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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 8, 1997
------------------------
NORFOLK SOUTHERN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
VIRGINIA 1-8339 52-1188014
STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
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THREE COMMERCIAL PLACE, NORFOLK, VIRGINIA 23510-2191
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (757) 629-2680
NO CHANGE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
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ITEM 5. OTHER EVENTS.
On April 8, 1997, Registrant issued a press release announcing that it has
entered into an agreement (the "Agreement") with CSX Corporation ("CSX")
providing for a joint acquisition of Conrail Inc. ("Conrail"). Under the terms
of the Agreement, Registrant and CSX will jointly acquire all outstanding shares
of Conrail not already owned by them for $115 in cash per share. In connection
therewith, Registrant's pending tender offer to acquire Conrail shares has been
terminated and CSX's pending tender offer to acquire Conrail shares will be
amended, among other things, to include Registrant as a co-bidder (the "Joint
Offer") and to extend its expiration date to May 23, 1997.
The estimated cost of the Joint Offer and of Conrail shares already
acquired by Registrant and by CSX is approximately $10.2 billion. Pursuant to
the Agreement, Registrant will bear 58% of the cost (or approximately $5.9
billion, of which approximately $1 billion has previously been expended) to
acquire the Conrail shares and CSX will bear 42% of such cost, in each case
taking into consideration amounts previously paid by each of them to acquire
Conrail shares. In addition, the Agreement provides that, upon consummation of
the Joint Offer and completion of the second-step merger specified in the
Agreement, and subject to regulatory approval, specified assets and liabilities
of Conrail will be allocated between Registrant and CSX pursuant to leasing,
operating, partnership or other arrangements, and the remaining assets and
liabilities of Conrail will be pooled and either shared or allocated between
Registrant and CSX on a ratable basis in accordance with the percentage of the
total consideration paid (including liabilities assumed) by Registrant and CSX,
respectively (such acquisition by Registrant of, or of the right to use, the
assets allocated to or shared by Registrant pursuant to the Agreement and the
assumption by Registrant of the liabilities allocated to or shared by it
pursuant to the Agreement, the "Transaction").
Registrant and CSX intend to file a joint application with the Surface
Transportation Board ("STB") in June seeking approval of the Conrail acquisition
and division. The shares purchased in the Joint Offer will be placed in a joint
voting trust pending STB approval which is expected in early 1998. Following
consummation of the Joint Offer, Registrant expects to use equity accounting for
financial reporting purposes. Following STB approval, Registrant plans to
consolidate its interest in Conrail for financial reporting purposes.
The foregoing description of the press release and the Agreement are
qualified in their entirety by reference to the full texts thereof, copies of
which have been included as exhibits hereto and are incorporated herein by
reference.
Registrant has identified a number of synergies related to the Transaction
which its management believes can be achieved that will yield in 1996 dollars
about $90 million in 1998, $220 million in 1999 and $350 million by the year
2000. These synergy estimates reflect anticipated operating expense savings and
revenue enhancements. Expense savings are expected to result from, among other
things, reduced general and administrative expenses, improved equipment
utilization and maintenance, improved use of rail yards and routes, coupled with
maintenance of way efficiencies, and more efficient transportation operations.
Revenue enhancements are expected to result from net new business (single-line
service, new coal traffic and the diversion of truck traffic to rail).
Registrant anticipates the synergies from the Transaction will result in
accretion in Registrant's earnings per share of about 5% beginning in 1999, 10%
in 2000, growing to more than 15% in 2001 and thereafter. In 1997 and 1998,
Registrant expects the acquisition to be dilutive to earnings by approximately
6% in each year. Cash earnings before goodwill should be accretive beginning in
1998 and Registrant currently estimates that it will book about $1.2 billion in
goodwill in accounting for the Transaction.
To finance the Transaction, Registrant expects to access the public and
private debt markets through the use of additional commercial paper and term
debt. Registrant anticipates that the additional $5 billion in debt to be issued
to finance the Transaction will bring its debt-to-total-capitalization to about
60%.
The foregoing estimates of cost savings, synergies, projected earnings per
share and pro forma financial information are "forward-looking" and inherently
subject to significant uncertainties and contingencies, many of which are beyond
the control of Registrant, including: (a) future economic conditions in the
markets in which Registrant and Conrail operate; (b) financial market
conditions; (c) inflation rates; (d) changing competition; (e) changes in the
economic regulatory climate in the United States railroad industry; (f) the
2
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ability to eliminate duplicative administrative functions; and (g) adverse
changes in applicable laws, regulations or rules governing environmental, tax or
accounting matters. There can be no assurance that the estimated savings,
revenue increases, synergies, projected earnings per share and pro forma
financial information will be achieved and actual savings, revenue increases,
synergies, projected earnings per share and pro forma financial information may
vary materially from those estimated. The inclusion of such estimates herein
should not be regarded as an indication or affirmation that Registrant or any
other party considers such estimates an accurate prediction of future events.
ITEM 7(C). EXHIBITS.
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<C> <S>
99.1 Press Release issued by Registrant and CSX on April 8, 1997.
99.2 Agreement, dated April 8, 1997, between Registrant and CSX,
including Exhibits thereto.
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3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 10, 1997
NORFOLK SOUTHERN CORPORATION
(Registrant)
By: /s/ DEZORA M. MARTIN
--------------------------------------
(signature)
Dezora M. Martin
Corporate Secretary
4
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EXHIBIT INDEX
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EXHIBIT
NUMBER
SYSTEM DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
99.1 Press Release issued by Registrant and CSX on April 8, 1997.
99.2 Agreement, dated April 8, 1997, between Registrant and CSX, including exhibits
thereto.
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<PAGE> 1
Exhibit 99.1
CONTACTS: THOMAS E. HOPPIN ROBERT FORT
CSX CORPORATION NORFOLK SOUTHERN CORPORATION
804-782-1450 757-629-2710
FOR IMMEDIATE RELEASE
CSX, NORFOLK SOUTHERN AGREE ON DIVISION OF CONRAIL;
JOINT ACQUISITION AND JOINT STB APPLICATION ALSO SET
RICHMOND and NORFOLK, Va. - April 8, 1997 - CSX Corporation (NYSE: CSX) and
Norfolk Southern Corporation (NYSE: NSC) today announced that they have reached
agreement on a division of the routes and assets of Conrail Inc.
The two companies said they will form a jointly owned entity to acquire
all outstanding shares of Conrail for $115 in cash per share. Norfolk Southern
will contribute $5.9 billion for its 58 percent share of the acquisition and CSX
will contribute $4.3 billion for its 42 percent share. The totals include
amounts previously spent by Norfolk Southern and CSX to acquire Conrail shares.
The companies also said they will file a joint application with the
Surface Transportation Board in June seeking approval of the Conrail acquisition
and division.
CSX's pending tender offer for the remaining shares of Conrail will be
amended to include Norfolk Southern and will be extended to May 23, 1997. The
shares purchased in the offer will be placed in a joint voting trust pending STB
approval of the proposed transaction.
As part of the agreement, CSX and Norfolk Southern will move to dismiss
all pending litigation between the two companies.
Norfolk Southern and CSX said the plan will create balanced competition
in the East, restore rail competition in regions now served only by Conrail, and
improve service to customers.
The result will be two strong competitors that will provide single-line
service between the New York metropolitan area and Chicago, between New York and
St. Louis and between the New York area and markets to the south and southwest.
Implementation of the plan is expected to bring new business and new jobs to the
rail industry and the regions now served by both companies.
The companies said they are confident the plan will earn support from
customers and the public, and are hopeful the STB will consider the joint
application on an expedited schedule.
Under the plan, Norfolk Southern and CSX will divide all of Conrail's
principal routes, which form an "X" crossing in Ohio, with each railroad
operating two of the four legs of the "X". Norfolk Southern will obtain about 58
percent of Conrail and CSX about 42 percent, based on the revenues generated by
Conrail's lines and facilities in 1995.
-- MORE --
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-2-
In arriving at the proposed division, the companies focused on
producing the best fit with their existing systems and optimizing service to
customers.
CSX will operate the legs between Boston and Cleveland through Albany
and Buffalo with connecting lines to Montreal, New York and New Jersey and
between Cleveland and St. Louis (former New York Central mainlines). In
addition, CSX will operate Conrail's line connecting New York and Philadelphia
(a former Reading line) and the line that connects Crestline, Ohio and Chicago,
a portion of which west of Fort Wayne, Ind., now is owned by Norfolk Southern.
CSX will also operate the line between Toledo and Columbus, Ohio.
Norfolk Southern will operate legs of the "X" between Chicago and
Cleveland (a former New York Central mainline) and the Conrail line between
Cleveland and northern New Jersey via Pittsburgh and Harrisburg (mostly the
former Pennsylvania Railroad mainline). In addition, Norfolk Southern will
operate the Conrail line serving the metropolitan New York area between northern
New Jersey and Buffalo through Binghamton, N.Y., (former Erie Lackawanna) and
another between Buffalo and Harrisburg, Pa.
Norfolk Southern will operate most Conrail lines in Michigan, Maryland,
Delaware and Pennsylvania. It also will operate the routes between Toledo and
Detroit, Columbus and Cincinnati and between Columbus and Charleston, W. Va.
Norfolk Southern and CSX jointly will operate Conrail assets in major
terminal areas such as Detroit and northern and southern New Jersey. The two
companies also will share access to certain lines in Philadelphia and
Indianapolis, and to the rail lines serving the Monongahela coal fields in
southwestern Pennsylvania.
The joint STB application will address traffic flows, terminal
operations and related matters; outline the capital investments each company
plans to make in new connections and facilities and to increase capacity on
critical routes; and detail operating savings and other public benefits
resulting from the transaction. Norfolk Southern and CSX will jointly solve the
few "2-to-1" points created by their division of Conrail.
CSX Corporation, headquartered in Richmond, Va., is an international
transportation company offering a variety of rail, container-shipping,
intermodal, trucking, barge and contract logistics management services. The
company's 18,000 route-mile rail system links 20 states to the East and Midwest.
Norfolk Southern is a Virginia-based holding company with headquarters
in Norfolk, Va. It owns a major freight railroad, Norfolk Southern Railway
Company, which operates more than 14,300 miles of road in 20 states primarily in
the Southeast and Midwest, and the Province of Ontario, Canada. The corporation
also owns North American Van Lines, Inc., and Pocahontas Land Corporation, a
natural resources company.
# # #
Note: Maps showing the proposed division of Conrail are available on
the World Wide Web sites of CSX and Norfolk Southern.
(Norfolk Southern: http://www.nscorp.com; CSX: http://www.csx.com)
<PAGE> 1
EXHIBIT 99.2
April 8, 1997
Mr. David R. Goode
Chairman, President and
Chief Executive Officer
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510
Dear David:
This letter sets forth our agreement concerning the
basis on which CSX Corporation ("CSX") and Norfolk Southern Corporation ("NSC")
would jointly participate in the acquisition of Conrail Inc. ("CRR") consistent
with CSX's merger agreement, as amended through the third amendment, dated
March 7, 1997 (the "Third Amendment"), and as further amended consistent with
the terms hereof through the fourth amendment dated the date hereof (the
"Fourth Amendment"), with CRR (the "Merger Agreement"). Under this Agreement,
CSX and NSC jointly will acquire all CRR shares not already owned by CSX and
NSC through CSX's outstanding tender offer (such outstanding tender offer as
supplemented to include NSC's participation as set forth herein, the "Amended
Second Offer") and the subsequent merger contemplated by the Merger Agreement
(the "Merger"). CRR will be the "Surviving Corporation" in the Merger, as
provided in the Merger Agreement. While this letter is provided as an outline
of our agreements and will be followed by Definitive Documentation (as
hereinafter defined), it is a binding obligation with respect to the matters
described herein. As used in this Agreement, "CSX" and "NSC" will include the
respective rail subsidiaries of CSX and NSC, as the context requires.
1. CSX/NS Acquisition Sub.
Formation. Promptly following the execution of this
Agreement, and subject to NSC's consent as provided below, CSX (or CSX and NSC)
will form a new entity under the laws of a jurisdiction to be determined, which
may be in corporate, partnership or limited liability company form ("CSX/NS
Acquisition Sub"). The authorized capital stock or similar equity interests or
units of CSX/NS Acquisition Sub (the "Equity") will consist solely of two
classes with identical economic and other rights, except that one class will
have voting rights and the other class will not have voting rights. CSX/NS
Acquisition Sub will be capitalized by CSX and NSC through the Stock
Contributions, which will have a deemed aggregate valuation of $2,898,263,640,
and Cash Contributions, all as provided
<PAGE> 2
Mr. David R. Goode
April 8, 1997
Page 2
below. Upon and immediately following the Stock Contributions as provided
below, the Equity with voting rights of CSX/NS Acquisition Sub will be owned
50% by CSX and 50% by NSC (with a deemed aggregate valuation of
$1,886,000,000), and the Equity without voting rights of CSX/NS Acquisition Sub
will be owned solely by CSX (or its controlled subsidiary) (with a deemed
aggregate valuation of $1,012,263,640) and will represent 34.94% of the
aggregate Equity represented by the outstanding voting and non-voting Equity of
CSX/NS Acquisition Sub. In connection with each Cash Contribution made under
this Agreement by CSX (or its controlled subsidiary) or NSC (or its controlled
subsidiary), non-voting Equity will be issued to the contributing party with a
deemed valuation equal to the amount of the related Cash Contribution.
Contributions. CSX, through Green Acquisition Corp.
("Tender Sub"), currently has (and, except with respect to 100 CRR shares to be
retained by CSX, upon the Stock Contributions Tender Sub will have) a
beneficial interest in 17,775,124 CRR shares now held in a voting trust; and
NSC, through Atlantic Acquisition Corporation ("AAC"), currently has a
beneficial interest in 8,200,000 CRR shares now held in a voting trust.
Neither Tender Sub nor AAC has incurred any obligations or liabilities or
engaged in any business or activities other than, in the case of Tender Sub, as
contemplated in the Merger Agreement and, in the case of AAC, in connection
with the NSC tender offer and related matters. Through the mechanics described
in the following paragraph, concurrently with the formation of CSX/NS
Acquisition Sub, CSX will contribute to CSX/NS Acquisition Sub all the capital
stock of Tender Sub and NSC will contribute to CSX/NS Acquisition Sub all of
its interest in such 8,200,000 CRR shares (such transactions, the "Stock
Contributions"). In connection with the Stock Contributions, (1) CSX will have
exclusive authority with respect to amendments to the CSX voting trust until
consummation of the Amended Second Offer and (2) CSX will be permitted to
retain 100 CRR shares outside of CSX/NS Acquisition Sub by conveyance from
Tender Sub prior to the Stock Contributions, by amendment to the Tender Sub
voting trust agreement to segregate such shares or otherwise. In addition, in
connection with the Stock Contributions, NSC will have exclusive authority with
respect to amendments to the AAC voting trust until consummation of the Amended
Second Offer. Notwithstanding anything to the contrary in the preceding two
sentences, no amendments shall be made to the Tender Sub voting trust or the
AAC voting trust that would impair the ability of the parties to consummate the
transactions contemplated herein in accordance with the terms hereof.
All CRR shares currently owned by Tender Sub and AAC,
and all additional CRR shares acquired pursuant to the Amended Second Offer and
the Merger, will continue to be held in voting trusts until the effective date
of Surface Transportation Board ("STB") approval of the transactions
contemplated by the Merger Agreement and by this Agreement. In furtherance
thereof, without prejudice to CSX's and NSC's obligations to make the Stock
Contributions upon the formation of CSX/NS Acquisition Sub as promptly as
practicable following the execution hereof as provided herein, upon
consummation of the Amended Second Offer, CSX and NSC will cause the CRR shares
currently held in the Tender Sub and AAC voting trusts to be transferred to a
new or consolidated voting trust, in a form as agreed to by CSX and NSC, for
the benefit of CSX/NS Acquisition Sub, to which all additional CRR shares
acquired pursuant to the Amended Second Offer and the Merger will be
transferred for the benefit of CSX/NS Acquisition Sub. CSX and NSC also will
cause the trustee of the new or consolidated voting trust to issue to CSX/NS
Acquisition Sub trust certificates representing all such CRR shares. Following
consummation of the Amended Second Offer and the Merger, CSX/NS Acquisition Sub
(or its wholly owned
<PAGE> 3
Mr. David R. Goode
April 8, 1997
Page 3
subsidiary) will own voting trust certificates representing 100% of the stock
of the Surviving Corporation.
In addition to the Stock Contributions provided for
above, each of CSX (or its controlled subsidiary) and NSC (or its controlled
subsidiary) will contribute cash to CSX/NS Acquisition Sub to fulfill its
obligations under this Agreement (including, without limitation, for the
purpose of purchasing in the Amended Second Offer and the Merger all CRR shares
not already held by the Tender Sub and AAC voting trusts) (each, a "Cash
Contribution") in amounts such that the aggregate cash amount expended
(excluding legal, investment banking and other advisory fees and associated
expenses (collectively, "Advisor Expenses") and including only the amounts paid
for the shares and amounts specifically required under this Agreement to be
shared by Percentage) to acquire CRR shares by CSX, NSC and CSX/NS Acquisition
Sub is borne 42% by CSX and 58% by NSC (the 42%/CSX and 58%/NSC is hereinafter
referred to as the "Percentage"), valuing all CRR shares acquired prior to the
date hereof by CSX at $110 per share and by NSC at $115 per share; provided
that CSX will not be required to make Cash Contributions to CSX/NS Acquisition
Sub unless and until NSC shall have made at least $1,757,125,979 in Cash
Contributions to CSX/NS Acquisition Sub. Such Cash Contributions will be made
in accordance with the terms under the subsection entitled "Formation" above
and at such times as are required to fulfill obligations hereunder (including,
without limitation, for Tender Sub to purchase CRR shares in the Amended Second
Offer and the Merger). All cash contributed by CSX and NSC to CSX/NS
Acquisition Sub to purchase CRR shares in the Amended Second Offer and the
Merger in accordance with this Agreement will be contributed by CSX/NS
Acquisition Sub to Tender Sub to be used by Tender Sub (or its wholly owned
subsidiary formed to consummate the Merger) to purchase CRR shares in
accordance with the Merger Agreement.
CSX's and NSC's obligations to make the Stock
Contributions and the Cash Contributions required hereunder and their other
obligations hereunder are not subject to the condition that Definitive
Documentation has been agreed to by CSX and NSC. The only conditions to CSX's
and NSC's obligations to make the Cash Contributions for the consummation of
the Amended Second Offer and the Merger will be those same conditions
applicable to CSX and Tender Sub as set forth in Section 15 of the CSX Offer to
Purchase, dated December 6, 1996, as amended (the "Offer to Purchase"), and in
the Merger Agreement, respectively. In addition, notwithstanding whether the
conditions to consummation of the Amended Second Offer or Merger are satisfied,
CSX and NSC shall be obligated to make Cash Contributions as provided in this
Agreement or indemnity payments as provided in this Agreement in order to
satisfy any claims made against CSX and NSC following the date hereof under the
Merger Agreement or this Agreement (including without limitation under the
"put" provisions of the Pennsylvania Control Transaction Law (as defined in the
Offer to Purchase)) in accordance with "Other Liabilities" in Section 3 of this
Agreement.
Governance. As described above, following the Stock
Contributions, each of CSX and NSC will have equal decision-making authority
with respect to matters relating to CSX/NS Acquisition Sub and its subsidiaries
(which, following the Stock Contributions, will include Tender Sub and Merger
Sub (as defined in the Merger Agreement)), including
<PAGE> 4
Mr. David R. Goode
April 8, 1997
Page 4
matters concerning the formation, organization, governance and activities
thereof. In furtherance of the foregoing, until the Stock Contributions, CSX
will not take any action concerning the formation, organization, governance or
activities of CSX/NS Acquisition Sub, without the prior agreement of NSC.
Following the Stock Contributions, each of the parties
will have and may exercise a 50% voting interest in CSX/NS Acquisition Sub
(which may also be held in one or more controlled subsidiaries) and will have
the right to appoint 50% of CSX/NS Acquisition Sub's directors or similar
governing representatives. Each of the parties will be entitled to appoint a
full time Co-Chief Executive Officer of CSX/NS Acquisition Sub, and all CSX/NS
Acquisition Sub executive appointments will be subject to approval by the board
of directors or similar governing body of CSX/NS Acquisition Sub. In addition,
the parties will establish a protocol for the management of CSX/NS Acquisition
Sub as well as a list of those items that will require board approval. The
provisions of this paragraph will apply equally to the governance of CRR
following the Control Date (as hereinafter defined) in order to effectuate the
transactions contemplated hereby (including on-going operation of Shared
Assets) as approved by the STB.
Subject to the other provisions hereof, in the event
any shares of common stock or other Equity in CSX/NS Acquisition Sub are
redeemed at any time, the parties agree that such redemption will occur in a
way to ensure that at all times CSX and NSC will have equal voting rights in
CSX/NS Acquisition Sub.
Further Actions. Following the Control Date, CRR lines
and assets proposed to be operated by NSC or by CSX will be segregated from
other CRR lines and assets through the creation of CRR or Surviving Corporation
subsidiaries or operating divisions or through other means. Subject to any
necessary regulatory approval, NSC and CSX will take and will cause CRR to take
such action as is necessary to name NSC nominees as the officers and directors
of the subsidiary or other entity holding the lines and assets to be operated
by NSC, and to name CSX nominees as the officers and directors of the
subsidiary or other entity holding the line and assets to be operated by CSX.
2. Acquisition; Amended Second Offer; Merger
Agreement.
Amended Second Offer. As promptly as practicable
following the execution hereof, the CSX Second Offer will be amended to add NSC
and CSX/NS Acquisition Sub as joint bidders and to extend the expiration date
thereof to 5:00 p.m. (New York City time) on May 23, 1997. Each of CSX and NSC
will agree to the form of, and will be responsible for the accuracy and
completeness of the information it provides in connection with, CSX's pending
tender offer, any amendment thereto or of the Amended Second Offer and any
related publications and filings, including any notices required to be given
pursuant to the Pennsylvania Control Transaction Law.
Decision-making. Each of CSX and NSC will have equal
decision-making authority with respect to the Amended Second Offer and the
Merger Agreement including any amendment thereof. In furtherance of the
foregoing, neither CSX nor NSC will, without the prior agreement of the other
party, (x) agree to any modifications of the terms, conditions and/or timing of
the Amended Second Offer or make any determination as to the satisfaction of
any conditions thereto or (y) agree to any modifications of the terms and
conditions of, or give any consent or waiver or exercise any right of
termination under, the
<PAGE> 5
Mr. David R. Goode
April 8, 1997
Page 5
Merger Agreement, including without limitation any decision regarding the
exercise of the Green Option (as defined in the Merger Agreement) or under
Section 4.1 of the Merger Agreement. In this regard, CSX will not, without
NSC's prior consent, agree to any determinations with respect to, or direct CRR
to take any action with respect to, CRR's Employee Stock Ownership Plan,
Pension Plan, Stock Employee Compensation Trust or any other CRR benefit plan.
The foregoing provisions are intended to provide that immediately upon
execution of this Agreement, NSC effectively will possess joint participation
and decision-making on an equal footing with CSX in providing any consents
under Section 4.1 of the Merger Agreement. In addition, upon consummation of
the Amended Second Offer, CSX agrees that the Green Option shall be cancelled
without any consideration paid to CSX.
CSX will not take any action that would reasonably be
expected to result in CRR having a right to terminate the Merger Agreement in
accordance with its terms (and NSC will not take any action including, without
limitation, by withholding consent or making determinations under the preceding
paragraph, in any case, that could reasonably be expected to result in CRR
having a right to terminate the Merger Agreement, including as a result of a
breach by CSX of the Merger Agreement). In addition, CSX will consult and
agree with NSC prior to providing any notices to CRR under the Merger Agreement
and shall promptly provide NSC with copies of all written notices provided by
CSX to CRR or received by CSX from CRR under the Merger Agreement.
CSX has supplied NSC with executed copies of an
amendment to CRR's Rights Plan and the Fourth Amendment and with certain
resolutions of the CRR Board which CSX has been advised have been enacted,
approved and delivered by the CRR Board immediately prior to the execution and
delivery of this Agreement, and NSC hereby consents to the taking of such
actions.
3. CRR Division. (a) Division of Assets.
Subject to necessary regulatory approvals and implementation, CRR's routes
("Routes"), assets in proximity to such Routes ("Assets Related to the Routes")
and certain facilities (the "Facilities") will be divided and made available to
CSX and NSC, and where indicated CSX and NSC will have Joint Use/Shared Access
relating to "Shared Assets" (as defined below), all as specified in the map and
the schedules thereto which are attached as part of Exhibit A (it being
understood that the portion of Exhibit A entitled "Conrail Line Allocation" is
not intended to represent the precise cutpoints of Routes, which will be
determined in connection with the negotiation of the Definitive Documentation
based on operational practicalities, but rather is intended to be descriptive
of the line segments agreed to by the parties in Exhibit A). Pursuant to this
division, except as provided more specifically hereafter or more fully
explained herein, following the implementation date of this division, (i) NSC
will acquire use of and responsibility for the management and costs (including
lease costs, if any) of the Altoona and Hollidaysburg shops, and (ii) CSX will
acquire use of and responsibility for the management and costs (including lease
costs) of the CRR headquarters building and the CRR information technology
facilities in Philadelphia; provided that to the extent that a Facility
referred to in (i) or (ii) immediately prior to such implementation date was
operated by CRR for the benefit of the CRR system as a whole, the party to
which such Facility is allocated will accommodate the needs of the other party
for a transition period following such implementation date, as will be provided
in the Definitive Documentation.
<PAGE> 6
Mr. David R. Goode
April 8, 1997
Page 6
Notwithstanding (i) and (ii) above, CSX and NSC will
jointly use and have responsibility for the following ("System Support
Operations"): the customer service center in Pittsburgh; the crew management
facility in Dearborn; the system maintenance-of-way equipment center in Canton;
the signal repair center in Columbus; and the management of a portion of CRR
headquarters function and management at System Support Operations sufficient
for the management of the Surviving Corporation ("Continuing Conrail
Management"). The Continuing Conrail Management will be comprised of those
employees of CRR selected by both CSX and NSC to operate the Surviving
Corporation (including the System Support Operations). The costs of Continuing
Conrail Management and of operating the Surviving Corporation will be shared
based on the Percentage.
It is the parties' current intention that the Surviving
Corporation will be preserved following the Merger, that the division of CRR
assets and the assumption of liabilities relating to CRR assets will be
specified in more detail in the Definitive Documentation and that CRR assets
and liabilities will be allocated pursuant to long-term operating agreements,
leases, one or more partnerships and/or limited liability companies and
indemnity arrangements which will be set forth in the Definitive Documentation.
However, the parties intend that, other than as described herein, the division
of CRR routes and assets described in Exhibit A will be final and do not intend
additional negotiation of such CRR routes and assets, except as agreed upon by
CSX and NSC to provide additional detail or under extraordinary circumstances.
It is the parties' intention that (a) prior to STB
approval, neither CSX nor NSC will at any time operate or exercise operational
control over any of the Routes or Assets Related to Routes or Facilities or
Shared Assets and (b) following STB approval, all CRR Routes and Assets Related
to Routes will be operated separately and independently by or for the
individual benefit of CSX or NSC, except (i) for such period after the Control
Date as may be necessary to effectuate the division of Routes and Assets
Related to Routes and Facilities contemplated hereby and as authorized by the
STB and (ii) for the operation of Shared Assets as defined and described in
Exhibit A pursuant to operating arrangements to be approved by the STB, if
applicable.
Rolling stock, locomotives and work equipment
("Equipment") will be allocated to, and made available for use by, CSX and NSC
in accordance with their respective Percentage. CSX and NSC will negotiate the
allocation of Equipment by series and condition, giving effect to the
suitability of the equipment for use on, and to meet traffic and service needs
on, the Routes, Assets Related to a Route, Facilities and Shared Assets.
Because CRR's equipment financing debt will be included in Pooled Costs (as
hereinafter defined), the parties acknowledge that the final allocation of
Equipment may require an equitable adjustment with respect to Pooled Costs. It
is the parties' current intention that Equipment will continue to be owned by
the Surviving Corporation or a subsidiary of the Surviving Corporation and
allocated to the parties pursuant to lease or other similar agreements.
Stock ownership or partnership interests held by CRR
and identified in Exhibit A.V. hereto will be allocated to either CSX or NSC as
provided in Exhibit A.V.
All CRR rolling-stock-related inventory and supplies
(including rolling-stock-related system stockpiles) at the Altoona and
Hollidaysburg shops as of the Control Date will be allocated to NSC, provided
that, to the extent that following the Control Date
<PAGE> 7
Mr. David R. Goode
April 8, 1997
Page 7
any work is performed at the request and for the account of CSX at the Altoona
or Hollidaysburg shops, then CSX shall not be charged for any materials or
supplies used in such work up to an amount equal to 42% of the total value of
the rolling-stock-related inventory and supplies (including
rolling-stock-related system stockpiles) at the Altoona and Hollidaysburg shops
as of the Control Date (ignoring inventory acquired for the purpose of
fulfilling a third-party contract, which will follow the contract).
All CRR furniture, fixtures, computers, office supplies
and equipment (other than Equipment and system stockpiles of supplies and
inventory, which will be allocated as otherwise provided herein) (all of the
foregoing, collectively, "FF&E") will be allocated between the parties as
follows: (i) all FF&E at CCR's Altoona and Hollidaysburg shops will be
allocated to NSC; (ii) all FF&E at CCR's Philadelphia headquarters building and
information technology center will be allocated to CSX; (iii) all FF&E located
in buildings on or along Allocated Assets will be allocated to the party
receiving such Allocated Assets; and (iv) all FF&E located in buildings on or
along Shared Assets, in System Support Operations facilities or elsewhere, will
be Pooled Assets and will be allocated or shared based on the Percentage. All
CRR corporate memorabilia and antiques, such as artifacts, charters and art
wherever located, will be allocated equally between CSX and NSC.
All other assets not otherwise allocated herein
including, but not limited to, the following, will be "Pooled Assets" and will
be allocated or shared based on the Percentage: (1) non-operating property and
improvements not in proximity to a Route, an Asset Related to a Route, a
Facility or a Shared Asset; (2) stock ownership or partnership interests (other
than interests allocated to either CSX or NSC as provided in Exhibit A.V.
hereto); (3) working capital; (4) employee benefits plans and the assets of
such plans; (5) system stockpiles of supplies and inventory regardless of
location (other than materials acquired for the purpose of fulfilling a
third-party contract, which will follow the contract, and other than as
provided above with respect to the rolling-stock-related inventory and supplies
(including rolling-stock-related system stockpiles) at the Altoona and
Hollidaysburg shops); (6) the System Support Operations; and (7) all other
assets not appurtenant to the allocated CRR assets.
(b) Shared Assets. Exhibit A specifies certain areas
of Joint Use/Shared Access where CRR routes and assets are to be made available
to both CSX and NSC on a shared basis ("Shared Assets") as described in Exhibit
A. Except as specified in Exhibit A, Shared Assets will remain assets of CRR
or a subsidiary of CRR.
(c) Liabilities.
General. Environmental liabilities (known and unknown)
of CRR that relate predominately to a Route or an Asset Related to a Route or a
Facility (Exhibit A) to be allocated to CSX or NSC (an "Allocated Asset") will
be Pooled Costs when paid prior to the Control Date and will follow such
Allocated Asset when paid following the Control Date. When expenses are paid
following the Control Date with respect to an environmental liability relating
to an Allocated Asset, the entity paying the expense will be reimbursed by CRR
or the Surviving Corporation to the extent of the net amount of any reserve
existing for such Allocated Asset as of the date hereof reduced by any payments
made and charged against such reserve through the Control Date.
<PAGE> 8
Mr. David R. Goode
April 8, 1997
Page 8
Liabilities (other than environmental liabilities,
which are provided for above) of CRR that arise after the Control Date and that
relate predominantly to an Allocated Asset will follow such Allocated Asset.
Except as otherwise provided herein, all other liabilities that (x) arise prior
to the Control Date and that relate predominately to an Allocated Asset or (y)
are Corporate Level (as defined below) liabilities will be Pooled Costs and
will be shared based on the Percentage. The "Control Date" is the effective
date on which NSC and CSX are authorized by the STB to exercise control over
CRR. "Corporate Level" liabilities will include, but not be limited to: (1)
environmental liabilities associated with property that is not allocated to CSX
or NSC pursuant to Exhibit A; (2) all claims arising prior to the Control Date
and not otherwise specifically allocated herein with administration of such
claims to be handled by CSX or NSC, whichever has control over the Allocated
Asset where the incident arose or in cases in which a liability arises from an
incident or incidents occurring at more than one location, by the party having
control of the Allocated Asset most significantly involved; (3) employee
benefit costs arising before the Control Date and not otherwise specifically
allocated in this Agreement, e.g., health, accident, life and disability
benefits; (4) all taxes accruing for periods prior to the Control Date,
including tax leverage transactions; (5) taxes, if any, associated with the
division of CRR assets between CSX and NSC; (6) leases and lease termination
costs that arise prior to the Control Date (other than the costs of any lease
for the Philadelphia headquarters, the Philadelphia information technology
center or the Altoona or Hollidaysburg shops); (7) debt and debt guarantees;
(8) costs of FELA claims made prior to the Control Date, which will be Pooled
Costs, provided that the costs of FELA claims made on and after the Control
Date will become the liability of the party to which the relevant employee is
allocated (it being agreed that a FELA claim shall be considered "made" (i)
when a written report of the incident giving rise to the claim has been made by
the injured employee or the employee's supervisor to the employer or (ii) when
the claimant's employer has made or filed a FRA report of an injured employee
or (iii) for an employee or former employee alleging an occupational injury,
when such employee has completed a written questionnaire regarding such injury
with the claim department or the employer has received written notice of legal
representation or notification of filing of a lawsuit regarding an employee or
former employee's claim); (9) all other employee costs not otherwise provided
for elsewhere herein or in the Definitive Documentation other than those for
claims which arise after an employee is transferred to either CSX or NSC (which
claims will be the responsibility of the party to whom such employee is
transferred); (10) liabilities arising prior to the Control Date from other
contracts; and (11) other transition costs of CRR not the sole responsibility
of CSX or NSC not specifically provided for elsewhere herein. (The term
"arise" or "arising prior to the Control Date" means that the circumstances
giving rise to the liability have transpired, whether or not such liability has
been discovered, asserted or accrued. If the circumstances giving rise to a
liability bridge the Control Date, the parties will apportion it to pre-Control
Date and post-Control Date periods, with disagreements being subject to binding
arbitration pursuant to the Definitive Documentation.)
Employee-related Liabilities. For purposes of the
following, "Separation Costs" means labor protection costs, severance
(including payments under severance agreements), personnel relocation expenses
and all other dismissal expenses and stay bonuses (including liabilities under
the Third Amendment); and "contract" means covered by a collective bargaining
agreement. Upon and following the Control Date:
(i) Separation Costs associated with contract
employees at CRR's shops in Altoona and
Hollidaysburg will be the responsibility of
NSC. Separation Costs
<PAGE> 9
Mr. David R. Goode
April 8, 1997
Page 9
associated with contract employees at CRR's
Philadelphia headquarters, Philadelphia
technology center and Pittsburgh customer
service center (notwithstanding the joint use
and responsibility provided for herein) will
be the responsibility of CSX.
However, the on-going expenses of the
Continuing Conrail Management and of the
other System Support Operations will be
Pooled Costs while they are incurred for the
benefit of both parties. Both CSX and NSC
will have the right, upon six months' prior
written notice, to notify the other party
that they no longer need a facility or
function or portion thereof the costs of
which were Pooled Costs at the time of such
notice. Once the six-month period has
expired, the costs associated with such
facility or function or portion thereof with
respect to which notice was given will cease
to be Pooled Costs and will be allocated as
otherwise provided in this Agreement, but the
costs associated with the facility or
function or portion thereof which continue to
be incurred for the benefit of both parties
will continue to be Pooled Costs and shared
by Percentage. Notwithstanding the
foregoing, Separation Costs associated with
Continuing Conrail Management employees and
System Support Operations employees shall be
allocated as otherwise provided herein.
(ii) Separation Costs associated with CRR contract
employees working jobs on Allocated Assets
will be the sole responsibility of the party
to which that Allocated Asset is allocated.
For each CRR contract employee working jobs
on Routes or Assets Related to Routes or
Facilities not primarily allocated to either
CSX or NSC (other than jobs that relate
primarily to Continuing Conrail Management or
Routes or Assets Related to Routes or
Facilities constituting System Support
Operations or Shared Assets), the Definitive
Documentation will establish a mechanism to
assign sole responsibility to either CSX or
NSC for the above costs and expenses.
(iii) Separation Costs, compensation and all other
expenses associated with employees of CSX or
NSC will be the sole responsibility of their
respective employing carrier.
(iv) Separation Costs associated with non-contract
employees (including payments to be made by
CSX, CRR or the Surviving Corporation under
the Merger Agreement) will be Pooled Costs
and shared by Percentage to the extent that
CRR assets are otherwise unavailable to
satisfy such expenses.
(v) Compensation and other expenses for employees
working jobs on Allocated Assets will be the
sole responsibility of the party to whom such
Allocated Asset has been allocated.
(vi) Without regard to the above, the Separation
Costs under CRR plans and agreements
(including the Third Amendment) for a CRR
employee who accepts employment with CSX or
NSC will be borne, subsequent to the date of
such employment, by the employing party.
<PAGE> 10
Mr. David R. Goode
April 8, 1997
Page 10
Other Liabilities. CSX and NSC will share by Percentage all
other liabilities and costs incurred following the execution of this Agreement
relating to the Merger Agreement (including for CRR shares, if any, that are
"put" pursuant to the Pennsylvania Control Transaction Law) other than (a)
Advisor Expenses, which will be paid by the incurring party, and (b)(i) CSX's,
CRR's and the Surviving Corporation's liability to current or former CRR
shareholders for the pending claims in the pending CRR shareholders litigation
(other than litigation brought by NSC or its affiliates), which liability,
together with all related litigation costs (which shall not include CRR legal
fees incurred prior to the date hereof), shall be borne solely by CSX, and (ii)
CSX's (including Tender Sub's), CRR's and the Surviving Corporation's, on the
one hand, or NSC's (including AAC's), on the other hand, liability for
disclosure-based claims based on disclosures made prior to the date hereof
brought by current or former CRR shareholders in connection with the Merger
Agreement or the Amended Second Offer or the transactions contemplated thereby
based on the accuracy or completeness of information supplied by such party,
which liability, together with all related litigation costs (which shall not
include CRR legal fees incurred prior to the date hereof), shall be solely the
responsibility of CSX or NSC, respectively.
4. Definitive Documentation. Promptly after
execution of this Agreement, CSX and NSC will negotiate in good faith toward
reaching and will enter into and execute fuller documentation with respect to
the transactions contemplated hereby ("Definitive Documentation"), which
documentation will supercede this Agreement. The Definitive Documentation will
include trackage rights and haulage agreements consistent with Exhibit B hereof
and will also implement the details provided in Exhibit A hereof. To the
extent that the parties are unable to agree on any matter arising under this
Agreement or in the negotiation of the Definitive Documentation, the parties
will appoint Cannon Y. Harvey, Esq., or such other person as may be mutually
agreed upon in the event that Mr. Harvey is unable or unwilling to serve, as a
mediator to aid in resolving such matter through mediation for a period not to
exceed 30 days under the then current CPR Institute For Dispute Resolution
Mediation Procedure for Business Disputes. The Definitive Documentation will
provide that all disputes and disagreements arising under the Definitive
Documentation will be resolved by binding arbitration in accordance with
procedures to be agreed upon and specified in the Definitive Documentation.
The provisions of this Section 4 shall not apply to any dispute for which a
party seeks an equitable remedy or other provisional relief.
5. STB. (a) The parties will coordinate and
cooperate with one another with respect to matters involving the STB approval
process, and will as expeditiously as possible seek STB and any other
regulatory approval or authority necessary for consummating the transactions
contemplated by this Agreement and the Definitive Documentation. The parties
will use their best efforts to obtain such approvals, and neither party will
take any position (at the STB or with any governmental or political body or
elsewhere) inconsistent with this Agreement and the Definitive Documentation.
(b) CSX and NSC shall coordinate and consult with one
another with respect to all settlements involving the STB approval process.
The parties further understand that: (1) any settlement or agreement
pertaining to the Shared Assets will require the joint approval of CSX and NSC;
(ii) neither CSX nor NSC shall make any settlement or agreement with respect to
a line or other asset which, after STB approval, would be operated in
<PAGE> 11
Mr. David R. Goode
April 8, 1997
Page 11
the interest of the other party without such other party's consent; and (iii)
nothing contained herein shall require joint action for either CSX or NSC to
enter into any settlement or railroad transportation contract with any shipper
or receiver of freight.
(c) If any settlement or any accepted STB condition
relates to an Allocated Asset which, after STB approval, would be operated in
the interest of NSC or in the interest of CSX or (as in the case of Shared
Assets) would be operated in the interest of both, the burden of such
settlement or condition will be borne where it falls, and the Percentage will
not be adjusted to reflect the settlement or condition.
(d) The Definitive Documentation and the voting trust
will include provisions specifying the parties' respective rights in the event
the STB imposes any non-standard condition materially reducing the benefits
anticipated by either party from the transaction.
6. Access and Preservation. Each of CSX and NSC
agrees to be bound by the terms of the Confidentiality Agreement dated March
13, 1997 (as if such agreement covered confidential information of either of
them) with respect to all confidential information to be provided by such
person to the other in connection with the transactions contemplated hereby.
Pursuant to the terms of Section 4.3 of the Merger Agreement, as amended, CSX
will use all reasonable efforts to cause NSC to be on an equal footing with CSX
with respect to the ability to obtain access to CRR property and personnel and
information about CRR. Until NSC is placed on an equal footing with CSX, CSX
will provide NSC and its representatives access upon reasonable notice and at
reasonable times and upon other reasonable terms and conditions, subject to
availability under the Merger Agreement and to applicable regulations, to the
books and records and assets of CRR and to CRR employees and advisers having
knowledge of its business and affairs.
7. NSC Offer. Upon execution hereof, NSC will
terminate its outstanding tender offer for CRR shares. Upon consummation of
the Amended Second Offer as modified in accordance with this Agreement, NSC
will withdraw its letter dated February 10, 1997 relating to the CRR 1997
Annual Meeting of Shareholders and, until such withdrawal, will take no action
in furtherance of the matters covered by such letter without CSX's consent,
unless the date of the CRR 1997 Annual Meeting of Shareholders is changed.
8. Litigation. Promptly following execution of
this letter agreement, NSC and CSX will take such action as is necessary to
dismiss with prejudice all pending lawsuits between the parties relating to the
CRR acquisition, and CSX, under the Merger Agreement, will not consent to the
taking of any action by CRR respecting, and, following the Merger will request
pursuant to Section 5.13 of the Merger Agreement the dismissal with prejudice
of, all claims and litigation against NSC, its officers and affiliates relating
to the CRR acquisition. In addition, CSX will request pursuant to Section 5.13
of the Merger Agreement that CRR join in a stay or similar adjournment of any
such proceeding.
9. Certain Obligations; Indemnification. CSX
and NSC, as provided above, each having a 50% voting interest in CSX/NS
Acquisition Sub (which, following the Merger, will own 100% of the Surviving
Corporation) following the Stock Contributions, will cause the Surviving
Corporation to honor all commitments of the Surviving Corporation under the
Merger Agreement. Except as may otherwise be provided in this
<PAGE> 12
Mr. David R. Goode
April 8, 1997
Page 12
Agreement, to the extent that, following the date hereof, any claims are made
under or in connection with the Merger Agreement against the Surviving
Corporation, CSX or NSC or any of their respective affiliates, CSX and NSC will
share any liability thereunder by Percentage, and each of CSX and NSC will
indemnify the other for its proportionate share according to Percentage, except
to the extent that any such liability results from a breach by the indemnified
party of the terms of this Agreement. However, the indemnification
contemplated in the foregoing sentence will not cover the liability to be borne
solely by CSX or NSC as provided under the subsection entitled "Other
Liabilities" in Section 3.
10. Disclosure. Any written news releases and
any other disclosure required to be filed with any governmental authority
(other than routine information) pertaining to this Agreement or the
transactions contemplated hereby will be reviewed by and agreed upon by both
CSX and NSC prior to release, subject to requirements of law.
11. Employment of Employees. As promptly and
practicably as possible after the date hereof subject to any subsequent
modifications deemed necessary by CSX and NSC to ensure continuity of customer
service, CSX and NSC will jointly develop the staffing process to be followed
with the employment or redistribution of non-contract CRR personnel associated
with the CRR acquisition. In addition, CSX and NSC will coordinate and consult
with one another in connection with the hiring of CRR personnel to CSX and NSC
in order to assure a smoother transition to the division contemplated hereby,
each party hereto recognizing these legitimate needs of the other with respect
to such hiring.
12. Payments. To the extent that a party is
liable and responsible for a payment item hereunder, such party will indemnify
the other hereto with respect to such item and such party will pay such item
directly, reimburse CRR for payment of such item or suffer an adjustment to the
contributions and distributions contemplated hereunder in respect of such
payment. The parties agree to make capital contributions to CSX/NS Acquisition
Sub in a timely manner to fund payments required to be made under this
Agreement.
13. Entire Agreement; No Third-Party
Beneficiaries; Consents. This Agreement (including the exhibits hereto) and
the confidentiality agreements between the parties constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement and are not intended to confer upon any person other than the parties
any rights or remedies. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF;
PROVIDED, HOWEVER, THAT THE LAWS OF THE RESPECTIVE STATES OF INCORPORATION OF
EACH OF THE PARTIES HERETO SHALL GOVERN THE RELATIVE RIGHTS, OBLIGATIONS,
POWERS, DUTIES AND OTHER INTERNAL AFFAIRS OF SUCH PARTY AND ITS BOARD OF
DIRECTORS. To the extent that any consent or concurrence is required under
this Agreement, such consent or concurrence will not be unreasonably withheld.
<PAGE> 13
Mr. David R. Goode
April 8, 1997
Page 13
If the terms of this letter are satisfactory to you,
please so signify by signing and returning to us the enclosed copy of this
letter so that work on the Definitive Documentation may begin.
Sincerely,
CSX CORPORATION
By: /s/ JOHN W. SNOW
-------------------------------------
John W. Snow
Accepted and Agreed as of the
8th day of April, 1997.
NORFOLK SOUTHERN CORPORATION
By: /s/ DAVID R. GOODE
------------------------------
David R. Goode
<PAGE> 14
Exhibit A
I. ROUTES
CRR's routes ("Routes") will be assigned as shown on the attached maps
and as set out in the attached table captioned "Conrail Line Allocation."
II. ASSETS RELATED TO ROUTES. Except as otherwise expressly provided in the
letter agreement, "Assets Related to Routes" shall include the following:
1. the track structure (rails, ties, grading, bridges, tunnels,
culverts, etc.),
2. the underlying right-of-way, operating and non-operating,
regardless of its width, and associated structures,
3. except in areas of Shared Assets, or areas where the parties'
respective Routes are approximately equidistant from the Asset
Related to the Route in question, where other arrangements are
made, appurtenant yards, sidings, switch tracks and repair or
other maintenance facilities,
4. real estate (whether or not used for operating purposes) in
proximity to the Routes,
5. signal, communications and computer facilities on the right-of-way
and, to the extent used to operate the Routes, off the
right-of-way (except where a particular S&C facility, such as a
microwave tower, is used in conjunction with operation of both a
Route going to NS and a Route going to CSXT, the parties shall
negotiate an arrangement which will facilitate their respective
operations),
6. tools and supplies located on and along the Routes, including
repair materials, except system stockpiles of supplies and
inventory,
7. equipment such as hi-rail cars and local repair equipment usually
and customarily used on a Route (as opposed to systemwide),
8. contracts, agreements, and rights, other than transportation
contracts, relating to a Route, including without limitation
trackage and other operating rights, crossing agreements, leases,
reversions, longitudinal easements and other occupancy agreements,
and the rents and profits arising therefrom, and
9. muniments of title, valuation maps, surveys, files and records
relating to a Route.
<PAGE> 15
III. JOINT USE/SHARED ACCESS AND OTHER CITY DETAIL
("SHARED ASSETS")
The Definitive Documentation will include agreements providing for joint use of
the following CRR properties and rights (the "Shared Assets"), subject to the
operating principles here specified.
ASHTABULA HARBOR
NS will be assigned and control CR's Ashtabula Harbor facilities, with CSXT
receiving use and access, up to a proportion of the total ground storage,
throughput, and tonnage capacity of the facility equal to the Percentage.
CSXT will control the interlocking at the crossing of the CR Youngstown Line and
CR Chicago Line.
NS and CSXT agree that if either carrier acquires or controls additional Lake
Erie coal dock capacity, it will make arrangements with the other carrier to
maintain parity and competitive balance in dock access and coal ground storage.
BUFFALO
The attached map summarizes the CSXT/NS understanding for CR facilities in
Buffalo, subject to the following:
- - CSXT will be assigned Seneca Yard, and both CSXT and NS will receive access
to yard tracks in Seneca Yard sufficient for the origination and termination
of trains (precise number of tracks to be determined), at the end of the CR
Buffalo Line to be assigned to NS, for purposes of improved interchange with
the South Buffalo RR.
- - CSXT and NS will form a joint team to study and use reasonable efforts to
resolve NS delay problems at CP Draw in Buffalo.
CHICAGO
The attached map summarizes the CSXT/NS understanding for CR facilities in
Chicago, subject to the following:
- - Both NS and CSXT will have access to CR's route and right to BNSF's Willow
Springs Yard.
2
<PAGE> 16
- - An agreement between NS and CSXT as IHB shareholders will provide that as
between NS and CSXT:
(a) CSXT will use and control IHB's Blue Island Yard, and NS will not
utilize Blue Island Yard except for purposes of traffic to/from IHB switched
industries;
(b) NS will use and control the IHB line from CP 502/Indiana Harbor to
Gibson Crossing for the purposes of connecting to the Streator Line;
(c) IHB dispatching will ultimately be controlled by CSXT but the
dispatching will be done locally in the Chicago area;
(d) CSXT will nominate, and subject to NS's concurrence in the nomination,
which will not be unreasonably withheld, the parties will vote to elect
CSXT's nominee as General Manager of IHB; and
(e) NS may from time to time at its reasonable option require that a
different General Manager be elected pursuant to (d).
(f) Both NS and CSXT will be considered owners for purposes of determining
rights to use IHB facilities and lines, IHB switch charges, and access to
IHB industries. Both NS and CSXT will have overhead trackage rights on all
IHB lines.
- - NS's rights over the IHB include use of B&OCT owned-trackage (IHB
controlled) between Grand Trunk Tower (Blue Island) and the end of B&OCT
ownership near McCook, and both CSXT and NS will retain access to Gibson
Yard, which is used for multilevel classification.
- - Should NS be dissatisfied with the treatment of its movements by IHB
dispatchers, NS, CSXT and IHB will attempt to resolve these dispatching
concerns. If the attempt does not resolve NS's concerns about IHB
dispatching, NS will have the right to request a change in control of IHB
dispatching to NS. If CSXT disagrees with that request for change in
dispatching control, NS and CSXT agree to submit that request to binding
arbitration. From time to time, not more frequently than 12 months after the
last change in dispatching control or arbitration, the party not controlling
dispatching may again seek a change, and require arbitration.
- - NS and CSXT will maintain competitive balance over and through the Chicago
gateway (including Streator), and will take appropriate steps to give the
other carrier parity in Chicago-area ownership, dispatching and operational
control as follows: If either party obtains additional control or additional
ownership of Chicago terminal carriers (including but not limited to IHB,
BRC, and EJ&E) or additional control of routes through Chicago, including
ownership or control acquired by future merger, purchase, or other means,
each hereby grants to the other a right to acquire an interest sufficient to
maintain parity, at a
3
<PAGE> 17
price proportionate to the price paid by the acquiror, of any such ownership
interest or additional control, however it is achieved. If either NS or CSXT
feels that an action by the other party has upset the parity in the Chicago
gateway and is unsuccessful in directly resolving the dispute, it may submit
the dispute to binding arbitration.
- - If the IHB agreements affecting or pertaining to Chicago's trackage expire
or other operating agreements affecting Conrail operations expire, then CSXT
and NS will take appropriate steps to execute new agreements or take other
measures to preserve and maintain the interests of CSXT and NS as provided
in this agreement.
- - Should CSXT merge with BNSF and if CSXT requests, then NS agrees to transfer
the Streator line from Osborne Crossing, including the dispatching control,
for fair value.
- - CSXT will be assigned CR's 59th St. ("Panhandle") Yard site.
- - CSXT will receive interim use of CR's Park Manor (63rd St.) intermodal
facility during the period of CSXT's interim haulage between Chicago and
Berea.
CLEVELAND
The attached map summarizes the CSXT/NS understanding for CR facilities in
Cleveland, subject to the following:
- - NS will have rights to construct a connection in eastern Cleveland to make
direct moves between NS's Cleveland-Buffalo line and the CR Chicago line,
using NS rights over CR's Cleveland Short Line to be assigned to CSXT.
- - CR's Collinwood Yard will be assigned to CSXT, and CR's Rockport Yard will
be assigned to NS.
- - The Ford engine plant (located on the NS portion of CR in Cleveland) and the
Parma auto plant (currently joint CSXT/CR) located on the CSXT portion of CR
in Cleveland will be jointly served.
COLUMBUS, OH
The attached map summarizes the CSXT/NS understanding for CR facilities in
Columbus, subject to field verification and the following:
- - NS will be assigned CR's Buckeye Hump Yard. CSXT will be assigned the former
"local yard" at Buckeye and the CR intermodal terminal at Buckeye.
4
<PAGE> 18
- - CSXT will be assigned the Buckeye Yard Lead from the north limit of "CP
Buckeye" to "CP Darby." NS will be assigned the east track from "CP 138" to
"CP 136," and CSXT will be assigned the west track between the same points.
North of "CP 136," the current end of double track, NS will be assigned the
right of way east of the single remaining track, and the Clintonville
Siding, east of the single remaining track, with the intent to connect these
two segments into a continuous track east of and parallel to the single
remaining track. A new connection will be constructed, at NS expense,
between the Clintonville Siding and the existing NS Bellevue-Portsmouth main
line in the vicinity of Milepost 133.5, where both the NS and CR rights of
way are parallel and level. CSXT shall, at its option and expense, have the
right to construct a connection from its assigned track, the west located
track of the right of way, to the new NS Clintonville Siding, so that both
tracks can be utilized for operational flexibility between the vicinity of
Milepost 133.5 to "CP 138," under the control of the respective assignee of
each track.
- - NS will control Buckeye interlocking, and CSXT will control CP-Mounds. CSXT
will control the Buckeye Yard lead north of the limits of Buckeye
interlocking. NS will have the right to construct a parallel track to the
Buckeye Yard lead in order to provide for the proper functioning of Buckeye
Yard.
DETROIT
The attached maps summarize the CSXT/NS understanding for CR facilities in
Detroit, subject to the following:
- - The NS/CSXT Detroit commercial joint area includes all CR trackage and
access rights east of CP-Townline(Michigan Line MP 7.4) and south to and
including Trenton (Detroit Line MP 20).
- - NS will have operating control (dispatching) of CR routes from the south
(Toledo, via Ecorse) and west (Kalamazoo, via CR's Junction Yard Branch)
into NS's Oakwood Yard. This disposition does not change the boundaries of
the NS/CSXT Detroit joint commercial area.
- - Both CSXT and NS will have rights to run their own trains over the trackage
in the NS/CSXT joint commercial area.
- - Lincoln Yard disposition has not been resolved and will be determined in
Definitive Documentation.
5
<PAGE> 19
ERIE, PA
NS will have a free easement along CR right of way through Erie assigned to CSXT
to replace NS right of way through streets in downtown Erie. Specifics including
length to be determined. All costs of associated construction and relocation
will be the responsibility of NS. NS will have trackage rights in Erie to
connect its route from Corry to its existing Buffalo-Cleveland line if such
connection can be achieved without using the CR Buffalo- Cleveland line.
FORT WAYNE, IN
CSXT will be assigned the NS and CR Fort Wayne Line in order to form a
contiguous route between Crestline and Chicago. Mike interlocking at Fort Wayne
and the Bucyrus interlocking will be controlled by NS.
A line relocation project underway in Fort Wayne will force NS and CSXT to share
the former CR line between Junction and Hadley (crossing of former PRR and NKP
West of Fort Wayne). Should NS and CSXT decide that capacity needs mandate an
additional track, NS and CSXT will equally share the cost of constructing a new
track between Junction and Hadley on the north side of the existing track, and
ownership of the south track will revert to NS and ownership of the north track
will revert to CSXT.
CSXT and NS will inspect and agree to divide CR's space in CR's Piqua Yard and
determine most efficient means of utilizing the physical plant in Fort Wayne.
Triple Crown will retain its current space in Piqua Yard and the right to have
NS operate its trains between Piqua Yard and Mike interlocking. The NS Fort
Wayne to Chicago line will be transferred to CSXT as part of a like kind
exchange for the Streator line.
INDIANAPOLIS
- - NS will be assigned Hawthorne Yard and NS will have sufficient tracks for
the arrival, departure and make up of trains and will have reasonable access
to and from the designated tracks.
MONONGAHELA
- - NS shall be assigned, control, operate and maintain Monongahela subject to a
joint use agreement providing CSXT equal, perpetual access to all current
and future facilities located or accessed from the former Monongahela
Railway, including Waynesburg Southern, hereinafter "Monongahela". NS and
CSXT shall share the operating and maintenance expenses on Monongahela on a
usage basis.
6
<PAGE> 20
- - CSXT and NS will both be able to separately provide transportation service
to all customers on the Monongahela and no additional access fee will be
charged CSXT for the joint usage. The parties will jointly work together to
extend the Monongahela into the Enlow Fork and Bailey Mine area.
- - Either party may request the construction of additional capacity and the
requesting party shall bear the expense therefor unless the parties decide
to share the additional capacity and the expense therefor.
- - Should CSXT be dissatisfied with the treatment of its movements by
Monongahela dispatchers, NS and CSXT will attempt to resolve these
dispatching concerns. If the attempt does not resolve CSXT's concerns about
Monongahela dispatching, CSXT will have a right to request a change in
control of Monongahela dispatching to CSXT. If NS disagrees with that
request for change in dispatching control, NS and CSXT agree to submit that
request to binding arbitration. From time to time, not more frequently than
12 months after the last change in dispatching control or arbitration, the
party not controlling dispatching may again seek a change, and require
arbitration. Neither party may sell or transfer its rights to the
Monongahela without first offering the other party the right of first
refusal.
NS/CSXT NORTH JERSEY COMMERCIAL JOINT AREA
The attached maps summarize the CSXT/NS understanding for CR facilities in
Northern New Jersey, subject to the following: (Dispatching to be determined by
Definitive Documentation).
- - The limits of the North Jersey NS CSXT commercial joint area will encompass
all northern New Jersey trackage east of, and including, the Northeast
Corridor, plus:
- CR Lehigh Line west to CP Port Reading Jct., NJT Raritan Line, CR Port
Reading Secondary west to Bound Brook and CR Perth Amboy Secondary west to
South Plainfield.
- - The NS/CSXT North Jersey commercial joint area includes the Northeast
Corridor local service south to the Trenton market.
- - The Port Newark/Elizabeth Marine Terminal area will be accessible to both
CSXT and NS including:
- Port Newark
- Dockside (Expressrail)
- Portside (Triple Crown)
7
<PAGE> 21
- - CSXT will be assigned CR's North Bergen and South Kearny (non-APL portion)
intermodal terminals. CSXT will also be assigned CR developable property
encompassing current CR Elizabethport Yard (Trumbull St. Yard). NS will be
afforded use of two tracks for support of E-Rail intermodal facility.
- - CSXT and NS both will have access to the APL terminal in Kearny.
- - NS will be assigned CR's Croxton and E-Rail intermodal facilities. NS will
also be assigned the CR developable property adjacent to E-Rail (former CNJ
shops area).
- - Oak Island Yard and auto terminals at Doremus Avenue, Greenville, and
Ridgefield Heights will be included in the NS/CSXT North Jersey Commercial
Joint Area, and be accessible to both CSXT and NS.
- - Both CSXT and NS will have the right to operate their own trains over any
part of the NS/CSXT North Jersey Commercial Joint Area, except to
exclusively assigned facilities.
- - In Definitive Documentation, CSXT and NS will consider arrangements
acceptable to the parties so each will have one controlled route through the
NS/CSXT North Jersey Commercial Joint Area to the extent practicable.
PHILADELPHIA/SOUTH NEW JERSEY
The attached maps summarize the CSXT/NS understanding for CR facilities in
Philadelphia and South New Jersey, subject to the following:
- - The NS/CSXT Philadelphia/South Jersey commercial joint area includes all CR
"Philadelphia" stations and stations within the Philadelphia City limits,
industries located on the CR Chester Industrial and CR Chester Secondary
tracks, all CR trackage in South New Jersey, and the CR freight franchise
rights on Amtrak's Northeast Corridor north from Philadelphia (Zoo Tower) to
the Trenton, NJ market.
- - The Morrisville intermodal facility is assigned to NS.
- - CSXT will be assigned a contiguous route through Philadelphia from CSXT's
(future) Eastwick connection to be constructed by CSXT, via CP Field and
portions of CR's Harrisburg and Trenton lines to CP River and points north.
In addition, CSXT will be assigned the Philadelphia/South Jersey Terminal
trackage from CP Field to Pier 122 (Greenwich Yard area).
- - To maintain a contiguous route through Philadelphia on the Northeast
Corridor, NS will have the option to reconstruct, own and control an
additional track where practical between Belmont and CP Field.
- - CSXT is assigned Greenwich Yard property, with the exception of tracks used
to support
8
<PAGE> 22
local freight service and the ore pier. NS and CSXT will continue to serve
the Ameriport intermodal terminal or any replacement substantially built
with public funding.
- - Both CSXT and NS will have the right to operate their own trains over any
part of the NS/CSXT Philadelphia/South New Jersey commercial joint area.
TOLEDO
The attached map summarizes the CSXT/NS understanding for CR facilities in
Toledo, subject to the following:
- - CR's Stanley Yard will be assigned to CSXT.
- - CR's Airline Jct. Yard will be assigned to NS.
- - CSXT and NS will form a joint team to study and use reasonable efforts to
resolve CSXT delay problems at Vickers interlocking in Toledo.
WASHINGTON, DC
The attached map summarizes the CSXT/NS understanding for CR facilities in
Washington, DC.
AMTRAK, NORTHEAST CORRIDOR (N.E.C.) RIGHTS
- - Commercial Definition
- North End - Philadelphia (Zoo tower) to New York (Penn Station) will be
part of the NS/CSXT Commercial Joint Area (NS and CSXT having equal
customer access).
- South End - Washington, D.C. to Philadelphia (Zoo tower) exclusive to NS.
- - Operating Definition
- Each party will have overhead trackage rights to operate trains between
New York and Washington, D. C., as follows:
- Between Zoo tower and Penn Station and between Landover and Baltimore,
rights shall be shared equally and scheduled alternatively.
- Between Baltimore and Zoo Tower, CSXT shall be limited to 4 trains a day.
9
<PAGE> 23
GENERAL
- - CSXT and NS will have the right to make unilateral improvements in tracks
and other facilities within joint commercial areas at their own cost.
- - "Assigned" indicates authority and responsibility for operation and control
under whatever business structure the parties specify in the Definitive
Documentation.
- - A "commercial joint area" or "joint commercial area" is a group of stations
in a common geographic area to which both NS and CSXT will have access
pursuant to the terms of this agreement and the Definitive Documentation.
IV. FACILITY ASSIGNMENT ("Facilities")
1. Altoona and Hollidaysburg Shops - NS
2. Philadelphia Headquarters and Philadelphia area information technology
facilities - CSXT
3. Customer Service Center (Pittsburgh) - CSXT and NS
4. Crew Management Facility (Dearborn) - CSXT and NS
5. Signal System Repair Center (Columbus) - CSXT and NS
6. System Maintenance of Way Equipment Center (Canton) - CSXT and NS
The Definitive Documentation will address the handling of train dispatching
facilities.
V. DISPOSITION OF CERTAIN CONRAIL INTERESTS
- - Belt Railway of Chicago - CR's 16.67% interest in is assigned to NS
- - Trailer Train (TTX) - CR's 21.81% interest in is divided as follows:
<TABLE>
<CAPTION>
CSXT NS
<S> <C> <C>
Current 9.340% 6.800%
Conrail Splits 9.635 12.175 (21.81%)
------ ------
18.975% 18.975%
====== ======
</TABLE>
- - Peoria & Pekin Union - CR's 25.64% interest in is assigned to NS.
10
<PAGE> 24
- - Lakefront Dock - CR's 50% interest in is assigned to CSXT.
- - CR's ownership in IHB will be assigned equally between CSXT and NS. It is
the parties' current intention that CR's ownership in IHB will continue in
CR. See city detail and trackage rights for details of IHB operations.
- - CR's ownership interest in the following affiliates will be shared based on
the Percentage, except where any of the assets of these affiliates are part
of the Routes or Assets related to Routes or Facilities assigned to either
NS or CSXT or are Shared Assets, then such affiliate assets will be assigned
to the specific geography and not shared by the Percentage. However, if
assets of these affiliates are solely assigned to one carrier based on
specific geography, and are valued at greater than $1 million, then the
other carrier will be due a portion of the value equal to that carrier's
Percentage:
- Merchants Dispatch Transportation
- Locomotive Management Services
- CRC Properties, Inc.
- CRR Investments, Inc.
- - The following affiliates are part of the route assets of CSXT and are
assigned to CSXT:
- SL&A Railway
- Albany Port Railway
- - Triple Crown: Conrail's share will be assigned to NS.
- - Conrail Direct - a truck contracting subsidiary which arranges pick-up and
delivery of intermodal freight. Company will be shared by Percentage until
parties can agree on a process for separation.
- - EMP - a container leasing partnership including CR, NS and UP. CR's interest
will be shared by the Percentage and CSXT will be made a partner.
11
<PAGE> 25
Exhibit B
TRACKAGE RIGHTS AND HAULAGE
CSXT RIGHTS ON NS
PERMANENT
- - CP River (West Falls), PA - Abrams, PA: Overhead trackage rights on CR's
Harrisburg Line for dimensional traffic.
- - CP King (Norristown), PA - Woodbourne (CP Wood), PA: Overhead trackage
rights on CR's Morrisville Line for dimensional traffic plus runaround
rights on short portion of SEPTA's Norristown Line.
- - Cleveland - Lorain, Fairlane, OH: Overhead trackage rights on CR's Chicago
Line to serve 2-to-1 auto plants at Fairlane and Avon Lake (CR Lorain).
- - Berea, OH - CP 181 (Cleveland, OH): Overhead trackage rights on CR's Chicago
Line.
- - Chicago (Pine to Rock Island Jct.): Overhead trackage rights on CR Chicago
Line.
- - Columbus, OH: Overhead trackage rights on CR Buckeye Line from "CP Hocking"
to Buckeye Yard, overhead trackage rights on CR Western Branch from Bannon
to Scioto, overhead trackage rights on CR Cincinnati Line from "CP 139" to
Buckeye Yard, via the Miami Lead, overhead trackage rights on the NS
assigned east track of the CR Columbus Line from CP 138 to the vicinity of
MP 133.5 (point of new NS connection), overhead trackage rights on CR Auburn
Connection from "CP Camp" to "CP 139," and overhead trackage rights on NS
from Bannon to the south (RR east) end of NS Watkins Yard (connection with
Watkins-Parsons transfer track).
- - Youngstown (Center St.) - Ashtabula Harbor, OH: CSXT overhead trackage
rights on CR Youngstown Line to access Ashtabula Harbor facilities.
- - Osborn Crossing - Streator, IL: Overhead trackage rights on CR Kankakee
Line, Kankakee Secondary and Streator Secondary for up to 8 total trains/day
to connect with, or with trackage of other intersecting railroads. CSXT
trains over the above limits are subject to negotiations between CSXT and NS
for CSXT contribution to investment needed for additional capacity.
NORTHEAST CORRIDOR
- - See Northeast Corridor in Exhibit A, III.
12
<PAGE> 26
CR RIGHTS ON CSXT TRANSFERRED TO CSXT
- - Carleton, MI to Alexis, MI
INTERIM
- - Berea, OH - Chicago (63rd St.): Overhead haulage on CR's Chicago Line for
maximum of 6 merchandise and/or intermodal trains/day each way, until CR's
Ft. Wayne Line (Ft. Wayne-Chicago now NS) is upgraded, up to a maximum of 3
years.
OTHER
All other CR rights that are part of, relate to, or connect with Routes, Assets
Related to Routes, and Facilities assigned to CSXT will be considered
appurtenant and will be assigned to CSXT, unless otherwise assigned in this
agreement, including Exhibit A.
Unless otherwise provided herein, or in the Definitive Documentation, a trackage
rights tenant shall only have the right to enter on and exit from the trackage
rights lines at points other than the endpoints where the tenant may make a
connection with its existing railroad line and joint CSXT/NS lines ("Point of
Permitted Entry or Exit").
If, in the opinion of the tenant, a new or upgraded connection is required at a
Point of Permitted Entry or Exit other than the endpoints, or, if in the opinion
of the tenant, other upgrading, including but not limited to switches, power
switches, signals, communications, etc., is required for operational efficiency,
the landlord will, subject to its own operational needs, cooperate and the
tenant will be responsible for funding that construction/upgrading at actual
cost or a cost mutually agreed to by CSXT and NS.
The Definitive Documentation will include agreements with terms and conditions
customary in the industry for trackage rights and haulage.
Where a tenant has access to 2-to-1 points via trackage rights, the tenant may
at its option access the points via haulage.
Unless a contrary intent appears from this Agreement including Exhibit A, or
from the Definitive Documentation, existing Conrail trackage rights over CSXT
will be assigned to NS and existing Conrail trackage rights over NS will be
assigned to CSXT.
13
<PAGE> 27
TRACKAGE RIGHTS AND HAULAGE
NS RIGHTS ON CSXT
PERMANENT
- - Muncie - Indianapolis (area). Overhead trackage rights on CR's Indianapolis
Line to serve 2-to-1 shippers/shortlines in Indianapolis plus the GM metal
fabrication plant.
- - Lafayette - Indianapolis (area): Overhead trackage rights on CSXT's
Lafayette - Crawfordsville, IN line to serve 2-to-1 shippers at
Crawfordsville, IN and overhead trackage rights on CR's
Crawfordsville-Indianapolis line to serve 2-to-1 shippers/shortlines in
Indianapolis plus the GM metal fabrication plant.
- - Buffalo (CP 437) - Niagara Falls (Suspension Bridge): Overhead trackage
rights on CR's Belt Line Branch and Niagara Branch to connect with, or with
trackage of Canadian carriers at Suspension Bridge.
- - Philadelphia(Park Jct.) - Anacostia Jct., MD: Inherits CR's overhead
trackage rights on CSXT.
- - Landover - RO (Alexandria, VA): Overhead trackage rights on CR's Landover
Line.
- - Toledo, OH: Inherits CR's overhead trackage rights on CSXT-controlled
portion of former Toledo Terminal RR.
- - Cleveland, OH: Overhead trackage rights on CR's Short Line from Quaker to
Berea, OH. Overhead trackage rights on CR's Chicago Line from CP 181 to
Collinwood Yard for purposes of interchange with CSXT.
- - Crestline, OH - Fort Wayne (Mike), IN: Overhead trackage rights on CR's Fort
Wayne Line (Ft. Wayne-Chicago now NS), with train limits as follows:
- 8 total trains/day between Crestline and Bucyrus
- 6 total trains/day between Bucyrus and Fort Wayne including rights
to serve 2-1 customers at Upper Sandusky.
NS trains over the above limits are subject to negotiations between CSXT and
NS for NS contribution to CSXT investment needed for additional capacity. NS
will [supervise the] dispatch[ing] of the Ft. Wayne to Crestline line until
CSXT haulage over CR Chicago Line between Berea and Chicago is terminated.
NS will control the Bucyrus interlocking permanently.
14
<PAGE> 28
- - Fort Wayne(Mike), IN - Chicago(Buff/Hick), IL: Overhead trackage rights on
former CR Fort Wayne Line, with 10 total train/day limit (limit does not
apply in Fort Wayne terminal). NS trains over the above limits are subject
to negotiations between CSXT and NS for NS contribution to CSXT investment
needed for additional capacity. NS will dispatch the line until CSXT haulage
over CR Chicago Line between Berea and Chicago is terminated.
- - Porter - Ivanhoe, IN: Overhead trackage rights on CR's Porter Branch.
- - Columbus, OH: Overhead trackage rights on CR Buckeye Line from "CP Hocking"
to "CP 138," overhead trackage rights on CR Western Branch from Scioto to
"CP Mounds," including the Mounds Connection, overhead trackage rights on
Buckeye Yard Lead from "CP Buckeye" to "CP Darby," overhead trackage rights
on the CSXT assigned west track of the CR Columbus Line from "CP 138" to the
vicinity of Milepost 133.5 (point of new NS connection), and overhead
trackage rights on CSXT between the south end of Parsons Yard (connection
with Watkins-Parsons transfer track) and Scioto.
- - Philadelphia: Overhead trackage rights on CR Harrisburg and Trenton Lines
from Field to Belmont.
- - Lima to Sidney, OH: Overhead trackage rights on CSXT Toledo Subdivision to
serve 2-to-1 customers at Sidney.
NORTHEAST CORRIDOR
- - See Northeast Corridor in Exhibit A, III.
INTERIM
- - Bound Brook, NJ - Woodbourne, PA: Overhead trackage rights for 12 total
train/day limit on CR's Trenton Line for dimensional trains until Pattenburg
Tunnel on CR's Lehigh line is cleared of dimensional restrictions, not to
exceed three years.
CR RIGHTS ON NS TRANSFERRED TO NS
- - Carol, IL to Keensburg, IL
- - Mill-Crescentville, OH
OTHER
All other CR rights that are part of, relate to, or connect with Routes, Assets
Related to Routes or Facilities assigned to NS will be considered appurtenant
and will be assigned to NS, unless otherwise assigned in this Agreement,
including Exhibit A.
15
<PAGE> 29
Unless otherwise provided herein, or in the Definitive Documentation, a trackage
rights tenant shall only have the right to enter on and exit from the trackage
rights lines at points other than the endpoints where the tenant may make a
connection with its existing railroad line and joint NS/CSXT lines ("Point of
Permitted Entry or Exit").
If, in the opinion of the tenant, a new or upgraded connection is required at a
Point of Permitted Entry or Exit other than the endpoints, or, if in the opinion
of the tenant, other upgrading, including but not limited to switches, power
switches, signals, communications, etc., is required for operational efficiency,
the landlord will, subject to its own operational needs, cooperate and the
tenant will be responsible for funding that construction/upgrading at actual
cost or a cost mutually agreed to by CSXT and NS.
The Definitive Documentation will include agreements with terms and conditions
customary in the industry for trackage rights and haulage.
Where a tenant has access to 2-to-1 points via trackage rights, the tenant may
at its option access the points via haulage.
Unless a contrary intent appears from this Agreement including Exhibit A, or
from the Definitive Documentation, existing Conrail trackage rights over CSXT
will be assigned to NS and existing Conrail trackage rights over NS will be
assigned to CSXT.
16
<PAGE> 30
CONRAIL LINE ALLOCATION
All trackage is not listed herein. Lines listed include main line routes,
primary branch lines and other lines which may need clarification. Lines pertain
to acquired ownership or where identified (TR) to assumed present CR freight
rights. Customer access is attributed to the acquiror of the line on which the
customer is located. Trackage not specifically listed is to be acquired by the
owner/acquirer of the route/line to which it connects. Clarification to customer
access shall be driven by assumptions used in traffic modeling exercise "SCR2"
used to arrive at the Percentage. City Detail (Exhibit A.III) and accompanying
maps will govern in terminal areas
EXHIBIT #
<TABLE>
<CAPTION>
Primary Route And Extension Acquisitions Segmt From
CSX Acquisitions
<S> <C> <C>
NY/NJ to Cleveland - NYC Route & Extensions 1 North NJ Terminal NJ
1 Poughkeepsie NY
1 New York City NY
1 Selkirk/Albany Term. NY
1 Selkirk NY
2 Selkirk/Albany Term. NY
3 Syracuse NY
4 Buffalo NY
5 Ashtabula OH
40 Boston MA
41 Syracuse NY
41 Adirondack Jct. PQ
41 Woodard NY
41 Syracuse NY
41 Hawk NY
42 Buffalo Terminal NY
42 Lockport NY
94 Syracuse NY
165 Selkirk/Boston Line MA
165 Selkirk/Boston Line MA
166 New York City NY
166 Connecticut Branch Lines
166 Connecticut Branch Lines
3 Churchville NY
3 Mortimer NY
3 Rochester Branch NY
Crestline to Chicago - PRR Route & Extensions 17 Crestline OH
18 Dunkirk OH
From NS 19 Fort Wayne IN
From NS 20 Warsaw IN
18 Adams IN
Berea to E. St. Louis Route & Extensions 21 Cleveland Terminal OH
122 Crestline OH
22 Galion OH
23 Ridgeway OH
24 Indianapolis IN
25 Terre Haute IN
26 Effingham IL
27 St. Elmo IL
27 Anderson IN
55 Columbus OH
83 Terre Haute IN
151 Danville IL
99 Indianapolis IN
100 Indianapolis IN
154 Indianapolis IN
105 HN Cabin IL
106 St. Elmo IL
98 Terre Haute IN
28 Muncie (Walnut Street) IN
28 New Castle RT IN
Columbus to Toledo Route & Extensions 53 Columbus OH
52 Ridgeway OH
51 Blanchard OH
51 Toledo Terminal OH
51 Toledo Terminal OH
Bowie to Woodzell, MD 90 Bowie MD
90 Brandywine MD
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Primary Route And Extension Acquisitions To
CSX Acquisitions
<S> <C> <C> <C>
NY/NJ to Cleveland - NYC Route & Extensions Selkirk/Albany Term. NY
New York City NY TR
White Plains NY TR
Poughkeepsie NY
Syracuse NY
Buffalo NY
Ashtabula OH
Cleveland Terminal OH
Selkirk/Albany Term. NY
Adirondack Jct. PQ
Montreal (St. Luc) PQ TR
Oswego NY
Hawk NY
Port of Oswego NY TR
Niagra Falls/Lockport NY
West Somerset NY TR
NYSW/FL Connections NY
MA Branch Lines MA
MA Branch Lines MA TR
Connecticut Branch Lines TR
TR
Wayneport NY
Avon NY
Crestline to Chicago - PRR Route & Extensions Dunkirk OH
Fort Wayne IN
From NS Warsaw IN
From NS Chicago Terminal (Clarke Jct.) IN
Decatur IN
Berea to E. St. Louis Route & Extensions Crestline OH
Galion OH
Ridgeway OH
Indianapolis IN
Terre Haute IN
Effingham IL
St. Elmo IL
E. St. Louis IL
Emporia IN
Galion OH
Danville IL
Olin IN
Rock Island IN
Crawfordsville/Bringhurst IN
Shelbyville IN
Valley Jct. IL
Salem IL TR
Beehunter IN TR
New Castle RT IN TR
Columbus to Toledo Route & Extensions Ridgeway OH
Blanchard OH
Toledo Terminal OH
Woodville OH
Stonyridge OH
Bowie to Woodzell, MD Morgantown MD
Chalk Point MD
</TABLE>
Confidential 4/8/97 Page 1
<PAGE> 32
CONRAIL LINE ALLOCATION
EXHIBIT #
<TABLE>
<CAPTION>
Primary Route And Extension Acquisitions Segmt From
CSX Acquisitions
<S> <C> <C> <C>
NY/NJ to Philadelphia (West Trenton Line) 182 Philadelphia PA
Washington, DC to Landover, MD 33 Washington (RO) DC
Quakertown Branch 130 Philadelphia Terminal PA
Chicago Area 192 Porter IN
</TABLE>
<PAGE> 33
CONRAIL LINE ALLOCATION
EXHIBIT #
<TABLE>
<CAPTION>
Primary Route And Extension Acquisitions Segmt To
<S> <C> <C> <C>
NY/NJ to Philadelphia (West Trenton Line) 182 North NJ Terminal NJ
Washington, DC to Landover, MD 33 Landover MD
Quakertown Branch 130 Quakertown PA TR
</TABLE>
Confidential 4/8/97 Page 2
<PAGE> 34
CONRAIL LINE ALLOCATION
EXHIBIT #
<TABLE>
<CAPTION>
Primary Route And Extension Acquisitions Segmt From
NS Acquisitions
<S> <C> <C>
NJ Terminal to Crestline - PRR Route & Extensions 10 North NJ Terminal
10 Somerville
10 Little Falls
10 Orange
10 Dover
10 Rockport
10 Phillipsburg
10 Allentown Terminal
186 Orange
170 North Jersey Terminal
182 Bound Brook
11 Allentown
12 Reading
12 Harrisburg Terminal
13 Harrisburg
13 Conemaugh Line
13 Pittsburgh
13 Central City
13 Pittsburgh Terminal
13 Monongahela
14 Pittsburgh Terminal
14 Pittsburgh
14 Salem
14 Beaver Falls
15 Alliance
120 Mantua
16 Alliance
114 Alliance
114 Rochester
114 E. Steubenville
1114 Steubenville Branches, Bridge
114 Pittsburgh Branches
45 Ashtabula
162 Ashtabula Harbor
46 Niles
46 Alliance
48 Youngstown
87 Allentown
CP Harris
Cloe
Tyrone
Cleveland to Chicago - NYC Water Level Route 6 Cleveland Terminal
6 Elyria
159 Toledo Terminal
7 Toledo Terminal
107 Elkhart
8 Elkhart
Philadelphia to Washington (NEC) Route & Extensions 31 Philadelphia Terminal
31 Wilmington Terminal
32 Perryville
32 Baltimore Terminal
33 Balt. BayView
33 Baltimore Terminal
33 Baltimore
34 Pocomoke
34 Harrington
131 Newark
Michigan Operations (Excluding Joint Detroit Area) 50 Toledo Terminal
60 Detroit Terminal
61 Jackson
62 Kalamazoo
70 Jackson
71 Kalamazoo
156 Kalamazoo
Eastern PA Lines & Extensions 37 Philadelphia Terminal
37 Reading Terminal
37 Thorndale
136 Leola/Chesterbrook PA Lines
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
Primary Route And Extension Acquisitions To
NS Acquisitions
<S> <C> <C> <C>
NJ Terminal to Crestline - PRR Route & Extensions NJ Somerville NJ
NJ Allentown PA
NJ Dover NJ TR
NJ Denville NJ TR
NJ Rockport NJ TR
NJ Phillipsburg NJ
PA E. Stroudsburg PA
NJ North Jersey Terminal NJ TR
NJ Little Falls NJ TR
NJ Ludlow NJ TR
PA Reading PA
PA Harrisburg PA
PA
PA Pittsburgh PA
via Saltsburg PA
PA W. Brownsville PA
PA South Fork PA
PA
PA Marianna PA
PA
PA Salem OH
OH Alliance OH
PA Wampum PA
OH Cleveland Terminal OH
OH Cleveland Terminal OH
OH Crestline OH
OH Omal OH
PA Yellow Creek OH
WV Weirton WV
OH
OH Youngstown OH
OH Ashtabula OH
OH Latimer OH
OH Youngstown OH
OH Rochester PA
PA Hazelton PA
PA Cloe PA TR
PA Shelocta PA
PA Lock Haven PA TR
Cleveland to Chicago - NYC Water Level Route OH Toledo Terminal OH
OH Lorain OH
OH Sylvania OH
OH Goshen IN
IN Goshen IN
IN Porter IN
Philadelphia to Washington (NEC) Route & Extensions PA Perryville MD TR
DE
MD Baltimore MD TR
MD
MD Landover MD TR
MD
MD Cockeysville MD
MD New Castle Jct DE
DE Frankford/Indian River DE
DE Porter DE
Michigan Operations (Excluding Joint Detroit Area) OH Detroit Terminal MI
MI Jackson MI
MI Kalamazoo MI
MI Elkhart IN
MI Lansing MI
MI Grand Rapids MI
MI Porter IN TR
Eastern PA Lines & Extensions PA Reading PA
PA Woodbourne PA
PA
</TABLE>
Confidential 4/8/97 Page 3
<PAGE> 36
CONRAIL LINE ALLOCATION
EXHIBIT #
<TABLE>
<CAPTION>
Primary Route And Extension Acquisitions Segmt From
NS Acquisitions
<S> <C> <C>
137 Philadelphia PA Terminal
111 Lancaster
112 Lancaster
Indiana Lines & Extensions 84 Anderson
85 Warsaw
163 Marion
Buffalo to NY/NJ Terminal Route & Extensions 44 NJ/NY Jct.
44 Suffern
44 Port Jervis
44 Binghamton
44 NJ/NY Jct.
44 Paterson Jct.
38 Waverly
88 Waverly
89 Sayre
93 Lyons
95 Corning
171 North Jersey Terminal
171 Paterson Jct.
171 NJ/NY Jct.
Buffalo to Harrisburg and South 35 Perryville
35 Carlisle
35 Wago
35 Harrisburg
36 Williamsport
39 Harrisburg
39 Watsontown
4 Ebenezer Jct.
91 Hornell
91 Corry
91 Youngstown
Cincinnati, OH to Columbus, OH to Charleston, WV 54 Columbus
54 Cincinnati Terminal
56 Columbus Terminal
57 Truro
150 Charleston
150 Charleston
Chicago South/Illinois Operations 193 Gibson
193 Hartsdale
82 Hartsdale
81 Schneider
97 Keensburg
152 Schneider
80 Danville
Chicago Market 194 Western Ave Operations/Loop
195 Chicago
196 Clarke Jct.
196 CP 509
197 Buff
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>
Primary Route And Extension Acquisitions To
NS Acquisitions
<S> <C> <C> <C>
Lancaster PA TR
PA Royalton PA TR
PA Lititz/Columbia PA
Indiana Lines & Extensions IN Warsaw IN
IN Goshen IN
IN Red Key IN
Buffalo to NY/NJ Terminal Route & Extensions NJ Suffern NY TR
NY Port Jervis NY
NY Binghamton NY
NY Waverly NY
NJ Spring Valley NY TR
NJ Ridgewood NJ TR
NY Buffalo NY
NY Mehoopany PA
PA Ludlowville NY
NY Himrods Jct NY
NY Himrods Jct NY
NJ Paterson Jct NJ TR
NJ North Newark NJ
NJ North Jersey Terminal NJ TR
Buffalo to Harrisburg and South MD Harrisburg PA
PA Harrisburg PA
PA York (area) PA
PA Shocks PA
MD Harrisburg PA
PA Buffalo NY
PA Strawberry Ridge PA
NY Lackawanna NY
NY Corry PA
PA Erie PA TR
OH Oil City PA
Cincinnati, OH to Columbus, OH to Charleston, WV OH Cincinnati OH
OH
OH Truro OH
OH Charleston WV
WV Cornelia WV
WV Morris Fork WV
Chicago South/Illinois Operations IN Hartsdale IN
IN Chicago Heights IL
IN Schneider IN
IN Hennepin IL
IL Carol IL
IN Wheatfield IN
IL Pekin/Peoria IL
Chicago Market Cicero/Elsdon IL
IL Grand Crossing IL
IN Grand Crossing IL
IL Calumet Park IL
IN Porter IN
</TABLE>
Confidential 4/8/97 Page 4
<PAGE> 38
Map Index
<TABLE>
<CAPTION>
NUMBER LOCATION DATE
<S> <C> <C>
1 Buffalo 4/8/97
2 Chicago Area 4/8/97
3 Cleveland 4/8/97
4 Columbus, OH 4/8/97
5 Detroit - Ownership and Commercial Limits 4/8/97
6 Detroit - Dispatching Only 4/8/97
7 Fort Wayne 4/8/97
8 Indianapolis 4/8/97
9 North Jersey Terminal - Commercial Limits 4/8/97
10 North Jersey Terminal - Ownership Limits 4/8/97
11 Philadelphia - Ownership/Control (2 pages) 4/8/97
12 Philadelphia - Commercial Limits 4/8/97
13 Toledo, OH 4/8/97
14 Washington, DC 4/8/97
15 Conrail System Map 4/8/97
</TABLE>
<PAGE> 39
[Map No. 1: This is a map dated 4/8/97 showing railroad locations in and around
Buffalo, New York. It indicates by colored lines the specific rail lines and
other rail facilities assigned to NS and CSX, respectively, consistent with the
narrative descriptions and the line segment information included in Exhibit A.]
[Map No. 2: This is a map entitled "C.R./I.H.B. Terminal Map", dated 4/8/97,
which shows railroad locations in and around the Chicago area. It indicates by
colored lines the specific rail lines (including trackage rights) and other rail
facilities assigned to NS and CSX, respectively, in and around Chicago, IL, and
Gary, IN., consistent with the narrative descriptions and the line segment
information included in Exhibit A.]
[Map No. 3: This is a map entitled "Cleveland (No Scale)" which shows railroad
locations in and around Cleveland, Ohio. It indicates by colored lines the
specific CR rail lines (including trackage rights) and other CR rail facilities
assigned to NS and CSX, respectively, in and around Cleveland, OH, consistent
with the narrative descriptions and the line segment information included in
Exhibit A. It also indicates existing CSX and NS rail lines.]
[Map No. 4: This is a map dated 4/8/97 which shows railroad routes and locations
in and around Columbus, Ohio. It indicates by colored lines the specific CR rail
lines (including trackage rights) and other CR rail facilities assigned to NS
and CSX, respectively, in and around Columbus, OH, consistent with the narrative
descriptions and the line segment information included in Exhibit A.]
[Map No. 5: This is a map entitled "Detroit (No Scale)", dated 4/8/97, which
shows railroad locations in and around Detroit, Michigan. It indicates by
colored lines (a) the specific CR rail lines (including trackage rights) and
other CR rail facilities assigned to NS and CSX, respectively, in and around
Detroit, MI, (b) the existing CSX and NS rail lines, and (c) the CR rail lines
to be operated as "joint" terminal lines, consistent with the
<PAGE> 40
2
narrative descriptions and the line segment information included in Exhibit A.]
[Map No. 6: This is a map dated 4/8/97 which shows railroad locations in and
around Detroit, Michigan. It indicates by colored lines the specific CR lines
and areas as to which NS, on the one hand, and a new joint terminal entity to be
operated for the benefit of both NS and CSX, on the other hand, will handle
train dispatching functions, consistent with the narrative descriptions and the
line segment information included in Exhibit A.]
[Map No. 7: This is a map entitled "Map IN-8b FORT WAYNE", dated 4/8/97, which
shows railroad locations in and around Fort Wayne, Indiana. It indicates by
colored lines those rail lines and areas that are to be reviewed by a joint
NS/CSX inspection team for improved operations and reduced conflicting
movements, consistent with the narrative descriptions and the
line segment information included in Exhibit A.]
[Map No. 8: This is a circular map dated 4/8/97 which shows railroad locations
in and around Indianapolis, Indiana. It indicates by colored lines (a) the
specific CR rail lines (including trackage rights) and other CR rail facilities
assigned to NS and CSX, respectively, in and around Indianapolis, IN, and (b)
the existing CSX rail lines,consistent with the narrative descriptions and the
line segment information included in Exhibit A.]
[Map No. 9: This is a map dated 4/8/97 which shows railroad locations in the
northern New Jersey area. It indicates by colored lines the commercial limits of
the rail lines and routes in northern New Jersey assigned to NS, those assigned
to CSX and those which are to operated jointly for the benefit of both NS and
CSX, consistent with the narrative descriptions and the line segment information
included in Exhibit A.]
[Map No. 10: This is a map entitled "NJ/NY Joint Terminal Area (Enlarged)",
dated 4/8/97, which shows railroad locations in the northern New Jersey area. It
indicates by colored lines (a) the specific CR rail lines and other CR rail
facilities assigned to NS and CSX, respectively, in northern New Jersey, and (b)
the CR rail lines and routes to be operated as "joint terminal" lines,
<PAGE> 41
3
consistent with the narrative descriptions and the line segment information
included in Exhibit A.]
[Map No. 11: This is a map consisting of two pages entitled "Philadelphia
(Ownership/Control)", dated 4/8/97, which shows railroad locations in and around
Philadelphia, Pennsylvania and southern New Jersey. Consistent with the
narrative descriptions and the line segment information included in Exhibit A,
this map indicates by colored lines (a) the specific CR rail lines and other CR
rail facilities assigned to NS and CSX, respectively, in the Philadelphia area,
(b) the CR rail lines and routes to be operated as "joint terminal" lines, and
(c) the CR rail lines which are to be operated as "joint terminal" lines but as
to which CSX will control dispatching functions.]
[Map No. 12: This is a map entitled "Philadelphia (Joint Commercial)", dated
4/8/97, which shows railroad locations in and around Philadelphia, Pennsylvania
and southern New Jersey. Consistent with the narrative descriptions and the line
segment information included in Exhibit A, this map indicates by colored lines
the commercial access relating to (a) the specific CR rail lines and other CR
rail facilities assigned to NS and CSX, respectively, in the Philadelphia area
and (b) the CR rail lines and routes to be operated as "joint terminal" lines.]
[Map No. 13: This is a map dated 4/8/97 which shows railroad locations in and
around Toledo, Ohio. Consistent with the narrative descriptions and the line
segment information included in Exhibit A, this map indicates by colored lines
(a) the specific CR rail lines and other CR rail facilities assigned to NS and
CSX, respectively, in the Toledo area, (b) the existing CSX and NS rail lines in
and around Toledo, and (c) existing trackage rights in favor of NS on the Ann
Arbor Railroad.]
[Map No. 14: This is a map entitled "Washington D.C. (No Scale)", dated 4/8/97,
which shows railroad locations in and around Washington, D.C. Consistent with
the narrative descriptions and the line segment information included in Exhibit
A, this map indicates by colored lines (a) the specific CR rail
<PAGE> 42
4
lines and other CR rail facilities assigned to CSX in the Washington area, (b)
the existing NS and CSX rail lines and routes, (c) NS trackage rights (existing
and new) on CSX lines, and (d) CSX and NS trackage rights on Amtrak's Northeast
Corridor route.]
[Map No. 15: This is a map of the northeastern part of the United States dated
4/8/97 which shows the rail lines comprising CR's railroad system network.
Consistent with the narrative descriptions and the line segment information
included in Exhibit A, this map indicates by colored lines (a) the CR rail lines
and routes allocated to CSX, (b) the CR rail lines and routes allocated to NS,
and (c) the CR rail lines and routes that are be operated jointly for the
benefit of both CSX and NS.]
