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): June 1, 1999
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 June 1, 1999, CSX Corporation ("CSX") and Norfolk Southern
Corporation ("Norfolk Southern") formally began integrated operations over their
respective portions of the Conrail Inc. ("Conrail") rail system. This step
implements the operating plan envisioned by CSX and Norfolk Southern when they
completed the joint acquisition of Conrail in May 1997 and later received
regulatory approval permitting them to exercise joint control over Conrail in
August 1998.
Under this operating plan, CSX Transportation, Inc. ("CSXT"),
CSX's rail subsidiary, has added approximately 4,400 route miles of track in the
Northeastern and Midwestern United States and in Canada to its existing lines
concentrated in the Middle Atlantic and Southeastern United States. To service
the new operations, approximately 6,200 former Conrail employees have joined
CSXT. CSXT now operates a network of more than 22,700 route miles in 23 states,
the District of Columbia, and two Canadian provinces and employs approximately
34,500 employees across the combined system.
The rail subsidiaries of CSX and Norfolk Southern operate their
respective portions of the Conrail system pursuant to various operating
agreements which took effect on June 1 and pay operating fees to Conrail for the
use of right-of-way and equipment. Conrail continues to provide rail service in
certain geographic areas for the joint benefit of CSX and Norfolk Southern for
which it is compensated on the basis of usage by the respective railroads.
CSX and Norfolk Southern, through a joint acquisition entity,
hold economic interests in Conrail of 42% and 58%, respectively, and voting
interests of 50% each.
CSX's press release announcing the event is included as an
exhibit hereto and is incorporated herein by reference. Copies of material
contracts governing the transaction and related operations are also filed as
exhibits hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are filed as a part of this report.
10.1 Amendment No. 1, dated as of August 22, 1998, to the
Transaction Agreement, dated as of June 10, 1997, by
and among CSX Corporation, CSX Transportation, Inc.,
Norfolk Southern Corporation, Norfolk Southern Railway
Company, Conrail Inc., Consolidated Rail Corporation,
and CRR Holdings LLC.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS, Continued
10.2 Amendment No. 2, dated as of June 1, 1999, to the
Transaction Agreement, dated June 10, 1997, by and
among CSX Corporation, CSX Transportation, Inc.,
Norfolk Southern Corporation, Norfolk Southern Railway
Company, Conrail Inc., Consolidated Rail Corporation,
and CRR Holdings, LLC.
10.3 Operating Agreement, dated as of June 1, 1999, by and
between New York Central Lines LLC and CSX
Transportation, Inc.
10.4 Shared Assets Area Operating Agreement for North
Jersey, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation,
Inc., and Norfolk Southern Railway Company, with
exhibit thereto.
10.5 Shared Assets Area Operating Agreement for Southern
Jersey/Philadelphia, dated as of June 1, 1999, by and
among Consolidated Rail Corporation, CSX
Transportation, Inc., and Norfolk Southern Railway
Company, with exhibit thereto.
10.6 Shared Assets Area Operating Agreement for
Detroit, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation,
Inc., and Norfolk Southern Railway Corporation, with
exhibit thereto.
10.7 Monongahela Usage Agreement, dated as of June 1, 1999,
by and among CSX Transportation, Inc., Norfolk
Southern Railway Company, Pennsylvania Lines LLC, and
New York Central Lines LLC, with exhibit thereto.
99.1 Press release issued by CSX Corporation on June 1,
1999.
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<PAGE>
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 & Public Affairs
Date: June 11, 1999
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<PAGE>
EXHIBIT LIST
Exhibit Description
10.1 Amendment No. 1, dated as of August 22, 1998, to the Transaction
Agreement, dated as of June 10, 1997, by and among CSX
Corporation, CSX Transportation, Inc., Norfolk Southern
Corporation, Norfolk Southern Railway Company, Conrail Inc.,
Consolidated Rail Corporation, and CRR Holdings LLC.
10.2 Amendment No. 2, dated as of June 1, 1999, to the Transaction
Agreement, dated June 10, 1997, by and among CSX Corporation, CSX
Transportation, Inc., Norfolk Southern Corporation, Norfolk
Southern Railway Company, Conrail Inc., Consolidated Rail
Corporation, and CRR Holdings, LLC.
10.3 Operating Agreement, dated as of June 1, 1999, by and between
New York Central Lines LLC and CSX Transportation, Inc.
10.4 Shared Assets Area Operating Agreement for North Jersey, dated as
of June 1, 1999, by and among Consolidated Rail Corporation, CSX
Transportation, Inc., and Norfolk Southern Railway Company, with
exhibit thereto.
10.5 Shared Assets Area Operating Agreement for Southern
Jersey/Philadelphia, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and
Norfolk Southern Railway Company, with exhibit thereto.
10.6 Shared Assets Area Operating Agreement for Detroit, dated as of
June 1, 1999, by and among Consolidated Rail Corporation, CSX
Transportation, Inc., and Norfolk Southern Railway Corporation,
with exhibit thereto.
10.7 Monongahela Usage Agreement, dated as of June 1, 1999, by and
among CSX Transportation, Inc., Norfolk Southern Railway Company,
Pennsylvania Lines LLC, and New York Central Lines LLC, with
exhibit thereto.
99.1 Press release issued by CSX Corporation on June 1, 1999.
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Exhibit 10.1
AMENDMENT NO. 1
to the
TRANSACTION AGREEMENT
by and among
CSX CORPORATION,
CSX TRANSPORTATION, INC.,
NORFOLK SOUTHERN CORPORATION,
NORFOLK SOUTHERN RAILWAY COMPANY,
CONRAIL INC.,
CONSOLIDATED RAIL CORPORATION
and
CRR HOLDINGS LLC
Dated as of June 10, 1997
<PAGE>
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 dated as of August 22, 1998 is by and among by and
among CSX CORPORATION, a Virginia corporation ("CSX"), CSX TRANSPORTATION, INC.,
a Virginia corporation, for itself and on behalf of its controlled Subsidiaries
(collectively, "CSXT"), NORFOLK SOUTHERN CORPORATION, a Virginia corporation
("NSC"), NORFOLK SOUTHERN RAILWAY COMPANY, a Virginia corporation, for itself
and on behalf of its controlled Subsidiaries (collectively, "NSR"), CONRAIL
INC., a Pennsylvania corporation, for itself and on behalf of its controlled
Subsidiaries (collectively, "CRR"), CONSOLIDATED RAIL CORPORATION, a
Pennsylvania corporation ("CRC"), and CRR HOLDINGS LLC, a Delaware limited
liability company ("CRR Parent"). CSX, CSXT, NSC, NSR, CRR, CRC and CRR Parent
have entered into that certain Transaction Agreement dated as of June 10, 1998
(the "Agreement"). The parties to the Agreement have determined to amend the
Agreement to increase the size of the Board of Directors of CRR Parent under the
Agreement as set forth herein. Accordingly, the parties agree as follows:
SECTION 1. Definitions. Capitalized terms used in this
Amendment and not defined herein shall have the meanings assigned to such terms
in the Agreement.
SECTION 2. Amendments of the Agreement. The Agreement is hereby
amended pursuant to and in compliance with Section 11.1 as set forth below:
(a) The text of subsection 4.2(a) is hereby deleted in its
entirety and the following substituted therefor:
"Following the Control Date, the business and affairs of
CRC shall be managed under the direction of the CRC Board
consisting of eight persons divided into two classes of
three directors. Four directors shall be designated by CSX
(the "CSX Directors") and four directors shall be
designated by NSC (the "NSC Directors")."
SECTION 3. Effectiveness. This Amendment shall become
effective as of August 22, 1998 (the "Amendment Date").
SECTION 4. Integration; Confirmation. On and after the Amendment
Date, each reference in the Agreement to "this Agreement," "herein," "hereunder"
or words of similar import, and each reference in any Note or other document
delivered in connection with the Agreement shall be deemed to be a reference to
the Agreement as amended by this Amendment, and the Agreement as so amended
shall be read as a single integrated document. Except as specifically amended by
this Amendment, all other terms and provisions of the Agreement shall continue
in full force and effect and unchanged and are hereby confirmed in all respects.
SECTION 5. Counterparts. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 6. Governing Law. This Amendment shall be construed
in accordance with and governed by the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
CSX CORPORATION
By: /s/PAUL R. GOODWIN
------------------
Name: Paul R. Goodwin
Title: Executive Vice President -
Finance and Chief Financial
Officer
CSX TRANSPORTATION, INC. (for itself and on
behalf of its controlled Subsidiaries)
By: /s/ MICHAEL J. WARD
--------------------
Name: Michael J. Ward
Title: Executive Vice President -
Finance and Chief Financial
Officer
NORFOLK SOUTHERN CORPORATION
By: /s/S.C. TOBIAS
--------------
Name: S. C. Tobias
Title: Vice Chairman and Chief
Operating Officer
NORFOLK SOUTHERN RAILWAY COMPANY
(for itself and behalf of its controlled
Subsidiaries)
By: /s/S.C. TOBIAS
--------------
Name: S. C. Tobias
Title: Vice President and Chief
Operating Officer
CONRAIL INC. (for itself and on behalf of
its controlled Subsidiaries)
By: /s/TIMOTHY O'TOOLE
------------------
Name: Timothy O'Toole
Title: President
CONSOLIDATED RAIL CORPORATION
By: /s/TIMOTHY O'TOOLE
------------------
Name: Timothy O'Toole
Title: President
CRR HOLDINGS LLC
By: /s/S. C. TOBIAS
---------------
Name: S. C. Tobias
Title: Vice President
Exhibit 10.2
Execution Copy
AMENDMENT NO. 2 TO
TRANSACTION AGREEMENT
THIS AMENDMENT NO. 2 TO THE TRANSACTION AGREEMENT (this "Amendment"),
dated as of June 1, 1999, by and among CSX CORPORATION, a Virginia corporation
("CSX"), CSX TRANSPORTATION, INC., a Virginia corporation, for itself and on
behalf of its controlled Subsidiaries (collectively, "CSXT"), NORFOLK SOUTHERN
CORPORATION, a Virginia corporation ("NSC"), NORFOLK SOUTHERN RAILWAY COMPANY, a
Virginia corporation, for itself and on behalf of its controlled Subsidiaries
(collectively, "NSR"), CONRAIL INC., a Pennsylvania corporation, for itself and
on behalf of its controlled Subsidiaries (collectively, "CRR"), CONSOLIDATED
RAIL CORPORATION, a Pennsylvania corporation ("CRC"), and CRR HOLDINGS LLC, a
Delaware limited liability company ("CRR Parent").
WHEREAS, the parties have previously entered into that certain
Transaction Agreement, dated as of June 10, 1997, as amended by Amendment No. 1
to Transaction Agreement, dated as of August 22, 1998 and the System Support
Operations Agreement dated as of May 15, 1999, relating to Section 2.3 hereof
(the "Transaction Agreement");
WHEREAS, the parties are on the date hereof consummating the Closing (as
defined in the Transaction Agreement) and entering into various documents and
instruments to effectuate the same, including Ancillary Agreements ("Closing
Documents");
WHEREAS, in connection with the parties' preparations for the Closing,
the parties have identified certain provisions of the Transaction Agreement for
which the Parties desire to clarify their understandings and agreements with
respect to such provisions and to make interim provisions with respect to
certain Transaction Agreement matters which are currently in dispute;
WHEREAS, the parties have determined that it is in the best interests of
their respective companies to amend the Transaction Agreement as set forth in
this Amendment;
WHEREAS, it is the intent of the parties that, except as expressly
amended hereby, the Transaction Agreement shall remain unamended and in full
force and effect;
NOW, THEREFORE, the parties hereby amend the Transaction Agreement as
follows:
SECTION 1. References; Interpretation.
--------------------------
(a) Unless otherwise specifically defined herein, each term used
herein which is defined in the Transaction Agreement has the meaning assigned to
such term in the Transaction Agreement. Each reference to "hereof", "hereunder",
"herein" and "hereby" and each reference to "this Agreement" and each other
similar reference contained in the Transaction Agreement shall from and after
the date of this Amendment refer to the Transaction Agreement as amended hereby.
<PAGE>
(b) The parties hereby expressly agree that the Closing is being
consummated, and the Closing Documents are being delivered, pursuant to and in
furtherance of the Transaction Agreement and shall be interpreted as such
consistent with the terms of the Transaction Agreement and in furtherance of the
terms of the Transaction Agreement to the greatest extent possible. Therefore,
in the event of any inconsistency between the terms of the Transaction Agreement
and any Closing Document, the terms of the Transaction Agreement shall prevail,
except to the extent such Closing Document provides otherwise.
SECTION 2. Transportation Contracts.
------------------------
(a) The beginning of the first sentence of Subsection 2.2(c)(iii)
of the Transaction Agreement is amended to read as follows:
"(iii) The following decision rules shall be
applied on an annual basis with tentative settlements to the
extent required by subsection (c)(ii) on a quarterly basis 90
days after the end of the quarter and an annual true-up 90 days
after the end of the year:"
(b) Subsection 2.2(c)(iii)(C)(aa)(x) of the Transaction Agreement
is hereby amended and restated in its entirety by deleting the existing
provision and inserting the following:
"(x) If the origin station is Local to NSR and the
destination station is on the NYC Allocated Assets and Local to
CSXT, then the allocation shall be on a joint line basis between
NSR and CSXT with the interchange to be negotiated between NSR
and CSXT and the revenues to be split based upon an ICC Docket
28300 mileage prorate with a minimum division of 25% to each of
NSR and CSXT; and"
(c) Subsection 2.2 (c) (iii) (C) (bb) (x) of the Transaction
Agreement is hereby amended and restated in its entirety by deleting the
existing provision and inserting the following:
"(x) If the origin station is Local to CSXT and the
destination station is on the PRR Allocated Assets and Local to
NSR, then the allocation shall be on a joint line basis between
CSXT and NSR with the interchange to be negotiated between CSXT
and NSR and the revenues to be split based upon an ICC Docket
28300 mileage prorate with a minimum division of 25% to each of
CSXT and NSR; and"
SECTION 3. FELA Matters.
------------
(a) Section 2.8(c) of the Transaction Agreement is hereby amended
and restated in its entirety by deleting the existing provision and inserting
the following:
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"(c) Except for liabilities that are the
responsibility of any Person pursuant to any of the Ancillary
Agreements, all liabilities associated with the handling and
disposition of FELA Claims ("FELA Liabilities") of CRR, CRC and
their Affiliates shall be allocated as follows: (i) FELA
Liabilities that arise from incidents or exposures occurring
prior to the Closing Date shall be Retained Liabilities; (ii) to
the extent FELA Liabilities arise from incidents or exposures
occurring in part prior, and in part on or after, the Closing
Date, that portion of the FELA Liability arising prior to the
Closing Date shall be Retained Liability; and, (iii) to the
extent FELA Liabilities arise from incidents or exposures
occurring on or after the Closing Date, they shall be the
responsibility of the party then employing the injured employee.
Notwithstanding the provisions of the foregoing sentence, if any
single incident occurring between the Control Date and the
Closing Date results in FELA Liability which exceeds CRC's
insurance coverage by $10 million or more, the amount by which
such liability exceeds $10 million in excess of CRC's insurance
coverage shall be a PRR Allocated Liability if the incident
occurred on or relates primarily to PRR Allocated Assets and
shall be a NYC Allocated Liability if the incident occurred on or
relates primarily to NYC Allocated Assets. CRC will obtain
insurance, in form and amount satisfactory to the parties hereto,
indemnifying PRR and NYC against the liability to which either
may be subject under this paragraph.
(b) Section 8.15 of the Transaction Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"Section 8.15. Administration of Actions. After the
-------------------------
Closing Date, (a) NYC shall have exclusive authority and control
over the investigation, prosecution, defense and appeal of all
Actions relating primarily to NYC, the NYC Allocated Assets, the
NYC Allocated Liabilities or a Retained Liability (except for
Retained Liabilities for which the monetary claim is more than
$500,000 or injunctive relief is sought) which arose at the
location of a NYC Allocated Asset, or with which a NYC Allocated
Asset is most significantly involved (each, an "NYC Action"), and
may settle or compromise, or consent to the entry of any judgment
with respect to, any such NYC Action without the consent of CRC,
NSC or PRR and (b) PRR shall have exclusive authority and control
over the investigation, prosecution, defense and appeal of all
Actions relating primarily to PRR, the PRR Allocated Assets, the
PRR Allocated Liabilities, or a Retained Liability (except for
Retained Liabilities for which the monetary claim is more than
$500,000 or injunctive relief is sought), which arose at the
location of a PRR Allocated Asset or with which a PRR Allocated
Asset is most significantly involved (each a "PRR Action"), and
may settle or compromise, or consent to the entry of any judgment
with respect to, any such PRR Action without the consent of CRC,
CSX or NYC.
3
<PAGE>
"Notwithstanding the foregoing, neither NYC or PRR
may settle or compromise, or consent to the entry of any judgment
with respect to, any such Action without the prior written
consent of the other if such settlement, compromise or consent to
such judgment (i) includes any form of injunctive relief binding
upon such other party or CRC or (ii) does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such other party or CRC and any Affiliates of CRC
subject to such Action of a full and final release from all
liability in respect to such claim or litigation. After the
Closing Date with respect to an Action not covered under clauses
(a) and (b) of the foregoing sentence (including Actions relating
to Retained Liabilities), the handling, administration and
disposition of such Actions shall be the joint responsibility of
CSX and NSC and the costs thereof shall be Corporate Level
Liabilities. In assigning joint responsibility for the
administration, handling and disposition of Actions to CSX and
NSC, hereunder it is not the parties' intent that CSX and NSC
will actually administer, handle and dispose of such Actions
jointly, but rather that CSX and NSC will agree on the most
practical and efficient arrangements with the objective of
eliminating unnecessary duplication of effort and minimizing
overall costs. The costs and expenses of the administration and
handling of such Actions shall be Corporate Level Liabilities;
provided that salaries and overheads associated with the salaries
of full time employees of CSX or NSC while engaged in
investigation or handling such Actions shall be the
responsibility of the employing party and are Corporate Level
Liabilities only to the extent that they are covered by insurance
or are otherwise reimbursable by CRR or CRC pursuant to a
separate agreement with CSX or NSC.
"The provisions of this Section 8.15 shall apply
except as may be otherwise provided in a separate agreement among
CRC, CSX and/or NSC and except as may be provided by action of
the CRC Board."
(c) Section 8.16 of the Transaction Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"Section 8.16. Administration of FELA Claims. (a)
-----------------------------
Except as provided pursuant to separate agreement between CSX and
NSC, the administration, handling and disposition of FELA Claims
(whenever made) that arise from incidents or exposures occurring
prior to the Closing Date shall be (i) the responsibility of the
parent of the party operating the Allocated Asset where the
incident or incidents giving rise to the FELA Claim occurred, or
(ii) the responsibility of the parent of the party operating the
Allocated Asset most significantly involved if the FELA Claim
arises from an incident or incidents occurring at multiple
locations on Allocated Assets, or (iii) the joint responsibility
of CSX and NSC if the FELA Claim arises from an incident or
incidents occurring at unknown locations or a location not
4
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otherwise covered by clauses (i) or (ii) of this sentence. In
assigning joint responsibility for the administration, handling
and disposition of FELA Claims to CSX and NSC under the foregoing
clause (iii), it is not the parties' intent that CSX and NSC will
actually administer, handle and dispose of such actions jointly,
but rather that CSX and NSC will agree on the most practical and
efficient arrangements with the objective of eliminating
unnecessary duplication of effort and minimizing overall costs.
The costs and expenses associated with the administration,
handling and disposition of FELA Claims that arise from incidents
or exposures occurring prior to the Closing Date shall be borne
by CRR; provided that salaries and overheads associated with the
salaries of full time employees of CSX or NSC while engaged in
investigation or handling such FELA Claims shall be the
responsibility of the employing party and are Corporate Level
Liabilities only to the extent that they are covered by insurance
or are otherwise reimbursable by CRR or CRC pursuant to a
separate agreement with CSX or NSC; provided, further that the
party responsible for the administration of FELA Claims which are
Retained Liabilities shall, before agreeing to any single
settlement of a FELA Claim or group of related FELA Claims,
involving a payment of more than $1 million, obtain the written
consent of the other party. Failure of either party to respond to
such a request for consent within fourteen days of receipt of
such request shall be deemed to constitute consent."
SECTION 4. CRC Pension Plan Matters.
------------------------
(a) Section 6.3(c) of the Transaction Agreement is hereby amended
by inserting the following after the word "Percentage":
", as adjusted to reflect any Separation Costs required to be
borne by CSX or NSC pursuant to Section 6.2(i) and to reflect any
timing differences in the transfers of assets and liabilities to
CSX and NSC pension plans based on actual investment experience."
(b) Section 6.3(c) of the Transaction Agreement is further
amended by deleting the last sentence thereof and replacing it with the
following:
"The Consolidated Rail Corporation Pension Fund Investment
Committee shall approve the manner and amounts to be transferred
to CSX and NSC pension plans with respect to transfers of
employees to CSX and NSC payrolls and this Section 6.3(c)."
SECTION 5. Insurance Matters. Section 2.11 of the Transaction
-----------------
Agreement is hereby deleted in its entirety and the following is substituted
therefor:
"2.11 Insurance Proceeds: Except as otherwise provided in
------------------
this Agreement, the proceeds of any insurance recoveries from
5
<PAGE>
insurance carried by CRR, CRC or their respective Affiliates on
or prior to the Closing Date and third party recoveries in the
nature of insurance or indemnity covering Assets, Retained
Liabilities or Allocated Liabilities, which are received on or
after the Closing Date, shall accrue to the benefit of and be
held by or paid over to CRC, NYC or PRR in proportion to the
obligation each bears under this Agreement for the particular
Liabilities to which the recoveries are applicable."
SECTION 6. Confirmation of Transaction Agreement. In all respects
-------------------------------------
not inconsistent with the terms and provisions of this Amendment, the
Transaction Agreement is hereby ratified, adopted, approved and confirmed.
SECTION 7. Miscellaneous. The provisions of Article XI of the
-------------
Transaction Agreement are hereby expressly incorporated by reference into this
Amendment, and each provision thereof shall have the same force and effect as if
fully set forth herein (except to the extent such provision is amended,
modified, supplemented, altered, rescinded or superseded by this Amendment).
[The remainder of this page has been intentionally left blank.]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date and year first above written.
CSX CORPORATION
By: /s/ GREGORY R. WEBER
--------------------
Name: Gregory R. Weber
Title: Vice President and
Treasurer
CSX TRANSPORTATION, INC., for itself
and on behalf of its controlled
Subsidiaries
By: /s/ PETER J. SHUDTZ
-------------------
Name: Peter J. Shudtz
Title: Vice President - Law &
General Counsel - CSX
Corporation, authorized
agent for CSX
Transportation, Inc.
NORFOLK SOUTHERN CORPORATION
By: /s/ STEPHEN C. TOBIAS
---------------------
Name: Stephen C. Tobias
Title: Vice Chairman and Chief
Operating Officer
NORFOLK SOUTHERN RAILWAY COMPANY,
for itself and on behalf of its
controlled Subsidiaries
By: /s/ J. L. MANETTA
-----------------
Name: J. L. Manetta
Title: Senior Vice President -
Operations
CONRAIL INC., for itself and on
behalf of its controlled
Subsidiaries
By: /s/TIMOTHY O'TOOLE
------------------
Name: Timothy O'Toole
Title: President and Chief
Executive Officer
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CONSOLIDATED RAIL CORPORATION
By: /s/JOHN MCKELVEY
----------------
Name: John McKelvey
Title: Chief Financial Officer
CRR HOLDINGS LLC
By: /s/ D. R. GOODE
---------------
Name: D. R. Goode
Title: Co-chairman and Company
Chief Executive Officer
8
Exhibit 10.3
OPERATING AGREEMENT
dated as of June 1, 1999
by and between
NEW YORK CENTRAL LINES LLC
as Owner,
and
CSX TRANSPORTATION, INC.
as Operator
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS AND USAGE.............................................1
SECTION 1.1 Definitions and Usage....................................1
ARTICLE II - OPERATION OF ALLOCATED ASSETS....................................1
SECTION 2.1 Operation of Allocated Assets............................1
SECTION 2.2 Term of Agreement........................................1
ARTICLE III - OPERATING FEE AND CERTAIN EXPENSES..............................2
SECTION 3.1 Operating Fee; Supplemental Operating Fees. ............2
SECTION 3.2 Method of Payment........................................2
SECTION 3.3 Late Payment.............................................2
SECTION 3.4 No Set-off, Counterclaims, etc...........................2
SECTION 3.5 Tax Provisions...........................................3
ARTICLE IV - REPRESENTATIONS, WARRANTIES AND AGREEMENTS.......................5
SECTION 4.1 Disclaimer of Warranties.................................5
SECTION 4.2 Operator To Exercise Certain Rights......................5
SECTION 4.3 Representations and Warranties of the Operator...........6
SECTION 4.4 Representations and Warranties of the Owner..............7
ARTICLE V - LIENS, QUIET ENJOYMENT............................................7
SECTION 5.1 Liens....................................................7
SECTION 5.2 Quiet Enjoyment..........................................8
ARTICLE VI - SETTLEMENT ACCOUNT...............................................8
SECTION 6.1 Maintenance of Settlement Account........................8
SECTION 6.2 Payment of Settlement Account Balance....................8
SECTION 6.3 Confirmation of Settlement Account.......................9
ARTICLE VII - OPERATION; MAINTENANCE..........................................9
SECTION 7.1 Operation and Maintenance................................9
SECTION 7.2 Modification............................................10
<PAGE>
Page
ARTICLE VIII - OBSOLESCENCE TERMINATION; ABANDONMENT.........................11
SECTION 8.1 Obsolescence Termination; Abandonment....................11
SECTION 8.2 Conditions of Termination...............................11
ARTICLE IX- TERMINATION......................................................12
SECTION 9.1 Termination. ..........................................12
SECTION 9.2 Owner Assignment, Lease or Sale of Allocated Asset......12
SECTION 9.3 Governmental Approvals..................................12
SECTION 9.4 Severable Modifications.................................12
ARTICLE X - LOSS, DESTRUCTION, CONDEMNATION, DAMAGE, ETC.....................13
SECTION 10.1 Replacement; Payment...................................13
SECTION 10.2 Applications During Event of Default...................14
SECTION 10.3 Application of Article VII.............................14
ARTICLE XI - INDEMNITIES.....................................................14
SECTION 11.1 Indemnity by Operator..................................14
SECTION 11.2 Indemnity by Owner.....................................15
SECTION 11.3 Indemnification Procedures..............................15
ARTICLE XII - ASSIGNMENTS....................................................16
SECTION 12.1 Operator Assignments....................................16
SECTION 12.2 Merger, Consolidation, Etc..............................16
SECTION 12.3 Owner Assignments......................................16
ARTICLE XIII - INSPECTION; MARKINGS..........................................16
SECTION 13.1 Rights to Information..................................16
SECTION 13.2 Markings...............................................17
ARTICLE XIV - EVENTS OF DEFAULT..............................................17
SECTION 14.1 Events of Default......................................17
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<PAGE>
Page
ARTICLE XV - REMEDIES........................................................18
SECTION 15.1 Remedies...............................................18
SECTION 15.2 Owner Rights............................................19
SECTION 15.3 Exercise of Other Rights or Remedies...................19
SECTION 15.4 Subject to Governmental Action.........................19
ARTICLE XVI - RIGHT TO PERFORM...............................................20
SECTION 16.1 Right to Perform.......................................20
ARTICLE XVII - RENEWAL OPTIONS...............................................20
SECTION 17.1 Renewal Notice.........................................20
ARTICLE XVIII - CERTAIN NOTICES AND INFORMATION..............................21
SECTION 18.1 Notices................................................21
SECTION 18.2 Notice of Event of Default.............................21
SECTION 18.3 Information Regarding Allocated Assets.................21
ARTICLE XIX - CONFIDENTIALITY................................................22
SECTION 19.1 Confidentiality........................................22
ARTICLE XX - MISCELLANEOUS...................................................22
SECTION 20.1 Dispute Resolution.....................................22
SECTION 20.2 Documentary Conventions................................22
Appendix
Appendix A: Definitions
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<PAGE>
OPERATING AGREEMENT
This OPERATING AGREEMENT (this "Agreement") is entered into as of June
1, 1999, by and between New York Central Lines LLC, a Delaware limited liability
company, as Owner and CSX Transportation, Inc., a Virginia Corporation, as
Operator.
ARTICLE I
Definitions and Usage
---------------------
SECTION 1.1 Definitions and Usage. Unless the context otherwise
-----------------------
requires, capitalized terms used herein shall have the respective meanings
assigned to them in Appendix A to this Agreement. Terms used, but not defined,
----------
in this Agreement or in Appendix A shall have the respective meanings assigned
----------
to them in the Transaction Agreement.
ARTICLE II
Operation of Allocated Assets
-----------------------------
SECTION 2.1 Operation of Allocated Assets. (a) The Owner hereby agrees
------------------------------
with the Operator, and the Operator hereby agrees with the Owner, that the
Operator shall have the license, right and obligation to use and operate the
Allocated Assets for the term referred to in Section 2.2 hereof on the terms and
conditions set forth in this Agreement. Except as otherwise specifically
provided in this Agreement, the Operator may use and operate the Allocated
Assets in such manner and for such purposes as the Operator considers necessary
or appropriate.
(b) The Owner hereby agrees that the Operator shall, effective as
of the Closing Date, have the right to receive and retain for its own benefit
and use and in its own name all revenues, tolls, rents, receipts, issues,
profits and income of every character arising from or associated with the
operation and use of the Allocated Assets.
SECTION 2.2 Term of Agreement. Immediately upon the execution hereof,
-----------------
without necessity of any further act or evidence by either party hereto, the
Allocated Assets shall be deemed delivered by the Owner to the Operator for the
Term and, if the Operator elects to exercise its renewal option pursuant to
Article XVII hereof, for any Renewal Term, in either case, all pursuant to the
terms of this Agreement, unless this Agreement shall have been earlier
terminated in accordance with its terms.
<PAGE>
ARTICLE III
Operating Fee and Certain Expenses
----------------------------------
SECTION 3.1 Operating Fee; Supplemental Operating Fees. The Operator
----------------------------------------------
shall pay to the Owner the Operating Fee commencing on the first Payment Date
and on each Payment Date thereafter for the duration of the Term and any Renewal
Term. Subject to any applicable Governmental Action, the Operating Fee shall be
recalculated on each Valuation Date to reflect the Fair Market Rental Value of
the Allocated Assets then subject to this Agreement. Supplemental Operating Fees
shall be paid by the Operator when due under the terms of this Agreement.
SECTION 3.2 Method of Payment. All Operating Fees and Supplemental
------------------
Operating Fees (to the extent Supplemental Operating Fees are not paid directly
by the Operator) shall be paid by the Operator to the Owner at the Owner's
office or at such other place in the U.S. as the Owner shall specify to the
Operator at least five (5) Business Days prior to the date such payment is due.
Each payment of Operating Fees and Supplemental Operating Fees shall be made by
the Operator in immediately available funds prior to 12:00 noon, New York time
at the place of payment, on the date when such payment shall be due.
SECTION 3.3 Late Payment. In the event any Operating Fees or
-------------
Supplemental Operating Fees shall not be paid on the due date thereof to the
Owner, the Operator shall pay to the Owner on written demand, interest (to the
extent permitted by Applicable Law) on such overdue amount from the due date
thereof (without regard to any grace period) to the date of payment thereof at
the Overdue Rate.
SECTION 3.4 No Set-off, Counterclaims, etc. THIS AGREEMENT IS A NET
---------------------------------
AGREEMENT. THE OPERATOR'S OBLIGATION TO PAY ALL PAYMENTS OF OPERATING FEES AS
AND WHEN THE SAME SHALL BECOME DUE AND PAYABLE IN ACCORDANCE WITH THE TERMS OF
THIS AGREEMENT SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE SUBJECT TO
ANY ABATEMENT OR DIMINUTION BY SET-OFF, DEDUCTION, COUNTERCLAIM, RECOUPMENT,
AGREEMENT, DEFENSE, SUSPENSION, DEFERMENT, INTERRUPTION OR OTHERWISE, AND UNTIL
SUCH TIME AS ALL AMOUNTS REQUIRED TO BE PAID UNDER THIS AGREEMENT SHALL HAVE
BEEN PAID, THE OPERATOR SHALL NOT HAVE ANY RIGHT TO TERMINATE THIS AGREEMENT OR
TO BE RELEASED, RELIEVED OR DISCHARGED FROM ITS OBLIGATION TO MAKE, AND SHALL
NOT SUSPEND, REDUCE OR DISCONTINUE, ANY PAYMENT OF OPERATING FEES FOR ANY REASON
WHATSOEVER (EXCEPT AS MAY BE EXPRESSLY PROVIDED HEREIN), including, without
limitation:
(a) any default, misrepresentation, negligence, misconduct or
other action or inaction of any kind by the Owner or any other Person, whether
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<PAGE>
under or in connection with this Agreement or any other agreement relating to
this Agreement or in connection with any unrelated transaction;
(b) the insolvency, bankruptcy, reorganization or cessation of
existence, or discharge or forgiveness of indebtedness of any Person referred to
in clause (a) above;
(c) the invalidity, unenforceability or impossibility of
performance of this Agreement for any reason;
(d) any defect in the title, condition, design, operation or
fitness for use of, or any Lien or other restriction of any kind upon, all or
any part of any Allocated Asset, any loss or destruction of, or damage to, any
Allocated Asset or any interruption in or cessation of the ownership,
possession, operation or use of any Allocated Asset for any reason whatsoever;
(e) any restriction, prevention or curtailment of or interference
with any Allocated Asset or the use thereof or any part thereof for any reason
whatsoever, including, without limitation, by any Governmental Authority;
(f) any Applicable Law now or hereafter in force;
(g) any failure to obtain any required Governmental Action for a
transfer of rights or title to the Owner, the Operator or any other Person;
(h) any amendment or other change of, or any assignment of any
rights under, this Agreement, or any waiver or other action or inaction under or
in respect of this Agreement, or any exercise or nonexercise of any right or
remedy under or in respect of this Agreement; and
(i) any other cause, circumstance, happening or event whatsoever,
foreseen or unforeseen, whether similar or dissimilar to any of the foregoing.
The Operator hereby waives and hereby agrees to waive at any future time
at the request of the Owner, to the extent now or then permitted by Applicable
Law, any and all rights that the Operator may have or that at any time hereafter
may be conferred upon it, by statute, regulation or otherwise, to terminate,
cancel, quit or surrender this Agreement other than in accordance with the
express terms hereof. Each Operating Fee payment shall be final and the Operator
agrees not to seek to recover all or any part of any such payment (except for
amounts paid to the Owner which the Owner in good faith agrees have been paid in
error) from the Owner for any reason under any circumstance whatsoever.
SECTION 3.5 Tax Provisions. (a) During the Term and any Renewal Term,
---------------
the Operator shall pay when due, all Taxes, other than Excluded Taxes (as
hereinafter defined), imposed on the Owner, based upon the Allocated Assets or
arising out of the use, lease, possession or operation of the Allocated Assets
during that period. For purposes of this Section, (i) Owner shall mean the Owner
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<PAGE>
and its Affiliates and (ii) Excluded Taxes shall mean (A) all Taxes based, in
whole or in part, on net income or gross income (including, without limitation,
any minimum tax) of the Owner or which are in substitution for, or relieve the
Owner from, any Tax based upon or measured by the Owner's net income or gross
income, together with any interest, penalties, additions to tax or additional
amounts that may become payable in respect thereof; (B) business and occupation
taxes, and gross receipts taxes (unless in the nature of a sales tax) of the
Owner and Taxes based upon the equity interests of the Owner; and (C) interest,
fines and penalties to the extent due to the acts or omissions of the Owner in
connection with Excluded Taxes. The Operator shall not be required to pay any
Tax it is obligated to pay under the provisions of this Section 3.5 during the
time it shall reasonably and in good faith and by appropriate legal or
administrative proceedings contest the validity or amount thereof.
(b) The Owner shall have the right and obligation, at its own
expense, to prepare and file all Tax returns required to be filed by the Owner
under Applicable Law. Prior to the Owner's filing of any Tax returns for Taxes
required to be paid by the Operator under paragraph (a) of this Section 3.5, the
Owner shall provide such returns to the Operator for its review and approval,
which approval will not be unreasonably withheld or delayed.
(c) The Operator and its assignees and designees shall have the
right (but only to the extent the Owner shall have such right, by contract or
otherwise) to control at its expense any audit or examination by any
Governmental Authority, or any judicial proceeding, relating to any Taxes
required to be paid by it under paragraph (a) of this Section 3.5.
(d) During the Term and any Renewal Term, the Operator and any of
its designees shall be entitled to claim federal, state and local tax benefits
(including, without limitation, deductions and credits) arising out of
Operator's expenditures in the use, possession or operation of the Allocated
Assets by the Operator, or any of its respective assignees or designees, and the
improvements thereto, that the Operator, or any of its designees is entitled to
claim under federal, state and local laws and regulations. These tax benefits
include but are not limited to: (i) deductions for depreciation or amortization
attributable to property (both tangible and intangible) owned by the Operator,
or any of its assignees or designees, including improvements made to any of the
Allocated Assets by any of them, as well as expenditures made by any of them
that are required to be capitalized under sections 263 or 263A or some other
section of the Code; (ii) deductions for expenditures made by the Operator, or
any of its assignees or designees, deductible as ordinary and necessary business
expenses under section 162 of the Code; (iii) deductions for losses attributable
to property (both tangible and intangible) owned by the Operator, or any of its
assignees or designees, deductible under section 165 of the Code; and (iv) any
federal, state or local credits applicable to the use, lease, possession or
operation of the Allocated Assets by the Operator, or any of its assignees or
designees, and improvements thereto. The Owner is entitled to deductions for
Taxes of the Owner paid by the Operator under paragraph (a) of this Section 3.5
and treated as rent paid by the Operator under this Agreement and taxable income
received by the Owner under section 1.162-11(a) of the Income Tax Regulations.
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<PAGE>
ARTICLE IV
Representations, Warranties and Agreements
------------------------------------------
SECTION 4.1 Disclaimer of Warranties. AS BETWEEN THE OWNER AND THE
--------------------------
OPERATOR, THE EXECUTION OF THIS AGREEMENT SHALL BE CONCLUSIVE PROOF OF
ACCEPTANCE BY THE OPERATOR OF EACH ALLOCATED ASSET AS BEING IN COMPLIANCE WITH
ALL REQUIREMENTS OF THIS AGREEMENT. THE OWNER AND THE OPERATOR TAKE EACH SUCH
ALLOCATED ASSET "AS IS" AND "WHERE IS", AND THE OPERATOR ACKNOWLEDGES THAT THE
OWNER HAS NOT MADE, NOR SHALL BE DEEMED TO HAVE MADE, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, MERCHANTABILITY, DESIGN, QUALITY, DURABILITY,
OPERATION OR FITNESS FOR USE OR PURPOSE OF EACH SUCH ALLOCATED ASSET OR ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO
EACH SUCH ALLOCATED ASSET OR OTHERWISE, IT BEING AGREED THAT ALL RISKS INCIDENT
THERETO ARE TO BE BORNE, AS BETWEEN THE OWNER AND THE OPERATOR, BY THE OPERATOR
IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN ANY SUCH ALLOCATED ASSET, OF ANY
NATURE WHETHER PATENT OR LATENT, AND THAT THE OWNER SHALL NOT HAVE ANY
RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO, except that the Owner hereby
represents, warrants and covenants that each such Allocated Asset shall be free
of Owner Liens on the Closing Date and except as otherwise provided in the
Transaction Agreement. The provisions of this Section 4.1 have been negotiated,
and the foregoing provisions are intended to be a complete exclusion and
negation of any other warranties made by the Owner, express or implied, with
respect to any Allocated Asset, whether arising pursuant to Applicable Law now
or hereafter in effect or otherwise. Nothing contained in this Section 4.1 shall
in any way diminish or otherwise affect any right the Operator may have with
respect to any Allocated Asset against any third Person. The Owner shall not at
any time be required to inspect any Allocated Asset, and any actual inspection
by the Owner shall not be deemed to affect or modify the provisions of this
Section 4.1.
<PAGE>
SECTION 4.2 Operator To Exercise Certain Rights. (a) The Owner hereby
-------------------------------------
authorizes the Operator, at the Operator's expense, to exercise in the name of
and on behalf of the Owner and the Operator, as their interests may appear, the
right and power to deal with any third party lessor, lessee, licensor, licensee,
seller, manufacturer, shipper or any other Persons (including agents and
consultants thereof) with respect to any Allocated Asset or who are party to any
Assigned Rights (each a "Third Party Provider") and the right to enforce (by
legal action or otherwise) against such Third Party Provider all rights, powers
and privileges of the Owner and to receive all benefits of the Owner with
respect to such Third Party Provider, under any Contract, Assigned Right,
express or implied warranty, indemnity or otherwise; provided, that if an Event
of Default shall have occurred and be continuing (and until all Events of
Default then outstanding shall no longer be continuing) the Owner may terminate
- 5 -
<PAGE>
the authority of the Operator under this Section 4.2. Any amount paid to the
Owner or Operator pursuant to the Operator's exercise of its authority under
this Section 4.2 shall be paid to the Operator. After the end of the Term or any
Renewal Term with respect to any Allocated Asset or after the termination of
this Agreement with respect to such Allocated Asset pursuant to Article XIV, (a)
the Operator shall have no further rights, powers, privileges or benefits under
this Section 4.2 and (b) all amounts payable by any Third Party Provider paid
with respect to periods arising thereafter shall be paid to, and retained by,
the Owner or any other Person as shall then be the owner of the Allocated Asset
as to which such payment is made.
(b) The Operator shall, with the Owner's prior consent, have the
right and power to execute and deliver on behalf of the Owner, the extension,
renewal, amendment or modification of any Assigned Rights or any other Contract
in respect of the Allocated Assets.
(c) The Owner shall as expeditiously as possible use its
reasonable efforts to obtain or transfer to the Operator any Governmental Action
or the consent, authorization, or approval of any private Person required to be
made, obtained or transferred to effectuate the purposes of this Agreement and
the transactions contemplated herein, which actions shall include furnishing all
information required under or in connection with such Governmental Action or the
approvals of, or filing with such private Person.
(d) The Operator shall pay, perform and discharge fully all of
the obligations of the Owner or its Affiliates under all Assigned Rights and
Contracts that are Allocated Assets from and after the Closing Date. Such
payments shall be considered Supplemental Operating Fees. The Owner or its
Affiliates shall, without further consideration therefor, pay, assign and remit
promptly to the Operator, as appropriate, all monies, rights and other
consideration received in respect of such performance. The Owner or its
Affiliates shall exercise or exploit the rights and options under all such
Contracts only as reasonably directed by the Operator.
SECTION 4.3 Representations and Warranties of the Operator. The Operator
----------------------------------------------
represents and warrants to the Owner as of the Closing Date as follows:
(a) Due Organization, etc. The Operator (i) is a corporation duly
----------------------
organized and validly existing under the laws of the Commonwealth of Virginia,
(ii) has the power and authority to enter into and perform its obligations under
this Agreement and (iii) has obtained all Governmental Action required to use or
hold the Allocated Assets in accordance with this Agreement, and to enter into
and perform its obligations under this Agreement.
(b) Due Authorization, Non-Contravention, etc. The execution,
---------------------------------------------
delivery and performance of this Agreement have been duly authorized by all
necessary corporate action on the part of the Operator, do not and will not
conflict with, result in any violation of, or constitute any default under, any
provision of any Organic Document of the Operator or Applicable Law.
- 6 -
<PAGE>
(c) Due Execution. This Agreement has been duly executed and
--------------
delivered by the Operator, and constitutes the legal, valid and binding
obligation of the Operator enforceable against the Operator in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
SECTION 4.4 Representations and Warranties of the Owner. The Owner
----------------------------------------------
represents and warrants to the Operator as of the Closing Date as follows:
(a) Due Organization, etc. The Owner (i) is a limited liability
------------------------
company duly organized and validly existing under the laws of the State of
Delaware, (ii) has the power and authority to enter into and perform its
obligations under this Agreement and (iii) has obtained all Governmental Action
required to enter into and perform its obligations under this Agreement.
(b) Due Authorization, Non-Contravention, etc. The execution,
---------------------------------------------
delivery and performance of this Agreement have been duly authorized by all
necessary company action on the part of the Owner, do not and will not conflict
with, result in any violation of, or constitute any default under, any provision
of any Organic Document of the Owner or Applicable Law.
(c) Due Execution. This Agreement has been duly executed and
--------------
delivered by the Owner, and constitutes the legal, valid and binding obligation
of the Owner enforceable against the Owner in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the court before
which any proceeding therefor may be brought.
ARTICLE V
Liens; Quiet Enjoyment
----------------------
SECTION 5.1 Liens. The Operator shall not directly or indirectly create,
-----
incur, assume or suffer to exist any Lien (other than Permitted Liens) on any
Allocated Asset. The Operator will promptly, at its own expense, take such
action as may be necessary duly to discharge any such Lien. The Operator's
obligations under this Section 5.1 with respect to any such Lien on any
Allocated Asset resulting from a claim arising prior to the termination of this
Agreement with respect to such Allocated Asset shall survive such termination.
The Operator agrees that, upon the termination of this Agreement, the Allocated
Assets shall be returned to the Owner free and clear of Liens, other than Owner
Liens.
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<PAGE>
SECTION 5.2 Quiet Enjoyment. Notwithstanding any other provision of this
---------------
Agreement, so long as no Event of Default shall have occurred and be continuing,
as between the Operator and Owner, the Operator shall have the exclusive rights
to possession, control and use of all Allocated Assets and neither the Owner nor
any Person acting or claiming through the Owner will take any action that shall
interfere with the peaceful and quiet enjoyment or the possession and use or
nonuse of any Allocated Asset by the Operator, and the Operator shall have the
right to possess and use or not use such Allocated Asset in its sole discretion,
subject always to the terms and conditions of this Agreement. The foregoing is
not intended to limit the inspection rights of the Allocated Assets granted by
the Operator pursuant to Section 13.1 hereof.
ARTICLE VI
Settlement Account
------------------
SECTION 6.1 Maintenance of Settlement Account. The Operator shall
------------------------------------
maintain a non-cash book account (the "Settlement Account") to reflect amounts
owed by the Operator to the Owner as a result of transactions described in
Sections 7.1(e), 8.1 and 10.1(a)(ii) hereof.
SECTION 6.2 Payment of Settlement Account Balance. The Operator shall
---------------------------------------
pay to the Owner an amount equal to the then balance of the Settlement Account
upon: (i) the sixth (6th), twelfth (12th), eighteenth (18th) and twenty-fourth
(24th) anniversaries of the Closing Date, (ii) the expiration of the Term (or,
if earlier, the termination of this Agreement), (iii) the sixth (6th)
anniversary of the first day of each Renewal Term, (iv) the end of each Renewal
Term (or, if earlier, the termination of this Agreement), and (v) thirty (30)
calendar days after the date on which a Substantial Allocated Asset (a) is not
repaired or replaced under Section 7.1(e) hereof, (b) is abandoned, sold or
otherwise disposed of under Section 8.1 hereof or (c) suffers an Event of Loss
and is not replaced under Section 10.1(a)(i) hereof (each, a "Settlement Account
Payment Date").
SECTION 6.3 Confirmation of Settlement Account. Within sixty (60) days
-----------------------------------
of the crediting of an amount to the Settlement Account, the Appraisal Procedure
shall be used to confirm that credits to the Settlement Account were based on
the fair market value of the relevant Allocated Assets consistent with the terms
of this Agreement. The Settlement Account shall be adjusted consistent with the
outcome of the Appraisal Procedure and the payments made pursuant to Section 6.2
hereof shall reflect any such adjustments.
ARTICLE VII
Operation; Maintenance
----------------------
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<PAGE>
SECTION 7.1 Operation and Maintenance. The Operator shall at all times
--------------------------
at its own expense during the Term and during any Renewal Term:
(a) use the Allocated Assets in such manner and for such purposes
as the Operator considers necessary or appropriate in connection with the
operation of its business;
(b) keep and maintain such books, records and title documents
relating to the Allocated Assets, and the acquisition, construction and
installation of Modifications thereto and the payment of the purchase price of
such Modifications, as the Operator considers appropriate consistent with the
Operator's customary business practices;
(c) maintain the Allocated Assets in accordance with the
Operator's customary practice;
(d) inspect, service, maintain, store, use, operate, repair,
replace, modify and improve the Allocated Assets in compliance in all material
respects with Applicable Law (including all applicable environmental and
occupational safety laws), and in compliance in all material respects with all
applicable licenses and permits relating to the Allocated Assets issued by any
Governmental Authority; provided, the Operator may in good faith by appropriate
proceedings contest the validity or application of any such Applicable Law in
any reasonable manner which does not involve any risk of the imposition of
criminal liability on the Owner, or any material danger of any fine, penalty, or
other imposition upon the Owner for which the Operator has not acknowledged its
obligation to indemnify the Owner pursuant to this Agreement; and
(e) in case of any damage to any Allocated Asset, other than
damage constituting an Event of Loss, at its election, in either case at its own
expense, (i) repair such Allocated Asset so as to restore its utility consistent
with the Operator's customary practice with respect to similar assets owned by
the Operator (as determined solely by the Operator) or (ii) replace such
Allocated Asset with an asset (which will become an Allocated Asset) having a
fair market value (as determined solely by the Operator) equivalent to that of
the damaged Allocated Asset immediately prior to the damage (assuming, in either
case, such Allocated Asset was then in the condition and state of repair
required to be maintained by the terms of this Agreement), with such alterations
and additions as may be made at the Operator's election pursuant to and subject
to the conditions of Section 7.2 hereof; provided, however, that the Operator
need not repair or replace any Allocated Asset to the extent that such Allocated
Asset is not necessary to the operation of the Allocated Assets considered as a
whole (as determined solely by the Operator), in which event the Operator shall
credit to the Settlement Account the fair market value of such Allocated Asset
as of the date immediately prior to the damage (assuming such Allocated Asset
was then in the condition and state of repair required to be maintained by the
terms of this Agreement). Upon the crediting of the Settlement Account with the
fair market value of such Allocated Asset, such Allocated Asset shall no longer
be subject to this Agreement and the Owner shall convey to the Operator or its
- 9 -
<PAGE>
designee, ownership of and title to such Allocated Asset. Notwithstanding the
foregoing, until payment by the Operator to the Owner of the amount credited to
the Settlement Account on the next succeeding Settlement Account Payment Date,
such Allocated Asset shall be deemed to continue to be subject to this Agreement
solely for the purpose of calculating the Operating Fee.
SECTION 7.2 Modification.
------------
(a) The Operator shall at its expense make any Modification to
any Allocated Asset required (i) by Applicable Law or in order to operate,
maintain, service, store, or use such Allocated Asset in accordance with
Applicable Law, as soon as practicable after any such requirement may arise or
(ii) in order for the Operator to comply with the provisions of this Agreement
(all such Modifications being referred to herein as "Required Modifications");
provided, that the Operator may, so long as no Event of Default shall have
occurred and be continuing, in good faith by appropriate proceedings contest the
validity or application of any Applicable Law in any reasonable manner which
does not involve any reasonably foreseeable risk of the imposition of criminal
liability on the Owner, or any material danger of any fine, penalty or other
imposition upon the Owner for which the Operator has not acknowledged its
obligation to indemnify the Owner pursuant to this Agreement. The Operator at
its expense, from time to time, may make any Modification to any Allocated Asset
that the Operator in its discretion may deem desirable in the proper conduct of
the Operator's business (all such Modifications which are not Required
Modifications being referred to herein as "Optional Modifications"); provided
that any construction of new trackage or facilities appurtenant to but not
located on such Allocated Assets shall, at Operator's election, be deemed not to
be Modifications hereunder and not subject to this Agreement.
(b) Title to each Modification shall vest as follows:
(i) in the case of each (A) Required Modification or
(B) other Nonseverable Modification, whether or not the Owner shall have
financed or provided financing (in whole or in part) for such Modification, the
Owner shall, without further act, effective on the date such Modification
shall have been incorporated into the modified Allocated Asset, acquire title to
such Modification free and clear of all Liens other than Permitted Liens; or
(ii) in the case of each Severable Modification, the
Operator shall retain title to such Modification and the Operator may (subject
to Section 7.2(c) hereof) remove such Modification at its expense at any time
so long as the modified Allocated Asset remains in or is restored by the
Operator to the condition required by this Agreement.
- 10 -
<PAGE>
Immediately upon title to a Modification vesting in the Owner pursuant
to this Section 7.2(b), such Modification shall, without further act, become
subject to this Agreement and be deemed part of the applicable Allocated Asset
for all purposes.
(c) Subject to compliance with Applicable Law, the Operator may
remove, at its expense, any Severable Modification; provided, that the Operator,
at its expense shall repair any damage to the Allocated Asset from which a
Severable Modification has been removed caused by such removal; provided,
further, that in the event the Operator shall not have removed any Severable
Modification to which the Operator shall have title as provided in Section
7.2(b)(ii) prior to the end of the Term or any Renewal Term, title to such
Severable Modification shall vest in the Owner upon the expiration of such Term
or Renewal Term.
ARTICLE VIII
Obsolescence Termination; Abandonment
-------------------------------------
SECTION 8.1 Obsolescence Termination; Abandonment. Except as may
----------------------------------------
otherwise be contemplated in this Agreement, the Operator may not dispose of, or
otherwise convey or transfer any interest in the Allocated Assets to any Person.
Unless an Event of Default shall have occurred and be continuing, if the
Operator has determined that an Allocated Asset is uneconomic or surplus to, or
no longer necessary for, the Operator's operating requirements as determined by
the Operator in its sole judgment, the Operator shall have the right, with the
Owner's consent, to abandon or sell or otherwise dispose of such Allocated Asset
(as agent for the Owner) in which event the Operator may retain the sale
proceeds (net of selling expenses), if any, received for such Allocated Asset
and shall credit to the Settlement Account the fair market value (as of the time
of the abandonment, sale or other disposition) of such Allocated Asset (which,
in no event, shall be less than the sale proceeds, net of selling expenses,
received for such Allocated Asset). Upon the crediting of the Settlement Account
with the fair market value of such Allocated Asset, such Allocated Asset shall
no longer be subject to this Agreement and the Owner shall convey to the
Operator or its designee, ownership of and title to such Allocated Asset.
Notwithstanding the foregoing, until payment by the Operator to the Owner of the
amount credited to the Settlement Account on the next succeeding Settlement
Account Payment Date, such Allocated Asset shall be deemed to continue to be
subject to this Agreement solely for the purpose of calculating the Operating
Fee.
SECTION 8.2 Conditions of Termination. As a condition to a termination,
-------------------------
abandonment or other disposition pursuant to this Article VIII, any necessary
Governmental Actions in connection therewith shall have been obtained by and at
the expense of the Operator. Upon the Operator's request, the Owner shall
cooperate fully with the Operator in seeking and obtaining all necessary
Governmental Actions in connection with the termination or abandonment of any
Allocated Asset.
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<PAGE>
ARTICLE IX
Termination
-----------
SECTION 9.1 Termination. (a) Unless the Operator exercises its renewal
-----------
option under Article XVII, upon termination of this Agreement, the Operator
shall, at its risk, cost and expense, cause the Allocated Assets subject to this
Agreement at such time to be (i) free and clear of all Liens other than Owner
Liens, (ii) in compliance with the maintenance and operating provisions of this
Agreement, and (iii) otherwise capable of being maintained, used and operated
substantially in compliance with Applicable Law for the operation of a railroad
appropriate to conditions existing at such time.
(b) Upon the termination of this Agreement, the Operator will, at
the Operator's expense, promptly and duly execute and deliver to the Owner such
documents and take such further actions as the Owner may reasonably request in
order to effect the return of the Allocated Assets, including any Assigned
Right, to the Owner or its designee.
SECTION 9.2 Owner Assignment, Lease or Sale of Allocated Asset. The
------------------------------------------------------
Operator agrees that during the last year of the Term or any Renewal Term, it
will cooperate in all reasonable respects with efforts of the Owner to lease,
sell, assign or otherwise transfer any Allocated Asset to any designee of the
Owner.
SECTION 9.3 Governmental Approvals. The Operator shall cooperate and
-----------------------
assist the Owner, at the expense of the Owner, in transferring or obtaining all
Governmental Actions which may be necessary for the Owner or its designee, as
the case may be, to operate, lease, purchase, assume or otherwise be a party to
or beneficiary of any returned Allocated Asset.
SECTION 9.4 Severable Modifications. At any time after the Operator has
-----------------------
notified the Owner that it has determined not to renew this Agreement pursuant
to Article XVII, or operational responsibility for the Allocated Assets reverts
to the Owner, the Operator shall at the Owner's request, advise the Owner of the
nature and condition of all Severable Modifications owned by the Operator
pursuant to Section 7.2(b)(ii) hereof which the Operator has removed or intends
to remove from the Allocated Assets in accordance with Section 7.2(c) hereof.
The Operator may (and shall, if so directed by Owner), at its sole cost, expense
and risk, remove from any Allocated Asset any Severable Modification; provided,
that any such Modification not removed pursuant to this Section 9.4 shall be
deemed to be part of the Allocated Asset to which it relates for all purposes
hereof and title to such Modification shall thereupon vest in the Owner free and
clear of all Liens, other than Owner Liens.
ARTICLE X
Loss, Destruction, Condemnation, Damage, etc.
---------------------------------------------
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<PAGE>
SECTION 10.1 Replacement; Payment.
--------------------
(a) Upon the occurrence of an Event of Loss, or an event which
with the passage of time would become an Event of Loss, with respect to any
Allocated Asset, the Operator shall:
(i) replace the Allocated Asset which suffered the Event
of Loss, with a replacement asset (which will become an Allocated Asset)
which has a fair market value equivalent to that of the Allocated Asset which
suffered the Event of Loss (as determined solely by the Operator) immediately
prior to such Event of Loss (assuming such Allocated Asset was then in the
condition and state of repair required by this Agreement); or
(ii) the Operator may retain the sale proceeds, if any,
received for the Allocated Asset suffering the Event of Loss and shall credit to
the Settlement Account the fair market value of such Allocated Asset
immediately prior to such Event of Loss (assuming such Allocated Asset was
then in the condition and state of repair required by this Agreement), which
fair market value in no event shall be less than the sale proceeds (net of
selling expenses) received for such Allocated Asset. Upon the crediting of
the Settlement Account with the fair market value of such Allocated Asset,
such Allocated Asset shall no longer be subject to this Agreement and the Owner
shall convey to the Operator or its designee, ownership of and title to such
Allocated Asset. Notwithstanding the foregoing, until payment by the Operator
to the Owner of the amount credited to the Settlement Account on the next
succeeding Settlement Account Payment Date, the Allocated Asset suffering the
Event of Loss shall be deemed to continue to be subject to this Agreement solely
for the purpose of calculating the Operating Fee.
(b) Upon compliance by the Operator with Section 10.1(a)(i), (i)
this Agreement shall continue with respect to any replacement Allocated Asset as
though no Event of Loss had occurred, (ii) the Owner shall convey "as is" "where
is", free and clear of all Owner Liens, without recourse or warranty (except as
to the ability and authority of the Owner to transfer and convey such Allocated
Asset free and clear of Owner Liens), to the Operator or its designee all right,
title and interest of the Owner in and to the Allocated Asset being replaced by
executing and delivering to the Operator or its designee such bills of sales and
other documents or instruments as the Operator or its designee may reasonably
request to evidence such conveyance, and (iii) the Owner shall assign to the
Operator all claims it may have against any other Person arising from the event
which gave rise to the replacement.
(c) Upon compliance by the parties with Section 10.1(a)(ii), the
Owner shall convey "as is" "where is", free and clear of all Owner Liens,
without recourse or warranty (except as to the ability and authority of the
Owner to transfer and convey such Allocated Asset free and clear of Owner
Liens), to the Operator or its designee all right, title and interest of the
Owner in and to such Allocated Asset by executing and delivering to the Operator
or its designee such bills of sales and other documents or instruments as the
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<PAGE>
Operator or its designee may reasonably request to evidence such conveyance.
SECTION 10.2 Applications During Event of Default. Any amount that shall
------------------------------------
be payable to the Operator pursuant to this Agreement arising out of any
warranty, governmental award or otherwise received in respect of any Allocated
Asset shall not be paid to the Operator or, if it shall have been previously
paid to the Operator, shall not be retained by the Operator but shall be paid to
the Owner, if at the time of such payment any Event of Default shall have
occurred and be continuing. In such event, all such amounts shall be paid to and
held by the Owner in trust as security for the obligations of the Operator to
make payments under this Agreement or applied by the Owner toward payment of any
of such obligations of the Operator at the time due hereunder. At such time as
there shall not be continuing any Event of Default all such amounts at the time
held by the Owner in excess of the amount, if any, that the Owner shall have
elected to apply as above provided shall be paid to the Operator.
SECTION 10.3 Application of Article VII. Article VII shall not apply to
--------------------------
any Allocated Asset after an Event of Loss has occurred with respect to such
Allocated Asset; provided, that the foregoing shall not limit the obligations of
the Operator under Article VII hereof with respect to any replacement Allocated
Asset.
ARTICLE XI
Indemnities
-----------
SECTION 11.1 Indemnity by Operator. (a) The Operator assumes and shall
---------------------
be fully responsible for all liabilities attributable in any way to the
Allocated Assets, or to operations on or over the Allocated Assets, except for
(i) Retained Liabilities and any other liabilities with respect to which it is
the responsibility of any Person other than the Operator under the terms of the
Transaction Agreement and the Ancillary Agreements to indemnify the Owner, and
(ii) liabilities that arise prior to the Closing Date referred to in Section
2.8(b)(i) or Section 2.8(c) of the Transaction Agreement; provided, that for the
purposes of this Section 11.1(a), the term "Ancillary Agreements" as used in the
parenthetical included in Sections 2.8(b) and 2.8(c) of the Transaction
Agreement shall be deemed not to include this Agreement. To that end, the
Operator agrees to and shall protect, indemnify and hold wholly harmless the
Owner and its directors, officers, employees and agents (each an "Owner
Indemnified Person") from and against any Damages arising from or attributable
to the liabilities assumed by the Operator under the first sentence of this
Section 11.1(a).
(b) Upon payment in full of any indemnity pursuant to this
Section 11.1, the Operator shall, to the extent of such payment and so long as
no Event of Default shall have occurred and be continuing, be subrogated to any
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<PAGE>
rights of the Owner Indemnified Person in respect of the matter against which
such indemnity was given (other than with respect to any insurance policies
carried by such Owner Indemnified Person).
SECTION 11.2 Indemnity by Owner. (a) The Owner shall be fully
--------------------
responsible for all liabilities allocated to it under Section 2.8(b)(i) of the
Transaction Agreement. The Owner shall be fully responsible for all liabilities
allocated to it under Section 2.8(c) of the Transaction Agreement and shall, to
the extent not obtained by CRC as required by Section 2.8(c) of the Transaction
Agreement, obtain within 60 days after the Closing Date insurance to cover such
liabilities from and after the Closing Date. To that end, the Owner agrees to
and shall protect, indemnify and hold wholly harmless the Operator and its
directors, officers, employees and agents (each, an "Operator Indemnified
Person") from and against any and all Damages arising from or attributable to
(i) Retained Liabilities and any other liabilities with respect to which it is
the responsibility of any Person other than the Operator under the terms of the
Transaction Agreement and the Ancillary Agreements to indemnify the Owner, and
(ii) liabilities that arise prior to the Closing Date referred to in Section
2.8(b)(i) and Section 2.8(c) of the Transaction Agreement; provided, that for
the purposes of this Section 11.2(a), the term "Ancillary Agreements" as used in
the parenthetical included in Sections 2.8(b) and 2.8(c) of the Transaction
Agreement shall be deemed not to include this Agreement.
(b) Upon payment in full of any indemnity pursuant to this
Section 11.2, the Owner shall, to the extent of such payment, be subrogated to
any rights of the Operator Indemnified Person in respect of the matter against
which such indemnity was given (other than with respect to any insurance
policies carried by such Operator Indemnified Person).
SECTION 11.3 Indemnification Procedures. (a) If any Action shall be
---------------------------
threatened or instituted or any claim or demand shall be asserted against any
Indemnified Party in respect of which indemnification may be sought under the
provisions of this Agreement, the Indemnified Party shall promptly cause written
notice of the assertion of any such claim, demand or Action of which it has
knowledge to be forwarded to the Indemnifying Party. Such notice shall contain a
reference to the provisions hereof or of such other agreement, instrument or
certificate delivered pursuant hereto, in respect of which such claim is being
made. The Indemnified Party's failure to give the Indemnifying Party prompt
notice shall not preclude the Indemnified Party from obtaining indemnification
from the Indemnifying Party under this Article XI unless the Indemnified Party's
failure has materially prejudiced the Indemnifying Party's ability to defend the
claim, demand or Action.
(b) If the Indemnified Party seeks indemnification from the
Indemnifying Party as a result of a claim or demand being made by a third party
(a "Third Party Claim"), the Indemnifying Party shall have the right promptly to
assume the control of the defense of any Action with respect to such Third Party
Claim, including, at its own expense, employment by it of counsel reasonably
satisfactory to the Indemnified Party. The Indemnified Party may, in its sole
discretion and at its own expense, employ counsel to represent it in the defense
of the Third Party Claim, and in such event counsel for the Indemnifying Party
- 15 -
<PAGE>
shall cooperate with counsel for the Indemnified Party in such defense, provided
that the Indemnifying Party shall direct and control the defense of such Third
Party Claim or proceeding. The Indemnifying Party shall not consent to the entry
of any judgment, except with the written consent of the Indemnified Party, and
shall not enter into any settlement of such Third Party Claim without the
written consent of the Indemnified Party which does not include as an
unconditional term thereof the release of the Indemnified Party from all
Liability in respect of such Third Party Claim.
ARTICLE XII
Assignments
-----------
SECTION 12.1 Operator Assignments. Except as otherwise provided in this
--------------------
Agreement, the Operator may not, without the prior written consent of the Owner,
and subject to any applicable Governmental Actions, assign, transfer, sublease
or otherwise grant the right to use any Allocated Asset or its interest therein
or rights with respect thereto, including any Assigned Right. Except as
otherwise provided in this Agreement, the Operator may, with the prior written
consent of the Owner, and subject to any applicable Government Actions, assign,
transfer, sublease or otherwise grant the right to use any Allocated Asset or
its interest therein or rights with respect thereto, including any Assigned
Right.
SECTION 12.2 Merger, Consolidation, Etc. The Operator, without the
-----------------------------
consent of the Owner, may assign all or any part of its rights and obligations
under this Agreement to (i) any of its controlled Subsidiaries or (ii) any
successor in the event of a merger, consolidation, sale of all or substantially
all its assets, liquidation or dissolution, if such assignee executes and
delivers to the Owner an agreement reasonably satisfactory in form and substance
to the Owner under which such assignee assumes and agrees to perform and
discharge all the obligations and liabilities of the Operator; provided that any
such assignment shall not relieve the Operator from the performance and
discharge of such obligations and liabilities.
SECTION 12.3 Owner Assignments. The Owner shall not transfer or assign
------------------
any part of its right, title and interest in this Agreement or any Allocated
Assets used hereunder without the prior written consent of the Operator.
ARTICLE XIII
Inspection; Markings
--------------------
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<PAGE>
SECTION 13.1 Rights to Information. The Owner may at its own expense,
----------------------
upon reasonable prior notice to the Operator during the normal business hours of
the Operator, no more frequently than once in any calendar year, inspect the
Allocated Assets and the books and records of the Operator relating to the
maintenance and performance of such Allocated Assets and make copies and
extracts therefrom, and may discuss such matters with the Operator's officers.
Upon the occurrence and during the continuance of an Event of Default, the Owner
may inspect such books and records at any time, which inspections shall be at
the expense of the Operator. The Owner also shall have the right at any time to
obtain information regarding the condition and state of repair of any Allocated
Asset, compliance by the Operator with Article VII hereof and the absence of an
Event of Default.
SECTION 13.2 Markings. The Operator shall affix to certain Allocated
--------
Assets agreed to by the Operator and Owner identifying labels, plates or tags
each setting forth such information as the Operator and Owner may agree. The
Operator covenants and agrees to replace any such label, plate or tag which may
be removed or destroyed or become illegible, and the Operator shall indemnify
each Owner Indemnified Person against any liability, loss or expense incurred by
such Owner Indemnified Person as a result of the failure to maintain such
markings.
ARTICLE XIV
Events of Default
-----------------
SECTION 14.1 Events of Default. Each of the following events shall
-----------------
constitute an Event of Default (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any Governmental Authority):
(a) the Operator shall fail to make any payment of (i) the
Operating Fee when due and such failure shall continue unremedied for a period
of thirty (30) Business Days and (ii) any Supplemental Operating Fees due under
this Agreement and such failure shall continue unremedied for a period of thirty
(30) Business Days; or
(b) the Operator shall fail to perform or observe any other
material covenant, condition or agreement to be performed or observed by it
under this Agreement and such failure shall continue unremedied for a period of
one hundred twenty (120) Business Days after notice thereof shall have been
given to the Operator by the Owner; provided, that the continuation of any such
failure or breach (other than a failure or breach curable by payment of money)
for a period longer than such one hundred twenty (120) Business Day period shall
not constitute an Event of Default if (i) such default is curable but cannot be
cured within such one hundred twenty (120) Business Day period and (ii) the
Operator is diligently pursuing the cure of such default; provided, further,
that any such failure or breach (other than a failure or breach curable by
payment of money) shall constitute an Event of Default if such failure is not
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<PAGE>
cured within the earlier of the last Business Day of the Term and any Renewal
Term and four hundred fifty (450) days from the date notice thereof has been
given to the Operator; or
(c) The Operator (i) shall commence a voluntary Insolvency
Proceeding, (ii) shall seek the appointment of a trustee, receiver, liquidator,
sequestrator, custodian or other similar official of the Operator or any
substantial part of the Operator's property, (iii) shall acquiesce in or consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary Insolvency Proceeding commenced against it, (iv)
shall make a general assignment for the benefit of creditors, or (v) shall fail
generally to pay its undisputed debts as they become due; or
(d) an involuntary Insolvency Proceeding shall be commenced
against the Operator seeking liquidation, reorganization or other relief with
respect to such Person or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, assignee, sequestrator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed or unstayed for a period of
one hundred twenty (120) consecutive Business Days.
ARTICLE XV
Remedies
--------
SECTION 15.1 Remedies. Upon the occurrence of any Event of Default and
--------
at any time thereafter so long as the same shall be continuing, the Owner may,
at its option, declare by written notice to the Operator this Agreement to be in
default; and at any time thereafter so long as such Event of Default shall not
have been remedied, the Owner may do one or more of the following with respect
to the Allocated Assets:
(a) sell the Allocated Assets at public or private sale, as the
Owner may determine, or otherwise dispose of, hold, use, operate, lease to
others or keep unused the Allocated Assets as the Owner, in its sole discretion,
may determine, all free and clear of any rights of Operator;
(b) whether or not the Owner shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a) above,
the Owner, by written notice to the Operator, may demand that the Operator pay
to the Owner, and the Operator shall pay to the Owner, any accrued but unpaid
Operating Fees (together with interest, if any, on such amount at the Overdue
Rate from such specified payment date until the date of actual payment of such
amount); or
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<PAGE>
(c) terminate this Agreement and the rights of the Operator to
use the Allocated Assets pursuant hereto.
The Owner may exercise one or more remedies in respect of certain
Allocated Assets and one or more other remedies in respect of other Allocated
Assets.
No termination of this Agreement, in whole or in part, or exercise of
any remedy under this Article XV shall, except as specifically provided herein,
relieve the Operator of any of its liabilities and obligations hereunder, all of
which then outstanding shall survive such termination, repossession or exercise
of remedy. In addition, the Operator shall be liable for any and all Fees and
Expenses and other costs and expenses incurred by the Owner by reason of the
occurrence of any Event of Default or the exercise of the remedies of the Owner
with respect thereto. At any sale of any Allocated Assets or any part thereof
pursuant to this Article XV, the Owner may bid for and purchase such property.
SECTION 15.2 Owner Rights. To the fullest extent permitted by Applicable
------------
Law, each and every right, power and remedy herein specifically given to the
Owner or otherwise in this Agreement shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given or now
or hereafter existing at law, in equity or by statute, and each and every right,
power and remedy whether specifically given herein or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by the Owner, and the exercise or the beginning of the exercise of any
power or remedy shall not be construed to be a waiver of the right to exercise
at the same time or thereafter any other right, power or remedy. No delay or
omission by the Owner in the exercise of any right, power or remedy or in the
pursuit of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of the Operator or to be an
acquiescence therein. No express or implied waiver by the Owner of any Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Event of Default.
SECTION 15.3 Exercise of Other Rights or Remedies. In addition to all
-------------------------------------
rights and remedies provided in this Article XV, the Owner may exercise any
other right or remedy that may be available to it under Applicable Law or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof.
SECTION 15.4 Subject to Governmental Action. The exercise of any right
-------------------------------
or remedy provided for in this Article XV shall be subject to any applicable
Governmental Action.
ARTICLE XVI
Right to Perform
----------------
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<PAGE>
SECTION 16.1 Right to Perform. If the Owner shall fail to make any
-----------------
payment or perform under, or comply with, any contract, lease, license or other
agreement in respect of the Allocated Assets to which the Owner is a party, the
Operator may (but shall have no duty to do so) make such payment or perform or
comply with such agreement, and the Operating Fee shall be reduced in the amount
of such payment and the amount of all expenses of the Operator (including Fees
and Expenses) incurred in connection with such payment or the performance of or
compliance with such agreement.
ARTICLE XVII
Renewal Options
---------------
SECTION 17.1 Renewal Notice.
--------------
(a) The Operator shall have the option to renew this Agreement
twice. Not less than one (1) year before expiration of the Term or the initial
Renewal Term, the Operator may deliver to the Owner a notice (the "Renewal
Notice") of the Operator's election to renew this Agreement in respect of all,
but not less than all, Allocated Assets for a renewal period of five (5) years
(or, if there has already been a renewal period, an additional renewal period of
five (5) years), or such other period of time as the Owner and the Operator
shall mutually agree (each such period, a "Renewal Term").
(b) All terms of this Agreement shall continue in full force and
effect during each such Renewal Term.
(c) In the event the Operator elects to renew this Agreement, the
Renewal Term will commence on the day immediately following the expiration of
the Term or initial Renewal Term and continue until the end of such Renewal
Term.
(d) The Renewal Notice, once given, shall be irrevocable and the
option to renew this Agreement shall expire if the Operator does not deliver the
Renewal Notice by the times provided in Section 17.1(a) hereof.
(e) Notwithstanding the foregoing, the Operator shall have no
right to renew this Agreement if any Event of Default exists on the date of
delivery of the Renewal Notice or the commencement of the Renewal Term.
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<PAGE>
ARTICLE XVIII
Certain Notices and Information
-------------------------------
SECTION 18.1 Notices. Any notice expressly required by this Agreement to
-------
be given to the Owner or the Operator shall be deemed delivered on the date sent
by registered mail, or by such other means as the parties hereto may agree, and
shall be addressed to them as follows:
(a) If to Owner:
New York Central Lines LLC
2001 Market Street
Philadelphia, Pennsylvania 19103
Attention: Vice President-General Counsel
Copy to:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(b) If to Operator:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
Each party may from time to time change its address in this Section 18.1 by
written notice delivered to the other party.
SECTION 18.2 Notice of Event of Default. Promptly after an executive
--------------------------
officer of the Operator shall have actual knowledge of the occurrence or
existence of any Event of Default or any event which, with the passing of time
or giving of notice, would constitute an Event of Default, the Operator shall so
notify the Owner and set forth in reasonable detail the circumstances
surrounding such event or Event of Default and shall specify what actions the
Operator has taken or intends to take to cure such event or Event of Default.
SECTION 18.3 Information Regarding Allocated Assets. The Operator shall
---------------------------------------
promptly furnish the information at such times and in such format as is
regularly produced by the Operator concerning the condition, maintenance and use
of the Allocated Assets as the Owner may reasonably request.
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<PAGE>
ARTICLE XIX
Confidentiality
---------------
SECTION 19.1 Confidentiality. The parties hereto shall hold, and shall
---------------
cause their respective officers, employees, agents, consultants and advisors to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its independent legal counsel, by
other requirements of law, all information furnished it by the other party
hereto, or their respective representatives, pursuant to this Agreement (except
to the extent that such information can be shown to have been (i) available to
such party on a non-confidential basis prior to its disclosure by the other
party, (ii) in the public domain through no fault of such party or (iii) later
lawfully acquired from other sources by the party to which it was furnished),
and no party shall release or disclose such information to any other Person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who shall be bound by the provisions of this Section
19.1. In the event that a subpoena, discovery or other request that arguably
calls for production or disclosure of such confidential information is received,
the party receiving such request must promptly notify in writing the party whose
information has been requested. The party receiving such request shall provide
the party whose confidential information has been requested, a reasonable
opportunity to review such information and to assert any rights it may have with
respect to the potential disclosure of such confidential information. Each party
shall be deemed to have satisfied its obligation to hold confidential
information concerning or supplied by the other party hereto, if it exercises
the same care as it takes to preserve confidentiality for its own similar
information.
ARTICLE XX
Miscellaneous
-------------
SECTION 20.1 Dispute Resolution. Except as otherwise specifically
-------------------
provided for herein, any dispute, controversy or claim (or any failure by the
parties to agree on a matter as to which this Agreement expressly or implicitly
contemplates subsequent agreement by the parties, except for matters left to the
sole discretion of a party) arising out of or relating to this Agreement, or the
breach, termination or validity hereof or thereof, shall be settled in
accordance with the provision of Section 11.12 of the Transaction Agreement.
SECTION 20.2 Documentary Conventions. This Agreement shall be governed
------------------------
by, and construed in accordance with, all the Documentary Conventions.
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<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have each caused this Operating Agreement to be duly executed as of the date
first above written.
NEW YORK CENTRAL LINES LLC,
as OWNER
By: /s/C. A. COOK
-------------
Name: C. A. Cook
Title: Vice President and Assistant
Secretary
CSX TRANSPORTATION, INC.,
as OPERATOR
By: /s/PETER J. SHUDTZ
------------------
Name: Peter J. Shudtz
Title: Vice President - Law and General
Counsel- CSX Corporation, authorized
agent for CSX Transportation, Inc.
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<PAGE>
APPENDIX A
----------
to Operating Agreement
DEFINITIONS AND RULES OF USAGE
Rules of Usage
--------------
The terms defined below shall have the respective meanings set forth
below for all purposes, and such meanings shall be equally applicable to both
the singular and plural forms of the terms defined. "Include", "includes" and
"including" shall be deemed to be followed by "without limitation" whether or
not they are in fact followed by such words or words of like import. "Writing",
"written" and comparable terms refer to printing, typing, lithography and other
means of reproducing words in a visible form. Any instrument or Applicable Law
defined or referred to below or in any instrument that recites it is to be
construed in accordance with this Appendix means such instrument or Applicable
Law as from time to time amended, modified or supplemented, including (in the
case of instruments) by waiver or consent and (in the case of Applicable Laws)
by succession of comparable successor Applicable Laws and includes (in the case
of instruments) references to all attachments thereto and instruments
incorporated therein; provided, that any reference to the Bankruptcy Code shall
mean the Bankruptcy Code as in effect on the date of reference thereto and
applicable to the relevant case. References to any Person are, unless the
context otherwise requires, also to its successors and assigns. "Hereof",
"herein", "hereunder" and comparable terms refer to the entire instrument in
which such terms are used and not to any particular article, section or other
subdivision thereof or attachment thereto. References to any gender include,
unless the context otherwise requires, references to all genders, and references
to the singular include, unless the context otherwise requires, references to
the plural and vice versa. "Shall" and "will" have equal force and effect.
References in an instrument to "Article", "Section" or another subdivision or to
an attachment are, unless the context otherwise requires, to an article, section
or subdivision of or an attachment to such instrument.
Definitions
-----------
"Action" shall mean any action, claim, suit, arbitration, inquiry,
------
subpoena, discovery request, proceeding or investigation by or before any
Governmental Authority or forum or authority having jurisdiction over the matter
involving or related to any Owner Indemnified Person, any Operator Indemnified
Person or the Allocated Assets.
"Affiliate" means, with respect to a specified Person, any Person that
---------
directly or indirectly controls, is controlled by or is under common control
with, the specified Person or any trust for the benefit of such Person or any
entities controlled by such Person; provided that (a) NYC shall not be an
Affiliate of CSX and its Subsidiaries or NSC and its Subsidiaries, (b) PRR shall
not be an Affiliate of NSC and its Subsidiaries or CSX and its Subsidiaries and
<PAGE>
(c) CSX and NSC and their respective Subsidiaries shall not be Affiliates of CRR
or CRR Parent and their respective Subsidiaries and vice versa.
"Agreement" means this Operating Agreement, dated as of the Closing
---------
Date, between the Owner and the Operator.
"Allocated Asset" means the assets identified in or pursuant to the
----------------
Transaction Agreement as the NYC Allocated Assets other than (i) the assets
identified in Item 1(E) of Schedule 1 to the Transaction Agreement, and (ii)
such items of inventory as may subsequently be agreed to by the parties from
time to time.
"Applicable Law" means, with respect to any Person or to any Allocated
---------------
Asset, all laws, ordinances, judgments, decrees, injunctions, writs and orders
of any Governmental Authority and any Governmental Actions applicable to or
having jurisdiction over such Person or Allocated Asset.
"Appraisal Procedure" means a procedure whereby (i) an independent
--------------------
third-party appraiser chosen jointly by the Owner and the Operator determines
the reasonableness of the fair market value of the Allocated Assets credited to
the Settlement Account if the fair market value of the Allocated Assets exceeds
$50,000 or determines the Fair Market Rental Value of the Allocated Assets, or
(ii) the reasonableness of the fair market value of the Allocated Assets
credited to the Settlement Account is certified by an officer of the Operator if
the fair market value is $50,000 or less. The fees and expenses of the appraiser
shall be divided equally between the Owner and the Operator.
"arises prior" means that the circumstances giving rise to the liability
------------
have transpired prior to the applicable date, whether or not such liability has
been discovered, asserted or accrued prior to such date. If the circumstances
giving rise to a liability bridge the Closing Date, the parties will apportion
it to pre-Closing Date and post-Closing Date periods, with disagreement being
subject to the dispute resolution provisions of Section 20.1 of the Agreement.
"Assigned Rights" means Contracts and rights included in the Allocated
----------------
Assets (including, but not limited to, transportation contracts).
"Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
----------------
amended from time to time, and the rules and regulations promulgated thereunder.
"Business Day" means any day other than a Saturday, Sunday or other day
------------
on which banks are authorized or required to be closed in New York, New York and
Richmond, Virginia.
"Closing Date" is the date of this Agreement.
------------
"Contracts" means any contract, lease, loan agreement, deed, easement,
---------
license, reversion, mortgage, security agreement, trust indenture or other
<PAGE>
agreement or instrument to which the Owner is a party or by which it is bound or
to which any of the Allocated Assets is subject.
"Contractual Obligation" means, with respect to any Person, any
------------------------
provision of any security issued by such Person or of any Contract to which such
Person is a party or by which it or any of its property is bound.
"CRC" means Consolidated Rail Corporation, a Pennsylvania corporation.
---
"CRR" means Conrail Inc., a Pennsylvania corporation.
---
"CSX" means CSX Corporation, a Virginia corporation.
---
"CSXT" means CSX Transportation, Inc., a Virginia corporation.
----
"Documentary Conventions" means, with respect to the Agreement and any
------------------------
instrument that states in substance that it is governed by the Documentary
Conventions, that, except as otherwise expressly provided therein:
(a) Documentary Convention--Survival. The representations,
----------------------------------
warranties and agreements of the parties contained or provided for in
such instrument and the parties' obligations under any and all thereof
shall survive the execution and delivery of such instrument and the
expiration or other termination of the Agreement and shall be and
continue in effect notwithstanding the fact that any party may waive
compliance with any other term, provision or condition of the Agreement.
(b) Documentary Convention--Governing Law. Such instrument shall
--------------------------------------
become effective upon delivery and shall in all respects be governed by,
and construed in accordance with, the laws (excluding principles of
conflict of laws) of the Commonwealth of Virginia applicable to
agreements made and to be performed entirely within such state,
including all matters of construction, validity and performance.
(c) Documentary Convention--Counterparts. Except as otherwise
-------------------------------------
specifically provided in the Agreement, such instrument may be executed
by the parties thereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument. To make proof
of such instrument, it shall only be necessary to produce one such
counterpart executed by each party thereto. All signatures need not be
on the same counterpart.
(d) Documentary Convention--Method of Payment. All amounts
---------------------------------------------
required to be paid by any party to such instrument to any other party,
either thereunder or under the Agreement shall be paid in such
- 3 -
<PAGE>
immediately available and freely transferable Dollars as at the time of
payment shall be legal tender for the payment of public and private
debts, by wire transfer, or other method of payment acceptable to the
payee, of immediately available funds to the account of the payee as
such payee may specify by notice to the other parties.
(e) Documentary Convention--Parties in Interest; Limitation on
-------------------------------------------------------------
Rights of Others. The terms of such instrument shall be binding upon,
----------------
and inure to the benefit of, the parties thereto and their permitted
successors and assigns. Nothing in such instrument shall be construed to
give any Person (other than the parties thereto and their permitted
successors and assigns and as expressly provided therein) any legal or
equitable right, remedy or claim under or in respect of such instrument
or any covenants, conditions or provisions contained therein.
(f) Documentary Convention--Table of Contents; Headings. The
------------------------------------------------------
table of contents, if any, and headings, if any, of the various
articles, sections and other subdivisions of such instrument are for
convenience of reference only and shall not modify, define or limit any
of the terms or provisions of such instrument. To the extent of any
inconsistency between the headings and any text, such text shall govern.
(g) Documentary Convention--Entire Agreement; Amendment and
------------------------------------------------------------
Waiver. The Agreement, the other Ancillary Agreements and the
------
Transaction Agreement constitute the entire agreement of the parties
thereto with respect to the subject matter thereof and supersede all
prior written and oral agreements and understandings with respect to
such subject matter. Neither the Agreement nor any of the terms hereof
may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or
modification shall be sought and subject to any other limitations on
amendments set forth in the Agreement, the other Ancillary Agreements
and the Transaction Agreement. Any amendment, modification or supplement
to the Agreement shall be subject to any applicable Governmental Action.
No failure or delay of any party in exercising any power or right under
this Agreement 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.
(h) Documentary Convention--Severability. Any provision of such
-------------------------------------
instrument that shall be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
provisions thereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by Applicable Law,
the parties to such instrument waive any provision of law that renders
any provision thereof prohibited or unenforceable in any respect.
- 4 -
<PAGE>
(i) Documentary Convention--Payment on Business Days. If any
payment under such instrument is required to be made on a day other than
a Business Day, the date of payment shall be extended to the next
Business Day without any additional interest for such extension period
so long as payment is made on such Business Day.
"Dollars" or "$" means dollars in the lawful currency of the United
------- -
States of America..
"Event of Default" has the meaning set forth in Section 14.1 of the
----------------
Agreement.
"Event of Loss" means, with respect to any Allocated Asset, the
---------------
occurrence of any of the following events: (a) the loss or theft of such
Allocated Asset to the extent that such Allocated Asset is not recovered within
one hundred eighty (180) days of such event or, if earlier, the expiration of
the Term or any Renewal Term, (b) the destruction of or damage to such Allocated
Asset or any part thereof to such extent as shall render repair of such
Allocated Asset uneconomical to the Operator or unfit or unsuitable for its
intended use, which destruction or damage is an actual or constructive total
loss, (c) the requisition of use of such Allocated Asset for an indefinite
period or for a stated period in excess of one hundred eighty (180) days or, if
earlier, which ends later than the expiration of the Term or any Renewal Term by
any Governmental Authority under power of eminent domain or otherwise, (d) the
condemnation, confiscation, seizure or requisition of title to such Allocated
Asset by a Governmental Authority, (e) any damage to such Allocated Asset which
results in an insurance settlement on the basis of an actual or constructive
total loss, (f) the prohibition by Applicable Law of the use of such Allocated
Asset by the Operator or any other Person for a period of one hundred eighty
(180) consecutive days from the date of such prohibition or, if earlier, the end
of the Term or any Renewal Term. The date of occurrence of an Event of Loss in
respect of any Allocated Asset shall be deemed to be, (1) in the event of damage
to such item, the date of such damage, (2) in the event of a condemnation or
requisition of title by a Governmental Authority, the date thereof, and (3) in
the event of an Event of Loss under clause (a), (c) or (f) of the first sentence
of this definition, the date of expiration of the period referred to in said
clause.
"Excluded Taxes" has the meaning set forth in Section 3.5 of the
--------------
Agreement.
"Fair Market Rental Value" means, as to the Allocated Assets, the fair
------------------------
market rental value that would be obtained in an arm's length transaction
between an informed and willing lessee and an informed and willing lessor, in
either case under no compulsion to lease, for the lease of the Allocated Assets,
disregarding the fact (if applicable) that the Allocated Assets are subject to
the Agreement and assuming that Article VII of the Agreement shall have been
complied with in all respects. Subject to the foregoing, the Fair Market Rental
Value as to the Allocated Assets shall be such value determined in accordance
with the Appraisal Procedure.
"Fees and Expenses" means, with respect to any Person in connection with
-----------------
any transaction or occurrence, the Person's reasonable fees and expenses
(including attorneys' fees and legal expenses) for such transaction or
occurrence.
- 5 -
<PAGE>
"Governmental Action" means all authorizations, consents, approvals,
--------------------
waivers, exceptions, variances, franchises, permissions, permits and licenses
of, and filings and declarations with, Governmental Authorities.
"Governmental Authority" means any federal, state, municipal, county,
-----------------------
local or foreign governmental Person, authority or agency, court, regulatory
commission, stock exchange or other similar body.
"Income Tax Regulations" means the regulations promulgated by the U.S.
----------------------
Department of the Treasury pursuant to the Code.
"Indemnifying Party" means a Person who is required or requested to
-------------------
provide indemnification under Article XI of the Agreement.
"Indemnified Party" means any Owner Indemnified Person or Operator
-----------------
Indemnified Person.
"Insolvency Proceeding" means any case or proceeding under bankruptcy,
----------------------
insolvency, reorganization, receivership, moratorium or other laws providing
relief to debtors.
"Lien" means any lien, mortgage, encumbrance, pledge, charge, lease,
----
easement, servitude or security interest or any interests similar to the
foregoing, including those existing under any conditional sales or other title
retention agreement or the filing of or agreement to deliver any financing
statement under the UCC.
"Modification" means, with respect to any Allocated Asset, any
------------
modification, alteration, addition, upgrade or improvement to such Allocated
Asset.
"Nonseverable Modification" means any Required Modification and any
--------------------------
Modification which is not readily removable without impairing the fair market
value, residual value, condition, remaining useful life or utility of the
Allocated Asset to which such Modification relates immediately prior to such
Modification.
"NSC" means Norfolk Southern Corporation, a Virginia corporation.
---
"NSR" means Norfolk Southern Railway Company, a Virginia corporation.
---
"NYC" means New York Central Lines LLC, a Delaware limited liability
---
company.
"Operating Fee" means the operating fee agreed to from time to time by
-------------
the Owner and Operator based on the Fair Market Rental Value of the Allocated
Assets as set forth in a supplement to this Agreement. The Operating Fee for
the first six years of this Agreement shall be as follows:
- 6 -
<PAGE>
June 1, 1999 through May 31, 2000 -- $118 million June 1, 2000
through May 31, 2001 -- $121 million June 1, 2001 through May 31,
2002 -- $134 million June 1, 2002 through May 31, 2003 -- $147
million June 1, 2003 through May 31, 2004 -- $164 million June 1,
2004 through May 31, 2005 -- $179 million
"Operator" means CSXT or any permitted successor or assign.
--------
"Operator Indemnified Person" has the meaning set forth in Section 11.2
---------------------------
of the Agreement.
"Optional Modification" has the meaning set forth in Section 7.2(a) of
---------------------
the Agreement.
"Organic Document" means, with respect to any Person, as applicable, the
----------------
certificate or articles of incorporation, partnership agreement, limited
liability company agreement, certificate of formation, membership agreement,
by-laws and all other organizational documents of such Person.
"Overdue Rate" means the rate determined on the first Business Day of
-------------
each calendar month equal to the lesser of (i) the prime rate set forth in The
Wall Street Journal and (ii) the maximum rate allowed by Applicable Law.
"Owner" means NYC, a Delaware limited liability company.
-----
"Owner Indemnified Person" has the meaning set forth in Section 11.1 of
------------------------
the Agreement.
"Owner Lien" means a Lien (i) which results from acts of, or any failure
----------
to act by, or as a result of claims against, the Owner, (ii) in favor of any
taxing authority by reason of the non-payment by the Owner, or (iii) which
results from acts of, or any failure to act by, the Owner in violation of its
obligations under the Agreement.
"Payment Date" means monthly in arrears on the 15th day of each calendar
------------
month to cover the preceding calendar month's usage or, if such day is not a
Business Day, the next succeeding Business Day.
"Permitted Liens" means, with respect to any Allocated Asset,
---------------
(a) The respective rights and interests of the Operator and
Owner under the Agreement,
(b) Owner Liens,
- 7 -
<PAGE>
(c) Liens for Taxes which are not yet due or so long as no Event
of Default shall have occurred and be continuing are being contested in good
faith by appropriate proceedings which suspend the collection thereof; provided,
that such proceedings shall not involve any material danger of the sale,
forfeiture or loss of such Allocated Asset or any part thereof or interest
therein or the reasonably foreseeable risk of imposition of any criminal
liability on the Owner or any other material liability not indemnified against
by the Operator,
(d) Liens of mechanics, materialmen, laborers, employees or
suppliers and similar Liens arising by operation of law, in each case incurred
by the Operator in the ordinary course of business for sums that are not overdue
for more than sixty (60) days or so long as no Event of Default shall have
occurred and be continuing are being contested in good faith by negotiations or
by appropriate proceedings which suspend the collection thereof; provided, that
such contest does not involve any material danger of the sale, forfeiture or
loss of such Allocated Asset or any part thereof or interest therein or the
reasonably foreseeable risk of imposition of any criminal liability on the Owner
or any other material liability not indemnified against by the Operator,
(e) Liens arising out of any judgments or awards against the
Operator with respect to which (i) at the time an appeal or proceeding for
review is being prosecuted in good faith, (ii) there shall have been secured a
stay of execution pending such appeal or proceeding for review, (iii) during
such proceeding there is not, and such proceeding does not involve, any material
danger of the sale, forfeiture or loss of such Allocated Asset or any part
thereof or any interest therein or the risk of imposition of any criminal
liability on the Owner or any other liability not indemnified against by the
Operator, and (iv) if such Liens have specifically attached to any Allocated
Asset, the Operator has provided the Owner with security reasonably satisfactory
to the Owner, in the amount of such claims,
(f) Liens, rights of way, easements and other rights to use the
Allocated Assets (including licenses for private crossings) common in the
railroad industry arising out of the ordinary course of business of the
Operator, and
(g) Liens consented to by the Owner.
"Person" shall mean any individual, corporation, partnership, limited
------
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PRR" means Pennsylvania Lines LLC, a Delaware limited liability
---
company.
"Renewal Notice" has the meaning set forth in Section 17.1(a) of the
--------------
Agreement.
"Renewal Term" has the meaning set forth in Section 17.1(a) of the
------------
Agreement.
- 8 -
<PAGE>
"Required Modification" has the meaning set forth in Section 7.2(a) of
---------------------
the Agreement.
"Settlement Account" has the meaning set forth in Section 6.1 of the
------------------
Agreement.
"Settlement Account Payment Date" has the meaning set forth in Section
-------------------------------
6.2 of the Agreement.
"Severable Modification" means any Modification which is not a
----------------------
Nonseverable Modification.
"Substantial Allocated Asset" means (i) an Allocated Asset with a fair
-----------------------------
market value in excess of $25 million or (ii) a group of Allocated Assets that
(a) are sold, transferred or otherwise disposed of during any calendar year to
the same Person (including Affiliates of such Person) or the same group of
Persons (including Affiliates of such Persons) and (b) have an aggregate fair
market value in excess of $25 million.
"Supplemental Operating Fees" means all amounts payable by the Operator
----------------------------
pursuant to the terms of the Agreement, including indemnities payable by the
Operator pursuant to Section 11.1 hereof, other than the Operating Fee.
"Tax" means all taxes (including income, franchise, excise, real and
---
personal property, sales, use, payroll and withholding and other taxes) imposed
by any federal, state, local, foreign or international taxing authority or
Governmental Authority, whether in the form of assessments, levies, imposts,
duties, charges, assessments, withholdings or otherwise, now existing or
hereafter created or adopted, together with all interest, penalties and
additions imposed with respect to such amounts.
"Term" means the period commencing on the Closing Date and terminating
----
on the 25th anniversary thereof.
"Termination Date" means the date on which the Term or any Renewal Term,
----------------
whichever is later, terminates.
"Third Party Claim" has the meaning set forth in Section 11.3(b) of the
-----------------
Agreement.
"Third Party Provider" has the meaning set forth in Section 4.2(a) of
--------------------
the Agreement.
"Transaction Agreement" means the Transaction agreement among CSX, CSXT,
---------------------
NSC, NSR, CRC, CRR and CRR Holdings LLC dated as of June 10, 1997.
"Valuation Date" means: (i) the Closing Date, (ii) the sixth (6th),
---------------
twelfth (12th), eighteenth (18th), and twenty-fourth (24th) anniversaries of the
- 9 -
<PAGE>
Closing Date, (iii) the first day of each Renewal Term; (iv) the sixth (6th)
anniversary of the first day of each Renewal Term, (v) a Settlement Account
Payment Date (if not already a Valuation Date pursuant to other clauses of this
definition), and (vi) such other dates as the parties hereto may agree.
- 10 -
Exhibit 10.4
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
NORTH JERSEY
Dated as of June 1, 1999
By and Among
CONSOLIDATED RAIL CORPORATION,
CSX TRANSPORTATION, INC. and
NORFOLK SOUTHERN RAILWAY COMPANY
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................................1
(a) AAR............................................................1
(b) Accounting Plan................................................1
(c) Action.........................................................2
(d) Adjacent Improvements..........................................2
(e) Bill...........................................................2
(f) Billing Month..................................................2
(g) Board of Managers..............................................2
(h) Budgeted Capital Expenditures..................................2
(i) Capital Expenditure Budget.....................................2
(j) Capital Expenditure Statement..................................2
(k) CRC Administrative Office......................................2
(l) CRC Board......................................................2
(m) CRC Train......................................................2
(n) CRC Train Usage Percentage.....................................2
(o) CSX............................................................3
(p) CSXT Operating Agreement.......................................3
(q) Damage(s)......................................................3
(r) Dispute Letter.................................................3
<PAGE>
Page
(s) Excluded Taxes.................................................3
(t) Expense Statement..............................................3
(u) GAAP...........................................................3
(v) General Manager................................................3
(w) Governmental Entity............................................3
(x) Interest Rental................................................3
(y) Jointly-Operated Facility......................................4
(z) Lesser Insured Operator........................................4
(aa) Letter Agreement...............................................4
(bb) Liabilities....................................................4
(cc) Nonseverable Improvement.......................................4
(dd) NSC............................................................4
(ee) NSR Operating Agreement........................................4
(ff) NYC............................................................4
(gg) Operating Budget...............................................5
(hh) Operating Plan.................................................5
(ii) Operator.......................................................5
(jj) Operator Consequential Damages.................................5
(kk) Operator's Expense Percentage..................................5
(ll) Operator's Facility............................................5
- ii -
<PAGE>
Page
(mm) Operator Train.................................................5
(nn) Person.........................................................5
(oo) Program Maintenance............................................5
(pp) Program Maintenance Proposal...................................5
(qq) PRR............................................................6
(rr) Railcar........................................................6
.
(ss) Reimbursable Expenses..........................................6
(tt) Renewal Term...................................................6
(uu) RoadRailer(R)..................................................6
(vv) Routine Maintenance............................................6
(ww) Severable Improvement..........................................6
(xx) Shared Asset Value.............................................6
(yy) Shared Assets..................................................6
(zz) Shared Assets Area.............................................7
(aaa) STB............................................................7
(bbb) Switching and Yard Services....................................7
(ccc) Tax or Taxes...................................................7
(ddd) Temporary Services.............................................7
(eee) Tier One Damages...............................................7
(fff) Tier Two Damages...............................................8
- iii -
<PAGE>
Page
(ggg) Total Train Usage Percentage...................................8
(hhh) Transaction Agreement..........................................8
(iii) Usage Statement................................................8
(jjj) USOA...........................................................8
(kkk) Valuation Date.................................................8
(lll) Zone...........................................................8
Section 2. Management........................................................8
(a) CRC Board......................................................8
(b) General Manager................................................9
(c) Employees.....................................................10
(d) CRC Responsibilities..........................................10
(e) Impartiality..................................................10
(f) Independent Contractors.......................................10
- iv -
<PAGE>
Section 3. Operations.......................................................10
(a) Operator's Rights.............................................10
(b) Use...........................................................11
(c) Grant of Rights...............................................11
(d) Switching and Yard Services...................................13
(e) Operating Protocols...........................................13
(f) Freight Traffic to Remain in Account of Each Operator.........13
<PAGE>
Page
(g) Rates, Routes and Divisions...................................14
(h) Shipper Bills.................................................14
(i) Service Responsibility........................................14
(j) Dispatching...................................................14
(k) Railcar Weighing..............................................15
(l) Freight Claims................................................15
(m) Freight Car Repairs...........................................15
(n) Train Services................................................15
(o) Wrecking Service..............................................16
(p) Admission of Third Parties....................................16
Section 4. Equipment and Properties.........................................16
(a) Procurement...................................................16
(b) Contribution of Locomotives by Operators......................16
(c) Locomotive Service and Repair.................................16
Section 5. Maintenance......................................................17
(a) Routine Maintenance...........................................17
(b) CRC Program Maintenance.......................................17
(c) Maintenance Standards.........................................18
Section 6. Capital Improvements.............................................18
(a) Proposed Projects.............................................18
- v -
<PAGE>
Page
(b) CRC Board Approved Projects...................................18
(c) Nonseverable Improvement Projects.............................18
(d) Severable Improvement Projects................................19
(e) Capital Improvements as Shared Assets.........................20
(f) Title to Severable Improvements...............................20
(g) Noninterference...............................................20
(h) Switch Connections............................................20
(i) Adjacent Improvements.........................................21
(j) Operator's Facilities.........................................21
Section 7. Accounting.......................................................21
(a) Books of Record and Account...................................21
(b) Financial Statements..........................................21
Section 8. Costs and Budgets................................................22
(a) CRC Costs.....................................................22
(b) Employee Cost Reimbursement...................................22
(c) Capital Expenditure Budget....................................22
(d) Operating Budget..............................................23
Section 9. Cost Sharing.....................................................23
(a) Accounting Plan...............................................23
(b) Usage Statement...............................................24
- vi -
<PAGE>
Page
(c) Expense Statement.............................................25
(d) Capital Expenditure Statement.................................25
(e) Bills.........................................................25
(f) Payment.......................................................26
(g) Disputed Bills................................................26
Section 10. Access..........................................................26
Section 11. Liability.......................................................26
(a) Operators' Sole Responsibility................................27
(b) Operators' Joint Responsibility...............................27
(c) CRC Responsibility - Allocation and Insurance.................27
(d) Process.......................................................28
(e) Indemnification...............................................29
(f) Specified Level Damages.......................................29
(g) Substance Abuse Exception.....................................31
(h) Transaction Agreement.........................................31
(i) Damages.......................................................31
Section 12. No Partnership..................................................31
Section 13. Arbitration.....................................................32
Section 14. Term............................................................32
Section 15. Force Majeure...................................................32
- vii -
<PAGE>
Page
Section 16. Entire Agreement................................................32
Section 17. Amendment and Waiver............................................33
Section 18. Severability....................................................33
Section 19. Remedies........................................................33
(a) Entitlement to Certain Remedies...............................33
(b) Preclusion of Certain Remedies................................33
Section 20. Interpretation..................................................33
Section 21. Headings........................................................34
Section 22. Parties.........................................................34
Section 23. Assignment......................................................34
(a) Limitation....................................................34
(b) Successor.....................................................34
Section 24. Notices.........................................................34
Section 25. Governing Law...................................................35
EXHIBIT A - Operating Protocols
- viii -
<PAGE>
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
NORTH JERSEY
This SHARED ASSETS AREA OPERATING AGREEMENT ("Agreement") dated
as of June 1, 1999, is by and among Consolidated Rail Corporation ("CRC"), CSX
Transportation, Inc. ("CSXT") and Norfolk Southern Railway Company ("NSR").
W I T N E S S E T H:
WHEREAS, all capitalized terms in this Agreement have the
respective meanings set forth in Section 1; and
WHEREAS, CSX owns all of the common stock of and controls CSXT,
NSC owns all of the common stock of and controls NSR, and CSX and NSC jointly
control CRC; and
WHEREAS, CSXT, NSR and CRC desire that the Shared Assets shall be
owned, operated and maintained by CRC and used by or for the exclusive benefit
of CSXT and NSR, and that CSXT and NSR shall each have full and equal rights to
use the Shared Assets to provide competitive railway freight transportation
services to, from and between all places within the Shared Assets Area.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, CRC, CSXT and NSR hereby agree
as follows:
Section 1.....Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "AAR" means the Association of American Railroads.
(b) "Accounting Plan" means the plan of accounting adopted
pursuant to Section 9(a).
(c) "Action" means any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any
Governmental Entity.
<PAGE>
(d) "Adjacent Improvement" means a capital improvement, such as a
spur, which provides access to customers and local industries and which (i) is
on property which is not part of the Shared Assets and (ii) will be directly
(without intermediate connection to another railroad) attached to trackage
included within the Shared Assets.
(e) "Bill" means a bill delivered by CRC to an Operator pursuant
to Section 9(e).
(f) "Billing Month" means the calendar month for which
information is shown on a Usage Statement.
(g) "Board of Managers" means any Board of Managers which may be
appointed by the CRC Board pursuant to Section 2(a)(ii).
(h) "Budgeted Capital Expenditures" means capital expenditures
included on a Capital Expenditure Budget which has been approved by the CRC
Board.
(i) "Capital Expenditure Budget" means a written budget
specifying proposed capital expenditures to be made by CRC with respect to
Shared Assets for the periods of time specified in such budget, and the proposed
sources of the capital required to make such expenditures.
(j) "Capital Expenditure Statement" means a statement delivered
by CRC pursuant to Section 9(d).
(k) "CRC Administrative Office" means the administrative office
of CRC located at Philadelphia, Pennsylvania, or at such other place designated
by CRC in a notice it delivers to CSXT and NSR.
(l) "CRC Board" means the Board of Directors of CRC.
(m) "CRC Train" means a train operated by CRC and performing
services pursuant to Sections 3(c) or (d).
(n) "CRC Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the total number of loaded and empty
Railcars in the account of such Operator in CRC Trains, by (ii) the total number
of loaded and empty Railcars in the accounts of both Operators in CRC Trains,
during such time period in such Zone.
(o) "CSX" means CSX Corporation.
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(p) "CSXT Operating Agreement" means the agreement, dated June 1,
1999, between CSXT and NYC providing for the use, operation and maintenance by
CSXT of certain assets owned or leased by NYC.
(q) "Damage(s)" means all assessments, fines, losses, damages,
liabilities, and costs and expenses related thereto, including, without
limitation, interest, penalties and attorneys' and consultants' fees and also
expressly including, without limitation, all liabilities arising after the
effective date hereof under the Federal Employers Liability Act, as amended, and
environmental laws.
(r) "Dispute Letter" means a letter delivered by an Operator
pursuant to Section 9(g)(i).
(s) "Excluded Taxes" means: (A) all Taxes based, in whole or in
part, on net income or gross income (including, without limitation, any minimum
tax) of CRC or which are in substitution for, or relieve CRC from, any Tax based
upon or measured by CRC's net income or gross income, together with any
interest, penalties, additions to tax or additional amounts that may become
payable in respect thereof; (B) business and occupation taxes, and gross
receipts taxes (unless in the nature of a sales tax) of CRC and Taxes based upon
the equity interests of CRC; and (C) interest, fines and penalties to the extent
due to the acts or omissions of CRC in connection with such Excluded Taxes.
(t) "Expense Statement" means a statement delivered by CRC
pursuant to Section 9(c).
(u) "GAAP" at any time means generally accepted accounting
principles in effect at such time.
(v) "General Manager" means the chief executive officer of CRC.
(w) "Governmental Entity" means any federal, state, local or
foreign court, administrative agency or commission or other governmental or
regulatory authority or commission or any arbitration tribunal.
(x) "Interest Rental" means an amount representing a fair
periodic return on the Shared Asset Value as of the most recent preceding
Valuation Date as determined by such appraiser as CSXT and NSR may select. The
Interest Rental for the first six years of this Agreement shall be as follows:
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June 1, 1999 through May 31, 2000 -- $14 million June 1, 2000
through May 31, 2001 -- $14 million June 1, 2001 through May 31,
2002 -- $16 million June 1, 2002 through May 31, 2003 -- $18
million June 1, 2003 through May 31, 2004 -- $20 million June 1,
2004 through May 31, 2005 -- $22 million
(y) "Jointly-Operated Facility" means a facility or yard which is
operated by or for a rail carrier and one or more other rail carriers.
(z) "Lesser Insured Operator" means the Operator which has the
lesser (as between the Operators) amount of available insurance benefits as
specified in Section 11(f)(i)(A.1)(2).
(aa) "Letter Agreement" means the letter agreement dated May 1,
1999 between NSC and CSX relating to the settlement of certain matters.
(bb) "Liabilities" means any and all debts, liabilities and
obligations of any kind whatsoever, whether or not accrued, contingent or
reflected on a balance sheet, known or unknown, absolute, determined,
determinable or otherwise, including, without limitation, those arising under
any law, rule, regulation, action, order or consent decree of any Governmental
Entity or any judgment in any Action of any kind or award of any arbitrator of
any kind and those arising under any contract.
(cc) "Nonseverable Improvement" means a capital improvement which
is integral to the operation of the Shared Assets and is not readily removable.
(dd) "NSC" means Norfolk Southern Corporation.
(ee) "NSR Operating Agreement" means the agreement, dated June 1,
1999, between NSR and PRR providing for the use, operation and maintenance by
NSR of certain assets owned or leased by PRR.
(ff) "NYC" means New York Central Lines LLC, a Delaware limited
liability company.
(gg) "Operating Budget" means a written budget specifying
estimated operating revenues and expenses and working capital requirements of
CRC with respect to the Shared Assets for the periods of time specified in such
budget.
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(hh) "Operating Plan" means the plan for road train and local
train schedules and classifications and related operating protocols for the
Shared Assets Area as may be agreed to, and modified from time to time, by CRC,
CSXT and NSR.
(ii) "Operator" means either CSXT or NSR.
(jj) "Operator Consequential Damages" means consequential,
indirect, incidental or other similar damage, injury or loss to an Operator.
(kk) "Operator's Expense Percentage" means for an Operator the
percentage obtained by multiplying 100 by the quotient obtained by dividing (i)
the total Reimbursable Expenses (except for Interest Rental, Taxes, insurance
costs and any other CRC expenses not apportioned between the Operators on a
usage basis) payable by such Operator for a particular period, by (ii) the total
Reimbursable Expenses (except for Interest Rental, Taxes, insurance costs and
any other CRC expenses not apportioned between the Operators on a usage basis)
payable by both Operators for such period.
(ll) "Operator's Facility" means a present, expanded or new
facility or yard which is owned or controlled exclusively by an Operator.
(mm) "Operator Train" means a train operated by an Operator and
performing services in accordance with Sections 3(a) and 3(c).
(nn) "Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company or other legal entity or organization.
(oo) "Program Maintenance" means scheduled renewal of track,
signals, structures and other fixed facilities performed by system or production
gangs assembled to accomplish a specific task or tasks.
(pp) "Program Maintenance Proposal" means a written proposal
prepared by CRC, CSXT or NSR which describes specific Program Maintenance which
the preparer of such proposal believes is necessary or desirable to maintain the
Shared Assets in a safe operating condition to permit or facilitate (i) the
performance by CRC of its services pursuant to this Agreement, or (ii) the use
of Shared Assets by the Operators, and which specifies a budget for such Program
Maintenance.
(qq) "PRR" means Pennsylvania Lines LLC, a Delaware limited
liability company.
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(rr) "Railcar" means, except as otherwise provided in the
Accounting Plan, each railroad freight car, locomotive, caboose or other
equipment (including RoadRailer(R) or comparable bimodal freight hauling
equipment in the account of either Operator) furnished in substitution of
railroad equipment, loaded or empty, which an Operator originates, terminates,
switches or moves on or overhead to any Shared Assets, except that (i) a single
standard flat car not exceeding 96 feet in length (excluding articulated flat
cars) shall count as a single Railcar, (ii) freight rail cars consisting of
articulated units bearing AAR Car Type Codes "Q" and "S" shall count as multiple
Railcars based on the second (numeric) digit of the Car Type Code for such
articulated units (by way of example, a car consisting of AAR Car Type Code
"S566" would be counted as five Railcars) (or corresponding car type codes and
digits if the AAR Car Type Codes should be modified at any time during the term
of this Agreement), and (iii) a single unit of RoadRailer(R) equipment (or
comparable bimodal freight hauling equipment in the account of either Operator)
shall count as one-half (1/2) of a Railcar.
(ss) "Reimbursable Expenses" means the expenses shown on an
Expense Statement, minus the revenues, if any, shown on such Expense Statement.
(tt) "Renewal Term" means the term of extension of this Agreement
under Section 14.
(uu) "RoadRailer(R)" means bimodal freight hauling equipment
manufactured by or under license from "RoadRailer(R)", a division of Wabash
National Corporation, and capable of movement over the highway when pulled by a
tractor and on the rails using locomotive power.
(vv) "Routine Maintenance" means day-to-day repairs to track,
signals, structures and other fixed facilities that are not part of Program
Maintenance.
(ww) "Severable Improvement" means a capital improvement which
is not a Nonseverable Improvement.
(xx) "Shared Asset Value" means at any date the value of the
Shared Assets, except leases and other contract rights granted by either
Operator to CRC, as of the most recent preceding Valuation Date as determined by
such appraiser as CSXT and NSR may select.
(yy) "Shared Assets" means all tracks, lands, easements, rights
of way, structures, facilities, appurtenances and rights related thereto, which
CRC owns, leases or otherwise has the right to operate over (including those
segments over which CRC or an Operator possesses operating rights pursuant to
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Section 3(c)), and which are used for railway purposes in the Shared Assets
Area, including the properties, rights, equipment, inventory and supplies,
whether owned or leased, described or referred to in Item 3A of Schedule 1
(including Attachments I and II) of the Transaction Agreement, but excluding
Operator's Facilities.
(zz) "Shared Assets Area" means the geographical area comprising
the Shared Assets and Operator Facilities and Jointly-Operated Facilities
directly (without intermediate connection to another railroad) attached to
trackage included within the Shared Assets, which is designated as the "North
Jersey" Shared Assets Area.
(aaa) "STB" means the Surface Transportation Board or, if there
shall be no Surface Transportation Board, any federal agency which is charged
with the function of approving combinations by rail carriers or persons
controlling them, or of other arrangements between rail carriers, and granting
exemptions from other laws with respect thereto or regulating other specific
functions with respect to the context in which such term is employed or any
successor entity thereof.
(bbb) "Switching and Yard Services" means the service of
classifying and assembling trains for the account of an Operator in
Jointly-Operated Facilities; movement of loaded or empty Railcars between yards
and local industries; and switching trains and Railcars at yards, terminals and
local industries.
(ccc) "Tax" or "Taxes" means taxes of any kind, levies or other
similar assessments, customs, duties, imposts, charges or fees, including,
without limitation, income taxes, gross receipts, ad valorem, excise, real or
personal property, sales, use, payroll, withholding, unemployment, transfer and
gains taxes or other governmental taxes imposed by or payable to the United
States, or any state, local or foreign government or subdivision thereof, and in
each instance such term shall include any interest, penalties or additions to
tax attributable to such Tax or Taxes.
(ddd) "Temporary Services" means services provided by CSXT or NSR
employees in the operation, maintenance or repair of any Shared Asset on an
emergency basis with the prior approval of the General Manager or senior CRC
employee who is directly responsible for the operation or maintenance of such
Shared Asset.
(eee) "Tier One Damages" means those Damages defined as Tier One
Damages in Section 11(f)(i)(A.1).
(fff) "Tier Two Damages" means those Damages defined as Tier Two
Damages in Section 11(f)(i)(B.1).
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(ggg) "Total Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the sum of the total number of loaded and
empty Railcars in the account of such Operator in CRC Trains and the total
number of loaded and empty Railcars in the account of such Operator in Operator
Trains, by (ii) the sum of the total number of loaded and empty Railcars in the
accounts of both Operators in CRC Trains and the total number of loaded and
empty Railcars in the accounts of both Operators in Operator Trains, during such
period in such Zone.
(hhh) "Transaction Agreement" means the Transaction Agreement
dated as of June 10, 1997, among CSX, CSXT, NSC, NSR, Conrail Inc., CRC and CRR
Holdings LLC.
(iii) "Usage Statement" means a statement delivered by CRC
pursuant to Section 9(b).
(jjj) "USOA" means the uniform system of accounts prescribed for
class I railroads by the STB or any successor federal agency that shall succeed
to the functions of the STB in prescribing uniform systems of accounts for rail
carriers; provided, that if there shall be no STB and no such federal agency,
USOA shall mean such system of accounts as is generally maintained by rail
carriers consistent with GAAP as applied in the rail industry.
(kkk) "Valuation Date" means the date of this Agreement and
thereafter the sixth (6th), twelfth (12th), eighteenth (18th) and twenty-fourth
(24th) anniversaries of the date of this Agreement and the first day of each
Renewal Term.
(lll) "Zone" means a designated geographic section, or designated
facilities, of the Shared Assets Area as established and described in the
Accounting Plan.
Section 2 Management.
(a) CRC Board.
(i) The CRC Board shall manage the Shared Assets.
(ii) The CRC Board may appoint a Board of Managers, a
committee, a CRC officer or other persons to have such duties and
authority with respect to the Shared Assets as may be assigned to them
from time to time by the CRC Board.
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(iii) Any Board of Managers appointed by the CRC Board
shall be comprised of an equal number of individuals (and their
successors) nominated by CSXT and nominated by NSR.
(iv) The CRC Board shall remove from any Board of
Managers (A) at the direction of CSXT, any person who was nominated by
CSXT, and (B) at the direction of NSR, any person who was nominated by
NSR.
(b) General Manager.
(i) The General Manager shall not at any time have been
an employee of CSXT or NSR or any of their affiliates unless otherwise
agreed to by both Operators, and shall be appointed by the CRC Board.
(ii) The General Manager shall manage and supervise the
ownership, operation, maintenance and use of the Shared Assets in
accordance with directives and policies of the CRC Board and this
Agreement, subject to the authority of the CRC Board, and through such
Shared Assets Area superintendents and other Shared Assets Area
executives as are appointed by the General Manager with the approval of
the CRC Board. The General Manager shall report to the CRC Board. The
General Manager shall perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR.
(iii) The General Manager may be removed from office
prior to the expiration of his or her term at any time by a majority of
the CRC Board for any reason or for no reason. Upon the written request
of CSXT or NSR to the CRC Board, the General Manager shall also be
removed from office prior to the expiration of his or her term for
serious misconduct, which shall mean conduct that would make it
unreasonable to retain the General Manager, including but not limited to
conduct such as: (A) violation of applicable alcohol or drug use
policies, (B) fraud, (C) embezzlement or other act of dishonesty against
CRC, CSXT or NSR or any of their customers or suppliers, (D) activities
willfully undertaken by the General Manager which reflect adversely upon
the reputation of CRC, CSXT or NSR, (E) refusal to perform or
substantial neglect of the responsibilities assigned to the General
Manager, (F) failure to perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR after 45
days' written notice from an Operator describing such failure, (G) any
violation of any law or rule or regulation of any Governmental Entity
which results in serious adverse consequences to CRC, CSXT or NSR, or
(H) any material violation of any directive or policy of the CRC Board
or any statutory or common law duty of loyalty to CRC. If a majority of
the CRC Board in response to such a request of CSXT or NSR fails to
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direct the removal of the General Manager, the dispute may be submitted
by either Operator for resolution by binding arbitration pursuant to
Section 13, provided, however, that in any such arbitration to resolve a
dispute under this Section 2(b)(iii), the hearing shall commence no
later than 30 days following the appointment of the arbitrator and the
award shall be rendered no later than 30 days following the completion
of the hearing.
(c) Employees. The General Manager and all persons who operate
and maintain the Shared Assets shall be employees of CRC, except for CSXT or NSR
employees who provide Temporary Services and employees of Operators or
independent contractors which provide services pursuant to contracts or
arrangements in accordance with Section 2(f).
(d) CRC Responsibilities. CRC shall be responsible for safely and
efficiently operating, controlling and managing the use of the Shared Assets,
impartially as between CSXT and NSR in accordance with directives and policies
of the CRC Board, and with responsible business practices which are consistent
with those used by CSXT and NSR in the operation of their businesses, and are
designed to achieve the lowest cost of the safe and efficient operation, use and
maintenance of the Shared Assets.
(e) Impartiality. CRC shall perform all of its obligations
pursuant to this Agreement on an impartial and non-discriminatory basis as
between CSXT and NSR, giving no preference to either of them in providing
Switching and Yard Services, in the control of train dispatching over the Shared
Assets, or in any other way whatsoever.
(f) Independent Contractors. CRC may, at least to the extent it
may do so immediately prior to the date of this Agreement, procure the use of
equipment or facilities owned by independent contractors, or services provided
by independent contractors (using their own employees), with respect to the
operation, maintenance and use of Shared Assets, including, without limitation,
accounting, computer and other administrative services, and the furnishing of
equipment and mechanical services. For purposes of this Section 2(f),
independent contractors may include CSXT or NSR.
Section 3 Operations.
(a) Operator's Rights. CRC hereby grants to each Operator full
operating rights to operate its own trains (staffed by a road crew) and
equipment, with its own crews and equipment and at its own expense, over any and
all tracks included in the Shared Assets, and to use all of the Shared Assets in
connection with the operation of such trains or equipment, for the following
purposes:
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(i) Movement by such Operator of trains (staffed by a
road crew) through the Shared Assets Area between two geographical
locations outside the Shared Assets Area;
(ii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and an Operator's Facility or a Jointly-Operated Facility which is
within the Shared Assets Area;
(iii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and local industries which are within the Shared Assets Area;
(iv) Movement by such Operator of trains (staffed by a
road crew) between Operator's Facilities or Jointly-Operated Facilities
which are within the Shared Assets Area and local industries which are
within the Shared Assets Area;
(v) Movement, handling, pick-up, set off, switching,
transfer and interchange of Railcars, blocks of Railcars or trains
(staffed by a road crew) to, from or at local industries, Operator's
Facilities or Jointly-Operated Facilities, in connection with movements
described in Sections 3(a)(i) through (iv), to the extent provided for
in the Operating Plan agreed to and modified by the parties from time to
time; and
(vi) such other purposes as may be agreed upon by CRC,
CSXT and NSR.
(b) Use. The crews of each train operated by an Operator on
Shared Assets shall be qualified under and shall comply with applicable laws and
regulations as well as the safety and operating rules of CRC.
(c) Grant of Rights. Subject to reasonable compensation and other
terms established in the Accounting Plan, and in each case for the purpose of
Switching and Yard Services performed by CRC pursuant to Section 3(d) and
movement of Operator Trains pursuant to Section 3(a):
(i) CSXT hereby grants to CRC and NSR overhead
operating rights to operate CRC trains and NSR trains, respectively,
with their own crews, over the following CSXT rail line segments:
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(A) the current CRC River line between CP2 and the
Ridgefield Heights Auto Facility (including the right to serve
such Ridgefield Heights Auto Facility); and
(B) such other CSXT line segments access to and use
of which by CRC and NSR are necessary to effectuate the train
operations and services contemplated by this Agreement.
(ii) CSXT hereby grants to CRC full operating rights to
operate CRC trains, with its own crews, over the CSXT rail line segments
within and through the area outlined on red on Exhibit 6 to the Letter
Agreement to access and serve on an unimpeded basis (i) customers
located on the real estate shown outlined in red on Exhibit 6 and (ii)
customers that are located north or west of the area outlined in red and
that are accessed via track #283 or via #274. Such trackage rights are
subject to relocation by CSXT or NYC, provided that CRC shall continue
to have the right to serve the customers referred to in the foregoing
sentence from the tracks to which such relocation is made and to operate
on an unimpeded basis over such relocated tracks. CRC shall have the
right to switch, classify and store up to (but not more than) twenty
(20) cars at a time on tracks designated from time to time by CSXT
within the area outlined in red on Exhibit 6, but solely with respect to
service provided to customers on the trackage rights described in this
Section 3(c)(ii).
(iii) NSR hereby grants to CRC and CSXT overhead
operating rights to operate CRC trains and CSXT trains, with their own
crews, over such NSR line segments access to and use of which by CRC and
CSXT are necessary to effectuate the train operations and services
contemplated by this Agreement.
(iv) NSR hereby grants to CRC full operating rights to
operate CRC trains, with its own crews, over the NSR rail line segments
within and through the area shown in green on Exhibit 7 to the Letter
Agreement to access and serve on an unimpeded basis the customers
located on the real estate shown in green on Exhibit 7. Such trackage
rights are subject to relocation by NSR or PRR, provided that CRC shall
continue to have the right to serve the customers referred to in the
foregoing sentence from the tracks to which such relocation is made and
to operate on an unimpeded basis over such relocated tracks. CRC shall
have the right to switch, classify and store up to (but not more than)
twenty (20) cars at a time on tracks designated from time to time by NSR
within the area colored green on Exhibit 7, but solely with respect to
service provided to customers on the trackage rights described in this
Section 3(c)(iv).
(v) CSXT hereby grants to CRC and NSR the right to use
Manville Yard for the purpose of basing local trains, classifying and
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assembling trains and switching Railcars, but not for the purpose of
serving local industries located at such yard.
When required by the CSXT Operating Agreement and the NSR Operating Agreement,
CSXT and NSR have obtained the consent of NYC and PRR, respectively, for the
grant of rights referred to in this Section 3(c). Notwithstanding any other
provision of this Agreement, each rail line segment identified in this Section
3(c) shall be dispatched, maintained, operated and controlled by the Operator
which granted the rights with respect to such segment, provided that such
dispatching, maintenance, operation and control shall be performed on an
impartial and non-discriminatory basis as between the Operators. Trains operated
by an Operator pursuant to operating rights granted under this Section 3(c)
shall be governed by and subject to the Operating Plan.
(d) Switching and Yard Services.
(i)....At the request of and as agent for each Operator,
CRC shall perform Switching and Yard Services required by such Operator
within the Shared Assets Area, including without limitation any such
services which such Operator may be responsible for performing or having
performed for a shipper or other Person.
(ii)...Except as otherwise provided in Section 3(a), and
other than within an Operator's Facility, neither Operator shall with
its own equipment or with its own crews perform any Switching and Yard
Service within the Shared Assets Area for itself or for any other
Person.
(e) Operating Protocols. From time to time, NSR, CSXT and CRC may
mutually establish Shared Assets Area Operating Plans, General Dispatching
Guidelines, Car Movement Guidelines, Switching/Blocking Requirements and other
operating protocols and rules concerning operations within the Shared Assets
Area, for the purpose of assuring timely train operations, fluid movement of all
railcars, equal and impartial handling of Operators' trains and railcars,
minimization in the number of empty cars in the Shared Assets Area, and overall
operating efficiency in the Shared Assets Area. The current Operating Protocols
have been agreed upon by NSR, CSXT and CRC and are set forth as Exhibit A to
this Agreement. The Operating Protocols may be modified only upon mutual
agreement of all parties.
(f) Freight Traffic To Remain in Account of Each Operator.
Switching and Yard Services and other services performed by CRC for either
Operator under this Agreement shall be performed as agent for, and for the
account of, such Operator. All freight traffic and Railcars handled within the
Shared Assets Area, including traffic and Railcars handled by CSXT or NSR
pursuant to Sections 3(a) and 3(c), and traffic and Railcars handled by CRC
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pursuant to Sections 3(c) and 3(d), shall at all times remain in the waybill,
car hire and revenue accounts of either CSXT or NSR.
(g) Rates, Routes and Divisions. Each Operator shall have
exclusive and independent authority to establish all rates, charges, service
terms, routes and divisions, and to collect all freight revenues, relating to
freight traffic transported for its account to, from and within the Shared
Assets Area (except those Shared Assets Area line segments over which such
Operator possesses only overhead operating rights pursuant to Section 3(c)). CRC
shall not participate or appear in any rates, routes or divisions relating to
any freight traffic whatsoever to, from and within the Shared Assets Area, and
shall not be entitled to or responsible for any freight charges relating to such
freight traffic. CRC shall not quote or establish any rate or service terms
applicable to freight transportation services to, from and within the Shared
Assets Area, enter into transportation contracts with any Person (other than an
Operator) for freight transportation services to, from and within the Shared
Assets Area, or undertake to perform any for-hire transportation services
directly, in its own name or for its own account for any Person (other than an
Operator). The transfer or exchange of freight traffic between CSXT and CRC, and
between NSR and CRC, within the Shared Assets Area shall not constitute an
interchange of freight traffic or freight rail cars for purposes of determining
rates, routes, divisions or interline settlements relating to any such freight
traffic.
(h) Shipper Bills. Neither Operator shall inform the other or CRC
of any rates or charges to shippers to which such Operator provides freight
transportation services in the Shared Assets Area, and no copies of any shipper
bill of lading or waybill shall be given by such Operator to the other or to CRC
except to the extent that such documents are exchanged between rail carriers in
the usual course of interline shipments and documenting.
(i) Service Responsibility. Each Operator shall at all times be
solely responsible for obtaining, supplying and routing Railcars other than
locomotives, for all Railcar ownership costs (including per-diem charges and
mileage allowances) and for providing service to its shippers within the Shared
Assets Area pursuant to its transportation contracts or other prices with its
shippers, including interline accounting, and all car hire and demurrage or
detention charges associated with Railcars in its account within the Shared
Assets Area.
(j) Dispatching. CRC shall, from local locations or a location
agreed upon by CSXT and NSR, control the dispatching, scheduling and movement
of, and Switching and Yard Services for, all trains (including Operator Trains
and CRC Trains) over the Shared Assets (other than Operator's Facilities, unless
requested to do so by the Operator thereof) without any discrimination at any
time in favor of or against either Operator, but in accordance with written
policies and priorities for categories of freight, type of Railcar, size of
train and train destinations established from time to time by the General
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Manager and approved by the CRC Board to achieve the maximum efficiency and
lowest aggregate Shared Asset costs of CRC and the Operators, provided, however,
that CSXT and NSR from time to time shall consider, and in the sole discretion
of each may adopt, mutually acceptable arrangements giving each Operator one
controlled route through the Shared Assets Area to the extent practicable and,
if the parties fail to adopt mutually acceptable arrangements giving either
Operator such a controlled route, CRC shall control dispatching, scheduling and
train movements over the affected Shared Assets as heretofore provided. CRC
shall also control the dispatching, scheduling, movement and Switching and Yard
Services for all CRC Trains and Operator Trains over the current CRC River Line
between CP 2 and CP 5. Dispatching, scheduling and movement of trains performed
by either Operator under this Section 3(j) shall conform to the same standards
of non-discrimination, written policies and priorities applicable to the control
of such functions by CRC at other locations included within the Shared Assets
Area.
(k) Railcar Weighing. All Railcars for the account of an Operator
which originate or terminate on Shared Assets and which require weighing shall
be weighed by and at the expense of such Operator or its customer, and at no
cost to CRC.
(l) Freight Claims. The Operators shall agree among themselves on
the most fair, practical and efficient arrangements for handling and
administering freight loss and damage claims with the intent that (i) each
Operator shall be responsible for losses occurring to lading either in its
possession or in the possession of CRC for the account of such Operator, and
(ii) the Operators shall follow relevant AAR rules and formulas in providing for
the allocation of losses which are either of undetermined origin or in Railcars
handled in interline service by or for the account of both Operators.
(m) Freight Car Repairs. If any Railcars are bad ordered while on
the Shared Assets and must be set out from a CRC Train or Operator Train, CRC
shall promptly return such Railcars to the Operator in whose account such
Railcars reside in accordance with such Operator's instructions. CRC shall
furnish, at such Operator's expense, required labor and material to perform, and
shall perform, light repairs on such bad ordered Railcars as necessary to make
such Railcars legal and safe for movement. CRC shall bill such Operator for the
costs of such light repairs in accordance with the Field and Office Manuals of
the AAR Interchange Rules in effect at the time such repairs are performed. CRC
shall bill directly to and collect from the applicable Operator charges for
repair items that, under the AAR Interchange Rules, are the responsibility of
the Railcar owner and/or the handling line carriers. Each Operator may rebill
charges for repair items that are the responsibility of the Railcar owner and/or
the handling line carriers. If any such bad ordered Railcar cannot be made legal
and safe for movement by the performance of light repairs, CRC shall, at such
Operator's expense, arrange for appropriate removal of the affected Railcar in
accordance with such Operator's instructions.
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(n) Train Services. Actual costs incurred by CRC to provide
special services (other than services otherwise provided for in this Agreement)
at the request of an Operator with respect to trains, locomotives and Railcars
for the account of such Operator, shall be paid by such Operator to CRC,
provided that the costs and terms of similar special services rendered to each
Operator shall be without discrimination between Operators as to cost and terms,
giving due allowance to any differences in the costs of providing such services.
(o) Wrecking Service. Wrecking service or wrecking train service
required in connection with services contemplated by this Agreement shall be
provided by CRC (or its designee) as promptly as possible.
(p) Admission of Third Parties. Notwithstanding any other
provision in this Agreement, no party may permit any Person (other than a party
hereto) to have access to, operate over or use any Shared Asset without the
prior approval of all parties, which approval may be given or refused in the
sole discretion of each party.
Section 4.....Equipment and Properties.
(a) Procurement. CRC shall procure, operate and maintain all
equipment, real property rights and improvements thereon which are reasonably
required for (i) CRC to operate the Shared Assets, and (ii) the Operators to
move trains over the Shared Assets, in each case in accordance with this
Agreement.
(b) Contribution of Locomotives by Operators. Upon reasonable
request by the General Manager, the Operators shall furnish to CRC, through
full-service lease or other mutually satisfactory arrangements, locomotives
reasonably required by CRC for the performance of its obligations under this
Agreement. The respective obligations of each Operator to furnish such
locomotives shall be based, insofar as reasonably practicable, upon the
Operator's CRC Train Usage Percentage during the calendar month preceding such
request for the Shared Assets Area or Zone in which such locomotives are needed
by CRC. It is the parties' intention that (i) the arrangements pursuant to which
such locomotives are furnished by either Operator to CRC shall provide that
heavy maintenance, repair and overhaul shall be the responsibility of such
Operator, (ii) locomotives furnished by either Operator to CRC may, in order to
permit maintenance, repair and overhaul of such locomotive units, be exchanged
for other locomotive units furnished by such Operator, and (iii) the respective
obligations of each Operator to furnish such locomotives upon request by the
General Manager shall be adjusted on at least a monthly or more frequent basis.
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(c) Locomotive Service and Repairs. At the request of an
Operator, CRC shall furnish required labor and material to perform, and shall
perform, fueling and servicing of any Operator's locomotive, as well as light
repairs on any Operator's locomotive as necessary to make such locomotive legal
and safe for movement. CRC shall bill such Operator (or other owner of such
locomotive) for the costs of such fueling, servicing and light repairs in
accordance with industry practice in effect at the time such fueling, services
or repairs are performed. If any such locomotive cannot be made safe for
movement by the performance of light repairs, CRC shall, at the expense of such
Operator (or other owner of such locomotive), arrange for appropriate removal of
such locomotive in accordance with such Operator's instructions.
Section 5. Maintenance.
(a) Routine Maintenance.
(i) CRC shall be responsible for Routine Maintenance
when necessary or desirable to maintain the Shared Assets in a safe
operating condition, and to permit and facilitate (A) the performance by
CRC of its obligations pursuant to this Agreement, and (B) the use of
Shared Assets by the Operators in accordance with this Agreement.
(ii) CSXT or NSR, directly or through their respective
affiliates, may perform the work which CRC performed prior to the date
of this Agreement when (A) CRC does not possess the skills needed for
such work, (B) CRC lacks the necessary employees to do such work in a
timely fashion, or (C) CRC does not possess the equipment needed to do
such work. CRC and the party performing the work shall agree to a
reasonable fee for such work prior to performance. CRC, CSXT and NSR may
agree to have additional work performed either by CSXT, NSR or their
affiliates.
(b) CRC Program Maintenance.
(i) The General Manager shall prepare and submit to the
CRC Board a Program Maintenance plan concurrently with the submission of
an Operating Budget and the Capital Expenditure Budget to the CRC Board.
(ii) Any of CRC, CSXT or NSR may at any time deliver a
Program Maintenance Proposal to the other two of them and to the General
Manager and each member of the CRC Board.
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(iii) The CRC Board shall either (A) approve any or all
of such Program Maintenance Proposals and plan with such changes as it
deems appropriate, include the costs thereof in a pending or amended
Capital Expenditure Budget, and direct the General Manager to cause the
maintenance described in approved Program Maintenance Proposals or plan
to be performed in accordance with Sections 5(b)(iv) and (v), or (B)
disapprove any or all of such Program Maintenance Proposals or plan.
(iv) Program Maintenance shall be the responsibility of
CSXT and NSR pursuant to contracts or arrangements with CRC, and CRC
shall not perform Program Maintenance, except for Program Maintenance
which can be provided by Persons other than CSXT or NSR at a lower cost
to CRC than the CSXT or NSR cost thereof.
(v) CRC shall select, to perform each Program
Maintenance project or program, the Operator which CRC reasonably
determines will perform such project or program at the least cost to CRC
consistent with safe and efficient operations, and taking into account
scheduling considerations, based on written proposals submitted by each
Operator.
(c) Maintenance Standards. Unless otherwise authorized by the CRC
Board, the General Manager shall prepare and submit to the CRC Board proposals
(including the Program Maintenance plan submitted pursuant to Section 5(b)) for
the performance of such Routine Maintenance and Program Maintenance as is
reasonably necessary to keep and maintain the Shared Assets substantially in
their condition as of the date of this Agreement. If the CRC Board fails either
to approve or disapprove by majority vote any such proposal within 45 days after
it was submitted to the CRC Board, the disagreement over the propriety or need
for any of the Routine Maintenance or Program Maintenance included in such
proposal may be submitted by either Operator for resolution by binding
arbitration pursuant to Section 13.
Section 6. Capital Improvements. Except as provided in Section
5, all capital improvements involving Shared Assets shall be governed by the
following provisions:
(a) Proposed Projects. Either Operator, CRC or the General
Manager may propose to the CRC Board from time to time capital improvement
projects. Each such project shall be reviewed by the CRC Board, which may
approve or disapprove by majority vote, or fail to approve, such projects.
(b) CRC Board Approved Projects. Each Operator shall be
responsible for an equal share of the initial budgeted funding of each capital
improvement project which has been approved by the CRC Board and is included in
an approved Capital Expenditure Budget, except as provided in Section 6(c). A
final accounting shall be made to adjust the initial budgeted funding to the
actual project cost as specified in the Accounting Plan.
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(c) Nonseverable Improvement Projects.
(i) At the written request of an Operator delivered to
the other, each Operator shall, within 45 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
proposal with respect to a Nonseverable Improvement project which was
neither approved nor disapproved by majority vote by the CRC Board
within 45 days after such project was proposed to the CRC Board (A)
describing any changes which such Operator proposes be made to such
project and specifying a schedule, budget and allocations between the
Operators of initial capital costs of such Nonseverable Improvement, or
(B) proposing that it not be made.
(ii) The arbitrator receiving the proposals referred to
in Section 6(c)(i) (A) shall consider (1) the degree, if any, to which
the construction, operation and use of such Nonseverable Improvement
would impair or interfere with the use of Shared Assets by CRC or either
Operator, or conflict with any pending capital improvements included in
an approved Capital Expenditure Budget, and (2) the budget and
allocations between the Operators of initial capital costs of such
Nonseverable Improvement as proposed by each Operator, and (B) shall
determine within 45 days of such receipt which of such proposals shall
be implemented, or that such Nonseverable Improvement shall not be made,
and the CRC Board shall approve any proposal which such arbitrator
determines shall be implemented.
(d) Severable Improvement Projects.
(i) Each Operator shall have the unilateral right to
construct and exclusively fund any Severable Improvement which was not
approved by the CRC Board.
(ii) Each Severable Improvement funded exclusively by
an Operator shall be used exclusively by that Operator, which shall be
solely responsible for maintaining such Severable Improvement at its own
expense, until such time that the other Operator gives written notice
that it desires also to use such Severable Improvement, stating the
amount which such other Operator is prepared to pay to the Operator
which initially funded such Severable Improvement for the right to use
such Severable Improvement.
(iii) If the Operators are unable to agree on the amount
of such payment within 45 days after the notice referred to in Section
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6(d)(ii) was given, then at the written request of an Operator delivered
to the other after 45 days but before 60 days after such notice was
given, each Operator shall, within 15 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
statement setting forth the proposed payment by the second Operator, and
the arbitrator shall within 45 days of such receipt determine which of
such proposed amounts shall apply, which shall be binding on both
Operators and paid promptly.
(iv) Such Severable Improvement shall become a
Nonseverable Improvement at the time such second Operator pays the
amount so determined and, thereafter, maintenance and other costs
associated with the operation of such improvement shall be apportioned
between the Operators as provided in this Agreement.
(e) Capital Improvements as Shared Assets. Upon completion, all
capital improvements approved by the CRC Board and all Nonseverable Improvements
shall become part of the Shared Assets owned by CRC subject to all provisions of
this Agreement, free and clear of all Operator liens.
(f) Title to Severable Improvements. Each Operator shall retain
title to all Severable Improvements exclusively funded by such Operator. At any
time during the term of this Agreement, an Operator may remove (at its sole
expense) any Severable Improvement which it exclusively funded, provided that
such Operator has repaired (at its sole expense) any damage to a Shared Asset
caused by such removal and has restored the related Shared Assets substantially
to their condition at the time such Severable Improvements were made. In the
event an Operator shall not have removed any Severable Improvement to which the
Operator shall have title prior to the expiration or termination of this
Agreement, title to such Severable Improvement shall vest in CRC, free and clear
of all Operator liens, upon such expiration or termination.
(g) Noninterference. The construction, operation and use of
Severable Improvements by an Operator shall not impair or interfere with the use
of Shared Assets by CRC or the other Operator, nor shall any Severable
Improvement conflict with any pending capital improvements included in an
approved Capital Expenditure Budget.
(h) Switch Connections. CRC shall, upon the written request of
one or both Operators, provide for switch and turnout connections from Shared
Asset tracks to a private sidetrack owned by a shipper or other Person, if such
request:
(i) includes the commitment of the Operator or both
Operators making such request, or
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(ii) is accompanied by a written undertaking from such
shipper or other Person, in each case satisfactory to CRC, to pay to CRC all
costs incurred from time to time by CRC to provide for such switch and turnout
connections within 30 days after it delivers a bill for such costs to such
Operator, Operators, shipper or other Person.
(i) Adjacent Improvements.
(i) In the event an Operator constructs, acquires or
funds the cost of an Adjacent Improvement (whether or not such Adjacent
Improvement is ultimately owned by such Operator), the other Operator
shall be entitled to share usage of such Adjacent Improvement by giving
written notice stating the amount which such other Operator is prepared
to pay to the first Operator for such right. If the Operators are unable
to agree on the amount of such payment within 45 days after such notice
was given, then at the written request of an Operator delivered to the
other after 45 days but before 60 days after such notice was given, the
matter shall be submitted for resolution by binding arbitration pursuant
to Section 13 and the provisions of Section 6(d)(iii) shall apply to
determine the amount of such payment.
(ii) After the second Operator pays the amount so
determined, if the first Operator owns or has a property interest in the
Adjacent Improvement, the provisions of this Section 6 shall be applied
as if such improvement were a Nonseverable Improvement. If a shipper or
another Person unrelated to the first Operator owns such Adjacent
Improvement, the second Operator shall be entitled to share fully the
rights of the first Operator in connection with such Adjacent
Improvement in consideration of the initial payment.
(j) Operator's Facilities. The foregoing provisions of this
Section 6 shall not apply to any capital improvement (including, but not limited
to, a transloading facility or automotive ramp) within an Operator's Facility or
the current CRC developable property encompassing current CRC Elizabethport Yard
(Trumbull Street Yard) or the CRC developable property east of current CRC's
Chemical Coast Secondary and adjacent to the E-Rail intermodal facility
(northern New Jersey).
Section 7. Accounting.
(a) Books of Record and Account. CRC shall keep proper books of
record and account, in which full and correct entries shall be made of all CRC
transactions, costs, expenses and revenues in accordance with GAAP and the USOA,
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as modified by the Accounting Plan. All expense and revenue transactions related
to the Shared Assets Area shall be readily identifiable by distinct accounting
codes.
(b) Financial Statements. CRC shall deliver to each Operator (i)
within 30 days after the end of each calendar month, a summary income statement
and a summary balance sheet showing as of the last day of and for such calendar
month, major categories of CRC revenue, expense, assets and liabilities, (ii)
within 30 days after the last day of each CRC fiscal quarter, interim financial
statements as of and for the fiscal quarter ended on such day, similar to
statements described in Rule 10-01 of Regulation S-X under the Securities
Exchange Act of 1934, as amended, as modified by the Accounting Plan, and (iii)
within 30 days after the last day of each CRC fiscal year, statements of income
and cash flow and a balance sheet as of and for the fiscal year ended on such
day, prepared in accordance with GAAP and the USOA, as modified by the
Accounting Plan.
Section 8. Costs and Budgets.
(a) CRC Costs. CRC shall pay (and, except for Excluded Taxes,
CSXT and NSR shall, pursuant to Section 9, reimburse CRC for) all of the costs
and expenses to maintain its ownership of the Shared Assets and to operate and
maintain the Shared Assets, including but not limited to all Taxes and
assessments, licenses, permits and any other governmental authorizations
required to own, operate and maintain the Shared Assets, the principal of and
interest and premium, if any, on, and all other costs of, its indebtedness and
all other costs of its capital.
(b) Employee Cost Reimbursement. CRC shall reimburse CSXT and NSR
for the wages, pro rata portion of fringe benefits, other direct employment
costs (including additives) and other actual employee-related costs of any CSXT
or NSR employee, respectively, who provides Temporary Services.
(c) Capital Expenditure Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each CRC fiscal year, a Capital Expenditure Budget for such fiscal year,
specifying for such year the schedule of Program Maintenance and Shared
Asset capital improvements to be performed and constructed for the
benefit of both Operators during such fiscal year and the months therein
during which such expenditures are proposed to be made, for approval, or
modification and approval, by the CRC Board.
(ii) The General Manager shall not permit any capital
expenditure to be made by CRC, CSXT or NSR except in accordance with the
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Capital Expenditure Budget in effect from time to time, Severable
Improvements exclusively funded by an Operator and emergency capital
expenditures made (A) to preserve, or to mitigate a serious diminution
in, the value and usefulness of a Shared Asset to CRC, CSXT and NSR, or
(B) to prevent or mitigate a serious disruption in the operation and use
of the Shared Assets by or for CRC, CSXT or NSR.
(iii) Any Capital Expenditure Budget may be amended in
writing at any time by the CRC Board.
(d) Operating Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each fiscal year of CRC, an Operating Budget for such fiscal year
showing the budget amounts of revenues and expenses for each month
during such fiscal year, for approval, or modification and approval, by
the CRC Board.
(ii) The General Manager shall use all reasonable
efforts to prevent CRC expenses with respect to Shared Assets for a
period from exceeding the amounts shown on the Operating Budget for such
period.
(iii) The General Manager shall give prompt written
notice to each member of the CRC Board of any actual or, in the judgment
of the General Manager, probable, material change in the revenues,
expenses or working capital requirements shown on the Operating Budget
for any period.
(iv) Any Operating Budget may be amended in writing at
any time by the CRC Board.
Section 9. Cost Sharing.
(a) Accounting Plan. The parties shall develop and implement a
written plan of accounting containing a detailed description, by category of
cost and location, of the costs associated with the management and operation of
the Shared Assets Area and the method by which such costs shall be fairly and
properly apportioned among the parties. Such plan of accounting may include
separate accounting and sharing of costs for particular Zones, and shall conform
to the following general principles:
(i) Forty two percent (42%) of Interest Rental shall be
apportioned to CSXT and fifty eight percent (58%) of Interest Rental
shall be apportioned to NSR;
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(ii) Locomotive ownership, lease, fueling, light repair
and servicing costs incurred by CRC within the Shared Assets Area or
each Zone (except costs incurred by CRC and charged directly to an
Operator pursuant to Section 4(c)) shall be apportioned between the
Operators on the basis of the CRC Train Usage Percentages;
(iii) Crew compensation and other crew costs incurred by
CRC within the Shared Assets Area or each Zone with respect to CRC
Trains shall be apportioned between the Operators on the basis of the
CRC Train Usage Percentages;
(iv) General and administrative, supervisory and
overhead expenses incurred by CRC within the Shared Assets Area or for
functions related to the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(v) Dispatching and train control costs (including,
without limitation, labor, equipment, materials and maintenance
expenses) incurred by CRC with respect to the Shared Assets Area shall
be apportioned between the Operators on the basis of the CRC Train Usage
Percentages;
(vi) Police and other costs incurred by CRC with respect
to security within the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(vii) Damage paid by CRC pursuant to Section 11(c) shall
be apportioned between the
Operators in accordance with Section 11(b);
(viii) All other costs incurred by CRC with respect to the
Shared Assets Area or each Zone (except Taxes and insurance) shall be
apportioned between the Operators on the basis of the Total Train Usage
Percentages;
(ix) Taxes (other than Excluded Taxes) incurred by CRC
with respect to the Shared Assets Area or each Zone shall be apportioned
between the Operators on the basis of the Operator's Expense Percentages
for the period to which such Taxes relate; and
(x) Insurance costs incurred by CRC with respect to
Shared Assets within the Shared Assets Area or each Zone shall be
apportioned between the Operators on the basis of the Operator's Expense
Percentages for the period to which such insurance costs relate;
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If the parties are unable to agree on the terms and provisions of the Accounting
Plan, such disagreement may be submitted by either Operator for resolution by
binding arbitration pursuant to Section 13.
(b) Usage Statement. CRC shall deliver to each Operator prior to
the last day of each calendar month, a written statement showing for the prior
Billing Month:
(i) the total number of loaded and empty Railcars in
the account of each Operator in CRC Trains which performed Switching and
Yard Services or operated directly between customer facilities in each
Zone;
(ii) the total number of loaded and empty Railcars moved
by or for such Operator in Operator Trains which operated overhead or
directly to Jointly-Operated Facilities, Operators' Facilities or
customer facilities in each Zone;
(iii) the calculation of the CRC Train Usage Percentage
and the Total Train Usage Percentage for each Operator for each Zone,
and (A) all Railcars in a train shall be deemed to be on Shared Assets when the
first or last Railcar of such train is on Shared Assets and (B) each time that a
Railcar is removed from or added to a train in the Shared Assets Area shall
constitute a separate movement of such Railcar.
(c) Expense Statement. Concurrently with the delivery of each
Usage Statement to the Operators, CRC shall deliver to the Operators a statement
showing (i) the expenses incurred by CRC to own, operate and maintain the Shared
Assets during the Billing Month, (ii) the revenues, if any, derived by CRC from
the ownership and operation of the Shared Assets during such Billing Month, and
(iii) the Reimbursable Expenses for such Billing Month, in each case computed in
accordance with GAAP and the USOA, as modified by the Accounting Plan.
(d) Capital Expenditure Statement. Concurrently with the delivery
of each Usage Statement to the Operators, CRC shall deliver to the Operators a
statement showing the estimated Budgeted Capital Expenditures for the calendar
month immediately succeeding the calendar month in which such statement is
delivered.
(e) Bills. Concurrently with the delivery to the Operators of a
Usage Statement for a Billing Month, CRC shall deliver to each Operator a bill
(a "Bill") showing for such Billing Month:
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(i) one hundred and two percent (102%) of the amount of
each Reimbursable Expense apportioned to such Operator for such Billing
Month under the Accounting Plan;
(ii) one-twelfth of fifty percent (50%) of the annual
amount of Budgeted Capital Expenditures approved by the CRC Board; and
(iii) one-twelfth of the Interest Rental apportioned to
such Operator.
(f) Payment. Each Operator shall pay to CRC the amount shown on
each Bill as being payable by such Operator, on or before the 30th day after the
date of such Bill regardless of whether or not such Operator disputes the
accuracy of any amount or calculation shown on such Bill.
(g) Disputed Bills.
(i) Any dispute by an Operator of the accuracy of any
amount or calculation shown on any Bill shall be described and specified
in reasonable detail in a Dispute Letter from such Operator to CRC and
the other Operator within two years after the date of such Bill.
(ii) Any amounts or calculations shown on any Bill which
are not disputed in accordance with Section 9(g)(i) shall conclusively
be deemed to be accurate and shall be binding on each Operator and CRC.
(iii) CRC and both Operators shall promptly endeavor to
resolve the disputes described in each Dispute Letter, and if they fail
to agree to a resolution of such disputes within 60 days of the delivery
of such Dispute Letter to CRC, then the firm of independent public
accountants which has been engaged as auditors for CRC shall be engaged
to resolve such disputes in accordance with GAAP and the USOA, as
modified by the Accounting Plan, and the written resolution of such
disputes signed by such accounting firm shall be binding on each
Operator and CRC.
(iv) Any adjustments to Bills which result from the
resolution of Dispute Letter disputes shall be reflected as charges or
credits on the first Bills delivered by CRC to the Operators after such
disputes have been resolved.
(v) The fees in connection with the resolution of any
Dispute Letter disputes of the accounting firm which has been engaged as
auditor for CRC shall be paid fifty percent (50%) by CSXT and fifty
percent (50%) by NSR.
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Section 10. Access. CRC shall give to each Operator during
normal CRC Administrative Office business hours, access to inspect and make
copies of any and all books of record and accounts relating to this Agreement,
all of which shall be maintained by CRC at the CRC Administrative Office.
Section 11. Liability. Except as otherwise provided in Section
3(l) (Freight Claims), Section 11(f) (Specified Level Damages) and Section 11(g)
(Substance Abuse Exceptions), the responsibility between and among CRC, CSXT and
NSR for all Damage arising out of, incidental to or occurring in connection with
this Agreement shall be apportioned without consideration of fault or negligence
of any kind or degree in accordance with the remaining provisions of this
Section 11. The provisions of this Section 11 are intended to inure only to the
benefit of the parties hereto and their corporate successors and affiliates, and
not to create any benefits for any third parties.
(a) Operators' Sole Responsibility. Except as otherwise provided
in Section 11(f) (Specified Level Damages) and Section 11(g) (Substance Abuse
Exceptions), each Operator shall assume and bear all responsibility for Damage
to its own trains, locomotives and equipment, to Railcars and lading in its
possession or being handled for its account and for the death of or injury to
its own employees.
(b) Operators' Joint Responsibility.
(i) Train Usage. Except as otherwise provided in (1)
Section 11(b)(ii) (First Year), (2) Section 11(a) (Operators' Sole
Responsibility), (3) Section 11(c)(i) (CRC Damages Generally), (4)
Section 11(c)(ii)(B) (No Reallocation for Insurance), (5) Section 11(f)
(Specified Level Damages), and (6) Section 11(g) (Substance Abuse
Exceptions), and subject to Section 11(c)(ii)(A) (Net of Insurance), all
Damage shall be apportioned between the Operators in proportion to their
respective Total Train Usage Percentages in the Zone in which the
incident giving rise to such Damage occurred for the 12 calendar month
period immediately preceding the incident giving rise to such Damage.
(ii) First Year. If an incident giving rise to Damage
for which the Operators are jointly responsible under Section 11(b)(i)
(Train Usage) occurs before June 1, 2000, responsibility for such Damage
shall be borne equally by the Operators, with each being liable for
one-half (1/2) of the damages.
(c) CRC Responsibility - Allocation and Insurance.
(i) CRC Damages Generally. Except as otherwise provided
in this Section 11(c), all Damages incurred by CRC, including, without
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limitation, those Damages apportioned to CRC under Section 11(f)
(Specified Level Damages) shall be CRC expenses, allocated as provided
in Section 11(b) (Operators' Joint Responsibility), and included in
Expense Statements charged to the Operators.
(ii) (A) Net of Insurance.
(1) Notwithstanding any other provision in
this Agreement (but subject to Section 11(c)(ii)(B) (No
Reallocation for Insurance)), all Damages (including
without limitation, loss or destruction of, or damage to,
CRC's own property) charged to the Operators, under the
Expense Statements or otherwise, shall be net of any CRC
insurance. It is the intent of the parties (a) for CRC to
look first to any insurance proceeds available to it
before attempting to recover any such Damages from the
Operators and (b) for the Operators' obligation to make
direct payment to CRC not to include any obligation to
make direct payment for any Damages covered by insurance
procured by or on behalf of CRC.
(2) If and to the extent that CRC is an
insured under, or otherwise provided coverage under, an
insurance policy or policies each of which provides
coverage for both CRC and one Operator but not the other
Operator, and regardless of whether two or more of these
policies shall be in existence or have different
deductible-retention amounts and/or limits of recovery,
then the amount of insurance proceeds deemed "available"
under Section 11(c)(ii)(A)(1) to which CRC shall look
before either Operator shall have any obligation for
direct payment shall, as to each Operator, be the maximum
available limit of the insurance providing coverage for
both that Operator and CRC.
(B) No Reallocation for Insurance. When part of the
apportioned Damage will be satisfied from insurance coverage
under this Section 11(c), and part paid directly by the Operator,
the insured portion of the Damage shall be apportioned among or
between CRC and the Operators (and consequently between or among
their insurers) in the same manner and amounts as it would have
been apportioned if the loss were not net of insurance. If any
such allocation results in one party hereto suffering a greater
uninsured loss than the other(s) because of differing deductibles
or self-retentions, that difference in coverage shall not be a
basis for any reapportionment or reallocation of Damage.
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(d) Process. Each Operator shall be responsible for the payment,
handling, administration and disposition of all Damage for which it bears
exclusive responsibility under Section 11(a) (Operators' Sole Responsibility),
and both Operators shall have joint responsibility for the payment, handling,
administration and disposition of all Damage for which they are jointly
responsible under Section 11(b) (Operators' Joint Responsibility) and Section
11(c) (CRC Responsibility - Allocation and Insurance). In assigning joint
responsibility to both Operators, it is not the intent of this Agreement that
the Operators will actually act jointly, but rather that the Operators will
agree between themselves on the most practical and efficient arrangements for
handling, administering, and disposing of Damage for which they bear joint
responsibility, with the objective of eliminating unnecessary duplication of
effort and minimizing overall costs.
(e) Indemnification. Each party to this Agreement covenants and
agrees to (i) fully indemnify and save harmless the other parties to this
Agreement from and against any payments which are the responsibility of such
party under this Agreement, and all expenses, including attorneys' fees and
expenses and other expenses of any court or regulatory proceeding, incurred by
such other parties in defending any claim that they are liable for such
payments, and (ii) defend such other parties against such claims with counsel
selected by such party and reasonably acceptable to such other parties.
(f) Specified Level Damages.
(i) Damages Amount. Section 11(a) (Operators' Sole
Responsibility) and Section 11(b) (Operators' Joint Responsibility)
shall apply directly only when the total amount of all Damages resulting
from a single incident is $25 million or less. Responsibility for
Damages resulting from a single incident for which Damages exceed $25
million shall be allocated as stated in this Section 11(f)(i).
(A.1) Tier One Damages Defined. In this Section
11(f), "Tier One Damages" for any incident occurring during and
between June 1, 1999 and May 31, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
the greater of:
(1) $25 million of Damages; or
(2) the lowest amount of Damages which, when
allocated among all parties, results in an allocation to
either Operator of Damages in an amount equal to all
insurance benefits available to that Operator (called the
"Lesser Insured Operator") which has the lesser (as
between the Operators) amount of insurance benefits
available to it, including, without limitation, insurance
- 29 -
<PAGE>
to which CRC looks under Section 11(c) (CRC Responsibility
- Allocation and Insurance). In determining insurance
benefits available to the Lesser Insured Operator, both
property and liability insurance shall be considered but
(I) only to the extent benefits are actually available in
connection with that incident and (II) they shall be
calculated separately (i.e., property insurance benefits
shall not be considered in any determination of available
liability insurance benefits and vice versa).
In this Section 11(f), "Tier One Damages" for any incident
occurring on or after June 1, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
only the first $25 million of Damages incurred by the parties,
unless otherwise agreed by the parties.
(A.2) Allocation of Tier One Damages. Tier One
Damages shall be allocated among the parties as follows:
(1) Any Damage for which each Operator would
otherwise be solely responsible under Section 11(a)
(Operators' Sole Responsibility) shall be allocated as
provided in Section 11(a);
(2) Any and all CRC Damages other than those
specified in preceding Section 11(f)(i)(A.2)(1)
(including, without limitation, Damage to its trains,
locomotives and equipment, whether owned or leased, to
Railcars and lading in its possession or being handled for
its account, and to the property of any others, as well as
any Damage arising from or in connection with the death of
or injury to any persons, including, without limitation,
its own employees) shall be allocated and paid as provided
in Section 11(c) (CRC Responsibility - Allocation and
Insurance); and
(3) Any and all other Damages shall be
allocated as provided in Section 11(b) (Operators' Joint
Responsibility).
(B.1) Tier Two Damages Defined. In this Section
11(f), "Tier Two Damages" shall include (1) those Damages
allocated to Tier Two under Section 11(g) (Substance Abuse
Exceptions) and (2) all of those Damages in excess of the
aggregate Tier One Damages calculated under Section
11(f)(i)(A.1).
- 30 -
<PAGE>
(B.2) Allocation of Tier Two Damages. Tier Two
Damages shall be allocated between or among the parties hereto in
proportion to their respective fault or negligence in causing the
Damage.
(ii) Dispute Resolution. Any dispute between or among
the parties hereto in determining their respective fault or negligence
in causing the Damage or otherwise relating to their respective
responsibilities for Damage arising out of, incidental to or occurring
in connection with any incident shall be submitted for resolution by
binding arbitration pursuant to Section 13 (Arbitration).
(iii) Amendment of Certain Amounts. The $25 million
amount referred to in this Section 11(f) may be adjusted every five
years following the date of this Agreement with the prior approval of
all parties, which approval may be given or refused in the sole
discretion of each party.
(g) Substance Abuse Exceptions. Each Operator shall assume and
bear all responsibility for Damage to the extent caused by acts or omissions of
any of its employees while under the influence of drugs or alcohol, and Sections
11(b) (Operators' Joint Responsibility) and Section 11(f) (Specified Level
Damages) shall not apply to any such Damage. If, but for the operation of this
Section 11(g), all or any Damages from an incident would otherwise have been
Tier One Damages under Section 11(f) (Specified Level Damages), the portion of
the Damages caused by acts or omissions of any the employee(s) while under the
influence of drugs or alcohol shall be Tier Two Damages, and allocated under
Section 11(f)(i)(B.2) (Allocation of Tier Two Damages), and the remaining
portion of the Damages from that incident shall be included in, and allocated
under, Tier One or Tier Two under the otherwise applicable provisions for
Section 11(f)(i).
(h) Transaction Agreement. Section 2.8 of the Transaction
Agreement shall control any conflict between Sections 11(b) and (c) and said
Section 2.8.
(i) Damages. As used in this Section 11 only, the term
"Damage(s)" shall exclude:
(i) Operator Consequential Damages (which are always
borne by the Operator which sustained them); and
(ii) any claim by any party, in its own right, against
any other party for exemplary or punitive damages, but not for
allocation under this Section 11 of exemplary or punitive damages
claimed against that party by a third person not a party hereto.
- 31 -
<PAGE>
With regard to exemplary and punitive Damages the parties acknowledge and agree
that, with regard to the subject of this Agreement, the intent and agreement of
the parties is that no party shall bring or recover any claim for exemplary or
punitive damages, in its own right, against any other party, but that any party
will allocate, in accordance with this Section 11, exemplary or punitive Damages
from any claim against it by a third person not a party hereto.
Section 12. No Partnership. Nothing in this Agreement shall be
construed to establish a partnership or joint venture between or among CRC, CSXT
or NSR or any of their affiliates or associates.
Section 13. Arbitration. Any dispute, controversy or claim (or
any failure by the parties to agree on a matter as to which this Agreement
expressly or implicitly contemplates subsequent agreement by the parties, except
for matters left to the sole discretion of a party) arising out of or relating
to this Agreement, or the breach, termination or validity hereof, shall be
finally settled through binding arbitration by a sole, disinterested arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall be jointly selected by the parties but, if the
parties do not agree on an arbitrator within 30 days after demand for
arbitration is made by a party, they shall request that the arbitrator be
designated by the American Arbitration Association. The award of the arbitrator
shall be final, binding and conclusive upon the parties. Each party to the
arbitration shall pay the compensation, costs, fees and expenses of its own
witnesses, experts and counsel. The compensation and any costs and expenses of
the arbitrator shall be borne equally by the parties. The arbitrator shall have
the power to require the performance of acts found to be required by this
Agreement, and to require the cessation or nonperformance of acts found to be
prohibited by this Agreement. The arbitrator shall not have the power to award
consequential or punitive damages. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof, which court may award
appropriate relief at law or in equity. All proceedings relating to any such
arbitration, and all testimony, written submissions and award, of the arbitrator
therein, shall be private and confidential as among the parties, and shall not
be disclosed to any other Person, except as required by law and except as
reasonably necessary to prosecute or defend any judicial action to enforce,
vacate or modify such arbitration award.
Section 14. Term. This Agreement shall become effective as of
the date first above written and shall remain in effect until the twenty-fifth
(25th) anniversary of such date, subject to the right of CSXT and NSR to agree
prior to the twenty-third (23rd) anniversary of such date to extend this
Agreement for a renewal period of five (5) years; and if so extended, to agree
prior to the twenty-eighth (28th) anniversary of such date to further extend
this Agreement for an additional renewal period of five (5) years (each such
period, a "Renewal Term").
- 32 -
<PAGE>
Section 15. Force Majeure. The obligations, other than payment
obligations, of the parties to this Agreement shall be subject to force majeure
(which shall include strikes, riots, floods, accidents, Acts of God, and other
causes or circumstances beyond the control of the party claiming such force
majeure as an excuse for non-performance), but only as long as, and to the
extent that, such force majeure shall prevent performance of such obligations.
Section 16. Entire Agreement. This Agreement and the Transaction
Agreement, including the other Ancillary Agreements (as defined in the
Transaction Agreement) constitute the entire agreement and supersede all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except the letter agreement dated
April 8, 1997 between CSX and NSC to the extent such April 8, 1997 letter
agreement covers matters not addressed or amended hereby or in the Transaction
Agreement or the Ancillary Agreements (as defined in the Transaction Agreement);
provided that it is the intent of the parties that this Agreement shall be an
effectuation of such April 8, 1997 letter agreement consistent with its terms,
and that the provisions of this Agreement shall be interpreted to give effect to
such April 8, 1997 letter agreement; and provided further that, in the event of
any inconsistency between the terms of this Agreement and such April 8, 1997
letter agreement, this Agreement shall prevail.
Section 17. Amendment and Waiver. Any amendment to this
Agreement must be in writing and executed and delivered by CRC, CSXT and NSR,
subject to any jurisdiction of the STB. Any waiver of any term or provision of
this Agreement must be in writing and executed and delivered by the party
entitled to enforcement of such term or provision.
Section 18. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, such provision is intended to be ineffective only to the most limited
extent possible in such context and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 19. Remedies.
(a) Entitlement to Certain Remedies. Each party acknowledges and
agrees that the other parties would be irreparably damaged in the event any of
the provisions of this Agreement were not performed by it in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
each party shall be entitled to an injunction or injunctions to prevent breaches
of such provisions and to specifically enforce such provisions, in addition to
- 33 -
<PAGE>
any other remedy to which such party may be entitled, at law or in equity.
(b) Preclusion of Certain Remedies. In no event shall any party
be liable to the other parties for any consequential, indirect, incidental,
punitive or other similar damages including, but not limited to, lost profits
for any breach or default, or any act or omission arising out of or in any way
relating to this Agreement, under any form or theory of action whatsoever,
whether in contract, tort or otherwise. The foregoing is not intended to alter
or limit the allocation of responsibility for Damage as provided in Section 11.
Section 20. Interpretation. This Agreement was drafted jointly
by CSXT and NSR, each of which was advised by its own counsel and other advisors
concerning all of the terms and provisions hereof; accordingly, any ambiguity
herein should not be construed in favor of or against any of them.
Section 21. Headings. Headings of Sections and paragraphs in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of any term or provision of this Agreement.
Section 22....Parties. This Agreement shall inure to the benefit
of and be binding upon CRC, CSXT and NSR and any successor of any of them by
operation of law, and any assignee agreed to by them in accordance with Section
23, and nothing in this Agreement is intended or shall be construed to give any
other Person any legal or equitable right, remedy or claim under or with respect
to this Agreement or any term or provision hereof.
Section 23. Assignment.
(a) Limitation. Except as provided in Section 23(b), neither this
Agreement (including the documents and instruments referred to herein) nor any
of the rights, interests or obligations hereunder, shall be assigned by any
party, including by operation of law, without the prior written consent of the
other parties (except to a controlled subsidiary), which consent may be given or
refused in the sole discretion of each party.
(b) Successor. Any party without the consent of the other parties
may assign all of its rights and obligations under this Agreement only to any
successor in the event of a merger, consolidation, sale of all or substantially
all its assets (but only if such sale includes all routes and lines owned by
such party to access the Shared Assets), if such assignee executes and delivers
to the other parties hereto an agreement reasonably satisfactory in form and
substance to such other party under which such assignee, which is reasonably
satisfactory to the other party, assumes and agrees to perform and discharge all
- 34 -
<PAGE>
the obligations and liabilities of the assigning party; provided that any such
assignment shall not relieve the assigning party from the performance and
discharge of such obligations and liabilities.
Section 24. Notices. Any notice given by CRC, CSXT or NSR to the
others under this Agreement shall be deemed delivered on the date sent by
registered mail, or by such other means as they may agree, and shall be
addressed to them as follows:
(A) If to CSXT:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(B) If to NSR:
Senior Vice President Operations
Norfolk Southern Railway Company
Three Commercial Place
Norfolk, Virginia 23510-2191
(C) If to CRC:
President and Chief Executive Officer
Consolidated Rail Corporation
2001 Market Street
Two Commerce Square
Philadelphia, Pennsylvania 19101
and each of them may from time to time change its address in this Section 24 by
written notice delivered to the others.
Section 25. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without regard to principles of conflicts of laws.
- 35 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in counterparts by their duly authorized officials as of the day
first above written.
CSX TRANSPORTATION, INC.
By: /s/PETER J. SHUDTZ
------------------
Peter J. Shudtz
Title: Vice President - Law and General Counsel - CSX
Corporation, authorized agent for CSX Transportation,
Inc.
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/ J. L. MANETTA
------------------
J. L. Manetta
Title: Senior Vice President Operations
CONSOLIDATED RAIL CORPORATION
By: /s/TIMOTHY O'TOOLE
------------------
Timothy O'Toole
Title: President
- 36 -
<PAGE>
EXHIBIT A
OPERATING PROTOCOLS
Consolidated Rail Corporation
Shared Assets Area
Terminal Capacity Guidelines
Yard Operations
o Cars loaded or empty moving outbound to either parent* company, which have
been made up for train departure at either a serving merchandise yard,
Automotive Terminal or jointly used Intermodal Facility will be considered
available at the published departure time for scheduled trains and the later
of 4 hours after notice to the parent or actual available time (set time)
for non-scheduled or extra trains. Cars remaining available for departure
in excess of ten (10) hours will be subject to a charge of $141.00 per car.
Thereafter, for every eight (8) hours that the same cars continue to remain
on track, along with all other cars of the same block codes within the
originating dispatch yard, will be subject to an additional charge of
$141.00 per car.
o Cars loaded or empty assembled for outbound train dispatch to either parent
company will be considered available at published departure time for such
scheduled trains. The Shared Assets Areas management will provide four (4)
hours advance notice prior to set time on non-scheduled or extra trains
before they will be considered available for departure.
o Management of Shared Assets Areas may refuse an inbound train of the same
category when a specific destination terminal has been holding more than one
(1) intermodal, automotive, manifest or unit train of a parent for power
and/or crew beyond ten (10) hours of scheduled departure or availability and
conditions within the involved destination terminal preclude the effective
handling of the offered inbound trains.
o Acts of God, Mainline blockages, labor strikes or other causes to a
cessation of consistent service beyond the control of a parent company will
be considered by the management of the Shared Assets Areas as to the
legitimacy of any assessment.
o Opportunities for the Shared Assets Areas management to consolidate
- ---------------------
*The term "parent" means CSXT and/or Norfolk Southern Railway Co. ("NSR") and is
not intended to describe the legal relationship between the parties.
1
<PAGE>
trains for the benefit of a specific Shared Assets Area operation and
the involved parent, as mutually agreed by the parties, will not result in
charges on cars designated for the annulled train resulting from said
consolidation.
o An inventory of hold cars awaiting disposition within any given Shared
Assets Area territory should not exceed thirty (30) cars per day for either
CSXT or NSR individually. The Shared Assets Areas management may elect to
limit receipt of inbound car flow from the delinquent parent for the
affected Shared Assets Areas territory, in accordance with the guidelines
for holding trains. Any loaded or empty car including those in unit train
consists carrying a "No Bill" status more than twenty-four (24) hours will
be assessed $10.00 per hour in excess thereof.
o Trains inbound to the Shared Assets Area territory must have proper car and
train documents. If this information is lacking, the Shared Area managers,
at their discretion, may hold trains outside the boundaries of the Shared
Assets Area until proper documentation is received.
o Regardless of company of employment, any qualified crew in the Shared Area
may operate any locomotive, regardless of ownership, in that area for the
purposes of positioning/hostling or movement of light power between yards.
Held Trains
o In recognition of terminal fluidity and capacity utilization, the Shared
Assets Areas management can require, in coordination with a parent's command
center, an inbound train to be held outside the boundaries of a Shared
Assets Area.
- Such notification must be given with enough notice for the parent to
chamber the train at a location that minimizes disruption to
operations.
- Decisions by the Director of Train Operations of Shared Assets Areas
management are final in this regard. Neither parent may compel the
Shared Assets Areas management to accept trains.
- Similarly, the decision to hold out a train other than temporary holds
is recognized as a serious action, which will be done only after all
other alternatives are exhausted. Data on these actions will be
maintained by Shared Assets Areas management and will be regularly
available for briefing to the Conrail's Board of Directors at its
pleasure.
2
<PAGE>
Storage
o Neither parent company may store or pre-position cars on Shared Assets
Area's tracks, including yard and industrial tracks to which they have
access. Empty cars routed to the Shared Assets Areas must have a customer
destination assigned, and must be loaded without beginning to accrue charges
as described in Conrail's Demurrage Tariff in effect on May 1, 1999. When it
is determined that cars cannot be delivered to the customer within 60 hours
of arrival, a call will be made to the parent's operations center. After
such a call is made, except in extraordinary cases, these cars will then be
placed on the parent's first available outbound train.
o CSXT and NS will independently establish such demurrage and car storage
arrangements with customers as each deems proper. Should customers keep or
store cars on SAA tracks beyond the time at which charges would begin to
accrue as called for in Conrail's Demurrage Tariff in effect on May 1, 1999,
then the parent road will be assessed $100 per car per day to cover the
operational cost of congestion and inefficient use of Shared Assets Areas
facilities.
o CSXT and NSR recognize that certain customers are currently provided car
storage within the Shared Asset Areas, and that this storage may be
essential to the functioning of the business of these customers. CSXT, NSR
and Shared Assets will review current pools and by consent of all three
parties approve their makeup and location based on operating efficiencies.
Thereafter pools will be regularly reviewed for the provision of such
storage to avoid congestion. Any request for additional car storage for any
Shared Assets Area customers must be approved by the Parents, who will
consider the availability of additional space with a view toward assuring
that operations in the Shared Assets Area remain fluid and will not be
affected by providing such car storage.
Interchange
o CSXT and NSR will not interchange cars to each other within the Shared
Assets Areas locations unless specifically provided through separate
agreements. No open interchanges have been established except at industries.
3
<PAGE>
Blocking
o To ensure the equal and fair use of the Shared Assets Area capacity by its
parent companies, the following car classification requirements will govern:
- Each parent company will be required to block inbound trains for the
Shared Assets Areas. Each parent will make the number of blocks called
for in the split-date Operating Plan. Failure to comply with inbound
blocking requirements and execute appropriate setoffs (unless otherwise
directed by Shared Assets
management) within the Shared Assets Area will result in an assessment
of $50.00 per loaded or empty car.
- Management of the Shared Assets Areas will be required to block outbound
trains. Parent companies will receive the number of blocks at each
Shared Assets Area terminal that is called for in the split-date
Operating Plan.
- Changes to the number of blocks made by or delivered to a Shared Asset
terminal may be made only by mutual consent of all three parties.
- Parent companies, except by joint agreement, may not compel the Shared
Assets Areas management to make a greater number of blocks at any
terminal, beyond the number of called for in the split-date Operating
Plan.
- Each parent may change the definition of its own specific blocks
originating at a Shared Assets Area terminal.
Hours of Service and Recrews
o Train crews on parent trains approaching a Shared Assets Area must have
sufficient time to terminate in or exit the Shared Assets Areas before
hours-of-service laws require them to rest. Sufficient time is considered
the trains scheduled elapsed time to terminate in or pass through the Shared
Assets Area. The Shared Assets Areas management may grant an exception if
the train can make it to its destination without undue disruption.
o Shared Assets Areas shall have the option to provide T&E relief service for
any road train on the hours-of-service law, regardless of parent company.
- Such relief will be provided after coordination with the appropriate
parent's operations center indicating the involved parent will provide
no relief crew.
4
<PAGE>
- Recrews will be at the sole cost and expense of the parent whose train
is recrewed at full cost plus a $500 surcharge.
- If specific trains frequently require recrews, Shared Assets Areas
management may request the parent to change its schedule or slotting of
subject train with the right to repeatedly hold that train for a recrew
outside the Shared Assets Areas as set forth under the "held trains"
provision until such appropriate adjustments are made to the
non-conforming schedule.
- Data on trains recrewed will be maintained by Shared Assets Areas
management and will be regularly available for briefing to Conrail's
Board of Directors at its pleasure.
Charges
o The charges paid by either owner under these protocols will be made to a
Conrail "passive income" account, which will be administered by Conrail.
Changes
o These terminal capacity guidelines will be reviewed at the request of any of
the three parties (CSXT, NSR, and/or CSAO). Proposed changes are subject to
the arbitration provisions of the Shared Asset Area Operating Agreements in
the event CSXT and NSR cannot agree.
5
Exhibit 10.5
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
SOUTH JERSEY/PHILADELPHIA
Dated as of June 1, 1999
By and Among
CONSOLIDATED RAIL CORPORATION,
CSX TRANSPORTATION, INC. and
NORFOLK SOUTHERN RAILWAY COMPANY
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................................1
(a) AAR............................................................1
(b) Accounting Plan................................................1
(c) Action.........................................................2
(d) Adjacent Improvements..........................................2
(e) Bill...........................................................2
(f) Billing Month..................................................2
(g) Board of Managers..............................................2
(h) Budgeted Capital Expenditures..................................2
(i) Capital Expenditure Budget.....................................2
(j) Capital Expenditure Statement..................................2
(k) CRC Administrative Office......................................2
(l) CRC Board......................................................2
(m) CRC Train......................................................2
(n) CRC Train Usage Percentage.....................................2
(o) CSX............................................................3
(p) CSXT Operating Agreement.......................................3
(q) Damage(s)......................................................3
(r) Dispute Letter.................................................3
<PAGE>
Page
(s) Excluded Taxes.................................................3
(t) Expense Statement..............................................3
(u) GAAP...........................................................3
(v) General Manager................................................3
(w) Governmental Entity............................................3
(x) Interest Rental................................................3
(y) Jointly-Operated Facility......................................4
(z) Lesser Insured Operator........................................4
(aa) Letter Agreement...............................................4
(bb) Liabilities....................................................4
(cc) Nonseverable Improvement.......................................4
(dd) NSC............................................................4
(ee) NSR Operating Agreement........................................4
(ff) NYC............................................................4
(gg) Operating Budget...............................................4
(hh) Operating Plan.................................................5
(ii) Operator.......................................................5
(jj) Operator Consequential Damages.................................5
(kk) Operator's Expense Percentage..................................5
(ll) Operator's Facility............................................5
- ii -
<PAGE>
Page
(mm) Operator Train.................................................5
(nn) Person.........................................................5
(oo) Program Maintenance............................................5
(pp) Program Maintenance Proposal...................................5
(qq) PRR............................................................5
(rr) Railcar........................................................6
.
(ss) Reimbursable Expenses..........................................6
(tt) Renewal Term...................................................6
(uu) RoadRailer(R)..................................................6
(vv) Routine Maintenance............................................6
(ww) Severable Improvement..........................................6
(xx) Shared Asset Value.............................................6
(yy) Shared Assets..................................................6
(zz) Shared Assets Area.............................................7
(aaa) STB............................................................7
(bbb) Switching and Yard Services....................................7
(ccc) Tax or Taxes...................................................7
(ddd) Temporary Services.............................................7
(eee) Tier One Damages...............................................7
(fff) Tier Two Damages...............................................7
- iii -
<PAGE>
Page
(ggg) Total Train Usage Percentage...................................7
(hhh) Transaction Agreement..........................................8
(iii) Usage Statement................................................8
(jjj) USOA...........................................................8
(kkk) Valuation Date.................................................8
(lll) Zone...........................................................8
Section 2. Management........................................................8
(a) CRC Board......................................................8
(b) General Manager................................................9
(c) Employees......................................................9
(d) CRC Responsibilities..........................................10
(e) Impartiality..................................................10
(f) Independent Contractors.......................................10
Section 3. Operations.......................................................10
(a) Operator's Rights.............................................10
(b) Use...........................................................11
(c) Grant of Rights...............................................11
(d) Switching and Yard Services...................................13
(e) Operating Protocols...........................................13
(f) Freight Traffic to Remain in Account of Each Operator.........13
- iv -
<PAGE>
Page
(g) Rates, Routes and Divisions...................................13
(h) Shipper Bills.................................................14
(i) Service Responsibility........................................14
(j) Dispatching...................................................14
(k) Railcar Weighing..............................................14
(l) Freight Claims................................................14
(m) Freight Car Repairs...........................................15
(n) Train Services................................................15
(o) Wrecking Service..............................................15
(p) Admission of Third Parties....................................15
Section 4. Equipment and Properties.........................................15
(a) Procurement...................................................15
(b) Contribution of Locomotives by Operators......................16
(c) Locomotive Service and Repair.................................16
Section 5. Maintenance......................................................16
(a) Routine Maintenance...........................................16
(b) CRC Program Maintenance.......................................17
(c) Maintenance Standards.........................................17
Section 6. Capital Improvements.............................................18
(a) Proposed Projects.............................................18
- v -
<PAGE>
Page
(b) CRC Board Approved Projects...................................18
(c) Nonseverable Improvement Projects.............................18
(d) Severable Improvement Projects................................19
(e) Capital Improvements as Shared Assets.........................19
(f) Title to Severable Improvements...............................19
(g) Noninterference...............................................20
(h) Switch Connections............................................20
(i) Adjacent Improvements.........................................20
(j) Operator's Facilities.........................................21
Section 7. Accounting.......................................................21
(a) Books of Record and Account...................................21
(b) Financial Statements..........................................21
Section 8. Costs and Budgets................................................21
(a) CRC Costs.....................................................21
(b) Employee Cost Reimbursement...................................21
(c) Capital Expenditure Budget....................................21
(d) Operating Budget..............................................22
Section 9. Cost Sharing.....................................................22
(a) Accounting Plan...............................................22
(b) Usage Statement...............................................24
- vi -
<PAGE>
Page
(c) Expense Statement.............................................24
(d) Capital Expenditure Statement.................................24
(e) Bills.........................................................25
(f) Payment.......................................................25
(g) Disputed Bills................................................25
Section 10. Access..........................................................26
Section 11. Liability.......................................................26
(a) Operators' Sole Responsibility................................26
(b) Operators' Joint Responsibility...............................26
(c) CRC Responsibility - Allocation and Insurance.................27
(d) Process.......................................................28
(e) Indemnification...............................................28
(f) Specified Level Damages.......................................28
(g) Substance Abuse Exceptions....................................30
(h) Transaction Agreement.........................................30
(i) Damages.......................................................30
Section 12. No Partnership..................................................31
Section 13. Arbitration.....................................................31
Section 14. Term............................................................31
Section 15. Force Majeure...................................................32
- vii -
<PAGE>
Page
Section 16. Entire Agreement................................................32
Section 17. Amendment and Waiver............................................32
Section 18. Severability....................................................32
Section 19. Remedies........................................................32
(a) Entitlement to Certain Remedies...............................32
(b) Preclusion of Certain Remedies................................33
Section 20. Interpretation..................................................33
Section 21. Headings........................................................33
Section 22. Parties.........................................................33
Section 23. Assignment......................................................33
(a) Limitation....................................................33
(b) Successor.....................................................33
Section 24. Notices.........................................................34
Section 25. Governing Law...................................................34
EXHIBIT A - Operating Protocols
- viii -
<PAGE>
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
SOUTH JERSEY/PHILADELPHIA
This SHARED ASSETS AREA OPERATING AGREEMENT ("Agreement") dated
as of June 1, 1999, is by and among Consolidated Rail Corporation ("CRC"), CSX
Transportation, Inc. ("CSXT") and Norfolk Southern Railway Company ("NSR").
W I T N E S S E T H:
WHEREAS, all capitalized terms in this Agreement have the
respective meanings set forth in Section 1; and
WHEREAS, CSX owns all of the common stock of and controls CSXT,
NSC owns all of the common stock of and controls NSR, and CSX and NSC jointly
control CRC; and
WHEREAS, CSXT, NSR and CRC desire that the Shared Assets shall be
owned, operated and maintained by CRC and used by or for the exclusive benefit
of CSXT and NSR, and that CSXT and NSR shall each have full and equal rights to
use the Shared Assets to provide competitive railway freight transportation
services to, from and between all places within the Shared Assets Area.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, CRC, CSXT and NSR hereby agree
as follows:
Section 1.....Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "AAR" means the Association of American Railroads.
(b) "Accounting Plan" means the plan of accounting adopted
pursuant to Section 9(a).
(c) "Action" means any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any
Governmental Entity.
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(d) "Adjacent Improvement" means a capital improvement, such as a
spur, which provides access to customers and local industries and which (i) is
on property which is not part of the Shared Assets and (ii) will be directly
(without intermediate connection to another railroad) attached to trackage
included within the Shared Assets.
(e) "Bill" means a bill delivered by CRC to an Operator pursuant
to Section 9(e).
(f) "Billing Month" means the calendar month for which
information is shown on a Usage Statement.
(g) "Board of Managers" means any Board of Managers which may be
appointed by the CRC Board pursuant to Section 2(a)(ii).
(h) "Budgeted Capital Expenditures" means capital expenditures
included on a Capital Expenditure Budget which has been approved by the CRC
Board.
(i) "Capital Expenditure Budget" means a written budget
specifying proposed capital expenditures to be made by CRC with respect to
Shared Assets for the periods of time specified in such budget, and the proposed
sources of the capital required to make such expenditures.
(j) "Capital Expenditure Statement" means a statement delivered
by CRC pursuant to Section 9(d).
(k) "CRC Administrative Office" means the administrative office
of CRC located at Philadelphia, Pennsylvania, or at such other place designated
by CRC in a notice it delivers to CSXT and NSR.
(l) "CRC Board" means the Board of Directors of CRC.
(m) "CRC Train" means a train operated by CRC and performing
services pursuant to Sections 3(c) or (d).
(n) "CRC Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the total number of loaded and empty
Railcars in the account of such Operator in CRC Trains, by (ii) the total number
of loaded and empty Railcars in the accounts of both Operators in CRC Trains,
during such time period in such Zone.
(o) "CSX" means CSX Corporation.
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(p) "CSXT Operating Agreement" means the agreement, dated June 1,
1999, between CSXT and NYC providing for the use, operation and maintenance by
CSXT of certain assets owned or leased by NYC.
(q) "Damage(s)" means all assessments, fines, losses, damages,
liabilities, and costs and expenses related thereto, including, without
limitation, interest, penalties and attorneys' and consultants' fees and also
expressly including, without limitation, all liabilities arising after the
effective date hereof under the Federal Employers Liability Act, as amended, and
environmental laws.
(r) "Dispute Letter" means a letter delivered by an Operator
pursuant to Section 9(g)(i).
(s) "Excluded Taxes" means: (A) all Taxes based, in whole or in
part, on net income or gross income (including, without limitation, any minimum
tax) of CRC or which are in substitution for, or relieve CRC from, any Tax based
upon or measured by CRC's net income or gross income, together with any
interest, penalties, additions to tax or additional amounts that may become
payable in respect thereof; (B) business and occupation taxes, and gross
receipts taxes (unless in the nature of a sales tax) of CRC and Taxes based upon
the equity interests of CRC; and (C) interest, fines and penalties to the extent
due to the acts or omissions of CRC in connection with such Excluded Taxes.
(t) "Expense Statement" means a statement delivered by CRC
pursuant to Section 9(c).
(u) "GAAP" at any time means generally accepted accounting
principles in effect at such
time.
(v) "General Manager" means the chief executive officer of CRC.
(w) "Governmental Entity" means any federal, state, local or
foreign court, administrative agency or commission or other governmental or
regulatory authority or commission or any arbitration tribunal.
(x) "Interest Rental" means an amount representing a fair
periodic return on the Shared Asset Value as of the most recent preceding
Valuation Date as determined by such appraiser as CSXT and NSR may select. The
Interest Rental for the first six years of this Agreement shall be as follows:
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June 1, 1999 through May 31, 2000 -- $18 million June 1, 2000
through May 31, 2001 -- $18 million June 1, 2001 through May 31,
2002 -- $20 million June 1, 2002 through May 31, 2003 -- $22
million June 1, 2003 through May 31, 2004 -- $25 million June 1,
2004 through May 31, 2005 -- $27 million
(y) "Jointly-Operated Facility" means a facility or yard which is
operated by or for a rail carrier and one or more other rail carriers.
(z) "Lesser Insured Operator" means the Operator which has the
lesser (as between the Operators) amount of available insurance benefits as
specified in Section 11(f)(i)(A.1)(2).
(aa) "Letter Agreement" means the letter agreement dated May 1,
1999 between NSC and CSX relating to the settlement of certain matters.
(bb) "Liabilities" means any and all debts, liabilities and
obligations of any kind whatsoever, whether or not accrued, contingent or
reflected on a balance sheet, known or unknown, absolute, determined,
determinable or otherwise, including, without limitation, those arising under
any law, rule, regulation, action, order or consent decree of any Governmental
Entity or any judgment in any Action of any kind or award of any arbitrator of
any kind and those arising under any contract.
(cc) "Nonseverable Improvement" means a capital improvement which
is integral to the operation of the Shared Assets and is not readily removable.
(dd) "NSC" means Norfolk Southern Corporation.
(ee) "NSR Operating Agreement" means the agreement, dated June 1,
1999, between NSR and PRR providing for the use, operation and maintenance by
NSR of certain assets owned or leased by PRR.
(ff) "NYC" means New York Central Lines LLC, a Delaware limited
liability company.
(gg) "Operating Budget" means a written budget specifying
estimated operating revenues and expenses and working capital requirements of
CRC with respect to the Shared Assets for the periods of time specified in such
budget.
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<PAGE>
(hh) "Operating Plan" means the plan for road train and local
train schedules and classifications and related operating protocols for the
Shared Assets Area as may be agreed to, and modified from time to time, by CRC,
CSXT and NSR.
(ii) "Operator" means either CSXT or NSR.
(jj) "Operator Consequential Damages" means consequential,
indirect, incidental or other similar damage, injury or loss to an Operator.
(kk) "Operator's Expense Percentage" means for an Operator the
percentage obtained by multiplying 100 by the quotient obtained by dividing (i)
the total Reimbursable Expenses (except for Interest Rental, Taxes, insurance
costs and any other CRC expenses not apportioned between the Operators on a
usage basis) payable by such Operator for a particular period, by (ii) the total
Reimbursable Expenses (except for Interest Rental, Taxes, insurance costs and
any other CRC expenses not apportioned between the Operators on a usage basis)
payable by both Operators for such period.
(ll) "Operator's Facility" means a present, expanded or new
facility or yard which is owned or controlled exclusively by an Operator.
(mm) "Operator Train" means a train operated by an Operator and
performing services in accordance with Sections 3(a) and 3(c).
(nn) "Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company or other legal entity or organization.
(oo) "Program Maintenance" means scheduled renewal of track,
signals, structures and other fixed facilities performed by system or production
gangs assembled to accomplish a specific task or tasks.
(pp) "Program Maintenance Proposal" means a written proposal
prepared by CRC, CSXT or NSR which describes specific Program Maintenance which
the preparer of such proposal believes is necessary or desirable to maintain the
Shared Assets in a safe operating condition to permit or facilitate (i) the
performance by CRC of its services pursuant to this Agreement, or (ii) the use
of Shared Assets by the Operators, and which specifies a budget for such Program
Maintenance.
(qq) "PRR" means Pennsylvania Lines LLC, a Delaware limited
liability company.
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<PAGE>
(rr) "Railcar" means, except as otherwise provided in the
Accounting Plan, each railroad freight car, locomotive, caboose or other
equipment (including RoadRailer(R) or comparable bimodal freight hauling
equipment in the account of either Operator) furnished in substitution of
railroad equipment, loaded or empty, which an Operator originates, terminates,
switches or moves on or overhead to any Shared Assets, except that (i) a single
standard flat car not exceeding 96 feet in length (excluding articulated flat
cars) shall count as a single Railcar, (ii) freight rail cars consisting of
articulated units bearing AAR Car Type Codes "Q" and "S" shall count as multiple
Railcars based on the second (numeric) digit of the Car Type Code for such
articulated units (by way of example, a car consisting of AAR Car Type Code
"S566" would be counted as five Railcars) (or corresponding car type codes and
digits if the AAR Car Type Codes should be modified at any time during the term
of this Agreement), and (iii) a single unit of RoadRailer(R) equipment (or
comparable bimodal freight hauling equipment in the account of either Operator)
shall count as one-half (1/2) of a Railcar.
(ss) "Reimbursable Expenses" means the expenses shown on an
Expense Statement, minus the revenues, if any, shown on such Expense Statement.
(tt) "Renewal Term" means the term of extension of this Agreement
under Section 14.
(uu) "RoadRailer(R)" means bimodal freight hauling equipment
manufactured by or under license from "RoadRailer(R)", a division of Wabash
National Corporation, and capable of movement over the highway when pulled by a
tractor and on the rails using locomotive power.
(vv) "Routine Maintenance" means day-to-day repairs to track,
signals, structures and other fixed facilities that are not part of Program
Maintenance.
(ww) "Severable Improvement" means a capital improvement which
is not a Nonseverable Improvement.
(xx) "Shared Asset Value" means at any date the value of the
Shared Assets, except leases and other contract rights granted by either
Operator to CRC, as of the most recent preceding Valuation Date as determined by
such appraiser as CSXT and NSR may select.
(yy) "Shared Assets" means all tracks, lands, easements, rights
of way, structures, facilities, appurtenances and rights related thereto, which
CRC owns, leases or otherwise has the right to operate over (including those
segments over which CRC or an Operator possesses operating rights pursuant to
Section 3(c)), and which are used for railway purposes in the Shared Assets
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<PAGE>
Area, including the properties, rights, equipment, inventory and supplies,
whether owned or leased, described or referred to in Item 3A of Schedule 1
(including Attachments I and II) of the Transaction Agreement, but excluding
Operator's Facilities.
(zz) "Shared Assets Area" means the geographical area comprising
the Shared Assets and Operator Facilities and Jointly-Operated Facilities
directly (without intermediate connection to another railroad) attached to
trackage included within the Shared Assets, which is designated as the "South
Jersey/Philadelphia" Shared Assets Area.
(aaa) "STB" means the Surface Transportation Board or, if there
shall be no Surface Transportation Board, any federal agency which is charged
with the function of approving combinations by rail carriers or persons
controlling them, or of other arrangements between rail carriers, and granting
exemptions from other laws with respect thereto or regulating other specific
functions with respect to the context in which such term is employed or any
successor entity thereof.
(bbb) "Switching and Yard Services" means the service of
classifying and assembling trains for the account of an Operator in
Jointly-Operated Facilities; movement of loaded or empty Railcars between yards
and local industries; and switching trains and Railcars at yards, terminals and
local industries.
(ccc) "Tax" or "Taxes" means taxes of any kind, levies or other
similar assessments, customs, duties, imposts, charges or fees, including,
without limitation, income taxes, gross receipts, ad valorem, excise, real or
personal property, sales, use, payroll, withholding, unemployment, transfer and
gains taxes or other governmental taxes imposed by or payable to the United
States, or any state, local or foreign government or subdivision thereof, and in
each instance such term shall include any interest, penalties or additions to
tax attributable to such Tax or Taxes.
(ddd) "Temporary Services" means services provided by CSXT or NSR
employees in the operation, maintenance or repair of any Shared Asset on an
emergency basis with the prior approval of the General Manager or senior CRC
employee who is directly responsible for the operation or maintenance of such
Shared Asset.
(eee) "Tier One Damages" means those Damages defined as Tier One
Damages in Section 11(f)(i)(A.1).
(fff) "Tier Two Damages" means those Damages defined as Tier Two
Damages in Section 11(f)(i)(B.1).
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<PAGE>
(ggg) "Total Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the sum of the total number of loaded and
empty Railcars in the account of such Operator in CRC Trains and the total
number of loaded and empty Railcars in the account of such Operator in Operator
Trains, by (ii) the sum of the total number of loaded and empty Railcars in the
accounts of both Operators in CRC Trains and the total number of loaded and
empty Railcars in the accounts of both Operators in Operator Trains, during such
period in such Zone.
(hhh) "Transaction Agreement" means the Transaction Agreement
dated as of June 10, 1997, among CSX, CSXT, NSC, NSR, Conrail Inc., CRC and CRR
Holdings LLC.
(iii) "Usage Statement" means a statement delivered by CRC
pursuant to Section 9(b).
(jjj) "USOA" means the uniform system of accounts prescribed for
class I railroads by the STB or any successor federal agency that shall succeed
to the functions of the STB in prescribing uniform systems of accounts for rail
carriers; provided, that if there shall be no STB and no such federal agency,
USOA shall mean such system of accounts as is generally maintained by rail
carriers consistent with GAAP as applied in the rail industry.
(kkk) "Valuation Date" means the date of this Agreement and
thereafter the sixth (6th), twelfth (12th), eighteenth (18th) and twenty-fourth
(24th) anniversaries of the date of this Agreement and the first day of each
Renewal Term.
(lll) "Zone" means a designated geographic section, or designated
facilities, of the Shared Assets Area as established and described in the
Accounting Plan.
Section 2 Management.
(a) CRC Board.
(i) The CRC Board shall manage the Shared Assets.
(ii) The CRC Board may appoint a Board of Managers, a
committee, a CRC officer or other persons to have such duties and
authority with respect to the Shared Assets as may be assigned to them
from time to time by the CRC Board.
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(iii) Any Board of Managers appointed by the CRC Board
shall be comprised of an equal number of individuals (and their
successors) nominated by CSXT and nominated by NSR.
(iv) The CRC Board shall remove from any Board of
Managers (A) at the direction of CSXT, any person who was nominated by
CSXT, and (B) at the direction of NSR, any person who was nominated by
NSR.
(b) General Manager.
(i) The General Manager shall not at any time have been
an employee of CSXT or NSR or any of their affiliates unless otherwise
agreed to by both Operators, and shall be appointed by the CRC Board.
(ii) The General Manager shall manage and supervise the
ownership, operation, maintenance and use of the Shared Assets in
accordance with directives and policies of the CRC Board and this
Agreement, subject to the authority of the CRC Board, and through such
Shared Assets Area superintendents and other Shared Assets Area
executives as are appointed by the General Manager with the approval of
the CRC Board. The General Manager shall report to the CRC Board. The
General Manager shall perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR.
(iii) The General Manager may be removed from office
prior to the expiration of his or her term at any time by a majority of
the CRC Board for any reason or for no reason. Upon the written request
of CSXT or NSR to the CRC Board, the General Manager shall also be
removed from office prior to the expiration of his or her term for
serious misconduct, which shall mean conduct that would make it
unreasonable to retain the General Manager, including but not limited to
conduct such as: (A) violation of applicable alcohol or drug use
policies, (B) fraud, (C) embezzlement or other act of dishonesty against
CRC, CSXT or NSR or any of their customers or suppliers, (D) activities
willfully undertaken by the General Manager which reflect adversely upon
the reputation of CRC, CSXT or NSR, (E) refusal to perform or
substantial neglect of the responsibilities assigned to the General
Manager, (F) failure to perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR after 45
days' written notice from an Operator describing such failure, (G) any
violation of any law or rule or regulation of any Governmental Entity
which results in serious adverse consequences to CRC, CSXT or NSR, or
(H) any material violation of any directive or policy of the CRC Board
or any statutory or common law duty of loyalty to CRC. If a majority of
the CRC Board in response to such a request of CSXT or NSR fails to
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<PAGE>
direct the removal of the General Manager, the dispute may be submitted
by either Operator for resolution by binding arbitration pursuant to
Section 13, provided, however, that in any such arbitration to resolve a
dispute under this Section 2(b)(iii), the hearing shall commence no
later than 30 days following the appointment of the arbitrator and the
award shall be rendered no later than 30 days following the completion
of the hearing.
(c) Employees. The General Manager and all persons who operate
and maintain the Shared Assets shall be employees of CRC, except for CSXT or NSR
employees who provide Temporary Services and employees of Operators or
independent contractors which provide services pursuant to contracts or
arrangements in accordance with Section 2(f).
(d) CRC Responsibilities. CRC shall be responsible for safely and
efficiently operating, controlling and managing the use of the Shared Assets,
impartially as between CSXT and NSR in accordance with directives and policies
of the CRC Board, and with responsible business practices which are consistent
with those used by CSXT and NSR in the operation of their businesses, and are
designed to achieve the lowest cost of the safe and efficient operation, use and
maintenance of the Shared Assets.
(e) Impartiality. CRC shall perform all of its obligations
pursuant to this Agreement on an impartial and non-discriminatory basis as
between CSXT and NSR, giving no preference to either of them in providing
Switching and Yard Services, in the control of train dispatching over the Shared
Assets, or in any other way whatsoever.
(f) Independent Contractors. CRC may, at least to the extent it
may do so immediately prior to the date of this Agreement, procure the use of
equipment or facilities owned by independent contractors, or services provided
by independent contractors (using their own employees), with respect to the
operation, maintenance and use of Shared Assets, including, without limitation,
accounting, computer and other administrative services, and the furnishing of
equipment and mechanical services. For purposes of this Section 2(f),
independent contractors may include CSXT or NSR.
Section 3 Operations.
(a) Operator's Rights. CRC hereby grants to each Operator full
operating rights to operate its own trains (staffed by a road crew) and
equipment, with its own crews and equipment and at its own expense, over any and
all tracks included in the Shared Assets, and to use all of the Shared Assets in
connection with the operation of such trains or equipment, for the following
purposes:
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<PAGE>
(i) Movement by such Operator of trains (staffed by a
road crew) through the Shared Assets Area between two geographical
locations outside the Shared Assets Area;
(ii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and an Operator's Facility or a Jointly-Operated Facility which is
within the Shared Assets Area;
(iii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and local industries which are within the Shared Assets Area;
(iv) Movement by such Operator of trains (staffed by a
road crew) between Operator's Facilities or Jointly-Operated Facilities
which are within the Shared Assets Area and local industries which are
within the Shared Assets Area;
(v) Movement, handling, pick-up, set off, switching,
transfer and interchange of Railcars, blocks of Railcars or trains
(staffed by a road crew) to, from or at local industries, Operator's
Facilities or Jointly-Operated Facilities, in connection with movements
described in Sections 3(a)(i) through (iv), to the extent provided for
in the Operating Plan agreed to and modified by the parties from time to
time; and
(vi) such other purposes as may be agreed upon by CRC,
CSXT and NSR.
(b) Use. The crews of each train operated by an Operator on
Shared Assets shall be qualified under and shall comply with applicable laws and
regulations as well as the safety and operating rules of CRC.
(c) Grant of Rights. Subject to reasonable compensation and other
terms established in the Accounting Plan, and in each case for the purpose of
Switching and Yard Services performed by CRC pursuant to Section 3(d) and
movement of Operator Trains pursuant to Section 3(a):
(i) CSXT hereby grants to CRC and NSR overhead
operating rights to operate CRC trains and NSR trains, respectively,
with their own crews, over the following CSXT rail line segments:
(A) the current CRC line between CP Phil and CP
Field and between CP Arsenal and CP Gray; and
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(B) such other CSXT line segments access to and use
of which by CRC and NSR are necessary to effectuate the train
operations and services contemplated by this Agreement.
(ii) CSXT hereby grants to CRC and NSR full operating
rights to operate CRC trains and NSR trains, respectively, with their
own crews, over the following CSXT rail line segments:
(A) the current CRC Trenton line between Park Jct.
and CP Newtown (at the approximate boundary of the Shared Assets
Area);
(B) between CP River and point PH-22I (which point
is shown in Exhibit 1 to the Letter Agreement) located in
Greenwich Yard;
(C) the Eastwick Connection constructed by CSXT on
the current CRC right-of-way between Eastwick and CP Field; and
(D) tracks over the northern part of Greenwich
Yard, as shown in beige on Exhibit 1 to the Letter Agreement, for
the purpose of serving on an unimpeded basis the Ameriport
intermodal facility and local industry north of Greenwich Yard.
The coloration of such beige area is representative only, because
the trackage rights are over such clear tracks (whether within or
parallel to such beige areas) as designated from time to time by
the Greenwich Yard yardmaster. CRC and NSR shall have an
unimpeded double stack cleared route ("Cleared Route") for the
purpose stated above. To the extent NYC or CSXT does any
construction currently or in the future that may cause a track
realignment or relocation, it will assure that NSR and CRC will
continue to have the Cleared Route.
(iii) CSXT hereby grants to CRC full operating rights to
operate CRC trains with their own crews on an unimpeded basis over the
CSXT rail line between points PH-22D and PH-22E as shown on Exhibit 1 to
the Letter Agreement.
(iv) NSR hereby grants to CRC and CSXT overhead
operating rights to operate CRC trains and CSXT trains, with their own
crews, over such NSR line segments access to and use of which by CRC and
CSXT are necessary to effectuate the train operations and services
contemplated by this Agreement.
(v) NSR hereby grants to CRC and CSXT full operating
rights to operate CRC trains and CSXT trains, respectively, with their
own crews, over the current Amtrak Lancaster line between Zoo and 52nd
Street.
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<PAGE>
(vi) NSR hereby grants to CRC and CSXT the right to use
West Falls Yard for the purpose of basing local trains, classifying and
assembling trains and switching Railcars, but not for the purpose of
serving local industries located at such yard.
(vii) CRC hereby grants to CSXT unimpeded trackage rights
to operate CSXT trains with their own crews over CRC's Track 354 from
point PH-22I to the connection at point PH-22H with NYC's Track 234, as
shown on Exhibit 1 to the Letter Agreement.
When required by the CSXT Operating Agreement and the NSR Operating Agreement,
CSXT and NSR have obtained the consent of NYC and PRR, respectively, for the
grant of rights referred to in this Section 3(c). Notwithstanding any other
provision of this Agreement, each rail line segment identified in this Section
3(c) shall be dispatched, maintained, operated and controlled by the Operator
which granted the rights with respect to such segment, provided that such
dispatching, maintenance, operation and control shall be performed on an
impartial and non-discriminatory basis as between the Operators. Trains operated
by an Operator pursuant to operating rights granted under this Section 3(c)
shall be governed by and subject to the Operating Plan.
(d) Switching and Yard Services.
(i) At the request of and as agent for each Operator,
CRC shall perform Switching and Yard Services required by such Operator
within the Shared Assets Area, including without limitation any such
services which such Operator may be responsible for performing or having
performed for a shipper or other Person.
(ii) Except as otherwise provided in Section 3(a), and
other than within an Operator's Facility, neither Operator shall with
its own equipment or with its own crews perform any Switching and Yard
Service within the Shared Assets Area for itself or for any other
Person.
(e) Operating Protocols. From time to time, NSR, CSXT and CRC may
mutually establish Shared Assets Area Operating Plans, General Dispatching
Guidelines, Car Movement Guidelines, Switching/Blocking Requirements and other
operating protocols and rules concerning operations within the Shared Assets
Area, for the purpose of assuring timely train operations, fluid movement of all
railcars, equal and impartial handling of Operators' trains and railcars,
minimization in the number of empty cars in the Shared Assets Area, and overall
operating efficiency in the Shared Assets Area. The current Operating Protocols
have been agreed upon by NSR, CSXT and CRC and are set forth as Exhibit A to
this Agreement. The Operating Protocols may be modified only upon mutual
agreement of all parties.
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(f) Freight Traffic To Remain in Account of Each Operator.
Switching and Yard Services and other services performed by CRC for either
Operator under this Agreement shall be performed as agent for, and for the
account of, such Operator. All freight traffic and Railcars handled within the
Shared Assets Area, including traffic and Railcars handled by CSXT or NSR
pursuant to Sections 3(a) and 3(c), and traffic and Railcars handled by CRC
pursuant to Sections 3(c) and 3(d), shall at all times remain in the waybill,
car hire and revenue accounts of either CSXT or NSR.
(g) Rates, Routes and Divisions. Each Operator shall have
exclusive and independent authority to establish all rates, charges, service
terms, routes and divisions, and to collect all freight revenues, relating to
freight traffic transported for its account to, from and within the Shared
Assets Area (except those Shared Assets Area line segments over which such
Operator possesses only overhead operating rights pursuant to Section 3(c)). CRC
shall not participate or appear in any rates, routes or divisions relating to
any freight traffic whatsoever to, from and within the Shared Assets Area, and
shall not be entitled to or responsible for any freight charges relating to such
freight traffic. CRC shall not quote or establish any rate or service terms
applicable to freight transportation services to, from and within the Shared
Assets Area, enter into transportation contracts with any Person (other than an
Operator) for freight transportation services to, from and within the Shared
Assets Area, or undertake to perform any for-hire transportation services
directly, in its own name or for its own account for any Person (other than an
Operator). The transfer or exchange of freight traffic between CSXT and CRC, and
between NSR and CRC, within the Shared Assets Area shall not constitute an
interchange of freight traffic or freight rail cars for purposes of determining
rates, routes, divisions or interline settlements relating to any such freight
traffic.
(h) Shipper Bills. Neither Operator shall inform the other or CRC
of any rates or charges to shippers to which such Operator provides freight
transportation services in the Shared Assets Area, and no copies of any shipper
bill of lading or waybill shall be given by such Operator to the other or to CRC
except to the extent that such documents are exchanged between rail carriers in
the usual course of interline shipments and documenting.
(i) Service Responsibility. Each Operator shall at all times be
solely responsible for obtaining, supplying and routing Railcars other than
locomotives, for all Railcar ownership costs (including per-diem charges and
mileage allowances) and for providing service to its shippers within the Shared
Assets Area pursuant to its transportation contracts or other prices with its
shippers, including interline accounting, and all car hire and demurrage or
detention charges associated with Railcars in its account within the Shared
Assets Area.
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(j) Dispatching. CRC shall, from local locations or a location
agreed upon by CSXT and NSR, control the dispatching, scheduling and movement
of, and Switching and Yard Services for, all trains (including Operator Trains
and CRC Trains) over the Shared Assets (other than Operator's Facilities, unless
requested to do so by the Operator thereof) without any discrimination at any
time in favor of or against either Operator, but in accordance with written
policies and priorities for categories of freight, type of Railcar, size of
train and train destinations established from time to time by the General
Manager and approved by the CRC Board to achieve the maximum efficiency and
lowest aggregate Shared Asset costs of CRC and the Operators.
(k) Railcar Weighing. All Railcars for the account of an Operator
which originate or terminate on Shared Assets and which require weighing shall
be weighed by and at the expense of such Operator or its customer, and at no
cost to CRC.
(l) Freight Claims. The Operators shall agree among themselves on
the most fair, practical and efficient arrangements for handling and
administering freight loss and damage claims with the intent that (i) each
Operator shall be responsible for losses occurring to lading either in its
possession or in the possession of CRC for the account of such Operator, and
(ii) the Operators shall follow relevant AAR rules and formulas in providing for
the allocation of losses which are either of undetermined origin or in Railcars
handled in interline service by or for the account of both Operators.
(m) Freight Car Repairs. If any Railcars are bad ordered while on
the Shared Assets and must be set out from a CRC Train or Operator Train, CRC
shall promptly return such Railcars to the Operator in whose account such
Railcars reside in accordance with such Operator's instructions. CRC shall
furnish, at such Operator's expense, required labor and material to perform, and
shall perform, light repairs on such bad ordered Railcars as necessary to make
such Railcars legal and safe for movement. CRC shall bill such Operator for the
costs of such light repairs in accordance with the Field and Office Manuals of
the AAR Interchange Rules in effect at the time such repairs are performed. CRC
shall bill directly to and collect from the applicable Operator charges for
repair items that, under the AAR Interchange Rules, are the responsibility of
the Railcar owner and/or the handling line carriers. Each Operator may rebill
charges for repair items that are the responsibility of the Railcar owner and/or
the handling line carriers. If any such bad ordered Railcar cannot be made legal
and safe for movement by the performance of light repairs, CRC shall, at such
Operator's expense, arrange for appropriate removal of the affected Railcar in
accordance with such Operator's instructions.
(n) Train Services. Actual costs incurred by CRC to provide
special services (other than services otherwise provided for in this Agreement)
at the request of an Operator with respect to trains, locomotives and Railcars
for the account of such Operator, shall be paid by such Operator to CRC,
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provided that the costs and terms of similar special services rendered to each
Operator shall be without discrimination between Operators as to cost and terms,
giving due allowance to any differences in the costs of providing such services.
(o) Wrecking Service. Wrecking service or wrecking train service
required in connection with services contemplated by this Agreement shall be
provided by CRC (or its designee) as promptly as possible.
(p) Admission of Third Parties. Notwithstanding any other
provision in this Agreement, no party may permit any Person (other than a party
hereto) to have access to, operate over or use any Shared Asset without the
prior approval of all parties, which approval may be given or refused in the
sole discretion of each party.
Section 4 Equipment and Properties.
(a) Procurement. CRC shall procure, operate and maintain all
equipment, real property rights and improvements thereon which are reasonably
required for (i) CRC to operate the Shared Assets, and (ii) the Operators to
move trains over the Shared Assets, in each case in accordance with this
Agreement.
(b) Contribution of Locomotives by Operators. Upon reasonable
request by the General Manager, the Operators shall furnish to CRC, through
full-service lease or other mutually satisfactory arrangements, locomotives
reasonably required by CRC for the performance of its obligations under this
Agreement. The respective obligations of each Operator to furnish such
locomotives shall be based, insofar as reasonably practicable, upon the
Operator's CRC Train Usage Percentage during the calendar month preceding such
request for the Shared Assets Area or Zone in which such locomotives are needed
by CRC. It is the parties' intention that (i) the arrangements pursuant to which
such locomotives are furnished by either Operator to CRC shall provide that
heavy maintenance, repair and overhaul shall be the responsibility of such
Operator, (ii) locomotives furnished by either Operator to CRC may, in order to
permit maintenance, repair and overhaul of such locomotive units, be exchanged
for other locomotive units furnished by such Operator, and (iii) the respective
obligations of each Operator to furnish such locomotives upon request by the
General Manager shall be adjusted on at least a monthly or more frequent basis.
(c) Locomotive Service and Repairs. At the request of an
Operator, CRC shall furnish required labor and material to perform, and shall
perform, fueling and servicing of any Operator's locomotive, as well as light
repairs on any Operator's locomotive as necessary to make such locomotive legal
and safe for movement. CRC shall bill such Operator (or other owner of such
locomotive) for the costs of such fueling, servicing and light repairs in
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accordance with industry practice in effect at the time such fueling, services
or repairs are performed. If any such locomotive cannot be made safe for
movement by the performance of light repairs, CRC shall, at the expense of such
Operator (or other owner of such locomotive), arrange for appropriate removal of
such locomotive in accordance with such Operator's instructions.
Section 5 Maintenance.
(a) Routine Maintenance.
(i) CRC shall be responsible for Routine Maintenance
when necessary or desirable to maintain the Shared Assets in a safe
operating condition, and to permit and facilitate (A) the performance by
CRC of its obligations pursuant to this Agreement, and (B) the use of
Shared Assets by the Operators in accordance with this Agreement.
(ii) CSXT or NSR, directly or through their respective
affiliates, may perform the work which CRC performed prior to the date
of this Agreement when (A) CRC does not possess the skills needed for
such work, (B) CRC lacks the necessary employees to do such work in a
timely fashion, or (C) CRC does not possess the equipment needed to do
such work. CRC and the party performing the work shall agree to a
reasonable fee for such work prior to performance. CRC, CSXT and NSR may
agree to have additional work performed either by CSXT, NSR or their
affiliates.
(b) CRC Program Maintenance.
(i) The General Manager shall prepare and submit to the
CRC Board a Program Maintenance plan concurrently with the submission of
an Operating Budget and the Capital Expenditure Budget to the CRC Board.
(ii) Any of CRC, CSXT or NSR may at any time deliver a
Program Maintenance Proposal to the other two of them and to the General
Manager and each member of the CRC Board.
(iii) The CRC Board shall either (A) approve any or all
of such Program Maintenance Proposals and plan with such changes as it
deems appropriate, include the costs thereof in a pending or amended
Capital Expenditure Budget, and direct the General Manager to cause the
maintenance described in approved Program Maintenance Proposals or plan
to be performed in accordance with Sections 5(b)(iv) and (v), or (B)
disapprove any or all of such Program Maintenance Proposals or plan.
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(iv) Program Maintenance shall be the responsibility of
CSXT and NSR pursuant to contracts or arrangements with CRC, and CRC
shall not perform Program Maintenance, except for Program Maintenance
which can be provided by Persons other than CSXT or NSR at a lower cost
to CRC than the CSXT or NSR cost thereof.
(v) CRC shall select, to perform each Program
Maintenance project or program, the Operator which CRC reasonably
determines will perform such project or program at the least cost to CRC
consistent with safe and efficient operations, and taking into account
scheduling considerations, based on written proposals submitted by each
Operator.
(c) Maintenance Standards. Unless otherwise authorized by the CRC
Board, the General Manager shall prepare and submit to the CRC Board proposals
(including the Program Maintenance plan submitted pursuant to Section 5(b)) for
the performance of such Routine Maintenance and Program Maintenance as is
reasonably necessary to keep and maintain the Shared Assets substantially in
their condition as of the date of this Agreement. If the CRC Board fails either
to approve or disapprove by majority vote any such proposal within 45 days after
it was submitted to the CRC Board, the disagreement over the propriety or need
for any of the Routine Maintenance or Program Maintenance included in such
proposal may be submitted by either Operator for resolution by binding
arbitration pursuant to Section 13.
Section 6 Capital Improvements. Except as provided in Section
5, all capital improvements involving Shared Assets shall be governed by the
following provisions:
(a) Proposed Projects. Either Operator, CRC or the General
Manager may propose to the CRC Board from time to time capital improvement
projects. Each such project shall be reviewed by the CRC Board, which may
approve or disapprove by majority vote, or fail to approve, such projects.
(b) CRC Board Approved Projects. Each Operator shall be
responsible for an equal share of the initial budgeted funding of each capital
improvement project which has been approved by the CRC Board and is included in
an approved Capital Expenditure Budget, except as provided in Section 6(c). A
final accounting shall be made to adjust the initial budgeted funding to the
actual project cost as specified in the Accounting Plan.
(c) Nonseverable Improvement Projects.
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(i) At the written request of an Operator delivered to
the other, each Operator shall, within 45 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
proposal with respect to a Nonseverable Improvement project which was
neither approved nor disapproved by majority vote by the CRC Board
within 45 days after such project was proposed to the CRC Board (A)
describing any changes which such Operator proposes be made to such
project and specifying a schedule, budget and allocations between the
Operators of initial capital costs of such Nonseverable Improvement, or
(B) proposing that it not be made.
(ii) The arbitrator receiving the proposals referred to
in Section 6(c)(i) (A) shall consider (1) the degree, if any, to which
the construction, operation and use of such Nonseverable Improvement
would impair or interfere with the use of Shared Assets by CRC or either
Operator, or conflict with any pending capital improvements included in
an approved Capital Expenditure Budget, and (2) the budget and
allocations between the Operators of initial capital costs of such
Nonseverable Improvement as proposed by each Operator, and (B) shall
determine within 45 days of such receipt which of such proposals shall
be implemented, or that such Nonseverable Improvement shall not be made,
and the CRC Board shall approve any proposal which such arbitrator
determines shall be implemented.
(d) Severable Improvement Projects.
(i) Each Operator shall have the unilateral right to
construct and exclusively fund any Severable Improvement which was not
approved by the CRC Board.
(ii) Each Severable Improvement funded exclusively by
an Operator shall be used exclusively by that Operator, which shall be
solely responsible for maintaining such Severable Improvement at its own
expense, until such time that the other Operator gives written notice
that it desires also to use such Severable Improvement, stating the
amount which such other Operator is prepared to pay to the Operator
which initially funded such Severable Improvement for the right to use
such Severable Improvement.
(iii) If the Operators are unable to agree on the amount
of such payment within 45 days after the notice referred to in Section
6(d)(ii) was given, then at the written request of an Operator delivered
to the other after 45 days but before 60 days after such notice was
given, each Operator shall, within 15 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
statement setting forth the proposed payment by the second Operator, and
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the arbitrator shall within 45 days of such receipt determine which of
such proposed amounts shall apply, which shall be binding on both
Operators and paid promptly.
(iv) Such Severable Improvement shall become a
Nonseverable Improvement at the time such second Operator pays the
amount so determined and, thereafter, maintenance and other costs
associated with the operation of such improvement shall be apportioned
between the Operators as provided in this Agreement.
(e) Capital Improvements as Shared Assets. Upon completion, all
capital improvements approved by the CRC Board and all Nonseverable Improvements
shall become part of the Shared Assets owned by CRC subject to all provisions of
this Agreement, free and clear of all Operator liens.
(f) Title to Severable Improvements. Each Operator shall retain
title to all Severable Improvements exclusively funded by such Operator. At any
time during the term of this Agreement, an Operator may remove (at its sole
expense) any Severable Improvement which it exclusively funded, provided that
such Operator has repaired (at its sole expense) any damage to a Shared Asset
caused by such removal and has restored the related Shared Assets substantially
to their condition at the time such Severable Improvements were made. In the
event an Operator shall not have removed any Severable Improvement to which the
Operator shall have title prior to the expiration or termination of this
Agreement, title to such Severable Improvement shall vest in CRC, free and clear
of all Operator liens, upon such expiration or termination.
(g) Noninterference. The construction, operation and use of
Severable Improvements by an Operator shall not impair or interfere with the use
of Shared Assets by CRC or the other Operator, nor shall any Severable
Improvement conflict with any pending capital improvements included in an
approved Capital Expenditure Budget.
(h) Switch Connections. CRC shall, upon the written request of
one or both Operators, provide for switch and turnout connections from Shared
Asset tracks to a private sidetrack owned by a shipper or other Person, if such
request:
(i) includes the commitment of the Operator or both
Operators making such request, or
(ii) is accompanied by a written undertaking from such
shipper or other Person,
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in each case satisfactory to CRC, to pay to CRC all costs incurred from time to
time by CRC to provide for such switch and turnout connections within 30 days
after it delivers a bill for such costs to such Operator, Operators, shipper or
other Person.
(i) Adjacent Improvements.
(i) In the event an Operator constructs, acquires or
funds the cost of an Adjacent Improvement (whether or not such Adjacent
Improvement is ultimately owned by such Operator), the other Operator
shall be entitled to share usage of such Adjacent Improvement by giving
written notice stating the amount which such other Operator is prepared
to pay to the first Operator for such right. If the Operators are unable
to agree on the amount of such payment within 45 days after such notice
was given, then at the written request of an Operator delivered to the
other after 45 days but before 60 days after such notice was given, the
matter shall be submitted for resolution by binding arbitration pursuant
to Section 13 and the provisions of Section 6(d)(iii) shall apply to
determine the amount of such payment.
(ii) After the second Operator pays the amount so
determined, if the first Operator owns or has a property interest in the
Adjacent Improvement, the provisions of this Section 6 shall be applied
as if such improvement were a Nonseverable Improvement. If a shipper or
another Person unrelated to the first Operator owns such Adjacent
Improvement, the second Operator shall be entitled to share fully the
rights of the first Operator in connection with such Adjacent
Improvement in consideration of the initial payment.
(j) Operator's Facilities. The foregoing provisions of this
Section 6 shall not apply to any capital improvement (including, but not limited
to, a transloading facility or automotive ramp) within an Operator's Facility.
Section 7 Accounting.
(a) Books of Record and Account. CRC shall keep proper books of
record and account, in which full and correct entries shall be made of all CRC
transactions, costs, expenses and revenues in accordance with GAAP and the USOA,
as modified by the Accounting Plan. All expense and revenue transactions related
to the Shared Assets Area shall be readily identifiable by distinct accounting
codes.
(b) Financial Statements. CRC shall deliver to each Operator (i)
within 30 days after the end of each calendar month, a summary income statement
and a summary balance sheet showing as of the last day of and for such calendar
month, major categories of CRC revenue, expense, assets and liabilities, (ii)
within 30 days after the last day of each CRC fiscal quarter, interim financial
statements as of and for the fiscal quarter ended on such day, similar to
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statements described in Rule 10-01 of Regulation S-X under the Securities
Exchange Act of 1934, as amended, as modified by the Accounting Plan, and (iii)
within 30 days after the last day of each CRC fiscal year, statements of income
and cash flow and a balance sheet as of and for the fiscal year ended on such
day, prepared in accordance with GAAP and the USOA, as modified by the
Accounting Plan.
Section 8 Costs and Budgets.
(a) CRC Costs. CRC shall pay (and, except for Excluded Taxes,
CSXT and NSR shall, pursuant to Section 9, reimburse CRC for) all of the costs
and expenses to maintain its ownership of the Shared Assets and to operate and
maintain the Shared Assets, including but not limited to all Taxes and
assessments, licenses, permits and any other governmental authorizations
required to own, operate and maintain the Shared Assets, the principal of and
interest and premium, if any, on, and all other costs of, its indebtedness and
all other costs of its capital.
(b) Employee Cost Reimbursement. CRC shall reimburse CSXT and NSR
for the wages, pro rata portion of fringe benefits, other direct employment
costs (including additives) and other actual employee-related costs of any CSXT
or NSR employee, respectively, who provides Temporary Services.
(c) Capital Expenditure Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each CRC fiscal year, a Capital Expenditure Budget for such fiscal year,
specifying for such year the schedule of Program Maintenance and Shared
Asset capital improvements to be performed and constructed for the
benefit of both Operators during such fiscal year and the months therein
during which such expenditures are proposed to be made, for approval, or
modification and approval, by the CRC Board.
(ii) The General Manager shall not permit any capital
expenditure to be made by CRC, CSXT or NSR except in accordance with the
Capital Expenditure Budget in effect from time to time, Severable
Improvements exclusively funded by an Operator and emergency capital
expenditures made (A) to preserve, or to mitigate a serious diminution
in, the value and usefulness of a Shared Asset to CRC, CSXT and NSR, or
(B) to prevent or mitigate a serious disruption in the operation and use
of the Shared Assets by or for CRC, CSXT or NSR.
(iii) Any Capital Expenditure Budget may be amended in
writing at any time by the CRC Board.
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(d) Operating Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each fiscal year of CRC, an Operating Budget for such fiscal year
showing the budget amounts of revenues and expenses for each month
during such fiscal year, for approval, or modification and approval, by
the CRC Board.
(ii) The General Manager shall use all reasonable
efforts to prevent CRC expenses with respect to Shared Assets for a
period from exceeding the amounts shown on the Operating Budget for such
period.
(iii) The General Manager shall give prompt written
notice to each member of the CRC Board of any actual or, in the judgment
of the General Manager, probable, material change in the revenues,
expenses or working capital requirements shown on the Operating Budget
for any period.
(iv) Any Operating Budget may be amended in writing at
any time by the CRC Board.
Section 9 Cost Sharing.
(a) Accounting Plan. The parties shall develop and implement a
written plan of accounting containing a detailed description, by category of
cost and location, of the costs associated with the management and operation of
the Shared Assets Area and the method by which such costs shall be fairly and
properly apportioned among the parties. Such plan of accounting may include
separate accounting and sharing of costs for particular Zones, and shall conform
to the following general principles:
(i) Forty two percent (42%) of Interest Rental shall be
apportioned to CSXT and fifty eight percent (58%) of Interest Rental
shall be apportioned to NSR;
(ii) Locomotive ownership, lease, fueling, light repair
and servicing costs incurred by CRC within the Shared Assets Area or
each Zone (except costs incurred by CRC and charged directly to an
Operator pursuant to Section 4(c)) shall be apportioned between the
Operators on the basis of the CRC Train Usage Percentages;
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(iii) Crew compensation and other crew costs incurred by
CRC within the Shared Assets Area or each Zone with respect to CRC
Trains shall be apportioned between the Operators on the basis of the
CRC Train Usage Percentages;
(iv) General and administrative, supervisory and
overhead expenses incurred by CRC within the Shared Assets Area or for
functions related to the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(v) Dispatching and train control costs (including,
without limitation, labor, equipment, materials and maintenance
expenses) incurred by CRC with respect to the Shared Assets Area shall
be apportioned between the Operators on the basis of the CRC Train Usage
Percentages;
(vi) Police and other costs incurred by CRC with respect
to security within the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(vii) Damage paid by CRC pursuant to Section 11(c) shall
be apportioned between the Operators in accordance with Section 11(b);
(viii) All other costs incurred by CRC with respect to the
Shared Assets Area or each Zone (except Taxes and insurance) shall be
apportioned between the Operators on the basis of the Total Train Usage
Percentages;
(ix) Taxes (other than Excluded Taxes) incurred by CRC
with respect to the Shared Assets Area or each Zone shall be apportioned
between the Operators on the basis of the Operator's Expense Percentages
for the period to which such Taxes relate; and
(x) Insurance costs incurred by CRC with respect to
Shared Assets within the Shared Assets Area or each Zone shall be
apportioned between the Operators on the basis of the Operator's Expense
Percentages for the period to which such insurance costs relate;
If the parties are unable to agree on the terms and provisions of the Accounting
Plan, such disagreement may be submitted by either Operator for resolution by
binding arbitration pursuant to Section 13.
(b) Usage Statement. CRC shall deliver to each Operator prior to
the last day of each calendar month, a written statement showing for the prior
Billing Month:
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(i) the total number of loaded and empty Railcars in
the account of each Operator in CRC Trains which performed Switching and
Yard Services or operated directly between customer facilities in each
Zone;
(ii) the total number of loaded and empty Railcars moved
by or for such Operator in Operator Trains which operated overhead or
directly to Jointly-Operated Facilities, Operators' Facilities or
customer facilities in each Zone;
(iii) the calculation of the CRC Train Usage Percentage
and the Total Train Usage Percentage for each Operator for each Zone,
and (A) all Railcars in a train shall be deemed to be on Shared Assets when the
first or last Railcar of such train is on Shared Assets and (B) each time that a
Railcar is removed from or added to a train in the Shared Assets Area shall
constitute a separate movement of such Railcar.
(c) Expense Statement. Concurrently with the delivery of each
Usage Statement to the Operators, CRC shall deliver to the Operators a statement
showing (i) the expenses incurred by CRC to own, operate and maintain the Shared
Assets during the Billing Month, (ii) the revenues, if any, derived by CRC from
the ownership and operation of the Shared Assets during such Billing Month, and
(iii) the Reimbursable Expenses for such Billing Month, in each case computed in
accordance with GAAP and the USOA, as modified by the Accounting Plan.
(d) Capital Expenditure Statement. Concurrently with the delivery
of each Usage Statement to the Operators, CRC shall deliver to the Operators a
statement showing the estimated Budgeted Capital Expenditures for the calendar
month immediately succeeding the calendar month in which such statement is
delivered.
(e) Bills. Concurrently with the delivery to the Operators of a
Usage Statement for a Billing Month, CRC shall deliver to each Operator a bill
(a "Bill") showing for such Billing Month:
(i) one hundred and two percent (102%) of the amount of
each Reimbursable Expense apportioned to such Operator for such Billing
Month under the Accounting Plan;
(ii) one-twelfth of fifty percent (50%) of the annual
amount of Budgeted Capital Expenditures approved by the CRC Board; and
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(iii) one-twelfth of the Interest Rental apportioned to
such Operator.
(f) Payment. Each Operator shall pay to CRC the amount shown on
each Bill as being payable by such Operator, on or before the 30th day after the
date of such Bill regardless of whether or not such Operator disputes the
accuracy of any amount or calculation shown on such Bill.
(g) Disputed Bills.
(i) Any dispute by an Operator of the accuracy of any
amount or calculation shown on any Bill shall be described and specified
in reasonable detail in a Dispute Letter from such Operator to CRC and
the other Operator within two years after the date of such Bill.
(ii) Any amounts or calculations shown on any Bill which
are not disputed in accordance with Section 9(g)(i) shall conclusively
be deemed to be accurate and shall be binding on each Operator and CRC.
(iii) CRC and both Operators shall promptly endeavor to
resolve the disputes described in each Dispute Letter, and if they fail
to agree to a resolution of such disputes within 60 days of the delivery
of such Dispute Letter to CRC, then the firm of independent public
accountants which has been engaged as auditors for CRC shall be engaged
to resolve such disputes in accordance with GAAP and the USOA, as
modified by the Accounting Plan, and the written resolution of such
disputes signed by such accounting firm shall be binding on each
Operator and CRC.
(iv) Any adjustments to Bills which result from the
resolution of Dispute Letter disputes shall be reflected as charges or
credits on the first Bills delivered by CRC to the Operators after such
disputes have been resolved.
(v) The fees in connection with the resolution of any
Dispute Letter disputes of the accounting firm which has been engaged as
auditor for CRC shall be paid fifty percent (50%) by CSXT and fifty
percent (50%) by NSR.
Section 10 Access. CRC shall give to each Operator during
normal CRC Administrative Office business hours, access to inspect and make
copies of any and all books of record and accounts relating to this Agreement,
all of which shall be maintained by CRC at the CRC Administrative Office.
Section 11 Liability. Except as otherwise provided in Section
3(l) (Freight Claims), Section 11(f) (Specified Level Damages) and Section 11(g)
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(Substance Abuse Exceptions), the responsibility between and among CRC, CSXT and
NSR for all Damage arising out of, incidental to or occurring in connection with
this Agreement shall be apportioned without consideration of fault or negligence
of any kind or degree in accordance with the remaining provisions of this
Section 11. The provisions of this Section 11 are intended to inure only to the
benefit of the parties hereto and their corporate successors and affiliates, and
not to create any benefits for any third parties.
(a) Operators' Sole Responsibility. Except as otherwise provided
in Section 11(f) (Specified Level Damages) and Section 11(g) (Substance Abuse
Exceptions), each Operator shall assume and bear all responsibility for Damage
to its own trains, locomotives and equipment, to Railcars and lading in its
possession or being handled for its account and for the death of or injury to
its own employees.
(b) Operators' Joint Responsibility.
(i) Train Usage. Except as otherwise provided in (1)
Section 11(b)(ii) (First Year), (2) Section 11(a) (Operators' Sole
Responsibility), (3) Section 11(c)(i) (CRC Damages Generally), (4)
Section 11(c)(ii)(B) (No Reallocation for Insurance), (5) Section 11(f)
(Specified Level Damages), and (6) Section 11(g) (Substance Abuse
Exceptions), and subject to Section 11(c)(ii)(A) (Net of Insurance), all
Damage shall be apportioned between the Operators in proportion to their
respective Total Train Usage Percentages in the Zone in which the
incident giving rise to such Damage occurred for the 12 calendar month
period immediately preceding the incident giving rise to such Damage.
(ii) First Year. If an incident giving rise to Damage
for which the Operators are jointly responsible under Section 11(b)(i)
(Train Usage) occurs before June 1, 2000, responsibility for such Damage
shall be borne equally by the Operators, with each being liable for
one-half (1/2) of the damages.
(c) CRC Responsibility - Allocation and Insurance.
(i) CRC Damages Generally. Except as otherwise provided
in this Section 11(c), all Damages incurred by CRC, including, without
limitation, those Damages apportioned to CRC under Section 11(f)
(Specified Level Damages) shall be CRC expenses, allocated as provided
in Section 11(b) (Operators' Joint Responsibility), and included in
Expense Statements charged to the Operators.
(ii) (A) Net of Insurance.
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(1) Notwithstanding any other provision in
this Agreement (but subject to Section 11(c)(ii)(B) (No
Reallocation for Insurance)), all Damages (including
without limitation, loss or destruction of, or damage to,
CRC's own property) charged to the Operators, under the
Expense Statements or otherwise, shall be net of any CRC
insurance. It is the intent of the parties (a) for CRC to
look first to any insurance proceeds available to it
before attempting to recover any such Damages from the
Operators and (b) for the Operators' obligation to make
direct payment to CRC not to include any obligation to
make direct payment for any Damages covered by insurance
procured by or on behalf of CRC.
(2) If and to the extent that CRC is an
insured under, or otherwise provided coverage under, an
insurance policy or policies each of which provides
coverage for both CRC and one Operator but not the other
Operator, and regardless of whether two or more of these
policies shall be in existence or have different
deductible-retention amounts and/or limits of recovery,
then the amount of insurance proceeds deemed "available"
under Section 11(c)(ii)(A)(1) to which CRC shall look
before either Operator shall have any obligation for
direct payment shall, as to each Operator, be the maximum
available limit of the insurance providing coverage for
both that Operator and CRC.
(B) No Reallocation for Insurance. When part of the
apportioned Damage will be satisfied from insurance coverage
under this Section 11(c), and part paid directly by the Operator,
the insured portion of the Damage shall be apportioned among or
between CRC and the Operators (and consequently between or among
their insurers) in the same manner and amounts as it would have
been apportioned if the loss were not net of insurance. If any
such allocation results in one party hereto suffering a greater
uninsured loss than the other(s) because of differing deductibles
or self-retentions, that difference in coverage shall not be a
basis for any reapportionment or reallocation of Damage.
(d) Process. Each Operator shall be responsible for the payment,
handling, administration and disposition of all Damage for which it bears
exclusive responsibility under Section 11(a) (Operators' Sole Responsibility),
and both Operators shall have joint responsibility for the payment, handling,
administration and disposition of all Damage for which they are jointly
responsible under Section 11(b) (Operators' Joint Responsibility) and Section
11(c) (CRC Responsibility - Allocation and Insurance). In assigning joint
responsibility to both Operators, it is not the intent of this Agreement that
- 28 -
<PAGE>
the Operators will actually act jointly, but rather that the Operators will
agree between themselves on the most practical and efficient arrangements for
handling, administering, and disposing of Damage for which they bear joint
responsibility, with the objective of eliminating unnecessary duplication of
effort and minimizing overall costs.
(e) Indemnification. Each party to this Agreement covenants and
agrees to (i) fully indemnify and save harmless the other parties to this
Agreement from and against any payments which are the responsibility of such
party under this Agreement, and all expenses, including attorneys' fees and
expenses and other expenses of any court or regulatory proceeding, incurred by
such other parties in defending any claim that they are liable for such
payments, and (ii) defend such other parties against such claims with counsel
selected by such party and reasonably acceptable to such other parties.
(f) Specified Level Damages.
(i) Damages Amount. Section 11(a) (Operators' Sole
Responsibility) and Section 11(b) (Operators' Joint Responsibility)
shall apply directly only when the total amount of all Damages resulting
from a single incident is $25 million or less. Responsibility for
Damages resulting from a single incident for which Damages exceed $25
million shall be allocated as stated in this Section 11(f)(i).
(A.1) Tier One Damages Defined. In this Section
11(f), "Tier One Damages" for any incident occurring during and
between June 1, 1999 and May 31, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
the greater of:
(1) $25 million of Damages; or
(2) the lowest amount of Damages which, when
allocated among all parties, results in an allocation to
either Operator of Damages in an amount equal to all
insurance benefits available to that Operator (called the
"Lesser Insured Operator") which has the lesser (as
between the Operators) amount of insurance benefits
available to it, including, without limitation, insurance
to which CRC looks under Section 11(c) (CRC Responsibility
- Allocation and Insurance). In determining insurance
benefits available to the Lesser Insured Operator, both
property and liability insurance shall be considered but
(I) only to the extent benefits are actually available in
connection with that incident and (II) they shall be
calculated separately (i.e., property insurance benefits
shall not be considered in any determination of available
liability insurance benefits and vice versa).
- 29 -
<PAGE>
In this Section 11(f), "Tier One Damages" for any incident
occurring on or after June 1, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
only the first $25 million of Damages incurred by the parties,
unless otherwise agreed by the parties.
(A.2) Allocation of Tier One Damages. Tier One
Damages shall be allocated among the parties as follows:
(1) Any Damage for which each Operator would
otherwise be solely responsible under Section 11(a)
(Operators' Sole Responsibility) shall be allocated as
provided in Section 11(a);
(2) Any and all CRC Damages other than those
specified in preceding Section 11(f)(i)(A.2)(1)
(including, without limitation, Damage to its trains,
locomotives and equipment, whether owned or leased, to
Railcars and lading in its possession or being handled for
its account, and to the property of any others, as well as
any Damage arising from or in connection with the death of
or injury to any persons, including, without limitation,
its own employees) shall be allocated and paid as provided
in Section 11(c) (CRC Responsibility - Allocation and
Insurance); and
(3) Any and all other Damages shall be
allocated as provided in Section 11(b) (Operators' Joint
Responsibility).
(B.1) Tier Two Damages Defined. In this Section
11(f), "Tier Two Damages" shall include (1) those Damages
allocated to Tier Two under Section 11(g) (Substance Abuse
Exceptions) and (2) all of those Damages in excess of the
aggregate Tier One Damages calculated under Section
11(f)(i)(A.1).
(B.2) Allocation of Tier Two Damages. Tier Two
Damages shall be allocated between or among the parties hereto in
proportion to their respective fault or negligence in causing the
Damage.
(ii) Dispute Resolution. Any dispute between or among
the parties hereto in determining their respective fault or negligence
in causing the Damage or otherwise relating to their respective
responsibilities for Damage arising out of, incidental to or occurring
in connection with any incident shall be submitted for resolution by
binding arbitration pursuant to Section 13 (Arbitration).
- 30 -
<PAGE>
(iii) Amendment of Certain Amounts. The $25 million
amount referred to in this Section 11(f) may be adjusted every five
years following the date of this Agreement with the prior approval of
all parties, which approval may be given or refused in the sole
discretion of each party.
(g) Substance Abuse Exceptions. Each Operator shall assume and
bear all responsibility for Damage to the extent caused by acts or omissions of
any of its employees while under the influence of drugs or alcohol, and Sections
11(b) (Operators' Joint Responsibility) and Section 11(f) (Specified Level
Damages) shall not apply to any such Damage. If, but for the operation of this
Section 11(g), all or any Damages from an incident would otherwise have been
Tier One Damages under Section 11(f) (Specified Level Damages), the portion of
the Damages caused by acts or omissions of any the employee(s) while under the
influence of drugs or alcohol shall be Tier Two Damages, and allocated under
Section 11(f)(i)(B.2) (Allocation of Tier Two Damages), and the remaining
portion of the Damages from that incident shall be included in, and allocated
under, Tier One or Tier Two under the otherwise applicable provisions for
Section 11(f)(i).
(h) Transaction Agreement. Section 2.8 of the Transaction
Agreement shall control any conflict between Sections 11(b) and (c) and said
Section 2.8.
(i) Damages. As used in this Section 11 only, the term
"Damage(s)" shall exclude:
(i) Operator Consequential Damages (which are always
borne by the Operator which sustained them); and
(ii) any claim by any party, in its own right, against
any other party for exemplary or punitive damages, but not for
allocation under this Section 11 of exemplary or punitive damages
claimed against that party by a third person not a party hereto.
With regard to exemplary and punitive Damages the parties acknowledge and agree
that, with regard to the subject of this Agreement, the intent and agreement of
the parties is that no party shall bring or recover any claim for exemplary or
punitive damages, in its own right, against any other party, but that any party
will allocate, in accordance with this Section 11, exemplary or punitive Damages
from any claim against it by a third person not a party hereto.
- 31 -
<PAGE>
Section 12 No Partnership. Nothing in this Agreement shall be
construed to establish a partnership or joint venture between or among CRC, CSXT
or NSR or any of their affiliates or associates.
Section 13 Arbitration. Any dispute, controversy or claim (or
any failure by the parties to agree on a matter as to which this Agreement
expressly or implicitly contemplates subsequent agreement by the parties, except
for matters left to the sole discretion of a party) arising out of or relating
to this Agreement, or the breach, termination or validity hereof, shall be
finally settled through binding arbitration by a sole, disinterested arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall be jointly selected by the parties but, if the
parties do not agree on an arbitrator within 30 days after demand for
arbitration is made by a party, they shall request that the arbitrator be
designated by the American Arbitration Association. The award of the arbitrator
shall be final, binding and conclusive upon the parties. Each party to the
arbitration shall pay the compensation, costs, fees and expenses of its own
witnesses, experts and counsel. The compensation and any costs and expenses of
the arbitrator shall be borne equally by the parties. The arbitrator shall have
the power to require the performance of acts found to be required by this
Agreement, and to require the cessation or nonperformance of acts found to be
prohibited by this Agreement. The arbitrator shall not have the power to award
consequential or punitive damages. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof, which court may award
appropriate relief at law or in equity. All proceedings relating to any such
arbitration, and all testimony, written submissions and award, of the arbitrator
therein, shall be private and confidential as among the parties, and shall not
be disclosed to any other Person, except as required by law and except as
reasonably necessary to prosecute or defend any judicial action to enforce,
vacate or modify such arbitration award.
Section 14 Term. This Agreement shall become effective as of
the date first above written and shall remain in effect until the twenty-fifth
(25th) anniversary of such date, subject to the right of CSXT and NSR to agree
prior to the twenty-third (23rd) anniversary of such date to extend this
Agreement for a renewal period of five (5) years; and if so extended, to agree
prior to the twenty-eighth (28th) anniversary of such date to further extend
this Agreement for an additional renewal period of five (5) years (each such
period, a "Renewal Term").
Section 15 Force Majeure. The obligations, other than payment
obligations, of the parties to this Agreement shall be subject to force majeure
(which shall include strikes, riots, floods, accidents, Acts of God, and other
causes or circumstances beyond the control of the party claiming such force
majeure as an excuse for non-performance), but only as long as, and to the
extent that, such force majeure shall prevent performance of such obligations.
- 32 -
<PAGE>
Section 16. Entire Agreement. This Agreement and the Transaction
Agreement, including the other Ancillary Agreements (as defined in the
Transaction Agreement) constitute the entire agreement and supersede all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except the letter agreement dated
April 8, 1997 between CSX and NSC to the extent such April 8, 1997 letter
agreement covers matters not addressed or amended hereby or in the Transaction
Agreement or the Ancillary Agreements (as defined in the Transaction Agreement);
provided that it is the intent of the parties that this Agreement shall be an
effectuation of such April 8, 1997 letter agreement consistent with its terms,
and that the provisions of this Agreement shall be interpreted to give effect to
such April 8, 1997 letter agreement; and provided further that, in the event of
any inconsistency between the terms of this Agreement and such April 8, 1997
letter agreement, this Agreement shall prevail.
Section 17 Amendment and Waiver. Any amendment to this
Agreement must be in writing and executed and delivered by CRC, CSXT and NSR,
subject to any jurisdiction of the STB. Any waiver of any term or provision of
this Agreement must be in writing and executed and delivered by the party
entitled to enforcement of such term or provision.
Section 18 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, such provision is intended to be ineffective only to the most limited
extent possible in such context and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 19 Remedies.
(a) Entitlement to Certain Remedies. Each party acknowledges and
agrees that the other parties would be irreparably damaged in the event any of
the provisions of this Agreement were not performed by it in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
each party shall be entitled to an injunction or injunctions to prevent breaches
of such provisions and to specifically enforce such provisions, in addition to
any other remedy to which such party may be entitled, at law or in equity.
(b) Preclusion of Certain Remedies. In no event shall any party
be liable to the other parties for any consequential, indirect, incidental,
punitive or other similar damages including, but not limited to, lost profits
for any breach or default, or any act or omission arising out of or in any way
relating to this Agreement, under any form or theory of action whatsoever,
whether in contract, tort or otherwise. The foregoing is not intended to alter
or limit the allocation of responsibility for Damage as provided in Section 11.
- 33 -
<PAGE>
Section 20. Interpretation. This Agreement was drafted jointly
by CSXT and NSR, each of which was advised by its own counsel and other advisors
concerning all of the terms and provisions hereof; accordingly, any ambiguity
herein should not be construed in favor of or against any of them.
Section 21. Headings. Headings of Sections and paragraphs in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of any term or provision of this Agreement.
Section 22. Parties. This Agreement shall inure to the benefit
of and be binding upon CRC, CSXT and NSR and any successor of any of them by
operation of law, and any assignee agreed to by them in accordance with Section
23, and nothing in this Agreement is intended or shall be construed to give any
other Person any legal or equitable right, remedy or claim under or with respect
to this Agreement or any term or provision hereof.
Section 23. Assignment.
(a) Limitation. Except as provided in Section 23(b), neither this
Agreement (including the documents and instruments referred to herein) nor any
of the rights, interests or obligations hereunder, shall be assigned by any
party, including by operation of law, without the prior written consent of the
other parties (except to a controlled subsidiary), which consent may be given or
refused in the sole discretion of each party.
(b) Successor. Any party without the consent of the other parties
may assign all of its rights and obligations under this Agreement only to any
successor in the event of a merger, consolidation, sale of all or substantially
all its assets (but only if such sale includes all routes and lines owned by
such party to access the Shared Assets), if such assignee executes and delivers
to the other parties hereto an agreement reasonably satisfactory in form and
substance to such other party under which such assignee, which is reasonably
satisfactory to the other party, assumes and agrees to perform and discharge all
the obligations and liabilities of the assigning party; provided that any such
assignment shall not relieve the assigning party from the performance and
discharge of such obligations and liabilities.
Section 24. Notices. Any notice given by CRC, CSXT or NSR to the
others under this Agreement shall be deemed delivered on the date sent by
registered mail, or by such other means as they may agree, and shall be
addressed to them as follows:
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<PAGE>
(A) If to CSXT:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(B) If to NSR:
Senior Vice President Operations
Norfolk Southern Railway Company
Three Commercial Place
Norfolk, Virginia 23510-2191
(C) If to CRC:
President and Chief Executive Officer
Consolidated Rail Corporation
2001 Market Street
Two Commerce Square
Philadelphia, Pennsylvania 19101
and each of them may from time to time change its address in this Section 24 by
written notice delivered to the others.
Section 25. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without regard to principles of conflicts of laws.
- 35 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in counterparts by their duly authorized officials as of the day
first above written.
CSX TRANSPORTATION, INC.
By: /s/PETER J. SHUDTZ
------------------
Peter J. Shudtz
Title: Vice President - Law and General Counsel - CSX
Corporation, authorized agent for CSX Transportation,
Inc.
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/J. L. MANETTA
----------------
J. L. Manetta
Title: Senior Vice President Operations
CONSOLIDATED RAIL CORPORATION
By: /s/TIMOTHY O'TOOLE
------------------
Timothy O'Toole
Title: President
- 36 -
<PAGE>
EXHIBIT A
OPERATING PROTOCOLS
Consolidated Rail Corporation
Shared Assets Area
Terminal Capacity Guidelines
Yard Operations
o Cars loaded or empty moving outbound to either parent* company, which have
been made up for train departure at either a serving merchandise yard,
Automotive Terminal or jointly used Intermodal Facility will be considered
available at the published departure time for scheduled trains and the later
of 4 hours after notice to the parent or actual available time (set time)
for non-scheduled or extra trains. Cars remaining available for departure
in excess of ten (10) hours will be subject to a charge of $141.00 per car.
Thereafter, for every eight (8) hours that the same cars continue to remain
on track, along with all other cars of the same block codes within the
originating dispatch yard, will be subject to an additional charge of
$141.00 per car.
o Cars loaded or empty assembled for outbound train dispatch to either parent
company will be considered available at published departure time for such
scheduled trains. The Shared Assets Areas management will provide four (4)
hours advance notice prior to set time on non-scheduled or extra trains
before they will be considered available for departure.
o Management of Shared Assets Areas may refuse an inbound train of the same
category when a specific destination terminal has been holding more than one
(1) intermodal, automotive, manifest or unit train of a parent for power
and/or crew beyond ten (10) hours of scheduled departure or availability and
conditions within the involved destination terminal preclude the effective
handling of the offered inbound trains.
o Acts of God, Mainline blockages, labor strikes or other causes to a
cessation of consistent service beyond the control of a parent company will
be considered by the management of the Shared Assets Areas as to the
legitimacy of any assessment.
o Opportunities for the Shared Assets Areas management to consolidate
- ---------------------
*The term "parent" means CSXT and/or Norfolk Southern Railway Co. ("NSR") and is
not intended to describe the legal relationship between the parties.
1
<PAGE>
trains for the benefit of a specific Shared Assets Area operation and
the involved parent, as mutually agreed by the parties, will not result in
charges on cars designated for the annulled train resulting from said
consolidation.
o An inventory of hold cars awaiting disposition within any given Shared
Assets Area territory should not exceed thirty (30) cars per day for either
CSXT or NSR individually. The Shared Assets Areas management may elect to
limit receipt of inbound car flow from the delinquent parent for the
affected Shared Assets Areas territory, in accordance with the guidelines
for holding trains. Any loaded or empty car including those in unit train
consists carrying a "No Bill" status more than twenty-four (24) hours will
be assessed $10.00 per hour in excess thereof.
o Trains inbound to the Shared Assets Area territory must have proper car and
train documents. If this information is lacking, the Shared Area managers,
at their discretion, may hold trains outside the boundaries of the Shared
Assets Area until proper documentation is received.
o Regardless of company of employment, any qualified crew in the Shared Area
may operate any locomotive, regardless of ownership, in that area for the
purposes of positioning/hostling or movement of light power between yards.
Held Trains
o In recognition of terminal fluidity and capacity utilization, the Shared
Assets Areas management can require, in coordination with a parent's command
center, an inbound train to be held outside the boundaries of a Shared
Assets Area.
- Such notification must be given with enough notice for the parent to
chamber the train at a location that minimizes disruption to
operations.
- Decisions by the Director of Train Operations of Shared Assets Areas
management are final in this regard. Neither parent may compel the
Shared Assets Areas management to accept trains.
- Similarly, the decision to hold out a train other than temporary holds
is recognized as a serious action, which will be done only after all
other alternatives are exhausted. Data on these actions will be
maintained by Shared Assets Areas management and will be regularly
available for briefing to the Conrail's Board of Directors at its
pleasure.
2
<PAGE>
Storage
o Neither parent company may store or pre-position cars on Shared Assets
Area's tracks, including yard and industrial tracks to which they have
access. Empty cars routed to the Shared Assets Areas must have a customer
destination assigned, and must be loaded without beginning to accrue charges
as described in Conrail's Demurrage Tariff in effect on May 1, 1999. When it
is determined that cars cannot be delivered to the customer within 60 hours
of arrival, a call will be made to the parent's operations center. After
such a call is made, except in extraordinary cases, these cars will then be
placed on the parent's first available outbound train.
o CSXT and NS will independently establish such demurrage and car storage
arrangements with customers as each deems proper. Should customers keep or
store cars on SAA tracks beyond the time at which charges would begin to
accrue as called for in Conrail's Demurrage Tariff in effect on May 1, 1999,
then the parent road will be assessed $100 per car per day to cover the
operational cost of congestion and inefficient use of Shared Assets Areas
facilities.
o CSXT and NSR recognize that certain customers are currently provided car
storage within the Shared Asset Areas, and that this storage may be
essential to the functioning of the business of these customers. CSXT, NSR
and Shared Assets will review current pools and by consent of all three
parties approve their makeup and location based on operating efficiencies.
Thereafter pools will be regularly reviewed for the provision of such
storage to avoid congestion. Any request for additional car storage for any
Shared Assets Area customers must be approved by the Parents, who will
consider the availability of additional space with a view toward assuring
that operations in the Shared Assets Area remain fluid and will not be
affected by providing such car storage.
Interchange
o CSXT and NSR will not interchange cars to each other within the Shared
Assets Areas locations unless specifically provided through separate
agreements. No open interchanges have been established except at industries.
3
<PAGE>
Blocking
o To ensure the equal and fair use of the Shared Assets Area capacity by its
parent companies, the following car classification requirements will govern:
- Each parent company will be required to block inbound trains for the
Shared Assets Areas. Each parent will make the number of blocks called
for in the split-date Operating Plan. Failure to comply with inbound
blocking requirements and execute appropriate setoffs (unless otherwise
directed by Shared Assets
management) within the Shared Assets Area will result in an assessment
of $50.00 per loaded or empty car.
- Management of the Shared Assets Areas will be required to block outbound
trains. Parent companies will receive the number of blocks at each
Shared Assets Area terminal that is called for in the split-date
Operating Plan.
- Changes to the number of blocks made by or delivered to a Shared Asset
terminal may be made only by mutual consent of all three parties.
- Parent companies, except by joint agreement, may not compel the Shared
Assets Areas management to make a greater number of blocks at any
terminal, beyond the number of called for in the split-date Operating
Plan.
- Each parent may change the definition of its own specific blocks
originating at a Shared Assets Area terminal.
Hours of Service and Recrews
o Train crews on parent trains approaching a Shared Assets Area must have
sufficient time to terminate in or exit the Shared Assets Areas before
hours-of-service laws require them to rest. Sufficient time is considered
the trains scheduled elapsed time to terminate in or pass through the Shared
Assets Area. The Shared Assets Areas management may grant an exception if
the train can make it to its destination without undue disruption.
o Shared Assets Areas shall have the option to provide T&E relief service for
any road train on the hours-of-service law, regardless of parent company.
- Such relief will be provided after coordination with the appropriate
parent's operations center indicating the involved parent will provide
no relief crew.
4
<PAGE>
- Recrews will be at the sole cost and expense of the parent whose train
is recrewed at full cost plus a $500 surcharge.
- If specific trains frequently require recrews, Shared Assets Areas
management may request the parent to change its schedule or slotting of
subject train with the right to repeatedly hold that train for a recrew
outside the Shared Assets Areas as set forth under the "held trains"
provision until such appropriate adjustments are made to the
non-conforming schedule.
- Data on trains recrewed will be maintained by Shared Assets Areas
management and will be regularly available for briefing to Conrail's
Board of Directors at its pleasure.
Charges
o The charges paid by either owner under these protocols will be made to a
Conrail "passive income" account, which will be administered by Conrail.
Changes
o These terminal capacity guidelines will be reviewed at the request of any of
the three parties (CSXT, NSR, and/or CSAO). Proposed changes are subject to
the arbitration provisions of the Shared Asset Area Operating Agreements in
the event CSXT and NSR cannot agree.
5
Exhibit 10.6
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
DETROIT
Dated as of June 1, 1999
By and Among
CONSOLIDATED RAIL CORPORATION,
CSX TRANSPORTATION, INC. and
NORFOLK SOUTHERN RAILWAY COMPANY
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................................1
(a) AAR............................................................1
(b) Accounting Plan................................................1
(c) Action.........................................................2
(d) Adjacent Improvements..........................................2
(e) Bill...........................................................2
(f) Billing Month..................................................2
(g) Board of Managers..............................................2
(h) Budgeted Capital Expenditures..................................2
(i) Capital Expenditure Budget.....................................2
(j) Capital Expenditure Statement..................................2
(k) CRC Administrative Office......................................2
(l) CRC Board......................................................2
(m) CRC Train......................................................2
(n) CRC Train Usage Percentage.....................................2
(o) CSX............................................................3
(p) CSXT Operating Agreement.......................................3
(q) Damage(s)......................................................3
(r) Dispute Letter.................................................3
<PAGE>
Page
(s) Excluded Taxes.................................................3
(t) Expense Statement..............................................3
(u) GAAP...........................................................3
(v) General Manager................................................3
(w) Governmental Entity............................................3
(x) Interest Rental................................................3
(y) Jointly-Operated Facility......................................4
(z) Lesser Insured Operator........................................4
(aa) Liabilities....................................................4
(bb) Nonseverable Improvement.......................................4
(cc) NSC............................................................4
(dd) NSR Operating Agreement........................................4
(ee) NYC............................................................4
(ff) Operating Budget...............................................4
(gg) Operating Plan.................................................5
(hh) Operator.......................................................5
(ii) Operator Consequential Damages.................................5
(jj) Operator's Expense Percentage..................................5
(kk) Operator's Facility............................................5
(ll) Operator Train.................................................5
- ii -
<PAGE>
Page
(mm) Person.........................................................5
(nn) Program Maintenance............................................5
(oo) Program Maintenance Proposal...................................5
(pp) PRR............................................................5
(qq) Railcar........................................................6
.
(rr) Reimbursable Expenses..........................................6
(ss) Renewal Term...................................................6
(tt) RoadRailer(R)..................................................6
(uu) Routine Maintenance............................................6
(vv) Severable Improvement..........................................6
(ww) Shared Asset Value.............................................6
(xx) Shared Assets..................................................6
(yy) Shared Assets Area.............................................7
(zz) STB............................................................7
(aaa) Switching and Yard Services....................................7
(bbb) Tax or Taxes...................................................7
(ccc) Temporary Services.............................................7
(ddd) Tier One Damages...............................................7
(eee) Tier Two Damages...............................................7
(fff) Total Train Usage Percentage...................................8
- iii -
<PAGE>
Page
(ggg) Transaction Agreement..........................................8
(hhh) Usage Statement................................................8
(iii) USOA...........................................................8
(jjj) Valuation Date.................................................8
(kkk) Zone...........................................................8
Section 2. Management........................................................8
(a) CRC Board......................................................8
(b) General Manager................................................9
(c) Employees.....................................................10
(d) CRC Responsibilities..........................................10
(e) Impartiality..................................................10
(f) Independent Contractors.......................................10
Section 3. Operations.......................................................10
(a) Operator's Rights.............................................10
(b) Use...........................................................11
(c) Grant of Rights...............................................11
(d) Switching and Yard Services...................................12
(e) Operating Protocols...........................................12
(f) Freight Traffic to Remain in Account of Each Operator.........12
(g) Rates, Routes and Divisions...................................13
- iv -
<PAGE>
Page
(h) Shipper Bills.................................................13
(i) Service Responsibility........................................13
(j) Dispatching...................................................13
(k) Railcar Weighing..............................................14
(l) Freight Claims................................................14
(m) Freight Car Repairs...........................................14
(n) Train Services................................................15
(o) Wrecking Service..............................................15
(p) Admission of Third Parties....................................15
Section 4. Equipment and Properties.........................................15
(a) Procurement...................................................15
(b) Contribution of Locomotives by Operators......................15
(c) Locomotive Service and Repair.................................16
Section 5. Maintenance......................................................16
(a) Routine Maintenance...........................................16
(b) CRC Program Maintenance.......................................17
(c) Maintenance Standards.........................................17
Section 6. Capital Improvements.............................................18
(a) Proposed Projects.............................................18
(b) CRC Board Approved Projects...................................18
- v -
<PAGE>
Page
(c) Nonseverable Improvement Projects.............................18
(d) Severable Improvement Projects................................18
(e) Capital Improvements as Shared Assets.........................19
(f) Title to Severable Improvements...............................19
(g) Noninterference...............................................19
(h) Switch Connections............................................20
(i) Adjacent Improvements.........................................20
(j) Operator's Facilities.........................................20
Section 7. Accounting.......................................................21
(a) Books of Record and Account...................................21
(b) Financial Statements..........................................21
Section 8. Costs and Budgets................................................21
(a) CRC Costs.....................................................21
(b) Employee Cost Reimbursement...................................21
(c) Capital Expenditure Budget....................................21
(d) Operating Budget..............................................22
Section 9. Cost Sharing.....................................................22
(a) Accounting Plan...............................................22
(b) Usage Statement...............................................24
(c) Expense Statement.............................................24
- vi -
<PAGE>
Page
(d) Capital Expenditure Statement.................................24
(e) Bills.........................................................25
(f) Payment.......................................................25
(g) Disputed Bills................................................25
Section 10. Access..........................................................26
Section 11. Liability.......................................................26
(a) Operators' Sole Responsibility................................26
(b) Operators' Joint Responsibility...............................26
(c) CRC Responsibility - Allocation and Insurance.................27
(d) Process.......................................................28
(e) Indemnification...............................................28
(f) Specified Level Damages.......................................28
(g) Substance Abuse Exception.....................................30
(h) Transaction Agreement.........................................30
(i) Damages.......................................................30
Section 12. No Partnership..................................................31
Section 13. Arbitration.....................................................31
Section 14. Term............................................................31
Section 15. Force Majeure...................................................32
Section 16. Entire Agreement................................................32
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Page
Section 17. Amendment and Waiver............................................32
Section 18. Severability....................................................32
Section 19. Remedies........................................................32
(a) Entitlement to Certain Remedies...............................32
(b) Preclusion of Certain Remedies................................33
Section 20. Interpretation..................................................33
Section 21. Headings........................................................33
Section 22. Parties.........................................................33
Section 23. Assignment......................................................33
(a) Limitation....................................................33
(b) Successor.....................................................33
Section 24. Notices.........................................................34
Section 25. Governing Law...................................................34
EXHIBIT A - Operating Protocols
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<PAGE>
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
DETROIT
This SHARED ASSETS AREA OPERATING AGREEMENT ("Agreement") dated
as of June 1, 1999, is by and among Consolidated Rail Corporation ("CRC"), CSX
Transportation, Inc. ("CSXT") and Norfolk Southern Railway Company ("NSR").
W I T N E S S E T H:
WHEREAS, all capitalized terms in this Agreement have the
respective meanings set forth in Section 1; and
WHEREAS, CSX owns all of the common stock of and controls CSXT,
NSC owns all of the common stock of and controls NSR, and CSX and NSC jointly
control CRC; and
WHEREAS, CSXT, NSR and CRC desire that the Shared Assets shall be
owned, operated and maintained by CRC and used by or for the exclusive benefit
of CSXT and NSR, and that CSXT and NSR shall each have full and equal rights to
use the Shared Assets to provide competitive railway freight transportation
services to, from and between all places within the Shared Assets Area.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, CRC, CSXT and NSR hereby agree
as follows:
Section 1 Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "AAR" means the Association of American Railroads.
(b) "Accounting Plan" means the plan of accounting adopted
pursuant to Section 9(a).
(c) "Action" means any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any
Governmental Entity.
<PAGE>
(d) "Adjacent Improvement" means a capital improvement, such as a
spur, which provides access to customers and local industries and which (i) is
on property which is not part of the Shared Assets and (ii) will be directly
(without intermediate connection to another railroad) attached to trackage
included within the Shared Assets.
(e) "Bill" means a bill delivered by CRC to an Operator pursuant
to Section 9(e).
(f) "Billing Month" means the calendar month for which
information is shown on a Usage Statement.
(g) "Board of Managers" means any Board of Managers which may be
appointed by the CRC Board pursuant to Section 2(a)(ii).
(h) "Budgeted Capital Expenditures" means capital expenditures
included on a Capital Expenditure Budget which has been approved by the CRC
Board.
(i) "Capital Expenditure Budget" means a written budget
specifying proposed capital expenditures to be made by CRC with respect to
Shared Assets for the periods of time specified in such budget, and the proposed
sources of the capital required to make such expenditures.
(j) "Capital Expenditure Statement" means a statement delivered
by CRC pursuant to Section 9(d).
(k) "CRC Administrative Office" means the administrative office
of CRC located at Philadelphia, Pennsylvania, or at such other place designated
by CRC in a notice it delivers to CSXT and NSR.
(l) "CRC Board" means the Board of Directors of CRC.
(m) "CRC Train" means a train operated by CRC and performing
services pursuant to Sections 3(c) or (d).
(n) "CRC Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the total number of loaded and empty
Railcars in the account of such Operator in CRC Trains, by (ii) the total number
of loaded and empty Railcars in the accounts of both Operators in CRC Trains,
during such time period in such Zone.
(o) "CSX" means CSX Corporation.
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<PAGE>
(p) "CSXT Operating Agreement" means the agreement, dated June 1,
1999, between CSXT and NYC providing for the use, operation and maintenance by
CSXT of certain assets owned or leased by NYC.
(q) "Damage(s)" means all assessments, fines, losses, damages,
liabilities, and costs and expenses related thereto, including, without
limitation, interest, penalties and attorneys' and consultants' fees and also
expressly including, without limitation, all liabilities arising after the
effective date hereof under the Federal Employers Liability Act, as amended, and
environmental laws.
(r) "Dispute Letter" means a letter delivered by an Operator
pursuant to Section 9(g)(i).
(s) "Excluded Taxes" means: (A) all Taxes based, in whole or in
part, on net income or gross income (including, without limitation, any minimum
tax) of CRC or which are in substitution for, or relieve CRC from, any Tax based
upon or measured by CRC's net income or gross income, together with any
interest, penalties, additions to tax or additional amounts that may become
payable in respect thereof; (B) business and occupation taxes, and gross
receipts taxes (unless in the nature of a sales tax) of CRC and Taxes based upon
the equity interests of CRC; and (C) interest, fines and penalties to the extent
due to the acts or omissions of CRC in connection with such Excluded Taxes.
(t) "Expense Statement" means a statement delivered by CRC
pursuant to Section 9(c).
(u) "GAAP" at any time means generally accepted accounting
principles in effect at such time.
(v) "General Manager" means the chief executive officer of CRC.
(w) "Governmental Entity" means any federal, state, local or
foreign court, administrative agency or commission or other governmental or
regulatory authority or commission or any arbitration tribunal.
(x) "Interest Rental" means an amount representing a fair
periodic return on the Shared Asset Value as of the most recent preceding
Valuation Date as determined by such appraiser as CSXT and NSR may select. The
Interest Rental for the first six years of this Agreement shall be as follows:
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<PAGE>
June 1, 1999 through May 31, 2000 -- $6 million June 1, 2000
through May 31, 2001 -- $7 million June 1, 2001 through May 31,
2002 -- $7 million June 1, 2002 through May 31, 2003 -- $8
million June 1, 2003 through May 31, 2004 -- $8 million June 1,
2004 through May 31, 2005 -- $9 million
(y) "Jointly-Operated Facility" means a facility or yard which is
operated by or for a rail carrier and one or more other rail carriers.
(z) "Lesser Insured Operator" means the Operator which has the
lesser (as between the Operators) amount of available insurance benefits as
specified in Section 11(f)(i)(A.1)(2).
(aa) "Liabilities" means any and all debts, liabilities and
obligations of any kind whatsoever, whether or not accrued, contingent or
reflected on a balance sheet, known or unknown, absolute, determined,
determinable or otherwise, including, without limitation, those arising under
any law, rule, regulation, action, order or consent decree of any Governmental
Entity or any judgment in any Action of any kind or award of any arbitrator of
any kind and those arising under any contract.
(bb) "Nonseverable Improvement" means a capital improvement which
is integral to the operation of the Shared Assets and is not readily removable.
(cc) "NSC" means Norfolk Southern Corporation.
(dd) "NSR Operating Agreement" means the agreement, dated June 1,
1999, between NSR and PRR providing for the use, operation and maintenance by
NSR of certain assets owned or leased by PRR.
(ee) "NYC" means New York Central Lines LLC, a Delaware limited
liability company.
(ff) "Operating Budget" means a written budget specifying
estimated operating revenues and expenses and working capital requirements of
CRC with respect to the Shared Assets for the periods of time specified in such
budget.
(gg) "Operating Plan" means the plan for road train and local
train schedules and classifications and related operating protocols for the
Shared Assets Area as may be agreed to, and modified from time to time, by CRC,
CSXT and NSR.
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<PAGE>
(hh) "Operator" means either CSXT or NSR.
(ii) "Operator Consequential Damages" means consequential,
indirect, incidental or other similar damage, injury or loss to an Operator.
(jj) "Operator's Expense Percentage" means for an Operator the
percentage obtained by multiplying 100 by the quotient obtained by dividing (i)
the total Reimbursable Expenses (except for Interest Rental, Taxes, insurance
costs and any other CRC expenses not apportioned between the Operators on a
usage basis) payable by such Operator for a particular period, by (ii) the total
Reimbursable Expenses (except for Interest Rental, Taxes, insurance costs and
any other CRC expenses not apportioned between the Operators on a usage basis)
payable by both Operators for such period.
(kk) "Operator's Facility" means a present, expanded or new
facility or yard which is owned or controlled exclusively by an Operator.
(ll) "Operator Train" means a train operated by an Operator and
performing services in accordance with Sections 3(a) and 3(c).
(mm) "Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company or other legal entity or organization.
(nn) "Program Maintenance" means scheduled renewal of track,
signals, structures and other fixed facilities performed by system or production
gangs assembled to accomplish a specific task or tasks.
(oo) "Program Maintenance Proposal" means a written proposal
prepared by CRC, CSXT or NSR which describes specific Program Maintenance which
the preparer of such proposal believes is necessary or desirable to maintain the
Shared Assets in a safe operating condition to permit or facilitate (i) the
performance by CRC of its services pursuant to this Agreement, or (ii) the use
of Shared Assets by the Operators, and which specifies a budget for such Program
Maintenance.
(pp) "PRR" means Pennsylvania Lines LLC, a Delaware limited
liability company.
(qq) "Railcar" means, except as otherwise provided in the
Accounting Plan, each railroad freight car, locomotive, caboose or other
equipment (including RoadRailer(R) or comparable bimodal freight hauling
equipment in the account of either Operator) furnished in substitution of
railroad equipment, loaded or empty, which an Operator originates, terminates,
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<PAGE>
switches or moves on or overhead to any Shared Assets, except that (i) a single
standard flat car not exceeding 96 feet in length (excluding articulated flat
cars) shall count as a single Railcar, (ii) freight rail cars consisting of
articulated units bearing AAR Car Type Codes "Q" and "S" shall count as multiple
Railcars based on the second (numeric) digit of the Car Type Code for such
articulated units (by way of example, a car consisting of AAR Car Type Code
"S566" would be counted as five Railcars) (or corresponding car type codes and
digits if the AAR Car Type Codes should be modified at any time during the term
of this Agreement), and (iii) a single unit of RoadRailer(R) equipment (or
comparable bimodal freight hauling equipment in the account of either Operator)
shall count as one-half (1/2) of a Railcar.
(rr) "Reimbursable Expenses" means the expenses shown on an
Expense Statement, minus the revenues, if any, shown on such Expense Statement.
(ss) "Renewal Term" means the term of extension of this Agreement
under Section 14.
(tt) "RoadRailer(R)" means bimodal freight hauling equipment
manufactured by or under license from "RoadRailer(R)", a division of Wabash
National Corporation, and capable of movement over the highway when pulled by a
tractor and on the rails using locomotive power.
(uu) "Routine Maintenance" means day-to-day repairs to track,
signals, structures and other fixed facilities that are not part of Program
Maintenance.
(vv) "Severable Improvement" means a capital improvement which
is not a Nonseverable Improvement.
(ww) "Shared Asset Value" means at any date the value of the
Shared Assets, except leases and other contract rights granted by either
Operator to CRC, as of the most recent preceding Valuation Date as determined by
such appraiser as CSXT and NSR may select.
(xx) "Shared Assets" means all tracks, lands, easements, rights
of way, structures, facilities, appurtenances and rights related thereto, which
CRC owns, leases or otherwise has the right to operate over (including those
segments over which CRC or an Operator possesses operating rights pursuant to
Section 3(c)), and which are used for railway purposes in the Shared Assets
Area, including the properties, rights, equipment, inventory and supplies,
whether owned or leased, described or referred to in Item 3A of Schedule 1
(including Attachments I and II) of the Transaction Agreement, but excluding
Operator's Facilities.
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<PAGE>
(yy) "Shared Assets Area" means the geographical area comprising
the Shared Assets and Operator Facilities and Jointly-Operated Facilities
directly (without intermediate connection to another railroad) attached to
trackage included within the Shared Assets, which is designated as the "Detroit"
Shared Assets Area.
(zz) "STB" means the Surface Transportation Board or, if there
shall be no Surface Transportation Board, any federal agency which is charged
with the function of approving combinations by rail carriers or persons
controlling them, or of other arrangements between rail carriers, and granting
exemptions from other laws with respect thereto or regulating other specific
functions with respect to the context in which such term is employed or any
successor entity thereof.
(aaa) "Switching and Yard Services" means the service of
classifying and assembling trains for the account of an Operator in
Jointly-Operated Facilities; movement of loaded or empty Railcars between yards
and local industries; and switching trains and Railcars at yards, terminals and
local industries.
(bbb) "Tax" or "Taxes" means taxes of any kind, levies or other
similar assessments, customs, duties, imposts, charges or fees, including,
without limitation, income taxes, gross receipts, ad valorem, excise, real or
personal property, sales, use, payroll, withholding, unemployment, transfer and
gains taxes or other governmental taxes imposed by or payable to the United
States, or any state, local or foreign government or subdivision thereof, and in
each instance such term shall include any interest, penalties or additions to
tax attributable to such Tax or Taxes.
(ccc) "Temporary Services" means services provided by CSXT or NSR
employees in the operation, maintenance or repair of any Shared Asset on an
emergency basis with the prior approval of the General Manager or senior CRC
employee who is directly responsible for the operation or maintenance of such
Shared Asset.
(ddd) "Tier One Damages" means those Damages defined as Tier One
Damages in Section 11(f)(i)(A.1).
(eee) "Tier Two Damages" means those Damages defined as Tier Two
Damages in Section 11(f)(i)(B.1).
(fff) "Total Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the sum of the total number of loaded and
empty Railcars in the account of such Operator in CRC Trains and the total
number of loaded and empty Railcars in the account of such Operator in Operator
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<PAGE>
Trains, by (ii) the sum of the total number of loaded and empty Railcars in the
accounts of both Operators in CRC Trains and the total number of loaded and
empty Railcars in the accounts of both Operators in Operator Trains, during such
period in such Zone.
(ggg) "Transaction Agreement" means the Transaction Agreement
dated as of June 10, 1997, among CSX, CSXT, NSC, NSR, Conrail Inc., CRC and CRR
Holdings LLC.
(hhh) "Usage Statement" means a statement delivered by CRC
pursuant to Section 9(b).
(iii) "USOA" means the uniform system of accounts prescribed for
class I railroads by the STB or any successor federal agency that shall succeed
to the functions of the STB in prescribing uniform systems of accounts for rail
carriers; provided, that if there shall be no STB and no such federal agency,
USOA shall mean such system of accounts as is generally maintained by rail
carriers consistent with GAAP as applied in the rail industry.
(jjj) "Valuation Date" means the date of this Agreement and
thereafter the sixth (6th), twelfth (12th), eighteenth (18th) and twenty-fourth
(24th) anniversaries of the date of this Agreement and the first day of each
Renewal Term.
(kkk) "Zone" means a designated geographic section, or designated
facilities, of the Shared Assets Area as established and described in the
Accounting Plan.
Section 2 Management.
(a) CRC Board.
(i) The CRC Board shall manage the Shared Assets.
(ii) The CRC Board may appoint a Board of Managers, a
committee, a CRC officer or other persons to have such duties and
authority with respect to the Shared Assets as may be assigned to them
from time to time by the CRC Board.
(iii) Any Board of Managers appointed by the CRC Board
shall be comprised of an equal number of individuals (and their
successors) nominated by CSXT and nominated by NSR.
(iv) The CRC Board shall remove from any Board of
Managers (A) at the direction of CSXT, any person who was nominated by
CSXT, and (B) at the direction of NSR, any person who was nominated by
NSR.
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<PAGE>
(b) General Manager.
(i) The General Manager shall not at any time have been
an employee of CSXT or NSR or any of their affiliates unless otherwise
agreed to by both Operators, and shall be appointed by the CRC Board.
(ii) The General Manager shall manage and supervise the
ownership, operation, maintenance and use of the Shared Assets in
accordance with directives and policies of the CRC Board and this
Agreement, subject to the authority of the CRC Board, and through such
Shared Assets Area superintendents and other Shared Assets Area
executives as are appointed by the General Manager with the approval of
the CRC Board. The General Manager shall report to the CRC Board. The
General Manager shall perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR.
(iii) The General Manager may be removed from office
prior to the expiration of his or her term at any time by a majority of
the CRC Board for any reason or for no reason. Upon the written request
of CSXT or NSR to the CRC Board, the General Manager shall also be
removed from office prior to the expiration of his or her term for
serious misconduct, which shall mean conduct that would make it
unreasonable to retain the General Manager, including but not limited to
conduct such as: (A) violation of applicable alcohol or drug use
policies, (B) fraud, (C) embezzlement or other act of dishonesty against
CRC, CSXT or NSR or any of their customers or suppliers, (D) activities
willfully undertaken by the General Manager which reflect adversely upon
the reputation of CRC, CSXT or NSR, (E) refusal to perform or
substantial neglect of the responsibilities assigned to the General
Manager, (F) failure to perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR after 45
days' written notice from an Operator describing such failure, (G) any
violation of any law or rule or regulation of any Governmental Entity
which results in serious adverse consequences to CRC, CSXT or NSR, or
(H) any material violation of any directive or policy of the CRC Board
or any statutory or common law duty of loyalty to CRC. If a majority of
the CRC Board in response to such a request of CSXT or NSR fails to
direct the removal of the General Manager, the dispute may be submitted
by either Operator for resolution by binding arbitration pursuant to
Section 13, provided, however, that in any such arbitration to resolve a
dispute under this Section 2(b)(iii), the hearing shall commence no
later than 30 days following the appointment of the arbitrator and the
award shall be rendered no later than 30 days following the completion
of the hearing.
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<PAGE>
(c) Employees. The General Manager and all persons who operate
and maintain the Shared Assets shall be employees of CRC, except for CSXT or NSR
employees who provide Temporary Services and employees of Operators or
independent contractors which provide services pursuant to contracts or
arrangements in accordance with Section 2(f).
(d) CRC Responsibilities. CRC shall be responsible for safely and
efficiently operating, controlling and managing the use of the Shared Assets,
impartially as between CSXT and NSR in accordance with directives and policies
of the CRC Board, and with responsible business practices which are consistent
with those used by CSXT and NSR in the operation of their businesses, and are
designed to achieve the lowest cost of the safe and efficient operation, use and
maintenance of the Shared Assets.
(e) Impartiality. CRC shall perform all of its obligations
pursuant to this Agreement on an impartial and non-discriminatory basis as
between CSXT and NSR, giving no preference to either of them in providing
Switching and Yard Services, in the control of train dispatching over the Shared
Assets, or in any other way whatsoever.
(f) Independent Contractors. CRC may, at least to the extent it
may do so immediately prior to the date of this Agreement, procure the use of
equipment or facilities owned by independent contractors, or services provided
by independent contractors (using their own employees), with respect to the
operation, maintenance and use of Shared Assets, including, without limitation,
accounting, computer and other administrative services, and the furnishing of
equipment and mechanical services. For purposes of this Section 2(f),
independent contractors may include CSXT or NSR.
Section 3 Operations.
(a) Operator's Rights. CRC hereby grants to each Operator full
operating rights to operate its own trains (staffed by a road crew) and
equipment, with its own crews and equipment and at its own expense, over any and
all tracks included in the Shared Assets, and to use all of the Shared Assets in
connection with the operation of such trains or equipment, for the following
purposes:
(i) Movement by such Operator of trains (staffed by a
road crew) through the Shared Assets Area between two geographical
locations outside the Shared Assets Area;
(ii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and an Operator's Facility or a Jointly-Operated Facility which is
within the Shared Assets Area;
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(iii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and local industries which are within the Shared Assets Area;
(iv) Movement by such Operator of trains (staffed by a
road crew) between Operator's Facilities or Jointly-Operated Facilities
which are within the Shared Assets Area and local industries which are
within the Shared Assets Area;
(v) Movement, handling, pick-up, set off, switching,
transfer and interchange of Railcars, blocks of Railcars or trains
(staffed by a road crew) to, from or at local industries, Operator's
Facilities or Jointly-Operated Facilities, in connection with movements
described in Sections 3(a)(i) through (iv), to the extent provided for
in the Operating Plan agreed to and modified by the parties from time to
time; and
(vi) such other purposes as may be agreed upon by CRC,
CSXT and NSR.
(b) Use. The crews of each train operated by an Operator on
Shared Assets shall be qualified under and shall comply with applicable laws and
regulations as well as the safety and operating rules of CRC.
(c) Grant of Rights. Subject to reasonable compensation and other
terms established in the Accounting Plan, and in each case for the purpose of
Switching and Yard Services performed by CRC pursuant to Section 3(d) and
movement of Operator Trains pursuant to Section 3(a):
(i) CSXT hereby grants to CRC and NSR overhead
operating rights to operate CRC trains and NSR trains, respectively,
with their own crews, over such CSXT line segments access to and use of
which by CRC and NSR are necessary to effectuate the train operations
and services contemplated by this Agreement.
(ii) NSR hereby grants to CRC and CSXT overhead
operating rights to operate CRC trains and CSXT trains, with their own
crews, over such NSR line segments access to and use of which by CRC and
CSXT are necessary to effectuate the train operations and services
contemplated by this Agreement.
When required by the CSXT Operating Agreement and the NSR Operating Agreement,
CSXT and NSR have obtained the consent of NYC and PRR, respectively, for the
grant of rights referred to in this Section 3(c). Notwithstanding any other
provision of this Agreement, each rail line segment identified in this Section
3(c) shall be dispatched, maintained, operated and controlled by the Operator
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<PAGE>
which granted the rights with respect to such segment, provided that such
dispatching, maintenance, operation and control shall be performed on an
impartial and non-discriminatory basis as between the Operators. Trains operated
by an Operator pursuant to operating rights granted under this Section 3(c)
shall be governed by and subject to the Operating Plan.
(d) Switching and Yard Services.
(i) At the request of and as agent for each Operator,
CRC shall perform Switching and Yard Services required by such Operator
within the Shared Assets Area, including without limitation any such
services which such Operator may be responsible for performing or having
performed for a shipper or other Person.
(ii) Except as otherwise provided in Section 3(a), and
other than within an Operator's Facility, neither Operator shall with
its own equipment or with its own crews perform any Switching and Yard
Service within the Shared Assets Area for itself or for any other
Person.
(e) Operating Protocols. From time to time, NSR, CSXT and CRC may
mutually establish Shared Assets Area Operating Plans, General Dispatching
Guidelines, Car Movement Guidelines, Switching/Blocking Requirements and other
operating protocols and rules concerning operations within the Shared Assets
Area, for the purpose of assuring timely train operations, fluid movement of all
railcars, equal and impartial handling of Operators' trains and railcars,
minimization in the number of empty cars in the Shared Assets Area, and overall
operating efficiency in the Shared Assets Area. The current Operating Protocols
have been agreed upon by NSR, CSXT and CRC and are set forth as Exhibit A to
this Agreement. The Operating Protocols may be modified only upon mutual
agreement of all parties.
(f) Freight Traffic To Remain in Account of Each Operator.
Switching and Yard Services and other services performed by CRC for either
Operator under this Agreement shall be performed as agent for, and for the
account of, such Operator. All freight traffic and Railcars handled within the
Shared Assets Area, including traffic and Railcars handled by CSXT or NSR
pursuant to Sections 3(a) and 3(c), and traffic and Railcars handled by CRC
pursuant to Sections 3(c) and 3(d), shall at all times remain in the waybill,
car hire and revenue accounts of either CSXT or NSR.
(g) Rates, Routes and Divisions. Each Operator shall have
exclusive and independent authority to establish all rates, charges, service
terms, routes and divisions, and to collect all freight revenues, relating to
freight traffic transported for its account to, from and within the Shared
Assets Area (except those Shared Assets Area line segments over which such
Operator possesses only overhead operating rights pursuant to Section 3(c)). CRC
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<PAGE>
shall not participate or appear in any rates, routes or divisions relating to
any freight traffic whatsoever to, from and within the Shared Assets Area, and
shall not be entitled to or responsible for any freight charges relating to such
freight traffic. CRC shall not quote or establish any rate or service terms
applicable to freight transportation services to, from and within the Shared
Assets Area, enter into transportation contracts with any Person (other than an
Operator) for freight transportation services to, from and within the Shared
Assets Area, or undertake to perform any for-hire transportation services
directly, in its own name or for its own account for any Person (other than an
Operator). The transfer or exchange of freight traffic between CSXT and CRC, and
between NSR and CRC, within the Shared Assets Area shall not constitute an
interchange of freight traffic or freight rail cars for purposes of determining
rates, routes, divisions or interline settlements relating to any such freight
traffic.
(h) Shipper Bills. Neither Operator shall inform the other or CRC
of any rates or charges to shippers to which such Operator provides freight
transportation services in the Shared Assets Area, and no copies of any shipper
bill of lading or waybill shall be given by such Operator to the other or to CRC
except to the extent that such documents are exchanged between rail carriers in
the usual course of interline shipments and documenting.
(i) Service Responsibility. Each Operator shall at all times be
solely responsible for obtaining, supplying and routing Railcars other than
locomotives, for all Railcar ownership costs (including per-diem charges and
mileage allowances) and for providing service to its shippers within the Shared
Assets Area pursuant to its transportation contracts or other prices with its
shippers, including interline accounting, and all car hire and demurrage or
detention charges associated with Railcars in its account within the Shared
Assets Area.
(j) Dispatching. CRC shall, from local locations or a location
agreed upon by CSXT and NSR, control the dispatching, scheduling and movement
of, and Switching and Yard Services for, all trains (including Operator Trains
and CRC Trains) over the Shared Assets (other than Operator's Facilities, unless
requested to do so by the Operator thereof) without any discrimination at any
time in favor of or against either Operator, but in accordance with written
policies and priorities for categories of freight, type of Railcar, size of
train and train destinations established from time to time by the General
Manager and approved by the CRC Board to achieve the maximum efficiency and
lowest aggregate Shared Asset costs of CRC and the Operators, provided, however,
that CSXT shall control the dispatching, scheduling, movement and Switching and
Yard Services for all CRC Trains and Operator Trains over the following Shared
Asset rail segments:
(A) the current CRC Lincoln Secondary between Carleton,
MI and Hold Out Signal at Lincoln Yard;
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and NSR shall control the dispatching, scheduling, movement and Switching and
Yard Services for all CRC Trains and Operator Trains over the following Shared
Asset rail segments:
(B) the current CRC Detroit Line between Trenton, MI
and CP YD;
(C) the current CRC Junction Yard Secondary between CP
YD and CP Townline, including New Wye Runner; and
(D) the current CRC Lincoln Running Track between
Ecorse Jct. and the connection with NSR.
Dispatching, scheduling and movement of trains performed by either Operator
under this Section 3(j) shall conform to the same standards of
non-discrimination, written policies and priorities applicable to the control of
such functions by CRC at other locations included within the Shared Assets Area.
(k) Railcar Weighing. All Railcars for the account of an Operator
which originate or terminate on Shared Assets and which require weighing shall
be weighed by and at the expense of such Operator or its customer, and at no
cost to CRC.
(l) Freight Claims. The Operators shall agree among themselves on
the most fair, practical and efficient arrangements for handling and
administering freight loss and damage claims with the intent that (i) each
Operator shall be responsible for losses occurring to lading either in its
possession or in the possession of CRC for the account of such Operator, and
(ii) the Operators shall follow relevant AAR rules and formulas in providing for
the allocation of losses which are either of undetermined origin or in Railcars
handled in interline service by or for the account of both Operators.
(m) Freight Car Repairs. If any Railcars are bad ordered while on
the Shared Assets and must be set out from a CRC Train or Operator Train, CRC
shall promptly return such Railcars to the Operator in whose account such
Railcars reside in accordance with such Operator's instructions. CRC shall
furnish, at such Operator's expense, required labor and material to perform, and
shall perform, light repairs on such bad ordered Railcars as necessary to make
such Railcars legal and safe for movement. CRC shall bill such Operator for the
costs of such light repairs in accordance with the Field and Office Manuals of
the AAR Interchange Rules in effect at the time such repairs are performed. CRC
shall bill directly to and collect from the applicable Operator charges for
repair items that, under the AAR Interchange Rules, are the responsibility of
the Railcar owner and/or the handling line carriers. Each Operator may rebill
charges for repair items that are the responsibility of the Railcar owner and/or
the handling line carriers. If any such bad ordered Railcar cannot be made legal
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and safe for movement by the performance of light repairs, CRC shall, at such
Operator's expense, arrange for appropriate removal of the affected Railcar in
accordance with such Operator's instructions.
(n) Train Services. Actual costs incurred by CRC to provide
special services (other than services otherwise provided for in this Agreement)
at the request of an Operator with respect to trains, locomotives and Railcars
for the account of such Operator, shall be paid by such Operator to CRC,
provided that the costs and terms of similar special services rendered to each
Operator shall be without discrimination between Operators as to cost and terms,
giving due allowance to any differences in the costs of providing such services.
(o) Wrecking Service. Wrecking service or wrecking train service
required in connection with services contemplated by this Agreement shall be
provided by CRC (or its designee) as promptly as possible.
(p) Admission of Third Parties. Notwithstanding any other
provision in this Agreement, no party may permit any Person (other than a party
hereto) to have access to, operate over or use any Shared Asset without the
prior approval of all parties, which approval may be given or refused in the
sole discretion of each party.
Section 4 Equipment and Properties.
(a) Procurement. CRC shall procure, operate and maintain all
equipment, real property rights and improvements thereon which are reasonably
required for (i) CRC to operate the Shared Assets, and (ii) the Operators to
move trains over the Shared Assets, in each case in accordance with this
Agreement.
(b) Contribution of Locomotives by Operators. Upon reasonable
request by the General Manager, the Operators shall furnish to CRC, through
full-service lease or other mutually satisfactory arrangements, locomotives
reasonably required by CRC for the performance of its obligations under this
Agreement. The respective obligations of each Operator to furnish such
locomotives shall be based, insofar as reasonably practicable, upon the
Operator's CRC Train Usage Percentage during the calendar month preceding such
request for the Shared Assets Area or Zone in which such locomotives are needed
by CRC. It is the parties' intention that (i) the arrangements pursuant to which
such locomotives are furnished by either Operator to CRC shall provide that
heavy maintenance, repair and overhaul shall be the responsibility of such
Operator, (ii) locomotives furnished by either Operator to CRC may, in order to
permit maintenance, repair and overhaul of such locomotive units, be exchanged
for other locomotive units furnished by such Operator, and (iii) the respective
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obligations of each Operator to furnish such locomotives upon request by the
General Manager shall be adjusted on at least a monthly or more frequent basis.
(c) Locomotive Service and Repairs. At the request of an
Operator, CRC shall furnish required labor and material to perform, and shall
perform, fueling and servicing of any Operator's locomotive, as well as light
repairs on any Operator's locomotive as necessary to make such locomotive legal
and safe for movement. CRC shall bill such Operator (or other owner of such
locomotive) for the costs of such fueling, servicing and light repairs in
accordance with industry practice in effect at the time such fueling, services
or repairs are performed. If any such locomotive cannot be made safe for
movement by the performance of light repairs, CRC shall, at the expense of such
Operator (or other owner of such locomotive), arrange for appropriate removal of
such locomotive in accordance with such Operator's instructions.
Section 5 Maintenance.
(a) Routine Maintenance.
(i) CRC shall be responsible for Routine Maintenance
when necessary or desirable to maintain the Shared Assets in a safe
operating condition, and to permit and facilitate (A) the performance by
CRC of its obligations pursuant to this Agreement, and (B) the use of
Shared Assets by the Operators in accordance with this Agreement.
(ii) CSXT or NSR, directly or through their respective
affiliates, may perform the work which CRC performed prior to the date
of this Agreement when (A) CRC does not possess the skills needed for
such work, (B) CRC lacks the necessary employees to do such work in a
timely fashion, or (C) CRC does not possess the equipment needed to do
such work. CRC and the party performing the work shall agree to a
reasonable fee for such work prior to performance. CRC, CSXT and NSR may
agree to have additional work performed either by CSXT, NSR or their
affiliates.
(b) CRC Program Maintenance.
(i) The General Manager shall prepare and submit to the
CRC Board a Program Maintenance plan concurrently with the submission of
an Operating Budget and the Capital Expenditure Budget to the CRC Board.
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(ii) Any of CRC, CSXT or NSR may at any time deliver a
Program Maintenance Proposal to the other two of them and to the General
Manager and each member of the CRC Board.
(iii) The CRC Board shall either (A) approve any or all
of such Program Maintenance Proposals and plan with such changes as it
deems appropriate, include the costs thereof in a pending or amended
Capital Expenditure Budget, and direct the General Manager to cause the
maintenance described in approved Program Maintenance Proposals or plan
to be performed in accordance with Sections 5(b)(iv) and (v), or (B)
disapprove any or all of such Program Maintenance Proposals or plan.
(iv) Program Maintenance shall be the responsibility of
CSXT and NSR pursuant to contracts or arrangements with CRC, and CRC
shall not perform Program Maintenance, except for Program Maintenance
which can be provided by Persons other than CSXT or NSR at a lower cost
to CRC than the CSXT or NSR cost thereof.
(v) CRC shall select, to perform each Program
Maintenance project or program, the Operator which CRC reasonably
determines will perform such project or program at the least cost to CRC
consistent with safe and efficient operations, and taking into account
scheduling considerations, based on written proposals submitted by each
Operator.
(c) Maintenance Standards. Unless otherwise authorized by the CRC
Board, the General Manager shall prepare and submit to the CRC Board proposals
(including the Program Maintenance plan submitted pursuant to Section 5(b)) for
the performance of such Routine Maintenance and Program Maintenance as is
reasonably necessary to keep and maintain the Shared Assets substantially in
their condition as of the date of this Agreement. If the CRC Board fails either
to approve or disapprove by majority vote any such proposal within 45 days after
it was submitted to the CRC Board, the disagreement over the propriety or need
for any of the Routine Maintenance or Program Maintenance included in such
proposal may be submitted by either Operator for resolution by binding
arbitration pursuant to Section 13.
Section 6 Capital Improvements. Except as provided in Section
5, all capital improvements involving Shared Assets shall be governed by the
following provisions:
(a) Proposed Projects. Either Operator, CRC or the General
Manager may propose to the CRC Board from time to time capital improvement
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projects. Each such project shall be reviewed by the CRC Board, which may
approve or disapprove by majority vote, or fail to approve, such projects.
(b) CRC Board Approved Projects. Each Operator shall be
responsible for an equal share of the initial budgeted funding of each capital
improvement project which has been approved by the CRC Board and is included in
an approved Capital Expenditure Budget, except as provided in Section 6(c). A
final accounting shall be made to adjust the initial budgeted funding to the
actual project cost as specified in the Accounting Plan.
(c) Nonseverable Improvement Projects.
(i) At the written request of an Operator delivered to
the other, each Operator shall, within 45 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
proposal with respect to a Nonseverable Improvement project which was
neither approved nor disapproved by majority vote by the CRC Board
within 45 days after such project was proposed to the CRC Board (A)
describing any changes which such Operator proposes be made to such
project and specifying a schedule, budget and allocations between the
Operators of initial capital costs of such Nonseverable Improvement, or
(B) proposing that it not be made.
(ii) The arbitrator receiving the proposals referred to
in Section 6(c)(i) (A) shall consider (1) the degree, if any, to which
the construction, operation and use of such Nonseverable Improvement
would impair or interfere with the use of Shared Assets by CRC or either
Operator, or conflict with any pending capital improvements included in
an approved Capital Expenditure Budget, and (2) the budget and
allocations between the Operators of initial capital costs of such
Nonseverable Improvement as proposed by each Operator, and (B) shall
determine within 45 days of such receipt which of such proposals shall
be implemented, or that such Nonseverable Improvement shall not be made,
and the CRC Board shall approve any proposal which such arbitrator
determines shall be implemented.
(d) Severable Improvement Projects.
(i) Each Operator shall have the unilateral right to
construct and exclusively fund any Severable Improvement which was not
approved by the CRC Board.
(ii) Each Severable Improvement funded exclusively by
an Operator shall be used exclusively by that Operator, which shall be
solely responsible for maintaining such Severable Improvement at its own
expense, until such time that the other Operator gives written notice
that it desires also to use such Severable Improvement, stating the
amount which such other Operator is prepared to pay to the Operator
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which initially funded such Severable Improvement for the right to use
such Severable Improvement.
(iii) If the Operators are unable to agree on the amount
of such payment within 45 days after the notice referred to in Section
6(d)(ii) was given, then at the written request of an Operator delivered
to the other after 45 days but before 60 days after such notice was
given, each Operator shall, within 15 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
statement setting forth the proposed payment by the second Operator, and
the arbitrator shall within 45 days of such receipt determine which of
such proposed amounts shall apply, which shall be binding on both
Operators and paid promptly.
(iv) Such Severable Improvement shall become a
Nonseverable Improvement at the time such second Operator pays the
amount so determined and, thereafter, maintenance and other costs
associated with the operation of such improvement shall be apportioned
between the Operators as provided in this Agreement.
(e) Capital Improvements as Shared Assets. Upon completion, all
capital improvements approved by the CRC Board and all Nonseverable Improvements
shall become part of the Shared Assets owned by CRC subject to all provisions of
this Agreement, free and clear of all Operator liens.
(f) Title to Severable Improvements. Each Operator shall retain
title to all Severable Improvements exclusively funded by such Operator. At any
time during the term of this Agreement, an Operator may remove (at its sole
expense) any Severable Improvement which it exclusively funded, provided that
such Operator has repaired (at its sole expense) any damage to a Shared Asset
caused by such removal and has restored the related Shared Assets substantially
to their condition at the time such Severable Improvements were made. In the
event an Operator shall not have removed any Severable Improvement to which the
Operator shall have title prior to the expiration or termination of this
Agreement, title to such Severable Improvement shall vest in CRC, free and clear
of all Operator liens, upon such expiration or termination.
(g) Noninterference. The construction, operation and use of
Severable Improvements by an Operator shall not impair or interfere with the use
of Shared Assets by CRC or the other Operator, nor shall any Severable
Improvement conflict with any pending capital improvements included in an
approved Capital Expenditure Budget.
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(h) Switch Connections. CRC shall, upon the written request of
one or both Operators, provide for switch and turnout connections from Shared
Asset tracks to a private sidetrack owned by a shipper or other Person, if such
request:
(i) includes the commitment of the Operator or both
Operators making such request, or
(ii) is accompanied by a written undertaking from such
shipper or other Person,
in each case satisfactory to CRC, to pay to CRC all costs incurred from time to
time by CRC to provide for such switch and turnout connections within 30 days
after it delivers a bill for such costs to such Operator, Operators, shipper or
other Person.
(i) Adjacent Improvements.
(i) In the event an Operator constructs, acquires or
funds the cost of an Adjacent Improvement (whether or not such Adjacent
Improvement is ultimately owned by such Operator), the other Operator
shall be entitled to share usage of such Adjacent Improvement by giving
written notice stating the amount which such other Operator is prepared
to pay to the first Operator for such right. If the Operators are unable
to agree on the amount of such payment within 45 days after such notice
was given, then at the written request of an Operator delivered to the
other after 45 days but before 60 days after such notice was given, the
matter shall be submitted for resolution by binding arbitration pursuant
to Section 13 and the provisions of Section 6(d)(iii) shall apply to
determine the amount of such payment.
(ii) After the second Operator pays the amount so
determined, if the first Operator owns or has a property interest in the
Adjacent Improvement, the provisions of this Section 6 shall be applied
as if such improvement were a Nonseverable Improvement. If a shipper or
another Person unrelated to the first Operator owns such Adjacent
Improvement, the second Operator shall be entitled to share fully the
rights of the first Operator in connection with such Adjacent
Improvement in consideration of the initial payment.
(j) Operator's Facilities. The foregoing provisions of this
Section 6 shall not apply to any capital improvement (including, but not limited
to, a transloading facility or automotive ramp) within an Operator's Facility.
Section 7 Accounting.
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(a) Books of Record and Account. CRC shall keep proper books of
record and account, in which full and correct entries shall be made of all CRC
transactions, costs, expenses and revenues in accordance with GAAP and the USOA,
as modified by the Accounting Plan. All expense and revenue transactions related
to the Shared Assets Area shall be readily identifiable by distinct accounting
codes.
(b) Financial Statements. CRC shall deliver to each Operator (i)
within 30 days after the end of each calendar month, a summary income statement
and a summary balance sheet showing as of the last day of and for such calendar
month, major categories of CRC revenue, expense, assets and liabilities, (ii)
within 30 days after the last day of each CRC fiscal quarter, interim financial
statements as of and for the fiscal quarter ended on such day, similar to
statements described in Rule 10-01 of Regulation S-X under the Securities
Exchange Act of 1934, as amended, as modified by the Accounting Plan, and (iii)
within 30 days after the last day of each CRC fiscal year, statements of income
and cash flow and a balance sheet as of and for the fiscal year ended on such
day, prepared in accordance with GAAP and the USOA, as modified by the
Accounting Plan.
Section 8 Costs and Budgets.
(a) CRC Costs. CRC shall pay (and, except for Excluded Taxes,
CSXT and NSR shall, pursuant to Section 9, reimburse CRC for) all of the costs
and expenses to maintain its ownership of the Shared Assets and to operate and
maintain the Shared Assets, including but not limited to all Taxes and
assessments, licenses, permits and any other governmental authorizations
required to own, operate and maintain the Shared Assets, the principal of and
interest and premium, if any, on, and all other costs of, its indebtedness and
all other costs of its capital.
(b) Employee Cost Reimbursement. CRC shall reimburse CSXT and NSR
for the wages, pro rata portion of fringe benefits, other direct employment
costs (including additives) and other actual employee-related costs of any CSXT
or NSR employee, respectively, who provides Temporary Services.
(c) Capital Expenditure Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each CRC fiscal year, a Capital Expenditure Budget for such fiscal year,
specifying for such year the schedule of Program Maintenance and Shared
Asset capital improvements to be performed and constructed for the
benefit of both Operators during such fiscal year and the months therein
during which such expenditures are proposed to be made, for approval, or
modification and approval, by the CRC Board.
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(ii) The General Manager shall not permit any capital
expenditure to be made by CRC, CSXT or NSR except in accordance with the
Capital Expenditure Budget in effect from time to time, Severable
Improvements exclusively funded by an Operator and emergency capital
expenditures made (A) to preserve, or to mitigate a serious diminution
in, the value and usefulness of a Shared Asset to CRC, CSXT and NSR, or
(B) to prevent or mitigate a serious disruption in the operation and use
of the Shared Assets by or for CRC, CSXT or NSR.
(iii) Any Capital Expenditure Budget may be amended in
writing at any time by the CRC Board.
(d) Operating Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each fiscal year of CRC, an Operating Budget for such fiscal year
showing the budget amounts of revenues and expenses for each month
during such fiscal year, for approval, or modification and approval, by
the CRC Board.
(ii) The General Manager shall use all reasonable
efforts to prevent CRC expenses with respect to Shared Assets for a
period from exceeding the amounts shown on the Operating Budget for such
period.
(iii) The General Manager shall give prompt written
notice to each member of the CRC Board of any actual or, in the judgment
of the General Manager, probable, material change in the revenues,
expenses or working capital requirements shown on the Operating Budget
for any period.
(iv) Any Operating Budget may be amended in writing at
any time by the CRC Board.
Section 9 Cost Sharing.
(a) Accounting Plan. The parties shall develop and implement a
written plan of accounting containing a detailed description, by category of
cost and location, of the costs associated with the management and operation of
the Shared Assets Area and the method by which such costs shall be fairly and
properly apportioned among the parties. Such plan of accounting may include
separate accounting and sharing of costs for particular Zones, and shall conform
to the following general principles:
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(i) Forty two percent (42%) of Interest Rental shall be
apportioned to CSXT and fifty eight percent (58%) of Interest Rental
shall be apportioned to NSR;
(ii) Locomotive ownership, lease, fueling, light repair
and servicing costs incurred by CRC within the Shared Assets Area or
each Zone (except costs incurred by CRC and charged directly to an
Operator pursuant to Section 4(c)) shall be apportioned between the
Operators on the basis of the CRC Train Usage Percentages;
(iii) Crew compensation and other crew costs incurred by
CRC within the Shared Assets Area or each Zone with respect to CRC
Trains shall be apportioned between the Operators on the basis of the
CRC Train Usage Percentages;
(iv) General and administrative, supervisory and
overhead expenses incurred by CRC within the Shared Assets Area or for
functions related to the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(v) Dispatching and train control costs (including,
without limitation, labor, equipment, materials and maintenance
expenses) incurred by CRC with respect to the Shared Assets Area shall
be apportioned between the Operators on the basis of the CRC Train Usage
Percentages;
(vi) Police and other costs incurred by CRC with respect
to security within the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(vii) Damage paid by CRC pursuant to Section 11(c) shall
be apportioned between the Operators in accordance with Section 11(b);
(viii) All other costs incurred by CRC with respect to the
Shared Assets Area or each Zone (except Taxes and insurance) shall be
apportioned between the Operators on the basis of the Total Train Usage
Percentages;
(ix) Taxes (other than Excluded Taxes) incurred by CRC
with respect to the Shared Assets Area or each Zone shall be apportioned
between the Operators on the basis of the Operator's Expense Percentages
for the period to which such Taxes relate; and
(x) Insurance costs incurred by CRC with respect to
Shared Assets within the Shared Assets Area or each Zone shall be
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apportioned between the Operators on the basis of the Operator's Expense
Percentages for the period to which such insurance costs relate;
If the parties are unable to agree on the terms and provisions of the Accounting
Plan, such disagreement may be submitted by either Operator for resolution by
binding arbitration pursuant to Section 13.
(b) Usage Statement. CRC shall deliver to each Operator prior to
the last day of each calendar month, a written statement showing for the prior
Billing Month:
(i) the total number of loaded and empty Railcars in
the account of each Operator in CRC Trains which performed Switching and
Yard Services or operated directly between customer facilities in each
Zone;
(ii) the total number of loaded and empty Railcars moved
by or for such Operator in Operator Trains which operated overhead or
directly to Jointly-Operated Facilities, Operators' Facilities or
customer facilities in each Zone;
(iii) the calculation of the CRC Train Usage Percentage
and the Total Train Usage Percentage for each Operator for each Zone,
and (A) all Railcars in a train shall be deemed to be on Shared Assets when the
first or last Railcar of such train is on Shared Assets and (B) each time that a
Railcar is removed from or added to a train in the Shared Assets Area shall
constitute a separate movement of such Railcar.
(c) Expense Statement. Concurrently with the delivery of each
Usage Statement to the Operators, CRC shall deliver to the Operators a statement
showing (i) the expenses incurred by CRC to own, operate and maintain the Shared
Assets during the Billing Month, (ii) the revenues, if any, derived by CRC from
the ownership and operation of the Shared Assets during such Billing Month, and
(iii) the Reimbursable Expenses for such Billing Month, in each case computed in
accordance with GAAP and the USOA, as modified by the Accounting Plan.
(d) Capital Expenditure Statement. Concurrently with the delivery
of each Usage Statement to the Operators, CRC shall deliver to the Operators a
statement showing the estimated Budgeted Capital Expenditures for the calendar
month immediately succeeding the calendar month in which such statement is
delivered.
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(e) Bills. Concurrently with the delivery to the Operators of a
Usage Statement for a Billing Month, CRC shall deliver to each Operator a bill
(a "Bill") showing for such Billing Month:
(i) one hundred and two percent (102%) of the amount of
each Reimbursable Expense apportioned to such Operator for such Billing
Month under the Accounting Plan;
(ii) one-twelfth of fifty percent (50%) of the annual
amount of Budgeted Capital Expenditures approved by the CRC Board; and
(iii) one-twelfth of the Interest Rental apportioned to
such Operator.
(f) Payment. Each Operator shall pay to CRC the amount shown on
each Bill as being payable by such Operator, on or before the 30th day after the
date of such Bill regardless of whether or not such Operator disputes the
accuracy of any amount or calculation shown on such Bill.
(g) Disputed Bills.
(i) Any dispute by an Operator of the accuracy of any
amount or calculation shown on any Bill shall be described and specified
in reasonable detail in a Dispute Letter from such Operator to CRC and
the other Operator within two years after the date of such Bill.
(ii) Any amounts or calculations shown on any Bill which
are not disputed in accordance with Section 9(g)(i) shall conclusively
be deemed to be accurate and shall be binding on each Operator and CRC.
(iii) CRC and both Operators shall promptly endeavor to
resolve the disputes described in each Dispute Letter, and if they fail
to agree to a resolution of such disputes within 60 days of the delivery
of such Dispute Letter to CRC, then the firm of independent public
accountants which has been engaged as auditors for CRC shall be engaged
to resolve such disputes in accordance with GAAP and the USOA, as
modified by the Accounting Plan, and the written resolution of such
disputes signed by such accounting firm shall be binding on each
Operator and CRC.
(iv) Any adjustments to Bills which result from the
resolution of Dispute Letter disputes shall be reflected as charges or
credits on the first Bills delivered by CRC to the Operators after such
disputes have been resolved.
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(v) The fees in connection with the resolution of any
Dispute Letter disputes of the accounting firm which has been engaged as
auditor for CRC shall be paid fifty percent (50%) by CSXT and fifty
percent (50%) by NSR.
Section 10 Access. CRC shall give to each Operator during
normal CRC Administrative Office business hours, access to inspect and make
copies of any and all books of record and accounts relating to this Agreement,
all of which shall be maintained by CRC at the CRC Administrative Office.
Section 11 Liability. Except as otherwise provided in Section
3(l) (Freight Claims), Section 11(f) (Specified Level Damages) and Section 11(g)
(Substance Abuse Exceptions), the responsibility between and among CRC, CSXT and
NSR for all Damage arising out of, incidental to or occurring in connection with
this Agreement shall be apportioned without consideration of fault or negligence
of any kind or degree in accordance with the remaining provisions of this
Section 11. The provisions of this Section 11 are intended to inure only to the
benefit of the parties hereto and their corporate successors and affiliates, and
not to create any benefits for any third parties.
(a) Operators' Sole Responsibility. Except as otherwise provided
in Section 11(f) (Specified Level Damages) and Section 11(g) (Substance Abuse
Exceptions), each Operator shall assume and bear all responsibility for Damage
to its own trains, locomotives and equipment, to Railcars and lading in its
possession or being handled for its account and for the death of or injury to
its own employees.
(b) Operators' Joint Responsibility.
(i) Train Usage. Except as otherwise provided in (1)
Section 11(b)(ii) (First Year), (2) Section 11(a) (Operators' Sole
Responsibility), (3) Section 11(c)(i) (CRC Damages Generally), (4)
Section 11(c)(ii)(B) (No Reallocation for Insurance), (5) Section 11(f)
(Specified Level Damages), and (6) Section 11(g) (Substance Abuse
Exceptions), and subject to Section 11(c)(ii)(A) (Net of Insurance), all
Damage shall be apportioned between the Operators in proportion to their
respective Total Train Usage Percentages in the Zone in which the
incident giving rise to such Damage occurred for the 12 calendar month
period immediately preceding the incident giving rise to such Damage.
(ii) First Year. If an incident giving rise to Damage
for which the Operators are jointly responsible under Section 11(b)(i)
(Train Usage) occurs before June 1, 2000, responsibility for such Damage
shall be borne equally by the Operators, with each being liable for
one-half (1/2) of the damages.
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(c) CRC Responsibility - Allocation and Insurance.
(i) CRC Damages Generally. Except as otherwise provided
in this Section 11(c), all Damages incurred by CRC, including, without
limitation, those Damages apportioned to CRC under Section 11(f)
(Specified Level Damages) shall be CRC expenses, allocated as provided
in Section 11(b) (Operators' Joint Responsibility), and included in
Expense Statements charged to the Operators.
(ii) (A) Net of Insurance.
(1) Notwithstanding any other provision in
this Agreement (but subject to Section 11(c)(ii)(B) (No
Reallocation for Insurance)), all Damages (including
without limitation, loss or destruction of, or damage to,
CRC's own property) charged to the Operators, under the
Expense Statements or otherwise, shall be net of any CRC
insurance. It is the intent of the parties (a) for CRC to
look first to any insurance proceeds available to it
before attempting to recover any such Damages from the
Operators and (b) for the Operators' obligation to make
direct payment to CRC not to include any obligation to
make direct payment for any Damages covered by insurance
procured by or on behalf of CRC.
(2) If and to the extent that CRC is an
insured under, or otherwise provided coverage under, an
insurance policy or policies each of which provides
coverage for both CRC and one Operator but not the other
Operator, and regardless of whether two or more of these
policies shall be in existence or have different
deductible-retention amounts and/or limits of recovery,
then the amount of insurance proceeds deemed "available"
under Section 11(c)(ii)(A)(1) to which CRC shall look
before either Operator shall have any obligation for
direct payment shall, as to each Operator, be the maximum
available limit of the insurance providing coverage for
both that Operator and CRC.
(B) No Reallocation for Insurance. When part of the
apportioned Damage will be satisfied from insurance coverage
under this Section 11(c), and part paid directly by the Operator,
the insured portion of the Damage shall be apportioned among or
between CRC and the Operators (and consequently between or among
their insurers) in the same manner and amounts as it would have
been apportioned if the loss were not net of insurance. If any
such allocation results in one party hereto suffering a greater
uninsured loss than the other(s) because of differing deductibles
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or self-retentions, that difference in coverage shall not be a
basis for any reapportionment or reallocation of Damage.
(d) Process. Each Operator shall be responsible for the payment,
handling, administration and disposition of all Damage for which it bears
exclusive responsibility under Section 11(a) (Operators' Sole Responsibility),
and both Operators shall have joint responsibility for the payment, handling,
administration and disposition of all Damage for which they are jointly
responsible under Section 11(b) (Operators' Joint Responsibility) and Section
11(c) (CRC Responsibility - Allocation and Insurance). In assigning joint
responsibility to both Operators, it is not the intent of this Agreement that
the Operators will actually act jointly, but rather that the Operators will
agree between themselves on the most practical and efficient arrangements for
handling, administering, and disposing of Damage for which they bear joint
responsibility, with the objective of eliminating unnecessary duplication of
effort and minimizing overall costs.
(e) Indemnification. Each party to this Agreement covenants and
agrees to (i) fully indemnify and save harmless the other parties to this
Agreement from and against any payments which are the responsibility of such
party under this Agreement, and all expenses, including attorneys' fees and
expenses and other expenses of any court or regulatory proceeding, incurred by
such other parties in defending any claim that they are liable for such
payments, and (ii) defend such other parties against such claims with counsel
selected by such party and reasonably acceptable to such other parties.
(f) Specified Level Damages.
(i) Damages Amount. Section 11(a) (Operators' Sole
Responsibility) and Section 11(b) (Operators' Joint Responsibility)
shall apply directly only when the total amount of all Damages resulting
from a single incident is $25 million or less. Responsibility for
Damages resulting from a single incident for which Damages exceed $25
million shall be allocated as stated in this Section 11(f)(i).
(A.1) Tier One Damages Defined. In this Section
11(f), "Tier One Damages" for any incident occurring during and
between June 1, 1999 and May 31, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
the greater of:
(1) $25 million of Damages; or
(2) the lowest amount of Damages which, when
allocated among all parties, results in an allocation to
either Operator of Damages in an amount equal to all
insurance benefits available to that Operator (called the
- 28 -
<PAGE>
"Lesser Insured Operator") which has the lesser (as
between the Operators) amount of insurance benefits
available to it, including, without limitation, insurance
to which CRC looks under Section 11(c) (CRC Responsibility
- Allocation and Insurance). In determining insurance
benefits available to the Lesser Insured Operator, both
property and liability insurance shall be considered but
(I) only to the extent benefits are actually available in
connection with that incident and (II) they shall be
calculated separately (i.e., property insurance benefits
shall not be considered in any determination of available
liability insurance benefits and vice versa).
In this Section 11(f), "Tier One Damages" for any incident
occurring on or after June 1, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
only the first $25 million of Damages incurred by the parties,
unless otherwise agreed by the parties.
(A.2) Allocation of Tier One Damages. Tier One
Damages shall be allocated among the parties as follows:
(1) Any Damage for which each Operator would
otherwise be solely responsible under Section 11(a)
(Operators' Sole Responsibility) shall be allocated as
provided in Section 11(a);
(2) Any and all CRC Damages other than those
specified in preceding Section 11(f)(i)(A.2)(1)
(including, without limitation, Damage to its trains,
locomotives and equipment, whether owned or leased, to
Railcars and lading in its possession or being handled for
its account, and to the property of any others, as well as
any Damage arising from or in connection with the death of
or injury to any persons, including, without limitation,
its own employees) shall be allocated and paid as provided
in Section 11(c) (CRC Responsibility - Allocation and
Insurance); and
(3) Any and all other Damages shall be
allocated as provided in Section 11(b) (Operators' Joint
Responsibility).
(B.1) Tier Two Damages Defined. In this Section
11(f), "Tier Two Damages" shall include (1) those Damages
allocated to Tier Two under Section 11(g) (Substance Abuse
Exceptions) and (2) all of those Damages in excess of the
aggregate Tier One Damages calculated under Section
11(f)(i)(A.1).
- 29 -
<PAGE>
(B.2) Allocation of Tier Two Damages. Tier Two
Damages shall be allocated between or among the parties hereto in
proportion to their respective fault or negligence in causing the
Damage.
(ii) Dispute Resolution. Any dispute between or among
the parties hereto in determining their respective fault or negligence
in causing the Damage or otherwise relating to their respective
responsibilities for Damage arising out of, incidental to or occurring
in connection with any incident shall be submitted for resolution by
binding arbitration pursuant to Section 13 (Arbitration).
(iii) Amendment of Certain Amounts. The $25 million
amount referred to in this Section 11(f) may be adjusted every five
years following the date of this Agreement with the prior approval of
all parties, which approval may be given or refused in the sole
discretion of each party.
(g) Substance Abuse Exceptions. Each Operator shall assume and
bear all responsibility for Damage to the extent caused by acts or omissions of
any of its employees while under the influence of drugs or alcohol, and Sections
11(b) (Operators' Joint Responsibility) and Section 11(f) (Specified Level
Damages) shall not apply to any such Damage. If, but for the operation of this
Section 11(g), all or any Damages from an incident would otherwise have been
Tier One Damages under Section 11(f) (Specified Level Damages), the portion of
the Damages caused by acts or omissions of any the employee(s) while under the
influence of drugs or alcohol shall be Tier Two Damages, and allocated under
Section 11(f)(i)(B.2) (Allocation of Tier Two Damages), and the remaining
portion of the Damages from that incident shall be included in, and allocated
under, Tier One or Tier Two under the otherwise applicable provisions for
Section 11(f)(i).
(h) Transaction Agreement. Section 2.8 of the Transaction
Agreement shall control any conflict between Sections 11(b) and (c) and said
Section 2.8.
(i) Damages. As used in this Section 11 only, the term
"Damage(s)" shall exclude:
(i) Operator Consequential Damages (which are always
borne by the Operator which sustained them); and
(ii) any claim by any party, in its own right, against
any other party for exemplary or punitive damages, but not for
allocation under this Section 11 of exemplary or punitive damages
claimed against that party by a third person not a party hereto.
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<PAGE>
With regard to exemplary and punitive Damages the parties acknowledge and agree
that, with regard to the subject of this Agreement, the intent and agreement of
the parties is that no party shall bring or recover any claim for exemplary or
punitive damages, in its own right, against any other party, but that any party
will allocate, in accordance with this Section 11, exemplary or punitive Damages
from any claim against it by a third person not a party hereto.
Section 12 No Partnership. Nothing in this Agreement shall be
construed to establish a partnership or joint venture between or among CRC, CSXT
or NSR or any of their affiliates or associates.
Section 13 Arbitration. Any dispute, controversy or claim (or
any failure by the parties to agree on a matter as to which this Agreement
expressly or implicitly contemplates subsequent agreement by the parties, except
for matters left to the sole discretion of a party) arising out of or relating
to this Agreement, or the breach, termination or validity hereof, shall be
finally settled through binding arbitration by a sole, disinterested arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall be jointly selected by the parties but, if the
parties do not agree on an arbitrator within 30 days after demand for
arbitration is made by a party, they shall request that the arbitrator be
designated by the American Arbitration Association. The award of the arbitrator
shall be final, binding and conclusive upon the parties. Each party to the
arbitration shall pay the compensation, costs, fees and expenses of its own
witnesses, experts and counsel. The compensation and any costs and expenses of
the arbitrator shall be borne equally by the parties. The arbitrator shall have
the power to require the performance of acts found to be required by this
Agreement, and to require the cessation or nonperformance of acts found to be
prohibited by this Agreement. The arbitrator shall not have the power to award
consequential or punitive damages. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof, which court may award
appropriate relief at law or in equity. All proceedings relating to any such
arbitration, and all testimony, written submissions and award, of the arbitrator
therein, shall be private and confidential as among the parties, and shall not
be disclosed to any other Person, except as required by law and except as
reasonably necessary to prosecute or defend any judicial action to enforce,
vacate or modify such arbitration award.
Section 14 Term. This Agreement shall become effective as of
the date first above written and shall remain in effect until the twenty-fifth
(25th) anniversary of such date, subject to the right of CSXT and NSR to agree
prior to the twenty-third (23rd) anniversary of such date to extend this
Agreement for a renewal period of five (5) years; and if so extended, to agree
prior to the twenty-eighth (28th) anniversary of such date to further extend
this Agreement for an additional renewal period of five (5) years (each such
period, a "Renewal Term").
- 31 -
<PAGE>
Section 15 Force Majeure. The obligations, other than payment
obligations, of the parties to this Agreement shall be subject to force majeure
(which shall include strikes, riots, floods, accidents, Acts of God, and other
causes or circumstances beyond the control of the party claiming such force
majeure as an excuse for non-performance), but only as long as, and to the
extent that, such force majeure shall prevent performance of such obligations.
Section 16. Entire Agreement. This Agreement and the Transaction
Agreement, including the other Ancillary Agreements (as defined in the
Transaction Agreement) constitute the entire agreement and supersede all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except the letter agreement dated
April 8, 1997 between CSX and NSC to the extent such April 8, 1997 letter
agreement covers matters not addressed or amended hereby or in the Transaction
Agreement or the Ancillary Agreements (as defined in the Transaction Agreement);
provided that it is the intent of the parties that this Agreement shall be an
effectuation of such April 8, 1997 letter agreement consistent with its terms,
and that the provisions of this Agreement shall be interpreted to give effect to
such April 8, 1997 letter agreement; and provided further that, in the event of
any inconsistency between the terms of this Agreement and such April 8, 1997
letter agreement, this Agreement shall prevail.
Section 17 Amendment and Waiver. Any amendment to this
Agreement must be in writing and executed and delivered by CRC, CSXT and NSR,
subject to any jurisdiction of the STB. Any waiver of any term or provision of
this Agreement must be in writing and executed and delivered by the party
entitled to enforcement of such term or provision.
Section 18 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, such provision is intended to be ineffective only to the most limited
extent possible in such context and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 19 Remedies.
(a) Entitlement to Certain Remedies. Each party acknowledges and
agrees that the other parties would be irreparably damaged in the event any of
the provisions of this Agreement were not performed by it in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
each party shall be entitled to an injunction or injunctions to prevent breaches
of such provisions and to specifically enforce such provisions, in addition to
any other remedy to which such party may be entitled, at law or in equity.
- 32 -
<PAGE>
(b) Preclusion of Certain Remedies. In no event shall any party
be liable to the other parties for any consequential, indirect, incidental,
punitive or other similar damages including, but not limited to, lost profits
for any breach or default, or any act or omission arising out of or in any way
relating to this Agreement, under any form or theory of action whatsoever,
whether in contract, tort or otherwise. The foregoing is not intended to alter
or limit the allocation of responsibility for Damage as provided in Section 11.
Section 20 Interpretation. This Agreement was drafted jointly
by CSXT and NSR, each of which was advised by its own counsel and other advisors
concerning all of the terms and provisions hereof; accordingly, any ambiguity
herein should not be construed in favor of or against any of them.
Section 21. Headings. Headings of Sections and paragraphs in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of any term or provision of this Agreement.
Section 22 Parties. This Agreement shall inure to the benefit
of and be binding upon CRC, CSXT and NSR and any successor of any of them by
operation of law, and any assignee agreed to by them in accordance with Section
23, and nothing in this Agreement is intended or shall be construed to give any
other Person any legal or equitable right, remedy or claim under or with respect
to this Agreement or any term or provision hereof.
Section 23. Assignment.
(a) Limitation. Except as provided in Section 23(b), neither this
Agreement (including the documents and instruments referred to herein) nor any
of the rights, interests or obligations hereunder, shall be assigned by any
party, including by operation of law, without the prior written consent of the
other parties (except to a controlled subsidiary), which consent may be given or
refused in the sole discretion of each party.
(b) Successor. Any party without the consent of the other parties
may assign all of its rights and obligations under this Agreement only to any
successor in the event of a merger, consolidation, sale of all or substantially
all its assets (but only if such sale includes all routes and lines owned by
such party to access the Shared Assets), if such assignee executes and delivers
to the other parties hereto an agreement reasonably satisfactory in form and
substance to such other party under which such assignee, which is reasonably
satisfactory to the other party, assumes and agrees to perform and discharge all
the obligations and liabilities of the assigning party; provided that any such
- 33 -
<PAGE>
assignment shall not relieve the assigning party from the performance and
discharge of such obligations and liabilities.
Section 24. Notices. Any notice given by CRC, CSXT or NSR to the
others under this Agreement shall be deemed delivered on the date sent by
registered mail, or by such other means as they may agree, and shall be
addressed to them as follows:
(A) If to CSXT:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(B) If to NSR:
Senior Vice President Operations
Norfolk Southern Railway Company
Three Commercial Place
Norfolk, Virginia 23510-2191
(C) If to CRC:
President and Chief Executive Officer
Consolidated Rail Corporation
2001 Market Street
Two Commerce Square
Philadelphia, Pennsylvania 19101
and each of them may from time to time change its address in this Section 24 by
written notice delivered to the others.
Section 25. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without regard to principles of conflicts of laws.
- 34 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in counterparts by their duly authorized officials as of the day
first above written.
CSX TRANSPORTATION, INC.
By: /s/PETER J. SHUDTZ
------------------
Peter J. Shudtz
Title: Vice President - Law and General
Counsel - CSX Corporation,
authorized agent for CSX
Transportation, Inc.
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/J. L. MANETTA
----------------
J. L. Manetta
Title: Senior Vice President Operations
CONSOLIDATED RAIL CORPORATION
By: /s/TIMOTHY O'TOOLE
------------------
Timothy O'Toole
Title: President
- 35 -
<PAGE>
EXHIBIT A
OPERATING PROTOCOLS
Consolidated Rail Corporation
Shared Assets Area
Terminal Capacity Guidelines
Yard Operations
o Cars loaded or empty moving outbound to either parent* company, which have
been made up for train departure at either a serving merchandise yard,
Automotive Terminal or jointly used Intermodal Facility will be considered
available at the published departure time for scheduled trains and the later
of 4 hours after notice to the parent or actual available time (set time)
for non-scheduled or extra trains. Cars remaining available for departure
in excess of ten (10) hours will be subject to a charge of $141.00 per car.
Thereafter, for every eight (8) hours that the same cars continue to remain
on track, along with all other cars of the same block codes within the
originating dispatch yard, will be subject to an additional charge of
$141.00 per car.
o Cars loaded or empty assembled for outbound train dispatch to either parent
company will be considered available at published departure time for such
scheduled trains. The Shared Assets Areas management will provide four (4)
hours advance notice prior to set time on non-scheduled or extra trains
before they will be considered available for departure.
o Management of Shared Assets Areas may refuse an inbound train of the same
category when a specific destination terminal has been holding more than one
(1) intermodal, automotive, manifest or unit train of a parent for power
and/or crew beyond ten (10) hours of scheduled departure or availability and
conditions within the involved destination terminal preclude the effective
handling of the offered inbound trains.
o Acts of God, Mainline blockages, labor strikes or other causes to a
cessation of consistent service beyond the control of a parent company will
be considered by the management of the Shared Assets Areas as to the
legitimacy of any assessment.
o Opportunities for the Shared Assets Areas management to consolidate
- ---------------------
*The term "parent" means CSXT and/or Norfolk Southern Railway Co. ("NSR") and is
not intended to describe the legal relationship between the parties.
1
<PAGE>
trains for the benefit of a specific Shared Assets Area operation and
the involved parent, as mutually agreed by the parties, will not result in
charges on cars designated for the annulled train resulting from said
consolidation.
o An inventory of hold cars awaiting disposition within any given Shared
Assets Area territory should not exceed thirty (30) cars per day for either
CSXT or NSR individually. The Shared Assets Areas management may elect to
limit receipt of inbound car flow from the delinquent parent for the
affected Shared Assets Areas territory, in accordance with the guidelines
for holding trains. Any loaded or empty car including those in unit train
consists carrying a "No Bill" status more than twenty-four (24) hours will
be assessed $10.00 per hour in excess thereof.
o Trains inbound to the Shared Assets Area territory must have proper car and
train documents. If this information is lacking, the Shared Area managers,
at their discretion, may hold trains outside the boundaries of the Shared
Assets Area until proper documentation is received.
o Regardless of company of employment, any qualified crew in the Shared Area
may operate any locomotive, regardless of ownership, in that area for the
purposes of positioning/hostling or movement of light power between yards.
Held Trains
o In recognition of terminal fluidity and capacity utilization, the Shared
Assets Areas management can require, in coordination with a parent's command
center, an inbound train to be held outside the boundaries of a Shared
Assets Area.
- Such notification must be given with enough notice for the parent to
chamber the train at a location that minimizes disruption to
operations.
- Decisions by the Director of Train Operations of Shared Assets Areas
management are final in this regard. Neither parent may compel the
Shared Assets Areas management to accept trains.
- Similarly, the decision to hold out a train other than temporary holds
is recognized as a serious action, which will be done only after all
other alternatives are exhausted. Data on these actions will be
maintained by Shared Assets Areas management and will be regularly
available for briefing to the Conrail's Board of Directors at its
pleasure.
2
<PAGE>
Storage
o Neither parent company may store or pre-position cars on Shared Assets
Area's tracks, including yard and industrial tracks to which they have
access. Empty cars routed to the Shared Assets Areas must have a customer
destination assigned, and must be loaded without beginning to accrue charges
as described in Conrail's Demurrage Tariff in effect on May 1, 1999. When it
is determined that cars cannot be delivered to the customer within 60 hours
of arrival, a call will be made to the parent's operations center. After
such a call is made, except in extraordinary cases, these cars will then be
placed on the parent's first available outbound train.
o CSXT and NS will independently establish such demurrage and car storage
arrangements with customers as each deems proper. Should customers keep or
store cars on SAA tracks beyond the time at which charges would begin to
accrue as called for in Conrail's Demurrage Tariff in effect on May 1, 1999,
then the parent road will be assessed $100 per car per day to cover the
operational cost of congestion and inefficient use of Shared Assets Areas
facilities.
o CSXT and NSR recognize that certain customers are currently provided car
storage within the Shared Asset Areas, and that this storage may be
essential to the functioning of the business of these customers. CSXT, NSR
and Shared Assets will review current pools and by consent of all three
parties approve their makeup and location based on operating efficiencies.
Thereafter pools will be regularly reviewed for the provision of such
storage to avoid congestion. Any request for additional car storage for any
Shared Assets Area customers must be approved by the Parents, who will
consider the availability of additional space with a view toward assuring
that operations in the Shared Assets Area remain fluid and will not be
affected by providing such car storage.
Interchange
o CSXT and NSR will not interchange cars to each other within the Shared
Assets Areas locations unless specifically provided through separate
agreements. No open interchanges have been established except at industries.
3
<PAGE>
Blocking
o To ensure the equal and fair use of the Shared Assets Area capacity by its
parent companies, the following car classification requirements will govern:
- Each parent company will be required to block inbound trains for the
Shared Assets Areas. Each parent will make the number of blocks called
for in the split-date Operating Plan. Failure to comply with inbound
blocking requirements and execute appropriate setoffs (unless otherwise
directed by Shared Assets
management) within the Shared Assets Area will result in an assessment
of $50.00 per loaded or empty car.
- Management of the Shared Assets Areas will be required to block outbound
trains. Parent companies will receive the number of blocks at each
Shared Assets Area terminal that is called for in the split-date
Operating Plan.
- Changes to the number of blocks made by or delivered to a Shared Asset
terminal may be made only by mutual consent of all three parties.
- Parent companies, except by joint agreement, may not compel the Shared
Assets Areas management to make a greater number of blocks at any
terminal, beyond the number of called for in the split-date Operating
Plan.
- Each parent may change the definition of its own specific blocks
originating at a Shared Assets Area terminal.
Hours of Service and Recrews
o Train crews on parent trains approaching a Shared Assets Area must have
sufficient time to terminate in or exit the Shared Assets Areas before
hours-of-service laws require them to rest. Sufficient time is considered
the trains scheduled elapsed time to terminate in or pass through the Shared
Assets Area. The Shared Assets Areas management may grant an exception if
the train can make it to its destination without undue disruption.
o Shared Assets Areas shall have the option to provide T&E relief service for
any road train on the hours-of-service law, regardless of parent company.
- Such relief will be provided after coordination with the appropriate
parent's operations center indicating the involved parent will provide
no relief crew.
4
<PAGE>
- Recrews will be at the sole cost and expense of the parent whose train
is recrewed at full cost plus a $500 surcharge.
- If specific trains frequently require recrews, Shared Assets Areas
management may request the parent to change its schedule or slotting of
subject train with the right to repeatedly hold that train for a recrew
outside the Shared Assets Areas as set forth under the "held trains"
provision until such appropriate adjustments are made to the
non-conforming schedule.
- Data on trains recrewed will be maintained by Shared Assets Areas
management and will be regularly available for briefing to Conrail's
Board of Directors at its pleasure.
Charges
o The charges paid by either owner under these protocols will be made to a
Conrail "passive income" account, which will be administered by Conrail.
Changes
o These terminal capacity guidelines will be reviewed at the request of any of
the three parties (CSXT, NSR, and/or CSAO). Proposed changes are subject to
the arbitration provisions of the Shared Asset Area Operating Agreements in
the event CSXT and NSR cannot agree.
5
Exhibit 10.7
MONONGAHELA USAGE AGREEMENT
Dated as of June 1, 1999
By and Among
CSX TRANSPORTATION, INC.
NORFOLK SOUTHERN RAILWAY COMPANY
PENNSYLVANIA LINES LLC
NEW YORK CENTRAL LINES LLC
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................................4
Section 2. Description of Monongahela.......................................10
Section 3. Customer Service.................................................11
Section 4. Usage of Subject Trackage........................................11
Section 5. Miscellaneous Operations Provisions..............................12
Section 6. Car Hire.........................................................19
Section 7. Accounting Records...............................................19
Section 8. Repairs and Lading Adjustments...................................20
Section 9. Usage Charges....................................................21
A. Transportation Costs..........................................21
B. Other Usage Charges...........................................21
Section 10. Maintenance of the Monongahela..................................27
Section 11. Capital Improvements............................................29
Section 12. Labor Claims....................................................32
Section 13. Freight Claims..................................................32
Section 14. Liability.......................................................33
(a) Sole Responsibility ..........................................33
(b) NSR-CSXT Joint Responsibility.................................34
(c) Process.......................................................34
(d) Indemnification...............................................35
<PAGE>
Page
(e) Specified Level Damages.......................................35
(f) Exceptions....................................................36
(g) Damages.......................................................36
(h) Limitation....................................................37
Section 15. No Partnership..................................................37
Section 16. Arbitration.....................................................37
Section 17. Force Majeure...................................................39
Section 18. Entire Agreement................................................39
Section 19. Amendment and Waiver............................................40
Section 20. Severability....................................................40
Section 21. Remedies........................................................40
Section 22. Interpretation..................................................41
Section 23. Headings........................................................41
Section 24. Parties.........................................................42
Section 25. Assignment......................................................42
Section 26. Term............................................................43
Section 27. Termination of Other Agreements.................................45
Section 28. Notices.........................................................45
Section 29. Governing Law...................................................47
- ii -
<PAGE>
MONONGAHELA USAGE AGREEMENT
This Monongahela Usage Agreement ("Agreement") made this 1st day
of June, 1999, by and between NORFOLK SOUTHERN RAILWAY COMPANY, hereinafter
referred to as "NSR", PENNSYLVANIA LINES LLC, hereinafter referred to as "PRR",
and CSX TRANSPORTATION, INC., hereinafter referred to as "CSXT," and NEW YORK
CENTRAL LINES LLC, hereinafter referred to as "NYC";
WITNESSETH:
WHEREAS, all capitalized terms in this Agreement have the
respective meanings set forth in Section 1; and
WHEREAS, Consolidated Rail Corporation ("CRC") is a wholly owned
subsidiary of Conrail Inc. ("CRR"); and
WHEREAS, CSX Corporation ("CSX") owns all of the common stock of
and controls CSXT, Norfolk Southern Corporation ("NSC") owns all of the common
stock of and controls NSR, and CSX and NSC jointly control CRC; and
WHEREAS, pursuant to the Transaction Agreement, certain assets of
CRC have been allocated to PRR, which is a wholly-owned subsidiary of CRC, to be
operated by NSR under the terms of the NSR Operating Agreement; and
WHEREAS, NSR and CSXT have agreed, and the STB has approved in
Finance Docket No. 33388, that certain tracks comprising all the rail facilities
described in Section 2 of this Agreement (hereinafter "Monongahela"), shall be
allocated to PRR pursuant to the Transaction Agreement, and pursuant to the NSR
<PAGE>
Operating Agreement, be operated by NSR, and NSR shall control, operate and
maintain the Monongahela under this Agreement, provided, however, that NYC shall
have equal access, pursuant to the terms of this Agreement, through full use of
the Monongahela to all current and future customer facilities located on or
accessed from the Monongahela; and
WHEREAS, pursuant to the Transaction Agreement, certain assets of
CRC (including equal access to the Monongahela that is the subject of this
Agreement) have been allocated to NYC, which is a wholly-owned subsidiary of
CRC, to be operated by CSXT under the terms of the CSXT Operating Agreement; and
WHEREAS, pursuant to the CSXT Operating Agreement, NYC is
assigning to CSXT all of its rights and obligations to operate NYC's assets,
including all of its rights and obligations with respect to the Monongahela set
forth in this Agreement, and thus CSXT, pursuant to this Agreement and the CSXT
Operating Agreement, shall have all of the rights and obligations conferred by
or imposed under this Agreement during the term of the CSXT Operating Agreement;
WHEREAS, under provisions of this Agreement and the CSXT
Operating Agreement, CSXT, as the assignee of NYC, shall have equal access
through full use of the Monongahela to all current and future customer
facilities located on or accessed from the Monongahela; and
- 2 -
<PAGE>
WHEREAS, in accordance with the terms of this Agreement, NSR and
CSXT shall share all maintenance and other expenses as specifically described
herein which relate directly to the Monongahela on a joint usage basis; and
WHEREAS, NSR and CSXT shall be able to provide separately
transportation service to all customers on or accessed from the Monongahela and,
except as provided herein, no access fees shall be charged NYC for the joint
usage; provided, however, the Operating Fee payable by CSXT to NYC under the
CSXT Operating Agreement includes an arm's-length charge for the assignment by
NYC to CSXT of access to the Monongahela; and
WHEREAS, as provided herein, NSR and CSXT will work together to
develop the expansion of existing and future facilities serving customers
located on or accessed from the Monongahela; and
WHEREAS, NSR and CSXT are agreeable to such an arrangement under
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, covenants and
agreements set forth herein, and for good and valuable consideration, the
receipt and sufficiency of which is acknowledged, CSXT and NSR hereby agree as
follows:
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Section 1. Definitions.
For purposes of this Agreement, the following terms have the
following meanings:
(a) "AAA" means the American Arbitration Association.
(b) "AAR" means the Association of American Railroads.
(c) "Accounting Plan" means the plan of accounting adopted
pursuant to Section 9(B)(a).
(d) "Action" means any action, claim, suit, arbitration,
inquiry, subpoena, discovery request, proceeding or investigation by or before
any Governmental Entity.
(e) "Bill" means a bill delivered by NSR to CSXT pursuant to
Section 9(B)(e).
(f) "Billing Month" means the calendar month for which
information is shown on a Usage Statement.
(g) "Budgeted Capital Expenditures" means capital expenditures
included on a Capital Expenditure Budget which has been agreed upon by NSR and
CSXT.
(h) "CCBU" means CSXT's Cumberland Coal Business Unit, currently
headquartered in Cumberland, MD, or any successor thereof.
(i) "CSXT Operating Agreement" has the meaning set forth in the
Transaction Agreement.
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(j) "Capital Expenditure Budget" means a written budget
specifying proposed capital expenditures to be made on the Monongahela for the
periods of time specified in such budget and the proposed sources of the capital
required to make such expenditures.
(k) "Capital Expenditure Statement" means a statement delivered
by NSR pursuant to Section 9(B)(d).
(l) "Carpenter/Tobias Letter" means the letter agreement dated
April 28, 1998, concerning the operation of the Monongahela.
(m) "Damage(s)" means all assessments, fines, losses, damages,
liabilities, and costs and expenses related thereto, including, without
limitation, interest, penalties and attorneys' and consultants' fees and also
expressly including, without limitation, all liabilities arising after the
effective date hereof under the Federal Employers Liability Act, as amended, and
environmental laws.
(n) "Dispute Letter" means a letter delivered by CSXT pursuant to
Section 9(B)(g).
(o) "Expense Statement" means a statement delivered by
NSR pursuant to Section 9(B)(c).
(p) "GAAP" at any time means generally accepted accounting
principles in effect at such time.
(q) "Governmental Entity" means any federal, state, local or
foreign court, administrative agency or commission or other governmental or
regulatory authority or commission or any arbitration tribunal.
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(r) "Liabilities" means any and all debts, liabilities and
obligations of any kind whatsoever, whether or not accrued, contingent or
reflected on a balance sheet, known or unknown, absolute, determined,
determinable or otherwise, including, without limitation, those arising under
any law, rule, regulation, action, order or consent decree of any Governmental
Entity or any judgment in any Action of any kind or award of any arbitrator of
any kind and those arising under any contract.
(s) "Monongahela Train" means a train operated by NSR for NSR or
for CSXT and serving customers located on the Monongahela.
(t) "Monongahela Train Usage Percentage" means for either NSR or
CSXT, for a particular time period, the percentage obtained by multiplying 100
by the quotient obtained by dividing (1) the total number of loaded and empty
Railcars in the account of NSR or CSXT, as the case may be, that are in
Monongahela Trains, by (2) the sum of the total number of loaded and empty
Railcars in the accounts of both NSR and CSXT that are in Monongahela Trains,
during such period for each Zone.
(u) "Nonseverable Improvement" means a capital improvement which
is integral to the operation of the Monongahela and is not readily removable.
(v) "NSR Operating Agreement" has the meaning set forth in the
Transaction Agreement.
(w) "Railcar" means, except as otherwise provided in the
Accounting Plan, each railroad freight car, locomotive, caboose or other
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equipment (including RoadRailer(R) equipment (or comparable bimodal freight
hauling equipment in either NSR's or CSXT's account)) furnished in substitution
of railroad equipment, loaded or empty, which an Operator originates,
terminates, switches or moves on or overhead within the Monongahela, except that
(i) a single standard flat car not exceeding 96 feet in length (excluding
articulated flat cars) shall count as a single Railcar, (ii) freight railcars
consisting of articulated units bearing AAR car type codes "Q" and "S" shall
count as multiple Railcars based on the second (numeric) digit of the car type
code for such articulated units (by way of example, a car consisting of AAR Car
Type Code "S566" would be counted as five Railcars) (or corresponding car type
codes and digits if the AAR car type codes should be modified at any time during
the term of this Agreement), and (iii) a single unit of RoadRailer(R) equipment
(or comparable bimodal freight hauling equipment in either NSR's or CSXT's
account) shall count as one-half (1/2) of a Railcar.
(x) "Railroad Consequential Damages" means consequential,
indirect, incidental or other similar damage, injury or loss to either NSR or
CSXT.
(y) "Reimbursable Expenses" means the expenses shown on an
Expense Statement, minus the revenues, if any, shown on such Expense Statement.
(z) "RoadRailer(R) means bimodal freight hauling equipment
manufactured by or under license from "RoadRailer(R), a division of Wabash
National Corporation, and capable of movement over the highway when pulled by a
tractor and on the rails using locomotive power.
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(aa) "Severable Improvement" means a capital improvement that is
not a Nonseverable Improvement, and specifically includes but is not limited to,
track extensions to customer facilities.
(bb) "STB" means the Surface Transportation Board, or if there
shall be no Surface Transportation Board, any federal agency which is charged
with the function of approving combinations by rail carriers or persons
controlling them, or of other arrangements between such rail carriers, and
granting exemptions from other laws with respect thereto or regulating other
specific functions with respect to the context in which such term is employed or
any successor entity thereof.
(cc) "Tax" or "Taxes" means taxes, levies or other similar
assessments, customs, duties, imposts, charges or fees, including, without
limitation, ad valorem, excise, real or personal property, sales, use, payroll,
withholding, unemployment, transfer and gains taxes or other governmental taxes
imposed by or payable to the United States, or any state, local or foreign
government or subdivision thereof, and in each instance such term shall include
any interest, penalties or additions to tax attributable to such Tax or Taxes.
(dd) "Total Monongahela Train Usage Percentage" means for either
NSR or CSXT, for a particular time period, the percentage obtained by
multiplying 100 by the quotient obtained by dividing (1) the total number of
loaded and empty Railcars in the account of NSR or CSXT, as the case may be,
that are in Monongahela Trains by (2) the sum of the total number of loaded and
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empty Railcars in the accounts of both NSR and CSXT that are in Monongahela
Trains, during such period for the entire Monongahela.
(ee) "Total Train Usage Percentage" means for either NSR or CSXT
for a particular time period, the percentage obtained by multiplying 100 by the
quotient obtained by dividing (i) the total number of loaded and empty Railcars
in the account of either NSR or CSXT, as the case may be, by (ii) the sum of the
total number of loaded and empty Railcars in the accounts of both NSR and CSXT,
during such period on the Monongahela.
(ff) "Train Usage Percentage" means for either NSR or CSXT for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the total number of loaded and empty
Railcars in the account of either NSR or CSXT, as the case may be, by (ii) the
sum of the total number of loaded and empty Railcars in the accounts of both NSR
and CSXT, during such period in such Zone.
(gg) "Transaction Agreement" means the Transaction Agreement
dated as of June 10, 1997, among CSX, CSXT, NSC, NSR, Conrail Inc., CRC and CRR
Holdings LLC.
(hh) "Usage Statement" means a statement delivered by NSR
pursuant to Section 9(B)(b).
(ii) "USOA" means the uniform system of accounts prescribed for
class I railroads by the STB or any successor federal agency that shall succeed
to the functions of the STB in prescribing uniform systems of accounts for rail
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carriers; provided, that if there shall be no STB and no such federal agency,
USOA shall mean such system of accounts as is generally maintained by rail
carriers consistent with GAAP as applied in the rail industry.
(jj) "Zone" refers to the division of the Monongahela for
accounting purposes, into the following three segments.
Zone 1:MP 0.0 CP BROWN to CP 85 WAYNESBURG (including
Manor Branch) Zone 2:CP 85 WAYNESBURG to MP W27.3 FEDERAL
2 MINE Zone 3:MP 0.0 CP BROWN to MP 79.6 LOVERIDGE
Section 2. Description of Monongahela.
The Monongahela is defined as the trackage described in the
definition of Zones set forth above, and as shown on Exhibit "A", which is
attached and made a part hereof (which includes CRC's Waynesburg Southern
Branch), and includes all existing and future spurs, sidings, leads, industry,
switching, loading, side, team and other tracks extending therefrom, together
with the right to use the Manor Branch shown on Exhibit "A", which is attached
hereto and made a part hereof. Monongahela includes the track structure (rails,
ties, ballast, etc., including structures supporting the track), right of way,
communication facilities, signal facilities and all other appurtenances thereto.
The Monongahela also includes all future Nonseverable Improvements. The
Monongahela excludes any tracks or facilities constructed beyond the limits of
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the Zones described above, or connecting to CP 58, MP 0.0 or MP 66.4
(Rivesville) from outside the Zones.
Section 3. Customer Service.
Both NSR and CSXT shall be able to provide separately and
independently rail transportation service to all customers on or accessed from
the Monongahela with their own equipment and crews.
Section 4. Use of Subject Trackage.
(a) CSXT shall have equal access to the Monongahela, as more
specifically provided herein.
(b) Subject to the terms of this Agreement, NSR shall have
control of the management and operation of the Monongahela. However, should CSXT
be dissatisfied with the fairness and equality of treatment of CSXT's movements
by NSR's Monongahela dispatchers, NSR and CSXT shall attempt to resolve these
dispatching concerns. If the attempt does not resolve CSXT's concerns about
Monongahela dispatching, CSXT shall have the right to request a change of
control of Monongahela dispatching to CSXT. If NSR disagrees with such request
for change in dispatching control, NSR and CSXT agree to submit that request to
binding arbitration as provided in Section 16 of this Agreement. From time to
time, but not more frequently than 12 months after the last change in
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dispatching control or arbitration, the party not controlling dispatching may
again seek a change and require arbitration.
Section 5. Miscellaneous Operations Provisions.
(a) When operating over the Monongahela, locomotives and crews
shall be equipped to communicate with the controlling dispatcher on radio
frequencies normally used in directing train movements on the Monongahela.
(b) Procedures for qualification and occupancy of the Monongahela
shall be arranged by the local supervision of NSR and CSXT, and shall be fair
and impartial as between NSR and CSXT.
(c) Before locomotives or equipment of NSR and CSXT enter onto
Monongahela, the employees shall request permission from the dispatcher in
charge of the Monongahela. Further, NSR and CSXT shall ascertain that the
trackage is clear and shall await confirmation from the dispatcher that such
permission has been issued to allow NSR and/or CSXT movements on or over the
Monongahela. Upon completing its operations and clearing the Monongahela, NSR or
CSXT, as the case may be, shall notify the dispatcher that it has completed its
operations and that its equipment is in the clear for other operations or has
moved off of Monongahela. Once NSR or CSXT has notified the dispatcher it is in
the clear or has cleared the Monongahela, NSR or CSXT shall not reenter the
Monongahela without again obtaining permission from the dispatcher.
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(d) The operation and equal access to the mines on the
Monongahela (the "Mines") will be governed by the loading demand of the Mines,
while always taking into account the customer's choice of carrier for the
particular movement. Trains will be scheduled onto the Monongahela based on the
Mines' request. The current practice of the Mines in providing a seven day
loading schedule of required loading will continue. The scheduling and
sequencing will be coordinated between the Mines and designated NSR and CSXT
representatives. All parties will work towards a monthly loading projection to
facilitate advanced planning and scheduling.
A rolling 36 hour loading schedule will be coordinated and
maintained by the Mines, NSR and CSXT, and will be updated every four hours. The
loading schedule will be the governing vehicle for sequencing trains on the
Monongahela by the dispatcher. This will allow each carrier to have sufficient
notification to ensure trains are positioned to protect loading on the
Monongahela. NSR and CSXT will develop scheduled running times from their
staging facilities to the entrance to the Monongahela. NSR and CSXT will
jointly develop running times from the entrance points to each of the Mines.
Changes in the train loading schedule or train ordering
will be coordinated jointly between NSR and CSXT to assure demand is met for all
Mines. In the event either an NSR or CSXT train fails to make the loading
schedule, every effort will be made to coordinate and resequence the
loading schedule to facilitate both carriers. The governing factor is to
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provide the appropriate NSR or CSXT trains required by the Mines. NSR and
CSXT agree to coordinate and implement an operating plan for the
Monongahela (the "Operating Plan") to ensure efficient movement of traffic
on the Monongahela. Related to the Operating Plan, Accounting Plan and
this Agreement is the Carpenter/Tobias Letter. The Carpenter/Tobias Letter
was executed in furtherance of this Agreement, the Operating Plan and the
Monongahela Accounting Plan and shall be enforceable according to its terms.
In the event that coal producers on the Monongahela need to change the loading
sequence once trains are positioned on the Monongahela, every attempt will
be made to have the original carrier secure the loading, subject to customer
approval.
A Service Standards Committee ("Committee") shall be
established with equal local representation from NSR and CSXT including General
Manager Coal Operations and General Manager CCBU or other representatives for
CSXT and the Superintendent of the Pittsburgh Division and the AVP
Transportation, or other representatives, for NSR. The Committee is charged
with developing and agreeing upon the contents of a "Report Card" for the
service on the Monongahela. The Report Card will attempt to provide a
mechanism to determine whether impartial access (as measured by train
performance, dispatching and maintenance) to all Mines is being provided. The
Committee will meet on a quarterly basis, or more frequently if required, to
review service, dispatching, maintenance and other issues as they arise. The
Committee's goal is to resolve all issues encompassing the operation on the
Monongahela.
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(e) NSR and CSXT shall comply with the provisions of the Federal
Locomotive Inspection Act and the Federal Safety Appliance Act, as amended, and
any other federal and state and local laws, regulations and rules respecting the
operation, condition, inspection and safety of its trains, locomotives, cars and
equipment while such trains, locomotives, cars, and equipment are being operated
over the Monongahela.
(f) CSXT in its use of the Monongahela shall comply in all
respects with the safety rules, operating rules and other regulations of NSR,
and the movement of CSXT trains, locomotives, cars, and equipment over the
Monongahela shall at all times be subject to the orders of the transportation
officers of NSR; provided that all such rules, regulations, practices and orders
must be impartially administered as between NSR and CSXT. NSR and CSXT trains
shall not include locomotives, cars or equipment which exceed the width, height,
weight or other restrictions or capacities of the Monongahela as published in
Railway Line Clearances, and no train shall contain locomotives, cars or
equipment which require speed restrictions or other movement restrictions that
would violate operating rules and regulations applicable to the Monongahela,
except with the concurrence of NSR which shall not be unreasonably withheld.
(g) CSXT shall make such arrangements with NSR as may be required
to have all CSXT employees who shall operate its trains, locomotives, cars and
equipment over the Monongahela qualified for operation thereover, and CSXT shall
pay to NSR, upon receipt of bills therefor, any cost incurred by NSR in
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connection with the cost of pilots furnished by NSR, until such time as such
employees are deemed by the appropriate examining officer of NSR to be properly
qualified for operation over Monongahela.
(h) In the event of any investigation or hearing concerning the
violation of any operating rule or practice by CSXT's employees while on the
Monongahela, CSXT shall be notified in advance of any such investigation or
hearing and such investigation or hearing may be attended by any official
designated by CSXT, and any such investigation or hearing shall be conducted in
accordance with the collective bargaining agreements, if any, that pertain to
CSXT's employee or employees required to attend such hearings.
(i) NSR shall have the right to exclude from the Monongahela any
employee of CSXT determined by above, to be in violation of NSR's rules,
regulations, orders, practices, or instructions issued by NSR's timetable or
otherwise. CSXT shall release, indemnify, defend, and save harmless NSR and its
parent corporation, subsidiaries and affiliates, and all of their respective
directors, officers, agents and employees from and against any and all claims
and expenses resulting from such reasonable and lawful exclusion.
(j) The railcars, trains, locomotives, cars and equipment of NSR
and CSXT shall be operated without prejudice or partiality to either party and
in such manner as shall afford the most economical and efficient movement of all
traffic.
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(k) In the event that a train of CSXT shall be forced to stop on
the Monongahela, due to mechanical failure of CSXT's equipment, or any other
cause not resulting from an accident or derailment, and such train is unable to
proceed, or if a train of CSXT fails to maintain the minimum speeds required on
the Monongahela, or if in emergencies, crippled or otherwise defective Railcars
are set out of CSXT's trains on the Monongahela, NSR shall arrange for motive
power or such other assistance as may be necessary to haul, help or push such
trains or Railcars, or to properly move the disabled equipment in the clear or
off the Monongahela, and CSXT shall reimburse NSR for the cost of rendering any
such assistance. If such assistance cannot be commenced within a reasonable
time, CSXT shall have the option through coordination with NSR, to provide such
assistance itself. If a train of NSR becomes unable to proceed or maintain the
required minimum speed or NSR Railcars become crippled and are set out, NSR
shall promptly clear off such trains or Railcars so as not to impede movements
on the Monongahela.
(l) If it becomes necessary to move, make repairs to, adjust or,
transfer the lading of crippled or defective Railcars, such work shall be done
by NSR, and if the Railcar is in the account of CSXT, CSXT shall reimburse NSR
for the cost thereof. If the Railcar is in the account of NSR, such cost shall
be borne by NSR and not shared pursuant to Section 9.
(m) In the event NSR and CSXT agree that NSR should retain
employees or provide additional employees for the sole benefit of CSXT, the
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parties hereto shall enter into a separate agreement under which CSXT shall bear
all cost and expense for any such retained or additional employees provided,
including without limitation all cost and expense associated with labor
protective payments which are made by NSR and which would not have been incurred
had the retained or additional employees not been provided.
(n) Notwithstanding the provisions of Section 14, for the
purposes of this Section 5, the word "equipment" shall mean and be confined to
(i) cabooses, (ii) vehicles and machinery which are capable of being operated on
railroad tracks that, at the time of an occurrence, are being operated on the
Monongahela and (iii) vehicles and machinery that, at the time of an occurrence,
are on the Monongahela or its right of way for the purpose of maintenance,
repair or inspection thereof or the clearing of wrecks thereon.
(o) Whenever CSXT's or NSR's use of the Monongahela requires
rerailing, wrecking service or wrecking train service, NSR shall perform or
provide such service. The cost of rerailing and the repair and restoration of
roadbed, track and structures shall be borne 100% by CSXT if the Railcars are in
CSXT's account or 100% by NSR if they are in NSR's account. Any other cost,
liability and expense related to the foregoing, including without limitation
loss of, damage to, or destruction of any property whatsoever and injury to and
death of any person or persons whomsoever or any damage to or destruction of the
environment whatsoever, including without limitation land, air, water, wildlife,
and vegetation, resulting therefrom, shall be apportioned in accordance with the
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provisions of Section 14 hereof. All locomotives, railcars, and equipment and
salvage from the same so picked up and removed which is owned by or under the
management and control of or used by CSXT at the time of such wreck, shall be
promptly delivered to CSXT. If such assistance cannot be commenced within a
reasonable time, CSXT shall have the option to provide such assistance itself.
Section 6. Car Hire.
All NSR and CSXT Railcars shall remain in the respective accounts
of NSR and CSXT at all times. NSR and CSXT Railcars and lading being moved in
their respective trains pursuant to this Agreement shall be the sole property of
that party. NSR and CSXT shall each pay and collect or cause to be paid and
collected all car hire and mileage charges pertaining to their respective
Railcars, and neither NSR nor CSXT shall have any responsibility for any such
car hire or mileage charges in the other party's account however incurred.
Section 7. Accounting Records.
The records of each party hereto, insofar as they pertain to
matters covered by this Agreement, shall be retained for a period of three (3)
calendar years and shall be open at all reasonable times to inspection by the
other party during such period. These records shall include train consist (list)
indicating car initial and number with associated car type code.
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Section 8. Repairs and Lading Adjustments.
If any CSXT Railcars are bad ordered en route and it is necessary
that they be set out, such Railcars, after being promptly repaired, shall be
returned or delivered to CSXT. NSR shall at the expense of CSXT, furnish
required labor and material, and perform light repairs on such bad ordered
equipment to make it safe for movement. For liability purposes only, the
employees and equipment of NSR while in any manner so engaged or while en route
to or returning from such repair assignment shall be considered sole CSXT
employees and exclusive CSXT equipment. In the case of such repairs by NSR to
CSXT Railcars, billing therefor shall be in accordance with the Field and Office
Manuals of the AAR Interchange Rules, or similar rules providing "industry
standard" procedures which are in effect at the time such work is performed,
hereinafter called "Interchange Rules". NSR shall prepare and submit billing
directly to and collect from the car owners for car owner responsibility items
as determined under the Interchange Rules and NSR shall prepare and submit
billing directly to and collect from CSXT for handling line responsibility items
as determined under the Interchange Rules. NSR shall also submit billing to and
collect from CSXT any charges for repair to freight cars that are car owner
responsibility items as determined under the Interchange Rules, should said car
owner refuse or otherwise fail to make payment therefor. In the event NSR
Railcars are bad ordered en route and set out, repaired, or work is performed on
such Railcars, as provided above, all such costs shall be borne by NSR and not
shared pursuant to Section 9.
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Section 9. Usage Charges.
A. Transportation Costs. The Carpenter/Tobias letter states that
--------------------
NSR will provide crews to operate CSXT trains between the Mines and CSXT's
Newell Yard or the Alicia or LaBelle barge terminals (or such other locations as
may be mutually agreed upon). Transportation costs associated with NSR's
operation of CSXT trains shall be as set forth in the Accounting Plan. To the
extent NSR and CSXT will be performing service over the Monongahela by operating
their own trains with their own crews, any and all costs directly associated
with the operation of such trains and crews shall be borne by the party
operating such trains and crews.
B. Other Usage Charges. Given the rights of equal access to the
--------------------
Monongahela, the parties agree that certain costs directly related to the
maintenance and operation of the Monongahela shall be shared based upon usage.
Accordingly, the parties agree to the following:
(a) The parties shall develop and implement a written Accounting
Plan containing a detailed description, by category of cost and location, of the
costs directly associated with the management and operation of the Monongahela
and the method by which such costs shall be fairly and properly apportioned
between the parties. Such Accounting Plan will include separate accounting and
sharing of costs as mutually agreed for particular Zones or for the overall
Monongahela, as the case may be, and shall conform to the following general
principles:
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(i) General and administrative, supervisory and
overhead expenses incurred within the Monongahela or for functions directly
related to the Monongahela shall be apportioned on the basis of the Total
Train Usage Percentages, or Total Monongahela Train Usage Percentages,
whichever is applicable as provided in the Accounting Plan;
(ii) Dispatching (where dispatching is located on the
Monongahela or where dispatching is devoted 100% to the Monongahela),
maintenance of dispatching equipment and train control costs (including labor,
materials and maintenance expenses) incurred with respect to the Monongahela
shall be apportioned on the basis of the Total Train Usage Percentages, or
Total Monongahela Train Usage Percentages, whichever is applicable as provided
in the Accounting Plan;
(iii) Police and other costs incurred with respect to
security within the Monongahela shall be apportioned on the basis of the Total
Train Usage Percentages, or Total Monongahela Train Usage Percentages, whichever
is applicable as provided in the Accounting Plan;
(iv) Damage paid by NSR pursuant to Section 14 shall be
apportioned in accordance with Section 14;
(v) Taxes (excluding income taxes) incurred with
respect to the Monongahela or individual Zones thereof shall be apportioned
between NSR and CSXT on the basis of the Total Train Usage Percentages, or
Total Monongahela Train Usage Percentages, whichever is applicable as
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provided in the Accounting Plan, or Train Usage Percentage for the individual
Zone, if capable of determination, for the period for which such Taxes apply;
(vi) The cost of premiums for liability and property
insurance, other than self-insurance, incurred with respect to the Monongahela
or individual Zones thereof shall be apportioned between NSR and CSXT on the
basis of (w) Total Train Usage Percentage, (x) Train Usage Percentage for the
individual Zone, (y) Total Monongahela Train Usage Percentage, or (z)
Monongahela Train Usage Percentage for the individual Zone, whichever is
applicable, as provided in the Accounting Plan, if capable of determination
for the period for which such Insurance costs apply;
(vii) The expense of installation and maintenance of AEI
readers including, but not limited to, those in the vicinity of CP 58
(existing), CP 85 Waynesburg, MP 0.5 and MP 66.0 shall be borne 50% by NSR and
50% by CSXT;
(viii) Section 14 of this Agreement deals with the
apportionment of Liability between the parties. Any payments made by NSR
pursuant to Section 14(a) which arise from the death or injury to NSR
employees, when such NSR employees are "joint employees," such as
Maintenance of Way, Signal, Dispatch, Bridge and Building, Mechanical and other
employees whose work on the Monongahela is other than revenue train
operations, shall be paid by NSR in accordance with Section 14(a), but
apportioned based on Total Train Usage Percentage or Train Usage Percentage for
the individual Zone, whichever is applicable as provided in the Accounting
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Plan; provided, however, should such employee Liability expense arise from work
performed as a result of capital improvements at the sole cost of NSR or CSXT,
then that party shall be fully responsible for all such payments; and
(ix) Maintenance of track structure (rails, ties,
ballast, etc., including structures supporting the track), right of way,
tunnels, communication facilities, signal facilities and all other appurtenances
thereto shall be apportioned on the basis of the Total Train Usage Percentage,
for the entire Monongahela or Train Usage Percentage for each Zone, whichever
is applicable, as provided in the Accounting Plan.
(x) Any other costs shall be reimbursed as otherwise
provided in this Agreement.
If the parties are unable to agree on the terms and
provisions of the Accounting Plan, such disagreement may be submitted by
either NSR or CSXT for resolution by binding arbitration pursuant to Section
16.
(b) NSR shall deliver to CSXT prior to the last day of each
calendar month, a written statement (the "Usage Statement") showing for the
prior Billing Month:
(i) the total number of Railcars moved by NSR or CSXT
on the Monongahela and in each Zone; and
(ii) the calculation of the Total Train Usage
Percentage, the Train Usage Percentage, Total Monongahela Train Usage Percentage
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and Monongahela Train Usage Percentage for each party for each Zone, and (A)
all Railcars in a train shall be deemed to be on the Monongahela, or a Zone,
as the case may be, when the first or last Railcar of such train is on the
Monongahela, or a Zone, as the case may be, and (B) each time that a Railcar
is removed from or added to a train on the Monongahela, or a Zone, as the
case may be, shall constitute a separate movement of such Railcar.
(c) Concurrently with the delivery of each Usage Statement, NSR
shall deliver to CSXT a statement (the "Expense Statement") showing the expenses
incurred by NSR and CSXT during the Billing Month, computed in accordance with
GAAP and the USOA, as modified by the Accounting Plan.
(d) Concurrently with the delivery of each Usage Statement, NSR
shall deliver to CSXT a statement (the "Capital Expenditure Statement") showing
the estimated Budgeted Capital Expenditures for the calendar month immediately
succeeding the calendar month in which such statement is delivered.
(e) Concurrently with the delivery of a Usage Statement for a
Billing Month, NSR shall deliver to CSXT a bill (a "Bill") showing for such
Billing Month:
(i) the amount of each Reimbursable Expense payable by
CSXT for such Billing Month calculated in accordance with the Accounting Plan;
and
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(ii) CSXT's percentage of the amount of Budgeted Capital
Expenditures and shown on the Capital Expenditure Statement delivered with such
Usage Statement.
(f) CSXT shall pay to NSR the amount shown on each Bill on or
before the 30th day after the date of such Bill regardless of whether or not
CSXT disputes the accuracy of any amount or calculation shown on such Bill.
(g) Disputed Bills:
(i) Any dispute by CSXT of the accuracy of any amount
or calculation shown on any Bill, shall be described and specified in reasonable
detail in a Dispute Letter from CSXT to NSR within two (2) years after the date
of such Bill.
(ii) Any amounts or calculations shown on any Bill which
are not disputed in accordance with this section 9 shall conclusively be deemed
to be accurate and shall be binding on both parties.
(iii) CSXT and NSR shall promptly endeavor to resolve the
disputes described in each Dispute Letter, and if they fail to agree to a
resolution of such disputes within 45 days of the delivery of such
Dispute Letter, then a firm of independent public accountants shall be
selected jointly by CSXT and NSR (or if they do not agree on such firm, then
such firm shall be selected by arbitration pursuant to Section 16) to resolve
such disputes, in each case in accordance with GAAP and the USOA, as modified
by the Accounting Plan, and the written resolution of such disputes signed by
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such accounting firm shall be binding on CSXT and NSR.
(iv) Any adjustments to Bills which result from the
resolution of Dispute Letter disputes shall be reflected as charges or credits
on the first Bills delivered by NSR to CSXT after such disputes have been
resolved.
(v) The costs of NSR's and CSXT's auditors in connection
with the resolution of any Dispute Letter disputes shall be paid by each
respective party, and the fees of any independent public accounting firm
engaged to resolve such disputes shall be paid 50 percent by NSR and 50 percent
by CSXT.
(h) At the option of either party hereto, the Accounting Plan
provided for in this Section 9 may be opened for reevaluation every year from
the effective date of this Agreement. Such reevaluation may include the
definition of the Zones and any modifications needed thereto. In the event the
parties fail to reach agreement upon reevaluation, such failure shall not
constitute a breach of this Agreement, and the parties shall continue to be
bound by the terms of compensation provided in this Section 9 until the matter
is settled or submitted to binding arbitration as outlined in Section 16.
Section 10. Maintenance of the Monongahela.
(a) NSR shall be responsible to maintain, repair and renew the
infrastructure of the Monongahela. NSR shall keep and maintain the Monongahela
in good condition for the use herein contemplated. NSR shall take all reasonable
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steps to ensure that any interruptions to train operations shall be kept to a
minimum. Furthermore, except as may be otherwise provided in Section 14, CSXT
shall not by reason of failure or neglect on the part of NSR to maintain, repair
or renew the Monongahela, have or make any claim or demand against NSR or its
parent corporation, subsidiaries or affiliates, including PRR, or their
respective directors, officers, agents or employees for any injury to or death
of any person or persons whomsoever, or for any damage to or loss or destruction
of any property whatsoever, or for any damages of any nature suffered by CSXT
resulting from any such failure or neglect.
(b) The Monongahela will be jointly inspected by each party's
Chief Engineer or their designees at any time upon mutual agreement, but not
less than once every three (3) years to determine if appropriate track standards
are maintained, and to review the performance of any capital plan for the
Monongahela as pertains to maintenance of track, signals, right of way and
appurtenances thereto. On or before August 15 of each year, NSR will provide
CSXT with a capital improvement plan covering the next three (3) years.
(c) Existing and future connections or facilities which are
jointly used by the parties hereto shall continue to be maintained, repaired and
renewed by and at the expense of both parties apportioned in accordance with
Sections 9 and 11 and the Accounting Plan, which shall become a part hereof.
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Section 11. Capital Improvements.
Capital Improvements on the Monongahela shall be governed by the
following provisions:
(a) From time to time, NSR or CSXT may propose to each other
construction of capital improvement projects ("Project"). Each Project shall be
reviewed promptly by the other party. If approved by both parties, NSR and CSXT
shall be responsible for an equal share of the budgeted initial funding, as
approved in the Capital Expenditure Budget, for the approved Project. A final
accounting will be made to adjust the initial budgeted funding to the actual
project cost as specified in the Accounting Plan.
(b) If a proposed project is not approved, and the proposed
Project would be a Nonseverable Improvement of the Monongahela which may be used
in the normal course of business by NSR or CSXT, then the following procedure
shall occur:
(i) At the written request of either NSR or CSXT
delivered to the other, each party shall, within 45 days of the delivery of
such request, submit to an arbitrator in accordance with Section 16 a written
proposal with respect to a Nonseverable Improvement Project which was not agreed
upon by the parties (1) describing any changes from the initial request which
such party proposes be made to such Project and specifying a schedule, budget
and allocations between NSR and CSXT of the capital costs of such Nonseverable
Improvement or (2) proposing that it not be made.
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(ii) The arbitrator receiving the proposals referred to
in Section 11(b)(i) (A) shall consider (1) the degree, if any, to which the
construction, operation and use of such Nonseverable Improvement would impair
or interfere with the use of the Monongahela, conflict with any pending capital
improvements, or be necessary or unnecessary to the operations of a particular
party, and (2) the budget and allocations between NSR and CSXT of the capital
costs of such Nonseverable Improvement as proposed by NSR and CSXT and (B) shall
determine within 45 days of such receipt which of such proposals shall be
accepted, or that such Nonseverable Improvement shall not be made. The
arbitrator's decision shall be binding and enforceable upon NSR to fund and
cause the Nonseverable Improvement to be made in accordance with such
decision and upon CSXT to fund such Nonseverable Improvement in accordance
with such decision, unless the decision is that such Nonseverable Improvement
shall not be made.
(c) Severable Improvements:
(i) (A) NSR shall have the right to cause the
construction, at its sole expense, and (B) CSXT shall have the right to require
NSR to cause the construction, but at CSXT's sole expense, of any Severable
Improvement which has not been agreed upon by the parties to be funded on a
shared basis.
(ii) Each Severable Improvement funded exclusively by
NSR or CSXT shall be used exclusively by NSR or CSXT, as the case may be, and
each party shall be solely responsible for the cost of maintaining such
Severable Improvement (recognizing that in either case the actual performance
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of such maintenance shall be the responsibility of NSR), until such time that
the other party gives written notice that it desires also to use such
Severable Improvement, stating the amount which such other party is prepared
to pay to the party which initially funded such Severable Improvement for
the right to use such Severable Improvement.
(iii) If the parties are unable to agree on the amount of
such payment within 45 days after such notice was given, then at the written
request of a party delivered to the other after 45 days but before 60 days after
such notice was given, NSR and CSXT, within 15 days of the delivery of such
request, shall submit to an arbitrator in accordance with Section 16 a
written statement setting forth the proposed payment by the other party, and
the arbitrator shall within 45 days of such receipt determine which of such
proposed amounts shall apply, which shall be binding on both parties and
paid promptly. Upon payment of the amount determined by the arbitrator,
the improvement shall become a Nonseverable Improvement.
(d) Upon completion, all capital improvements shall become part
of the Monongahela owned by PRR subject to all provisions of this Agreement.
(e) Subject to all of the provisions hereof, the parties will
work together to develop the expansion of existing and future facilities serving
customers located on or accessed from the Monongahela.
(f) The construction, operation and use of a Severable
Improvement by a party shall not unduly impair or interfere with the use of a
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Severable Improvement by the other party, nor shall any Severable Improvement
unduly impair or interfere with train operations on the Monongahela. No
Severable Improvement shall unduly impair or interfere with any pending or
proposed capital improvements included in an approved Capital Expenditure
Budget.
Section 12. Labor Claims.
Each party shall indemnify and hold harmless the other party
against any and all costs and payments, including benefits, allowances, and
arbitration, administrative, and litigation expenses, arising out of claims or
grievances made by or on behalf of or lawsuits brought by or on behalf of its
own employees or their collective bargaining representatives, either pursuant to
employee protective conditions imposed by a governmental agency upon the
agency's approval or exemption of this Agreement and operations hereunder or
pursuant to a collective bargaining agreement. It is the parties' intention that
each party shall bear the full costs of protection of its own employees under
employee protective conditions that may be imposed, and of grievances filed by
its own employees arising under its collective bargaining agreements with its
employees.
Section 13. Freight Claims.
The parties shall agree between themselves on the most fair,
practical and efficient arrangements for handling and administering freight loss
and damage claims with the intent that (a) each party shall be responsible for
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losses occurring to lading in its possession for the account of such party and
(b) the parties shall follow relevant AAR rules and formulas in providing for
the allocation of losses which are either of undetermined origin or in Railcars
handled in interline service by or for the account of both parties.
Section 14. Liability.
Except as otherwise provided in Section 13 and this Section 14,
the responsibility between CSXT and NSR for all Damage arising out of,
incidental to or occurring in connection with this Agreement shall be
apportioned without consideration of fault or negligence of any kind or degree
as follows:
(a) Sole Responsibility. Except as otherwise provided in Section
14(e) (Specified Level Damages) and Section 14(f) (Exceptions), each party shall
assume and bear all responsibility for Damage to its own trains, locomotives and
equipment, to Railcars and lading in its possession or being handled for its
account, and for the death of or injury to its own employees. Subject to Section
14(f) (Exceptions), for the purpose of this Section 14(a):
(i) when NSR employees are engaged in capital
improvements at the sole cost of CSXT under Section 9(B)(a)(viii), such
employees engaged in such capital improvements shall be treated as if they were
CSXT employees; and
(ii) when NSR is operating trains for CSXT, NSR employees
engaged in moving, inspecting, preparing, handling, being transported to or
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from, transporting such employees to or from, or other similar activities
directly related to the movement of CSXT trains shall be treated as if they
were CSXT employees and such trains shall be CSXT trains.
(b) NSR-CSXT Joint Responsibility. (i) Except as otherwise
provided in Section 14(b)(ii) with regard to Damages occurring in the first 12
months of operation and in Sections 14(a) (Sole Responsibility), Section 14(e)
(Specified Level Damages) and Section 14(f) (Exceptions), the parties shall
jointly assume and bear all responsibility for all Damage in proportion to their
respective Train Usage Percentages in the Zone in which the incident giving rise
to such Damage occurred for the 12 calendar month period immediately preceding
the incident giving rise to such Damage.
(ii) In the event an incident giving rise to Damage for
which the parties are jointly responsible occurs during the 12-month period
immediately following the date of this Agreement, responsibility for such
Damage shall be borne equally by the parties with each being liable for
one-half (1/2) of the damages.
(c) Process. Each party shall be responsible for the payment,
handling, administration and disposition of all Damage for which it bears
exclusive responsibility under Section 14(a), and both parties shall have joint
responsibility for the payment, handling, administration and disposition of all
Damage for which they are jointly responsible under Section 14(b). In assigning
joint responsibility to both parties, it is not the intent of this Agreement
that the parties will actually act jointly, but rather that the parties will
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agree between themselves on the most practical and efficient arrangements for
handling, administering, and disposing of Damage for which they bear joint
responsibility, with the objective of eliminating unnecessary duplication of
effort and minimizing overall costs.
(d) Indemnification. Each party to this Agreement covenants and
agrees to (i) fully indemnify and save harmless the other party to this
Agreement from and against any payments which are the responsibility of such
party under this Agreement, and all expenses, including attorneys' fees and
expenses and other expenses of any court or regulatory proceeding, incurred by
such other parties in defending any claim that it is liable for such payments,
and (ii) defend such other party against such claims with counsel selected by
such party and reasonably acceptable to such other party.
(e) Specified Level Damages. Sections 14(a) (Sole Responsibility)
and 14(b) (NSR-CSXT Joint Responsibility) shall apply directly only when the
total amount of all Damages resulting from a single incident is $25 million or
less. Responsibility for Damages resulting from a single incident for which
Damages exceed $25 million shall be classified as "Tier One Damages" or "Tier
Two Damages" and allocated as stated in subparagraphs (i), (ii) and (iii) of
this Section 14(e).
(i) In this Section 14(e), "Tier One Damages" for any
incident include the greater of (1) $25 million of Damages or (2) an
amount equal to all combined liability insurance benefits available to
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whichever of NSR or CSXT has the lesser (as between them) amount of
insurance benefits available to it applicable to that incident, but only
to the extent that benefits are actually available.
(ii) Tier One Damages shall be allocated between NSR and
CSXT in accordance with Sections 14(a) (Sole Responsibility) and 14(b)
(NSR-CSXT Joint Responsibility).
(iii) In this Section 14(e), "Tier Two Damages" include
all of those Damages in excess of the Tier One Damages calculated under
Section 14(e)(i). Tier Two Damages shall be allocated between the
parties hereto in proportion to their respective fault or negligence in
causing the Damage.
(f) Exceptions. Each party shall assume and bear all
responsibility for Damage to the extent caused by acts or omissions of any of
its employees while under the influence of drugs or alcohol and Sections 14(b)
and (e) shall not apply to any such Damage. Notwithstanding any other provision
of this Agreement including, without limitation, both clauses of the last
sentence of Section 14(a) and Section 9(B)(a)(viii), no NSR employee handling a
CSXT train or performing other functions on the Monongahela shall be treated as
a CSXT employee for purposes of this Section 14(f).
(g) Damages. As used in this Section 14 only, the term
"Damage(s)" shall exclude Railroad Consequential Damages (which are always borne
by whichever of NSR or CSXT sustained them) and claims for exemplary and
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punitive Damages. With regard to exemplary and punitive Damages, the parties
acknowledge and agree that, with regard to the subject of this Agreement, the
intent and agreement of the parties is that no party shall bring or recover any
claim for exemplary or punitive damages, in its own right, against any other
party, but that any party will allocate, in accordance with this Section 14,
exemplary or punitive Damages from any claim against it by a third person not a
party hereto.
(h) Limitation. The parties hereto acknowledge that, pursuant to
the penultimate paragraph of the Carpenter/Tobias Letter, CSXT can elect to
operate its own trains with its own crews, and if CSXT exercises that election
in the future and runs its own trains with its own crews, the provisions of
clause (ii) of the last sentence of Section 14(a) shall not apply during any
such CSXT operations.
Section 15. No Partnership.
Nothing in this Agreement shall be construed to establish a
partnership or joint venture between or among CSXT or NSR or any of their
affiliates or associates.
Section 16. Arbitration.
Any dispute, controversy or claim (or any failure by the parties
to agree on a matter as to which this Agreement expressly or implicitly
contemplates subsequent agreement by the parties, except for matters left to the
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<PAGE>
sole discretion of a party) arising out of or relating to this Agreement, or the
breach, termination or validity hereof, shall be finally settled through binding
arbitration by a sole, disinterested arbitrator in accordance with the
Commercial Arbitration Rules of the AAA. The arbitrator shall be jointly
selected by the parties, but if the parties do not agree on an arbitrator within
30 days after demand for arbitration is made by a party, they shall request that
the arbitrator be designated by the AAA. The award of the arbitrator shall be
final, binding and conclusive upon the parties. Each party to the arbitration
shall pay the compensation, costs, fees and expenses of its own witnesses,
experts and counsel. The compensation, and any costs and expenses of the
arbitrator, shall be borne equally by the parties. The arbitrator shall have the
power to require the performance of acts, found to be required by this
Agreement, and to require the cessation or nonperformance of acts found to be
prohibited by this Agreement. The arbitrator shall not have the power to award
consequential or punitive damages. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof, which court may award
appropriate relief at law or in equity. All proceedings relating to any such
arbitration, and all testimony, written submissions and award of the arbitrator
therein, shall be private and confidential as between the parties, and shall not
be disclosed to any third party, except as required by law and except as
reasonably necessary to prosecute or defend any judicial action to enforce,
vacate or modify such arbitration award.
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Section 17. Force Majeure.
The obligations, other than payment obligations, of the parties
to this Agreement shall be subject to force majeure (which shall include
strikes, riots, floods, accidents, Acts of God, and other causes or
circumstances beyond the control of the party claiming such force majeure as an
excuse for non-performance), but only as long as, and to the extent that, such
force majeure shall prevent performance of such obligations.
Section 18. Entire Agreement.
This Agreement, the Carpenter/Tobias Letter, and the Transaction
Agreement (including the other Ancillary Agreements, as defined in the
Transaction Agreement) constitute the entire agreement and supersede all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except the letter agreement dated
April 8, 1997 between CSX and NSC to the extent such April 8, 1997 letter
agreement covers matters not addressed or amended hereby or in the Transaction
Agreement or the Ancillary Agreements (as defined in the Transaction Agreement);
provided that it is the intent of the parties that this Agreement shall be an
effectuation of such April 8, 1997 letter agreement consistent with its terms,
and that the provisions of this Agreement should be interpreted to give effect
to such April 8, 1997 letter agreement; and provided further that, in the event
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of any inconsistency between the terms of this Agreement and such April 8, 1997
letter agreement, this Agreement shall prevail.
Section 19. Amendment and Waiver.
Any amendment to this Agreement must be in writing and executed
and delivered by CSXT, NSR, PRR, and NYC subject to any jurisdiction of the STB.
Any waiver of any term or provision of this Agreement must be in writing and
executed and delivered by the party entitled to enforcement of such term or
provision.
Section 20. Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, such provision is to be
intended to be ineffective only to the most limited extent possible in such
context and the remainder of the terms, provisions, covenants and restrictions
of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 21. Remedies.
(a) Each party acknowledges and agrees that the other parties
would be irreparably damaged in the event any of the provisions of this
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Agreement were not performed by it in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that each party shall be
entitled to an injunction or injunctions to prevent breaches of such provisions
and to specifically enforce such provisions, in addition to any other remedy to
which such party may be entitled, at law or in equity.
(b) In no event shall any party be liable to the other parties
for any consequential, indirect, incidental, punitive or other similar damages
including but not limited to lost profits for any breach or default, or any act
or omission arising out of or in any way relating to this Agreement, under any
form or theory of action whatsoever, whether in contract, tort or otherwise.
Section 22. Interpretation.
This Agreement was drafted jointly by CSXT, NSR, PRR and NYC,
each of which was advised by its own counsel and other advisors concerning all
of the terms and provisions hereof; accordingly, any ambiguity herein should not
be construed in favor of or against any of them.
Section 23. Headings.
Headings of sections in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of any term
or provision of this Agreement.
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Section 24. Parties.
This Agreement shall inure to the benefit of and be binding upon
NSR, CSXT, PRR, and NYC and any successor of any of them by operation of law,
and any assignee agreed to by them in accordance with Section 25, and nothing in
this Agreement is intended or shall be construed to give any other person any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any term or provision hereof.
Section 25. Assignment.
(a) Except as provided herein, neither this Agreement (including
the documents and instruments referred to herein) nor any of the rights,
interests or obligations hereunder, shall be assigned by any party, including by
operation of law, without the prior written consent of the other parties, except
to a controlled subsidiary, or in the case of PRR, to NS, NSR or a subsidiary or
affiliate of NS, and in the case of NYC, to CSX, CSXT or a subsidiary or
affiliate of CSX.
(b) (i) Except as otherwise provided herein, in the event either
of NSR or PRR proposes to sell or transfer its interest in all or any portion of
the Monongahela, CSXT shall have the right of first refusal to purchase such
interest at the same price, and substantially the same terms and conditions
offered to NSR or PRR; provided CSXT must make such offer within 30 days of
receiving notification from NSR or PRR of the price, terms and conditions being
offered by such other prospective purchaser.
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(ii) In the event CSXT or NYC proposes to sell or transfer
its operating rights on all or any portion of the Monongahela, NSR shall have
the right of first refusal to purchase such rights at the same price, and
substantially the same terms and conditions offered to CSXT or NYC, provided
NSR must make such offer within 30 days of receiving notification from CSXT
or NYC of the price, terms and conditions being offered by such other
prospective purchaser.
(c) Any party without the consent of the other party may assign
all of its rights and obligations under this Agreement only to any successor in
the event of a merger, consolidation, sale of all or substantially all its
assets, including all routes and lines owned by such party to access the
Monongahela, if such assignee executes and delivers to the other party hereto an
agreement reasonably satisfactory in form and substance to such other party
under which such assignee, which is reasonably satisfactory to the other party,
assumes and agrees to perform and discharge all the obligations and Liabilities
of the assigning party; provided that any such assignment shall not relieve the
assigning party from the performance and discharge of such obligations and
Liabilities.
Section 26. Term.
(a) This Agreement shall become effective as of the date first
above written and shall remain in effect until the 25th anniversary of such
date, and shall remain in effect continuously thereafter unless and until
terminated by CSXT or, if the CSXT Operating Agreement shall have terminated, by
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NYC, in its sole discretion, upon (90) days written notice.
(b) The rights, benefits, duties and obligations running from or
to NSR under this Agreement shall in all events expire (except liabilities
incurred prior to termination) upon the earlier of: (i) termination of this
Agreement or (ii) termination of the NSR Operating Agreement (including any
renewals thereof) and the rights, benefits, duties and obligations running from
or to CSXT under this Agreement shall in all events expire (except liabilities
incurred prior to termination) upon the earlier of (i) termination of this
Agreement or (ii) termination of the CSXT Operating Agreement (including any
renewals thereof). Notwithstanding any other provision of this Agreement, (1)
upon termination of the NSR Operating Agreement, the rights, benefits, duties
and obligations running from or to NSR under this Agreement shall run from or to
PRR, and (2) upon termination of the CSXT Operating Agreement, the rights,
benefits, duties and obligations running from or to CSXT under this Agreement
shall run from or to NYC. In the event PRR is unable or unwilling to carry out
the duties and obligations of NSR or fails to designate an operator reasonably
satisfactory to NYC to do so, then NYC, or an operator designated by NYC and
satisfactory to PRR, shall have the option to carry out such duties and
obligations related solely to the Monongahela.
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Section 27. Termination of Other Agreement.
This Agreement, upon the effective date hereof, supersedes and
terminates the agreement by and between The Monongahela Railway Company (now
CRC) and CSXT dated October 19, 1990, relating to CSXT trackage rights between
Brown, Pennsylvania, and Catawba Junction (Rivesville), West Virginia.
Section 28. Notices.
Any notice given by CSXT, NSR, PRR, or NYC to the others under
this Agreement shall be deemed delivered on the date sent by registered mail, or
by such other means as they may agree, and shall be addressed to them as
follows:
(a) If to CSXT:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(b) If to NSR:
Senior Vice President Operations
Norfolk Southern Railway Company
Three Commercial Place
Norfolk, Virginia 23510-2191
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(c) If to PRR:
PRR
2001 Market Street
Philadelphia, Pennsylvania 19103
Attention: Vice President-General Counsel
Copy to:
Senior Vice President Operations
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510
(d) If to NYC:
NYC
2001 Market Street
Philadelphia, Pennsylvania 19103
Attention: Vice President-General Counsel
Copy to:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
and each of them may from time to time change its address in this Section 28 by
written notice delivered to the others.
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Section 29. Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, without regard to principles of
conflicts of laws.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in counterparts by their duly authorized officials as of the day
first above written.
CSX TRANSPORTATION, INC.
By: /s/PETER J. SHUDTZ
------------------
Peter J. Shudtz
Title: Vice President - Law and General
Counsel - CSX Corporation,
authorized agent for CSX
Transportation, Inc.
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/J. L. MANETTA
----------------
J. L. Manetta
Title: Senior Vice President Operations
PENNSYLVANIA LINES LLC
By: /s/JAMES D. MCGEEHAN
--------------------
James D. McGeehan
Title: Assistant Treasurer
NEW YORK CENTRAL LINES LLC
By: /s/ C. A. COOK
---------------
C. A Cook
Title: Vice President and Secretary
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EXHIBIT "A"
[MAP]
Map of Monongahela Mine District
Exhibit 99.1
Contact: Elisabeth J. Gabrynowicz
(804) 782-1449
Kathleen A. Burns
(904) 366-2949
CSX OPERATING NEW RAIL NETWORK
Conrail properties integrated into 23,000-mile system
RICHMOND, Va., June 1, 1999 - More than two years of intensive planning
and unprecedented testing come to fruition today as CSX Corporation (NYSE: CSX)
begins operating its share of Conrail.
"This is an historic day," said John W. Snow, chairman, president and
chief executive officer. "Today our vision of creating a revitalized and
competitive eastern rail system will begin to be realized."
The "new" CSX Transportation Inc. (CSXT), the rail unit of CSX, will now
operate about 4,400 more route miles of track. About 6,200 former Conrail
employees join the CSXT ranks today.
"The integration planning process has been the most extensive and
comprehensive ever, with two primary goals in mind - safety and customer
service," said A. R. "Pete" Carpenter, president and CEO of CSXT. "CSXT and
Conrail employees have worked hard to get us to this point - but we all know
that the real work is just beginning. Our job now is to implement the
integration well."
Over the last two years, CSXT has hired more than 1,500 train crew
members, purchased nearly 300 new locomotives and invested more than $500
million in capital improvements in preparation for the integration.
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CSXT's expanded rail system will offer broader market reach for
shippers, single-line service to every major market in the eastern United States
and direct rail access to more ports than any railroad in the nation. For the
first time in a generation, rail competition will be reintroduced to the
Northeastern United States. The new network is expected to take more than a
million truckloads off the highways as improved service attracts more freight to
rail.
CSX and Norfolk Southern Corporation announced the joint acquisition of
Conrail in April 1997 and filed with the federal Surface Transportation Board
(STB) in June of that year their joint application to acquire and allocate
Conrail's predominantly Northeastern routes. The STB voted unanimously on June
8, 1998, to approve the transaction. The acquisition has received broad and
ongoing support from shippers, labor unions, public officials, safety and health
organizations and environmental groups.
CSX Transportation and its 34,500 employees provide rail transportation
and distribution services over a 22,700 route mile network in 23 states, the
District of Columbia and two Canadian provinces. CSXT is a business unit of CSX
Corporation, based in Richmond, Va., an international transportation company
providing rail, intermodal, container-shipping and contract logistics services
worldwide.
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CSX's Internet address: http://www.csx.com
