
Other long-term assets (primarily prepaid
pension asset) 92 67
Miscellaneous 98 66
------ ------
2,129 2,069
------ ------
Noncurrent assets:
Nondeductible reserves and other
liabilities (174) (144)
Tax benefit transfer receivable (36) (33)
Alternative minimum tax credits (38)
Miscellaneous (95) (21)
------ ------
(305) (236)
------ ------
Special income tax obligation and
deferred income tax liabilities, net $1,824 $1,833
====== ======
8. Employee Benefits
-----------------
Pension Plans
-------------
The Company and certain subsidiaries maintain defined benefit pension plans
which are noncontributory for all non-union employees and generally
contributory for participating union employees. Benefits are based primarily
on credited years of service and the level of compensation near retirement.
Funding is based on the minimum amount required by the Employee Retirement
Income Security Act of 1974.
<PAGE>
Pension credits include the following components:
1996 1995 1994
----- ---- ----
(In Millions)
Service cost - benefits earned during the period $ 9 $ 8 $ 8
Interest cost on projected benefit obligation 51 51 48
Return on plan assets - actual (138) (254) (10)
- deferred 47 167 (77)
Net amortization and deferral (15) (15) (15)
----- ---- ----
$ (46) $(43) $(46)
===== ==== ====
The funded status of the pension plans and the amounts reflected in the
balance sheets are as follows:
1996 1995
------ -----
(In Millions)
Accumulated benefit obligation ($655 million
and $603 million vested, respectively) $ 661 $ 609
====== ======
Market value of plan assets 1,187 1,168
Projected benefit obligation (734) (726)
------ ------
Plan assets in excess of projected
benefit obligation 453 442
Unrecognized prior service cost 36 50
Unrecognized transition net asset (90) (120)
Unrecognized net gain (231) (157)
------ ------
Net prepaid pension cost $ 168 $ 215
====== ======
The assumed weighted average discount rates used in 1996 and 1995 are 7.5%
and 7.0%, respectively, and the rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation as of December 31, 1996 and 1995 is 6.0%. The expected
long-term rate of return on plan assets (primarily equity securities) in 1996
and 1995 is 9.0%.
Savings Plans
-------------
The Company and certain subsidiaries provide 401(k) savings plans for union
and non-union employees. Under the Non-union ESOP, 100% of employee
contributions are matched in the form of ESOP Stock for the first 6% of a
participating employee's base pay. There is no Company match provision under
the union employee plan. Savings plan expense was $4 million in 1996 and
1995, and $5 million in 1994.
In connection with the Non-union ESOP, the Company issued 9,979,562 of the
authorized 10 million shares of its ESOP Stock to the Non-union ESOP in
exchange for a 20 year promissory note with interest at 9.55% from the
Non-union ESOP in the principal amount of $288 million. In addition, unearned
ESOP compensation of $288 million was recognized as a charge to stockholders'
equity coincident with the Non-union ESOP's issuance of its $288 million
promissory note to the Company. The debt of the Non-union ESOP was recorded
by the Company and offset against the promissory note from the Non-union
ESOP. Unearned ESOP compensation is charged to expense as shares of ESOP
Stock are allocated to participants. Approximately 2.7 million ESOP shares
have been cumulatively allocated to participants through December 31, 1996,
and a portion of these shares have been tendered to CSX (Note 2). An amount
equivalent to the preferred dividends declared on the ESOP Stock partially
offsets compensation and interest expense related to the Non-union ESOP.
In 1994, the ESOP's promissory note to the Company was refinanced. As part of
the refinancing, the interest rate was decreased to 8.0%, from the original
9.55%, and accrued interest of $21 million was capitalized as part of the
principal balance of the promissory note.
The Company is obligated to make dividend payments at a rate of 7.51% on the
ESOP Stock and additional contributions in an aggregate amount sufficient to
enable the Non-union ESOP to make the required interest and principal
payments on its note to the Company.
Interest expense incurred by the Non-union ESOP on its debt to the Company
was $24 million in 1996 and 1995, and $30 million in 1994. Compensation
expense related to the Non-union ESOP was $11 million in 1996, and $10
million in 1995 and 1994. Preferred dividends of $20 million were declared in
1996, and $21 million in 1995 and 1994. Preferred dividend payments of $25
million, $21 million and $16 million were made in 1996, 1995 and 1994,
respectively. The Company received debt service payments from the Non-union
ESOP of $40 million in 1996, $31 million in 1995 and $21 million in 1994.
Postretirement Benefits Other Than Pensions
-------------------------------------------
The Company provides health and life insurance benefits to certain retired
non-union employees. Certain non-union employees are eligible for retiree
medical benefits, while substantially all non-union employees are eligible
for retiree life insurance benefits. Generally, company-provided health care
benefits terminate when individuals reach age 65.
Retiree life insurance plan assets consist of a retiree life insurance
reserve held in the Company's group life insurance policy. There are no plan
assets for the retiree health benefits plan.
The following sets forth the plans' funded status reconciled with amounts
reported in the Company's balance sheets:
1996 1995
----------------- -----------------
Life Life
Medical Insurance Medical Insurance
Plan Plan Plan Plan
(In Millions)
Accumulated postretirement benefit obligation:
Retirees $44 $20 $38 $19
Fully eligible active plan
participants 1 5 1
Other active plan participants 3 5
--- --- --- ---
Accumulated benefit obligation 45 23 43 25
Market value of plan assets (10) (7)
--- --- --- ---
Accumulated benefit obligation
in excess of plan assets 45 13 43 18
Unrecognized gains and (losses) (1) 2 1 (1)
Accrued benefit cost recognized
in the Consolidated Balance --- --- --- ---
Sheet $44 $15 $44 $17
=== === === ===
Net periodic postretirement
benefit cost, primarily
interest cost $ 3 $ 1 $ 4 $ 1
=== === === ===
An 8 percent rate of increase in per capita costs of covered health care
benefits was assumed for 1997, gradually decreasing to 6 percent by the year
2007. Increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1996 by $2 million and would have an immaterial
effect on the net periodic postretirement benefit cost for 1996. Discount
rates of 7.5% and 7.0% were used to determine the accumulated postretirement
benefit obligations for both the medical and life insurance plans in 1996 and
1995, respectively.
The assumed rate of compensation increase was 6.0% in 1996 and 5.0% in 1995.
Retiree medical benefits are funded by a combination of Company and retiree
contributions. Retiree life insurance benefits are provided by insurance
companies whose premiums are based on claims paid during the year.
9. Capital Stock
-------------
Preferred Stock
---------------
The Company is authorized to issue 25 million shares of preferred stock with
no par value. The Board of Directors has the authority to divide the
preferred stock into series and to determine the rights and preferences of
each.
The Company cannot pay dividends on its common stock unless full cumulative
dividends have been paid on its ESOP Stock, and no distributions can be made
to the holders of common stock upon liquidation or dissolution of the Company
unless the holders of the ESOP Stock have received a cash liquidation payment
of $28.84375 per share, plus unpaid dividends up to the date of such payment.
The ESOP Stock is convertible into an equivalent number of shares of common
stock based on their respective market values at the date of conversion. The
ESOP Stock is entitled to one vote per share, voting together as a single
class with common stock on all matters.
As a result of the CSX tender offer related to the proposed merger (Note 2),
2.2 million shares of ESOP Stock have been converted to common shares as a
result of being removed from the Non-union ESOP 401(k) savings plan.
Employee Benefits Trust
-----------------------
In 1995, the Company issued approximately 4.7 million shares of its common
stock to the Conrail Employee Benefits Trust (the "Trust") in exchange for a
promissory note of $250 million at an interest rate of 6.9%. The Trust is
being used to fund certain employee benefits and other forms of compensation
over its fifteen-year term. The amount representing unearned employee
benefits is recorded as a deduction from stockholders' equity and is reduced
as benefits and compensation are paid through the release of shares from the
Trust. The shares owned by the Trust are valued at the closing market price
as of the end of each reporting period, with corresponding changes in the
balance of the Trust reflected in additional paid-in capital. The Trust has
sold shares of Conrail common stock in connection with the CSX and Norfolk
tender offers (Note 2) and has used the proceeds to repurchase shares of
Conrail common stock in the open market. Shares held by the Trust are not
considered outstanding for earnings per share computations until released by
the Trust, but do have voting and dividend rights.
<PAGE>
Common Stock Repurchase Program
-------------------------------
In April 1995, the Board of Directors approved a $250 million multi-year
stock repurchase program. During 1996, the Company acquired 2,225,738 shares
for approximately $156 million under this program.
At December 31, 1996, approximately $93 million remained available from this
authorization; however, as a result of the proposed merger with CSX
Corporation (Note 2), the Company will not make any additional stock
repurchases under this program.
The activity and status of treasury stock follow:
1996 1995 1994
---------- --------- ---------
Shares, beginning of year 3,297,717 1,789,164 83,745
Acquired 2,225,738 1,508,553 1,705,419
---------- --------- ----------
Shares, end of year 5,523,455 3,297,717 1,789,164
========== ========= ==========
Stock Plans
-----------
The Company's stock-based compensation plans as of December 31, 1996 are
described below. The Company applies APB 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been
recognized for its fixed stock option plans. SFAS 123 was issued in 1995 and,
if fully adopted, would change the method of recognition of costs on plans
similar to those of the Company. Adoption of SFAS 123 is optional; however,
the required pro forma disclosures as if the Company had adopted the cost
recognition requirements under SFAS 123 in 1996 and 1995 are presented below.
The Company's 1987 and 1991 Long-Term Incentive Plans authorize the granting
to officers and key employees of up to 4 million and 6.6 million shares of
common stock, respectively, through stock options, stock appreciation rights,
phantom stock and awards of restricted or performance shares. A stock option
is exercisable for a specified term commencing after grant at a price not
less than the fair market value of the stock on the date of grant. The
vesting of awards made pursuant to these plans is contingent upon one or more
of the following: continued employment, passage of time or financial and
other performance goals.
Effective November 1996, the Company's Board of Directors authorized the
automatic vesting of all unvested stock options outstanding in connection
with the Merger Agreement between CSX and the Company (Note 2).
<PAGE>
The activity and status of stock options under the incentive plans follow:
Non-qualified Stock Options
-----------------------------------
Option Price Shares
Per Share Under Option
----------------- ------------
Balance, January 1, 1994 $14.000 - $60.500 1,966,321
Granted $52.188 - $66.938 23,988
Exercised $14.000 - $51.375 (507,450)
Canceled $42.625 - $60.500 (118,904)
------------
Balance, December 31, 1994 $14.000 - $66.938 1,363,955
Granted $50.688 - $68.563 516,757
Exercised $14.000 - $53.875 (200,940)
Canceled $42.625 - $53.875 (123,560)
------------
Balance, December 31, 1995 $14.000 - $68.563 1,556,212
Granted $68.563 - $96.063 551,038
Exercised $14.000 - $73.250 (1,268,085)
Canceled $42.625 - $70.031 (3,984)
------------
Balance, December 31, 1996 $14.000 - $96.063 835,181
============
Exercisable,
December 31, 1996 $14.000 - $74.188 831,481
============
Available for future grants
December 31, 1995 1,188,193
============
December 31, 1996 3,969,317
============
The weighted average exercise prices of options granted during 1996 and 1995
are $70.130 per share and $51.204 per share, respectively. The weighted
average exercise prices of options exercised during 1996 and 1995 are $48.32
per share and $31.16 per share, respectively. The average remaining maximum
terms of options is not considered meaningful given the events that have
occurred as a result of the proposed merger with CSX (Note 2).
The fair value of each option granted during 1996 is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted average assumptions: (1) dividend yield of 2.43%, (2) expected
volatility of 25.25%, (3) risk-free interest rate of 5.51%, and (4) expected
life of 4 years. The weighted average fair value of options granted during
1996 and 1995 is $16.00 per share and $13.12 per share, respectively.
Had the compensation cost for the Company's 1996 and 1995 grants for
stock-based compensation plans been determined consistent with SFAS 123, the
Company's net income, primary earnings per share and fully diluted earnings
per share for 1996 and 1995 would approximate the pro forma amounts below ($
in millions except per share data):
1996 1995
----- -----
Net income as reported $ 342 $ 264
Net income pro forma 335 262
Primary earnings per share $4.25 $3.19
Primary earnings per share pro forma 4.16 3.16
Fully diluted earnings per share $3.89 $2.94
Fully diluted earnings per share pro forma 3.81 2.92
<PAGE>
The Company has granted phantom shares and restricted stock under its
non-union employee bonus plans to eligible employees who elect to defer all
or a portion of their annual bonus in a given year. The number of shares
granted depends on the length of the deferral period. Grants are made at the
market price of the Company's common stock at the date of grant. The Company
has granted 148,749 shares and 337,329 shares of phantom and restricted
stock, respectively, under its non-union employee bonus plans through
December 31, 1996. The Company has also granted 73,344 performance shares
under its 1991 Long-Term Incentive Plan through December 31, 1996.
Compensation expense related to these plans was $2 million in 1996 and $3
million in 1995. The weighted-average fair value for the phantom shares and
restricted stock granted during 1996 and 1995 was $68.02 per share and $52.88
per share, respectively.
Stock Rights
------------
In 1989, the Company declared a dividend of one common share purchase right
(the "Right") on each outstanding share of common stock. The Rights are not
exercisable or transferable apart from the common stock until the occurrence
of certain events arising out of an actual or potential acquisition of 10% or
more of the Company's common stock, and would at such time provide the holder
with certain additional entitlements. However, under the terms of the Merger
Agreement (Note 2) the CSX tender offer does not constitute an event that
would result in the Rights becoming exercisable. In 1995, a dividend of one
Right for each share of ESOP Stock was declared and paid. The exercise price
of the Rights is $205. The Rights may be redeemed by the Company prior to
becoming exercisable at one-half cent ($.005) per Right and have no voting or
dividend rights.
10.Asset Disposition Charge
------------------------
Included in 1995 operating expenses is an asset disposition charge of $285
million, which reduced net income by $176 million. The asset disposition
charge resulted from a review of the Company's route system and other
operating assets to determine those that no longer effectively and
economically supported current and expected operations. The Company
identified and has committed to sell 1,800 miles of rail lines that are
expected to provide proceeds substantially less than net book value. In
addition, other assets, principally yards and side tracks, identified for
disposition were written down to estimated net realizable value (See Note 1
"Asset Impairment").
11.1994 Early Retirement Program
-----------------------------
During 1994, the Company recorded a charge of $84 million, which reduced net
income by $51 million, for a non-union employee voluntary early retirement
program and related costs. The majority of the cost of the early retirement
program is being paid from the Company's overfunded pension plan.
12.Other Income, Net
-----------------
1996 1995 1994
---- ---- ----
(In Millions)
Interest income $ 29 $ 33 $ 34
Rental income 50 57 53
Property sales 23 27 18
Other, net 10 13 13
---- ---- ----
$112 $130 $118
==== ==== ====
13.Commitments and Contingencies
-----------------------------
Environmental
-------------
The Company is subject to various federal, state and local laws and
regulations regarding environmental matters. CRC is a party to various
proceedings brought by both regulatory agencies and private parties under
federal, state and local laws, including Superfund laws, and has also
received inquiries from governmental agencies with respect to other potential
environmental issues. At December 31, 1996, CRC has received, together with
other companies, notices of its involvement as a potentially responsible
party or requests for information under the Superfund laws with respect to
cleanup and/or removal costs due to its status as an alleged transporter,
generator or property owner at 135 locations. However, based on currently
available information, the Company believes CRC may have some potential
responsibility at only 61 of these sites. Due to the number of parties
involved at many of these sites, the wide range of costs of possible
remediation alternatives, the changing technology and the length of time over
which these matters develop, it is often not possible to estimate CRC's
liability for the costs associated with the assessment and remediation of
contaminated sites.
Although the Company's operating results and liquidity could be significantly
affected in any quarterly or annual reporting period if CRC were held
principally liable in certain of these actions, at December 31, 1996, the
Company had accrued $55 million, an amount it believes is sufficient to cover
the probable liability and remediation costs that will be incurred at
Superfund sites and other sites based on known information and using various
estimating techniques. The Company believes the ultimate liability for these
matters will not materially affect its consolidated financial condition.
The Company spent $11 million in 1996, $14 million in 1995 and $8 million in
1994 for environmental remediation and related costs and anticipates spending
an amount comparable to that spent in 1996 during 1997. In addition, the
Company's capital expenditures for environmental control and abatement
projects were approximately $6 million in 1996 and 1995, and $5 million in
1994, and are anticipated to be approximately $10 million in 1997.
The Environmental Quality Department is charged with promoting the Company's
compliance with laws and regulations affecting the environment and
instituting environmentally sound operating practices. The department
monitors the status of the sites where the Company is alleged to have
liability and continually reviews the information available and assesses the
adequacy of the recorded liability.
Other
-----
The Company is involved in various legal actions, principally relating to
occupational health claims, personal injuries, casualties, property damage
and damage to lading. The Company has recorded liabilities on its balance
sheet for amounts sufficient to cover the expected payments for such actions.
The Company may be contingently liable for approximately $63 million at
December 31, 1996 under indemnification provisions related to sales of tax
benefits.
CRC had an average of 20,761 employees in 1996, approximately 87% of whom are
represented by 14 different labor organizations and are covered by 22
separate collective bargaining agreements. The Company was engaged in
collective bargaining at December 31, 1996 with labor organizations
representing approximately 22% of its labor force.
In 1994, Locomotive Management Services, a general partnership of which CRC
holds a fifty percent interest, issued $96 million of Equipment Trust
Certificates to fund the purchase price of 60 new locomotives. While
principal and interest payments on certificates will be fully guaranteed by
CRC, through a sharing agreement with its partner, CRC's portion of the
guarantee is reduced to approximately $48 million, effective January 1, 1997,
with the Company's purchase of twenty of the locomotives.
CRC has received three adverse jury verdicts related to railroad crossing
accidents in Ohio that include significant punitive damage awards that
collectively approximate $30 million. CRC believes the punitive damage awards
in those cases are improper and that it has meritorious defenses, which it
plans to pursue on appeal. The Company is not presently able to reasonably
estimate the ultimate outcome of these cases, and accordingly, no expense for
such awards has been recorded as of December 31, 1996.
As part of the Merger Agreement (Note 2), the Company may be a party to
certain stock purchase options or, under certain circumstances, be required
to pay substantial termination fees.
<PAGE>
14. Condensed Quarterly Data (Unaudited)
-----------------------------------
<TABLE>
<CAPTION>
First Second Third Fourth
------------ ------------- ------------- ------------
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
($ In Millions Except Per Share)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $889 $889 $949 $923 $933 $923 $943 $951
Income (loss) from operations 69 114 54 180 235 208 243 (46)
Net income (loss) 31 55 26 123 138 116 147 (30)
Net income (loss) per common share:
Primary .36 .66 .30 1.52 1.74 1.44 1.86 (.43)
Fully diluted .35 .61 .29 1.37 1.58 1.31 1.70 (.43)
Ratio of earnings to fixed charges 1.75x 2.39x 1.57x 3.42x 4.77x 4.02x 4.91x -
Dividends per common share .425 .375 .425 .375 .475 .425 .475 .425
Market prices per common share
(New York Stock Exchange)
High 77 1/4 57 5/8 73 1/4 56 1/4 74 5/8 70 1/4 100 7/8 74 3/8
Low 67 5/8 50 1/2 66 1/4 51 1/8 63 3/4 55 1/8 68 1/2 65 1/2
</TABLE>
<PAGE>
During the second quarter of 1996, the Company recorded a one-time charge of
$135 million for the non-union employee voluntary early retirement and
separation programs and related costs, which reduced net income by $83
million (Note 3). Without this charge, net income would have been $109
million for the quarter ($1.37 and $1.25 per share, primary and fully
diluted, respectively).
As a result of a decrease in a state income tax rate enacted during the
second quarter of 1995, income tax expense was reduced by $21 million
representing the effects of adjusting deferred income taxes and the special
income tax obligation for the rate decrease as required under SFAS 109 (Note
7). Without this one-time tax benefit, the Company's net income for the
quarter would have been $102 million ($1.25 and $1.14 per share, primary and
fully diluted, respectively). During the fourth quarter of 1995, an asset
disposition charge reduced income from operations by $285 million and
adversely affected the quarter's net income by $176 million (Note 10).
Without the asset disposition charge, net income would have been $146 million
($1.82 and $1.65 per share, primary and fully diluted, respectively) for the
fourth quarter of 1995. After the asset disposition charge, earnings were
insufficient by $58 million to cover fixed charges for the quarter.
<PAGE>
Exhibit 99.4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
($ In Millions Except Per Share Data)
Quarters ended
March 31,
-------------------
1997 1996
---- ----
Revenues $906 $889
---- ----
Operating expenses
Way and structures 124 140
Equipment 202 219
Transportation 354 362
General and administrative 110 99
---- ----
Total operating expenses 790 820
---- ----
Income from operations 116 69
Interest expense (45) (47)
Other income, net 27 28
---- ----
Income before income taxes 98 50
Income taxes 37 19
---- ----
Net income $ 61 $ 31
==== ====
Net income per common share
Primary $ .74 $ .36
Fully diluted .70 .35
Dividends per common share $.475 $.425
Weighted average number of shares used in
computing earnings per share (thousands)
Primary 80,025 78,002
Fully diluted 86,842 87,759
Ratio of earnings to fixed charges 2.52x 1.75x
See accompanying notes.
<PAGE>
CONRAIL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ In Millions) March 31, December 31,
1997 1996
--------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 32 $ 30
Accounts receivable 662 630
Deferred tax assets 293 293
Material and supplies 141 139
Other current assets 34 25
------ ------
Total current assets 1,162 1,117
Property and equipment, net 6,599 6,590
Other assets 709 695
------ ------
Total assets $8,470 $8,402
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 65 $ 99
Current maturities of long-term debt 82 130
Accounts payable 148 135
Wages and employee benefits 167 143
Casualty reserves 140 141
Accrued and other current liabilities 476 444
------ ------
Total current liabilities 1,078 1,092
Long-term debt 1,889 1,876
Casualty reserves 195 190
Deferred income taxes 1,520 1,478
Special income tax obligation 330 346
Other liabilities 306 313
------ ------
Total liabilities 5,318 5,295
------ ------
Stockholders' equity
Series A ESOP convertible junior
preferred stock 183 211
Unearned ESOP compensation (221) (222)
Common stock 89 88
Additional paid-in capital 2,430 2,404
Employee benefits trust (357) (384)
Retained earnings 1,376 1,357
------ ------
3,500 3,454
Treasury stock (348) (347)
------ ------
Total stockholders' equity 3,152 3,107
------ ------
Total liabilities and
stockholders' equity $8,470 $8,402
====== ======
See accompanying notes.
CONRAIL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ In Millions)
Quarters ended
March 31,
------------------
1997 1996
----- ----
Cash flows from operating activities $ 170 $ 121
----- -----
Cash flows from investing activities
Property and equipment acquisitions (41) (18)
Other (4) (16)
----- -----
Net cash used in investing activities (45) (34)
----- -----
Cash flows from financing activities
Net proceeds from (repayment of)
short-term borrowings (34) 45
Payment of long-term debt (63) (97)
Repurchase of common stock - (41)
Dividends paid on common stock (40) (35)
Dividends paid on preferred stock (3) (10)
Other 17 5
----- -----
Net cash used in financing activities (123) (133)
----- -----
Increase (decrease) in cash and cash equivalents 2 (46)
Cash and cash equivalents
Beginning of period 30 73
----- -----
End of period $ 32 $ 27
===== =====
See accompanying notes.
<PAGE>
CONRAIL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The unaudited financial statements contained herein present the
consolidated financial position of Conrail Inc. (the "Company") as of March
31, 1997 and December 31, 1996, and the consolidated results of operations
and cash flows for the three-month periods ended March 31, 1997 and 1996.
In the opinion of management, these financial statements include all
adjustments, consisting of normal recurring adjustments, necessary to
present fairly the results for the interim periods included.
The rules and regulations of the Securities and Exchange Commission permit
certain information and footnote disclosures, ordinarily required by
generally accepted accounting principles, to be condensed or omitted from
interim financial reports. Accordingly, the financial statements included
herein should be read in conjunction with the audited financial statements
and notes for the year ended December 31, 1996, presented in the Company's
Annual Report on Form 10-K.
2. In January 1997, Consolidated Rail Corporation ("CRC") assumed $31
million of Equipment Trust Certificates, at an interest rate of 8.31%, due
2012, to finance the lease buyout of 20 locomotives from Locomotive
Management Services, a general partnership of which CRC holds a fifty
percent interest.
3. Effective April 1, 1997, the Company's Board of Directors authorized the
vesting of all stock options and performance shares outstanding in
connection with the proposed acquisition of the Company by CSX Corporation
and Norfolk Southern Corporation. The vesting of the performance shares
will result in an $18 million charge to operating expenses in April 1997,
while the vesting of stock options will not have an income statement
effect.
4. During February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128), which establishes new standards for computing and presenting
earnings per share ("EPS"). SFAS 128 replaces the presentation of primary
EPS with a presentation of basic EPS. It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities
with a complex capital structure. This Statement is effective for financial
statements issued for periods ending after December 15, 1997, with earlier
application not permitted. The EPS included in the Company's financial
statements is computed in accordance with APB Opinion No. 15, "Earnings per
Share". However, had the Company adopted the provisions of SFAS 128 in the
first quarter of 1997, basic EPS and diluted EPS would be approximately the
same as the current computations of primary EPS and fully diluted EPS,
respectively, included in the Company's financial statements.
5. Information regarding contingent liabilities and litigation was included
in Note 13 to Consolidated Financial Statements and Part I, Item 3 - Legal
Proceedings in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996. There have been no material developments with respect to
these matters during the first three months of 1997, except as disclosed in
the Annual Report on Form 10-K or elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and Board of Directors of
Conrail Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Conrail Inc. and its subsidiaries (the "Company") as of March 31, 1997 and
the related condensed consolidated statements of income and cash flows for
the three months ended March 31, 1997 and March 31, 1996. This financial
information is the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying interim financial information for it to
be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income, of stockholders' equity and of
cash flows for the year then ended (not presented herein), and in our report
dated January 21, 1997, except as to Note 2 to the consolidated financial
statements, which is as of March 7, 1997, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1996, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
/s/ PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
April 16, 1997
Exhibit 99.5
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On May 23, 1997, the Joint Tender Offer for the Conrail shares expired. As
a result of the contribution by the Company and NSC of Conrail shares owned by
them before the Joint Tender Offer as well as the contribution of funds to
complete the Joint Tender Offer and the merger, they have, respectively, a 42
percent and a 58 percent economic interest in a jointly owned acquisition entity
(the "Acquisition Entity") which now owns the Conrail shares held in a voting
trust pending Surface Transportation Board ("STB") approval. The Company and NSC
also each may exercise a 50 percent voting interest in the Acquisition Entity
and each has the right to appoint 50 percent of that entity's directors and a
full-time Co-Chief Executive Officer. Under the CSX/NSC Agreement, subject to
STB approval, the Company will operate routes and assets (or rights thereto)
that generated approximately 42 percent of Conrail's 1995 revenues.
The exercise of control over Conrail by the Company and NSC remains subject
to a number of conditions and approvals, including approval by the STB, which
has the authority to modify contract terms and impose additional conditions,
including with respect to divestitures, grants of trackage rights and other
terms of continuing operations. The Company and NSC intend to file a joint
application with the STB in June 1997 for control and division of Conrail and
for such other matters as may be required to be approved by the STB. The joint
STB application will address traffic flows, operations and related matters; will
outline the capital investments each company plans to make in new connections
and facilities and to increase capacity on critical routes; and will detail
operating savings and other public benefits resulting from the transaction. The
application also will contain certain historical and pro forma financial
information required by the STB. The STB has issued a scheduling order that
provides for issuance of a final STB decision no later than 350 days after the
Company and NSC file their joint application. No assurance can be given with
respect to the receipt of STB approval or the modifications or conditions that
may be imposed in connection therewith.
The Unaudited Pro Forma Financial Statements included herein present a
Condensed Consolidated Statement of Financial Position for the Company as of
March 28, 1997, and Condensed Consolidated Statements of Earnings for the fiscal
quarter ended March 28, 1997, and the fiscal year ended December 27, 1996. The
pro forma financial statements reflect (i) the completion by the Company and NSC
of their Joint Tender Offer for the Conrail Shares and the merger at $115 per
share through the Acquisition Entity; and (ii) the related borrowings by the
Company.
These events are reflected in the Pro Forma Condensed Consolidated
Statement of Financial Position as if they had occurred on March 28, 1997, and
in the Pro Forma Condensed Consolidated Statements of Earnings as if they had
occurred at the beginning of the period presented. The financial information for
Conrail was based upon its historical financial statements for the quarter ended
March 31, 1997, and for the year ended December 31, 1996, as reported in its
Form 10-Q and Form 10-K, respectively. Conrail's 1996 results included a special
charge of $135 million (pre-tax) for voluntary separation programs.
The Company is using the equity method of accounting for its interest in
Conrail following consummation of the Joint Tender Offer and continuing through
the date Conrail shares are held in the voting trust - a period that will extend
at least until the effective date of the STB's decision approving the
transactions contemplated by the CSX/NSC Agreement (if such approval is
obtained). In accordance with Accounting Principles Board ("APB") Opinion No.
18, "The Equity Method of Accounting for Investments in Common Stock," the
excess of the Company's purchase price over the underlying net assets acquired
("Excess") is being amortized. Based on a preliminary analysis of the fair value
of the underlying net assets of Conrail, the Company believes a significant
portion of the Excess will be allocated to long-lived assets other than
goodwill. Further information as to the values of assets and liabilities, as
well as specific allocations to the Company or NSC, may affect these preliminary
estimates.
The method of accounting for the investment in Conrail subsequent to
dissolution of the voting trust will depend on the final terms of the ownership
arrangement between the Company and NSC approved by the STB. Additionally, the
ultimate terms of leases, operating partnerships and other arrangements will
affect the accounting. It is also expected that some of the assets and
operations of Conrail will remain subject to joint control by the Company and
NSC and, thus, will continue to be accounted for using the equity method of
accounting even after STB approval.
The unaudited pro forma financial statements do not reflect synergies, and,
accordingly, do not account for any potential increases in operating income, any
estimated cost savings, any adjustments to conform accounting practices or any
capital expenditures to be realized or made by either the Company or Conrail to
achieve such improvements. The unaudited pro forma financial statements are
prepared for illustrative purposes only and are not necessarily indicative of
the financial position or results of operations that might have occurred had the
applicable transactions actually taken place on the date indicated, or of future
results of operations or financial position of the standalone or combined
entities.
The unaudited pro forma financial statements are based on the historical
consolidated financial statements of the Company and Conrail and should be read
in conjunction with such historical financial statements and the notes thereto.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of March 28, 1997
Unaudited
(Dollars in Millions)
Pro Forma
CSX with
CSX Pro Forma Conrail
Historical Adjustments Investment
Assets
Current assets $ 1,941 $ 1,941
Properties - net 11,924 11,924
Investment in Conrail 1,955 $ 2,251(1) 4,206
Other long-term assets 1,068 50(1) 1,118
-------- -------- --------
Total assets $ 16,888 $ 2,301 $ 19,189
======== ======== ========
Liabilities
Current liabilities $ 2,571 $ 101(1) $ 2,672
Long-term debt 4,243 2,200(1) 6,443
Deferred income taxes 2,743 2,743
Other long-term liabilities 2,204 2,204
-------- -------- --------
Total liabilities 11,761 2,301 14,062
-------- -------- --------
Shareholders' Equity
Common stock 218 218
Other capital 1,470 1,470
Retained earnings 3,546 3,546
Minimum pension liability (107) (107)
-------- -------- --------
Total shareholders' equity 5,127 -- 5,127
-------- -------- --------
Total liabilities and shareholders'
equity $ 16,888 $ 2,301 $ 19,189
======== ======== ========
See accompanying Notes to Unaudited Pro Forma Financial Statements.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Fiscal Quarter Ended March 28, 1997
Unaudited
(Dollars in Millions, Except Per Share Data)
Pro Forma CSX
CSX Pro Forma with Conrail
Historical Adjustments Investment (5)
---------- ----------- --------------
Operating revenue $2,567 $ 2,567
Operating expense 2,243 2,243
------ --------
Operating income 324 324
Other income (expense) (7) $ 1 (3) (6)
Interest expense 84 46 (2) 130
------ ------ --------
Earnings before income taxes 233 (45) 188
Income tax expense 82 (16)(4) 66
------ ------ --------
Net earnings $ 151 $ (29) $ 122
====== ====== ========
Earnings per share $ 0.70 $(0.14) $ 0.56
Average common shares outstanding
(thousands) 217,227 217,227
See accompanying Notes to Unaudited Pro Forma Financial Statements.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Fiscal Year Ended December 27, 1996
Unaudited
(Dollars in Millions, Except Per Share Data)
Pro Forma CSX
CSX Pro Forma with Conrail
Historical Adjustments Investment (5)
---------- ----------- --------------
Operating revenue $ 10,536 $ 10,536
Operating expense 9,014 9,014
--------- ---------
Operating income 1,522 1,522
Other income 43 $ 70 (3) 113
Interest expense 249 285 (2) 534
--------- --------- ---------
Earnings before income taxes 1,316 (215) 1,101
Income tax expense 461 (96)(4) 365
--------- --------- ---------
Net earnings $ 855 $ (119) $ 736
========= ========= =========
Earnings per share $ 4.00 $ (0.55) $ 3.45
Average common shares outstanding
(thousands) 213,633 213,633
See accompanying Notes to Unaudited Pro Forma Financial Statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Dollars in
Millions, Except Per Share Data)
Note 1. Preliminary Calculation of Purchase Price
Pursuant to the CSX/NSC Agreement, CSX has invested approximately $4.156
billion (including the $1.955 billion expended in November 1996, and excluding
transaction costs) to acquire, through its ownership interest in Conrail,
various Conrail routes and assets or rights thereto. The acquisition was
financed with a combination of debentures and commercial paper. The purchase
price has been preliminarily calculated as follows:
<TABLE>
<S> <C>
Estimated Conrail shares outstanding at May 23, 1997 (000's) 86,475
Less: Shares acquired pursuant to CSX's first tender offer (a) (17,775)
Shares acquired pursuant to NSC's first tender offer (8,200)
--------
Shares acquired pursuant to Joint Tender Offer and merger 60,500
Joint Tender Offer and merger price per share $ 115
--------
Cost of shares acquired pursuant to Joint Tender Offer and merger $ 6,958
Plus: Cost of shares acquired pursuant to CSX's first tender offer (a) 1,955
Cost of shares acquired pursuant to NSC's first tender offer 943
Unexercised Conrail stock options 39
--------
Joint purchase price 9,895
CSX's allocation 42%
--------
Joint purchase price payable by CSX 4,156
Estimated transaction fees payable by CSX 50
--
Purchase price payable by CSX, including transaction fees 4,206
Less: Cost of shares held at March 28, 1997 (1,955)
--------
Pro forma adjustment to Conrail investment 2,251
Pro forma adjustment for debt issuance costs 50
--------
Pro forma adjustment to debt 2,301
Less: Current portion of commercial paper (101)
--------
Pro forma adjustment to long-term debt $ 2,200
========
</TABLE>
(a) Exclusive of 85,000 shares previously sold by CSX at an average price of
$98.983 per share.
<PAGE>
Note 2. Debt
Long-term debt has been increased by $2.2 billion and short-term debt has
been increased by $0.1 billion to reflect the net additional borrowing
subsequent to March 28, 1997 to finance the Company's purchase price (including
transaction fees and debt issuance costs) in excess of the $1.955 billion
previously paid. This net additional borrowing is inclusive of the proceeds of
$2.5 billion of debentures, reduced by net repayments of commercial paper
previously outstanding. As a consequence of the Company's first tender offer and
its share of the subsequent Joint Tender Offer and merger, short-term and
long-term debt of $4.256 billion is outstanding, as follows:
Weighted-Average
Principal Interest Rate for
Amount Pro Forma Adjustment
------ --------------------
Debentures $2,500 7.55% (fixed)
Commercial paper 1,756 5.70% (variable)
Total debt incurred by CSX $4,256 6.79%
Pro forma interest expense has been increased as a result of the additional debt
incurred, as noted below. Debt placement fees, debt discount and related costs
are being amortized on the interest method and, together with annual commitment
fees, approximate $7 million in the first year after consummation of the Joint
Tender Offer. Inclusive of these costs, the effective interest rate is
approximately 6.95%. If interest rates assumed were to change by one-eighth of
one percent, the pro forma interest expense on variable rate debt associated
with the transaction would vary by $2 million annually.
Fiscal Quarter Ended Fiscal Year Ended
Mar. 28, 1997 Dec. 27, 1996
------------- -------------
Effective interest on $4.256
billion of debt $74 $296
Less: interest already recognized
in historical financial statements* (28) (11)
--- ---
Pro forma adjustment $46 $285
=== ====
*Resulting from long-term debt incurred to finance the first tender offer.
<PAGE>
Note 3. Other Income
The equity method of accounting will be applied to the Company's investment
in Conrail throughout the period the investment is held in the voting trust. In
accordance with APB Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock," other income includes 42% of Conrail's historical
net income, adjusted for amortization, net of tax, of the difference between the
Company's investment in Conrail and 42% of Conrail's underlying equity in net
assets. The difference is primarily attributable to the estimated fair value of
property and equipment, net of the related deferred taxes, and includes
approximately $757 million in goodwill. This allocation is based on preliminary
estimates of fair values of all Conrail assets and liabilities and is likely to
change after the Definitive Documentation is finalized and regulatory approvals
are obtained. To the extent that specific assets and liabilities are allocated
to Conrail entities over which the Company will have a controlling financial
interest, the allocation will be redesignated to follow the method in which the
investment is accounted for subsequent to the approval by the STB. The
preliminary estimates are also likely to change as additional information
concerning fair values and remaining useful lives becomes available. An
appraisal of the assets is currently underway. The Company intends to amortize
any goodwill resulting from the purchase over a period of 40 years. Adjustments
to property and equipment are depreciated over their estimated remaining useful
lives, which range from 2 to 102 years.
Preliminary Allocation of Purchase Price
----------------------------------------
Net assets of Conrail at March 31, 1997 $3,152
CSX's economic interest x 42%
-----
CSX share of Conrail net assets 1,324
Estimated fair value adjustments, principally
property and equipment 3,480
Deferred taxes on estimated fair value adjustments
and transaction fees (1,305)
Estimated goodwill 757
------
Purchase price payable by CSX (including
transaction costs) $4,256
======
Detail of Pro Forma Adjustment
------------------------------
Fiscal Quarter Fiscal Year
Ended Ended
Mar. 28, 1997 Dec. 27, 1996
------------- -------------
Conrail net income $ 61 $ 342
CSX's economic interest x42% x 42%
---- -----
Equity earnings from investment in Conrail 26 144
Depreciation (19) (77)
Amortization of goodwill (40-year life) (5) (19)
Tax benefit on depreciation 7 30
---- -----
Net impact on other income 9 78
Less: dividend amounts previously recognized
(cost method) (8) (8)
---- -----
Pro Forma adjustment to Other Income (Expense) $ 1 $ 70
==== =====
<PAGE>
Note 4. Income Tax Expense
Income tax expense includes the tax benefit on the additional interest
expense (see Note 2) as well as the tax effect on equity income:
Fiscal Quarter Fiscal Year
Ended Ended
Mar. 28, 1997 Dec. 27, 1996
------------- -------------
Tax benefit on acquisition debt interest expense $ (26) $(104)
Tax expense on dividends received 1 5
----- -----
Net tax benefit (25) (99)
Less tax benefit previously recognized (9) (3)
----- -----
Pro forma adjustment to income tax expense $ (16) $ (96)
===== =====
Note 5. Unusual Events
As described in Note 3, pro forma amounts reflected in the Pro Forma
Condensed Consolidated Statements of Earnings were calculated and presented in
accordance with the equity method of accounting. If the effects of 42% of
Conrail's after-tax merger-related costs of $14 million had been excluded for
the fiscal quarter ended March 28, 1997, pro forma net earnings and pro forma
earnings per share would have been $128 million and 59 cents, respectively. If
the effects of 42% of Conrail's one-time after-tax charge of $83 million related
to voluntary separation programs and after-tax merger-related costs of $10
million had been excluded for the fiscal year ended December 27, 1996, pro forma
net earnings and pro forma earnings per share would have been $775 million and
$3.63, respectively.
<PAGE>
Note 6. Summarized Consolidated Conrail Financial Data
Because of the numerous agreements that must be negotiated and completed,
and because STB approval must be obtained, it is not possible to present some or
most of the Company's investment in Conrail based on separate assets,
liabilities and operations. However, the Company has a 42% economic interest in
the entity formed to acquire Conrail Shares. It is expected that in some form,
yet to be finally determined, the Company will have a primary operating interest
in certain routes and facilities of Conrail. The following historical Conrail
financial data, as of and for the quarter ended March 31, 1997 and the year
ended December 31, 1996, respectively, is presented to facilitate an
understanding of the Company's ultimate economic interest in Conrail:
Conrail Inc.
Summarized Consolidated Statement of Income
(Dollars in millions)
Quarter Ended Year Ended
March 31, 1997 December 31, 1996
-------------- -----------------
Revenues $ 906 $ 3,714
Operating expenses 790 3,113*
----- -------
Income from operations 116 601
Interest expense (45) (182)
Other income - net 27 112
----- -------
Income before income taxes 98 531
Income taxes 37 189
----- -------
Net income $ 61 $ 342
===== =======
*Operating expenses include a $135 million charge for voluntary separation
programs, $83 million after tax.
Conrail Inc.
Summarized Consolidated Balance Sheet
(Dollars in millions)
As of As of
Mar. 31, 1997 Dec. 31, 1996
------------- -------------
Assets
Current assets $1,162 $1,117
Property and equipment 6,599 6,590
Other assets 709 695
------ ------
Total assets $8,470 $8,402
====== ======
Liabilities and Stockholders' Equity
Current liabilities $1,078 $1,092
Long-term debt 1,889 1,876
Other long-term liabilities 2,351 2,327
------ ------
Total liabilities 5,318 5,295
Stockholders' equity 3,152 3,107
------ ------
Total liabilities and stockholders'
equity $8,470 $8,402
====== ======
