SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
Commission File # 0-12985
DELAWARE OTSEGO CORPORATION
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(Exact name of Registrant as specified in its charter)
New York 16-0913491
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1 Railroad Ave., Cooperstown, New York 13326
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (607) 547-2555
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.125 per share
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes ___X___ No_______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $10,857,668 as of March 21, 1995.
1,536,880
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(Number of shares of Common Stock outstanding as of March 21, 1995)
DOCUMENTS INCORPORATED BY REFERENCE
Information with respect to Directors in Item 10 and the information required
by Items 11-13 is incorporated herein by reference from the proxy material of
the Registrant in connection with its annual meeting of shareholders
scheduled for June 3, 1995.
<PAGE>
PART I
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Item 1. BUSINESS
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General
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Delaware Otsego Corporation, a New York corporation, is a railroad
holding company. The Company's principal executive offices are located
at 1 Railroad Avenue, Cooperstown, New York 13326, and its telephone number
is (607) 547-2555. As used in this Form 10-K, unless the context requires
otherwise, the term "Company" or "DOC" refers to Delaware Otsego Corporation
and its subsidiaries: Susquehanna Properties, Inc. (SPI); Fonfulco, Inc.
(Fonfulco); Lackawaxen and Stourbridge Railroad Corporation (LASB); Syracuse,
Binghamton and New York Railroad Corporation (SBNY); The New York,
Susquehanna and Western Railway Corporation (NYS&W); Cooperstown and
Charlotte Valley Railway Corporation (CACV); Delta Warehousing Corporation
(DWC); Central New York Railroad Corporation (CNY); Delaware Otsego Equipment
Corporation (DOE); Susquehanna Bulk Systems, Inc. (SBS); Staten Island
Railway Corporation (SIRY); Rahway Valley Company, Lessee (RVC-L); and
Rahway Valley Railroad Company (RVRR).
The Company operates in one business segment - railroad transportation.
DOC's rail system provides rail service for customers along its routes and
access to the national rail system through interchange facilities with two
of the major northeastern railroads, Consolidated Rail Corporation
("Conrail") and the CP Rail System ("CP"). Additionally, pursuant to a
Haulage Agreement with CP, the Company has direct access with the Norfolk
Southern rail system and other carriers in Buffalo, NY. DOC's railroad
system is devoted principally to carrying freight, but also generates
revenue through the operation of passenger excursion trains. DOC seeks to
encourage development on and near, and utilization of, its real estate and
rights-of-way by potential shippers and as a possible source of additional
revenue. The Company also generates revenues by granting to various
entities, such as utilities, pipeline and communication companies and
non-industrial tenants, the right to occupy its railroad right-of-way and
other real property. The Company also hires rail equipment to, and repairs
rail equipment owned by, others, and provides services related to the
transfer of bulk commodities from railcar to truck.
Railroad Operations
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The Company operates a 500 mile regional railroad in New York, New
Jersey and Pennsylvania, of which 200 miles consist of trackage rights over
the lines of other railroads. The Company's rail lines have been integrated
into a coordinated rail system which connects upstate New York with the
Northern New Jersey - New York City metropolitan area and provides rail
service via two Class I carriers (through its connections with Conrail
and CP).
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The Company presently serves over 110 customers in its railroad
operations, two of which accounted for approximately 70% of its traffic
volume. In 1994, the Company earned approximately $9.8 million from CSX
Intermodal, Inc., representing 39% of railway operating revenues, on traffic
moving to CSXI's owned facility located adjacent to the NYS&W at Little
Ferry, NJ. 1994 revenues for container traffic moved on behalf of Hanjin
Shipping Lines to the Resources Warehousing and Consolidation Services,
Incorporated facility ("RWCS"), were approximately $7.7 million, representing
31% of railway operating revenues. No assurance can be given that such
revenue levels will be attained in the future. The principal freight carried
by the Company consists of manufactured goods, industrial raw materials,
paper products, and agricultural commodities.
The operation of a railroad requires significant expenditures for
maintenance-of-way and equipment, the availability of railcars in diverse
locations for the carriage of customer freight, and reliance upon other
carriers who participate in the transportation of almost all freight
transported by the DOC system.
Real Estate Activities & Other Operations
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Through its subsidiaries, the Company seeks to maximize utilization of
and revenues from its real estate holdings. Leasing and right-of-way
agreements, sales where favorable prices can be obtained or property is
deemed unusable in the Company's rail operations, and the encouragement of
industrial development are the focus of the Company's activities in this
regard.
Marketing
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The Company markets its services primarily through its sales and
customer service personnel, under the supervision of its Executive Vice
President and the Vice President-Marketing and Sales of its NYS&W subsidiary.
In addition, the Company's executive officers are occasionally involved in
formulating and making presentations to customers and potential customers.
Suppliers
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The Company is able to acquire the equipment, parts and other materials
it needs in the operation of its business from several suppliers. The
Company does not believe that the loss of any supplier would have a material
adverse effect on its business, as there are alternative suppliers available.
Competition
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The Company's regional rail system is relatively small in an industry
dominated by carriers with far greater resources and facilities. In the
Company's area of operation, it competes with Conrail, particularly with
respect to bulk and intermodal traffic, and with both long-haul and
short-haul trucking companies which may be able to offer more extensive
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facilities and resources than the Company. Deregulation of the railroad
industry has intensified competition and will likely continue to do so,
placing pressure on pricing and routing schedules of the Company. The
Company believes that it is able to compete for railroad business on the
basis of its quality of customer service, pricing, scheduling and
concentration on its principal rail corridors. There can be no assurance,
however, that the Company will be able to maintain its present competitive
position.
The Company relies on, and its ability to compete is dependent upon,
its rail connections with CP and with Conrail for a substantial portion of
its rail traffic. Changes in the operations of either of these carriers
could have a material adverse impact on the Company.
With respect to its real estate activities, the Company competes with
other railroads, developers and real estate businesses for purchasers,
tenants and users of its real property. For example, other railroads seek
some of the same customers for fiber optics cable installation, and real
estate developers and other railroads seek the same type of industrial user
as is sought by the Company. Such competitors may have greater financial
resources, more experience in real estate development or a greater ability
to offer incentives than does the Company. No assurance can be given that
the Company's efforts to develop, lease or sell its real estate resources
will be successful.
Regulation
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The Company is subject to regulation by the Interstate Commerce
Commission, the Federal Railroad Administration, and certain state and local
authorities, including state Departments of Transportation, in connection
with some aspects of its railroad operations. Such regulation affects rates,
safety rules, maintenance of track, other facilities, and rights-of-way, and
may affect the Company's revenues and expenses.
Environmental Matters
- ---------------------
The Company transports hazardous materials on behalf of certain of its
customers, and uses certain hazardous materials in the normal course of the
repair and maintenance of its locomotives, rail cars and other equipment.
The operation of a railroad includes the risk of derailments which could
result in the release or spillage of diesel fuel and hazardous materials
from locomotives and rail cars to property of the Company and adjoining
properties. The Company is not aware of any such spills or releases which
have not been remediated.
The Company, as the owner of real estate, may be responsible under
certain circumstances for remediation of environmental conditions on its
property, whether or not such conditions arose from the Company's operations.
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The Company has no knowledge of the existence of any such conditions, but
cannot assure that such will not arise or occur in the future.
However, during 1993, The New York, Susquehanna and Western Railway
Corporation, a Company railroad operating subsidiary, received notice from
the Environmental Protection Agency (EPA) that it is a potentially
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act (Superfund) and may be required to share in
the cost to clean up a certain site identified by the EPA. The information
presently available to the Company indicates that the estimated liability is
less than ten thousand dollars and, therefore, will not have a material
affect on the consolidated financial condition or results of operation.
Employees
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At December 31, 1994, the Company employed 200 people, of whom 123 were
operating personnel, 12 were supervisors, 48 were office and sales personnel,
and 17 were executive officers and managerial personnel. 32 of the Company's
operating personnel are subject to a collective bargaining agreement with the
Brotherhood of Locomotive Engineers (BLE) which sets their general level of
compensation and working conditions through December 31, 1996. During 1994,
the Brotherhood of Maintenance of Way Employees ("BMWE") was certified to
represent the approximate 64 employees of the Company's Track Department.
The Company is currently negotiating a new agreement with BMWE. The Company
considers its employee relations to be good.
Item 2. PROPERTIES
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The Company's executive offices are located in approximately 4,500
square feet of space at 1 Railroad Avenue, Cooperstown, New York, a property
owned by the Company. The Company also owns the Edgewater Executive Offices
in Cooperstown. This structure, containing 10,000 square feet of space,
presently is used for offices, conferences, and facilities for overnight
accommodations for Company guests.
The Company owns 140 route miles of track and right-of-way and owns
jointly with the County of Sussex, New Jersey an additional 8.8 miles of
line. The Company leases 186.2 miles of line. Included in this total are
164.35 miles of line leased from several Industrial Development Agencies at
nominal cost, which leases expire in April, 1997, at which time ownership of
the lines revert to the Company for nominal consideration. Additionally,
the Company has agreements enabling it to use track owned by other railroads
including trackage rights from Warwick, New York to Binghamton, New York of
175 miles, which is subject to abandonment by its owners upon compliance
with certain statutory procedures which may require approval of the
Interstate Commerce Commission.
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The properties of the Company are subject to various easements,
occupations, licenses, leases and rights-of-way. The trackage and other
operating rights pursuant to which the Company is authorized to carry freight
over track belonging to others are subject to contractual agreements which
may be subject to termination or restriction, either of which may have a
significant adverse affect on the railroad operations of the Company.
Substantially all the Company's properties are subject to lien, or
mortgage, in connection with obligations of the Company to Manufacturers
and Traders Trust Company, New Jersey Economic Development Authority,
Federal Railroad Administration, and General Electric Credit Corporation.
A description of the Company's railroad properties, by subsidiary, is
as follows:
a) NYS&W. The NYS&W is the main operating subsidiary of the
Company, and consists of two divisions. The Southern Division consists of
82.6 miles of Company-owned track which, together with 8.8 miles of track
owned jointly with the County of Sussex, NJ, run from Jersey City, NJ to
Warwick, NY. NYS&W has trackage and other operating rights to run over
track owned by Conrail from Warwick, NY to Binghamton, NY and, alternatively,
from Passaic Junction, NJ to Binghamton, NY. The Northern Division consists
of track from Binghamton, NY to Chenango Forks, NY, and then to Jamesville,
NY (the Syracuse Branch) and Utica, NY (the Utica Branch), a total of
164.35miles. The Northern Division properties were acquired pursuant to a
lease purchase agreement with the industrial development agencies of the
counties of location.
b) CNY. The CNY consists of 21.7 miles of Company-owned track
from its connection with NYS&W in Richfield Junction, NY to Richfield
Springs, NY. The Company intends to abandon all rail operations on CNY in
1995.
c) SBNY. SBNY (formerly known as the Fonda, Johnstown and
Gloversville Railroad Company) operates passenger excursion and shuttle
trains on 10 miles of track located in Syracuse, NY and owned by Onondaga
County Industrial Development Agency.
d) CACV. The CACV consists of 15.9 miles of Company-owned track
from an interchange with D&H at Cooperstown Junction, NY to Cooperstown, NY.
The Company intends to abandon all rail operations on CACV in 1995.
e) RVC, RVRR. The RVC and RVRR are related companies which own
11.6 miles of track running from Cranford Junction, NJ to Summit, NJ. Rail
operations on these lines were abandoned pursuant to Interstate Commerce
Commission authority in 1992. The Company has reached an agreement in
principal to sell these assets to the New Jersey Department of Transportation
in 1995.
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The Southern Division and the Syracuse Branch of the Northern Division
of NYS&W consist mainly of Class II track in accordance with Federal Railroad
Administration ("FRA") standards, allowing operation at speeds of up to 40
mph. Generally, all other trackage owned or leased by the Company, with
the exception of industrial spurs and sidings, are designated Class III
tracks, thereby allowing speeds of up to 25 mph. While existing track
conditions and speeds allow the Company to adequately serve all its existing
customers, maintenance and rehabilitation of rail facilities is an ongoing
project.
The Company owns 9 locomotives of various manufacture, age and size,
and leases an additional 9 locomotives. The Company has ordered 3 new
locomotives which it expects to receive in the first half of 1995. The
Company believes it has an adequate supply of locomotives for its current
needs. The Company owns fewer than 50 railcars of various types and
manufacture, and depends on connecting rail lines and customers to provide
cars for outbound loadings.
Item 3. LEGAL PROCEEDINGS
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There are no material pending legal proceedings other than ordinary
routine litigation, incidental to the Company's business, to which the
Company or any of its subsidiaries is a party or of which any of its or
their property is the subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
Executive Officers and Key Employees of the Registrant
- ------------------------------------------------------
Each of the following officers of the Company has been elected by the
Board of Directors and serves at the discretion of the Board.
Position with Officer
Name Age the Registrant Since
- --------------------- ------ --------------------------- -------
Walter G.Rich 49 President,Chief Executive 1968
Officer & Director
C. David Soule 44 Executive Vice President 1981
& Director
William B. Blatter 60 Senior Vice President & 1988
Chief Financial Officer
Nathan R. Fenno 36 Vice President-Law, General 1988
Counsel & Secretary
Robert E. Pierce 48 Vice President/Controller 1982
Frank Quattrocchi 45 Vice President & Treasurer 1993
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Mr. Rich has been a member of the Board of Directors of the Company
since 1968, and has been President and Chief Executive Officer since 1971.
Mr. Rich is also a director of Norwich Aero Products, Inc. and Security
Mutual Life Insurance Company of New York. Mr. Rich was appointed in 1993
to the New York State Public Transportation Safety Board.
Mr. Soule has been Executive Vice President of the Company since June,
1983. He was elected to the Board of Directors in June, 1984.
Mr. Blatter joined the Company as Vice President-Finance and Chief
Financial Officer in April, 1988, and was named Senior Vice President and
Chief Financial Officer in June, 1990.
Mr. Fenno joined the Company as Attorney in July, 1987. Mr. Fenno was
appointed General Counsel and Corporate Secretary in July, 1988, and Vice
President-Law in September, 1991.
Mr. Pierce joined the Company in September, 1981 and has served as Vice
President/Controller since February 1, 1986.
Mr. Quattrocchi joined the NYS&W in June, 1983. Mr. Quattrocchi was
promoted to Vice President & Treasurer of the Company in April, 1993.
The following are other key employees of the Registrant's operating
subsidiaries:
Mr. Joseph G. Senchyshyn became Vice President-Operations of NYS&W on
September 3, 1985.
Mr. Robert A. Kurdock was appointed Vice President of NYS&W in June of
1985. He has been employed by the Company since September, 1980, serving in
increasingly responsible positions.
Mr. Richard J. Hensel joined the NYS&W as Vice President-Engineering of
NYS&W in April, 1987.
Mr. Paul Garber joined the NYS&W in 1989, and was appointed Vice
President of Marketing & Sales in October, 1990.
Mr. Phillip England joined the NYS&W as Vice President-Mechanical in
August, 1994. He was previously employed by Consolidated Rail Corporation
for over five years in various positions in its Mechanical Department.
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<TABLE>
PART II
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Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
- -------------------------------------------------------------
STOCKHOLDER MATTERS
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Market Information
- ------------------
The Company's common stock trades in the over-the-counter market and is
quoted on the NASDAQ National Market ("NASDAQ"). The symbol for the common
stock is "DOCP". The following table sets forth the quarterly high and low
sale prices of the Company's common stock as reported by NASDAQ for the two
years ending December 31, 1994.
<CAPTION>
1994 High Low
---------------- -------- ---------
<S> <C> <C>
First Quarter $ 10 3/4 $ 9 1/2
Second Quarter $ 10 3/4 $ 9 1/2
Third Quarter $ 10 3/4 $ 9 1/2
Fourth Quarter $ 11 $ 10 1/4
</TABLE>
<TABLE>
<CAPTION>
1993 High Low
---------------- -------- ---------
<S> <C> <C>
First Quarter $ 11 $ 8 3/4
Second Quarter $ 10 3/4 $ 9 3/4
Third Quarter $ 10 3/4 $ 9 3/4
Fourth Quarter $ 10 3/4 $ 10
</TABLE>
Holders of Record
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As of December 31, 1994, the approximate number of record
holders of the Company's common stock was 1,545.
Dividends
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During 1994, the Company paid a 5% stock dividend payable to
stockholders of record February 19, 1994. The dividend was paid on March 14,
1994, resulting in the issuance of an additional 69,097 shares. Subsequent
to year-end, the Company declared a 5% stock dividend payable to stockholders
of record February 17, 1995. The dividend will be paid on March 20, 1995
and 72,518 shares will be issued accordingly.
The Company's loan with Manufacturers and Traders Trust Company provides
that the Company may not, during the term of the loan, declare any cash
dividends in excess of $110,000. In addition, the Financing Agreement
between the Company and its subsidiary NYS&W, and the Federal government
through the FRA 505 Redeemable Preference Share Program provides that yearly
dividends may not exceed 50% of the total additions to retained earnings of
the Company for the previous year, nor 50% of the total additions to retained
earnings for 1985 and each year thereafter.
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<TABLE>
Item 6. Selected Financial Data
<CAPTION>
(Thousands except per share amounts)
Year Ended December 31,
------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS: 1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Operating Revenues $27,463 $22,610 $22,922 $26,886 $27,324
Directed Service Revenues (1) 0 0 149 743 10,778
Income (Loss) from Operations (2,504) (3,055) (2,168) (1,447) 1,025
Other Income (Expense), Net (844) 1,174 241 4,034 (331)
-------- -------- -------- -------- --------
Income (Loss) Before Income
Taxes & Extraordinary Item (3,348) (1,881) (1,927) 2,587 694
Provision for Income Tax
Benefit (Expense) 1,128 603 605 (551) (280)
Extraordinary Item
(Net of Tax) (2) (228) 0 765 0 629
-------- -------- -------- -------- --------
Net Income (Loss) ($2,448) ($1,278) ($557) $2,036 $1,043
======== ======== ======== ======== ========
Earnings Per Share:
Income (Loss) Before
Extraordinary Item (1.44) (0.83) (0.86) 1.33 0.27
Extraordinary Item (0.15) 0.00 0.50 0 0.41
-------- -------- -------- -------- --------
Net Income (Loss) (1.59) (0.83) (0.36) 1.33 0.68
Cash Dividends Per Share $0.00 $0.00 $0.09 $0.07 $0.06
Weighted Average Shares
Outstanding (3) 1,536 1,536 1,536 1,536 1,536
FINANCIAL POSITION:
Total Assets $68,877 $65,619 $63,530 $60,536 $61,807
Long-Term Debt 10,066 11,167 13,092 13,825 13,052
Property, Plant & Equip. 84,185 79,680 73,101 64,266 60,417
Stockholders' Equity (3) $29,511 $29,493 $28,844 $28,031 $24,945
</TABLE>
[FN]
(1) See Note in Financial Statements and Management's Discussion and
Analysis on D&H Service Operations.
(2) See Management's Discussion and Analysis for discussion of the
extraordinary item.
(3) All data in the accompanying financial statements and related
notes have been restated to give effect to a 5% stock dividend
declared on January 12, 1995.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
The following Management's Discussion and Analysis of
Financial Condition and Results of Operations relates to the
continuing operations of the Company. The principal subsidiary is
The New York, Susquehanna and Western Railway Corporation. A
discussion of the Company's temporary operation over lines of the
Delaware and Hudson Railway Corporation (D&H) from June 23, 1988,
through February 27, 1990, follows the discussion of the Company's
liquidity and capital resources.
1994 Compared to 1993
Operating Revenues
Railway operating revenues, which include intermodal, carload
and all other rail operating revenues, were $4,117 greater in 1994
than 1993.
Intermodal revenues in the aggregate for 1994 increased $4,011
compared to 1993, due principally to the continued escalating
demand for containerized transportation. Intermodal revenues from
CSX Intermodal, Inc. ("CSXI") increased $3,475 due to two new
intermodal services that began in June and August respectively in
1994. The third and fourth quarters of 1994 realized approximately
$1.3 million and $2.6 million respectively, from this segment of
CSXI business. Both services transport containerized traffic to
CSXI's Little Ferry Terminal in New Jersey. Revenue from inter-
modal shipments on behalf of Hanjin shipping lines to the Resources
facility in New Jersey improved $536 compared to 1993, due to
increased traffic levels.
Carload revenues were $116 higher in 1994 compared with 1993,
due mainly to greater commodity shipments for paper, lumber and
stone ballast, combined with favorable shipper rebate arrangements.
Other railway operating revenues in the aggregate declined
insignificantly in 1994 compared to 1993. Components include
passenger revenues, which were $78 greater in 1994 than 1993 due to
the initiation of the passenger shuttle service in Syracuse, New
York. Demurrage, switching and other incidental railway operating
revenue for 1994 declined approximately $87 compared to 1993.
Real property revenues for 1994 improved $120 when compared to
1993, due principally to additional signboard rentals and increased
rates based on changes in the Consumer Price Index.
Other operating revenues in 1994 were $616 greater than 1993,
due mainly to increased construction activity in which the Company
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recovers the costs of certain equipment and general overhead
expenses based upon pre-approved rates by the reimbursing
government agency. During 1994, the Company received approval from
a state agency to increase its billable general overhead rate.
Seasonality and Effects of Inflation
The Company's container and carload freight revenues are
affected by seasonal demands for consumer goods, generally
resulting in higher intermodal revenues in the third quarter. The
effects of inflation have not had a material effect on the
Company's operating expenses in the aggregate.
Operating Expenses
Maintenance of way and structures expenses for 1994 were $459
greater than 1993, due mainly to $360 of increased trackage rights
costs attributable to additional business over Conrail track, and
approximately $99 of increased expenses for compensation and
benefits, utilities and independent contractors.
Maintenance of equipment expenses for 1994 were $233 higher
than 1993, due mainly to greater expenses for labor costs,
increased maintenance of locomotives and railcars resulting from
increased traffic, and increased maintenance of track equipment due
to higher levels of construction activity.
Transportation expenses in the aggregate for 1994 rose by
$3,407 over 1993 levels, due principally to increases in traffic
levels from two new intermodal services. The principal components
of the increase were: $384 in compensation and benefits, which
reflects a 5% scheduled wage increase for contract employees; $210
in diesel fuel; $155 for increased costs of road locomotive
utilization; haulage costs of $1,665; $263 in terminal operating
expenses; $147 in drayage charges and $68 for additional security
at terminal facilities. Derailment expenses in 1994 exceeded 1993
by $280; the 1993 period included a favorable adjustment of $130
necessary to reduce a previously established reserve for a major
derailment in which all claims had been settled. Passenger
expenses for 1994 exceeded 1993 amounts by $134, due to start-up
and other operating expenses from initiating the shuttle service in
Syracuse, New York.
Car hire expenses for 1994 increased by $195 compared to 1993,
mainly due to greater traffic levels.
Depreciation and amortization expenses for 1994 increased $144
compared with 1993. The increase was due to additions to property,
plant and equipment.
As a result of the foregoing, operating expenses increased
$4,302 in 1994 compared to 1993. For the twelve month period ended
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December 31, 1994, the operating loss declined $551 from the 1993
period. The operating ratio for 1994 improved to 109.1% compared
to 113.5% in 1993.
Interest Expense, Net
Interest expense net, comprised of interest expense (net of
capitalized interest) and interest income, for 1994 increased $159
compared to 1993. Total interest expense for 1994 was $1,399
compared to $1,171 for 1993, due principally to higher interest
rates, additional interest from the issuance of $3,580 of 6.5%
convertible subordinated notes in September 1993, and increased
borrowings from the construction line of credit.
Other Income (Expense)
The Company's gain on sale of property, equipment and other
declined $1,859 in 1994 compared to 1993, due principally to gain
of $1,911 recognized in the 1993 period from the sale of a
permanent easement to Public Service Electric and Gas Company.
Taxes
The Company provides for income taxes in accordance with the
liability method as set forth in Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". The Company's
provision for income taxes on income (loss) before extraordinary
item resulted in a $1,128 tax benefit in 1994 compared to a benefit
of $603 for 1993. See Note 6 to financial statements for further
information concerning income taxes.
Extraordinary Item
During 1994, the Company completed the refinancing of its
major bank debt with Manufacturers and Traders Trust Company. In
conjunction with this refinancing, the Company wrote-off $334,
representing the unamortized balance of deferred financing costs
incurred in 1990 in conjunction with its prior loans. The write-
off was recorded as an extraordinary item in the statement of
earnings, net of applicable income taxes of $106.
1993 Compared to 1992
Operating Revenues
Railway operating revenues, which include intermodal, carload
and all other rail operating revenues, was $20,864 in 1993,
essentially the same as 1992.
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Intermodal revenues for 1993 were $13,497, a decline of $117
compared to 1992. Revenue from intermodal shipments to the
Resources facility increased $415 for 1993 compared to 1992.
Intermodal revenue derived from CSX Intermodal, Inc. for 1993
declined $533 compared to the 1992 period, due principally to
increased competition between carriers resulting in declines in the
volume in Westbound shipments from the greater New York market.
Carload revenues for 1993 were $6,678, an increase of $457
compared to 1992. Increase in volume for grain, stone, lumber,
automobiles and food products contributed to the improved carload
business. Full operation of the new distribution facilities in
Northern New Jersey have made a significant improvement in this
segment of business.
Other railway operating revenues in the aggregate declined
$341 in 1993 compared to 1992. Passenger excursion revenue, a
component of other railway operating revenues, declined $368 due to
a poor response to the Company's scenic excursion trains in the New
Jersey market. The New Jersey excursion activity has been
discontinued and the Company will re-direct its passenger excursion
efforts in 1994. The passenger revenue decline was offset inpart
by increases of $27 in incidental railway operating revenues.
Real property revenues declined $94 in 1993 compared to 1992,
due mainly to certain one-time rents in 1992.
Other operating revenue declined $353 in 1993 compared to
1992, due primarily to the recognition of a $150 inducement fee
paid to the Company for its commitment to develop a food-grade bulk
transfer terminal and $100 recognized in 1992 from a third party
obligation, which was partially offset by $76 from increased
construction activity. Equipment lease revenue declined $136 in
the 1993 period, due mainly to the expiration of a lease.
Operating Expenses
Maintenance of way and structure expenses were up $334 for the
1993 period compared to 1992, due to a major snow storm occurring
in March 1993, additional expenses for trackage rights, and
increased normal maintenance expenses.
Maintenance of equipment expenses in the aggregate for 1993
exceeded 1992 levels by $296 due to: $155 increase in locomotive
expenses due to additional costs of materials and supplies; $182
increase in track construction equipment expense; $75 increased
expenses for maintaining the Company's over-the-road truck and
automobile fleet; offset by $116 of reduced expenses for railcar
maintenance, due principally to declines in repair activity
resulting from operational changes in the Southern Division.
Transportation expenses in the aggregate for 1993 increased
$66 compared to 1992. The increased expense is generally the result
of an increase of approximately $154 from an entire years operation
of the Company's auto distribution terminal net of reduced
14
<PAGE>
derailment expenses.
Car hire expense for 1993 increased $133 compared to the 1992
period, due mainly to greater freight shipments.
Depreciation and amortization expense for 1993 increased $63
compared to 1992.
General, administrative and other expenses in the aggregate
for 1993 declined $315 compared to 1992, due to the benefit of a
favorable insurance claim settlement of approximately $107,
declines of approximately $31 in freight contract allowances, and
declines of approximately $114 in litigation settlement expenses.
As a result of the foregoing, operating expenses increased
$574 in 1993 compared to 1992. For the twelve month period ended
December 31, 1993, the Company sustained an operating loss of
$3,055. The operating ratio for 1993 was 113.5% compared to 109.5%
in 1992.
Interest Expense, Net
Interest expense net, comprised of interest expense (net of
capitalized interest), and interest income for 1993 increased $349
compared to 1992. Total interest expense for 1993 was $1,171
compared to $952 for 1992, due principally to higher LIBOR interest
rates, additional interest from the issuance of $3,580 of 6.5%
convertible subordinated notes in September 1993, and increased
borrowings from the construction line of credit.
Other Income (Expense)
The Company's gain on sale of property, equipment and other
for 1993 increased $1,282 compared to 1992 and includes gain from
the sale of a permanent easement to Public Service Electric and Gas
Company of $1,911.
Taxes
The Company provides for income taxes in accordance with the
liability method as set forth in Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". The Company's
provision for income taxes on income (loss) before extraordinary
item resulted in a $603 tax benefit in 1993 compared to a benefit
of $605 for 1992. See Note 6 to the financial statements for
further information concerning income taxes.
LIQUIDITY AND CAPITAL RESOURCES (DOLLARS IN THOUSANDS)
At December 31, 1994, the Company had a working capital
deficit of $7,149 compared to a deficit of $4,777 at December 31,
1993. A significant portion of the $2,372 decline is due
15
<PAGE>
principally to investing activities, specifically the increase in
property, plant and equipment.
Liquidity refers to the ability of an organization to generate
adequate amounts of cash, principally from operating results or
through borrowing power to meet its short-term and long-term cash
requirements. At December 31, 1994, the Company had cash and cash
equivalents of $1,308 compared to $810 at December 31, 1993. Refer
to the Company's consolidated statements of cash flows for a
further explanation of changes.
During 1994, the Company completed financing arrangements with
Manufacturers and Traders Trust Company (M&T), whereby the Company
may borrow up to $5 million on a line of credit secured by eligible
accounts receivable. At December 31, 1994, the Company had drawn
down $3,400 of an available $3,800. The interest rate is 1% over
Prime. Prime at December 31, 1994 was 8.5%. In addition, the
Company entered into a $5.5 million ten-year term loan with M&T
payable on a fifteen-year amortization. The proceeds were used to
retire debt and to improve working capital.
Total long-term liabilities at December 31, 1994, were
$22,347, a decrease of $511 compared to December 31, 1993. Long-
term debt exclusive of current maturities, as a percentage of
equity at December 31, 1994, was 34.1% compared to 37.9% at
December 31, 1993, and total capitalization (long-term debt, 6.5%
convertible subordinated notes and equity) was $43,157 at December
31, 1994, compared to $44,240 at December 31, 1993.
Property, Plant and Equipment additions for 1994 were $7,182
of which $4,491 was funded by grants from the New York and New
Jersey Departments of Transportation. The $2,691 balance was
provided from additional debt and sales of real property.
The Company's capital spending program for 1995, including
commitments, is projected at approximately $16 million. (Refer to
Note 11 - Commitments to the consolidated financial statements).
The expenditures are expected to be met from grants from
participating state governments which are expected to continue
beyond 1995, cash from operations, debt issuances and sales of non-
operating assets.
Subsequent to year-end, the Company reached an agreement in
principal to sell 8.8 miles of railroad line located in New Jersey
to the New Jersey Department of Transportation for $6.4 million.
The transaction, which is expected to close in the first half of
1995, will result in a gain of approximately $5.3 million. A
reduction in the Company's working capital deficit should result
from the transaction. A portion of the proceeds will be used to
partially pay down debt and to make certain capital expenditures.
16
<PAGE>
Environmental Matters
During 1993, The New York, Susquehanna and Western Railway
Corporation, a Company railroad operating subsidiary, received
notice from the Environmental Protection Agency (EPA) that it is a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act (Superfund) and may be
required to share in the cost to clean up a certain site identified
by the EPA. The information presently available to the Company
indicates that the estimated liability is less than ten thousand
dollars and, therefore, will not have a material affect on the
consolidated financial condition or results of operations.
Inflation
Generally accepted accounting principles require the use of
historical costs in preparing financial statements. This approach
disregards the effects of inflation on the replacement cost of
property and equipment. The Company is a capital-intensive company
and has approximately $84.2 million invested in such assets. The
replacement costs of these assets, as well as the related
depreciation expense, would be substantially greater than the
amounts reported on the basis of historical costs.
DELAWARE & HUDSON SERVICE OPERATIONS
For the period from June 20, 1988 through February 28, 1990,
the Company provided railroad transportation service over the lines
owned and/or operated by Delaware & Hudson Railway Company (D&H)
pursuant to directed service orders of the Interstate Commerce
Commission (ICC). This service was provided under several
assistance agreements from other railroads, principally CSX
Transportation, Inc. Revenues and expenses in 1992 represent
continued assistance following the operating period as provided by
CSX Transportation, Inc. This assistance related to the continued
wind down of the D&H service operations. The close out of the D&H
operation has had no affect on the Company's net income in any year
and transactions in 1994 and 1993 were not significant.
17
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data begin on the
next page.
18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Delaware Otsego Corporation
We have audited the accompanying consolidated balance sheets of Delaware
Otsego Corporation and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Delaware
Otsego Corporation and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Ernst & Young LLP
Syracuse, New York
March 3, 1995
19
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
DELAWARE OTSEGO CORPORATION AND SUBSIDIARIES
<CAPTION>
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
Year ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES
Railway operating revenues $24,981 $20,864 $20,729
Real property revenues 1,283 1,163 1,257
Other operating revenue 1,199 583 936
-------- -------- --------
Operating Revenues 27,463 22,610 22,922
Directed Service Revenues -- Note 9 149
-------- -------- --------
TOTAL OPERATING REVENUES 27,463 22,610 23,071
OPERATING EXPENSES
Maintenance of way and structures 3,604 3,145 2,811
Maintenance of equipment 2,449 2,216 1,921
Transportation 14,288 10,881 10,811
Car hire expense 1,194 999 866
Depreciation and amortization 3,930 3,786 3,723
Taxes other than income taxes 243 365 370
General, administrative and other 4,259 4,273 4,588
-------- -------- --------
Operating Expenses 29,967 25,665 25,090
Directed Service Expenses--Note 9 149
-------- -------- --------
TOTAL OPERATING EXPENSES 29,967 25,665 25,239
-------- -------- --------
LOSS FROM OPERATIONS (2,504) (3,055) (2,168)
OTHER INCOME (EXPENSE)
Interest expense, net (1,181) (1,022) (673)
Gain on sale of prop., equip. and other 337 2,196 914
-------- -------- --------
OTHER INCOME (EXPENSE), NET (844) 1,174 241
Loss before income taxes and
Extraordinary item (3,348) (1,881) (1,927)
Provision for income tax benefit--Note 6 1,128 603 605
-------- -------- --------
LOSS BEFORE EXTRAORDINARY ITEM (2,220) (1,278) (1,322)
Extraordinary item net of tax--Note 4 (228) 765
-------- -------- --------
NET LOSS ($2,448) ($1,278) ($557)
Earnings per common share:
Loss before extraordinary item ($1.44) ($0.83) ($0.86)
Extraordinary item (0.15) 0.50
-------- -------- --------
Net loss per share--Note 1 ($1.59) ($0.83) ($0.36)
</TABLE>
[FN]
See notes to consolidated financial statements.
20
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
DELAWARE OTSEGO CORPORATION AND SUBSIDIARIES
<CAPTION>
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
December 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,308 $810
Accounts receivable 6,085 4,202
Reimbursable construction costs 1,106 2,316
Materials and supplies 587 416
Deferred income taxes--Note 6 317 364
Prepaid expenses 179 201
Other current assets 288 181
-------- --------
TOTAL CURRENT ASSETS 9,870 8,490
PROPERTY, PLANT AND EQUIPMENT--Notes 1 through 4
Land 2,373 2,351
Bldgs., mach., equip. and leasehold improvements 81,812 77,329
-------- --------
84,185 79,680
Less accumulated depreciation and amortization (25,961) (23,757)
-------- --------
58,224 55,923
OTHER ASSETS
Other assets 107 397
Intangible assets, net--Notes 1 and 4 676 809
-------- --------
783 1,206
-------- --------
$68,877 $65,619
======== ========
</TABLE>
[FN]
See notes to consolidated financial statements
21
<PAGE>
<TABLE>
<CAPTION>
December 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to bank--Note 3 $3,400 $1,215
Accounts payable 10,018 8,258
Accrued and other current liabilities 2,481 2,283
Current maturities of long-term debt--Note 4 1,120 1,512
-------- --------
TOTAL CURRENT LIABILITIES 17,019 13,268
LONG-TERM LIABILITIES
Long-term debt--Note 4 10,066 11,167
Deferred income tax--Note 6 8,582 7,984
Deferred revenue and other liabilities 119 127
SUBORDINATED NOTES
6.5% Convertible Subordinated Notes--Note 5 3,580 3,580
-------- --------
22,347 22,858
-------- --------
39,366 36,126
STOCKHOLDERS' EQUITY
Common stock, par value, $.125 per share-
-authorized 10,000,000 shares; issued
and outstanding--1,536,880 in 1994 and
1,464,362 in 1993 192 183
Additional paid-in capital 3,278 2,544
Contributed capital 16,687 14,214
Retained earnings 9,354 12,552
-------- --------
29,511 29,493
-------- --------
COMMITMENTS--Notes 7 and 11 $68,877 $65,619
======== ========
</TABLE>
[FN]
See notes to consolidated financial statements.
22
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
DELAWARE OTSEGO CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
Common Stock
Par Value Additional Contributed
$.125 Paid-in Capital Retained
Per Share Capital (Note 1) Earnings
------------ ----------- ------------ ---------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 $166 $1,287 $10,785 $15,793
Dividends paid at $.10 per share (133)
Net Loss (557)
5% Stock Dividend declared
January 4, 1993 8 569 (577)
Rehabilitation Subsidies--Note 1 1,503
-------- -------- -------- --------
BALANCE AT DECEMBER 31, 1992 174 1,856 12,288 14,526
Net Loss (1,278)
5% Stock Dividend declared
January 10, 1994 9 682 (696)
Rehabilitation Subsidies--Note 1 1,926
Exercise of Employee Stock Options 6
-------- -------- -------- --------
BALANCE AT DECEMBER 31, 1993 183 2,544 14,214 12,552
Net Loss (2,448)
5% Stock Dividend declared
January 12, 1995 9 734 (750)
Rehabilitation Subsidies - Note 1 2,473
-------- -------- -------- --------
BALANCE AT DECEMBER 31, 1994 $192 $3,278 $16,687 $9,354
</TABLE>
[FN]
See notes to consolidated financial statements.
23
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
DELAWARE OTSEGO CORPORATION AND SUBSIDIARIES
<CAPTION>
(THOUSANDS)
Year ended December 31,
--------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss ($2,448) ($1,278) ($557)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 3,930 3,786 3,723
Provision for losses on accounts receivable 31 10 (30)
Provision for deferred income taxes (1,346) (359) 41
Gain on sale of fixed assets (328) (2,288) (975)
Amortization of deferred income (8) (35) (189)
Provision for interest accrual on loans (88)
Forgiveness of indebtedness (1,159)
Proceeds of deferred rent 4 10
Write-off of loan origination fees 334
Changes in operating assets and liabilities:
(Increase)decrease in accounts receivable (1,914) 625 1,671
Decrease(increase) in materials and supplies,
prepaids and other current assets 954 (1,199) (638)
Increase (decrease) in accounts payable and
accrued expenses 1,932 394 (566)
(Increase)decrease in other assets (116) 18 58
---------- ---------- ----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 1,021 (322) 1,301
INVESTING ACTIVITIES
Additions to property, plant and equipment (7,182) (6,573) (9,581)
Acquisition of intangible assets (282) (126)
Proceeds and deposits from
sale of assets and easement 1,357 2,124 1,120
Decrease in note receivable from Director 1,625
Contributed capital 4,491 3,567 2,783
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (1,616) (1,008) (4,053)
FINANCING ACTIVITIES
Release of escrowed cash for property improvements 194 1,264
Increase (decrease) in notes payable 2,185 (1,095) 1,925
Proceeds from long-term borrowings 5,565 222 2,376
Principal payments on long-term debt (7,057) (2,486) (1,983)
Proceeds from other borrowings 406
Dividends paid (6) (5) (133)
Proceeds from convertible subordinated notes 3,580
Proceeds of employee stock options 6
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,093 416 3,449
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 498 (914) 697
Cash and cash equivalents at beginning of year 810 1,724 1,027
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,308 $810 $1,724
</TABLE>
[FN]
See notes to consolidated financial statements.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DELAWARE OTSEGO CORPORATION AND SUBSIDIARIES
December 31, 1994, 1993 and 1992
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business: The Company operates a regional railroad system extending into the
states of New York, Pennsylvania and New Jersey. Two major customers
accounted for 70%, 64%, and 65% of railway operating income in 1994, 1993,
and 1992, respectively.
Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries, all of
which are wholly-owned. All significant intercompany transactions and
balances have been eliminated in consolidation.
Accounts Receivable and Revenue Recognition: Accounts receivable and accounts
payable in the consolidated balance sheet reflect interline transactions with
other railroads which the Company is required to enter into as part of
settling freight payments received from customers. The system follows Railway
Accounting Rules as adopted by member railroads of The Association of American
Railroads, of which the Company is a member. At year end, in accordance with
industry practice, accrued revenue on a completed service basis is reflected
in the consolidated statements of operations for unsettled freight not yet
part of the interline accounting system.
At December 31, 1994, the Company's trade receivables include approximately
$2.1 million or 34.6% of total receivables, representing balances due from
its two major customers. The Company does not require collateral. The risk
associated with this concentration is not deemed significant.
Allowances for doubtful accounts of $190 thousand and $174 thousand have been
applied as a reduction of accounts receivable at December 31, 1994 and 1993,
respectively.
Commodity Agreement Used to Hedge Price Fluctuations: The Company enters into
a diesel fuel supply agreement to hedge its exposure to price fluctuations on
approximately 30% of its anticipated fuel requirements during a seven month
period, generally late fall - early spring, for its freight transportation
business. The nature of the hedging transaction does not result in any
significant risk to the Company.
Materials and Supplies: Materials and supplies are stated at the lower of
cost or market determined by the average cost method.
Materials and supplies are charged to expense, construction-in-progress
or property, plant and equipment at the time of use.
Property, Plant and Equipment: Property, plant and equipment is recorded at
cost including capitalized interest during periods of construction.
Depreciation is provided over the estimated useful lives of the related assets
and is computed principally by the straight-line method for financial
statement purposes.
Costs of reimbursable rehabilitation projects not yet complete are recorded in
reimbursable construction costs. Charges incurred during the project phase
are billed to the respective state or federal government agency. The proceeds
from these subsidies are recorded in the consolidated statement of
stockholders' equity as contributed capital at the time of receipt net of
applicable income taxes.
25
<PAGE>
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
The cost of property retired or sold and related accumulated depreciation
are removed from the asset and allowance accounts. Gain or loss on
disposition of property is reflected in earnings. Maintenance and repairs
are charged to earnings as incurred. Renewals and betterments are
capitalized.
Leasehold improvements are amortized on the straight-line method over the
remaining life of the lease or the estimated life of the improvement,
whichever is shorter.
Intangible Assets: Intangibles are amortized by the straight-line method
over a period of 5 to 40 years. Accumulated amortization was $1.5 million
and $1.8 million at December 31, 1994 and 1993, respectively.
Estimated Self-Insurance Liability: The Company is self-insured to various
limits for public liability and property loss. The liability for self-
insurance is generally accrued based on occurrence, with liability for
possible escalation on unsettled claims being estimated based on individual
situations. In the opinion of management, after review with attorneys for the
Company, such claims are of a nature that they will not have a material
adverse effect on the financial position of the Company.
Income Taxes: The Company provides for income taxes in accordance with the
liability method as set forth in Statement of Financial Accounting Standards
No. 109, "Accounting For Income Taxes". Under the liability method, deferred
taxes are determined based on the difference between the financial statement
and tax basis of assets and liabilities using enacted tax rates in effect in
the years in which the differences are expected to reverse. (See Note 6.)
Earnings Per Share: Earnings per share are based on the average number of
common and common equivalent shares outstanding during the period. The
weighted average number of shares outstanding is approximately 1.5 million in
1994, 1993 and 1992 respectively and include the effects of a 5% stock
dividend declared on January 12, 1995. All data in the accompanying financial
statements and related notes have been restated to give effect to the dividend.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
Reclassification: Certain amounts in the 1993 and 1992 financial statements
have been reclassified to conform to the 1994 presentation.
26
<PAGE>
<TABLE>
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment balances by major classes at
December 31, 1994 and 1993 follows:
<CAPTION>
THOUSANDS
-------------------
1994 1993
-------- --------
<S> <C> <C>
Land $2,373 $2,351
Buildings and bridges 6,337 6,765
Machinery, equipment and roadway 74,989 70,110
Leasehold improvements 486 454
-------- --------
84,185 79,680
Less allowance for depreciation and amortization (25,961) (23,757)
-------- --------
PROPERTY, PLANT AND EQUIPMENT, NET $58,224 $55,923
======== ========
</TABLE>
NOTE 3--NOTES PAYABLE TO BANK
Notes payable at December 31, 1994 consist of a secured advance under a
$5 million line of credit. Interest on these borrowings is at Prime plus
1% (Prime at December 31, 1994 was 8.5%). The notes are secured by eligible
accounts receivable. At December 31, 1994, the Company had drawn down $3.4
million of an available $3.8 million. Notes payable at December 31, 1993
consist of a secured advance under a $3 million line of credit. The $1.2
million balance was paid off in 1994. The weighted average interest rate
on the borrowings is 7.9% and 7.0% for 1994 and 1993, respectively.
27
<PAGE>
<TABLE>
NOTE 4--LONG-TERM DEBT
Long-term debt obligations at December 31 are summarized as follows:
<CAPTION>
THOUSANDS
-------------------
1994 1993
-------- --------
<S> <C> <C>
Term loan payable to Manufacturers and Traders Trust
Company in quarterly principal installments of $92
thousand plus interest through 2004, with a balloon
payment of $1.8 million in same year. Interest on portions
of the term loan are based on the prime rate plus 1.5%
or LIBOR, and the greater of a 3.5% fixed rate above the
yield on United States Treasury Obligations, or 8%.
(Prime at 8.50% on December 31, 1994). $5,317
Loan payable to the New Jersey Economic Development
Authority due in monthly installments of $18 thousand
plus interest through 1999, with interest at a rate
between 2% and 12% (6% at December 31, 1994) secured
by a mortgage on real property 1,125 $1,341
Loan payable to the federal government through the
Federal Railway Administration (FRA) due in quarterly
installments of $88 thousand including interest at 6.276%
with a balloon payment of $1.5 million on March 31, 2000,
secured by a mortgage on real property. 2,552 2,737
Various promissory and mortgage notes payable, due in
monthly installments, with interest varying from
6.5% - 9.4% at December 31, 1994. The notes are
secured by land, buildings, or equipment. 2,192 2,407
Term loan paid in 1994 6,194
-------- --------
11,186 12,679
Less current portion 1,120 1,512
-------- --------
$10,066 $11,167
======== ========
</TABLE>
In December 1992, the Company finalized an agreement with the Staten Island
Railroad Corporation (SIRC) that provided for the forgiveness of
approximately $1.2 million of debt to SIRC in connection with the termination
of a land lease. The transaction was recorded as an extraordinary item in
1992, net of applicable income taxes of approximately $400 thousand. The
debt was incurred as part of the purchase of certain track structure. The
carrying value of the track structure, which amounted to approximately $1
million, was recovered in 1994 when the property was sold.
During 1994, the Company completed the refinancing of its major bank debt
with Manufacturers and Traders Trust Company. In conjunction with this
refinancing, the Company wrote-off $334 thousand, representing the
unamortized balance of deferred financing costs incurred in 1990 in
conjuction with its prior loans. The write-off was recorded as an
extraordinary item net of applicable income taxes of $106.
28
<PAGE>
NOTE 4--LONG-TERM DEBT--Continued
Substantially all assets of the Company are pledged as collateral under debt
agreements. In addition to other requirements, the Company is required to
meet certain minimum tangible net worth, working capital, and current ratio
requirements under certain debt agreements. At December 31, 1994, the
Company met all the minimum requirements.
Under the Company's loan agreement with Manufacturers & Traders Trust
Company, cash dividends in any fiscal year shall not exceed forty (40%)
percent of consolidated net income.
The September 30, 1985, Financing Agreement between the Company and its
subsidiary, NYS&W, and the Federal government through the FRA 505 Redeemable
Preference Share Program provides that yearly dividends may not exceed 50%
of the total additions to retained earnings of the Company for the previous
year, nor 50% of the total additions to retained earnings for 1985 and in
each year thereafter.
Interest expense, net (in thousands) is comprised of interest expense of
$1,399, $1,170 and $952 for 1994, 1993 and 1992 respectively, net of
respective amounts for capitalized interest of $147, $91 and $148, and
interest income of $71, $57 and $131. Interest paid (in thousands) was
$1,332, $1,131 and $753 for the 1994, 1993 and 1992 periods.
<TABLE>
<CAPTION>
A summary of maturities of long-term debt at December 31, 1994 is as follows:
Thousand
--------
<S> <C>
1995 $1,120
1996 1,100
1997 1,171
1998 1,069
1999 1,071
Thereafter 5,655
--------
$11,186
========
</TABLE>
NOTE 5--6.5% CONVERTIBLE SUBORDINATED NOTES
During 1993, the Company completed a private placement of $3.6 million of
6.5% convertible subordinated notes due September 1, 2003. The notes are
convertible into shares of the Company's presently authorized common stock
at a conversion price of $11.11 per share, after giving effect to stock
dividends. Interest on the notes is payable semi-annually on the first day
of March and September of each year. The notes may be converted into shares
anytime prior to maturity. The Company has reserved 322 thousand shares of
authorized common stock for the conversion of the notes. Directors of the
Company purchased $850 thousand of the notes.
29
<PAGE>
<TABLE>
NOTE 6--INCOME TAXES
<CAPTION>
The components of the provision for federal and state income taxes are as
follows (in thousands):
-----------------------------
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Current tax (expense) benefit ($218) $244 $646
Deferred tax benefit (expense) 1,346 359 (41)
------- -------- --------
TOTAL INCOME TAX BENEFIT (EXPENSE) $1,128 $603 $605
======= ======== ========
</TABLE>
A reconciliation of the statutory U.S. federal income tax rate to the
effective income tax rate follows:
<TABLE>
<CAPTION>
------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Statutory income tax rate 34.00% 34.00% 34.00%
State taxes, net of federal tax benefit (2.72) (1.53) (1.00)
Other 2.41 (.40) (1.60)
-------- -------- --------
EFFECTIVE INCOME TAX RATE 33.69% 32.07% 31.40%
======== ======== ========
</TABLE>
State taxes are based on a combination of pre-tax earnings, allocated
capital and gross transportation receipts. Amounts included in current
tax expense were $218 thousand, $44 thousand and $24 thousand for 1994,
1993 and 1992, respectively.
The Company has general business credit carryovers of approximately $1.5
million which expire at various dates through the year 2002, net operating
loss carryforwards of $9 million which expire at various dates through 2009,
and alternative minimum tax credits of $981 thousand available to reduce
income taxes otherwise currently payable.
Net income tax payments (refunds) amounted to $28 thousand, ($211 thousand),
and ($86 thousand) in 1994, 1993 and 1992, respectively.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of
December 31 are as follows:
30
<PAGE>
<TABLE>
<CAPTION>
NOTE 6--INCOME TAXES--Continued THOUSANDS
-------------------
1994 1993
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Book basis in excess of tax basis of property,
plant and equipment $14,127 $12,220
-------- --------
Deferred tax assets:
Vacation reserve $115 $93
Bad debt reserve 65 59
Litigation reserve 82 108
Other-net 35 84
Net operating loss carryforwards 3,065 1,756
General business credit carryforwards 1,519 1,519
AMT credit carryforwards 981 981
-------- --------
Total deferred tax assets 5,862 4,600
-------- --------
Net deferred tax liabilities $8,265 $7,620
======== ========
Classification of deferred taxes:
Non-current liabilities $8,582 $7,984
Current assets (317) (364)
-------- --------
$8,265 $7,620
======== ========
</TABLE>
31
<PAGE>
NOTE 7--LEASES
The Company leases certain equipment and real estate under operating lease
agreements for periods ranging from one to nine years. The annual rental
expenses were $2.9 million, $2.8 million and $2.8 million for 1994, 1993
and 1992, respectively.
<TABLE>
<CAPTION>
Future minimum lease payments for noncancelable operating leases as of
December 31, 1994, are as follows:
Year ending December 31
THOUSANDS
---------
<S> <C>
1995 $828
1996 712
1997 628
1998 626
1999 652
Thereafter 2,185
---------
TOTAL MINIMUM OPERATING LEASE PAYMENTS $5,631
=========
</TABLE>
Included in the above table is an operating lease for railroad equipment
leased from a Director of the Company. Included in expense for the years
ending December 31, 1994, 1993 and 1992 are related party lease payments
in the aggregate of $9 thousand.
NOTE 8--STOCK OPTIONS
The Stockholders of the Company have approved stock option plans for
officers, directors and key employees. At December 31, 1994, there are
184,462 exercisable shares under option. The exercise price of options
granted is equal to the fair market value of the common stock on the date
of grant. The options expire ten years from the date of grant.
The status of these plans at December 31, is as follows (the stock option
data has been restated to reflect the effects of the 1995 5% stock dividend):
Shares
Under Option
Option Price Range
--------- -------------
1994 184,462 $10.25-$11.55
Options Exercise
Exercised Price
--------- -------------
1994 - -
1993 525 $10.50
1992 - -
32
<PAGE>
NOTE 9--DELAWARE & HUDSON SERVICE OPERATIONS
For the period from June 20, 1988 through February 28, 1990, the Company
provided railroad transportation service over the lines owned and/or operated
by Delaware & Hudson Railway Company (D&H) pursuant to directed service
orders of the Interstate Commerce Commission (ICC). This service was
provided under several assistance agreements from other railroads,
principally CSX Transportation, Inc. Revenues and expenses in 1992 represent
continued assistance following the operating period as provided by CSX
Transportation, Inc. This assistance related to the continued wind down of
the D&H service operations. The close out of the D&H operation has had no
affect on the Company's net income in any year and transactions in 1994
and 1993 were not significant.
NOTE 10--EMPLOYEE BENEFIT PLAN
On August 1, 1990, the Company established a defined contribution plan
covering substantially all employees. Employees can contribute a portion
of their salary or wages as prescribed under section 401(k) of the Internal
Revenue Code and, subject to certain limitations, the Company will match a
portion of the employees' contribution. The amounts of employer
contributions were $78 thousand in 1994, $75 thousand in 1993, and $79
thousand in 1992.
NOTE 11--COMMITMENTS
The Company has outstanding commitments of approximately $6.1 million in
connection with the completion of various rehabilitation projects and
construction in progress. Completion dates range from six months to three
years. The commitments are expected to be partially offset by government
agency funding of approximately $5.5 million.
Subsequent to 1994, the Company entered into a purchase agreement for three
(3) new General Motors, 4,000 horsepower, 6-axle, SD-70 locomotives at a
total cost of approximately $4.2 million. Delivery is anticipated to occur
in the first half of 1995. The purchase will be financed by a loan of up
to $5 million from the Federal Financing Bank and will be guaranteed by the
Federal Railroad Administration.
The Company entered into a purchase agreement in August 1992 for certain
property currently under lease for a total consideration of approximately
$3 million in June 1995. The total purchase price, after giving effect to
changes in the Consumer Price Index, will be approximately $3.5 million.
The property is presently being used for relocation and expansion of its
bulk distribution operations.
Certain claims have been filed against the Company or its subsidiaries and
have not been finally adjudicated. These claims when finally concluded and
determined, will not, in the opinion of management based upon information
that it presently possesses, have a material adverse effect on the
consolidated financial position.
33
<PAGE>
NOTE 12--QUARTERLY FINANCIAL DATA--UNAUDITED
<TABLE>
<CAPTION>
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1994
Revenues $4,980 $6,062 $8,112 $8,646
Expenses 6,077 6,663 8,530 8,750
Loss before extraordinary item (1,097) (601) (418) (104)
Net Loss (1,097) (829) (418) (104)
Loss per common share:
Before extraordinary item (0.71) (0.39) (0.28) (0.06)
Net Loss (0.71) (0.54) (0.28) (0.06)
1993
Revenues $7,555 $5,806 $6,350 $5,243
Expenses 6,931 6,391 6,785 6,125
Net income (loss) 624 (585) (435) (882)
Earnings (loss) per common share:
Net income (loss) 0.41 (0.38) (0.29) (0.57)
</TABLE>
Earnings per common share have been adjusted retroactively to reflect a 5%
stock dividend declared January 12, 1995. The second quarter 1994 net loss
includes the effects of an extraordinary item (See Note 4).
34
<PAGE>
SCHEDULE II
DELAWARE OTSEGO CORPORATION & SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Years ended December 31, 1994, 1993 and 1992
Accumulated Amortization
of Intangible Assets
Thousands
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Description
Balance at beginning of year $1,794 $1,689 $1,590
Write-off loan origination fees (407) - -
Charged to costs and expenses 75 105 99
-------- -------- --------
BALANCE AT END OF YEAR $1,462 $1,794 $1,689
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Allowance for
Uncollectible Accounts
Thousands
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year $174 $238 $259
Charged to costs and expenses 31 10 (30)
Deductions (15)* (74)* 9 *
-------- -------- --------
BALANCE AT END OF YEAR $190 $174 $238
======== ======== ========
</TABLE>
* Uncollectible accounts written off, net of recoveries
35
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III
--------
The information required in Item 10 (Directors and Executive Officers
of the Registrant), Item 11 (Executive Compensation), Item 12 (Security
Ownership of Certain Beneficial Owners and Management), and Item 13 (Certain
Relationships and Related Transactions) except for the information set forth
at the end of Part I with respect to Executive Officers of the Company, is
incorporated herein by reference to the Company's Proxy Statement to be filed
within 120 days of December 31, 1994.
PART IV
-------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) (1) Financial Statements
The following financial statements of Delaware Otsego Corporation are
included in Part II, Item 8:
Page
-----
Report of Independent Auditors 19
Consolidated Statements of Operations for
the Years Ended December 31, 1994,
1993, and 1992 20
Consolidated Balance Sheets at
December 31, 1994 and 1993 21
Consolidated Statements of Stockholders'
Equity for the Years Ended
December 31, 1994, 1993, and 1992 23
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1994,
1993, and 1992 24
Notes to Consolidated Financial Statements 25
(2) Financial Statement Schedules
Schedule II: Valuation and Qualifying
Accounts 35
All other schedules called for under Regulation S-X are not submitted
because they are not applicable or not required or because the required
information is not material or is included in the financial statements or
notes thereto.
36
<PAGE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company in the fourth quarter.
(c)Exhibits
Filed herewith (-) or
Incorporated by Reference
to
--------------------------
3.1 Restated Certificate of Exhibit 3.1 to Regis-
Incorporation of the trant's Annual Report on
Delaware Otsego Corporation Form 10-K dated December
dated June 1, 1991 31, 1991
3.2 By-Laws of DOC dated April 5, Exhibit 3.8 to Regis-
1988 trant's Annual Report on
Form 10-K dated December
31, 1988
4.1 Form of Delaware Otsego Cor- Exhibit 1 to Registrant's
poration 6.5% Convertible Current Report on Form 8-K
Subordinated Note due dated October 19, 1993
September 1, 2003
10.1 Employment Agreement between Exhibit 10.1 to Regis-
DOC and Walter Rich dated trant's Quarterly Report
June 4, 1994 on Form 10-Q dated June
30, 1994
10.2 Direct Loan Agreement between Exhibit 10(g) to Registra-
New Jersey Economic Develop- tion Statement on Form
ment Authority and NYS&W S-1, No. 2-94319
dated August 6, 1982
10.3 Agreement between Conrail Exhibit 10(p) to Registra-
and NYS&W dated March 30, tion Statement on Form
1982 relating to trackage S-1, No. 2-94319
rights over line of Conrail
from Binghamton, New York to
Warwick, New York via
Campbell Hall and Maybrook,
New York
10.4 Financing Agreement between Exhibit 19.11 to Form 10-Q
NYS&W and FRA dated dated November 13, 1986
September 30, 1985
10.5 Agreement Amending Financing Exhibit 19.12 to Form 10-Q
Agreement between FRA and dated November 13, 1986
NYS&W dated July 30, 1986
10.6 Amendment to Direct Loan Exhibit 19.18 to Form 10-Q
Agreement between New Jersey dated November 13, 1986
Economic Development
Authority and NYS&W dated
July 15, 1986
37
<PAGE>
10.7 Amendment to Direct Loan Exhibit 19.19 to Form 10-Q
Agreement between New Jersey dated November 13, 1986
Economic Development
Authority and NYS&W dated
September 2, 1986
10.8 Amended and Restated Credit Exhibit 10.8 to Form 10-Q
Agreement between Manufac- dated November 11, 1994
turers and Traders Trust
Company and DOC dated
May 27, 1994
10.9 Agreement between NYS&W and -
Brotherhood of Locomotive En-
gineers dated March 30, 1994
10.11 Modification to Direct Loan Exhibit 10(hh) to Regis-
Agreement and Direct Loan tration Statement on Form
Promissory Note dated as of S-1, No. 2-94319
August 6, 1982 between the
New Jersey Economic Develop-
ment Authority and NYS&W
dated July 17, 1984
10.12 Amendment to Operating Exhibit 10(qq) to Regis-
Agreement Under Branchline tration Statement on Form
Assistance Program between S-1, No. 2-94319
NYS&W and New York State
Department of Transporta-
tion dated January 10, 1984
10.15 Transportation Agreement Exhibit 10.15 to Regis-
between NYS&W and CSX/ trant's Form 8-K dated
Sea-Land Intermodal, Inc. May 20, 1992
dated December 30, 1989
(Confidential treatment of
portions of this document
requested)
10.22 Delaware Otsego Corporation Exhibit B to Definitive
1987 Stock Option Plan Proxy Statement Dated
October 7, 1987
10.23 Delaware Otsego Corporation Exhibit B to Definitive
1993 Stock Option Plan Proxy Statement Dated
May 5, 1993
10.25 Employment Agreement between Exhibit 10.29 to Regis-
DOC and C. David Soule dated trant's Quarterly Report
June 4, 1994 on Form 10-Q dated June
30, 1994
38
<PAGE>
10.26 Employment Agreement between Exhibit 10.30 to Regis-
DOC and William B. Blatter trant's Quarterly Report
dated June 4, 1994 on Form 10-Q dated June
30, 1994
10.27 Form of Delaware Otsego Exhibit 7(c)(1) to Regis-
Corporation 6.5% Convertible trant's Form 8-K dated
Subordinated Note Due on October 19, 1993
September 1, 2003
10.28 Guarantee Commitment between -
the Federal Railroad
Administration and DOC
dated September 29, 1994
21 Subsidiaries of Registrant -
23 Consent of Ernst & Young LLP -
39
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Delaware Otsego Corporation has duly caused this
Annual Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DELAWARE OTSEGO CORPORATION
- ---------------------------
Registrant
By: s/ Walter G. Rich
------------------------------
Walter G. Rich, Director
President and Chief Executive
Officer
Date: March 27, 1995
-------------------------
By: s/ William B. Blatter
------------------------------
William B. Blatter
Senior Vice President and
Chief Financial Officer
Date: March 27, 1995
-------------------------
By: s/ Robert E. Pierce
------------------------------
Robert E. Pierce
Vice President, Controller &
Chief Accounting Officer
Date: March 27, 1995
-------------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:
s/ C. David Soule s/ Malcolm C. Hughes
- ----------------------------- -------------------------------
C. David Soule, Director Malcolm C. Hughes, Director
March 27, 1995 March 27, 1995
s/ Niles F. Curtis s/ Gerald D. Groff, M.D.
- ----------------------------- -------------------------------
Niles F. Curtis, Director Gerald D. Groff, M.D., Director
March 27, 1995 March 27, 1995
s/ Everett A. Gilmour s/ Charles S. Brenner
- ----------------------------- ------------------------------
Everett A. Gilmour, Director Charles S. Brenner, Director
March 27, 1995 March 27, 1995
s/ John M. Ladd
- ----------------------------- ------------------------------
John M. Ladd, Director
March 27, 1995
40
<PAGE>
EXHIBIT INDEX
-------------
Page
----
10.9 Agreement between NYS&W and
Brotherhood of Locomotive En-
gineers dated March 30, 1994 42
10.28 Guarantee Commitment between
the Federal Railroad Admin-
istration and DOC dated
September 29, 1994 95
21 Subsidiaries of Registrant 139
23 Consent of Ernst & Young LLP 140
41
AGREEMENT
BY AND BETWEEN
THE NEW YORK, SUSQUEHANNA AND WESTERN RAILWAY CORPORATION
AND
THE BROTHERHOOD OF LOCOMOTIVE ENGINEERS
Dated: March 30, 1994
42
<PAGE>
Preamble 2
ARTICLE I - Wages 3
ARTICLE II - On-Off Duty Points - Home Terminals 4
ARTICLE III - Seniority 5
ARTICLE IV - Guaranteed Work Week 10
ARTICLE V - Examination and Instruction Classes 10
ARTICLE VI - Basis of Day's Work 11
ARTICLE VII - Meal Period and Car Allowance 11
ARTICLE VIII - Bereavement 12
ARTICLE IX - Holidays 12
ARTICLE X - Vacation 13
ARTICLE XI - Jury Duty 15
ARTICLE XII - Leave of Absence 15
ARTICLE XIII _ Time Limit on Claims 16
ARTICLE XIV - Discipline and Investigations 19
ARTICLE XV - Special Board of Adjustment 23
ARTICLE XVI - Union Shop 25
ARTICLE XVII - Union Shop - Dues Deduction 27
ARTICLE XVIII - Insurance Coverage 28
ARTICLE XIX - Miscellaneous 30
ARTICLE XX - Effect and Duration of Agreement 35
Article XXI - Operation Red Block Agreement 35
43
<PAGE>
AGREEMENT
THIS AGREEMENT entered into this 30, day of March, 1994
BY AND BETWEEN:
THE NEW YORK, SUSQUEHANNA AND WESTERN RAILWAY CORPORATION
AND
THE BROTHERHOOD OF LOCOMOTIVE ENGINEERS
SCHEDULE OF WAGES AND RULES OF LOCOMOTIVE ENGINEERS
WITNESSETH
WHEREAS, the National Mediation Board by Certification dated
January 19, 1981, 8 NMB No. 64, Case No. R 5172, certified that the
Brotherhood of Locomotive Engineers had been duly designated and
authorized to represent, for purposes of the Railway Labor Act, as
amended, the craft or class of Locomotive Engineer employees of The
New York, Susquehanna and Western Railway Corporation, its
successors and assigns, after finding that the carrier maintained
a composite craft of operating employees, all of whom are qualified
Locomotive Engineers, or are eligible by training and promotion to
become qualified Locomotive Engineers, and
WHEREAS, the Corporation and the Employees recognize that
contractual provisions tailored to and necessary for the successful
operations of this property are essential to the preservation of
rail service and related employment opportunities,
NOW, THEREFORE, in consideration of the premises and condi-
tions herein contained, the parties have reached the following
agreement as a result of collective bargaining for the purpose of
facilitating the peaceful adjustment of differences that may arise
during operations, from time to time thereafter, and to promote
harmony and efficiency to the end that the employees and The New
York, Susquehanna and Western Railway Corporation and the
general public may mutually benefit thereby.
44
<PAGE>
PREAMBLE
This agreement will apply to the work or service of trans-
porting goods, commodities and passengers by the employees speci-
fied herein and governs the rates of pay, hours of service and
working conditions of all such employees engaged in the operation
of engines and trains, remote control devices used to operate
engines and any other motive power used in performing the work or
services provided by train crews and all work generally recognized
as the work of train crews and performed on the main lines, branch
lines, within yard facilities, or on sidings and industrial tracks,
in any class of service; road, yard, local, freight or passenger
and work trains.
It is understood that the duties and responsibilities of
Engineers shall be the duties and responsibilities directly related
to transporting goods, commodities and passengers by rail. The
duties and responsibilities of Engineers will not be assigned to
others and the duties and responsibilities of other crafts will not
be assigned to Engineers, unless mutually agreed between the
representative of the Carrier and the Brotherhood of Locomotive
Engineers. If a new type of locomotive or motive power is placed
into service, Engineers will be instructed in the operation of the
new type of locomotive power, and will be used to operate it.
It is understood that all Engineers will be licensed properly
in accordance with Federal and applicable State and Provincial laws
and regulations. The Carrier is to ensure that all employees who
are required to be examined or licensed pursuant to Federal, State
and Provincial regulations or statutes shall be so advised and
shall make arrangements for said examinations or licensing that may
be required. No employee shall be allowed to operate equipment or
work in engine service unless they are in compliance with the above
requirements. Any and all fees that may be required by a
governmental agency to obtain or maintain compliance with the
requirements of any Federal, State or Provincial regulations or
statutes applicable to Engineers shall be paid for by the Carrier.
The New York, Susquehanna and Western Railway Corporation
recognizes the General Committee of Adjustment of the Brotherhood
of Locomotive Engineers, the designated representative of which is
signatory hereto, as the bargaining representative of all Engineers
employed by The New York, Susquehanna and Western Railway
Corporation.
"Duly Accredited Representative" means the General Chairman of
the Brotherhood of Locomotive Engineers having jurisdiction, Local
Chairman, or any elected or appointed officer of the Brotherhood of
Locomotive Engineers designated by the General Chairman.
"Designated Carrier Official" means a person or persons
45
<PAGE>
designated by the President of The New York, Susquehanna and
Western Railway Corporation.
The General Committee of Adjustment of the Brotherhood of
Locomotive Engineers shall represent all Locomotive Engineers in
the making of agreements concerning rates of pay, rules and working
conditions and interpretations thereof.
All controversies affecting Locomotive Engineers shall be
handled in accordance with the interpretations of this agreement as
agreed upon between the Committee of the Brotherhood of Locomotive
Engineers and The New York, Susquehanna and Western Railway
Corporation.
ARTICLE I
WAGES
Section 1.
(A) Road Crew assignments are 1/1/93- 1/1/94- 1/1/95- 1/1/96-
between Binghamton, NY 12/31/94 12/31/95 12/31/95 12/31/96
and Jersey City, NJ
Road Crew Rates per trip. $179.00 $188.00 $199.00 $211.00
After twelve (12) hours they will be paid at the current hourly
rate till they are finished with their tour of duty.
If road crews, after arrival at final terminal, are required to
handle cars other than their own train or operate their train
beyond the terminal, they will be paid for such time worked at
the current hourly rate in addition to their trip rate.
(B) HOURLY RATES OF PAY:
HOURLY HOURLY HOURLY HOURLY
JOB SERVICE RATE RATE RATE RATE
TITLE REQUIREMENTS 1/1/93- 1/1/94- 1/1/95- 1/1/96-
12/31/93 12/31/93 12/31/95 12/31/96
Locomotive 0-6 months $10.77 $11.31 $11.99 $12.71
Engineer
Trainee I
Locomotive 6 mos.- 1 yr. $13.76 $14.45 $15.32 $16.24
Engineer II
Locomotive over 1 yr. $14.90 $15.65 $16.59 $17.59
Engineer III
The Corporation is not prohibited from advancing engineers
to any category prior to the expiration of the service require-
ments.
46
<PAGE>
Section 2. The collectively bargained for hourly wage in-
creases set forth in Section 1 are retroactive to January 1,
1993.
Section 3. (a) Employees shall be paid every Monday.
(b) Should the payday fall on a legal holiday, the
employee shall be paid on the following work day.
(c) Voucher for pay shortages equal to one (1)
day or more shall be paid by voucher upon request.
Section 4. Copy of Agreement - The New York, Susquehanna and
Western Railway Corporation, at it's expense, shall furnish each
employee covered by this agreement, one copy of this agreement,
in the booklet form, including any revisions thereto.
ARTICLE II
ON-OFF DUTY POINTS - HOME TERMINALS
Section 1. "Home Terminal Engineers" shall be those engineers
holding regular assignments pursuant to the procedures set forth
on Exhibit A attached hereto. It is agreed than on the Northern
Division, Binghamton is recognized as a home terminal for no less
than five (5) engineers and Utica is recognized as a home termi-
nal for no less than two (2) engineers. It is agreed that on the
Southern Division there will be no fewer than six (6) Home Termi-
nal Engineers. It is agreed if there is a decline in business on
the Northern Division and the Southern Division the number of
Home Terminal Engineers will have to be adjusted accordingly by
the Carrier's Vice President - Operations.
Section 2. A Northern Division Engineer shall not be forced
to report to duty at the other Division Terminal ("Foreign Termi-
nal") unless no other engineers assigned to the Division are
available for that assignment and then only in accordance with
the following:
i) In the event a Home Terminal Engineer is forced to re-
port for an assignment at the foreign terminal, he shall receive
the equivalent of two (2) hours wages for doing so along with car
allowance at the rate of twenty-two cents (.22 cents) per mile to
and from the away from home terminal, and shall end that
assignment only when he returns to his home terminal.
(ii) In the event an Extra Board Engineer is forced to re-
port for an assignment at the foreign terminal, he shall receive
pay at the hourly rate for deadheading to, but not from, the
foreign terminal together with a car allowance at the rate of
twenty-two cents (.22) per mile for the actual increase in
commuting distance from his home to and from the foreign terminal
47
<PAGE>
over the commuting distance from his home to and from his home
terminal.
iii) An Engineer may not elect to decline an assignment
which has as its effect the forcing of an Engineer from the
foreign terminal to accept that assignment.
Section 3. Extra Board:
(A) To be established and recognized as:
1. Ridgefield Park, New Jersey - Southern Division
2. Binghamton, New York - Northern Division
3. Utica, New York - Northern Division
(B) The extra board will be governed and regulated by the
Carrier's Vice President - Operations and the General Chairman of
the Brotherhood of Locomotive Engineers. In so doing, it will be
the goal to expand the extra board when extra board engineers are
consistently working more than sixty (60) hours per week and to
contract the extra board when extra board engineers are consist-
ently working less than thirty-six (36) hours per week.
Section 4. On-Off Duty Points:
An engineer's on and off duty point will be the same, except
in the case of the Northern Division when an Engineer has been
forced to an assignment at the Foreign Terminal and in the case
of engineers operating trains via Port Jervis. It is agreed that
Ridgefield Park, Butler and Hawthorne on the Southern Division,
and Binghamton and Utica on the Northern Division are recognized
as on-duty points. The designation of additional on-duty points
is negotiable when mutually agreed upon. The Company shall pro-
vide wash rooms, rest rooms, locker facilities and lighted park-
ing facilities at on-duty points. This section shall not apply
to work trains.
ARTICLE III
SENIORITY
Section 1.
(A) The right to preference of work by locomotive engineers
possessing necessary fitness and ability will be governed by the
procedures set forth on Exhibit A attached hereto.
(B) Seniority of engineers will date from the time they
enter the service of the Corporation except:
1. Seniority of the former New York, Susquehanna and
Western Railroad Company employees shall date from date of hire
48
<PAGE>
with that Company and the roster shall indicate primary (prior)
rights to perform specific duties.
2. Seniority of Northern Division employees, who pre-
viously held seniority on the Delaware Otsego Corporation roster,
shall date from their date of hire on that roster.
(C) Engineers on the Southern Division roster will be
placed, in seniority order, on the bottom of the Northern Divi-
sion roster. Engineers on the Northern Division roster will be
placed, in seniority order, on the bottom of the Southern Divi-
sion roster.
(D) Employees hired in the Transportation Department on and
after July 1, 1982 will be trained for the purpose of establish-
ing eligibility as locomotive engineer and will hold no other
primary rights. Such employees will be subject to the probation-
ary provisions of this Article and upon establishing eligibility,
as provided in Article III, will rank on the roster from the date
of hire. This being equal, they will be ranked by lottery,
jointly supervised by the Corporation and Brotherhood representa-
tives.
(E) A locomotive engineer's roster, indicating the seniori-
ty ranking and other pertinent data, shall be issued once each
year and posted on January 1st on bulletin boards accessible to
the employees. If not challenged within sixty (60) days after
such posting, no protest against the seniority dates on the
roster will thereafter be recognized.
(F) When from any cause it becomes necessary to furlough
engineers from the working list, such reductions shall be made in
reverse order of seniority. When engineers are furloughed due to
reduction in force, they will retain and accumulate all seniority
rights, provided they return to service within seven (7) days
after being served with notice, by personal visit, telegram or
certified letter to the last address furnished the Corporation,
that their service is requested.
(G) In the event that forced assignment of engineers should
become necessary, such forcing shall be made in reverse order of
seniority from engineers assigned to the division.
Section 2. The first four (4) calendar months from the date
of their hiring, shall be a probationary period for new em-
ployees. The New York, Susquehanna and Western Railway Corpora-
tion may discharge such employees at any time during the proba-
tionary period and the discharge shall not be subject to the
grievance and arbitration provisions of this Agreement or be
questioned by the employee's representative.
49
<PAGE>
Section 3. The Carrier will provide the General Chairman with
a list of employees who are hired or terminated, their home ad-
dresses, and Social Security numbers if available, otherwise the
employee's identification numbers. The data will be supplied
within thirty (30) days after the month in which the employee is
hired or terminated.
Section 4. No employee shall be added to the seniority roster
after January 1, 1994 until such employee has successfully com-
pleted four (4) calendar months in transportation service as an
engineer under this agreement and has complied with the provi-
sions of Article V.
Section 5. Resignation. Employees may resign at any time at
their discretion. Such resignation shall be in writing and sub-
mitted to the Vice President - Operations, with a copy to the
General Chairman. Oral resignations shall not be accepted.
THE BALANCE OF THIS PAGE LEFT INTENTIONALLY BLANK
50
<PAGE>
NEW YORK SUSQUEHANNA AND WESTERN RAILWAY
LOCOMOTIVE ENGINEER SENIORITY ROSTER
SOUTHERN DIVISION
========================================
(AS OF JANUARY 1, 1994)
SENIORITY HOME EXTRA BD LEAVE OF PRIOR
NAME DATE TERMINAL EMPLOYEE ABSENCE RIGHTS
- ------------------------------------------------------------------------
1. A. VITALE 10/08/56 LITTLE FERRY T
2. R. ASCHOFF 02/28/74 LITTLE FERRY M
3. A.J. FRANKOVIC 06/03/74 LITTLE FERRY M
4. S.J. WHRITENOUR 11/19/74 LITTLE FERRY M
5. W.G. RICH 06/01/66 X
6. G. ROBINSON 04/01/76 X
7. G.K. SIKKEMA 04/17/82 UTICA
8. A.G. WHITEHILL 04/20/82 BINGHAMTON
9. J.A WHITE 04/22/82 BINGHAMTON
10. H.C. GREENBLATT 05/05/82 BINGHAMTON
11. J.M. DILLON 05/17/82 UTICA
12. M.S. WILBER 09/16/83 BINGHAMTON
13. S.L. BALDWIN 07/12/84 BINGHAMTON
14. R.E COLUCCI 04/29/85 X
15. T.J. CHARETTE 09/06/85 X
16. H.A. MELENDEZ 10/31/85 LITTLE FERRY
17. B.L. WALKER 11/08/85 X
18. J.R. FERRELL 08/12/86 X
19. R.J. UPDIKE 10/27/86 X
20. W.P. DONAHUE 06/01/87 LITTLE FERRY
21. K. VANDENHOUTEN 08/24/87 X
22. R.E WYMAN 10/08/87 X
23. B.F. VANDERHOFF 09/13/88 X
24. R.E TRAVIS 10/03/88 X
25. R.K. WICKES 10/10/88 X
26. R.C AVERY 06/26/89 X
27. J.J. JOHNSTON 07/12/89 X
28. S.R. ZABKO 04/23/90 X
29. R.E. ZABKO 08/01/90 X
30. D.D. WELAND 08/07/90 X
31. C.M. DORN 11/27/90 X
32. M. HOLOWINKA 05/17/93 X
33. T. WHITEHILL 06/15/93 X
34. W. COOPER 07/12/93 X
35. K. QUINN 09/03/93 X
36. W.O. BLOOMFIELD 09/04/93 X
37. K.A. BECK 09/05/93 X
38. R.E. GRANEY 09/06/93 X
========================================================================
TO BE POSTED AS PER ARTICLE III PARAGRAPH (E) ON THE BULLETIN BOARDS
51
<PAGE>
NEW YORK SUSQUEHANNA AND WESTERN RAILWAY
LOCOMOTIVE ENGINEER SENIORITY ROSTER
NORTHERN DIVISION
========================================
(AS OF JANUARY 1, 1994)
SENIORITY HOME EXTRA BD LEAVE OF PRIOR
NAME DATE TERMINAL EMPLOYEE ABSENCE RIGHTS
- ------------------------------------------------------------------------
1. W.G. RICH 06/01/66 X
2. G. ROBINSON 04/01/76 X
3. G.K. SIKKEMA 04/17/82 UTICA
4. A.G. WHITEHILL 04/20/82 BINGHAMTON
5. J.A WHITE 04/22/82 BINGHAMTON
6. H.C. GREENBLATT 05/05/82 BINGHAMTON
7. J.M. DILLON 05/17/82 UTICA
8. A. VITALE 10/08/56 LITTLE FERRY T
9. R. ASCHOFF 02/28/74 LITTLE FERRY M
10. A.J. FRANKOVIC 06/03/74 LITTLE FERRY M
11. S.J WHRITENOUR 11/19/74 LITTLE FERRY M
12. M.S. WILBER 09/16/83 BINGHAMTON
13. S.L. BALDWIN 07/12/84 BINGHAMTON
14. R.E COLUCCI 04/29/85 X
15. T.J. CHARETTE 09/06/85 X
16. H.A. MELENDEZ 10/31/85 LITTLE FERRY
17. B.L. WALKER 11/08/85 X
18. J.R. FERRELL 08/12/86 X
19. R.J. UPDIKE 10/27/86 X
20. W.P. DONAHUE 06/01/87 LITTLE FERRY
21. K. VANDENHOUTEN 08/24/87 X
22. R.E WYMAN 10/08/87 X
23. B.F. VANDERHOFF 09/13/88 X
24. R.E TRAVIS 10/03/88 X
25. R.K. WICKES 10/10/88 X
26. R.C AVERY 06/26/89 X
27. J.J. JOHNSTON 07/12/89 X
28. S.R. ZABKO 04/23/90 UTICA X
29. R.E. ZABKO 08/01/90 X
30. D.D. WELAND 08/07/90 X
31. C.M. DORN 11/27/90 X
32. M. HOLOWINKA 05/17/93 X
33. T. WHITEHILL 06/15/93 X
34 W. COOPER 07/12/93 X
35. K. QUINN 09/03/93 X
36. W.O. BLOOMFIELD 09/04/93 X
37. K.A. BECK 09/05/93 X
38. R.E. GRANEY 09/06/93 X
========================================================================
TO BE POSTED AS PER ARTICLE III PARAGRAPH (E) ON THE BULLETIN BOARDS
52
<PAGE>
ARTICLE IV
GUARANTEED WORK WEEK
Unless furloughed by written notification, every Home Termi-
nal Engineer will be guaranteed a minimum of forty hours pay dur-
ing a work week. For purposes of this Article, the work week
will be Monday through Sunday.
This Article does not apply to employees on the Extra Board.
ARTICLE V
EXAMINATION AND INSTRUCTION CLASSES
Section 1. Engineers entering service will be required to
pass a medical examination, hazardous materials training, a book
of rules class (NORAC) every year, and such other training neces-
sary to meet governmental requirements. Engineers will be re-
quired to attend such other training deemed necessary by the Car-
rier to safely and efficiently carry out their duties as en-
gineers. When they pass a satisfactory examination, they will be
furnished with a certificate showing the same.
Compensation of eight hours pay at the current
rate will be allowed for attending training classes and examina-
tions. If the employee fails and has to be reexamined, compensa-
tion will be paid for the subsequent examination which he pass-
es, except that there will be no compensation for subsequent ex-
aminations prompted by violation of Rule G. Mileage to training
and examinations at the Carrier's current rate shall be paid only
if such is held at a location more than twenty (20) miles from
the employee's on-off duty point.
Section 2. Except as required by law or government regula-
tion, reasonable advance notice of all examinations will be
given.
Section 3. Engineers in the service of this Carrier will be
examined by a Carrier physician or other appropriate professional
whenever in the opinion of the Carrier there is reason to believe
that their physical condition, color perception, acuteness of
vision or hearing has become impaired to the extent that might
render their service unsafe.
Section 4. There shall be no agreements for restricted or
special duty unless agreed to in writing by the Carrier's Vice
President - Operations and the General Chairman.
53
<PAGE>
ARTICLE VI
BASIS OF DAY'S WORK
Section 1. Regular crew assignments will have the same work-
ing hours for all members of the crew. So far as practicable,
assignments shall be scheduled for eight (8) hours work, and
eight (8) hours or less shall constitute a day's work.
Section 2. Time for which Engineers will be paid shall begin
at the time they are required to report for duty and end at the
time they are relieved from the performance of all duties at the
designated point with a minimum of eight (8) hours pay.
Section 3. When Engineers are required to report for duty,
they shall be paid for the total time on duty or held for duty
with a minimum of eight (8) hours pay except as provided herein.
Section 4. If an assignment is annulled, the engineers who
are available and scheduled to report for an assignment will be
paid a minimum of four (4) hours plus mileage to and from the
location. This provision will apply to an assignment on either
Division only after all crew members have been called and the
full crew is assigned and less than two (2) hours notice of an-
nulment is provided.
Section 5. An engineer who marks off sick after reporting to
work shall be paid for time on duty.
Section 6. It is agreed that the local and general committee-
men required to attend labor conferences at the request of the
carrier will be allowed eight (8) hours pay.
ARTICLE VII
MEAL PERIOD AND CAR ALLOWANCE
Section 1. Transportation crews, other than Road Crews, will
be allowed sufficient time for a meal period, not to exceed thir-
ty (30) minutes, without deductions in pay within a reasonable
time after going on duty, and in no event will be required to
work less than four (4) hours nor longer than six (6) hours with-
out being afforded time for a meal period. In the event a meal
period is denied within this time limit after request, the crew
will be paid one (1) hour at the current hourly rate, and if a
crew is not allowed a meal period within that days duty, they
will be paid an additional one (1) hour at the current hourly
rate for a total of two (2) extra hours pay. Crews called to
relieve Road Crews shall be allowed either a meal period or the
meal en-route provided in Section 2, as the service requires.
Section 2. Engineers held away from their home terminal for
assignment shall be furnished suitable accommodations and sixteen
dollars ($16.00) per day meal allowance plus eight dollars
($8.00) meal en-route on assignment. Engineers may be held away
54
<PAGE>
from home terminals for up to sixteen (16) hours without penalty.
After this period engineers shall be paid their hourly rate for
up to eight (8) hours terminal time. After four (4) hours termi-
nal time, a second meal allowance of $16.00 will be paid. Holding
engineers thereafter shall be subject to the same pattern of six-
teen (16) hours without penalty/eight (8) hours with pay and so
on.
Section 3. When engineers are authorized to use their person-
al automobile on Company business, they will be allowed twenty
two (.22) cents per mile (or the rate paid to other Carrier em-
ployees, whichever is greater) for such use in addition to any
other compensation to which they may be entitled.
Section 4. Time permitting, if a road crew is to be deadhead-
ed from an away from home terminal back to their home terminal,
they will be allowed to eat a meal without penalty.
ARTICLE VIII
BEREAVEMENT
Employees will be excused from work due to a death
in their immediate family (spouse, son, daughter, mother, father,
brother, sister, mother-in-law, father-in-law, and grandparents),
and will be paid eight (8) hours pay for each work day lost up to
a total of three (3) days. No pay will be given for time not
worked before the date of death or after the day of the funeral.
Bereavement pay will not be allowed to employees absent from work
because of furlough, leave of absence or actual suspension and
will not duplicate payments of days the employee is compensated
for holidays or vacations. Employees will be allowed to resched-
ule vacations in the event bereavement days overlap vacation
days.
ARTICLE IX
HOLIDAYS
Section 1. There will be ten (10) paid holidays during each
year as follows:
New Year's Eve Labor Day
New Year's Day Thanksgiving Day
Good Friday Day after Thanksgiving
Memorial Day Day before Christmas
Fourth of July Christmas Day
To be eligible for holiday pay, an Extra-board
Engineer must be available for work the day before, the day of
and the day after the holiday. To be eligible for holiday pay,
a Home Terminal Engineer must be available the day before and the
day after the holiday, unless such day is a regular day off.
55
<PAGE>
Section 2. An employee not working on a holiday will be al-
lowed eight (8) hours at the hourly rate.
Section 3. When an employee works a tour of duty which com-
mences on a holiday, the holiday allowance provided in Section 2
will be increased to equal the time actually worked. Such allow-
ance will be in addition to compensation for the time worked.
Section 4. When a holiday falls during an employee's vacation
period, such holiday shall not be counted as a vacation day but
such vacation day will be given to the employee thereafter to be
taken pursuant to Article X.
Section 5. Holiday pay will be paid to an Extra-board En-
gineers who has been compensated for 100 hours during the 30 day
period prior to the holiday, or who works on the holiday.
ARTICLE X
VACATION
Section 1. Each employee who has been employed by the Corpo-
ration for one (1) year or more and who worked for a minimum of
1,000 hours during the previous calendar year, shall be entitled
to one (1) week's vacation allowance; each employee who has been
so employed for two (2) years shall be entitled to two (2) weeks
vacation allowance; each employee who has been so employed for
nine (9) years shall receive three (3) weeks vacation allowance;
each employee who has been so employed for fifteen (15) years
shall receive four (4) weeks vacation allowance; each employee
who has been so employed for twenty years or more shall receive
five (5) weeks vacation allowance. All such vacations shall be
taken as hereinafter provided. It is understood and agreed that
employees will establish vacation qualifications based on the
date of hire on the seniority roster or date of hire by the Cor-
poration, whichever is earlier.
Section 2. Vacations should normally be taken in units of one
(1) or more weeks but where service requirements permit, an indi-
vidual employee may be permitted by the supervising officer to
take a vacation period of less than one (1) week. A full work
day is the minimum vacation period to be taken.
Section 3. An employee's weekly vacation allowance will be
forty (40) times the straight time hourly rate of pay of the last
service performed prior to taking vacation or 1/52 per week of
last year's gross wages, whichever is greater.
Section 4. Seniority in employee selection will be the basis
for the establishment of vacation schedules. Vacation schedules
will be established each year as follows:
(a) On or before February 1, the Northern Division and
Southern Division written blank vacation schedules will be
56
<PAGE>
provided by the Carrier to the General Chairman.
(b) On or before February 7, the three most senior en-
gineers on each roster will chose their vacation time for the
ensuing year.
(c) On or before February 14, the next three most sen-
ior engineers on each roster will chose their vacation time for
the ensuing year.
(d) The procedure described in subsections (b) and (c)
shall continue in periods of seven (7) days and three (3)
engineers until the bottom of the roster is reached.
(e) Any engineer who fails to designate his vacation
during the seven days provided in the procedure described above
will be allowed to designate his vacation after the bottom of the
roster is reached, in seniority order with any other engineer who
failed to designate his vacation in the procedure described
above.
Section 5. Vacations will be taken between January 1st and
December 31st. However, it is recognized that the exigencies of
the service may create practical difficulties in providing vaca-
tions in all instances. Due regard, consistent with requirements
of the service, shall be given to the preference of the employee
in his seniority order when granting vacations. Representatives
of the Corporation and of the employees will cooperate in arrang-
ing vacation periods, administering vacations and releasing em-
ployees when requirements of the service will permit.
Section 6. Vacations shall not be accumulated or carried over
from one year to another. In cases where vacations have not been
taken due to sickness, suspension or carrier request, vacation
time will be rescheduled or paid for within that calendar year.
Section 7. In the event that an employee takes all or part of
the earned vacation, prior to reaching the anniversary date in
the anniversary year, the amount of vacation allowance will be
the same as if the anniversary date has been reached.
Section 8. The vacation provided for in this Article shall be
considered to have been earned when the employee has qualified
under Section 1 hereof. If an employee's employment status is
terminated for any reason except voluntary resignation without
two (2) weeks notice, the full vacation pay earned, up to the
time of leaving the service, shall be granted upon request. If
an employee entitled to vacation or vacation pay shall die, the
vacation pay earned and not received shall be paid according to
law.
Section 9. Employees who take vacation in a weekly block
shall be considered to be on vacation (Monday - Sunday) but will
be permitted to mark up for work on Saturday and Sunday if they
so desire.
Section 10. The parties hereto having in mind conditions which
57
<PAGE>
may exist or may arise in making provisions for vacation with
pay, agree that additional understandings may be entered into to
implement the purpose of this Agreement, provided that such un-
derstandings shall not be inconsistent with this Article.
ARTICLE XI
JURY DUTY
When an employee is summoned for jury duty and is required to
lose time from work as a result thereof, he shall be paid for
eight (8) hours pay at the current hourly rate for each day lost,
subject to the following qualification requirements and limita-
tions:
(A) The employee must furnish the Corporation with a statement
from the Court of jury allowance paid and the days on which jury
duty was performed, before the employee can be reimbursed.
(B) The number of days for which jury duty pay shall be paid is
limited to a maximum of thirty (30) days in any calendar year.
(C) No jury duty pay will be allowed for any day on which the
employee is on vacation or entitled to holiday pay, but employees
shall have the right to rearrange vacation so as not to coincide
with jury duty.
(D) Employees will be allowed eight (8) hours rest prior to and
following completion of jury duty.
(E) Employees will give prompt notification to the Carrier of
being called for jury duty.
ARTICLE XII
LEAVE OF ABSENCE
Section 1. Employees may, upon written request to their em-
ploying officer, be granted leave of absence for a period or pe-
riods not to exceed six (6) months when such leaves or extensions
are agreed to by the Carrier and the General Chairman of the
Brotherhood of Locomotive Engineers.
Section 2. In the event of absence occasioned by illness or
injury, employees will be granted leave of absence automatically
upon presentation of written request accompanied by appropriate
substantiating medical evidence. Such automatic leaves will not
be for a period of more than three (3) months and extensions
thereof will require a new application and further substantiating
medical evidence. In the event the employing officer and/or the
58
<PAGE>
General Chairman are not satisfied that the illness or injury is
bonafide, additional evidence may be required to establish same
to their satisfaction.
Section 3. Employees may return to work prior to the expira-
tion of an authorized leave of absence period when there is no
other prohibition.
Section 4. Employees accepting official positions with the
Carrier or the Brotherhood of Locomotive Engineers will retain
their seniority while holding such positions.
Section 5. Employees elected or appointed to public office
may be granted a leave of absence for the duration of their term
of office, if such office is related to railroad work.
Section 6. Employees in military service will be granted
leave of absence in compliance with the law. Employees will be
allowed eight (8) hours rest following completion of military
tour of duty.
Section 7. Employees who do not return to service at the ex-
piration of an authorized leave of absence period and have not
submitted a written request for an extension thereof, will be
notified by the Company that they are absent without permission
and such notice will instruct them to return to service or to
satisfactorily account for their absence within fifteen (15) days
or forfeit their seniority. A copy of the notice to the absent
employee will be furnished to the General Chairman of the Brother
hood of Locomotive Engineers.
Section 8. It is understood that the " leave of absence " re-
ferred to in this agreement is intended to cover a period of ab-
sence of thirty (30) days or more.
Section 9. The General Chairman will be furnished with a copy
of each leave of absence granted to the employees. Employees
currently on leave of absence will not be subject to this Agree-
ment until they return.
ARTICLE XIII
TIME LIMIT ON CLAIMS
Section 1. A claim for compensation alleged to be due may be
made only by a claimant or, on his behalf, by a duly accredited
representative. Not later than fourteen (14) days from the date
of the occurrence on which the claim is based, a claimant or his
duly accredited representative must submit two time slips alleg-
ing the claim to the officer of the Corporation designated to
receive time slips. The representative of the Corporation who
receives the time slips from the claimant or from his duly ac-
credited representative must acknowledge receipt of the time
slips by signing and dating them, and returning the duplicate
59
<PAGE>
copy to the claimant or his duly accredited representative. If
not presented in the manner outlined in this paragraph, a claim
shall not be entertained or allowed, but improper handling of one
claim shall not invalidate other claims of a like or similar na-
ture.
Section 2. If a claimant is absent because of sickness or
temporary disability, the fourteen (14) day time limit shall be
extended by the number of the days the claimant is absent.
Section 3. To file a claim, a claimant or his duly accredited
representative shall be required to furnish sufficient informa-
tion on the time slip to identify the basis of the claim, such
as:
1. Name, Occupation, Employee Number, Division.
2. Train symbol or job number and engine number(s).
3. On and off duty time.
4. Date and time of day work performed.
5. Location and details of work performed for which claim
is filed.
6. Upon whose orders work was performed.
7. Description of instructions issued to have such work
performed.
8. Claim being made, rule if known, and reason supporting
claim.
Section 4. When a claim for compensation alleged to be due is
not allowed, or should payment be made for less than the full
amount claimed, the claimant shall be informed of the decision
and reasons for it, in writing, within fourteen (14) days from
the date that claim is received.
When the claimant is not so notified, the claim
shall be allowed, but such payment shall not validate any other
such claims, nor shall such payment establish any precedent.
Section 5. A claim for compensation denied in accordance with
the foregoing Section 4 shall be invalid unless within sixty (60)
days after the date of the initial denial of the claim, the clai-
mant's Duly Accredited Representative appeals it in writing in
the following form to the Vice President - Operations:
1.Subject: (Set forth nature of claim, dates, name of
claimant.)
2.Employee's Statement of Facts:
3.Position of Employees:
Note: Claims of a continuing nature shall be consid-
ered properly appealed when listed and identified with the ini-
tial claim by the Duly Accredited Representative with the Vice
President - Operations.
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Section 6. The Vice President - Operations shall arrange to
meet on a regular basis with the Duly Accredited Representative
who requests to discuss appeals which have been received by the
Vice President - Operations at least ten (10) days in advance of
a meeting. In the written appeal, the Duly Accredited Represen-
tative should either request to discuss the appeals at the regu-
lar meeting with the Vice President - Operations or waive the
discussion and request a written response. The Vice President -
Operations shall render a decision in writing to the Duly Ac-
credited Representative within sixty (60) days of the date the
Vice President - Operations receives the appeal requesting the
written decision or within sixty (60) days of the date the appeal
was discussed at a meeting. If the claim is denied, the decision
shall be rendered in the following form:
1. Corporation's Statement of Facts:
2. Position of Corporation:
When a claim is denied and the Duly Accredited Representative is
not notified within the time limit, the claim shall be allowed
but such payment shall not validate any other such claim nor
shall such payment establish any precedent. Appeals received
less than ten (10) days in advance of a meeting shall be sched-
uled for discussion at the next meeting.
Section 7. A claim for compensation denied in accordance with
the foregoing Section 6 shall be invalid unless within ninety
(90) days of the date of the denial by the Vice President - Oper-
ations, the General Chairman appeals it in writing to the highest
officer of the Corporation designated to handle claims. The
highest officer of the Corporation designated to handle claims
shall meet on a regular basis with the General Chairman upon re-
quest to discuss appeals. In the written appeals the General
Chairman should either request to discuss the appeals at the reg-
ular meeting or waive the discussion and request a written re-
sponse. Neither party shall be limited by the positions taken
during prior handling. The highest officer of the Corporation
designated to handle claims shall render a decision in writing
within ninety (90) days of the date he receives the appeal or
within (90) days after discussing the claim at a meeting. When
the General Chairman is not so notified, claim shall be allowed
but such payment shall not validate any other such claim or es-
tablish any precedent.
Section 8. The decision of the highest officer of the Corpo-
ration designated to handle claims shall be final and binding
unless within six (6) months after the date of the decision, the
officer is notified in writing that his decision is not accepted.
In the event of such notification, the claim shall become invalid
unless, within one year from the date of the Corporation's deci-
sion, the claims are disposed of on the property or submitted to
a tribunal having jurisdiction pursuant to law or agreement, un-
less the parties mutually agree to other proceedings for final
61
<PAGE>
disposition of said claims.
Section 9. The time limit provisions in this article may be
extended at any level of handling in any particular case by mu-
tual consent of the duly authorized officer of the Corporation
and representatives of the Organization.
Section 10. The time limits set forth herein do not apply in
discipline cases.
ARTICLE XIV
DISCIPLINE AND INVESTIGATION
Section 1. Except as provided in Section 2, no engineer shall
be disciplined, suspended or dismissed from the service until a
fair and impartial formal investigation has been conducted by an
authorized Company representative.
Section 2.
A. Except when a serious act or occurrence is involved, an
engineer shall not be held out of service for disciplinary mat-
ters before a formal investigation is conducted. A serious oc-
currence is defined as: Rule "G", Insubordination, Gross Negli-
gence, Theft.
B. If an engineer is held out of service before a formal
investigation for other than serious act or occurrence, he shall
be paid what he would have earned on his assignment had he not
been held out of service beginning with the day he is taken out
of service and ending with the date the decision is rendered or
he is returned to service, excluding the day of the formal inves-
tigation whether or not he is disciplined.
C. Formal investigations, except those involving a serious
act or occurrence, may be dispensed with when the engineer in-
volved and the Duly Accredited Representative and an authorized
officer of the Corporation, through informal handling, are able
to resolve the matter to their mutual interest. A request for
informal handling must be made at least twenty four (24) hours
before the formal investigation is scheduled to begin. No formal
transcript, statement or recording shall be taken at the informal
handling. When a case is handled informally and the matter of
responsibility and discipline to be assessed, if any, is re-
solved, no formal investigation shall be required.
A written notice of the discipline assessed and the
reason therefore shall be issued to the engineer responsible,
with a copy to the Duly Accredited Representative if he partici-
pated in the informal handling, at the conclusion of the informal
handling. Discipline matters resolved in accordance with this
62
<PAGE>
paragraph are final and binding.
Section 3. At least seventy two (72) hours in advance, the
employee will be notified by the Corporation, in writing, of the
time and location of the hearing. In the event the employee is
off duty by reason of sickness, leave of absence or vacation, the
time limits referred to herein shall begin from the date the em-
ployee returns to duty.
A. An engineer directed to attend a formal investigation
to determine his responsibility, if any, in connection with an
act or occurrence shall be notified in writing within fourteen
(14) days from the date the Corporation becomes aware of such act
or occurrence. Notice shall be deemed given when deposited with
the U.S. Postal service, postage prepaid, certified mail return
receipt requested and addressed to the engineer.
That notice shall contain:
(i) The time, date and location where the formal
investigation shall be held.
(ii) The date, and approximate time and location
of the act or occurrence.
(iii) A description of the act or occurrence which
is the subject of the investigation and the rules which may be
involved.
(iv) A statement that he may be represented by his
duly accredited representative.
(v) The identity of the witness directed by the
Corporation to attend.
B. When a letter of complaint is the basis for requiring
him to attend the formal investigation, the engineer shall be
furnished with a copy of the written complaint together with the
written notice for him to attend the investigation.
Section 4.
A. The investigation must be scheduled to begin within
seven (7) days from the date the engineer received notice of the
investigation.
B. An engineer who may be subject to discipline shall have
the right to have present desired witnesses who have knowledge of
the act or occurrence to present testimony, and the Corporation
shall order employee witness(s) to be in attendance.
C. The time limit is subject to the availability of the
principal(s) involved and the witness(s) to attend the formal
investigation and may, by written notice to the engineer in-
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volved, be extended by the equivalent amount of time the princi-
pal(s) involved or the necessary witness(s) are off duty due to
sickness, temporary disability, discipline, leave of absence or
vacation. When an engineer is being held out of service for a
serious act or occurrence pending the investigation and other
principal(s) or witness(s) are not available for the reasons cit-
ed, he may request commencement of the investigation. If either
the engineer or the Corporation Officer is of the opinion that
the testimony of the unavailable principal(s) or witness(s) is
necessary for the final determination of facts and discipline has
been assessed against the engineer as a result of the investiga-
tion, such discipline shall be reviewed when the testimony of the
missing principal(s) or witness(s) is available.
D. When a formal investigation is not scheduled to begin
within the time set forth in this article, no discipline shall be
assessed against the engineer.
E. An engineer who may be subject to discipline and his
Duly Accredited Representative shall have the right to be present
during the entire investigation. Witnesses may be examined sepa-
rately but those whose testimony conflicts shall be brought to-
gether.
Section 5. When an engineer is assessed discipline, a true
copy of the investigation record shall be given to the engineer
and to his duly accredited representative with the notice of dis-
cipline.
Section 6.
A. If discipline is to be imposed following a formal in-
vestigation, the engineer to be disciplined shall be given a
written notice of the decision within fourteen (14) days of the
date the formal investigation is completed, and any discipline
shall become effective within fifteen (15) days of the notice of
decision on not less than three (3) days notice, except in cases
involving major violations of the operating rules where the en-
gineer is already being held out of service. However, multiple
disciplinary sanctions will be served consecutively.
B. When an engineer is required to perform service during
a period of suspension, the balance of said suspension shall be
eliminated.
Section 7. If the decision rendered by the Vice
President-Operations is to be appealed, the General Chairman
must, within sixty (60) days after the date the decision is
rendered by the Vice President - Operations, make an appeal, in
writing, to the highest appeals officer of the Corporation
requesting either that he be given a written response or that the
case be held in abeyance pending discussion in conference with
the highest appeals officer of the Corporation. When a written
response is requested, the highest appeals officer of the
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Corporation shall give written notification of his decision to
the General Chairman within sixty (60) days after the date of his
receipt of the appeal. When a request is made for the case to
be held in abeyance pending discussion in conference, the
conference shall be arranged within sixty (60) days after the
highest officer of the Corporation receives the request for the
conference. The highest appeals officer of the Corporation shall
give written notification of his decision to the General Chairman
within sixty (60) days after the date of the conference.
Section 8. The decision of the highest appeals officer of the
Corporation shall be final and binding unless within sixty (60)
days after the date of the written decision, that officer is no-
tified in writing his decision is not accepted. In the event of
such notification, the decision on a case involving other than a
dismissal shall be final and binding unless the case is submitted
to tribunal having jurisdiction pursuant to law within one (1)
year computed from the date the decision was rendered.
Section 9. Expedited Procedure for Handling Dismissal Cases:
A. When an engineer is dismissed, his case may be given
expedited handling by his General Chairman to a Special Board of
Adjustment, which shall meet in Cooperstown, New York or other
convenient locations as may be agreed by the parties which will
be composed of three (3) members:
(i) A representative of the Brotherhood of Locomotive
Engineers.
(ii) The highest appeals officer of the Corporation or
his designated representative.
(iii)A neutral member selected by the parties.
In the event the parties are unable to agree upon a
neutral member, they shall request the National Mediation Board
to appoint a neutral. Such Special Board shall be established
pursuant to Public Law 89-459 89th Congress, H. R. 706 June 20,
1966, within thirty (30) days of the effective date of this
agreement.
B. Before invoking the services of the Special Board of
Adjustment, the General Chairman must, within thirty (30) days
after the notice of dismissal, appeal the case in writing direct-
ly to the highest appeals officer of the Corporation.
C. In the written appeal, the General Chairman should
either request a conference or waive the conference and request
a written decision. When a conference is requested, a meeting
date will be arranged as promptly as possible but not later than
thirty (30) days after the highest appeals officer of the
Corporation receives the request. The highest appeals officer
shall render a decision in writing to the General Chairman as
promptly as possible but no later than fifteen (15) days after
the date the case is discussed in conference. When the written
decision is requested, the highest appeals officer of the
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Corporation shall render a decision in writing to the General
Chairman as promptly as possible but not later than fifteen (15)
days after the date the appeals is received.
D. The decision of the highest appeals officer of the Cor-
poration shall be final and binding unless within thirty (30)
days after the date the General Chairman receives the decision
the General Chairman notifies the highest appeals officer of the
Corporation in wring of his desire to submit the case to the Spe-
cial Appeals Board of Adjustment. After the highest appeals of-
ficer of the Corporation receives such written notification, the
Board shall be convened as promptly as possible but no later than
thirty (30) days after the case is presented before the Board.
E. Claims for time lost shall be waived in any dismissal
case which the Organization does not progress under the Expedited
Procedure for Handling Dismissal Cases. This shall not preclude
the Organization from progressing such a case to a tribunal hav-
ing jurisdiction pursuant to law without regard to any time lim-
its in this article. The progression of the case shall not be
considered a request for leniency.
Section 10.
A. Time limits provided for in this article may be extend-
ed or waived by agreement in writing between the applicable of-
ficers of the Corporation and the engineer's Duly Accredited Rep-
resentative.
B. If discipline assessed is not appealed within the time
limits set forth in this article or as extended, the decision
shall be considered final, except as provided in Section 11. If
the decision on appeal is not rendered within the time limits set
forth in this article or as extended, the discipline assessed
shall be expunged.
Section 11. When notification in writing is required, personal
delivery or proof of mailing, certified mail, return receipt re-
quested to the employee's last known address, within the specific
time limit shall be considered proper notification.
ARTICLE XV
SPECIAL BOARD OF ADJUSTMENT BASIC AGREEMENT
Section 1. There shall be established a Special Board of Ad-
justment which shall be known as The New York, Susquehanna and
Western Railway Corporation/Brotherhood of Locomotive Engineers
Special Board of Adjustment, hereafter referred to as the
"Board".
Section 2. Such Board shall have jurisdiction only of claims
and grievances arising out of interpretation or application of
this Agreement. Said claims and grievances shall be only those
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which have been handled on the property under the applicable time
limit rules and have been listed to the Board by either of the
parties. The Board shall not have jurisdiction over disputes
growing out of requests for changes in rates of pay, rules or
working conditions nor have authority to change existing Agree-
ments or establish new rules.
Section 3. The Board shall consist of three (3) members. The
New York, Susquehanna and Western Railway Corporation and the
Brotherhood of Locomotive Engineers shall each appoint one (1)
member. A third member, who shall be Chairman of the Board,
shall be a neutral person, unbiased as between the parties, and
shall be selected as provided in Section 4 hereof. Party members
of the Board may be changed or substituted for, from time to
time, or at any time, by the respective parties designating them.
Section 4. As soon as possible after execution of this Agree-
ment, the party members shall meet for the purpose of selecting
a panel of three (3) neutrals to serve on the Board. If at that
time they are unable to agree upon the panel of neutrals, either
party may within ten (10) days, request the National Mediation
Board to appoint sufficient neutrals to fill out the panel of
three (3). The panel of Neutrals shall, to the extent possible,
be used on a rotating basis to hear disputes presented to the
Board.
Either party may advise the National Mediation
Board of it's desire to replace a neutral from the Panel but not
prior to the neutral being replaced having served a minimum of
two (2) years and not prior to rendering of awards on all issues
and disputes the neutral to be replaced has heard.
Section 5. The compensation and expenses of the carrier mem-
ber shall be borne by the Carrier. The compensation and expenses
of the Brotherhood of Locomotive Engineers shall be borne by the
Brotherhood of Locomotive Engineers. The compensation and ex-
penses of the Neutral Members shall be fixed and paid for by the
National Mediation Board.
Section 6. The Board shall hold hearings on each claim on
grievances submitted to it. Due notice of such hearings shall be
given the parties. At such hearings the parties may be heard in
person, or by other authorized representatives as they may elect.
The fact and agreement of their position with respect to each
case being considered by the Board. The Neutral Member shall
have authority to request the production of such additional data,
oral or written, as it may desire from either party, to be sub-
mitted, if possible, within fifteen (15) days from receipt of
request.
Section 7. The Board must make findings of fact and render an
award on each case submitted to it, within thirty (30) days after
the close of the hearing of each claim. No case may be withdrawn
after hearing on that case has begun, except by consent of both
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parties. Such findings and awards shall be in writing, and cop-
ies shall be forwarded to each of the parties to the dispute.
Such awards shall be final and binding upon the parties to the
dispute and if in favor of the petitioner shall direct other par-
ty to comply therewith, on or before a date named. Each member
of the Board shall have one (1) vote and any two (2) members of
the Board shall be competent to render an award and to make any
decision which the Board is empowered to make by statute or by
this Agreement.
In case a dispute arises involving an interpreta-
tion or application of an award while the Board is in existence
or upon recall within thirty (30) days thereafter, the Board upon
request of either party, shall interpret the Award in light of
the dispute.
Section 8. The Board hereby established shall continue in
existence until the parties agree to its discontinuance. Upon
agreement to discontinue the Board it shall cease to exist, ex-
cept for interpretation of its awards as above provided.
Section 9. In agreeing to the establishment of this Special
Board of Adjustment it is understood and agreed that neither par-
ty hereto is waiving its right, in any of the claims to be sub-
mitted to said Board, to argue that the Board does not have ju-
risdiction because (1) the claim is properly referable to (or
pending before) another tribunal under law or by an agreement,
(2) claim has not been properly progressed under the Railway La-
bor Act and/or applicable time rules, or (3) the claim does not
constitute a "minor" dispute referable to this Special Board.
Section 10. Any time limit set forth in this Agreement may be
extended by agreement of all parties.
ARTICLE XVI
UNION SHOP
Section 1. Subject to the terms and conditions below, an em-
ployee within the class or craft represented by the Brotherhood
of Locomotive Engineers shall, as a condition of continued em-
ployment, acquire and maintain membership in said Brotherhood
within four (4) calendar months following the first day of com-
pensated service or four (4) calendar months following the effec-
tive date of this Agreement, whichever is later. This Article
shall not require such conditions of employment if membership is
not available upon the same terms and conditions as are generally
applicable to other members or if membership is denied or termi-
nated for any reason other than failure of the employee to pay
the periodic dues, initiation fees and assessments (not including
fines and penalties) uniformly required as a condition of ac-
quired or retaining membership.
Section 2. The Brotherhood of Locomotive Engineers Membership
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- - All employees on the active payroll of the New York, Susquehan-
na and Western Railway as of the effective date of this agree-
ment, who are members of the Brotherhood of Locomotive Engineers,
shall maintain their membership in the Brotherhood of Locomotive
Engineers in good standings as a condition of continued employ-
ment. For new hires, the fourth month anniversary following the
beginning of such employment and shall thereafter maintain their
membership in the Brotherhood of Locomotive Engineers in good
standings as a condition of continued employment.
Section 3. All members in active service, including those
holding official positions with the Carrier and those employed
exclusively by the BLE, shall pay such dues and assessments as
may be levied under the By-Laws of the BLE. Active membership
includes all occupations eligible for membership in the BLE re-
gardless of status.
Section 4. The Brotherhood of Locomotive Engineers shall in-
dependently ascertain whether employees comply with union member-
ship requirements and shall be responsible for initiating action
to enforce the terms of this Article. To initiate such action,
the General Chairman or the designated representative shall noti-
fy the appropriate Corporation representative in writing, of the
failure of an individual employee to comply with union membership
requirements. Within ten (10) calendar days following receipt of
such notice the Corporation shall notify the concerned employee
of the charge of failure to comply with union membership require-
ments. Such notification will be by certified mail, return re-
ceipt requested sent to the employee's last known address and
will advise that formal hearing will be granted if requested, in
writing, within ten (10) calendar days following receipt of the
notice. If a hearing is not requested, as provided herein, the
Corporation shall proceed to terminate the employee's employment
relationship at the end of thirty (30) calendar days from receipt
of the General Chairman's initiating notice.
Section 5. If a hearing is properly requested, it will be
held within ten (10) days of receipt of request and will be con-
fined to proof of compliance. A decision, as to the employee's
compliance with union membership requirements, shall be rendered
by the Corporation within seven (7) calendar days following the
hearing date. The employee and the General Chairman shall be
promptly notified and if the decision affirms the non-compliance
charge, the employee's employment relationship shall be terminat-
ed within ten (10) calendar days of the date of the decision,
unless the Corporation and the Brotherhood of Locomotive En-
gineers agree otherwise in writing. If the decision of the Cor-
poration is unsatisfactory to either the employee or the Brother-
hood, the dispute may be submitted to a tribunal having jurisdic-
tion provided such proceedings are instituted within six (6)
months after receipt of the written decision. A representative
of the Brotherhood of Locomotive Engineers shall have the right
to be present at and participate in any hearing which involves
the Brotherhood.
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Section 6. The discipline rule (ARTICLE XIV) shall not apply
to union membership requirements cases and nothing herein shall
be used as a basis for time or money claims against the Corpora-
tion.
ARTICLE XVII
UNION SHOP- DUES DEDUCTION
Section 1. Subject to the conditions herein set forth, the
Corporation shall withhold and deduct amounts due the Brotherhood
of Locomotive Engineers for periodic dues, assessments and in-
surance premiums (not including fines or penalties) from wages
payable to employees who are members of the Brotherhood and who
have so authorized the Corporation by signed authorization which
shall, in accordance with its terms be irrevocable for one (1)
year from the date of its execution. Revocation of wages deduc-
tion authorization shall be in writing and which may be executed
by the employee within fifteen (15) days after the end of the
year. If the authorization is not so revoked, it shall be con-
sidered as re-executed and may not be revoked for an additional
period of one (1) year. The re-executed authorization shall be
similarly continued in full force and effect and be considered as
re-executed from year to year unless and until the employee exe-
cutes a revocation form within fifteen (15) days after the end of
any such year.
Section 2. The Brotherhood shall assume the full responsibil-
ity and cost for the reproduction of such forms, for the procure-
ment and execution of said forms by employees and for the deliv-
ery of the forms to the Corporation. Authorization and revoca-
tion forms shall be delivered to the Corporation not later than
the 20th of the month preceding the month in which the deduction
or termination of deduction is to become effective.
Section 3. Deductions as provided for herein shall be made by
the Corporation in accordance with a deduction list furnished to
the appropriate Corporation officer by the Treasurer of the Local
Division of the Brotherhood of Locomotive Engineers.
Any addition or deletion of names, or changes in
amounts, shall be so furnished to the Corporation on or before
the 20th day preceding the month in which the deduction shall be
made.
Section 4. Deductions as provided for herein shall be made
monthly by the Corporation from wages due employees for the first
weekly pay period which ends in each calendar month and the Cor-
poration shall pay, by draft, to the order of the Treasurer of
the Local Division of the Brotherhood of Locomotive Engineers,
the total amount of such deductions, on or before the 10th day of
the month following the month in which such deductions are made.
With the draft the Corporation shall forward to the Treasurer of
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the Local Division of the Brotherhood of Locomotive Engineers, a
list setting forth any scheduled deductions which were not made.
Section 5. No deduction shall be made from the wages of any
employee who does not have due, for the pay period specified, an
amount equal to the sum to be deducted in accordance herewith,
after all deductions for the following purpose have been made:
i. Federal, State and Municipal Taxes
ii. Other deductions required by law, such as garnishments
and attachments
iii. Amounts due the Corporation
Section 6. Responsibility of the Corporation shall be limited
to remitting to the Brotherhood of Locomotive Engineers amounts
actually deducted from the wages of employees as outlined herein
and the Corporation shall not be responsible financially or
otherwise for failure to make proper deductions. Any questions
arising as to the correctness of the amount deducted shall be
handled between the employee involved and the Brotherhood of Lo-
comotive Engineers, and any complaints against the Corporation in
connection therewith shall be handled by the Brotherhood of Loco-
motive Engineers on behalf of the employee concerned.
ARTICLE XVIII
INSURANCE COVERAGE
Section 1. The Carrier and the Brotherhood of Locomotive En-
gineers have agreed that the employees will be provided the Group
Insurance Plan, including dental coverage, heretofore adopted by
the Delaware Otsego Corporation for its employees and extended to
the employees of The New York, Susquehanna and Western Railway
Corporation as of the date of this agreement.
This Plan, or its equivalent, will be continued in
effect for the benefit of the employees covered by this Agreement
for the term of the Agreement, subject to the following:
(a) Contributions for single coverage shall be the same as
all other employees, but shall not exceed $5.00 per week.
(b) Contributions for family coverage shall be the same as
all other employees, but:
(i) for engineers hired on or before February 13, 1986,
shall not exceed $15.00 per week; and
(ii) for all other engineers, contributions will be 50%
of the cost of coverage for 24 continuous months, at
which point family coverage will be provided pursuant
to (i) above.
(c) Deductibles shall be no more than $100.00 per year for
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individual coverage and $200.00 per year for dependent coverage.
Section 2. Notwithstanding the above, it is agreed that em-
ployees will not request, or be provided, dependent coverage if
that employee has coverage for his dependents available elsewhere
at no charge.
Section 3. Carrier will provide a supplemental income plan
providing for weekly payment of the difference between Railroad
Retirement Sick Benefit payments and eighty percent (80%) of an
employee's base wages to extend for the duration of the Railroad
Retirement Sick Benefit payments to an employee who is unable to
work due to a major on-the-job accident. "Major on-the-job ac-
cident" is defined as being of more than seven (7) calendar days
duration. "Base wages" is defined as being the average of the
employee's gross weekly wages during the six (6) month period to
the major on-the-job accident.
Section 4. Carrier will provide a supplemental income plan
providing for weekly payment of $100.00 to extend for the dura-
tion of Railroad Retirement Sick Benefit payments, to an employee
who is unable to work due to a major illness. "Major illness" is
defined as being of more than seven (7) calendar days duration
and to be other than a major on-the-job accidents.
Section 5. The Corporation will pay up to twenty ($20.00)
dollars per employee per year for safety shoes, will provide one
(1) pair of safety glasses per employee, and will provide hard-
hats at no charge to the employee.
Section 6. Subrogation: The Carrier shall be subrogated to
any right of recovery an employee may have against any party for
loss to the extent that the carrier has made payments pursuant to
this Article.
The payments provided for above will be made, as
above provided, for covered accidents on or after July 1, 1989.
Benefits provided under this Article XVIII will be offset against
any right of recovery the employee may have against the Corpora-
tion for hospital, surgical, medical, related expenses or damages
of any kind.
It is understood that no benefits or payments will
be due or payable to any employee unless such employee stipulates
as follows:
"In consideration of the payment of any of the benefits pro-
vided in Article XVIII of the Agreement of April 7, 1990 or
its successors, (employee) agrees to be governed by all of
the conditions and provisions said and set forth by Article
XVIII."
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ARTICLE XIX
MISCELLANEOUS
Section 1. CREWS:
A. Thru freight crews and local freight crews will consist
of two (2) engineers, provided however, that the carrier may in-
crease the crew size with a third engineer.
B. Passenger Service: Crews in revenue passenger service
with a push-pull operation involving a steam locomotive shall
consist of 4 engineers. Crews in all other passenger service
involving a steam locomotive shall consist of 3 engineers. Crews
in all other passenger service shall consist of two (2) en-
gineers.
C. Work Train Service: When engineers are required to
report for duty at the work train site, deadhead allowance at the
current hourly rate will be compensated to each engineer to and
from the engineer's designated terminal. When engineers are re-
quired to use their personal automobile to report for duty at a
work train site, each engineer will be compensated twenty-two
(.22) cents per to and from the engineer's designated terminal,
in addition to the compensation to which they may be entitled.
Section 2. RESTRICTIONS ON CREWS:
A. Southern Division - Ridgefield Park Crew - Upon en-
tering Binghamton-Northern Division Terminal shall be restricted
to Old State Road.
B. Northern Division - Binghamton Crew - Upon entering
North Bergen Southern Division Terminal shall be restricted to
west side of Cross Street.
Section 3. ENGINEER TRAINING: For engineer training school,
Carrier shall pay eight hours per day of attendance, lodging,
together with a meal allowance of $16.00 per day if away from
home terminal. Employees who successfully complete engineer
training school shall qualify on physical characteristics within
six (6) months thereafter.
Section 4. DEADHEADING: Deadheading at current hourly rate
of pay will apply. Employees will be afforded a fully enclosed
area with an ambient air temperature above sixty five degrees
Fahrenheit (65 F) while waiting for deadhead transportation.
Road crews destined to a foreign terminal will be paid their trip
rate plus deadheading to their home terminal at the current hour-
ly rate; however, deadhead compensation shall not start until ten
hours after the duty commenced.
Section 5. SAFETY PROGRAM:
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A. The parties agree that it is of paramount importance to
promote safety and the safe operations of the railroad, there-
fore, there is hereby established a Committee on Safety consist-
ing of the General Chairman of The BLE, the safety officer of
each division to meet with management as needed to discuss safety
issues and issues of mutual concern so as to promote the safe and
effective operations of the railroad. Additionally, a plan of
Safety Awards will be established whereby awards shall be made to
enhance a greater degree of employee awareness to safety in the
workplace.
B. The Carrier agrees to pay a minimum of eight (8) hours
and auto allowance computed at twenty two cents (.22) per mile to
and from such meeting place for committee members attending meet-
ings and to provide a meal for such meeting.
Section 6. PERFORMING OTHER SERVICES:
Engineers attending court or coroner's inquest as witnesses
on behalf of the carrier, or engaged in any other work assigned
to them by the carrier, shall receive pay for a minimum of eight
(8) hours per day at the daily rate while so engaged together
with necessary expenses.
Section 7. REGISTERS:
Registers will be kept in convenient places where engineers
will register time of beginning and ending of run.
Section 8. RECORDS:
A. No suspensions, entries or notations will be made
against engineers' records until they have been notified of same.
B. Engineers will be furnished an abstract of their record
on request.
Section 9. HANDLING MEN:
It is the responsibility of the Engineer to notify the
Designated Carrier Officer or his representative of this fact as
soon as the engineer discovers that a runaround has occurred.
The Carrier will have the option, in the event of a dispute, to
let the "duly accredited representative" review any of the crew
dispatchers computer records and listen to the crew dispatchers
tape recorded telephone conversations surrounding the disputed
call. The Carrier shall bear no expense in this regard.
Section 10. PHYSICAL DISQUALIFICATIONS:
A. When an engineer has been physically disqualified he
shall be furnished a copy of the medical report containing the
reason for disqualifications.
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B. When an engineer has been physically disqualified and
a physician of his choice disputes the medical diagnosis of the
Corporation which resulted in the engineer's disqualification,
such disqualification may be appealed and a request made for an
examination by a neutral physician. The request for a neutral
physician must be made by the General Chairman to the highest
appeals officer of the Corporation. A copy of the findings of
the engineer's personal physician must accompany such request.
The neutral physician shall be a specialist in the field involved
in the disqualification, and shall be selected by a physician
designated by the General Chairman and a physician designated by
the Corporation. To the extent practical the neutral physician
and the examination shall be at a location convenient to the en-
gineer.
C. The engineer shall be examined by the neutral physician
who shall report his findings in writing to the physician desig-
nated by the General Chairman and to the physician designated by
the Corporation. The findings of the neutral physician shall be
final and binding. If the neutral physician finds that the diag-
nosis of the Corporation physician is not correct, the engineer
shall be returned to service promptly after the report is re-
ceived by the Corporation.
D. A physically disqualified engineer who is returned to
service on the basis of the decision of the neutral physician
shall be paid for time lost due to his disqualification computed
from the date of receipt of written medical report from the engi-
neer's physician by the highest appeals officer of the Corpora-
tion. The General Chairman and the highest appeals officer of
the Corporation shall determine the payment to be made for time
lost if the physically disqualified engineer performed compensat-
ed service on an irregular basis during the six (6) month period
before his disqualification.
E. An engineer who has accepted physical disqualification
or who was found to be properly disqualified by a neutral physi-
cian may, if there has been a change in his physical condition as
evidenced by a report of his personal physician, request a reex-
amination. There shall be no claims for time lost in such case
unless the Corporation refuses to grant the reexamination or
there is unreasonable delay in applying the terms of this arti-
cle.
F. The Corporation shall pay its physician, and the en-
gineer shall pay the physician designated by the General Chair-
man. The expense of the neutral physician, including x-ray and
laboratory examinations as he may require, shall be divided equ-
ally between the Corporation and the engineer involved.
Section 11. QUALITY OF WORK LIFE:
The New York, Susquehanna and Western Railway Corporation
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recognizes the value of improving the quality of its employees
work life by providing time off, and minimizing time away from
home whenever possible, subject to effective manpower utiliza-
tion. Therefore, subcommittees of management and labor represen-
tatives will be formed at regional levels to investigate, and
discuss issues and make recommendations.
Section 12. BULLETIN BOARD
The New York, Susquehanna and Western Railway Corporation
agrees to provide suitable locked bulletin boards at locations
designated by the Brotherhood of Locomotive Engineers. Bulletin
boards will be locked to prevent posting or removal by unauthor-
ized persons. The Brotherhood of Locomotive Engineers may post
notices relating to Union matters. Such notices shall pertain to
such matters as meetings and elections of the B.L.E. Union ap-
pointments to office, the results of Union elections, and Union
social, educational or recreational affairs.
Section 13. EQUIPMENT ON MOTIVE POWER:
A. Engines shall be supplied with fuel, water, sand, and
equipment necessary for the service to be performed and shall be
equipped to comply with statutory requirements relating to the
health and comfort of the Engineers.
B. Engineers shall be responsible for knowing that their
engines are property equipped and serviced. Engineers shall re-
port any defects that come to their attention.
C. When engineers are dispatched from an engine facility
where enginehouse forces are employed and on duty at the time of
dispatchment, engines shall be supplied and cleaned by engine-
house forces. At location where enginehouse forces are not em-
ployed, engines shall be supplied by other than Engineers.
D. All engine cabs shall be provided with heating equip-
ment maintained to heat the locomotive cab in compliance with FRA
regulations. Cab windows and doors shall be weather-stripped and
maintained.
E. Front and rear windows shall be equipped with de-
frosters and windshield wipers which shall be maintained in good
working order.
F. All road locomotives shall be equipped with flush or
septic type toilets which shall be maintained in a clean sanitary
condition.
G. All diesel locomotives used regularly in yard services
shall be equipped for bay windows on the Engineer's side of the
locomotive and locomotives shall be provided with bay windows
from October 1st through April 30th. Awnings shall be provided
on locomotive used regularly in yard service, on the Engineer's
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<PAGE>
side of the locomotive, May 1st through September 30th.
H. All locomotives shall be equipped with seats on the
right side of the cab which shall be upholstered spring or other
satisfactory cushioned material. Seats shall be not less than
seventeen (17) inches long and twenty (20) inches wide. Uphol-
stered seat back and arm rests shall be furnished and maintained
in good condition. Seats shall be adjustable vertically and from
front to back and back rests shall be adjustable. Upholstery
materials shall be perforated. Consistent with clearances, seats
shall be located as close to the right hand side of the cab as
possible while allowing one hundred eighty (180) degree rotation
of seat when fully collapsed. Necessary clearance shall be pro-
vided between the seats and the operating controls to give En-
gineers freedom of movement in performance of their duties.
I. Mechanical devices for cooling water shall be provided
in all motive power cabs. Such devices shall provide a dry cool-
ing compartment of sufficient size to accommodate water bottles
and lunches. Coolers shall be maintained in a suitable operating
condition and shall be cleaned and sanitary. Sanitary water will
be supplied by Carrier. An adequate supply of single service pa-
per cups protected from spoilage shall be provided. Bottles
shall be maintained and used subject to health department and
legislative requirements. On motive power cabs which have inop-
erative water coolers which cannot be repaired prior to dispatch-
ment, an adequate supply of ice and drinking water in a suitable
leak proof container shall be provided and replaced on the power
cabs.
J. Road type motive power cabs shall be equipped with an
accurate speed indicator.
K. Locomotives owned or leased (except short term leases)
by NYS&W presently in service which have been equipped to comply
with the provisions of agreements in effect, prior to the effec-
tive date of this agreement, on the separate properties conveyed
to NYS&W shall not have such equipment changed except as provided
for in this Article.
L. Motive power cabs purchased or leased (except short
term leases) by NYS&W subsequent to the date of this Agreement
shall be equipped as set forth in this Article.
M. Regular, extra and pool engineers will not be required
to operate engines when the cab heater and cab weather-stripping
are not properly maintained. No disciplinary action will be tak-
en against any engineer refusing to accept the assigned engine.
This will apply when ambient air temperature is less than sixty
five (65) degrees F at idle and the locomotive was previously
reported as unsuitable for service.
N. Any and all pilot assignments for the movement of con-
tractors' equipment on NYS&W property shall be filled pursuant to
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the provisions of ARTICLE III.
O. Any and all flagging assignments for work by third-par-
ties on NYS&W property shall be filled pursuant to the provisions
of ARTICLE III if engineers are available.
Section 14. STATEN ISLAND RAILWAY:
In the event that NYS&W, or a carrier controlled by or under
common control with NYS&W, acquires rights to operate over the
former Staten Island Railway, the terms of this agreement shall
apply with appropriate changes made for operational purposes.
Section 15. 401(K) SAVINGS PLAN:
It is agreed the Carrier will continue in effect the Dela-
ware Otsego Corporation/ The New York Susquehanna and Western
Railway Corporation 401 (K) Savings Plan.
ARTICLE XX
EFFECT AND DURATION OF AGREEMENT
Section 1. The purpose of this Agreement is to fix the gener-
al level of compensation during the period of the Agreement and
to settle the dispute growing out of notices served on the Corpo-
ration and the Brotherhood of Locomotive Engineers leading up to
that Agreement. As of its effective date, it supersedes all pri-
or Agreements between B.L.E. and the Carrier.
Section 2. The Agreement shall remain in effect until January
1, 1997 and thereafter until changed or modified in accordance
with the provisions of the Railway Labor Act as amended.
Section 3. The parties shall not serve any notice or proposal
under the Railway Labor Act for the purpose of changing the pro-
visions of any Article of this Agreement prior to November 1,
1996, not to become effective prior to January 1, 1997.
Section 4. During the term of this Agreement, notices cover-
ing subject matters not specifically dealt with in the Articles
of this Agreement may be served and progressed within, but not
beyond, the specific procedures for peacefully resolving disputes
which are provided for in the Railway Labor Act, as amended.
Section 5. This Article XXI will not debar the parties from
discussing and agreeing upon any subject of mutual interest.
ARTICLE XXI
OPERATION RED BLOCK AGREEMENT
WHEREAS, THE NEW YORK, SUSQUEHANNA AND WESTERN RAILWAY COR-
PORATION (hereinafter "NYS&W") and the BROTHERHOOD OF LOCOMOTIVE
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ENGINEERS (hereinafter "BLE"), recognize that the use of alcohol
and/or drugs by employees on duty or subject to call is a serious
problem within the railroad industry, and that the safety of the
general public as well as that of all employees is jeopardized by
the use of drugs and alcohol; and
WHEREAS, the BLE and NYS&W recognize that employees found to
have alcohol and/or drugs in their system will not be allowed to
perform service.
NOW, THEREFORE, in consideration of the mutual promises con-
tained herein, the parties agree to implement the following pro-
cedures governing the identification, evaluation, and rehabilita-
tion of employees who use drugs and alcohol.
1. Drug and alcohol tests shall be performed on any
and all employees involved when the following events occur:
a) Any FRA reportable accident under 49 CFR, Part
225, in which a minimum of $5,200 damage occurs but which does not
reach the thresholds defined in Subpart C of 49 CFR, Part 219, for
mandatory post-accident testing. NYS&W's supervisor will exclude
the employee from the required testing under this subsection if the
accident was a grade crossing accident where there were no physical
injuries, or caused by an act of God, or track and mechanical
failures and which are not coupled with Operating Rule violations.
b) Any FRA Group A reportable injury. Employees
will have all injuries evaluated and/or treated by health care
professionals prior to the collection of samples (see Appendix C).
An exception to the testing requirement will be granted by an NYS&W
supervisor where it is determined that the employee is merely a
passive participant in circumstances leading to the injury.
Examples of such circumstances include, but are not limited to,
the following:
(1) Situations involving bee stings, dog bites, snake bites,
etc.;
(2) Foreign particles in the eye when wearing safety glasses, or
when safety glasses are not required;
(3) Employees injured as a result of vandalism.
(4) Passengers in Company vehicles or in Company-furnished taxi
cabs that are involved in accidents;
(5) Injuries as a result of exposure to hazardous material in a
customer's plant or facility;
(6) Employees suffering from chronic occupational illnesses,
developed from exposure over a long period of time, such as loss
of hearing, asbestos, etc.;
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(7) Employees struck by flying objects, such as rocks, cinders,
boards, etc.; and
(8) Employees subjected to an assault by one or more persons and
when it is clearly evident that the injured worker did not
provoke the assault.
2. Employees shall also be subject to drug and alcohol
testing when reasonable suspicion exists that the employee has
been using alcohol or drugs, based upon the appearance, behavior,
speech, or body odors of the suspected employee. One supervisory
employee, who is qualified by having attended NYS&W's three
hours of drug training program, may require the employee to sub-
mit to a breathalyzer test for the presence of alcohol. Such a
breathalyzer test shall be administered by a person qualified
either under 49 CFR Part 219 or under the laws and regulations of
the state where the test is administered. To require urine test-
ing, a determination must be made by two supervisory employees,
one of which must be qualified by having attended NYS&W's
three hours of drug training program. Employees tested under
this section will be withheld from service until the test results
have been received by the Company doctor. The individual will be
provided a copy of the laboratory report. If the test(s) result
is negative, the employee will be paid for all time lost and be
immediately returned to service.
3. Drug and alcohol urine screening also shall be re-
quired as a part of all reinstatement physical examinations, all
return from furlough examinations, and all other
Company-sponsored examinations for individuals who have been out
of service for more than 90 days.
4a. Employees who are required to be tested for drugs
and alcohol under this Agreement are required, as a condition of
employment, to provide the necessary breath or urine samples to
the NYS&W at their designated testing facilities. Employees
tested pursuant to Sections 1 or 2 of this Agreement shall be
afforded an opportunity to also provide blood samples, but it is
not required. If the employee's urine test is positive for drugs
at the levels described in Section 7, the test results will be
considered positive and conclusive for drugs, notwithstanding the
results of the blood test. The results of blood testing will be
provided to the Employee Assistance Program Counselor to help
establish usage patterns. If the employee's urine test for alco-
hol is positive at the levels described in Section 8, and the
employee was offered and refused to give a blood sample, the
urine test shall be considered positive and conclusive. If blood
was given as part of an alcohol test and negative, the test re-
sults will be considered negative, but only for alcohol. The
employee will be provided written notification of the drug and
alcohol test results.
4b. If an employee refuses to give samples of breath
or urine as specified under the terms of this Agreement, he/she
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<PAGE>
will be taken out of service immediately and be charged with in-
subordination and a hearing will be conducted under the terms of
applicable collective bargaining agreements and practices that
may result in discipline.
5. No employee shall be screened for alcohol and/or
drugs under Sections 1 and 2 of this Agreement after eight hours
have passed from the triggering event as specified in Sections 1
and 2, or after having been relieved from duty.
6. When drug and alcohol testing occurs pursuant to
Sections 1 and 2 pursuant to this Agreement, the employee shall
tender his or her full cooperation to the supervisor and the
staff of the testing facility in completing a Testing Control
Form (sample attached as Appendix A). Information to be collect-
ed on this form shall include data on the individual being test-
ed, reasons the individual is being tested, and specifics about
the sample collection procedure. Further, the form shall provide
space for the tested employee to offer a statement if the em-
ployee so desires. NYS&W shall provide the tested employee with
a copy of the Testing Control Form at the time samples are drawn.
The original copy of this form will be placed in the employee's
personnel record.
7. The drugs for which NYS&W will screen an employee's
urine sample include, but are not limited to, the following:
amphetamines, barbiturates benzodiazepines, cannabinoids, co-
caine, methadone, methaqualone, opiates, and phencyclidine.
These samples initially will be screened by EMIT method (an immu-
noassay method) and all positives will be confirmed by gas
chromatography/mass spectroscopy (GC/MS) and reported quantita-
tively. Cannabinoids will be screened with a detection limit of
100 ng/ml. The cannabinoids will be confirmed by use of the
GC/MS detecting the Delta 9 fraction, at a confirmation detection
limit of 20 ng/ml.
8a. For the alcohol tests mandated in this Agreement,
NYS&W will test the employee's breath or urine. The breath alco-
hol determination will be performed via a chemical test of breath
given in compliance with the laws and regulations of the state
where the test is given. No breath alcohol test will be consid-
ered positive at levels which indicate less than .06% of one per-
centum by weight of alcohol in the blood. The urine alcohol
determination will be performed via enzyme kinetic methods and
positive results will be confirmed by gas chromatography (GC).
No urine alcohol test will be considered positive at levels less
than 20 mg/dl.
8b. As to those employees who, pursuant to Section 4,
elect to provide a blood sample, that blood sample will be tested
to confirm any positives which resulted from the urine screens.
Confirmations for positive drug results will be done by the GC/MS
method. Confirmation of positive urine alcohol findings will be
done by the GC method. No blood alcohol test will be considered
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positive at levels less than 20 mg/dl.
8c. Nothing in Section 8 is intended to change the
provisions of Section 4 with respect to the conclusiveness of the
urine test for drugs.
9. Samples shall be obtained from the employees in
accordance with the procedures set forth in Appendix C attached.
10. The testing laboratories which NYS&W will use to
analyze urine and blood samples provided by the employee pursuant
to this Agreement will be of high quality. Should the BLE have
valid questions about the competency of the testing laboratory,
NYS&W, upon receipt of such questions, shall investigate the mat-
ter and report its findings to the BLE. Should standards and
certification be established by the National Institute of Drug
Abuse, the laboratory selected by NYS&W must be able to satisfy
these criteria. The chosen laboratory must observe established
FRA mandated chain of custody requirements and have appropriate
safeguards for the handling of all samples.
11a. Any employee tested under this Agreement and
found to be positive for drugs and/or alcohol in accordance with
Section 4 hereof, except as provided in Subsection (b), will be
medically disqualified by an NYS&W's Company physician and will
be required to participate in the Employee Assistance Program for
evaluation and successfully complete the prescribed treatment
program prior to being considered for return to service. An em-
ployee's return to service further will be predicated upon the
passing of a re-examination by a Company physician which will
include alcohol and drug screens (this procedure is explained in
Appendix B).
11b. Former employees who are being considered for re-
instatement to service and as such are required to take a rein-
statement physical examination who have a positive drug and/or
alcohol finding, as provided for in Section 4, must within
forty-five (45) days of receipt of notification of the positive
drug or alcohol finding, begin to participate in the Employee
Assistance Program. Such a former employee must also meet all
the requirements of Subsection 11(a) of this Agreement prior to
being returned to service. Failure of the former employee to
meet the requirements of Subsections 11(a) and 11(b) of this
Agreement shall permanently preclude the employee from being
rehired.
11c. Former employees returned to service under Sec-
tions 11a and 11b after January 1, 1994 shall be subject to test-
ing for drugs/alcohol at any time within five (5) years of return
to service at the Company's discretion. A second positive
drug/alcohol test within such five (5) year period shall there-
after permanently preclude the employee from being rehired.
12. All Employee Assistance Program records, including
the counselor notes, will be confidential and will not be re-
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leased to the employee or management of NYS&W, except for the
Company physician, personnel of the Employee Assistance Program,
and, to the extent the need arises to protect the confidentiality
of EAP records, NYS&W's Law Department.
13. If an employee is medically disqualified as a re-
sult of drug and alcohol testing done pursuant to this Agreement,
and the employee or his representative objects to either the
evaluation or the treatment recommendations of NYS&W's Employee
Assistance Program counselors, the employee or his representative
may appeal the evaluation or treatment by requesting NYS&W's
highest designated officer under the Railway Labor Act to estab-
lish a joint medical board in accordance with the following pro-
cedures:
a. The employee involved, or his representative,
will select a physician to represent him and NYS&W will select a
physician to represent it. If the two physicians thus selected
shall agree on the correctness of the Employee Assistance Program
counselor's evaluation and/or treatment recommendations or
determination of completion, the conclusion reached by them shall be final.
b. If the two physicians selected in accordance
with the foregoing paragraphs cannot agree, NYS&W and the
employee's representative shall select a third physician to be
agreed upon by them who shall be a practitioner of recognized
standing in the medical profession and a specialist in the drug
and/or alcohol abuse treatment. The three selected physicians
shall constitute a Board which will then examine the employee and
the evaluation and treatment recommendations or determination of
completion of the Employee Assistance Program counselor and
render an opinion supported at least by a majority of the Board
as to the proper evaluation and course of treatment or
determination of completion for the employee. The Board's
findings shall be final and binding.
c. The Carrier and the individual employee will
each defray the expenses of their respective physicians. The
expenses of the third member of the Medical Board will be divided
equally between the Carrier and the individual employee.
14. This Agreement is without prejudice to the right of
NYS&W to require additional drug and/or alcohol tests as a part
of any required Company-sponsored physical examination. NYS&W
intends to use drug and alcohol tests in certain
Company-sponsored physicals to collect additional medical
findings when warranted by the situation.
15. NYS&W will provide training to all its Transporta-
tion Department line officers responsible for authorizing tests
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of employees under Section 2 of this Agreement. Copies of the
Agreement will be made available to all employees represented by
the BLE, and optional orientation sessions will be held through-
out NYS&W's system outlining the procedures for implementing this
Agreement.
16. An Oversight Committee will be established, com-
posed of one member each from the BLE, Transportation and Labor
Relations Departments, and a Company physician. This Committee
will meet twice a year to:
a. Review the overall results of the testing
conducted pursuant to this Agreement;
b. Identify and make recommendations to resolve
any implementation difficulties; and
c. Assure quality control of the testing facili-
ties and procedures. In this regard, the Committee will be
responsible for developing, implementing, and monitoring blind
testing procedures of any laboratory used to support this
Agreement.
17. NYS&W agrees that drug and alcohol tests will not be
authorized solely as a result of any anonymous phone calls, let-
ters, or other anonymous communications regarding the behavior or
actions of an employee.
18. It is recognized by both parties that this Agreement
shall become null and void should any federal law be
enacted requiring railroads to implement mandatory random drug
testing on employees covered by this Agreement. Nonetheless,
portions of this Agreement not in conflict with such legislation
shall continue in full force and effect.
19. This Agreement shall not be considered as waiving any
right of NYS&W or objection by an employee to the conducting of
searches of lockers or personal property of the employee by
NYS&W's employees or agents for disciplinary purposes, and by
entering into this Agreement, BLE shall not be considered as hav-
ing concurred with or expanded upon any right of NYS&W relative
to conducting searches of lockers or personal property for disci-
plinary purposes.
20. NYS&W agrees that it will not seek monetary indemnifi-
cation for litigation expense or damages from the BLE should lit-
igation be brought by an individual employee or group of em-
ployees, which is not authorized by BLE and which BLE is not act-
ing in concert with such employee(s), over the testing of the
employee under this Agreement. However, NYS&W may join the BLE
in such litigation where its presence is needed because of the
remedy sought, such as back seniority.
21. Any dispute over the interpretation or application of
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the Agreement, except as provided in Section 12 hereof, should be
submitted to a Special Board of Adjustment pursuant to 45 USC 153
(Second), and the arbitration provisions in the collective bar-
gaining agreements between the BLE and NYS&W pursuant to the man-
date of Section 3 of the Railway Labor Act.
Signed this 30th day of March, 1994
For the BROTHERHOOD OF LOCOMOTIVE ENGINEERS:
SIDNEY L. BALDWIN
______________________________
Sidney Baldwin, General Chairman
Brotherhood of Locomotive Engineers
Division #521
Subject to Ratification
J. A. CASSIDY JR.
____________________________
Joseph Cassidy, Vice President
Brotherhood of Locomotive Engineers
FOR THE NEW YORK, SUSQUEHANNA AND WESTERN RAILWAY CORPORATION:
WALTER G. RICH
______________________________
Walter G. Rich, President and
Chief Executive Officer
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APPENDIX A
__________
TESTING CONTROL FORM
____________________
This form shall be completed for each individual employee who is
required to submit to a testing procedure regardless if testing
is mandatory pursuant to the FRA Rule or pursuant the drug and
alcohol testing agreement between NYS&W and BLE.
*****************************************************************
______________________ __________________________ __________
Date and Time Employee Name (print) Employee
I.D. No.
_________________________________ ___________________________
Name of Supervisor Requiring Test Title
______________________________________
Signature of Supervisor Requiring Test
_________________________________________________________________
Railroad Location
*****************************************************************
REASON FOR TESTING
__________________
____ Haz Mat Spill
____ $500,000
____ (FRA) Mandatory Test ____ Fatality
____ Impact over $50,000
____ Impact with reportable
____ injury
*****************************************************************
____ FRA Reportable Accident
____ Agreement Required ____ FRA Reportable Injury
____ Probationary Employee
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Reasonable suspicion based upon the behaviors of the
employee. Please describe circumstances. __________________
____________________________________________________________
____________________________________________________________
*****************************************************************
______________________
Samples to be Provided
FRA Mandatory Reasonable Suspicion Refused Samples
_____________ ____________________ _______________
____ Blood and Urine ____ Urine ____ Urine
____ Employee Initials ____ Blood ____ Blood
Employee Employee
____ Initials ____ Initials
*****************************************************************
SAMPLE COLLECTION
_________________________________________________________________
Institution Collecting Samples - Name and Address
___________________________________ __________________________
Name & Title of Person Collecting Date & Time Sample
Sample Provided
______________________________ __________________________
Telephone Number Date & Time Sample
Shipped
Urine Sample # Blood Sample #
___________ ____________
Urine Sample # Blood Sample #
___________ ____________
*****************************************************************
TESTING CONTROL FORM
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Employee, please list all over-the-counter and/or prescribed
medication taken within last 60 days.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
*****************************************************************
Employee, please feel free to use the following section to
describe circumstances around the testing procedure or comments
about the drawing of samples.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Employee Initials
_____
*****************************************************************
By signing this document by the individual constitutes
verification that the above information is correct and timely
documented. It does not constitute an admission of any
responsibility. Objections are not necessarily limited to the
information contained in this form.
Employee Signature
__________________________
Date and Time
__________________________
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APPENDIX B
__________
MEDICAL/EAP PROCEDURES
FOR HANDLING EMPLOYEES DRUG & ALCOHOL TESTED
Upon receipt of laboratory analysis of drug and alcohol screens
provided by individuals covered by this Agreement, those
employees found to have used foreign substances must be medically
disqualified and removed from service. Negative findings at the
levels specified in this Agreement will be attached to the
employee's medical record with no notification sent to the
employee's work location.
In an attempt to address the cause of the substance use and to
prevent such occurrences in the future, a procedure has been
developed in which all employees under this Agreement found to be
positive will be evaluated as to their dependence on drugs and/or
alcohol. Those found to be habitual abusers must successfully
complete a prescribed treatment program prior to a re-examination
by the Company physician for consideration of returning to
service.
This procedure is described in the following steps:
STEP 1 Employee submits to testing as described and authorized
in the Agreement. Samples are analyzed at the Carrier's approved
laboratory and all findings are forwarded to the Company
physician. Negative findings are noted in the employee's medical
files. Copy is sent to the employee, but not sent to the
employee's supervisor. Positive findings will result in the
employee being medically disqualified from service. If it comes
to the attention of the Company physician that a test is
defective in that there is no proper chain of custody, or that
the chain appears to be violated in the opinion of the testing
analysis laboratory, the results will be considered null and void
and the employee will be handled as though the test results were
negative.
STEP 2 Company physician staff telephonically notifies
supervision to remove employee from service.
STEP 3 Confirmation of medical disqualification and telephonic
notification to remove from service is provided the employee's
supervisor in writing by the Company physician in the usual
manner.
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STEP 4 Employee is notified in writing of medical
disqualification and given the reason for this action, e.g., on
the basis of the alcohol and drug screens. The employee is
directed to the appropriate Employee Assistance Program counselor
for evaluation. Should the employee fail to respond or refuse to
contact the EAP, the Manager - Payroll will send a follow-up
letter to the employee. This letter re-emphasizes that without
an evaluation by the counselor, no physical examination will be
scheduled and no consideration will be given to return to
service.
STEP 5 Employee is evaluated by the Employee Assistance Program
counselor, and the results of this evaluation are sent to the
Company physician. If found to be non-dependent, Manager -
Payroll will schedule the physical examination after receiving
the proper documentation from the counselor. Should the
employee be in need of treatment, the counselor will develop a
Treatment Plan for the employee and forward a copy to the Company
physician for placement in the employee's medical record.
STEP 6 Employee begins activities to satisfy the objectives
outlined in the Treatment Plan. The EAP counselor monitors
progress of the employee on a weekly basis or more frequently if
appropriate.
STEP 7 Upon completion of treatment, the EAP counselor
furnishes the Company physician in writing with the documentation
of the employee's progress. Should the employee fail to
participate in treatment, or unsuccessfully complete the
Treatment Plan Recommendations outlined for him, the Company
physician will be notified of the employee's performance in
writing.
STEP 8 After receiving the proper documentation outlining the
completion of treatment, the Company physician will authorize
another physical examination for consideration of return to
service. Should the Company physician be advised that the
employee failed to complete treatment, the Company physician will
notify the employee by letter that without providing evidence of
completing treatment, no return to service examination will be
scheduled.
STEP 9 Employee re-examined by the Company physician in
preparation for return to service.
STEP 10 If qualified, supervision is notified telephonically
with hard copy to follow for the employee's file. Employee
resumes service immediately upon supervisor's receipt of this
information. If found to be unqualified by the Company
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physician, supervisor is not notified of this finding. If the
reason for failing the qualification process is substance abuse
related, the employee returns to Step 4 of this procedure. If
additional medical problems are uncovered, they will be handled
in accordance with established policies and procedures prior to
being considered for re-examination for consideration of return
to service.
THE BALANCE OF THIS PAGE LEFT INTENTIONALLY BLANK
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EXHIBIT A
---------
Calling crews - extra lists.
1. Engineers assigned to extra lists will be assigned in first-
in, first-out basis, except as otherwise provided.
2. Engineers on extra lists will be called a minimum of two (2)
hours before they are required to report for service.
3. No more engineers will be assigned to any terminal than are
necessary to move traffic promptly and with certainty; the number
of engineers will be kept to the lowest possible limit to perform
the work, and when reductions are made, the most junior engineers
will be taken off first.
4. Extra engineers who are first out and available on extra
lists will be called in turn for service. After competing job
assignment, they will be marked up on the bottom of the extra
list in the same relative order in which they were called.
5. Extra engineers who do not have sufficient time under the
Hours of Service Law to be called for service will retain their
standing on the extra list until they are called for service af-
ter their rest.
6. Extra engineers who miss a call or pass when called to cover
assignments will be marked up on the bottom of the extra list.
Extra engineers who mark off will be marked up on the bottom of
the extra board when they notify the carrier that they are avail-
able for service.
7. If an extra list is exhausted, engineers holding regular
assignments who are available may be called. Such engineers may
pass without penalty.
Regular Assignments and Advertisements:
1. The rights to regular assignments shall be held by the sen-
ior qualified engineer who bids the job.
2. New assignments, re-advertised assignments, extra lists, and
vacancies will be advertised and assigned every Monday. The ad-
vertising period will close after three (3) days, and assignments
will be awarded through notice issued by 11:00 am every Monday,
to be effective 12:01 am Tuesday.
3. The advertisement notice will contain the report time, re-
lief day(s), reporting terminal, job symbol and other information
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necessary to identify the assignments. The notice will also con-
tain the location of the designated officer of the Corporation to
whom applications for assignments are to be sent, and the date
and the time the advertisement period closes. Engineers may bid
for more than one assignment by starting the order of preference.
4. A regular assignment starting time may be changed depending
of traffic patterns by notifying the regularly assigned engineers
8 hours in advance of their regularly assigned starting time or
the altered time, whichever is earlier.
5. Vacancies caused by sickness, temporary disability, suspen-
sion or leave of absence will be advertised when it is known that
the engineer will be off duty for a period of 30 days or when
such engineer has been off duty for a period of 30 days.
6. Regular assignments, except in road pool service, will be
re-advertised when any of the following permanent changes are
made in such assignments:
a. Changing the home or away-from-home terminal; changing
the starting time 30 minutes or more or changing the rest
days of an assignment.
7. Regular assignment in road pool service will be advertised
by mutual agreement. Regular assignments in road pool service
will be re-advertised when there is a permanent change in the
home terminal or away-from-home terminal or terminals.
8. When a regular assignment is annulled for two or more conse-
cutive days during a work week (not including a week during which
a holiday occurs) the assignment will be re-advertised.
9. Assignments will be made to engineers in seniority order
from written bids submitted to the officer of the Corporation
designated in the advertisement notice prior to the close of an
advertisement period. Engineers will be given a receipt for bids
submitted to the designated officer of the Corporation.
When no bids are received for advertised engineers assign-
ments, the assignments will be filled by the junior qualified
engineer working at the same location as the assignment that
failed for bid.
10. All engineers may elect to make an optional displacement to
as assignment held by a junior engineer twice a year. The appli-
cation for an optional displacement must be in writing by 12:00
Noon on June 27th and December 28th of each year. The optional
displacement shall become effective 12:01 a.m. on July 1st and
January 1st of each year. Engineers who are displaced as a result
of an optional displacement shall be notified as soon as possible
and have 24 hours from the time they are notified to exercise
their seniority against a junior engineer or to an assignment
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that is being advertised for bid up until the advertisement is
closed.
11. Engineers holding assigned jobs may elect to pass on holi-
days, without penalty, in which event the job will be covered by
the extra board.
12. An engineer returning to duty after being absent may dis-
place a junior engineer after giving no less than twenty-four
hours notice to the carrier.
13. An engineer will be entitled to exercise his seniority by
displacement when he is removed from his assignment by a senior
engineer; when his assignment is abolished or when his assignment
is re-advertised in the appropriate manner.
14. An engineer who fails to exercise his seniority within 24
hours after being notified of displacement will forfeit his right
to a displacement. The 24 hour period will begin at the end of
the tour of duty the engineer is currently assigned or from when
he receives notification of his displacement, whichever is later.
15. It is recognized that the contract calls for six (6) Home
Terminal Engineers on the Southern Division. In the event there
are not six regular assignment positions on the Southern Divi-
sion, then there will be advertised position(s) for "Home Termi-
nal Engineer - No Assigned Job" to make up the difference.
Modifications:
The parties agree to work together to make changes and adjust-
ments to the procedures set forth above for each terminal for
their mutual benefit as circumstances arise.
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GUARANTEE COMMITMENT
TABLE OF CONTENTS
Page
Recitals . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - TERM
Section 1.01. Term. . . . . . . . . . . . . . . . . . 3
ARTICLE II - DETERMINATIONS AND FINDINGS
Section 2.01. The Note . . . . . . . . . . . . . . . . 4
Section 2.02. Guarantee Agreement. . . . . . . . . . . 4
ARTICLE III - PREMIUM CHARGE
Section 3.01. Premium Charge . . . . . . . . . . . . 4
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF
APPLICANT AND GUARANTOR
Section 4.01. Corporate Organization and Good Standing 5
Section 4.02. Validity of Agreements . . . . . . . . 5
Section 4.03. No Bankruptcy of Officers and Directors;
No Felony Conviction or Securities Law
Violation. . . . . . . . . . . . . . . 6
Section 4.04. Books of Account, Capital Structure, and
Financial Statements. . . . . . . . . . 7
Section 4.05. No Changes Since Most Recent Balance
Sheet . . . . . . . . . . . . . . . . . 8
Section 4.06. Distributions . . . . . . . . . . . . . 8
Section 4.07. Material Contracts, Judgments, Decrees,
Obligations, or Liabilities . . . . . . 9
Section 4.08. Litigation. . . . . . . . . . . . . . . 9
Section 4.09. Employee Protection . . . . . . . . . . 9
Section 4.10. Buy America and Cargo Preference. . . . 10
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Section 4.11. Lobbying. . . . . . . . . . . . . . . . 11
Section 4.12. Nondiscrimination . . . . . . . . . . . 12
Section 4.13. Defaults Under Existing Agreements. . . 14
Section 4.14. Related Persons . . . . . . . . . . . . 15
Section 4.15. Tax Returns . . . . . . . . . . . . . . 15
Section 4.16. Completeness of Information . . . . . . 15
Section 4.17. Completeness of Representations and
Warranties. . . . . . . . . . . . . . . 16
Section 4.18. Purpose . . . . . . . . . . . . . . . . 16
Section 4.19. Prospective Representations and Warranties 16
ARTICLE V - AFFIRMATIVE COVENANTS OF APPLICANT
Section 5.01. Further Documentation. . . . . . . . . 17
Section 5.02. Pay Obligation . . . . . . . . . . . . 17
Section 5.03. Pay Taxes and Other Claims . . . . . . 17
Section 5.04. Maintenance of Insurance . . . . . . . 18
Section 5.05. Financial Records, Auditor's Retainer. 18
Section 5.06. Year-end Financial Statements. . . . . 19
Section 5.07. Periodic Financial Statements. . . . . 19
Section 5.08. Compliance with Applicable Laws. . . . 20
Section 5.09. Legal Process. . . . . . . . . . . . . 21
Section 5.10. Maintenance of Locomotives . . . . . . 21
Section 5.11. Budgets. . . . . . . . . . . . . . . . 22
Section 5.12. Audit and Inspection Rights. . . . . . 22
Section 5.13. Information between Applicant and
Holder . . . . . . . . . . . . . . . . 23
Section 5.14. Information on Applicant's and
Guarantor's Performance. . . . . . . . 23
Section 5.15. Guarantee of New Subsidiaries. . . . . 24
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ARTICLE VI - NEGATIVE COVENANTS OF APPLICANT AND GUARANTOR
Section 6.01. Guarantees, Indebtedness . . . . . . . 24
Section 6.02. Merger, Acquisition or Sale of Assets. 25
Section 6.03. Purchase or Redemption of Securities of
Applicant and Guarantor. . . . . . . . 25
Section 6.04. Certificate of Incorporation, Bylaws,
Subsidiaries, Lines of Business. . . . 26
Section 6.05. Purchase of Investment Securities,
Lending or Advancing Funds . . . . . . 26
Section 6.06. Dividends, Deployment of Assets. . . . 26
Section 6.07. Financial Tests. . . . . . . . . . . . 27
ARTICLE VII - SECURITY INTEREST
Section 7.01. Grant of Security Interest . . . . . . 27
Section 7.02. Priority of Security Interest. . . . . 28
Section 7.03. Evidence of Perfection, Releases . . . 28
ARTICLE VIII - CONDITIONS PRECEDENT TO THIS AGREEMENT
Section 8.01. Corporate Standing and Other Corporate
Documents . . . . . . . . . . . . . . . 28
Section 8.02. Performance of Applicant's and Guarantor's
Agreement . . . . . . . . . . . . . . . 29
Section 8.03. No Events of Default under the Obligation 29
Section 8.04. Opinion of Applicant's and Guarantor's
Independent Auditors. . . . . . . . . . 30
Section 8.05. Environmental Assessment. . . . . . . . 30
Section 8.06. Completion of Proceedings and Documents
by Applicant, Guarantor and Holder. . . 31
Section 8.07. Conditions Precedent. . . . . . . . . . 31
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ARTICLE IX - EVENTS OF DEFAULT AND REMEDIES
Section 9.01. Events of Default . . . . . . . . . . . 32
Section 9.02. Remedies. . . . . . . . . . . . . . . . 34
Section 9.03. Further Remedies. . . . . . . . . . . . 35
Section 9.04. Settlement. . . . . . . . . . . . . . . 35
Section 9.05. Cumulative Remedies. . . . . . . . . . 35
ARTICLE X - MISCELLANEOUS
Section 10.01. Indemnification. . . . . . . . . . . . 35
Section 10.02. Survival of Representations, Warranties
and Indemnification. . . . . . . . . . 36
Section 10.03. Incorporation of Exhibits and Schedules 36
Section 10.04. Subsidiaries of Applicant and DO . . . 36
Section 10.05. Entire Agreement . . . . . . . . . . . 37
Section 10.06. Parties Bound, Right to Assign . . . . 37
Section 10.07. Table of Contents; Headings. . . . . . 37
Section 10.08. Notices; Action to be taken. . . . . . 37
Section 10.09. Release of Information . . . . . . . . 38
Section 10.10. No Waiver by Administrator . . . . . . 39
Section 10.11. Governing Law. . . . . . . . . . . . . 39
Section 10.12. Representatives. . . . . . . . . . . . 39
Section 10.13. Counterparts . . . . . . . . . . . . . 39
Section 10.14. Severability . . . . . . . . . . . . . 39
Section 10.15. Use of "Applicant" and "DO". . . . . . 40
Exhibit A -- Application
Exhibit B -- Note
Exhibit C -- Guarantee Documents
Exhibit D -- Security Agreement
Exhibit E -- M & T Loan Agreement
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GUARANTEE COMMITMENT
THIS AGREEMENT, made and entered into on September , 1994, in
Washington, D.C., by and among the United States of America
("United States"), represented by the Secretary of Transportation
("Secretary") acting through the Administrator of the Federal
Railroad Administration or the Administrator's designee
("Administrator"), The New York, Susquehanna and Western Railway
Corporation, a corporation organized and existing under the laws of
the State of New Jersey ("Applicant"), and the Delaware Otsego
Corporation, a corporation organized and existing under the laws of
the State of New York ("DO").
RECITALS
A. The Secretary is authorized, pursuant to section 511 of
the Railroad Revitalization and Regulatory Reform Act of 1976, as
amended ("Act"), to guarantee or to make a commitment to guarantee
the payment of the principal balance of, and any interest on, an
obligation of an applicant prior to, on, or after the date of
execution or the date of disbursement of such obligation, if the
proceeds of such obligation shall be or have been used to acquire
or to rehabilitate and improve facilities or equipment or to
develop or establish new railroad facilities.
All guarantees entered into by the Secretary under Section 511
of the Act constitute general obligations of the United States
backed by the full faith and credit of the United States. The
Secretary, by delegation of authority dated May 20, 1976,
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49 C.F.R. 1.49(U), has duly delegated the Secretary's authority
under Title V of the Act, with the exception of those powers
contained in section 506(c), to the Administrator.
B. The Department of Transportation and Related Agencies
Appropriations Act, 1994, Pub. L. No. 103-122 (Oct. 27, 1993), has
authorized the Administrator to guarantee a new loan to the
Applicant under section 511 of the Act for up to $5,000,000, and
Applicant has submitted an application, attached hereto as
Exhibit A ("Application"), requesting a guarantee by the United
States of principal, interest, and other payments which may become
due under a future advance promissory note ("Note"), the form of
which is attached hereto and made a part hereof as Exhibit B,
issued by the Applicant to the Federal Financing Bank (an
instrumentality of the United States) and its successors and
assigns ("Holder"), of even date herewith. The proceeds of the
Note will be used to purchase three railroad locomotives, described
as either GE Model C44 DASH 9 (4400 Horsepower) or EMD Model SD 70
(4000 Horsepower) ("Locomotives"). In order to receive such
guarantee as contained in a guarantee agreement and a financing
commitment each among the Administrator, Applicant and the Holder,
of even date herewith and attached hereto and made a part hereof as
Exhibits C (hereinafter collectively referred to as "Guarantee
Documents"), the Applicant is willing to secure its obligations to
the Administrator under this Agreement by providing a purchase
money first lien on the Locomotives and a mortgage on certain
property all as set forth in a security agreement of even date
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herewith among DO, Applicant, and the Administrator, a copy of
which is attached hereto and made a part hereof as Exhibit D,
("Security Agreement").
C. As a condition to entering into this Agreement and the
Guarantee Documents, the Administrator requires that DO
unconditionally guarantee the performance of all of the obligations
of the Applicant to the Administrator, which exist as of the date
hereof or may arise hereafter pursuant to the terms and provisions
of this Agreement, the Note, and the Guarantee Documents and the DO
is willing to provide such a guarantee in the Security Agreement.
D. The Administrator, having found that the statutory
prerequisites have been satisfied by Applicant and DO is willing to
execute the Guarantee Documents; the Holder is willing to purchase
from Applicant the obligation under such guarantee; and the
Applicant is willing to sell to Holder the Note and to use the
proceeds for the purposes intended.
NOW, THEREFORE, in consideration of the premises and the
mutual undertakings hereinafter set forth, the parties hereto agree
as follows:
ARTICLE I
TERM
Section 1.01. Term. Except as otherwise provided herein,
this Agreement shall be coterminous with the Note.
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ARTICLE II
DETERMINATIONS AND FINDINGS
Section 2.01. The Note. The Applicant will issue the Note in
the amount of up to Five Million Dollars ($5,000,000.00) to the
Holder.
Section 2.02. Guarantee Documents. The Administrator will
guarantee to Holder that it will make payment in cash of the
principal balance of, and any interest, late charges and other sums
payable on, the Note in accordance with the provisions of the
Guarantee Documents. This guarantee is conclusive evidence that
the Note is in compliance with the provisions of the Act and that
the Note has been approved and is legal as to principal, interest,
and other terms. This guarantee is valid and enforceable in the
hands of the Holder and shall constitute a general obligation of
the United States backed by the full faith and credit of the United
States.
ARTICLE III
PREMIUM CHARGE
Section 3.01. Premium Charge. Applicant agrees to pay the
United States for its guarantee a premium, charged at an annual
rate of two-tenths of one percent (2/10 of 1%) on the unpaid
principal balance of the Note at the time payment is due. The
initial payment is made herewith, the receipt whereof is hereby
acknowledged, and Applicant agrees to pay such premium hereafter on
each anniversary date of this Agreement until the Note has been
repaid in full.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF APPLICANT AND GUARANTOR
Applicant and DO hereby represent and warrant as follows:
Section 4.01. Corporate Organization and Good Standing.
(a) Applicant and DO have been duly organized and are validly
existing and in good standing under the laws of the State of New
Jersey and New York, respectively.
(b) Applicant and DO are qualified to do business and are in
good standing in each State where the nature of their business or
the character of their properties requires such qualification and
standing. There are no other jurisdictions where Applicant or DO
should be qualified or licensed.
(c) Applicant and DO have full power and authority to own,
lease, hold, and operate their properties, and to conduct their
business in conformity with all applicable Federal, state and local
laws, statutes, and regulations. No further authorization from any
governmental agency is required to permit Applicant or DO to
operate their businesses.
Section 4.02. Validity of Agreements.
(a) The execution, delivery and performance of this
Agreement, the Note, the Guarantee Documents, Security Agreement,
and all other documents related to this transaction (hereafter
collectively referred to as the "Indebtedness") -
(i) are within the corporate authority of Applicant and
DO and have been authorized by all necessary and proper corporate
proceedings;
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(ii) do not and will not conflict with, violate,
constitute a default (or with the passage of time or with the
giving of notice or both, become a default) under, or result in the
creation or acceleration of a lien, charge, or encumbrance under
the certificate of incorporation or the bylaws of Applicant or DO,
or under any agreement binding upon Applicant or DO, or to which
they or their property are subject, or contravene any law,
regulation, rule, order, writ, decree, judgment or other
determination of a governmental agency, provided that Applicant and
DO will procure consent to the transaction embodied in this
Agreement from the Manufacturers and Traders Trust Company and that
the procurement of such a consent shall be a condition precedent
under section 8.07 herein:
(iii) do not and will not improperly or illegally impair
or infringe upon the rights of stockholders (including pre-emptive
rights, if any) and creditors of Applicant or DO; and
(iv) when and as executed and delivered in accordance
with their terms and conditions, will constitute valid and binding
obligations of Applicant and DO enforceable against Applicant and
DO in accordance therewith.
(b) The Note has been or will be issued in conformity with
all applicable state and Federal laws and regulations.
Section 4.03. No Bankruptcy of Officers and Directors;
No Felony Conviction or Securities Law Violation.
For the period commencing ten (10) years prior to the date
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hereof and ending on the date hereof -
(a) None of the officers or directors of Applicant or DO has
been involved as an officer, director, or stockholder (owning in
excess of ten percent of the issued and outstanding shares of any
class of such corporation's stock), in a bankruptcy or similar type
proceeding.
(b) no officer, director, department head or stockholder of
Applicant (owning in excess of ten percent of the issued and
outstanding shares of any class of Applicant's or DO's stock) or DO
has been convicted of any felony or violation of securities laws.
Section 4.04. Books of Account, Capital Structure, and
Financial Statements.
(a) Since their inception, Applicant and DO have kept and
maintained their books of account in accordance with generally
accepted accounting principles and practices consistently applied,
or with the Uniform Systems of Accounts of the Interstate Commerce
Commission.
(b) All of the financial statements, submitted to the
Administrator as part of the Application, are correct and complete
and have been prepared in strict consistency with the books of
account of Applicant and DO. The most recent balance sheets
contained in the Application fairly present the financial condition
of Applicant and DO, and the income statements fairly present the
results of operations of Applicant and DO for the respective
periods indicated.
(c) A statement of the capital structure of Applicant and DO
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indicating their authorized and issued debt and equity securities
as of the date hereof is as set forth on Schedule 4.04(c), attached
hereto. Such schedule also indicates (i) which securities, if any,
have pre-emptive rights, (ii) whether there are any outstanding
subscriptions or options to purchase securities and the book values
of each share of capital stock as of the most recent balance sheet
in the Application, (iii) all commitments, loan agreements or
arrangements for the issuance of debt by Applicant and DO, and (iv)
any commitment to convert debt into shares of common stock.
(d) All of the shares of the stock of Applicant and DO
presently outstanding have been duly authorized, validly issued in
conformity with all applicable state and Federal laws, and
regulations and are fully paid and non-assessable.
Section 4.05. No Changes Since Most Recent Balance Sheet.
There has been no change, which has had or may have a substantial
adverse effect on the operations or condition (financial, business,
labor or otherwise) of Applicant or DO, in the capital structure or
the condition (financial, business, labor or otherwise) of
Applicant or DO, since the date of the most recent balance sheets
in the Application.
Section 4.06. Distributions. Applicant and DO have not made
any distributions to their stockholders as dividends or other
payments of profit, surplus or reserves, or of capital, since the
date of the most recent balance sheet in the Application, nor are
any presently due or payable, nor have any been declared or
provided for by Applicant or DO, nor are Applicant or DO obligated
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in any manner to make such distributions or other payments.
Section 4.07. Material Contracts, Judgments, Decrees,
Obligations or Liabilities. Neither Applicant nor DO is a party
to, or is subject to, any contract, agreement, debt, mortgage,
indenture instrument, lease, judgment, decree, obligation or
liability, contingent or otherwise (other than transactions in the
ordinary course of business which do not, individually or in the
aggregate, materially adversely affect the condition or operations
of Applicant or DO) which has a material adverse effect on the
condition (financial, business, labor, or otherwise) or operations
of Applicant or DO.
Section 4.08. Litigation. There is no legal or
administrative litigation, investigation or other action of any
nature pending, or to the knowledge of the Applicant or DO
threatened against, or directly involving, Applicant or DO which
involves the possibility of a judgment or liability not fully
covered by insurance and exceeding $100,000 and which may
materially and adversely affect any of the assets of Applicant or
DO or their right to carry on their businesses as now conducted,
except as noted in Schedule 4.08 hereof, and Applicant and DO have
not been cited, enjoined, or any way restricted by any local,
state, or Federal court or agency in the conduct of their
businesses.
Section 4.09. Employee Protection. Applicant and DO have
complied and shall continue to comply with the conditions of
employee protection set forth in section 516 of the Act, and all
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rules and regulations promulgated thereunder.
Section 4.10. Buy America and Cargo Preference.
(a) Buy American. Each third party contract utilizing FRA
assistance must conform with the Buy American Act (41 U.S.C.
10a-d), if applicable.
(b) Cargo Preference. Applicant will require all contracts
and purchase orders issued by Applicant subsequent to the effective
date of this Agreement, for equipment, materials or commodities
that are to be obtained with funds provided hereunder, to:
(i) Utilize privately-owned United States flag commercial
vessels, to the extent such United States flag commercial vessels
are available at fair and reasonable rates, to ship at least 50
percent of the gross tonnage (computed separately for dry bulk
carriers, dry cargo liners and tankers) of any equipment, materials
or commodities which are both:
(1) procured, contracted for or otherwise obtained with
funds granted, guaranteed, loaned or advanced by the
Administrator under this Agreement, and (2) transported by
ocean vessel;
(ii) Furnish within twenty (20) working days following the
date of loading for shipments originating within the United States,
or within thirty (30) working days following the date of loading
for shipments originating outside the United States, a legible copy
of a rated, "on-board" commercial ocean bill-of-lading in English
of each shipment or cargo described in Paragraph (a) above to both
the Administrator and to the Division of National Cargo, Office of
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Market Development, Maritime Administration, Washington D.C. 20590;
(iii) Insert the substance of the provisions of Paragraphs (i)
and (ii) above along with the following language--
"Upon any breach Applicant contractor, vendor, subcontractor
or subvendor of the provisions of Paragraphs (i) or (ii) above
Applicant shall be entitled to receive three times the
applicable freight charge with respect to which such breach
occurs as liquidated damages. Recovery of this amount, for
the benefit of the United States, has been imposed upon
Applicant as an alternative to other remedies under its
contract with the Federal government caused by such breach.
All subcontracts issued pursuant to this agreement must
contain the substance of the provisions of this Paragraph and
Paragraphs (i) and (ii) hereof."
in all contracts executed and purchase orders issued pursuant to
this Agreement; and
(iv) Enforce diligently the liquidated damages provision
contained in Paragraph (iii).
Section 4.11. Lobbying. (a) The Interim Final Guidance
issued by the Office of Management and Budget, as it may be amended
from time to time, and any regulations hereafter issued in lieu of
or in addition to the Interim Final Guidance, implementing Section
319 of Public Law 101-121 (hereafter "Lobbying Regulations") are
incorporated herein by reference.
(b) Applicant shall insure that no appropriated funds are
expended by Applicant or any borrower, grantee, contractor or
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recipient of Applicant to pay any person for influencing or
attempting to influence an officer or employee of any agency,
Member of Congress, or officer or employee of a Member of Congress
or of Congress in connection with the awarding of any Federal
contract, grant, loan, cooperative agreement or extension,
continuation, renewal, amendment, or modification thereof.
(c) Applicant shall comply with all the provisions of the
Lobbying Regulations.
Section 4.12. Nondiscrimination. Applicant and DO have
complied and shall continue to comply with:
(a) The provisions of 49 U.S.C. 306 and all rules and
regulations promulgated thereunder, including 49 C.F.R part 265
which is incorporated herein by reference; and
(b)(i) Title VI of the Civil Right Act of 1964, 42 U.S.C.
sections 2000d, et seq. ("Civil Rights Act"), (ii) all requirements
imposed by or pursuant to 49 C.F.R. Part 21 (nondiscrimination in
Federally-Assisted Programs of the Department of Transportation;
(iii) any regulations which may be issued by the Administrator in
compliance with Department of Transportation Order No. 1000.12; and
(iv) other pertinent directives, (including the Department of
Transportation standard assurances required under 49 C.F.R. 21.7)
to the end that, no person in the United States shall, on the
grounds of race, color, sex, or national origin, be excluded from
participation in, be denied the benefits of, or be otherwise
subjected to discrimination under any program or activity for which
Applicant or DO receives assistance under this Agreement, and
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Applicant and DO hereby give assurance that they will promptly take
any measure necessary to effectuate this warranty; and
(c) Pursuant to the provision of 49 C.F.R. Part 23, the
following statement is hereby made a part of this Agreement: if as
a condition of assistance the recipient has submitted and the
Department has approved a minority business enterprise affirmative
action program which the recipient agrees to carry out, this
program is incorporated into this financial assistance agreement by
reference. This program shall be treated as a legal obligation and
failure to carry out its terms shall be treated as a violation of
this financial assistance agreement. Upon notification to the
recipient of its failure to carry out the approved program the
Department shall impose such sanctions as noted in 49 CAR Part 24,
Subpart E, which sanctions may include termination of the agreement
or other measures that may affect the ability of the recipient to
obtain future DOT financial assistance.
Policy. It is the policy of the Department of Transportation
that minority business enterprises as defined in 49 C.F.R. Part 23
shall have the maximum opportunity to participate in the
performance of contracts financed in whole or in part with Federal
funds under this Agreement. Consequently the MBE requirements of
49 C.F.R. Part 23 apply to this Agreement.
MBE Policy. Applicant or its contractor agrees to ensure that
minority business enterprises as defined in 49 C.F.R. Part 23 have
the maximum opportunity to participate in the performance of
contracts and subcontracts financed in whole or in part with
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Federal funds provided under this Agreement. In this regard all
recipients or contractors shall take all necessary and reasonable
steps in accordance with 49 C.F.R. Part 23 to ensure that minority
business enterprises have the maximum opportunity to compete for
and perform contracts. Recipients and their contractors shall not
discriminate on the basis of race, color, national origin, or sex
in the award and performance of DOT-assisted contracts.
(d) To the extent required by law, including Department of
Transportation regulations at 49 C.F.R. Part 27 and the standard
assurances thereunder, both of which are incorporated herein by
reference, no otherwise qualified handicapped individual in the
United States, as defined in 29 U.S.C. 706(6), will, solely by
reason of his or her handicap, be excluded from participation in,
be denied the benefits of, or be subject to discrimination under
any program or activity receiving benefits under this Agreement.
Section 4.13. Defaults Under Existing Agreements. Neither
Applicant nor DO is (a) in default under any written indenture,
contract, mortgage, franchise, lease, agreement, permit, or any
other instrument, nor overdue in the payment of vouchers for
materials and supplies, (b) in violation of its certificate of
incorporation or bylaws, or any applicable law, (c) in default with
respect to any judgment, order, writ, injunction or decree of any
court, or (d) in default under or cited for noncompliance with any
order, license, or regulation of any Federal, state, municipal or
other governmental agency; which defaults or violations
individually or in the aggregate might have consequences which
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would materially and adversely affect the assets of Applicant or DO
or their right to carry on their businesses which they now conduct
or presently propose to conduct.
Section 4.14. Related Persons. To the knowledge of the
officers and directors of Applicant and DO, no stockholder (owning
in excess of ten (10) percent of the issued and outstanding shares
of any class of Applicant's or DO's stock), director, or officer of
Applicant or DO and no relative by blood or marriage, of any of
them is retained or employed, directly or indirectly, by or is a
stockholder (owning in excess of ten (10) percent of the issued and
outstanding shares of any class of stock) of any supplier, service
organization, customer other than by bill of lading, contractor or
any entity with which Applicant or DO does business, or is
financially involved with Applicant or DO in any manner, except as
provided in Schedule 4.14.
Section 4.15. Tax Returns. All Federal, state, and other tax
returns and reports of Applicant and DO required by law or
regulation to be filed have been duly filed; and all Federal,
state, and other taxes, assessments, fees, and other governmental
charges (other than those presently payable without penalty)
imposed upon Applicant or DO with respect to any of their
properties, assets or income which are due and payable have been
duly paid.
Section 4.16. Completeness of Information. Applicant has
submitted all written information requested of it in the
Application.
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Section 4.17. Completeness of Representations and Warranties.
The sections comprising Article IV hereof, the exhibits and
schedules attached hereto, and any material incorporated herein by
reference are true, accurate, and complete and do not contain any
untrue statements of fact or omit to state any fact necessary to
make the statements herein contained not misleading. There is no
fact which materially adversely affects or in the future may, so
far as Applicant or DO now foresee, materially adversely affect the
business, prospects, or condition (financial, business, labor or
otherwise) of Applicant or DO or of their properties or assets,
which has not been set forth herein, other than changes in the
ordinary course of business which, in the aggregate, do not
materially adversely affect Applicant or DO.
Section 4.18. Purpose. The proceeds of the Note will be used
solely to purchase the Locomotives.
Section 4.19. Prospective Representations and Warranties. To
the extent sections 4.02, 4.09, 4.10, and 4.16 hereof govern
prospective action, in addition to present intent, the
representations and warranties shall not be considered a
representation or warranty for the purpose of events of default
under section 9.01(a)(ii) hereof but shall be considered a covenant
or condition for the purpose of events of default under section
9.01(a)(i) hereof.
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ARTICLE V
AFFIRMATIVE COVENANTS OF APPLICANT
Section 5.01. Further Documentation. In furtherance of the
transactions herein contemplated, Applicant and DO will execute and
cause to be delivered to the Administrator such other certificates,
documents, statements, agreements, or opinions as may be reasonably
requested by the Administrator.
Section 5.02. Pay Obligations. Applicant will duly and
punctually pay the principal balance of, and any interest, Late
charges (as defined in the Note), or other amounts due on the Note
in accordance with the provisions thereof.
Section 5.03. Pay Taxes and Other Claims. Applicant or DO,
as the case may be, will pay and discharge all taxes, assessments,
fees and other governmental charges lawfully levied or imposed upon
its income or profits, or upon its property, before the date on
which penalties attach thereto, pay when due all lawful claims for
labor, materials, supplies, and rents, and pay all other debts and
liabilities which, if unpaid, would by law be a lien or charge of
material consequence upon the property of Applicant or DO or lead
to the suspension of a material segment of its business; provided,
however, that nothing herein shall require Applicant or DO to make
any such payment so long as (a) Applicant or DO in good faith and
by appropriate proceedings diligently contests its obligation to do
so, (b) such reserve as shall be required by generally accepted
accounting principles shall have been made therefore, (c) notice
thereof is promptly given to the Administrator, and (d) failure to
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pay when due would not result in the forfeiture or loss of any
property of Applicant or DO.
Section 5.04. Maintenance of Insurance. Applicant will carry
insurance on the Locomotives which is adequate and usual within the
industry, designating the Administrator as the loss payee, as long
as this Agreement remains in effect. Applicant and DO will
maintain levels of insurance on their other assets, which are
consistent with customary industry practice for their respective
class of railroad, and will promptly notify the Administrator of
any material change in insurance coverage.
Section 5.05. Financial Records, Auditor's Retainer.
(a) Applicant and DO will, at their own cost and expense,
keep full, complete and current books and records of
their business and financial affairs.
(b) Both Applicant and DO will appoint an independent
certified public accounting firm to audit their books annually and
provide for, among other things, the preparation of the annual
reports and certificates to be furnished the Administrator in
accordance with this Agreement. Such independent public accounting
firm will make such checks, investigations and studies which would
enable it to give an unqualified opinion (but the opinion rendered
need not be unqualified) with respect to financial statements in
accordance with generally accepted accounting principles applied on
a consistent basis. Applicant and DO will direct such independent
accounting firm to furnish such additional information as may be
reasonably required by the Administrator under this Agreement.
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Section 5.06. Year-end Financial Statements. Applicant and
DO will deliver to the Administrator as soon as practicable but in
any event within one hundred twenty (120) days after the end of
each calendar year -
(a) a consolidated and consolidating profit and loss
statement, balance sheet, and statement of changes in financial
position for, and as of, the end of such calendar year prepared and
certified by Applicant's and DO's independent accounting firm, and
containing reasonable detail regarding the results of operations
and financial condition of Applicant and DO, including carloadings
and per diem earnings from car leases;
(b) a certificate of said independent accounting firm and
certificates of the chief executive officers and chief financial
officers of Applicant and DO that, to the best of their knowledge
and belief, no default exists under the Indebtedness or any other
document or instrument pursuant to which any indebtedness is
outstanding, and that all of the terms of the Indebtedness have
been duly performed; or if, to the knowledge of any of them, the
terms of the Indebtedness or any other document or instrument
pursuant to which any indebtedness is outstanding have not been
fully performed, said certificates shall specify the nature of the
default and the steps being taken by Applicant or DO, as the case
may be, to correct such default.
Section 5.07. Periodic Financial Statements. Applicant and
DO will submit to the Administrator within sixty (60) days after
the close of business on the last day of each quarter -
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(a) quarterly consolidated profit and loss statements, balance
sheets, and quarterly capital expenditure statements, each compared
against the respective budgets established under section 5.12
hereof which fairly present the results of operations and financial
condition of Applicant and DO respectively including carloadings
and per diem earnings from car leases; and
(b) certificates executed by the chief executive officer and
chief financial officers of Applicant and DO certifying that, to
the best of their knowledge and belief, the respective statements
present fairly the results of the operations and financial
condition of Applicant and DO for and as at the end of the period
covered, and there are no defaults under the Indebtedness, or any
written document or instrument pursuant to which indebtedness is
outstanding, or, if a default exists, specifying the nature of the
default and the steps being taken by Applicant or DO to correct
such default.
Section 5.08. Compliance with Applicable Laws. Applicant and
DO will own, lease, hold and operate their properties and conduct
their businesses in conformity with all Federal, state, and local
laws, statutes, ordinances, regulations and orders of governmental
authorities and all requirements of such foreign jurisdictions as
may be applicable and will promptly comply with any such laws,
statutes, ordinances, regulations and orders; provided, however,
that nothing herein shall require Applicant and DO to comply so
long as (a) they in good faith and by appropriate proceeding
diligently contest their obligation to do so, (b) such reserve as
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shall be required by generally accepted accounting principles shall
have been made therefor, (c) notice thereof is promptly given to
the Administrator, and (d) failure to comply would not result in
the forfeiture or loss of any property of Applicant or DO.
Applicant and DO shall promptly file all reports which are required
to be filed with all governmental agencies and shall promptly
furnish copies of all reports which have a material and adverse
effect on their operations or financial condition, and any others
specifically requested by the Administrator, with all attached
documents, to the Administrator.
Section 5.09. Legal Process. Applicant and DO shall provide
reasonable notice to the Administrator, within ten (10) days after
receipt, of legal process relating to an uninsured claim or alleged
claim against Applicant that, if upheld, would have a severe
adverse effect upon Applicant or DO and is not covered by insurance
(except for such claims or alleged claims falling within any
applicable deductible or self-insurance).
Section 5.10. Maintenance of Locomotives.
Applicant and DO, at their own cost and expense, will at all times
maintain and service the Locomotives and comply with a preventive
maintenance program consistent with the manufacturer's
recommendations which will include testing, repair and overhaul of
the Locomotives so that the Locomotives shall remain (i) in as good
operating condition as when delivered (ordinary wear and tear from
proper use excepted) and (ii) in compliance with all applicable
laws and regulations in effect from time to time.
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Section 5.11. Budgets. Applicant and DO will, reasonably in
advance of the commencement of each calendar year, prepare and
submit to their Board of Directors and obtain the approval of their
Boards with respect thereto, capital and operating expenses budgets
(reporting separately maintenance of way, maintenance of equipment,
transportation and other expenses), calendarized profit and loss
projections, a projected source and use of funds statement and a
projected year-end balance sheet, all itemized in reasonable
detail, for the ensuing calendar year. A copy of such documents as
is required to be approved by the Boards or their designees shall
be provided to the Administrator within ten (10) days after such
Board or designee approval and shall include a narrative statement
reconciling the information furnished thereunder with Applicant's
or DO's obligations under this Agreement.
Section 5.12. Audit and Inspection Rights.
(a) The Applicant and DO will give representatives of the
Administrator and the Comptroller General of the United States free
access, at reasonable times during normal business hours and upon
reasonable advance notice, to examine and inspect all books,
accounts, records, reports, files, inventories, equipment,
facilities, and other papers or things properly relating to the
documents. Nothing contained herein is intended to extend the
holding period of such books, accounts, records, reports, and files
beyond three (3) years from the date such books, accounts, records,
reports and files were prepared, unless a longer period is required
by contract or by some other governmental agency.
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(b) Such representatives shall be afforded full cooperation
for verifying the Applicant's or DO's compliance with this
Agreement or in making any inspections hereunder.
(c) Nothing herein shall limit the authority granted to the
Comptroller General of the United States by section 514 of the Act.
(d) Such representatives shall be afforded full facilities
for verifying transactions with the balances or securities held by
depositories, fiscal agents, and custodians relating in any way to
the Indebtedness. All such property of such persons or entities
will, to the extent practicable, remain in the possession and
custody of such persons or entities. Such representatives shall
have the right to discuss with the officers of the Applicant and DO
affairs of such persons or entities.
(e) At the Administrator's election, the Applicant and DO
will make any such inspections and provide any such reports as are
necessary to verify compliance with the provisions of this
Agreement.
Section 5.13. Information between Applicant and Holder.
Applicant will provide the Administrator with a conforming copy of
each and every substantive document or thing passing between it and
the Holder and in any way relating to the Indebtedness,
contemporaneously with the provision of such document or thing to
the Holder.
Section 5.14. Information on Applicant's and DO's
Performance. Applicant and DO will furnish promptly on request of
the Administrator such information as may be reasonably necessary
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to determine whether (a) Applicant and DO are fulfilling their
warranties, covenants and agreements contained in the Indebtedness,
and (b) an Event of Default has occurred hereunder or under any of
the Indebtedness.
Section 5.15. Guarantee of New Subsidiaries. Applicant and
DO shall notify the Administrator of the formation of any new
subsidiary corporation and shall, at the request of the
Administrator, require any such subsidiary corporation to
unconditionally guarantee the performance of all of the obligations
of Applicant under the Indebtedness.
ARTICLE VI
So long as this Agreement remains in effect, without the prior
written consent of the Administrator:
A. NEGATIVE COVENANTS OF APPLICANT AND DO.
Section 6.01 Guarantees, Indebtedness. Applicant and DO will
not -
(a) guarantee any contract other than a contract of a wholly-
owned subsidiary, or
(b) incur, create, assume, or guarantee or in any manner
become or be liable in respect of any indebtedness for borrowed
money except:
(i) such indebtedness between Applicant or DO and a
wholly-owned subsidiary;
(ii) the unmatured balance from time to time remaining
unpaid on any indebtedness of Applicant or DO reflected in the most
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recent balance sheets of Applicant and DO as set forth in the
Application;
(iii) any indebtedness incurred to simultaneously pay or
prepay in full the Note; and
(iv) any indebtedness incurred in the ordinary course of
Applicant's or DO's businesses.
(c) incur, create, assume, or guarantee or in any manner
become or be liable in respect of any indebtedness not in the
ordinary course of Applicant's or DO's businesses except as may
otherwise be specifically provided in this Agreement.
Section 6.02. Merger, Acquisition or Sale of Assets.
Applicant and DO will not consolidate or merge with, or purchase
all or a substantial part of the assets of, any corporation, firm,
association or enterprise. Applicant and DO will not sell, lease
or otherwise transfer a substantial part of their assets other than
a sale, lease or transfer in the normal course of its present
business. Applicant and DO will not voluntarily participate in any
sale, exchange, or other scheme to deliver a controlling interest
in any class of voting stock of Applicant or DO to any individual
or entity.
Section 6.03. Purchase or Redemption of Securities of
Applicant and DO. Applicant and DO will not purchase, redeem or
otherwise acquire or retire for value any shares of their stock or
other securities other than payments to be made pursuant to the
provisions of the Note or other obligations as they become due.
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Section 6.04. Certificate of Incorporation, Bylaws,
Subsidiaries, Lines of Business. Applicant and DO will not
organize, or permit to be organized, any subsidiary corporation
which is not one-hundred percent (100%) owned directly or
indirectly by Applicant or DO. Applicant and DO will not amend
their certificates of incorporation or by-laws to engage in lines
of business other than those in which they are engaged at the date
hereof and in lines of business directly related thereto.
Section 6.05. Purchase of Investment Securities, Lending or
Advancing Funds. Applicant and DO will not purchase securities
other than certificates of deposit, commercial paper rated at the
highest Moody's rating and maturing within twenty (20) days, or
full faith and credit obligations of the United States, its
agencies or instrumentalities. Applicant and DO will not lend or
advance any funds to any person, corporation, firm or other entity
other than loans or advances to wholly owned subsidiaries, and
reasonable advances to employees.
Section 6.06. Dividends, Deployment of Assets. (a) Applicant
and DO will not make any dividend payments if such payments exceed:
(1) when compared to the net income of Applicant for any
fiscal year, the ratio of aggregate dividends paid by
Applicant during the 5 fiscal years prior the date of this
Agreement to the aggregate net income of Applicant or DO, as
the case may be, for such period; or
(2) fifty per centum (50%) of the total addition to retained
income of Applicant, or DO as the case may be, computed on a
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cumulative basis and giving cognizance to dividends paid,
during the period commencing with the fiscal year prior to the
date of this Agreement.
(b) Applicant and Do will not, except as provided in
subsections (a) and (b) above, use or retain any funds or assets
from nonrailroad operations in operations other than railroad
operations, except to the extent of normal and customary cash
requirements of such nonrailroad operations or use any funds or
assets from railroad operations for nonrailroad purposes
Section 6.07. Financial Tests. DO and Manufacturers and
Traders Trust Company are parties to an Amended and Restated Credit
Agreement dated May 17, 1994 ("M&T Loan"). Applicant is a
guarantor of DO's obligations under the M&T Loan. Sections 7.11,
7.12, 7.13, 7.14, 7.15, and 7.16 of the M&T Loan, as they may be
amended from time to time, require DO to meet certain financial
tests. Attached hereto as Exhibit E is a copy of the entire M & T
Loan Agreement, as it exists as of the date hereof. Should the
M & T Loan terminate at any time while this Agreement remains in
effect, the financial tests in effect at the time of the
termination of the M & T Loan shall remain in effect hereunder
unless otherwise agreed to by the Administrator.
ARTICLE VII
SECURITY INTEREST
Section 7.01. Grant of Security Interest. Applicant and DO
will grant to the United States the security interests set forth in
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the Security Agreement as security for any expenses incurred, and
amounts required to be paid, by the United States under the
Indebtedness.
Section 7.02. Priority of Security Interest. The liens and
security interests provided for under the Security Agreement shall
be first in time and right to all other liens and security
interests, except as specifically provided therein.
Section 7.03. Evidence of Perfection of Liens, Releases.
(a) Applicant and DO shall deliver or cause to be delivered
to the Administrator evidence satisfactory to the Administrator
that valid liens and security interests as required under this
Article have been perfected, including all required subordinations
by the Manufacturers and Traders Trust Company.
(b) All costs of subordinations and preparation, filing,
perfection and release of the security interests conveyed hereunder
shall be borne by Applicant and DO.
ARTICLE VIII
CONDITIONS PRECEDENT TO THIS AGREEMENT
The undertakings of the Administrator herein shall be subject
to the following conditions which must be satisfied on or before
execution of this Agreement.
Section 8.01. Corporate Standing and Other Corporate
Documents. Applicant and DO shall have delivered to the
Administrator -
(a) A copy of the certificate of incorporation of Applicant
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and DO and of each amendment thereto certified by the appropriate
official or department of the jurisdiction of incorporation;
(b) A copy of the bylaws of Applicant and DO and all
amendments thereto, certified by the secretary of Applicant and DO;
(c) An exact copy of the Note as executed by and between
Applicant and Holder which Note shall be the final agreement of the
parties thereto and shall be in the form attached hereto as
Exhibit "B".
Section 8.02. Performance of Applicant's and DO's Agreements.
(a) Applicant and DO shall have performed all undertakings
contained herein including the provision of all schedules and other
information, where such performance or provision was required at or
prior to the date hereof.
(b) Applicant and DO shall not have incurred any material
liabilities, direct or contingent, other than in the ordinary
course of business, since the date or dates of the most recent
financial statements set forth in the Application except as set
forth in the schedules previously attached hereto;
(c) The Administrator shall have received a certificate of
Applicant's and DO's chief executive officers or their authorized
representative dated as of the date hereof to the foregoing effect.
Section 8.03. No Events of Default. There shall
exist at the date hereof no condition or event which
constitute, or which after notice or lapse of time or both would
constitute, an Event of Default as defined in any of the
Indebtedness, and the Administrator shall have received
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a certificate of the Applicant's and DO's chief executive officer
or his authorized representative, as of the date hereof, to the
foregoing effect.
Section 8.04. Opinion of Applicant's and DO's Independent
Auditors. The Administrator shall have received from Applicant's
and DO's presently retained independent Certified Public Accounting
firm a certificate or letter as of the date hereof, stating in
effect that on the basis of procedures and inquiries to be outlined
in such letter (which need not constitute an examination in
accordance with generally accepted auditing standards), nothing
came to its attention that caused it to believe that (a) at a date
not more than ten (10) days prior to the date hereof there was any
change in the capital stock or long term debt of Applicant or DO
and subsidiaries consolidated, if any, or any decreases in
consolidated net current assets or net assets as compared with
amounts shown in the most recent balance sheet of Applicant or DO
as set forth in the Application or (b) for the period from the most
recent financial statements set forth in the Application to such
date not more than ten (10) days prior to the date hereof, there
were any decreases, as compared with the corresponding period in
the preceding year, in consolidated net revenues or in the total or
per share amounts of income before extraordinary items or of net
income.
Section 8.05. Environmental Assessment. The Administrator
shall have conducted an assessment as to whether the transaction
significantly affects the quality of the human environment, and
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such conclusion of the environmental assessment shall be
satisfactory to the Administrator in all respects.
Section 8.06. Completion of Proceedings and Documents by
Applicant, DO and Holder. All proceedings, conditions and
agreements to be taken, satisfied and performed in connection with
the transactions contemplated by this Agreement and to be
consummated as of, prior to, or after, the date hereof and all
documents and things incident thereto (including, but not limited
to, perfection of liens, mortgages, security interests,
subordination by the Manufacturers and Traders Trust Company and
execution of the Guarantee Documents), shall be satisfactory in
form and substance in all respects to the Administrator and the
Holder, and the Administrator and the Holder shall have received
executed original counterparts, or certified copies of all
documents and things reasonably requested in connection with said
transactions and of all corporate proceedings in connection
therewith, in form and substance satisfactory in all respects to
the Administrator and the Holder.
Section 8.07. Commitment to Guarantee. If any condition
precedent, including the delivery of any document, consent,
certification, report, or other material to be provided by
Applicant, DO, the Administrator, or the Holder pursuant to any
provision of the Indebtedness, remains outstanding or unsatisfied
as of close of business September 30, 1994, all obligations of this
transaction, including the purchase of the Note shall be suspended
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until such time as all such condition precedent are satisfied,
but in no event shall this Agreement continue beyond December 31,
1994, if any such condition precedent remains unsatisfied.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Section 9.01. Events of Default. The following shall be Events of
Default:
(a) Any of the following defaults, but only upon the
Administrator's notification to Holder, DO and Applicant in writing
that such defaults are to be treated as Events of Default: (i) A
breach in the due observance or performance of any covenant or
condition contained in Sections 4.17, 5.01, 5.06, 5.07, 5.11 and
5.14 herein and such breach shall continue for a period of thirty
(30) days.
(ii) Any representation or warranty herein made by
Applicant or DO or incorporated herein by reference proving to
be untrue or incomplete in any material respect, or any
statement, certificate or information furnished by Applicant
or DO hereunder proving to be untrue or incomplete in a
material respect, either as of the date hereof or as of the
date on which the things therein set forth were stated or
certified.
(iii) Applicant or DO becoming party to any litigation
the outcome of which would, in the reasonable judgment of the
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Administrator, severely jeopardize the continued operation or
the financial condition of the Applicant or DO.
(b) Applicant's failure to meet its obligation under the Note
to pay principal and interest, Late Charges and other sums payable
in accordance with the terms of the Note, which shall continue for
a period of thirty (30) days.
(c) Applicant's or DO's -
(i) discontinuing or abandoning its entire business (or
any significant part thereof) which would impair its ability
to carry on its business as it now conducts or presently
proposes to conduct it;
(ii) making a general assignment for the benefit of
creditors;
(iii) applying for or consenting to the appointment of a
receiver, a trustee or liquidator of Applicant or DO of all or
a substantial part of its assets;
(iv) filing a voluntary petition in bankruptcy or filing
a petition or answer seeking reorganization or an arrangement
with creditors who are seeking to take advantage of any other
law (whether Federal or state) relating to relief of debtors,
or admit (by answer, by default or otherwise), the material
allegations of a petition filed against it in any bankruptcy,
reorganization, arrangement, insolvency or other proceeding
(whether Federal or state) relating to relief of debtors;
(v) suffering or permitting to continue unstayed and in
effect for fifteen (15) days any judgment, decree or order of
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a court of competent jurisdiction, which approves a petition
seeking reorganization of Applicant or DO, or appoints a
receiver, trustee or liquidator of Applicant or DO of all or a
substantial part of its assets; or
(vi) taking or omitting to take any action which causes
any of the foregoing.
(d) Except as set forth in Section 9.01(a)(i), a breach in
the due observance or performance of any covenant or condition
contained in any of the Indebtedness or any other written
agreement, document or instrument pursuant to which indebtedness is
outstanding, which shall remain outstanding for thirty (30) days.
Section 9.02. Remedies. (a) Upon the occurrence of an Event
of Default pursuant to the provisions of the Indebtedness, the
Administrator may demand from Applicant and/or DO payment in full
to the Administrator of the principal balance, unpaid interest on,
Late Charges, and any other payments due under the Note and any
other of the Indebtedness.
(b) If the Administrator makes payment to Holder pursuant to
the Guarantee Documents, the Administrator shall have all of the
rights granted to the Administrator by law or by agreement with
Applicant and DO and shall be subrogated to all of the rights which
Holder has against Applicant to the extent of such payment.
(c) The Administrator may, in the Administrator's discretion,
recondition, reconstruct, renovate, repair, maintain, operate,
rent, sell, or otherwise dispose of any property or other interest
obtained by the Administrator pursuant to the Indebtedness.
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Section 9.03. Further Remedies. If an Event of Default shall
occur, the Administrator shall obtain all rights and remedies in
law and equity to seek damages from or enforce performance by
Applicant or DO. Nothing contained in this section, however, is
intended to mitigate the Administrator's undertakings with respect
to Holder.
Section 9.04. Settlement. If the United States shall pay
principal and interest, or any other sums in satisfaction of its
obligations under the Guarantee Documents and shall take action in
the name of the United States or in the name of Holder to protect
the interests of the United States, the Administrator may, in the
Administrator's discretion, accept a conveyance of property in full
or partial satisfaction of any sums owed to the Administrator. If
the United States receives, through the sale of property, an amount
greater than the aggregate of its cost and the amount paid to
Holder hereunder, the United States shall pay any excess to
Applicant or DO, as the case may be.
Section 9.05. Cumulative Remedies. All rights and remedies
of the Administrator and Holder, whether specified herein or
inherent in law or equity, shall be cumulative.
ARTICLE X
MISCELLANEOUS
Section 10.01. Indemnification. Applicant and DO shall
indemnify and hold the United States harmless from and against any
claim, demand, cause of action, damage, liability, cost or expense
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(including reasonable attorneys' fees and court costs) incurred by
the United States and arising out of, or in any way resulting from,
the Indebtedness (except if such claim, demand, cause of action,
damage, liability, cost or expense is asserted against the United
States in its governmental capacity), including, but not limited
to, the use, operation or condition of any equipment or facilities
for which financing is guaranteed hereunder.
Section 10.02. Survival of Representations, Warranties and
Indemnification. All representations and warranties contained in
this Agreement by or on behalf of Applicant or DO in connection
with the transactions contemplated hereby and the indemnification
set forth in Section 10.01 hereof shall survive the execution,
delivery and termination of this Agreement.
Section 10.03. Incorporation of Exhibits and Schedules. All
reference herein to this Agreement shall be deemed to also refer to
the Exhibits and Schedules annexed and attached hereto or otherwise
referred to herein, and such Exhibits and Schedules shall bind the
parties hereto as if the provisions thereof had been set forth in
their entirety herein.
Section 10.04. Subsidiaries of Applicant or DO. All
references herein to Applicant or DO shall be deemed to include,
where applicable, any subsidiary of Applicant or DO whether in
existence on the date of this Agreement or thereafter created or
acquired. As used herein, the term "subsidiary" shall mean any
corporation (other than Applicant or DO) in an unbroken chain of
corporations beginning with Applicant or DO, if each of the
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corporations, other than the last corporation in the unbroken
chain, owns voting securities possessing more than 50 percent of
the total combined voting power in one of the other corporations in
such chain.
Section 10.05. Entire Agreement. This Agreement embodies the
entire agreement and understanding between Applicant, DO, Holder
and the Administrator and supersedes all prior agreements and
understandings relevant to the subject matter hereof. No
amendments, waivers, or modifications to this Agreement are to be
effective unless executed by the parties hereto in
writing specifically referring to this Agreement, and no
amendments, waivers, or modifications to Sections 9.01 and 9.02
hereof shall be effective without Holder's written consent.
Section 10.06. Parties Bound, Right to Assign. All the terms
and conditions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by each of the parties hereto and
their legal representatives, successors and assigns, provided that
this Agreement may not be transferred or assigned by Applicant or
DO without the prior written consent of the Administrator.
Section 10.07. Table of Contents; Headings. The table of
contents and headings of the Articles and Sections of this
Agreement are inserted for convenience only and shall not be deemed
to constitute a part hereof or in any manner limit or define the
terms of this Agreement.
Section 10.08. Notices; Action to be taken. Notices required
or permitted hereunder shall be deemed given if personally
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delivered or mailed by registered or certified mail, return receipt
requested and postage pre-paid, to the following addresses of the
parties or at such other addresses as either Applicant, DO or the
Administrator shall, from time to time, designate by written
notice:
Applicant: The New York, Susquehanna and Western
Railway Corporation
ATTN: President
1 Railroad Ave.
Cooperstown, NY 50636
DO: Delaware Otsego Corporation
ATTN: President
1 Railroad Ave.
Cooperstown, NY 50636
Holder: Federal Financing Bank
Main Treasury Building Room 3054
15th St. & Pennsylvania Ave., N.W.
Attn: Manager
Washington, D.C. 20220
Administrator: Federal Railroad Administration
Attn: Associate Administrator for
Railroad Development
400 7th Street, S.W.
Washington, D.C. 20590
All notices mailed shall be deemed given as of the date
indicated by the post marks.
Section 10.09. Release of Information. Applicant, DO and
Holder hereby authorize the Administrator to make public any terms
of this Agreement, or any other information (financial or
otherwise) concerning or affecting Applicant, DO or Holder, except
that such information as may previously have been designated
confidential shall be kept confidential to the extent permissible
by law.
136
<PAGE>
Section 10.10. No Waiver by Administrator. No course of
dealing on the part of the Administrator, nor any failure or delay
by the Administrator, with respect to exercising any right, power
or privilege of the Administrator under this Agreement shall
operate as a waiver thereof and any single or partial exercise of
any such right, power or privilege shall not preclude any later
exercise of any other right, power or privilege hereunder.
Section 10.11. Governing Law. This Agreement has been
executed and delivered in the District of Columbia and shall be
construed in accordance with Federal law, where applicable, and
otherwise by the laws of the District of Columbia. For any
litigation arising hereunder, Applicant and DO agree to the
jurisdiction of the Federal Court of the District of Columbia only
with respect to issues of law which arise under District of
Columbia law.
Section 10.12. Representatives. References to the
Administrator or the Comptroller General of the United States
include their subordinates, employees, agents and servants. The
Administrator acts hereunder in the Administrator's official, not
personal, capacity.
Section 10.13. Counterparts. This Agreement may be executed
in any number of counterparts. All such counterparts shall be
deemed to be originals and shall constitute but one and the same
agreement.
Section 10.14. Severability. If any provision of this
Agreement shall be invalid, illegal, or unenforceable, the
137
<PAGE>
validity, legality, or enforceability of the remaining provisions
shall not be affected or impaired in any way thereby. A provision
held to be unenforceable as applied to any party of circumstance
remains applicable to other parties and other circumstances.
Section 10.15. Use of "Applicant" and "DO." Use of
"Applicant" and "DO" in the conjunctive or disjunctive means
Applicant and DO jointly and severally. Any action by the
Administrator against either Applicant or DO need not include the
other.
IN WITNESS WHEREOF, this Agreement (511) executed on this
the 29th day of September, 1994.
ATTEST: UNITED STATES OF AMERICA
FEDERAL RAILROAD ADMINISTRATION
By: By: Jolene M. Molitoris
- --------------------------- ---------------------------
ATTEST: New York, Susquehanna, and Western
Railway Corporation
(APPLICANT)
By: By: Wm B. Blatter
- --------------------------- ---------------------------
ATTEST: Delaware Otsego Corporation
(DO)
By: By: Wm B. Blatter
- --------------------------- ---------------------------
(CORPORATE SEAL)
138
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
STATE OF
NAME OF SUBSIDIARY INCORPORATION
__________________ _____________
Cooperstown and Charlotte Valley New York
Railway Corporation
Central New York Railroad Corporation New York
Syracuse, Binghamton and New York New York
Railroad Corporation
Lackawaxen and Stourbridge Railroad Pennsylvania
Corporation
Delaware Otsego Equipment Corporation New York
Fonfulco, Inc. New York
The New York, Susquehanna and Western New Jersey
Railway Corporation
Susquehanna Properties, Inc. New York
Staten Island Railway Corporation New York
Delta Warehousing Corporation New Jersey
Rahway Valley Company, Lessee New Jersey
Rahway Valley Railroad Company New Jersey
Susquehanna Bulk Systems, Inc. New Jersey
139
Exhibit 23 - Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 and Form S-3 No. 33-34587) pertaining to the 1987 Stock Option
Plan of Delaware Otsego Corporation of our report dated March 3, 1995, with
respect to the consolidated financial statements and schedule of Delaware
Otsego Corporation included in this Annual Report (Form 10-K) for the year
ended December 31, 1994.
Ernst & Young LLP
Syracuse, New York
March 27, 1995
140
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