SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 1, 1999
CSX TRANSPORTATION, INC.
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation or organization)
1-3359 54-6000720
(Commission (I.R.S. Employer
File No.) Identification No.)
500 Water Street, Jacksonville, FL 32202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 359-3100
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<PAGE>
ITEM 5. OTHER EVENTS
On June 1, 1999, CSX Transportation, Inc. ("CSXT"), and Norfolk
Southern Railway Company ("Norfolk Southern Railway") formally began integrated
operations over their respective portions of the Conrail Inc. ("Conrail") rail
system. This step implements the operating plan envisioned by CSX Corporation
("CSX") and Norfolk Southern Corporation ("Norfolk Southern") when they
completed the joint acquisition of Conrail in May 1997 and later received
regulatory approval permitting them to exercise joint control over Conrail in
August 1998.
Under this operating plan, CSXT has added approximately 4,400
route miles of track in the Northeastern and Midwestern United States and in
Canada to its existing lines concentrated in the Middle Atlantic and
Southeastern United States. To service the new operations, approximately 6,200
former Conrail employees have joined CSXT. CSXT now operates a network of more
than 22,700 route miles in 23 states, the District of Columbia, and two Canadian
provinces and employs approximately 34,500 employees across the combined system.
CSXT and Norfolk Southern Railway operate their respective
portions of the Conrail system pursuant to various operating agreements which
took effect on June 1 and pay operating fees to Conrail for the use of
right-of-way and equipment. Conrail continues to provide rail service in certain
geographic areas for the joint benefit of CSXT and Norfolk Southern Railway for
which it is compensated on the basis of usage by the respective railroads.
CSX and Norfolk Southern, through a joint acquisition entity,
hold economic interests in Conrail of 42% and 58%, respectively, and voting
interests of 50% each.
CSX's press release announcing the event is included as an
exhibit hereto and is incorporated herein by reference. Copies of material
contracts governing the transaction and related operations are also filed as
exhibits hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are filed as a part of this report.
10.1 Transaction Agreement, dated as of June 10, 1997, by
and among CSX Corporation, CSX Transportation, Inc.,
Norfolk Southern Corporation, Norfolk Southern Railway
Company, Conrail Inc., Consolidated Rail Corporation,
and CRR Holdings LLC, with certain schedules thereto.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS, Continued
10.2 Amendment No. 1, dated as of August 22, 1998, to the
Transaction Agreement, dated as of June 10, 1997, by
and among CSX Corporation, CSX Transportation, Inc.,
Norfolk Southern Corporation, Norfolk Southern Railway
Company, Conrail Inc., Consolidated Rail Corporation,
and CRR Holdings LLC.
10.3 Amendment No. 2, dated as of June 1, 1999, to the
Transaction Agreement, dated June 10, 1997, by and
among CSX Corporation, CSX Transportation, Inc.,
Norfolk Southern Corporation, Norfolk Southern Railway
Company, Conrail Inc., Consolidated Rail Corporation,
and CRR Holdings, LLC.
10.4 Operating Agreement, dated as of June 1, 1999, by and
between New York Central Lines LLC and CSX
Transportation, Inc.
10.5 Shared Assets Area Operating Agreement for North
Jersey, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation,
Inc., and Norfolk Southern Railway Company, with
exhibit thereto.
10.6 Shared Assets Area Operating Agreement for Southern
Jersey/Philadelphia, dated as of June 1, 1999, by and
among Consolidated Rail Corporation, CSX
Transportation, Inc., and Norfolk Southern Railway
Company, with exhibit thereto.
10.7 Shared Assets Area Operating Agreement for Detroit,
dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation,
Inc., and Norfolk Southern Railway Corporation, with
exhibit thereto.
10.8 Monongahela Usage Agreement, dated as of June 1, 1999,
by and among CSX Transportation, Inc., Norfolk
Southern Railway Company, Pennsylvania Lines LLC, and
New York Central Lines LLC, with exhibit thereto.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS, Continued
99.1 Press release issued by CSX Corporation on June 1,
1999.
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<PAGE>
Signature
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
CSX TRANSPORTATION, INC.
By: /s/ MICHAEL J. WARD
-------------------
Michael J. Ward
Executive Vice President -
Coal and Merger Planning
Date: June 11, 1999
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<PAGE>
EXHIBIT LIST
Exhibit Description
10.1 Transaction Agreement, dated as of June 10, 1997, by and among
CSX Corporation, CSX Transportation, Inc., Norfolk Southern
Corporation, Norfolk Southern Railway Company, Conrail Inc.,
Consolidated Rail Corporation, and CRR Holdings LLC, with certain
schedules thereto.
10.2 Amendment No. 1, dated as of August 22, 1998, to the Transaction
Agreement, dated as of June 10, 1997, by and among CSX
Corporation, CSX Transportation, Inc., Norfolk Southern
Corporation, Norfolk Southern Railway Company, Conrail Inc.,
Consolidated Rail Corporation, and CRR Holdings LLC.
10.3 Amendment No. 2, dated as of June 1, 1999, to the Transaction
Agreement, dated June 10, 1997, by and among CSX Corporation, CSX
Transportation, Inc., Norfolk Southern Corporation, Norfolk
Southern Railway Company, Conrail Inc., Consolidated Rail
Corporation, and CRR Holdings, LLC.
10.4 Operating Agreement, dated as of June 1, 1999, by and between
New York Central Lines LLC and CSX Transportation, Inc.
10.5 Shared Assets Area Operating Agreement for North Jersey, dated as
of June 1, 1999, by and among Consolidated Rail Corporation, CSX
Transportation, Inc., and Norfolk Southern Railway Company, with
exhibit thereto.
10.6 Shared Assets Area Operating Agreement for Southern
Jersey/Philadelphia, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and
Norfolk Southern Railway Company, with exhibit thereto.
10.7 Shared Assets Area Operating Agreement for Detroit, dated as of
June 1, 1999, by and among Consolidated Rail Corporation, CSX
Transportation, Inc., and Norfolk Southern Railway Corporation,
with exhibit thereto.
10.8 Monongahela Usage Agreement, dated as of June 1, 1999, by and
among CSX Transportation, Inc., Norfolk Southern Railway Company,
Pennsylvania Lines LLC, and New York Central Lines LLC, with
exhibit thereto.
99.1 Press release issued by CSX Corporation on June 1, 1999.
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Exhibit 10.1
TRANSACTION AGREEMENT
by and among
CSX CORPORATION,
CSX TRANSPORTATION, INC., NORFOLK SOUTHERN CORPORATION,
NORFOLK SOUTHERN RAILWAY COMPANY, CONRAIL INC.,
CONSOLIDATED RAIL CORPORATION and
CRR HOLDINGS LLC
Dated as of June 10, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Defined Terms. . . . . . . . . . . . 1
Section 1.2. Other Definitive Provisions. . . . . 15
ARTICLE II
DESIGNATION AND ALLOCATION OF ASSETS
AND LIABILITIES
Section 2.1. Conveyance of Assets.. . . . . . . . 16
Section 2.2. Allocation of Certain Assets . . . . 16
Section 2.3. System Support Operations; Dispatching 24
Section 2.4. Transition Period Accommodation. . . 27
Section 2.5. Trackage, Haulage, Shared Asset and Other
Operating Agreements . . . . . . . . 30
Section 2.6. Equipment. . . . . . . . . . . . . . 30
(a) Locomotive Equipment. . . . . 30
(b) Rolling Stock Equipment . . . . 31
(c) Work Equipment. . . . . . . . . 32
(d) Assignment. . . . . . . . . . . 32
(e) Lease of Equipment. . . . . . . 32
(f) Equitable Adjustment. . . . . . 33
Section 2.7. Inventory at Altoona and Hollidaysburg 33
Section 2.8. Allocated and Retained Liabilities . 34
Section 2.9. Other Liabilities. . . . . . . . . . 35
Section 2.10. Interline Accounts and Allocation. . 36
Section 2.11. Insurance Proceeds . . . . . . . . . 37
ARTICLE III
CLOSING AND CLOSING DATE
Section 3.1. Closing. . . . . . . . . . . . . . . 37
Section 3.2. Pre-Closing Actions. . . . . . . . . 37
Section 3.3. Closing Deliveries . . . . . . . . . 37
ARTICLE IV
CRR PARENT, CRR AND CRC GOVERNANCE AND FUNDING
Section 4.1. Pre-Control Date Matters . . . . . . 39
Section 4.2. Post-Control Date CRC Governance . . 40
Section 4.3. Post-Closing Date CRC Funding. . . . 41
Section 4.4. Post-Control Date CRC and Other
Distributions. 41
Section 4.5. Operating Fees, Interest Rentals and
Base Rent. . . . . . . . . . . . . . . 42
ARTICLE V
NYC and PRR GOVERNANCE AND CONDUCT
Section 5.1. NYC Governance . . . . . . . . . . . 42
Section 5.2. PRR Governance . . . . . . . . . . . 43
Section 5.3. NYC and PRR Actions. . . . . . . . . 43
Section 5.4. NYC and PRR Distributions. . . . . . 43
Section 5.5. Actions. . . . . . . . . . . . . . . 43
ARTICLE VI
EMPLOYEE MATTERS
Section 6.1. Employees of CRR and CRC . . . . . . 43
Section 6.2. Employee Related Liabilities . . . . 44
Section 6.3. Non-Agreement Employee Benefit Plans 46
Section 6.4. Residual Liability . . . . . . . . . . 47
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1. CSX.. . . . . . . . . . . . . . . . 48
(a) Organization and Good Standing. 48
(b) Authority . . . . . . . . . . . 48
(c) Enforceability. . . . . . . . . 48
(d) No Violation. . . . . . . . . . 48
(e) No Approvals. . . . . . . . . . 48
Section 7.2. NSC.. . . . . . . . . . . . . . . . 49
(a) Organization and Good Standing. 49
(b) Authority . . . . . . . . . . . 49
(c) Enforceability. . . . . . . . . 49
(d) No Violation. . . . . . . . . . 49
(e) No Approvals. . . . . . . . . . 49
ARTICLE VIII
COVENANTS
Section 8.1. Conduct of Business. . . . . . . . . 50
Section 8.2. Best Efforts . . . . . . . . . . . . 50
Section 8.3. Further Assurances; Consents . . . . 50
Section 8.4. STB Approval . . . . . . . . . . . . 51
Section 8.5. Other Approvals. . . . . . . . . . . 52
Section 8.6. INTENTIONALLY OMITTED. . . . . . . . 52
Section 8.7. Risk of Loss; Forced Disposal. . . . 53
Section 8.8. Public Statements; Public Filings. . 53
Section 8.9. Restructuring of CRC . . . . . . . . 53
Section 8.10. Provision of Corporate Records . . . 55
Section 8.11. Access to Information. . . . . . . . 55
Section 8.12. Production of Witnesses and Individuals 56
Section 8.13. Confidentiality. . . . . . . . . . . 56
Section 8.14. Privileged Matters . . . . . . . . . 57
Section 8.15. Administration of Actions. . . . . . 58
Section 8.16. Administration of FELA Claims. . . . 59
Section 8.17. Tax Matters. . . . . . . . . . . . . 60
Section 8.18. Committees . . . . . . . . . . . . . 60
Section 8.19. Chicago Gateway Access . . . . . . . 60
Section 8.20. Car Hire and Car Service . . . . . . 61
ARTICLE IX
CONDITIONS PRECEDENT TO THE CLOSING
Section 9.1. Conditions Precedent to Obligations. 61
ARTICLE X
INDEMNIFICATION
Section 10.1. Indemnification. . . . . . . . . . . . 62
Section 10.2. Indemnification Procedures . . . . . . 62
Section 10.3. Remedies . . . . . . . . . . . . . . . 63
ARTICLE XI
MISCELLANEOUS
Section 11.1. Amendment. . . . . . . . . . . . . . . 64
Section 11.2. Extension; Waiver. . . . . . . . . . . 64
Section 11.3. Notices. . . . . . . . . . . . . . . . 64
Section 11.4. Interpretation . . . . . . . . . . . . 65
Section 11.5. Entire Agreement . . . . . . . . . . . 65
Section 11.6. Parties in Interest. . . . . . . . . 66
Section 11.7. Governing Law. . . . . . . . . . . . 66
Section 11.8. Counterparts . . . . . . . . . . . . . 66
Section 11.9. Assignment . . . . . . . . . . . . . 66
Section 11.10 Severability . . . . . . . . . . . . 67
Section 11.11. Lack of Control; Effect on CRR and its
Controlled Subsidiaries. . . . . . . 67
Section 11.12. Dispute Resolution . . . . . . . . . 67
Section 11.13. CRC Status . . . . . . . . . . . . . 68
Schedule 1
Assets
Attachment I
Attachment II
Schedule 2
Major Decisions
Schedule 3
Preservation of Fair Access to Chicago Gateway
Schedule 4
Schedule of Trackage Rights, Haulage,
Shared Assets and Other Operating Agreements
Exhibit A
Form of Operating Agreements
Exhibit A-1 (CSXT Operating Agreement)
Exhibit A-2 (NSR Operating Agreement)
Exhibit B
Form of LLC Agreements
Exhibit C
Form of Trackage Rights Agreements Exhibit C-1 (NSR on CSXT) Exhibit C-2 (CSXT
on NSR)
Exhibit D
Form of CSX/NSC Haulage Agreements
Exhibit E
Form of Capital Contribution, Assignment And Assumption Agreements
Exhibit F
Tax Allocation Agreement
Exhibit G
North Jersey Shared Assets Agreement
Exhibit H
South Jersey/Philadelphia Shared Assets Agreement
Exhibit I
Detroit Shared Assets Agreement
Exhibit J
Ashtabula Interlocking Agreement
Exhibit K
CP-Mounds Interlocking Agreement
Exhibit L
Warsaw Interlocking Agreement
Exhibit M
Crestline Interlocking Agreement
Exhibit N
Buckeye Interlocking Agreement
Exhibit O
Mike Interlocking Agreement
Exhibit P
Bucyrus Interlocking Agreement
Exhibit Q
CP 138 Interlocking Agreement
Exhibit R
Short Interlocking Agreement
Exhibit S
Berea Interlocking Agreement
Exhibit T
Ashtabula Access Agreement
Exhibit U
Seneca Yard Access Agreement
Exhibit V
Ford (Rockport) Switching Agreement
Exhibit W
GM Parma Switching Agreement
Exhibit X
Indianapolis Switching Agreement
Exhibit Y
GM Lordstown Switching Agreement
Exhibit Z
Lorain Switching Agreement
Exhibit AA
Fairlane Switching Agreement
Exhibit BB
Crawfordsville Switching Agreement
Exhibit CC
Sidney Switching Agreement
Exhibit DD
Sandusky Switching Agreement
Exhibit EE
Upper Sandusky Switching Agreement
Exhibit FF
Indiana Harbor Belt Agreement
Exhibit GG
Monongahela Access and Use Agreement
Exhibit HH
Park Manor Temporary Lease Agreement
Exhibit II
NSR and CSXT Construction Rights Agreement
Exhibit JJ
NSR Buckeye Construction Rights Agreement
Exhibit KK
NSR Field-Belmont Construction Rights Agreement
Exhibit LL
Erie Deed of Easement
Exhibit MM
Fort Wayne-Chicago/Streator Line Exchange Agreement
Exhibit NN
Piqua Yard Agreement
Exhibit OO
Elizabethport Yard Access Agreement
Exhibit PP
Agreement for Assignment of CRC Rights
Exhibit QQ
CSXT Eastwick Construction Agreement
Exhibit RR
Agreement for Assignment of CRC Rights
(Northeast Corridor)
Exhibit SS
Agreement for Assignment of Chicago Rights
<PAGE>
TRANSACTION AGREEMENT
TRANSACTION AGREEMENT, dated as of June 10, 1997 ("Agreement"), by
and among CSX CORPORATION, a Virginia corporation ("CSX"), CSX TRANSPORTATION,
INC., a Virginia corporation, for itself and on behalf of its controlled
Subsidiaries (collectively, "CSXT"), NORFOLK SOUTHERN CORPORATION, a Virginia
corporation ("NSC"), NORFOLK SOUTHERN RAILWAY COMPANY, a Virginia corporation,
for itself and on behalf of its controlled Subsidiaries (collectively, "NSR"),
CONRAIL INC., a Pennsylvania corporation, for itself and on behalf of its
controlled Subsidiaries (collectively, "CRR"), CONSOLIDATED RAIL CORPORATION, a
Pennsylvania corporation ("CRC"), and CRR HOLDINGS LLC, a Delaware limited
liability company ("CRR Parent").
WHEREAS, CSX and NSC have entered into a letter agreement dated as
of April 8, 1997 (the "April 8 Agreement").
WHEREAS, pursuant to the April 8 Agreement, CSX and NSC have jointly
acquired all of the outstanding capital stock of CRR through CRR Parent, in
which CSX and NSC each owns a 50% voting interest.
WHEREAS, CSX and NSC are seeking the approval of the STB to
undertake the transactions contemplated by this Agreement and the April 8
Agreement.
WHEREAS, pursuant to the April 8 Agreement the parties wish to
provide herein for the governance and operation of CRR and its Affiliates and
for the basis pursuant to which CRR's assets and liabilities will be allocated
to or shared by CSX and its Affiliates, on the one hand, and NSC and its
Affiliates, on the other hand, after the Closing Date (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Defined Terms. As used in this Agreement, the
following terms have the meanings set forth below:
"AAC" means Atlantic Acquisition Corporation, a Pennsylvania
corporation and a wholly owned Subsidiary of NSC.
"AAR" means the Association of American Railroads.
"AAR Car Service Rules" means the Code of Car Service Rules/Code of
Car Hire Rules contained in AAR Circular OT-10 as promulgated in the Official
Railway Equipment Register.
"AAR Depreciated Value" means depreciated value as determined in
accordance with Rule 107 of the Office and Field Manuals of the AAR Interchange
Rules adopted by the AAR Technical Services Division, Mechanical Section,
Operations and Maintenance Department.
"Action" shall mean any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any
Governmental Entity or forum or authority having jurisdiction over the matter
involving or related to CRR, CRC or their respective Affiliates, the Assets, the
Retained Liabilities or the Allocated Liabilities, but shall exclude FELA
Claims.
"Affiliate" means, with respect to a specified Person, any Person
that directly or indirectly controls, is controlled by or is under common
control with, the specified Person or any trust for the benefit of such Person
or any entities controlled by such Person; provided that, for the purposes of
this Agreement, (a) NYC shall not be an Affiliate of CSX and its Subsidiaries or
NSC and its Subsidiaries, (b) PRR shall not be an Affiliate of NSC and its
Subsidiaries or CSX and its Subsidiaries and (c) CSX and NSC and their
respective Subsidiaries shall not be Affiliates of CRR or CRR Parent and their
respective Subsidiaries and vice versa.
"Allocated Assets" means the Assets to be transferred at the Closing
to either NYC ("NYC Allocated Assets") or PRR ("PRR Allocated Assets").
"Allocated Liabilities" means the Liabilities of CRR, CRC or their
respective Affiliates to be assumed at the Closing by either NYC ("NYC Allocated
Liabilities") or PRR ("PRR Allocated Liabilities").
"Amended and Restated Voting Trust Agreement" means the Voting
Trust Agreement among CSX, NSC, CRR Parent, Green and Deposit Guarantee
National Bank, dated as of April 8, 1997.
"Ancillary Agreements" means the Equipment Agreements, the CSXT
Operating Agreement, the NSR Operating Agreement, the NYC LLC Agreement, the PRR
LLC Agreement, the CRR Holdings LLC Agreement, the Trackage Rights Agreements,
the CSXT/NSR Haulage Agreements, the Tax Allocation Agreement, the Shared Assets
Agreements and the Other Operating Agreements.
"April 8 Agreement" has the meaning set forth in the preamble to
this Agreement.
"Assets" means any and all of CRR's, CRC's or their respective
Affiliates' right, title and interest in and to all of the rights, properties,
assets, claims, Contracts and businesses of every kind, character and
description, whether real, personal or mixed, whether tangible or intangible,
whether accrued, contingent or otherwise and wherever located, owned or used
primarily by such party. On the Closing Date, all Assets will be either (i) NYC
Allocated Assets, (ii) PRR Allocated Assets or (iii) Retained Assets.
"Base Inventory" has the meaning ascribed thereto in Section 2.7.
"Base Rent" has the meaning set forth in the CSXT Equipment
Agreement and the NSR Equipment Agreement.
"Books and Records" means the books, files and records (including
computerized databases and records) of CRR, CRC or their respective Affiliates
and includes the NYC Books and Records and the PRR Books and Records.
"Capital Contribution, Assignment and Assumption Agreements" means
the instruments (including quitclaim deeds or other instruments transferring
title to real estate) pursuant to which the Allocated Assets and the Allocated
Liabilities will be transferred at the Closing to NYC or PRR, as the case may
be, substantially in the form attached hereto as Exhibit E.
"Closing" has the meaning ascribed thereto in Section 3.1.
"Closing Date" has the meaning ascribed thereto in Section 3.1.
"Co-Chairmen" means the co-chairmen of the CRC Board after the
Control Date, being the CSX Co-Chairman and the NSC Co-Chairman.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time or any successor United States federal tax
statute. References to a specific section of the Code shall include a reference
to the corresponding provisions of any such successor United States federal tax
statute.
"Communications Team" has the meaning ascribed thereto
in Section 2.2.
"Continuing CRC Management" means employees (regardless of craft,
position or classification) of CRR, CRC or their respective Affiliates (other
than NYC, PRR and their respective Subsidiaries) who are determined to be
Continuing CRC Management pursuant to Section 6.1(c), which employees will
consist of the following categories: (a) employees performing general and
administrative functions for CRR, CRC or their respective Affiliates (other than
NYC, PRR and their respective Subsidiaries), (b) employees performing interim
general, administrative or technical functions for CRR, CRC or their respective
Affiliates (other than NYC, PRR and their respective Subsidiaries) (including
employees performing such functions at CRR's headquarters office building and
information technology center in Philadelphia, PA) which functions CSX and NSC
shall identify prior to the Closing Date and shall agree are necessary for an
interim period after the Closing Date in accordance with Section 2.4, (c)
employees operating, managing or performing work at the SSO Facilities, and (d)
employees (other than those described in clauses (a), (b) and (c) above)
operating, managing or performing work on Retained Assets that are to be
operated pursuant to the Shared Assets Agreements.
"Contracts" means any contract, lease, loan agreement, deed,
easement, license, reversion, mortgage, security agreement, trust indenture or
other agreement or instrument to which any of CRR, CRC or their respective
Affiliates is a party or by which any of them is bound or to which any of the
Assets is subject.
"Contracts Team" has the meaning ascribed thereto in Section 2.2.
"Control Date" means the effective date on which CSX and NSC are
authorized by the STB to exercise control over CRR.
"Corporate Level Liabilities" means the following Liabilities of
CRR, CRC or their respective Affiliates: (a) Environmental Liabilities that are
designated as Corporate Level Liabilities pursuant to Section 2.8(b)(iii); (b)
all Liabilities (except as specified in Section 2.8(b)(i) or (ii), Section
2.8(c) or Section 2.9) associated with the handling and disposition of Actions
arising prior to the Closing Date; (c) all Liabilities (except as specified in
Section 2.8(b)(i) or (ii), Section 2.8(c) or Section 2.9) associated with the
handling and disposition of Actions arising on or after the Closing Date and
that do not relate predominantly to Allocated Assets; (d) all Liabilities
(except as specified in Section 2.8(b)(i) or (ii), Section 2.8(c) or Section
2.9) associated with the handling and disposition of Actions arising on or after
the Closing Date designated as Corporate Level Liabilities pursuant to Section
2.8; (e) Employee Related Liabilities that are designated as Corporate Level
Liabilities pursuant to Article VI; (f) all Taxes accruing for periods prior to
the Closing Date, including in respect of tax leverage transactions; (g) Taxes,
if any, associated with the designation, allocation and transfer of the Assets
as contemplated in this Agreement; (h) Liabilities under leases (including
without limitation lease termination costs) that arise prior to the Closing Date
(other than the lease Liabilities in respect of the CRC headquarters office
building in Philadelphia, PA, or the information technology center in
Philadelphia, PA, or the Altoona, PA or Hollidaysburg, PA shops); (i)
Indebtedness (other than intercorporate Indebtedness of direct or indirect
Subsidiaries of CRR the capital stock, or similar interests, of which is
included in the Allocated Assets, which will be treated as agreed to by the
parties prior to the Closing); (j) all Liabilities associated with the handling
and disposition of FELA Claims made prior to the Control Date and all
Liabilities associated with the handling and disposition of FELA Claims made on
or after the Control Date and designated as Corporate Level Liabilities pursuant
to Section 2.8(c); (k) all employee costs not otherwise allocated under this
Agreement; (l) all Liabilities arising prior to the Closing Date not otherwise
allocated under this Agreement; (m) transition costs not the sole responsibility
of CSX, CSXT, NYC, NSC, NSR or PRR and not otherwise allocated under this
Agreement; and (n) all Liabilities incurred with respect to Continuing CRC
Management, the SSO Facilities and the Retained Assets, except where this
Agreement (including the Schedules and Exhibits hereto) or the Ancillary
Agreements may expressly designate the Liability in some other manner.
"Corporate Memorabilia" means all corporate memorabilia, antiques,
artifacts, charters and art owned by CRR, CRC or their respective Affiliates,
wherever located.
"CRC" has the meaning set forth in the preamble to this Agreement.
"CRC Board" means the Board of Directors of CRC.
"CRR" has the meaning set forth in the preamble to this Agreement.
"CRR Holdings LLC Agreement" means the Limited Liability Company
Agreement of CRR Holdings LLC, dated May 21, 1997, as amended from time to time.
"CRR Industries" means CRR Industries, Inc., a Pennsylvania
corporation and a wholly owned Subsidiary of CRR.
"CRR Parent" has the meaning set forth in the preamble to this
Agreement.
"CRR Shares" means the shares of Common Stock and Series A ESOP
Convertible Junior Preferred Stock of CRR.
"CRR Stay Bonus Program" means either the Conrail Inc. Stay Bonus
Program, Classes 8 And Below, or the Conrail Inc. Stay Bonus Program Classes
9-11, both to be entered into pursuant to Attachment A to the Third Amendment.
"CSX" has the meaning set forth in the preamble to this
Agreement.
"CSX Co-Chairman" has the meaning ascribed thereto in Section 4.2.
"CSX Directors" has the meaning ascribed thereto in Section 4.2.
"CSXT" has the meaning set forth in the preamble to this
Agreement.
"CSXT Equipment" means the Equipment subject to the CSXT
Equipment Agreement.
"CSXT Equipment Agreement" means the agreement to be entered into
between NYC and CSXT in a form to be agreed by CSX and NSC, to provide CSXT with
the right to use, operate and maintain certain of the Equipment which NYC has
the right to use and operate pursuant to the NYC Equipment Agreement.
"CSXT/NSR Haulage Agreements" means the agreements pursuant to which
CSXT and/or NSR will provide haulage services for the
other, in substantially the form attached hereto as Exhibit D; each CSXT/NSR
Haulage Agreement shall be in respect of a Route identified on Item 2 of
Schedule 4 and shall incorporate the terms set forth therein.
"CSXT Operating Agreement" means the agreement to be entered into
between CSXT and NYC, substantially in the form attached hereto as Exhibit A-1,
to provide for the use, operation and maintenance by CSXT of certain of the NYC
Allocated Assets after the Closing Date.
"Damages" means all assessments, losses, damages, liabilities, costs
and expenses, including without limitation interest, penalties and attorneys'
and consultants' fees.
"Distribution" means any dividend or other distribution with respect
to any shares of capital stock or similar equity interests.
"Employee Related Liabilities" means Liabilities to be designated
as NYC Allocated Liabilities, PRR Allocated Liabilities or Corporate Level
Liabilities pursuant to Article VI.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
emissions, discharges, or releases of pollutants, contaminants, hazardous or
toxic materials or substances or wastes into the environment, including, without
limitation, ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, hazardous or toxic
materials or substances or wastes or the cleanup or other remediation thereof.
"Environmental Liabilities" means any and all Liabilities arising in
connection with or in any way relating to any Asset (or formerly held Asset) and
which arise under or relate to matters covered by any Environmental Laws.
"Equipment" means all freight car rolling stock, cabooses, trailers,
containers, end of train devices, locomotives and Work Equipment of CRR, CRC or
their respective Affiliates, whether owned or leased.
"Equipment Agreements" means the NYC Equipment Agreement, the PRR
Equipment Agreement, the CSXT Equipment Agreement and the NSR Equipment
Agreement.
"Fair Market Rental Value" has the meaning set forth in the CSXT
Operating Agreement, the NSR Operating Agreement, the CSXT Equipment Agreement
and the NSR Equipment Agreement.
"FELA Claim" means a claim made under the Federal Employers
Liability Act, as amended from time to time. A FELA Claim shall be considered
"made" upon the earliest to occur of the following: (i) the claimant's employer
has received or prepared a written report (including, in the case of an alleged
occupational injury, a questionnaire) of the claim or of the incident from which
the claim arises; or (ii) the claimant's employer has received written notice of
the claim from the claimant or the claimant's attorney; or (iii) an action,
claim or suit asserting the claim has been filed and properly served on the
claimant's employer. For the purposes of this definition (i) the term "written
report" shall include reports which are electronically prepared or transmitted,
and (ii) the term "employer" shall include the employer currently responsible
under the Federal Employers Liability Act for the claim or cause of action being
asserted and such employer's attorney.
"FF&E" means all furniture, fixtures, computers, office supplies and
equipment (other than Equipment and system stock- piles of supplies and
inventory) of CRR, CRC or their respective Affiliates.
"Governmental Entity" means any federal, state, local or foreign
court, administrative agency or commission or other governmental or regulatory
authority or commission or any arbitration tribunal.
"Green" means Green Acquisition Corp., a Pennsylvania corporation
and a wholly owned Subsidiary of CRR Parent.
"Indebtedness" means, when used with reference to a specified
Person, at any date, without duplication, (a) all obligations of such Person for
borrowed money, including, without limitation, all principal, interest,
premiums, fees, expenses, overdrafts and penalties with respect thereto, (b) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable, (d) all
obligations of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (e) all payment
obligations under capitalized leases and (f) all indebtedness of any other
Person of the type referred to in clauses (a) to (e) above directly or
indirectly guaranteed by such Person.
"Indemnified Party" means a Person who requires or requests
indemnification under Article X.
"Indemnifying Party" means a Person who is required or requested to
indemnify another Person under Article X.
"Interest Rental" has the meaning set forth in the Shared Assets
Agreements.
"Inventory Team" has the meaning ascribed thereto in Section
2.2.
"IRS Submission" has the meaning ascribed thereto in Section
8.9.
"Liabilities" means any and all debts, liabilities and obligations
of any kind whatsoever, whether or not accrued, contingent or reflected on a
balance sheet, known or unknown, absolute, determined, determinable or
otherwise, including, without limitation, those arising under any law, rule,
regulation, action, order or consent decree of any Governmental Entity or any
judgment in any Action of any kind or award of any arbitrator of any kind and
those arising under any Contract. At the Closing Date, all Liabilities of CRR,
CRC or their respective Affiliates will be either (i) NYC Allocated Liabilities,
(ii) PRR Allocated Liabilities or (iii) Retained Liabilities.
"Locomotive Team" has the meaning ascribed thereto in Section
2.6.
"Major Decisions" means any of the items identified on Schedule
2 hereto.
"Merger" means the merger of a subsidiary of Green with and into
CRR pursuant to the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger by and
among CRR, CSX and Green dated as of October 14, 1996 and as amended as of
November 5, 1996, December 18, 1996, March 7, 1997 and April 8, 1997 and as may
be further amended from time to time in accordance with its terms and the terms
of this Agreement.
"NSC" has the meaning set forth in the preamble to this
Agreement.
"NSC Co-Chairman" has the meaning ascribed thereto in Section
4.2.
"NSC Directors" has the meaning ascribed thereto in Section 4.2.
"NSR" has the meaning set forth in the preamble to this
Agreement.
"NSR Equipment" means the Equipment subject to the NSR
Equipment Agreement.
"NSR Equipment Agreement" means the agreement to be entered into
between PRR and NSR, in a form to be agreed among CSX and NSC, to provide NSR
with the right to use, operate and maintain certain of the Equipment which PRR
has the right to use and operate pursuant to the PRR Equipment Agreement.
"NSR Operating Agreement" means the agreement to be entered into
between NSR and PRR, substantially in the form attached hereto as Exhibit A-2,
to provide for the use, operation and maintenance by NSR of certain of the PRR
Allocated Assets after the Closing Date.
"NYC" means New York Central Lines LLC (or such other name as may
be specified by CSX), which will be organized on or prior to the Closing
pursuant to Section 3.2 as a Delaware limited liability company and a wholly
owned Subsidiary of CRC.
"NYC Action" has the meaning ascribed thereto in Section 8.14.
"NYC Allocated Assets" means the Assets identified on Item 1 of
Schedule 1 hereto and the Transportation Contracts allocated to NYC pursuant to
Section 2.2(c) (unless CSX and NSC in their discretion agree that any such
Assets shall not be NYC Allocated Assets) together with the Unallocated Assets
designated as NYC Allocated Assets prior to the Closing Date pursuant to Article
II, including any cash benefit in lieu of such Assets pursuant to Section 8.7.
"NYC Allocated Liabilities" means the Liabilities designated as
NYC Allocated Liabilities pursuant to Section 2.8 or Article VI, together with
all Liabilities allocated to and the responsibility of NYC under any Ancillary
Agreement.
"NYC Books and Records" shall mean the books, files and records
(including computerized databases and records) of CRR, CRC or their respective
Affiliates that relate principally to the NYC Allocated Assets or NYC Allocated
Liabilities and are necessary or useful for the operation of the business in
respect thereof.
"NYC Equipment Agreement" means the agreement to be entered into
between CRC and NYC, in a form to be agreed among CSX and NSC, to provide NYC
with the right to use, operate and maintain certain of the Equipment allocated
to NYC pursuant to Section 2.6(e)(i).
"NYC LLC Agreement" means the Limited Liability Company Agreement
of NYC, substantially in the form attached hereto as Exhibit B.
"NYC Restructuring" has the meaning ascribed thereto in Section
8.9.
"Operating Fee" has the meaning set forth in the CSXT Operating
Agreement and the NSR Operating Agreement.
"Other Operating Agreements" means the agreements to be entered
into between and among CRC, NYC, PRR, CSXT and/or NSR, substantially in the
forms attached hereto as Exhibits J through RR, providing for various operating,
access, construction and other matters. The Other Operating Agreements are
listed in Item 4 of Schedule 4 hereto.
"PBCL" means the Pennsylvania Business Corporation Law of 1988, as
amended from time to time.
"Pennsylvania Control Transaction Law" means Subchapter E of
Chapter 25 of the PBCL, as amended from time to time.
"Percentage" means, in the case of CSX, 42% and, in the case of
NSC, 58%.
"Person" includes any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company or other legal entity or organization.
"Pooled Assets" means all Unallocated Assets for which no
allocation methodology is provided for in Section 2.2(a) through (i), including
the Assets identified on Item 4 of Schedule 1.
"Privileged Information" has the meaning ascribed thereto in
Section 8.14.
"Privileges" has the meaning ascribed thereto in Section 8.14.
"PRR" means Pennsylvania Lines LLC (or such other name as may be
specified by NSC), which will be organized on or prior to Closing pursuant to
Section 3.2 as a Delaware limited liability company and a wholly owned
Subsidiary of CRC.
"PRR Action" has the meaning ascribed thereto in Section 8.15.
"PRR Allocated Assets" means the Assets identified on Item 2 of
Schedule 1 hereto and the Transportation Contracts allocated to PRR pursuant to
Section 2.2(c) (unless CSX and NSC in their discretion agree that any such
Assets shall not be PRR Allocated Assets), together with the Unallocated Assets
designated as PRR Allocated Assets prior to the Closing Date pursuant to Article
II, including any cash benefit in lieu of such Assets pursuant to Section 8.7.
"PRR Allocated Liabilities" means the Liabilities designated as
PRR Allocated Liabilities pursuant to Section 2.8 or Article VI, together with
all Liabilities allocated to and the responsibility of PRR under any Ancillary
Agreement.
"PRR Books and Records" shall mean the books, files and records
(including computerized databases and records) of CRR, CRC or their respective
Affiliates that relate principally to the PRR Allocated Assets or PRR Allocated
Liabilities and are necessary or useful for the operation of the business in
respect thereof.
"PRR Equipment Agreement" means the agreement to be entered into
between CRC and PRR, in a form to be agreed among CSX and NSC, to provide PRR
with the right to use, operate and maintain certain of the Equipment allocated
to PRR pursuant to Section 2.6(e)(i).
"PRR LLC Agreement" means the Limited Liability Company Agreement
of PRR, substantially in the form attached hereto as Exhibit B.
"PRR Restructuring" has the meaning ascribed thereto in Section
8.9.
"Radio Licenses" has the meaning ascribed thereto in Section
2.2.
"Required Approvals" has the meaning ascribed thereto in
Section 7.1.
"Restructuring" means either the NYC Restructuring or the PRR
Restructuring, as the context requires.
"Retained Assets" means the Assets identified on Item 3 of
Schedule 1 hereto (unless CSX and NSC in their discretion agree that any such
Assets shall not be Retained Assets) together with the Unallocated Assets
designated as Retained Assets prior to the Closing Date pursuant to Article II,
including (a) Equipment that is not included in the Allocated Assets, (b) the
SSO Facilities and (c) the Pooled Assets not designated as Allocated Assets
pursuant to Section 2.2(j).
"Retained Liabilities" means the Liabilities designated as
Retained Liabilities pursuant to Section 2.8 (including, without limitation, all
Corporate Level Liabilities), together with all Liabilities allocated to and the
responsibility of CRR, CRC or their respective Affiliates under any Ancillary
Agreement.
"Rolling Stock Team" has the meaning ascribed thereto in
Section 2.6.
"Route" means the rights and Assets used to provide transportation
service along a railroad line connecting two or more stations and consisting of
one or more tracks (together with associated sidings, side tracks, signaling,
land and other related facilities).
"Ruling" has the meaning ascribed thereto in Section 8.9.
"Separation Costs" means labor protection costs, including
dismissal allowances, displacement allowances and the cost of administering,
arbitrating and litigating such labor protection provisions, severance
(including payments under severance agreements), personnel relocation expenses
and all other dismissal expenses and stay bonuses, including any payment
intended to reimburse for excess parachute excise tax imposed under Section 4999
of the Code with respect to such dismissal expenses or stay bonuses.
"Service" has the meaning ascribed thereto in Section 8.9.
"Shared Assets Agreements" means the agreements between and among
CRC, NYC, PRR, CSXT and/or NSR, substantially in the forms attached hereto as
Exhibits G through I, providing for the operation of certain Retained Assets for
the benefit of CSXT and NSR. The Shared Assets Agreements are listed in Item 3
of Schedule 4 hereto.
"Shared Assets Areas" means (a) the North Jersey shared Asset
facility to be covered by the Shared Assets Agreement substantially in the form
attached hereto as Exhibit G, (b) the South Jersey/Philadelphia shared Asset
facility to be covered by the Shared Assets Agreement substantially in the form
attached hereto as Exhibit H and (c) the Detroit shared Asset facility to be
covered by the Shared Assets Agreement substantially in the form attached hereto
as Exhibit I.
"SSO Facilities" means the CRR or CRC system support operations
facilities described in Item 3(B) of Schedule 1 (including equipment and other
Assets associated with such facilities) used as of the date hereof by CRR and
CRC or their respective Affiliates to provide support functions benefiting the
CRC rail system as a whole, including: (a) the customer service center in
Pittsburgh, PA; (b) the crew management facility in Dearborn, MI; (c) the system
maintenance-of-way equipment center in Canton, OH; (d) the signal repair center
in Columbus, OH; (e) the system freight claims facility in Buffalo, NY; (f) the
system non-revenue billing facility at Bethlehem, PA; (g) the system rail
welding plant at Lucknow (Harrisburg), PA; (h) the system road foreman/engineer
training center at Philadelphia and Conway, PA; (i) the CRC police operations
center at Mt. Laurel, NJ; and (j) such other facilities providing system-wide
support functions as CSX and NSC shall identify and agree upon prior to the
Closing Date.
"STB" means the Surface Transportation Board or, if there shall be
no Surface Transportation Board, any federal agency which is charged with the
function of approving combinations by rail carriers or persons controlling them,
or of other arrangements between such rail carriers, and granting exemptions
from other laws with respect thereto or regulating other specific functions with
respect to the context in which such term is employed or any successor entity
thereof.
"Subsidiary" means, when used with reference to a specified
Person, any corporation or other organization, whether incorporated or
unincorporated, of which at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries; provided that CRR Parent and any Person in
which CRR Parent owns, directly or indirectly an interest (it being assumed for
the purposes of this Agreement that CRR Parent does not own, directly or
indirectly, an interest in either CSX or NSC) shall not be a Subsidiary of
either CSX or NSC.
"Surviving Corporation" means the surviving corporation of the
Merger.
"Tax" or "Taxes" means taxes of any kind, levies or other similar
assessments, customs, duties, imposts, charges or fees, including, without
limitation, income taxes, gross receipts, ad valorem, excise, real or personal
property, sales, use, payroll, withholding, unemployment, transfer and gains
taxes or other governmental taxes imposed by or payable to the United States, or
any state, local or foreign government or subdivision thereof, and in each
instance such term shall include any interest, penalties or additions to tax
attributable to such Tax or Taxes. The term "Tax" or "Taxes" shall not include
any payment intended to reimburse the recipient for an excess parachute excise
tax imposed under Section 4999 of the Code.
"Tax Allocation Agreement" means the agreement to be entered into
among Green, CRR, CRC, CRR Industries, PRR and NYC, substantially in the form
attached hereto as Exhibit F, pursuant to which the rights and obligations
relating to Tax matters involving the operations of CRR, CRC, PRR and NYC shall
be allocated.
"Tax Returns" means all returns, information returns, statements,
certifications, reports or other documentation relating to Taxes.
"Third Amendment" means the third amendment, dated March 7, 1997,
to the Merger Agreement.
"Third Party Claim" has the meaning ascribed thereto in Section
10.2.
"Trackage Rights Agreements" means the agreements pursuant to
which CSXT and NSR will grant trackage rights to the other, in substantially the
form attached hereto as Exhibit C; each Trackage Rights Agreement shall be in
respect of a Route identified on Item 1 of Schedule 4 and shall incorporate the
terms set forth therein.
"Transaction Expenses" means, with respect to a specified Person,
all of such Person's fees and expenses, including, without limitation, filing
fees and fees and expenses of legal counsel, depositaries, dealer managers,
proxy solicitors, information agents, printers, investment bankers or advisors,
financing sources, accountants, public relations advisors and other consultants
and advisors incurred in connection with the acquisition of CRR Shares, the
Merger, the April 8 Agreement, this Agreement, the Ancillary Agreements and the
transactions contemplated herein and therein.
"Transportation Contracts" means Contracts between rail carrier(s)
and a Person or Persons relating to the purchase of transportation services as
specified in 49 U.S.C. ss. 10102(9)(A) and (B); provided that, if a
Transportation Contract covers service between more than one pair of points, the
provisions governing service between each pair of points shall be treated as a
distinct Transportation Contract.
"Unallocated Assets" means Assets which are not as of the date of
this Agreement identified on Schedule 1 hereto as Allocated Assets or Retained
Assets.
"Valuation Date" has the meaning set forth in the CSXT Operating
Agreement, the NSR Operating Agreement, the CSXT Equipment Agreement, the NSR
Equipment Agreement and the Shared Assets Agreements.
"Voting Trust" means the voting trust for the shares of capital
stock of CRR or CRC created under the Amended and Restated Voting Trust
Agreement.
"Work Equipment" means track machinery, non-revenue rolling stock
dedicated to track maintenance (such as ballast and tie cars), other mobile
equipment (such as backhoes, bulldozers and the like), other engineering
equipment and automobiles and trucks assigned to CRC system and staff functions
(automobiles and trucks assigned to Allocated Asset locations shall be included
in the Allocated Assets).
"Work Equipment Team" has the meaning ascribed thereto in Section
2.6.
Section 1.2. Other Definitive Provisions. When used in this
Agreement in respect of a Liability or an Action, the terms "arise" or "arising"
mean that the circumstances giving rise to the Liability or Action have
transpired, whether or not such Action or Liability has been discovered,
asserted or accrued. When used in this Agreement, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
ARTICLE II
DESIGNATION AND ALLOCATION OF ASSETS
AND LIABILITIES
Section 2.1. Conveyance of Assets. On the Closing Date and upon the
terms and subject to the conditions set forth in this Agreement, (i) CRC and its
Affiliates shall contribute, assign, transfer, convey and deliver the NYC
Allocated Assets to NYC and NYC shall accept from CRC and its Affiliates all of
the right, title and interest of CRC and its Affiliates in all of the NYC
Allocated Assets, and (ii) CRC and its Affiliates shall contribute, assign,
transfer, convey and deliver the PRR Allocated Assets to PRR and PRR shall
accept from CRC and its Affiliates all of the right, title and interest of CRC
and its Affiliates in all of the PRR Allocated Assets. Except as expressly
provided in this Agreement, CSX and its Affiliates, on the one hand, and NSC and
its Affiliates, on the other hand, shall retain all their existing rights with
respect to the Assets.
Section 2.2. Allocation of Certain Assets. As soon as practicable
after the date hereof and in any event prior to the Closing Date, CSX and NSC
shall use their best efforts to designate the Unallocated Assets as either NYC
Allocated Assets, PRR Allocated Assets or Retained Assets. CSX and NSC shall
continue to monitor such designation up to, and shall update such designation as
of, the Closing Date. Such designation shall be as agreed between CSX and NSC in
accordance with the following guidelines (which shall not, unless CSX and NSC
otherwise agree, affect Assets already designated as Allocated Assets or
Retained Assets pursuant to Schedule 1 hereto):
(a) Unallocated FF&E shall be designated as follows: (i) all FF&E
located in or along Allocated Assets shall be designated in the same manner as
such Allocated Assets, (ii) all FF&E located in or along Retained Assets shall
be designated as Retained Assets and (iii) all FF&E not designated pursuant to
clause (i) or (ii) above shall be designated as NYC Allocated Assets or PRR
Allocated Assets by value in proportion to CSX's and NSC's respective
Percentage.
(b) On or prior to the Closing Date, CSX, NSC and CRR shall take an
inventory of all Corporate Memorabilia, and CSX and NSC shall value the
principal items or categories, engaging an appraiser if they cannot agree on the
value thereof. One half of the Corporate Memorabilia by value shall be
designated as NYC Allocated Assets and the other half shall be designated as PRR
Allocated Assets by the mutual agreement of CSX and NSC. If CSX and NSC have not
agreed on the particular items or categories of Corporate Memorabilia to be
designated as NYC Allocated Assets and PRR Allocated Assets, respectively, they
will alternate selecting Corporate Memorabilia having a value of 5% (as near as
may be) of the total value of all of the Corporate Memorabilia, with the party
having first choice selected by lot.
(c) The parties recognize the importance of assuring that the
acquisition of CRC does not create shipping disruptions for CRC customers and
hence are hereby making arrangements to carry out CRC's Transportation Contracts
in the manner hereinafter set forth.
(i) All CRC Transportation Contracts in effect as of the Closing
Date ("Existing Transportation Contracts") shall remain in effect through their
stated term and the obligations thereunder shall be carried out thereafter by
CSXT utilizing NYC Allocated Assets and NSR utilizing PRR Allocated Assets, or
pursuant to the Shared Assets Agreements, as the case may be.
(ii) CSXT and NSR shall allocate the responsibilities to serve
customers under the Existing Transportation Contracts in a manner to achieve
reliability and proper service to the customers, and the revenues and expenses
associated with the Existing Transportation Contracts and related services shall
be allocated and accounted for between CSXT and NSR in accordance with the
Percentage Division to the extent that the performance of contracts allocated by
Percentage Division departs from the Percentage Division.
(iii) The following decision rules shall be applied on an annual
basis with tentative settlements to the extent required by subsection (c)(ii) on
a quarterly basis 60 days after the end of the quarter and an annual true-up 90
days after the end of the year:
(A) For purposes of this Subsection (c), "Local" means a station
that is not Dual and is served solely by CSXT or NSR, and "Dual" means a
station with line-haul service by both, including service accessed by one
or the other through trackage rights or haulage, in each case as of the
date of this Agreement giving effect to the effectuation of the Closing.
For purposes of the definition of "Dual", the term includes (a) as to
commodities that are handled by rail before or after shipment by water,
all stations at which such commodities are handled in Ocean, Gulf and
Great Lakes port cities to which each of CSXT and NSR has line haul
service to any such station, and (b) as to intermodal service, all
intermodal facilities in any city in which each of CSXT and NSR has line
haul service to any intermodal facility. Further, references to "Off Line"
stations in this Subsection (c) do not include a situation where such
station is Local or Dual to NSR or CSXT or a third railroad whose sole
connection is with CSXT or NSR.
(B) In addition, for purposes of this Subsection (c) only, the
phrase "Percentage Division" shall mean 50% CSXT - 50% NSR.
(C) Revenues shall be allocated as follows:
(aa) Where the Existing Transportation Contract calls for
transportation from an origin station located on the PRR Allocated
Assets, the allocation shall be solely to NSR, except as follows:
(x) If the origin station is Local to NSR and the
destination station is on the NYC Allocated Assets and Local
to CSXT, then the allocation shall be on a joint line basis
between NSR and CSXT with the interchange to be negotiated
between NSR and CSXT and the revenues to be split 30% to NSR,
30% to CSXT, and the remainder to be based upon a mileage
prorate; and
(y) If, notwithstanding its location on the PRR
Allocated Assets, the origin station is Dual and the
destination station is on the NYC Allocated Assets and Local
to CSXT, then the allocation shall be solely to CSXT. (bb)
Where the Existing Transportation Contract calls for
transportation from an origin station located on the NYC Allocated
Assets, the allocation shall be solely to CSXT, except as follows:
(x) If the origin station is Local to CSXT and the
destination station is on the PRR Allocated Assets and Local
to NSR, then the allocation shall be on a joint line basis
between CSXT and NSR with the interchange to be negotiated
between CSXT and NSR and the revenues to be split 30% to CSXT,
30% to NSR, and the remainder to be based an a mileage
prorate; and
(y) If, notwithstanding its location on the NYC Allocated Assets,
the origin station is Dual and the destination station is on the PRR
Allocated Assets and Local to NSR, then the allocation shall be solely to
NSR.
(cc) Where the Existing Transportation Contract calls for transportation
where at least one of the origin and destination stations is Dual or which is
located in a Shared Assets Area or located on or accessed from the tracks of the
former Monongahela Railway or Waynesburg Southern Railway ("MGA") (collectively,
a "Specified Station"), the following shall apply as to such Existing
Transportation Contract:
(x) If the other station is located on a PRR Allocated Asset and is
Local to NSR, then the allocation shall be solely to NSR;
(y) If the other station is located on an NYC Allocated Asset and is
Local to CSXT, then the allocation shall be solely to CSXT; and
(z) If the other station is a Specified Station, then CSXT and
NSR shall divide the allocation on the Percentage Division (by
revenue) annually.
(dd) Where the origin station is Off Line and the destination station
is within the former CRC territory, the following shall apply as to the Existing
Transportation Contract:
(x) If the destination station is located on an NYC Allocated Asset
and is Local to CSXT, the allocation shall be solely to CSXT.
(y) If the destination station is located on a PRR Allocated Asset
and is Local to NSR, the allocation shall be solely to NSR.
(z) If the destination Station is Dual or is located in a Shared
Assets Area or in MGA, CSXT and NSR shall divide the allocation on the
Percentage Division (by revenue) annually.
(ee) Where the origin station is within the former CRR territory and the
destination station is Off Line, the following shall apply as to the Existing
Transportation Contracts:
(x) If the origin station is located on an NYC Allocated Asset and
is Local to CSXT, the allocation shall be solely to CSXT.
(y) If the origin station is located on a PRR
Allocated Asset and is Local to NSR, the allocation
shall be solely to NSR.
(z) If the origin station is Dual or is located in
a Shared Asset Area or in MGA, CSXT and NSR shall divide
the allocation on the Percentage Division (by revenue)
annually.
(ff) Where the origin station and the destination
station are both Off Line, CSXT and NSR shall divide the
allocation on the Percentage Division.
(gg) As to any joint line Existing Transportation
Contract which involves either CSXT and CRC and NSR and CRC,
that Transportation Contract shall be treated, for the
purposes of the above rules, as if it involved an NSR or CSXT
Local origin or off-line destination (as the case may be) and
only that portion of the transportation over former CRC Routes
shall be governed by the foregoing.
(hh) Where, as of the Closing Date, CRC has a
proportional rate Existing Transportation Contract which
provides a through rate in combination with a separate
proportional rate CSXT or NSR transportation contract, the
separate CSXT or NSR transportation contract shall be
unaffected and only the CRC portion of the transportation
shall be governed by the foregoing.
(iv) There shall be a presumption that responsibility for the
performance of contracts shall follow the allocations referred to above
and that presumption, except in extraordinary cases, shall control in all
cases except those provided for in Sections 2.2(c)(iii)(C)(cc)(z),
2.2(c)(iii)(C)(dd)(z), and 2.2(c)(iii)(C)(ee)(z). Exceptions in those
cases just mentioned shall be made to promote the use of efficient routes,
high-quality service and consistency of service to customers, and in that
connection there shall be a presumption against dividing a contract
between a single destination and a single origin between the two carriers.
(v) In the case of a single Existing Transportation Contract which
covers multiple origin and destination pairs, allocation of revenue shall be on
the basis of each pair but CSXT and NSR shall cooperate as necessary to assure
that the shippers under such Existing Transportation Contracts receive the
benefits (e.g., volume pricing, refunds, etc.)to which they are entitled
thereunder, notwithstanding any division of responsibility in providing the
transportation.
(vi) Nothing in this Section 2.2(c) shall limit any right of the
parties to provide service to or enter into transportation contracts with
shippers with Existing Transportation Contracts.
(d) All Contracts granting any unrelated Person the right to bury
fiber optic cable longitudinally along Assets shall be designated as Retained
Assets (if any Assets in respect of which such rights are given are Allocated
Assets, NYC or PRR, as the case may be, will license or otherwise grant rights
to CRC or its Affiliates to maintain the subject matter of the Contracts
granting such rights), except where such rights relate only to either NYC
Allocated Assets or PRR Allocated Assets, in which case such Contracts shall be
designated in the same manner as such Allocated Assets; provided that NYC and
PRR shall, to the extent permitted under such Contracts that are designated as
Retained Assets, be given equal access to CRC's or its Affiliate's rights to use
capacity on such fiber optic cable and shall participate equally in any other
benefits of such Contracts.
(e) Promptly after the date hereof, CSXT and NSR each shall appoint
up to five members of a committee (the "Contracts Team"). The Contracts Team
shall meet and not later than January 1, 1998 shall negotiate an equitable
designation of all Contracts (other than Transportation Contracts and Contracts
otherwise allocated or designated under the terms hereof) based on the following
guidelines:
(i) Contracts that relate predominantly to either NYC Allocated
Assets, PRR Allocated Assets or Retained Assets will be designated in the
same manner as such Assets.
(ii) Contracts (A) that benefit CRC as a whole (such as unfilled
system purchase and supply Contracts), (B) that relate predominantly to
Retained Assets (such as certain intermodal terminal Contracts) or (C)
that the Contract Team cannot designate for whatever reason, shall be
Retained Assets and CRC shall, to the extent permitted under the relevant
Contract, subcontract its duties, obligations and rights under such
Contract to NYC or PRR by value in proportion to CSX's and NSC's
respective Percentage in accordance with the procedure set forth in
Section 8.5(b).
(f) Promptly after the date hereof, NSR and CSXT each shall appoint
up to five members of a committee (the "Communications Team"). The
Communications Team shall meet and not later than January 1, 1998 shall
negotiate an equitable designation of all radio licenses held or owned by CRR,
CRC or their respective Affiliates ("Radio Licenses") based on the following
guidelines:
(i) In general, Radio Licenses will be designated as PRR Allocated
Assets or NYC Allocated Assets depending on the designation of the
Allocated Assets to which the Radio Licenses most relate. The designation
of Radio Licenses will be made in such manner as to facilitate and permit
continued operations on the PRR Allocated Assets and the NYC
Allocated Assets substantially as conducted before the Closing Date.
(ii) Base Radio Licenses shall be designated and reissued on their
present frequencies to PRR or NYC, depending on whether the Allocated
Assets on or near which the base radio operates are NYC Allocated Assets
or PRR Allocated Assets. If the base radio is used for train operations on
a line that includes both PRR Allocated Assets and NYC Allocated Assets,
the Radio License shall be allocated in the same manner as the Allocated
Assets on which the base radio is located and the party allocated such
Radio License shall grant to the other party the right to operate a base
station and other needed radio equipment on that frequency.
(iii) Mobile Radio Licenses (such as those relating to engine
radios and end-of-train-devices) will be designated
as NYC Allocated Assets or PRR Allocated Assets giving effect to the
relative operating needs and existing systems of each of NYC and/or CSXT,
on the one hand, and PRR and/or NSR on the other hand.
(iv) Radio Licenses for which the Communications Team can not agree
upon the designation as PRR Allocated Assets or NYC Allocated Assets prior
to the Closing Date or that are required for CRC operations under the
Shared Assets Agreements will be Retained Assets and held by CRR for the
benefit of both NYC and PRR.
(g) In connection with its negotiations under Section 2.2(f), the
Communications Team also shall not later than January 1, 1998 negotiate an
equitable designation in accordance with CSX's and NSC's respective Percentage
of all Unallocated Assets that are signal and communications equipment or
facilities and leased communications services. This will include all signal and
communications equipment and facilities and leased services that are (i) used by
CRC system-wide, (ii) used in conjunction with the operation of both a Route
included in NYC Allocated Assets and a Route included in PRR Allocated Assets
(such as a microwave tower), or (iii) of a character that precludes such Assets
from being logically segregated and designated by Route. In making its
designation, the Communications Team shall consider, among other things, Asset
value and each party's relative ability to maintain current operations and
compatibility with existing equipment. Items for which the Communications Team
cannot agree upon the designation as PRR Allocated Assets or NYC Allocated
Assets prior to the Closing Date or that are required for CRC operations under
the Shared Assets Agreements will be Retained Assets and held for the benefit of
both NYC and PRR, although it is the intention of the parties that such signal
and communications equipment or facilities and leased communications equipment
(other than items required for CRC operations under the Shared Assets
Agreements) be designated to the extent possible as Allocated Assets.
(h) System stockpiles of inventory, material and supplies of CRR,
CRC or their respective Affiliates, regardless of location (other than such
Assets designated as PRR Allocated Assets pursuant to Section 2.7) are Pooled
Assets that shall be Retained Assets at the Closing Date unless otherwise
designated hereunder. Promptly after the date hereof, CSXT and NSR each shall
appoint up to four members of a committee (the "Inventory Team"). In addition to
its functions pursuant to Section 2.7, the Inventory Team shall not later than
January 1, 1998 determine whether and to what extent system stockpiles of
inventory, material and supplies of CRR, CRC or their respective Affiliates (i)
shall be designated as NYC Allocated Assets or PRR Allocated Assets (such
designation to be in proportion to CSX's and NSC's respective Percentage) or
(ii) shall be Retained Assets as to which NYC and CSXT, on the one hand, and PRR
and NSR, on the other hand, shall have access to in accordance with the
procedure to be determined by the Inventory Team pursuant to this Section
2.2(h). In making its identification and designation, the Inventory Team shall
specify that (i) inventory, materials and supplies acquired for the purpose of
fulfilling third-party Contracts shall be designated in the same manner as and
be applied to fulfill such Contracts and (ii) inventory, materials and supplies
held for maintenance of facilities that are included in Allocated Assets shall
be designated in the same manner as such Allocated Assets. System stockpiles or
portions thereof that are not specifically designated by the Inventory Team
shall be Retained Assets. The Inventory Team shall determine an appropriate
procedure for NYC and CSXT, on the one hand, and PRR and NSR, on the other hand,
to have access to all system stockpiles of inventory, material and supplies that
are Retained Assets by value in proportion to CSX's and NSC's respective
Percentage.
(i) Unless otherwise agreed upon by CSX and NSC prior to the
Closing, all computer software and associated data and engineering CADD systems
owned or used by CRR, CRC or their respective Affiliates which may be copied and
used by both NYC and PRR without the permission of, or payment to, any Person
shall be designated in the same manner as the hardware on which it is stored;
provided that PRR shall have the right to copy and to receive a non-exclusive
license of such computer software, rights, data, licenses and systems that are
designated as NYC Allocated Assets and NYC shall have the right to copy and to
receive a non-exclusive license of such computer software, rights, data,
licenses and systems that are designated as PRR Allocated Assets. Unless
otherwise agreed upon by CSX and NSC prior to the Closing, all computer software
and associated data and engineering CADD systems owned or used by CRR, CRC or
their respective Affiliates which may not be copied or used (or which may not be
copied or used without the permission of or payment to any Person) by both NYC
and PRR shall be Retained Assets, provided that CRR, CRC and their respective
Affiliates shall use their reasonable commercial efforts to assign, license or
otherwise make available on an equal basis to each of CSX, NSC or their
designees, upon request, the nonexclusive use of all or any portion of such
software, data, licenses and systems. Notwithstanding the foregoing, no party
shall be required to maintain any item of software on computer equipment
included in Allocated Assets, or be required to make license or other payments
for such software, for a period longer than 12 months.
(j) To the extent not otherwise agreed upon by CSX and NSC prior to
the Closing Date, all Pooled Assets shall be Retained Assets available for the
benefit of both CSXT and NYC, on the one hand, and NSR and PRR, on the other
hand in accordance with CSX's and NSC's respective Percentage. If CSX and NSC
agree prior to the Closing Date that specified Pooled Assets (or groups of
Pooled Assets) should be allocated to NYC or PRR, such specified Pooled Assets
shall, at the Closing, be designated as NYC Allocated Assets or PRR Allocated
Assets, as the case may be.
Section 2.3. System Support Operations; Dispatching. (a) The parties
recognize that each SSO Facility has been used by CRR and CRC to provide a
support function benefiting the CRC rail system as a whole (e.g., system-wide
crew management or signal repair support functions). It is expected that each of
CSXT and NYC, on the one hand, and NSR and PRR, on the other hand, may require
the use or benefit of or access to the functions and support provided by the SSO
Facilities for a period of time after the Closing Date. Accordingly, the SSO
Facilities shall be included in Retained Assets and will continue to be owned by
CRR, CRC or its Affiliates. Until a party terminates its use of an SSO Facility
as provided below, (i) the costs of operating such SSO Facility shall be
included in Corporate Level Liabilities and (ii) such SSO Facility shall be
operated for the benefit of both CSXT and NYC, on the one hand, and NSR and PRR,
on the other hand, based on their operating and administrative needs.
(b) Each of CSXT and NYC, on the one hand, and NSR and PRR, on the
other hand, shall have the right, upon six months' prior written notice, to
notify the other that it no longer needs the use of or access to all or any
specified portion of the functions performed at a particular SSO Facility. If
the party receiving such notice notifies the other party within thirty days of
receipt of such notice that it no longer needs the use of or access to all or
the same specified portion of the functions performed at a particular SSO
Facility, then the effective date of the notice sent by the receiving party
shall be deemed to be the same as that of the notice which it received from the
notifying party. If the notice relates to less than the entire SSO Facility, it
shall state with specificity the particular function(s) and/or Continuing CRC
Management position(s) covered by the notice. Notices may be given at any time
before or after the Closing Date and in each case shall specify an effective
date which shall be a date on or after the Closing Date that is not less than
six months after the date such notice is given. From and after the effective
date of a notice, all costs associated and incurred after the effective date of
such notice with the SSO Facility (or portion thereof) and Continuing CRC
Management positions identified in the notice shall cease to be Corporate Level
Liabilities and will be allocated entirely to and be the responsibility of the
party continuing to use the functions performed at the SSO Facility or portion
thereof. Costs associated with an SSO Facility (or portion thereof) or the
Continuing CRC Management employees performing work at that SSO Facility which
are not terminated by such notice but continue to be incurred for the benefit of
both parties will continue to be Corporate Level Liabilities. Notwithstanding
the foregoing, Separation Costs associated with Continuing CRC Management
employees after the Control Date shall be allocated and paid as provided in
Article VI.
(c) In the case of an SSO Facility as to which both CSXT and NYC, on
the one hand, and NSR and PRR, on the other hand, have discontinued use of the
entire SSO Facility by each giving six-month termination notices that have
become effective, CSX and NSC will cause CRC and its Affiliates to take such
action as may be appropriate to discontinue the use of or provide for the
disposition of such SSO Facility (which may include a disposition to NYC or
PRR), and costs associated with such SSO Facility between the effective date of
the second notice and such discontinuance or disposition shall be Corporate
Level Liabilities and the cash proceeds, if any, of such discontinuance or
disposition shall, subject to Section 4.4, be for the benefit of CRC.
(d) The full costs of maintaining and operating SSO Facilities shall
include all direct and indirect costs (excluding return on investment and system
overheads), compensation and benefits, purchased services, insurance, facility
costs and computer processing costs. CSX and NSC shall establish appropriate
accounting systems and controls designed to capture and track such costs.
(e) To facilitate the division of dispatching functions
currently performed for the five CRC operating divisions, NSC and CSX agree that
the territorial boundaries of the operating divisions will be changed and
dispatching functions will be assigned and transferred as follows:
(i) Dearborn division: The Dearborn division office building will be
included in PRR Allocated Assets. All dispatching functions at such
facility will be assigned to PRR and NSR except (A) those for dispatching
the Cleveland East, Cleveland terminal and other Dearborn division
segments included in the NYC Allocated Assets, which functions will be
assigned and transferred to NYC and CSXT, and (B) those for dispatching of
the Detroit Shared Assets Area which functions will be assigned and
transferred to CRC and will be relocated to a neutral site.
(ii) Indianapolis division: The Indianapolis division office
building will be included in NYC Allocated Assets. All dispatching
functions at such facility will be assigned to NYC and CSXT except those
for dispatching the Marion branch, the Cincinnati line, the West Virginia
secondary and other Indianapolis division segments included in the PRR
Allocated Assets, which functions will be assigned and transferred to PRR
and NSR.
(iii) Pittsburgh division: The Pittsburgh division office building
will be included in PRR Allocated Assets. All dispatching functions at
such facility will be assigned to PRR and NSR except those for dispatching
Pittsburgh division segments included in the NYC Allocated Assets, which
functions will be assigned and transferred to NYC and CSXT.
(iv) Philadelphia division (Mt. Laurel, NJ): The Philadelphia
division office building will be included in the Retained Assets. All
dispatching functions at such facility will be assigned to PRR and NSR
except (A) those for dispatching the Trenton line, the River line, the
Popes Creek secondary, the Herbert secondary, the Landover line and other
Philadelphia division segments included in the NYC Allocated Assets, which
functions will be assigned and transferred to NYC and CSXT, and (B) those
for dispatching the North Jersey Shared Assets Area and the South
Jersey/Philadelphia Shared Assets Area and segments included in the
Retained Assets, which functions will be assigned to CRC.
(v) Albany division: The Albany division office building will be
included in the NYC Allocated Assets. All dispatching functions will be
assigned to NYC and CSXT except those for dispatching the Southern tier,
including the Corning secondary, the New Jersey transit line, the Buffalo
line and other Albany division segments included in the PRR Allocated
Assets, which functions will be assigned and transferred to PRR and NSR.
The parties intend that the dispatching desks, equipment and similar
property associated with a dispatching function will, to the extent
practicable, follow the assignment of that function to the party
designated pursuant to clauses (i) through (v) above, to enable such party
to perform dispatching necessary in connection with the Assets allocated
to or used by such party. In addition, the parties recognize that interim
dispatching services may be required to be provided to each other for the
above Routes during a brief interim period (which shall be no longer than
reasonably necessary) and that the parties may charge reasonable fees for
such services.
Section 2.4. Transition Period Accommodation. (a) To the extent that
(i) the CRR headquarters office building in Philadelphia, PA or (ii) the CRR
information technology center in Philadelphia, PA (both of which are NYC
Allocated Assets) were used by CRR or CRC prior to the Closing Date for the
benefit of the CRR and CRC system as a whole, CSX will (or will cause CSXT or
NYC to) furnish and make available for the benefit of NSC or its Affiliates
access to and use of such NYC Allocated Assets (including, without limitation,
office and other space, equipment, computer systems, and data and other
information) as are necessary or convenient in order to reasonably accommodate
the needs of NSC, NSR and PRR for the services and functions performed at such
facilities for a transition period not to exceed (A) twenty-four months
following the Closing Date in respect of the CRR headquarters office building in
Philadelphia, PA and (B) six months following the Closing Date (extendable for
an additional six months at NSC's option) in respect of the CRR information
technology center in Philadelphia, PA. CSX may accommodate such needs of NSC,
NSR and PRR for such services and functions using premises in Philadelphia, PA
other than the premises referred to in clauses (i) and (ii) of this Section
2.4(a); provided that NSC consents to such arrangement, such consent not to be
unreasonably delayed or withheld. CSX, CSXT or NYC, as the case may be, shall
furnish and make available to NSC, NSR or PRR such NYC Allocated Assets at those
facilities as may be reasonably requested by NSC, NSR or PRR; provided that the
nature and scope of the use of such NYC Allocated Assets shall not be greater
than the nature and scope of the use of such NYC Allocated Assets for the
benefit of the CRR and CRC system prior to the Closing Date. CSX may charge NSC,
NSR or PRR, as the case may be, charges calculated at fair market value by CSX
and NSC for such use of such NYC Allocated Assets.
(b) To the extent that (i) the CRC car shop at Hollidaysburg, PA or
(ii) the CRC locomotive shop at Altoona, PA (both of which are PRR Allocated
Assets) were used by CRR or CRC prior to the Closing Date for the benefit of the
CRR and CRC system as a whole, NSC will (or will cause NSR or PRR to) reasonably
accommodate the needs of CSX, CSXT or NYC for the services and functions
performed at such facilities for a transition period not to exceed twenty-four
months following the Closing Date. NSC may accommodate such needs of CSX, CSXT
and NYC for such services and functions using premises other than the premises
referred to in clauses (i) and (ii) of this Section 2.4(b); provided that CSX
consents to such arrangement, such consent not to be unreasonably delayed or
withheld. NSC, NSR or PRR, as the case may be, shall furnish and make available
to CSX, CSXT or NYC such services and functions at those facilities as may be
reasonably requested by CSX, CSXT or NYC; provided that the nature and scope of
such services and functions shall not be greater than those which were provided
in respect of the NYC Allocated Assets by those facilities prior to the Closing
Date. NSC may charge CSX, CSXT or NYC, as the case may be, charges calculated at
fair market value by CSX and NSC for such services and functions.
(c) In complying with Section 2.4(a) and Section 2.4(b), (i) the
accommodating party will provide or make available the Assets or the services,
functions and systems of, and data and information from, the specified
facilities to the extent it can reasonably do so and (ii) if the accommodating
party so requests, the party accommodated will use its reasonable commercial
efforts to discontinue its need for such Assets or services, functions,
information, systems and data at the earliest time practicable following, but
not later than twenty-four months after, the Closing Date (or earlier time as
provided in Section 2.4(a) in respect of the information technology center in
Philadelphia, PA). Nothing herein shall preclude a party from agreeing to make
available the Assets or services, functions and systems of and information and
data from, its facilities to the using party after such maximum periods provided
for in Sections 2.4(a) and 2.4(b), but it shall not be required to do so.
(d) CSX will (or will cause CSXT or NYC to) make available to CRR,
CRC and their respective Affiliates the CRR headquarters office building and the
CRR information technology center in Philadelphia, PA (both of which are NYC
Allocated Assets) for use by those employees identified in clause (b) of the
definition of "Continuing CRC Management" in Section 1.1. Unless otherwise
agreed to by CSX and NSC, CRR, CRC and their respective Affiliates shall have
the right to use those facilities for such Continuing CRC Management employees
to perform such general, administrative and technical services and functions for
an interim period not to exceed (i) twenty-four months following the Closing
Date in respect of the CRR headquarters office building in Philadelphia, PA and
(B) six months following the Closing Date (extendable for an additional six
months at NSC's option) in respect of the CRR information technology center in
Philadelphia, PA. CSX may move such facilities to new premises or may move the
Continuing CRC Management using the facilities to new premises; provided that
NSC consents to such arrangement, such consent not to be unreasonably withheld
and; provided further that CSX and NSC agree on the new fair market value of
such facilities which will be Corporate Level Liabilities pursuant to this
Section 2.4(d). Until a party terminates its use of the support functions and
services of any such Continuing CRC Management employee as provided below, the
costs of employing such employee and the fair market value of related facilities
shall be Corporate Level Liabilities and such employee's services will be
available for the benefit of both CSXT and NYC, on the one hand, and NSR and
PRR, on the other hand, based on the operating and administrative needs of each.
(e) Each of CSX and NSC and their respective Affiliates shall have
the right, upon six months' prior written notice, to notify the other party that
the notifying party no longer needs the support functions and services provided
by any one or more of the Continuing CRC Management employees referred to in
Section 2.4(d). The notice shall state with specificity the particular
Continuing CRC Management position(s) covered by the notice. If the party
receiving such notice notifies the other party within thirty days of receipt of
such notice that it no longer needs the support functions and services provided
by the same (or more) continuing CRC Management employees as are included in the
first notice, then the effective date of such second notice shall be deemed to
be the same as that of the first notice. Notices may be given at any time before
or after the Closing Date and in each case shall specify an effective date on or
after the Closing Date, but not less than six months after the date such notice
is given. From and after the effective date of such a notice, all costs
associated with the Continuing CRC Management positions identified in the notice
shall cease to be Corporate Level Liabilities but shall be allocated entirely to
and be the responsibility of the party continuing to use the functions and
services provided by such Continuing CRC Management positions; provided that in
the case of Continuing CRC Management positions as to which both parties have
given termination notices that have become effective, all costs associated with
such Continuing CRC Management positions after the date the second termination
notice becomes effective shall be Corporate Level Liabilities. Notwithstanding
the foregoing, Separation Costs associated with all Continuing CRC Management
employees after the Closing Date shall be allocated and paid as otherwise
provided in Article VI.
Section 2.5. Trackage, Haulage, Shared Asset and Other Operating
Agreements. On the Closing Date and upon the terms and subject to the conditions
set forth in this Agreement, each of CRC, CSXT and NSR shall execute and
deliver, and the parties shall cause their respective Affiliates and NYC and PRR
to execute and deliver, the following agreements to which it is a party:
(a) The Trackage Rights Agreements: A Trackage Rights Agreement
covering each of the Routes listed in Item 1 of Schedule 4 and containing the
terms and provisions applicable to such Route as set forth in Item 1 of Schedule
4 will be executed by the parties designated in such Item 1.
(b) The CSXT/NSR Haulage Agreements: A CSXT/NSR Haulage Agreement
covering each of the Routes listed in Item 2 of Schedule 4 and containing the
terms and provisions applicable to such Route as set forth in Item 2 of Schedule
4 will be executed by the parties designated in such Item 2.
(c) The Shared Assets Agreements.
(d) The Other Operating Agreements (in respect of Other Operating
Agreements for which the relevant Exhibit hereto sets forth all or some of the
terms of an agreement rather than the form of agreement, the parties shall use
their best efforts to agree to the form of such Other Operating Agreements prior
to the Closing Date).
Section 2.6. Equipment. The parties intend that all Equipment will
be allocated between NYC and PRR (either as Allocated Assets or as Retained
Assets which are subject to the NYC Equipment Agreement or the PRR Equipment
Agreement) by series and condition such that NYC and PRR each receives Equipment
by value in proportion to CSX's and NSC's respective Percentage. Disputes
concerning such allocation shall be subject to binding arbitration under Section
11.12. After the Equipment has been allocated, the parties may agree in their
sole discretion to changes in the allocation giving consideration to other
factors. In furtherance of the foregoing sentence, the parties will appoint
representatives to various teams to consider appropriate adjustments to
allocations of Equipment as described below:
(a) Locomotive Equipment. Promptly after the date hereof, CSXT and
NSR shall each appoint up to three members of a committee (the "Locomotive
Team"). The Locomotive Team shall meet not later than January 1, 1998, to
consider an adjustment to the allocation of locomotive Equipment (including
appurtenances and assigned or related equipment such as locomotive radios) to
NYC and PRR, taking into consideration the following guidelines:
(i) The Locomotive Team shall agree upon parameters to be considered
in any adjustment to the allocation of locomotive Equipment to NYC and
PRR, including CRC's book value, actual numbers of locomotives,
horsepower, tractive effort, powered axles, ownership and encumbrances,
age and condition.
(ii) The CSXT appointees and the NSR appointees on the Locomotive
Team shall separately develop and present to each other proposals for
any adjustments to the allocation of locomotive Equipment to NYC and
PRR.
(iii) In its negotiations, the Locomotive Team may consider CRC yard
service, minimizing maintenance costs, enhancing reliability, and meeting
service needs. The Locomotive Team may consider trades of CSXT and NSR
locomotives to avoid the division of small groups of locomotive Equipment
and to minimize the number of different models each would have as a result
of the allocation.
(iv) If agreement is not reached prior to March 31, 1998, the
Locomotive Team will submit a list of disputed issues for resolution to the
chief operating officers of CSXT and NSR.
(b) Rolling Stock Equipment. Promptly after the date hereof, CSXT and NSR
each shall appoint up to four members of a committee (the "Rolling Stock Team").
The Rolling Stock Team shall meet not later than January 1, 1998 to consider an
adjustment to the allocation of rolling stock Equipment (including cabooses and
non-revenue rolling stock but excluding Work Equipment) to NYC and PRR, taking
into consideration the following guidelines:
(i) Consideration may be given to class and builder's lot, series
within a given AAR car type and AAR Depreciated Value. Consideration may
be given to splitting between NYC and PRR so as to minimize ongoing
maintenance and repair cost, facilitate the assignment of car reporting
marks, permit customary and efficient handling, movement and interchange
of rolling stock in compliance with the AAR Car Service Rules and other
applicable industry requirements.
(ii) All rolling stock Equipment that CSXT and NSR agree is either
(A) obsolete or (B) damaged beyond
economical repair necessary to return the same to service, may be
grouped in a separate category and allocated between NYC and PRR in
accordance with CSX's and NSC's respective Percentage (based on AAR
Depreciated Value).
(iii) Consideration will be given to traffic and service
requirements on the Routes comprising the Allocated Assets based on the
most current traffic information (including current and anticipated
traffic density, customer needs and transportation requirements).
(iv) Head-of-train-devices and end-of-train-devices may be allocated
between NYC and PRR based on current transportation needs and train starts
in respect of the NYC Allocated Assets and PRR Allocated Assets, as the
case may be.
(v) If agreement is not reached prior to March 31, 1998, the Rolling
Stock Team will submit a list of disputed issues to the chief operating
officers of CSXT and NSR.
(c) Work Equipment. Promptly after the date hereof, NSR and CSXT
each shall appoint up to three members of a committee (the "Work Equipment
Team"). The Work Equipment Team shall, not later than January 1, 1998, meet to
consider an adjustment to the allocation of all Work Equipment that is part of
the Unallocated Assets. The Work Equipment Team may allocate such Work Equipment
to NYC and PRR by value in proportion to CSX's and NSC's respective Percentage
based on category of equipment, then model, then age and then condition. If
agreement is not reached prior to March 31, 1998, the Work Equipment Team will
submit a list of disputed issues to the chief operating officers of CSXT and
NSR.
(d) Assignment. CSXT and NSR recognize that it may be desirable to
cause CRC to assign and transfer ownership of certain of the allocated Equipment
to NYC and PRR as part of the NYC Allocated Assets or the PRR Allocated Assets,
respectively, to the extent such transfer is consistent with existing leases and
financing agreements relating to such Equipment. If CSXT and NSR agree,
Indebtedness related to Equipment may also be assigned to and assumed by NYC and
PRR as part of the NYC Allocated Liabilities and the PRR Allocated Liabilities,
respectively.
(e) Lease of Equipment. Equipment that is allocated to NYC and PRR
as provided in this Section 2.6 will be made available to NYC and PRR as
follows: (i) Equipment that is included in the Retained Assets shall be leased
by CRC or its Affiliates to NYC or PRR, as the case may be, pursuant to the NYC
Equipment Agreement or the PRR Equipment Agreement and will thereupon be leased
or otherwise made available by NYC to CSXT and by PRR to NSR pursuant to the
CSXT Equipment Agreement or the NSR Equipment Agreement, respectively; and (ii)
Equipment that CSXT and NSR agree shall be assigned and transferred by CRC or
its Affiliates to NYC or PRR, as the case may be, will be included in the NYC
Allocated Assets or the PRR Allocated Assets, respectively, and will be leased
or otherwise made available by NYC to CSXT and PRR to NSR pursuant to the CSXT
Equipment Agreement or the NSR Equipment Agreement, respectively. Liabilities
arising from the ownership, operation and maintenance of Equipment shall be
borne by the parties as provided for in the relevant Equipment Agreements. If
the foregoing arrangements are impracticable in respect of any Equipment due to
the requirements of any Contracts relating to such Equipment, the parties will
negotiate other arrangements to achieve substantially the same effect.
(f) Equitable Adjustment. The parties recognize that the allocation
of Equipment in general and the allocation of Equipment that is collateral with
respect to Indebtedness may not reflect precisely CSX's and NSC's respective
Percentage and that an equitable adjustment may be required with respect to
Corporate Level Liabilities or otherwise to assure that each of NYC and PRR
receives the benefits and bears the costs of Equipment as nearly as practicable
in proportion to CSX's and NSC's respective Percentage. The Locomotive Team, the
Rolling Stock Team and the Work Equipment Team, assisted as necessary by CSX and
NSC accounting personnel, shall specify an appropriate adjustment mechanism
which may include, but need not include or be limited to, trades between CSXT
and NSR of locomotive Equipment, rolling stock Equipment and/or Work Equipment.
Section 2.7. Inventory at Altoona and Hollidaysburg. (a) As soon as
practicable before the Closing Date, the Inventory Team shall determine the Base
Inventory. "Base Inventory" (i) will consist of and mean all
rolling-stock-related and locomotive-related inventory and supplies (including
rolling-stock-related and locomotive-related system stockpiles) of CRR, CRC or
their respective Affiliates located at the Altoona and Hollidaysburg shops as of
a date at least thirty days prior to the anticipated Closing Date to be agreed
by the Inventory Team, and (ii) will exclude (A) all obsolete or damaged
material and supplies and (B) all inventory acquired for the purpose of
fulfilling third-party Contracts which inventory will follow and be applied to
fulfillment of such Contracts. The Inventory Team will code and group the items
of inventory, materials and supplies included in the Base Inventory as "new,"
"reconditioned," "re-usable," and the like, and will value the groups based on
CRC's material costs or other mutually agreeable methodology (excluding
additives and overheads). The sum of the values of the groups will be the value
of the Base Inventory.
(b) Rolling-stock-related and locomotive-related inventory and
supplies (including rolling-stock-related and locomotive-related system
stockpiles) of CRR, CRC and their respective Affiliates located at the Altoona
and Hollidaysburg shops as of the Closing Date will be included in the PRR
Allocated Assets. To the extent that, after the Closing Date, any work is
performed at the request and for the account of CSXT or NYC at the Altoona shop
or the Hollidaysburg shop pursuant to Section 2.4(b), CSXT and NYC will not be
charged for inventory and supplies used in such work up to an amount of
inventory and supplies equal to 42% of the total value of the Base Inventory,
but only to the extent that such work requires material and supplies of the
types included in the Base Inventory. Notwithstanding the foregoing, NSR or PRR
will separately charge CSXT or NYC for the fair market value of work performed
for the account of CSXT or NYC.
Section 2.8. Allocated and Retained Liabilities. The parties agree
that on and as of the Closing Date (x) NYC shall assume and agree to pay,
perform and discharge as and when due all of the NYC Allocated Liabilities, (y)
PRR shall assume and agree to pay, perform and discharge as and when due all of
the PRR Allocated Liabilities, and (z) CRC and its Affiliates shall retain and
pay, perform and discharge as and when due all of the Retained Liabilities. In
furtherance of the foregoing, the parties agree that, in addition to Employee
Related Liabilities that are designated as Allocated Liabilities or Retained
Liabilities under Article VI, the Allocated Liabilities and the Retained
Liabilities shall consist of the following:
(a) All Liabilities of CRR, CRC or their Affiliates, other than
Environmental Liabilities (which are expressly allocated pursuant to Section
2.8(b)), Corporate Level Liabilities (which are expressly allocated pursuant to
Section 2.8(f)), Employee Related Liabilities (which are expressly allocated
pursuant to Article VI), Liabilities referred to in Section 2.9 or Liabilities
expressly allocated to any Person pursuant to any of the Ancillary Agreements,
including Liabilities associated with the handling and disposition of Actions,
that (i) arise on or after the Closing Date and relate predominantly to NYC
Allocated Assets shall be NYC Allocated Liabilities, and (ii) arise on or after
the Closing Date and that relate predominantly to PRR Allocated Assets shall be
PRR Allocated Liabilities.
(b) Environmental Liabilities (other than Environmental Liabilities
expressly allocated to any Person pursuant to any of the Ancillary Agreements)
shall be designated as follows: (i) Environmental Liabilities that relate
predominantly to NYC Allocated Assets shall be NYC Allocated Liabilities; (ii)
Environmental Liabilities that relate predominantly to PRR Allocated Assets
shall be PRR Allocated Liabilities; and (iii) Environmental Liabilities that do
not relate predominantly to Allocated Assets shall be Corporate Level
Liabilities; provided that, in the case of Environmental Liabilities allocated
to either NYC or PRR pursuant to clause (i) or (ii) above, NYC or PRR, as the
case may be, will be reimbursed by CRC as amounts are expended by NYC or PRR, as
the case may be, in respect of an Environmental Liability to the extent of the
amount of the reserve existing in respect of such Environmental Liability as of
April 8, 1997, reduced by any payments made and charged against such reserve
prior to the Closing Date, except that NYC or PRR, as the case may be, will
repay the amounts under this Section 2.8(b) to CRC to the extent that they
receive the proceeds of any insurance recoveries in respect of an Allocated
Liability which exceed such Allocated Liability net of such payments made.
(c) All Liabilities (other than Liabilities expressly allocated to
any Person pursuant to any of the Ancillary Agreements) associated with the
handling and disposition of FELA Claims made on or after the Control Date shall
be NYC Allocated Liabilities, PRR Allocated Liabilities or Corporate Level
Liabilities based upon the final allocation under this Article II of the Asset
where the incident or incidents giving rise to the FELA Claim occurred, or, if
the FELA Claim arises from an incident or incidents occurring at more than one
location, based upon the final allocation under this Article II of the Asset
most significantly involved.
(d) Except as provided in Section 2.8(a), Section 2.8(b) or Section
2.8(c), all Liabilities associated with the handling and disposition of Actions
arising from incidents which occur in part prior to the Closing Date and in part
on or after the Closing Date shall be allocated as follows:
(i) that portion of the Liability which is fairly attributable to
incidents occurring prior to the Closing Date shall be Corporate Level
Liabilities; and
(ii) that portion of the Liability which is fairly attributable to
incidents occurring on or after to the Closing Date shall be NYC Allocated
Liabilities, PRR Allocated Liabilities or Corporate Level Liabilities
based upon the final allocation under this Article II of the Asset where
the incident or incidents giving rise to the Action occurred, or, if the
Action arises from an incident or incidents occurring at multiple
locations, based upon the final allocation under this Article II of the
Asset most significantly involved.
(e) Except as provided in Section 2.9(b) or Section 2.9(c), all
Liabilities incurred after April 8, 1997 relating to the Merger Agreement,
including without limitation Liabilities for CRR Shares, if any, that are put
pursuant to the Pennsylvania Control Transaction Law, shall be Retained
Liabilities.
(f) Except as provided in Sections 2.8(b) through (e), all
Liabilities that arise prior to the Closing Date and all Corporate Level
Liabilities shall be Retained Liabilities.
Section 2.9. Other Liabilities. (a) Each of CSX and NSC shall
bear its own Transaction Expenses.
(b) CSX shall bear and pay all of CSX's, CRR's, the Surviving
Corporation's and their respective Affiliates' Liabilities to current or former
CRR shareholders with respect to the handling (which CSX shall control) and
disposition (which CSX shall control) of claims pending on April 8, 1997 in
shareholder Actions pending on April 8, 1997 (other than Actions brought by NSC
or its Affiliates) together with all related litigation costs (which shall not
include CRR legal fees incurred prior to April 8, 1997).
(c) CSX's, Green's, CRR's and the Surviving Corporation's, on the
one hand, and NSC's and AAC's on the other hand, Liability with respect to the
handling (which shall be controlled by the liability bearing party) and
disposition (which shall be controlled by the liability bearing party) of
disclosure-based claims based on disclosures made prior to April 8, 1997 brought
by current or former CRR shareholders in connection with the Merger Agreement,
the Amended Second Offer (as defined in the April 8 Agreement) or the
transactions contemplated thereby based on the accuracy or completeness of
information supplied by such party, together with all related litigation costs
(which shall not include CRR legal fees incurred prior to April 8, 1997), shall
be borne solely by CSX or NSC, respectively.
Section 2.10. Interline Accounts and Allocation. (a) The parties acknowledge
that interline railroads often allocate certain assets and liabilities arising
from interline activities between and among themselves on the basis of AAR or
industry agreements and rules, including, without limitation, AAR rules for the
allocation of freight revenues and freight loss and damage claims. If any Asset
or Liability which is allocated under this Agreement to NYC or PRR would, in the
usual course of business under applicable AAR or industry agreement, rule or
practice, be allocated between or among participating interline railroads, then
the subsequent allocation of that Asset or Liability between or among NYC, PRR
and/or any railroad subsidiary of either CSX or NSC under that agreement, rule
or practice shall not in any manner be affected by this Agreement and the
parties shall accept and be governed by that subsequent reallocation under the
applicable AAR or industry agreement, rule or practice, notwithstanding any
provision of this Agreement which may be construed or interpreted to the
contrary, including, without limitation, the provisions of Section 2.2 and
Section 2.8. The parties shall also accept and be governed by any provision of
any AAR or industry agreement, rule or practice applicable to processes and
procedures for dealing with the circumstances underlying any such subsequent
reallocation (including without limitation the investigation and processing of
third party claims), notwithstanding any provision of this Agreement which may
be construed or interpreted to the contrary, including, without limitation, the
provisions of Section 8.14 and Section 10.2.
(b) If any dispute, controversy or claim arises with regard to the
subsequent reallocation of any portion of any asset or liability allocated under
Section 2.10(a), and the pertinent AAR or industry agreement, rule or practice
provides for arbitration, then the arbitration provisions of that agreement,
rule or practice shall, as to that subsequent reallocation, supersede any
provisions of this Agreement which may be construed or interpreted to the
contrary, including, without limitation, the arbitration provisions of Section
11.12.
Section 2.11. Insurance Proceeds. Except as otherwise provided in
this Agreement, the proceeds of any insurance recoveries from insurance carried
by CRR, CRC or their respective Affiliates on or prior to the Closing Date
covering Assets, Retained Liabilities or Allocated Liabilities, which are
received on or after the Closing Date, shall accrue to the benefit of and be
held by or paid over to CRC, NYC or PRR in proportion to the obligation each
bears under this Agreement for the particular Liabilities to which the insurance
recoveries are applicable.
ARTICLE III
CLOSING AND CLOSING DATE
Section 3.1. Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated in Article II and
Article VI (the "Closing") shall take place at a place to be mutually agreed by
CSX and NSC on the third business day following the date on which all of the
conditions set forth in Article IX shall have been satisfied or waived, or at
such other time, date and place as the parties shall agree upon (the "Closing
Date").
Section 3.2. Pre-Closing Actions. Prior to the Closing, CRR shall
cause CRC to establish NYC and PRR as wholly owned Subsidiaries of CRC and shall
cause CRC and NYC to enter into the NYC LLC Agreement and shall cause CRC and
PRR to enter into the PRR LLC Agreement.
Section 3.3. Closing Deliveries. At the Closing:
(a) CSX and CSXT shall deliver or cause to be
delivered to NSC the following documents:
(i) an executed counterpart of the CSXT Equipment Agreement;
(ii) an executed counterpart of the CSXT Operating
Agreement;
(iii) an executed counterpart of each of the Trackage Rights
Agreements to which CSXT or its Affiliates is to be a party;
(iv) an executed counterpart of each of the CSXT/NSR Haulage
Agreements to which CSXT or its Affiliates is to be a party;
(v) an executed counterpart of each of the Shared Assets
Agreements and Other Operating Agreements to which CSXT or its
Affiliates is to be a party; and
(vi) such other and further certificates, assurances and documents
otherwise necessary for the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements.
(b) NSC and NSR shall deliver or cause to be delivered to CSX
the following documents:
(i) an executed counterpart of the NSR Equipment Agreement; (ii) an
executed counterpart of the NSR Operating Agreement; (iii) an
executed counterpart of each of the Trackage Rights
Agreements to which NSR or its Affiliates is to be a party;
(iv) an executed counterpart of each of the CSXT/NSR Haulage
Agreements to which NSR or its Affiliates is to be a party;
(v) an executed counterpart of each of the Shared Assets
Agreements and Other Operating Agreements to which NSR or its
Affiliates is to be a party; and
(vi) such other and further certificates, assurances and documents
otherwise necessary for the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements.
(c) CRR Parent, CRR and CRC (for itself and, if applicable, as
CRR's successor entity) shall deliver or cause to be delivered to each of CSX
and NSC:
(i) the NYC Equipment Agreement executed by CRC and NYC;
(ii) a counterpart of the CSXT Equipment Agreement executed by
NYC;
(iii) the PRR Equipment Agreement executed by CRC and PRR;
(iv) a counterpart of the NSR Equipment Agreement executed by
PRR;
(v) a counterpart of the CSXT Operating Agreement executed by
NYC;
(vi) a counterpart of the NSR Operating Agreement executed by
PRR;
(vii) an executed counterpart of each of the Trackage Rights
Agreements, the CSXT/NSC Haulage Agreements, the Shared Assets Agreements
and the Other Operating Agreements to which CRC or its
Affiliates is a party;
(viii) the Tax Allocation Agreement executed by Green, CRR, CRC,
CRR Industries, PRR and NYC;
(ix) the NYC LLC Agreement executed by CRC;
(x) the PRR LLC Agreement executed by CRC;
(xi) a Capital Contribution, Assignment and Assumption Agreement
executed by CRC and NYC to effectuate the transfer of the NYC Allocated
Assets and the NYC Allocated Liabilities to NYC;
(xii) a Capital Contribution, Assignment and Assumption Agreement
executed by CRC and PRR to effectuate the transfer of the PRR Allocated
Assets and the PRR Allocated Liabilities to PRR; and
(xiii) such other and further certificates, assurances and
documents otherwise necessary for the consummation of
the transactions contemplated by this Agreement and the
Ancillary Agreements.
ARTICLE IV
CRR PARENT, CRR AND CRC GOVERNANCE AND FUNDING
Section 4.1. Pre-Control Date Matters. (a) Unless expressly
permitted in another agreement between CSX and NSC, neither CSX nor NSC will,
without the prior agreement of the other, agree to any modifications of the
terms and conditions of, or give any consent or waiver under, the Merger
Agreement, including without limitation under Section 4.1 of the Merger
Agreement. Without limiting the foregoing, neither CSX nor NSC will, without the
other's prior consent, agree to any determinations with respect to, direct CRR
to take any action with respect to, or object to or prohibit any action with
respect to CRR's employee stock ownership plan, pension plan, stock employee
compensation trust or any other CRR benefit plan, program, arrangement or other
contract, or any trust or other funding arrangement that is intended to be used
in whole or in part to provide or fund benefits under any CRR or CRC benefit
plans, programs, arrangements or contracts. In addition, CSX will consult and
agree with NSC prior to providing any notices to CRR under the Merger Agreement
and shall promptly provide NSC with copies of all written notices provided by
CSX to CRR or received by CSX from CRR under the Merger Agreement.
(b) Prior to the Control Date CRR shall be governed in accordance
with the terms of the Amended and Restated Voting Trust Agreement.
Section 4.2. Post-Control Date CRC Governance. CRR Parent shall vote
all of the shares in the capital stock of CRC and all of the parties shall take
all other necessary or desirable action within their respective control to
effectuate the following:
(a) Following the Control Date, the business and affairs of CRC
shall be managed under the direction of the CRC Board consisting of six persons
divided into two classes of three directors. Three directors shall be designated
by CSX (the "CSX Directors") and three directors shall be designated by NSC (the
"NSC Directors").
(b) Approval of the CRC Board shall be required for all Major
Decisions of CRC. The power of the CRC Board to approve such actions and
decisions shall be exclusive to the CRC Board, and no officer may take any such
action or make any such decision without the approval of the CRC Board. Any
action or decision of the CRC Board, whether at a meeting of the CRC Board or by
written consent, may only be taken if approved by a majority of CSX Directors
and a majority of NSC Directors.
(c) The CSX Directors may appoint by majority vote one Co-Chairman
(the "CSX Co-Chairman") and the NSC Directors may appoint by majority vote one
Co-Chairman (the "NSC Co-Chairman"). The Co-Chairmen shall preside at all
meetings of the CRC Board and shall have and perform such other duties as may be
assigned to them by the CRC Board.
(d) If the office of any CSX Director becomes vacant, the remaining
CSX Directors by a majority vote may appoint any qualified individual to fill
such vacancy, and such individual shall hold office for the unexpired term and
until his or her successor shall be duly chosen. If the office of any CSX
Director becomes vacant and there are no remaining CSX Directors, CSX may
appoint any qualified individuals to fill the CSX Directors vacancies by a
writing to such effect. If the office of any NSC Director becomes vacant, the
remaining NSC Directors by a majority vote may appoint any qualified individual
to fill such vacancy, and such individual shall hold office for the unexpired
term and until his or her successor shall be duly chosen. If the office of any
NSC Director becomes vacant and there are no remaining NSC Directors, NSC may
appoint any qualified individuals to fill the NSC Directors vacancies by a
writing to such effect.
(e) Any CSX Director may be removed either for or without cause
at any time, but only by CSX in a writing to such effect. Any NSC Director
may be removed either for or without
cause at any time, but only by NSC in a writing to such effect.
(f) In addition to the two Co-Chairmen of the CRC Board, the
officers of CRC may include a chief executive officer, one or more vice
presidents, a treasurer and a secretary, all of whom shall be elected by and
shall serve at the direction of the CRC Board.
(g) The parties agree to take all necessary action such that each of
CSX and NSC shall have rights identical to those set forth in paragraphs (a)
through (f) above with respect to the Boards of Directors and management of CRR
and each of its Affiliates in addition to CRC other than NYC and PRR.
Section 4.3. Post-Closing Date CRC Funding. (a) From and after the
Closing Date, CSX and NSC shall ensure that CRR, CRC and their Affiliates have
sufficient cash to satisfy the Retained Liabilities as they become due and any
operating and other expenses incurred by CRR, CRC and their Affiliates in the
conduct of their business consistent with this Agreement and the Ancillary
Agreements after giving effect to any Distributions received or to be received
from NYC and PRR. In furtherance of the foregoing sentence, following receipt by
CRR Parent of written notice from CRC of a CRC Board decision that CRC requires
such cash, CRR Parent shall provide such cash to CRC by capital contribution,
loan or advance to be made on the next business day following the expiration of
30 days after receipt of such notice, unless a later date is determined by the
CRC Board or another date is agreed in writing by CRC and CRR Parent.
(b) It is the intent of the parties that the economic burden of the
Corporate Level Liabilities will be borne, directly or indirectly, by CSX or NSC
in accordance with their respective Percentage.
Section 4.4. Post-Control Date CRC and Other Distributions.
Following the Control Date, subject to any legal and contractual restrictions,
the CRC Board shall cause CRC to make a Distribution to CRR Parent as soon as is
practical and in any event within 45 days after each fiscal quarter of all cash
received by CRC from operations and any dividends, interest or other cash
Distributions from any Person in which CRC has an interest which is in excess of
120% of the amount of cash reasonably contemplated by the CRC Board as being
necessary for the cash payment of CRC's operating expenses (net of receipts),
debt service, contingencies, budgeted capital expenditures and working capital
requirements (all of which shall take into account cash on hand and future
expected cash surpluses and cash requirements). Notwithstanding the foregoing,
no Distribution shall be made which would render CRC insolvent or which is
prohibited by the terms of any Indebtedness of CRC or its Affiliates.
Section 4.5. Operating Fees, Interest Rentals and Base Rent. The
parties anticipate that as of the Closing Date, the sum of the following amounts
will total seven hundred and fifty million dollars: (i) Interest Rentals payable
under the Shared Assets Agreements, (ii) Operating Fees payable under the CSXT
Operating Agreement and the NSR Operating Agreement and (iii) Base Rent payable
under the CSXT Equipment Agreement and the NSR Equipment Agreement. The parties
acknowledge that as of a Valuation Date, (i) the Interest Rentals, Operating
Fees and Base Rent shall be determined as set forth in the CSXT Operating
Agreement, the NSR Operating Agreement, the CSXT Equipment Agreement, the NSR
Equipment Agreement and the Shared Assets Agreements and (ii) the allocation
between CSXT and NSR of the Operating Fees and Base Rent payable under the CSXT
Operating Agreement, the NSR Operating Agreement, the CSXT Equipment Agreement
and the NSR Equipment Agreement shall reflect the then relative Fair Market
Rental Values of the NYC Allocated Assets, the PRR Allocated Assets, the CSXT
Equipment and the NSR Equipment as of the most recent Valuation Date (which
allocation, in the case of a Valuation Date that is also the Closing Date, shall
be a 58% allocation to NSR and a 42% allocation to CSXT).
ARTICLE V
NYC and PRR GOVERNANCE AND CONDUCT
Section 5.1. NYC Governance. From and after the Control Date, CSX
shall have exclusive authority to direct the appointment of the officers and
directors of NYC who shall in their discretion, but subject to the provisions of
this Agreement, direct the operation of NYC. Without limiting the foregoing but
subject to Section 5.3, CRC, in its capacity as the sole member of NYC, shall
follow CSX's directions with respect to the management and operation of NYC to
the extent that such directions are not inconsistent with the terms of this
Agreement, the NYC LLC Agreement or any applicable laws and do not involve the
transfer, sale, conveyance, distribution, pledge, hypothecation, encumbrance or
assignment of such membership interest (other than in connection with a
Restructuring).
Section 5.2. PRR Governance. From and after the Control Date, NSC
shall have exclusive authority to direct the appointment of the officers and
directors of PRR, who shall in their discretion, but subject to the provisions
of this Agreement, direct the operation of PRR. Without limiting the foregoing
but subject to Section 5.3, CRC, in its capacity as the sole member of PRR,
shall follow NSC's directions with respect to the management and operation of
PRR to the extent that such directions are not inconsistent with the terms of
this Agreement, the PRR LLC Agreement or any applicable laws and do not involve
the transfer, sale, conveyance, distribution, pledge, hypothecation, encumbrance
or assignment of such membership interest (other than in connection with a
Restructuring).
Section 5.3. NYC and PRR Actions. Notwithstanding anything to the
contrary contained in Section 5.1 or Section 5.2, unless it receives the prior
written consent of CSX and NSC to the contrary, CRC, as the sole member of each
of NYC and PRR, shall cause NYC and PRR respectively to enforce, to the fullest
extent permitted by law or Contract, their rights under the Ancillary
Agreements, including any right to receive payments or any indemnities
thereunder.
Section 5.4. NYC and PRR Distributions. The parties agree that, from
and after the Control Date, other than Distributions made by NYC and PRR
contemporaneously and in proportion to the respective Percentage of CSX and NSC,
NYC and PRR shall not be required, without the consent of CSX or NSC,
respectively, to make any Distributions to CRC or its Affiliates.
Section 5.5. Actions. CRC shall exercise its ownership interest in
NYC and PRR, respectively, and all of the parties shall take all other necessary
or desirable action within their respective control, in order to effectuate the
provisions of this Article V.
ARTICLE VI
EMPLOYEE MATTERS
Section 6.1. Employees of CRR and CRC. (a) On the Closing Date, or
as soon thereafter as any applicable labor agreements, statutes, regulations and
STB conditions, and implementing agreements thereunder, may permit or require,
each of CSX, NSC, NYC or PRR or their respective Affiliates shall make
employment available to CRR and CRC agreement employees pursuant to the
requirements and procedures under the said applicable labor agreements,
statutes, regulations, conditions and implementing agreements.
(b) Prior to the Closing Date, each of CSX and NSC and their
respective Affiliates shall comply with the Staffing Process Guidelines dated
June 1, 1997 as adopted by CSX and NSC.
(c) Not later than thirty days prior to the Closing Date, CSX and
NSC jointly shall determine the location, functions to be performed by,
resources and positions required by, and methodology for cost determination for
Continuing CRC Management. Each function shall be defined in terms of a
description of the function, the number of positions required to perform the
function and general descriptions of the nature of each function, including
whether it is intended to be performed on an interim or on-going basis. CSX and
NSC jointly may enter into one or more agency agreements by which CSX or NSC or
their respective Affiliates may perform any Continuing CRC Management functions.
(d) To the extent implementing agreements are required by STB-imposed conditions
in order to effect the transactions contemplated by Article II and Article VI,
each party agrees to use its commercially reasonable efforts to obtain
implementing agreements reasonably determined by the parties to be necessary to
effect such transactions. Where necessary to effect the transactions
contemplated by Article II and Article VI, the parties will jointly negotiate
(and if no agreement is reached will jointly arbitrate to reach an agreement) an
implementing agreement to which they will be parties with the employee
representative(s) of the appropriate craft or class of employees of each
carrier. Notwithstanding the foregoing, no party shall be required by this
Section 6.1(d) to agree to implementing agreements which it, in its reasonable
judgment, determines to be contrary to its business interests.
Section 6.2. Employee Related Liabilities. Employee Related
Liabilities shall be designated as follows:
(a) Separation Costs subsequent to the Control Date associated with
agreement employees at CRC's or its Affiliates' shops in Altoona and
Hollidaysburg shall be the responsibility of NSR. Separation Costs subsequent to
the Control Date associated with agreement employees at CRC's or its Affiliates'
headquarters in Philadelphia, technology center in Philadelphia, and customer
service center in Pittsburgh (notwithstanding its joint use as a SSO Facility)
will be the responsibility of CSXT.
(b) The on-going employee expenses related to Continuing CRC
Management after the Control Date shall be Corporate Level Liabilities; provided
that (i) each of CSX and NSC shall have the right pursuant to Section 2.3 to
discontinue use of a Continuing CRC Management function or a position related to
a SSO Facility and (ii) each of CSX and NSC shall have the right pursuant to
Section 2.4 to discontinue use of a function performed by, or a position
occupied by, an employee identified pursuant to clause (b) of the definition of
Continuing CRC Management. Notwithstanding the foregoing, Separation Costs
associated with Continuing CRC Management employees after the Closing Date shall
be allocated as otherwise provided in this Agreement.
(c) In each instance subsequent to the Control Date and subject to
the provisions of Section 6.2(a) above, (i) Separation Costs associated with CRC
agreement employees working jobs at or in respect of NYC Allocated Assets will
be the sole responsibility of CSXT, (ii) Separation Costs associated with CRC
agreement employees working jobs at or in respect of PRR Allocated Assets will
be the sole responsibility of NSR, (iii) for each CRC agreement employee working
a job at or in respect of Retained Assets, Separation Costs will be a Corporate
Level Liability, and (iv) Separation Costs associated with CRC or CRR agreement
employees working jobs at or in respect of two or more such properties (i.e.,
NYC Allocated Assets, PRR Allocated Assets and Retained Assets) will be treated
as the responsibility of CSXT, NSR, or as a Corporate Level Liability, depending
upon the Asset at or in respect of which the employee predominantly works.
(d) Subject to Sections 6.2(a) and (e), if an employee of CRR, CRC
or their respective Affiliates on the Control Date who is subject to any
protective conditions imposed by the STB pursuant to the transactions
contemplated by this Agreement or the Ancillary Agreements cannot obtain
employment with CRC, PRR, NYC, CSX, NSC or their respective Affiliates after the
Control Date, then the Separation Costs in respect of such employee shall be
included among Corporate Level Liabilities, NYC Allocated Liabilities or PRR
Allocated Liabilities on the basis of whether the employee performed the
preponderance of his or her service in the six months preceding the first day of
the month in which the Control Date occurred at or in respect of a Retained
Asset, an NYC Allocated Asset or a PRR Allocated Asset. The Separation Costs of
employees as to whom no reasonable determination can be made shall be Corporate
Level Liabilities, but shall be assigned on an alternating basis to NYC and PRR
for the purpose of administering the claims.
(e) If an employee of CRC, CSX, NSC, PRR, NYC or their respective
Affiliates who is subject to any protective conditions imposed by the STB
pursuant to the transactions contemplated by this Agreement or the Ancillary
Agreements moves his or her employment from one of such parties to another of
such parties on or after the Control Date (including any employee in respect of
whom the Separation Costs have already been allocated to one of CRC, PRR, NYC,
CSX, NSC or their respective Affiliates), responsibility for such employee's
Separation Costs arising thereafter shall be assumed by the new employer;
provided that any relocation costs shall be the responsibility of the first
employer.
(f) Separation Costs associated with employees who were employed by
CSX or NSC or their Affiliates on the day preceding the Control Date will be the
sole responsibility of such employer.
(g) Separation Costs associated with employees who are, as of the
Control Date, non-agreement employees of CRR or CRC (including payments to be
made by CSX, CRR or the Surviving Corporation under the Merger Agreement) shall
be Corporate Level Liabilities. Compensation and other expenses after the
Control Date associated with those non-agreement CRC employees who are not
designated as Continuing CRC Management and who are not employed by either CSX
or NSC, or their respective Affiliates, shall be Corporate Level Liabilities
until such time as such employees are no longer employed by CRC.
(h) Compensation and other expenses (excluding Separation Costs) for
agreement employees (other than Continuing CRC Management) working jobs at or in
respect of NYC Allocated Assets shall be the sole responsibility of CSXT.
Compensation and other expenses (excluding Separation Costs) for agreement
employees (other than Continuing CRC Management) working jobs at or in respect
of PRR Allocated Assets shall be the sole responsibility of NSR.
(i) Notwithstanding anything in this Section 6.2 to the contrary,
Separation Costs (other than payments made pursuant to the CRR Stay Bonus
Program) under CRR or CRC plans and agreements (including the Third Amendment)
for a CRC non-agreement employee who becomes employed after the Control Date by
CSX or its Affiliates or NSC or its Affiliates, which Separation Costs arise
subsequent to the date of such employment, will be borne by the employing party.
Section 6.3. Non-Agreement Employee Benefit Plans. (a) The employee
benefit plans, programs and policies which currently are provided to the
non-agreement employees of CRR, CRC or their respective Affiliates will continue
to be provided to the non-agreement employees of CRC and its Affiliates and to
non-agreement Continuing CRC Management on and after the Control Date, unless it
is determined jointly by CSX and NSC that such benefits shall be changed;
provided that CSX and NSC shall not make any changes in such plans, programs or
policies that contravene Attachment A to the CRR Disclosure Schedule delivered
in connection with the Third Amendment. The costs associated with such plans,
programs and policies shall be Corporate Level Liabilities, except that
Separation Costs shall be allocated and paid as otherwise provided herein. CSX
and NSC jointly may enter into one or more agency agreements with CRR, CRC or
their respective Affiliates for CSX or NSC to provide any of such benefits,
programs or policies.
(b) Any employee benefit plans, programs and policies for the
employees of NYC and its Subsidiaries shall be the sole responsibility of NYC
and included in the NYC Allocated Liabilities. Any employee benefit plans,
programs and policies for the employees of PRR and its Subsidiaries shall be the
sole responsibility of PRR and included in the PRR Allocated Liabilities.
However, notwithstanding the foregoing, NYC, PRR and CRC shall provide to each
other any information that is necessary to determine whether any benefit plan is
or continues to be tax qualified, and in the event that NYC, PRR or CRC
reasonably determines that the benefit plans of NYC, PRR and CRC, when
considered together, may cause one or more benefit plans to lose or fail to
obtain their tax qualification, NYC, PRR and CRC shall agree to appropriate
changes to prevent such loss of tax qualification.
(c) CSX, NSC and CRC agree to take any actions permitted by law
that are necessary or appropriate to determine the amount of excess assets in
CRC benefit plans and to allow allocation to CSX and NSC or their respective
Affiliates in proportion to their respective Percentage; provided that no such
transfer shall reduce the assets remaining in any CRC defined benefit plans to a
level that is less than 100% of the Liabilities for benefits on a termination
basis as reasonably calculated by Price Waterhouse employing usual and customary
methodology and assumptions and; provided further that no such transfer shall
reduce the assets remaining in any other CRC benefit plan to a level that is
less than 100% of the Liabilities for those other CRC benefit plans as
reasonably calculated by Price Waterhouse. CSX, NSC and CRC shall reach an
agreement as to the transfer of accrued benefits and related assets with respect
to employees that are transferred.
(d) Any Liabilities incurred prior to the Closing Date by CRR, CRC
or any of their respective Affiliates with respect to any employee benefit plan,
program, policy or arrangement, other than to the extent a Liability is funded
under a CRC benefit plan, shall be Corporate Level Liabilities.
Section 6.4 Residual Liability. The allocation of liabilities
associated with the employees of CRR, CRC or any of their respective Affiliates
hereunder is intended merely to assign primary responsibility for such
liabilities among the parties. Nothing in the Agreement shall be interpreted or
construed as a restriction or limitation of the duties and responsibilities of
CRR, CRC, their respective Affiliates and CSX with respect to employee-related
liabilities as set forth in the Merger Agreement and Attachment A to the CRR
Disclosure Schedule delivered in connection with the Third Amendment.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1. CSX. CSX represents and warrants to NSC, CRR and
CRR Parent as of the date hereof and as of the Closing Date as follows:
(a) Organization and Good Standing. CSX is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia.
(b) Authority. CSX has full corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
corporate proceedings required to be taken by or on the part of CSX to authorize
CSX to execute, deliver and authorize the performance of this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby have
been duly and properly taken.
(c) Enforceability. This Agreement has been and each of the
Ancillary Agreements will be duly executed and delivered by CSX and, when duly
executed and delivered by NSC and (to the extent such agreement is not being
entered into as of the date hereof) CSX, will constitute the legal, valid and
binding obligation of CSX enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization and other
laws of general application relating to or affecting enforcement of creditors'
rights and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
(d) No Violation. The execution and delivery by CSX of this
Agreement and the Ancillary Agreements will not violate in any material respect
any law, or in any material respect conflict with, result in any breach of,
constitute a default (or any event which with notice or lapse of time or both
would become a default) under the Articles of Incorporation or Bylaws of CSX or
any material Contract to which CSX is a party or by which it or its property or
assets is bound.
(e) No Approvals. Except for required approvals by the STB and
filings required under the Securities Exchange Act of 1934, as amended (the
"Required Approvals"), no declaration, filing or registration with, or notice
to, or authorization, consent or approval of, any Governmental Entity is
necessary for the consummation by CSX of the transactions contemplated hereby or
by the Ancillary Agreements, other than such filings, registrations,
authorizations, consents or approvals which, if not obtained or made, will not,
in the aggregate, materially adversely affect the ability of CSX to consummate
the transactions contemplated hereby or by the Ancillary Agreements.
Section 7.2. NSC. NSC represents and warrants to CSX, CRR and
CRR Parent as of the date hereof and as of the Closing Date as follows:
(a) Organization and Good Standing. NSC is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia.
(b) Authority. NSC has full corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
corporate proceedings required to be taken by or on the part of NSC to authorize
NSC to execute, deliver and authorize the performance of this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby have
been duly and properly taken.
(c) Enforceability. This Agreement has been and each of the
Ancillary Agreements will be duly executed and delivered by NSC and, when duly
executed and delivered by CSX and (to the extent such agreement is not being
entered into as of the date hereof) NSC, will constitute the legal, valid and
binding obligation of NSC enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization and other
laws of general application relating to or affecting the enforcement of
creditors' rights and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) No Violation. The execution and delivery by NSC of this
Agreement and the Ancillary Agreements will not violate in any material respect
any law, or in any material respect conflict with, result in any breach of,
constitute a default (or any event which with notice or lapse of time or both
would become a default) under the Articles of Incorporation or Bylaws of NSC or
any material Contract to which NSC is a party or by which it or its property or
assets is bound.
(e) No Approvals. Except for the Required Approvals, no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any Governmental Entity is necessary for the consummation by NSC of the
transactions contemplated hereby or by the Ancillary Agreements, other than such
filings, registrations, authorizations, consents or approvals which, if not
obtained or made, will not, in the aggregate, materially adversely affect the
ability of NSC to consummate the transactions contemplated hereby or by the
Ancillary Agreements.
ARTICLE VIII
COVENANTS
Section 8.1. Conduct of Business. Except as provided for in this
Agreement or as otherwise consented to by CSX and NSC in writing, between the
Control Date and the Closing Date, the parties will use reasonable commercial
efforts to cause the Assets to be operated by CRR, CRC and their respective
Affiliates in the ordinary course consistent with past practice and in
compliance in all material respects with all applicable laws and regulations and
will use their reasonable commercial efforts to preserve intact the Assets, use
reasonable efforts to keep available the services of CRR's, CRC's and their
respective Affiliates' current officers and other key employees as a group and
preserve CRR's, CRC's and their respective Affiliates' relationships with those
Persons having business dealings with CRR, CRC and their respective Affiliates
to the end that their goodwill and ongoing businesses shall be unimpaired at the
Closing Date. Without limiting the foregoing, between the Control Date and the
Closing Date, the parties will use reasonable commercial efforts to ensure that
CRR, CRC and their respective Affiliates continue their maintenance and
improvement of Assets in the ordinary course in accordance with past practice
without discriminating between Assets on the basis of whether they are or will
be NYC Allocated Assets, PRR Allocated Assets or Retained Assets.
Section 8.2. Best Efforts. Subject to the terms and conditions of
this Agreement, each party agrees to use best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements. No party shall knowingly take any action in
contravention of, or which is inconsistent with, the transactions contemplated
by this Agreement.
Section 8.3. Further Assurances; Consents. (a) From time to time
after the Closing Date, each of the parties will execute and deliver such
further instruments and will take such other actions as CSX, on the one hand, or
NSC, on the other hand, may reasonably request in order to effectuate the
purposes of this Agreement and the Ancillary Agreements and to carry out the
terms hereof and thereof. To the extent that any consent or concurrence is
required under this Agreement by any party or its Affiliates, such consent or
concurrence shall not be unreasonably withheld.
(b) If any of the Allocated Assets cannot be transferred as
contemplated by this Agreement (other than Contracts which are dealt with in
Section 8.5), the parties will cooperate to make the Allocated Asset available
through whatever alternative arrangements will best carry out the purpose and
accomplish the intent of this Agreement, except that this requirement shall not
apply to Allocated Assets which cannot be transferred because of regulatory
constraints.
Section 8.4. STB Approval. (a) The parties will as expeditiously as
possible seek STB approval necessary for the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements. The parties will
use their reasonable best efforts to obtain such approvals, and no party will
take any position (at the STB or with any other Governmental Entity or
elsewhere) inconsistent with this Agreement and the Ancillary Agreements.
(b) Each of CSX and NSC shall (i) coordinate and cooperate with one
another to prepare and present to the STB, as soon as practicable, all
applications, petitions, notices, filings and other presentations in connection
with seeking all STB approvals, exemptions or other authorizations necessary to
consummate the transactions contemplated by this Agreement and by the Ancillary
Agreements, using, to the extent practicable, joint legal counsel and expert
witnesses, (ii) prosecute such applications, petitions, notices, filings and
other presentations with diligence, (iii) diligently oppose any objections to,
appeals from or petitions to reconsider or reopen any such STB approval, (iv)
take all such further action as in their judgment may facilitate obtaining a
final order or orders of the STB approving the transactions contemplated by this
Agreement and the Ancillary Agreements and (v) bear the burden, without
adjustment in the Percentage or other consideration, of any STB imposed
condition it accepts.
(c) Each of CSX and NSC shall coordinate and consult with one
another with respect to all settlements involving the STB approval process. The
parties further agree that, (i) any settlement or agreement pertaining to the
Shared Assets Areas and the Shared Assets Agreements will require the joint
approval of CSX and NSC; (ii) none of CRR, CRC nor CSX shall make any settlement
or agreement with respect to any PRR Allocated Asset without NSC's prior written
consent; (iii) none of CRR, CRC nor NSC shall make any settlement or agreement
with respect to any NYC Allocated Asset without CSX's prior written consent and
(iv) nothing contained herein shall require joint action for either CSX or NSC
to enter into any settlement or Transportation Contract with any shipper or
receiver of freight. CSX and NSC may act in their sole discretion in respect of
the matters set forth in this Section 8.4(c).
(d) If the STB, as a condition to its approval of the transactions
contemplated by this Agreement and the Ancillary Agreements, imposes a
non-standard condition which would materially reduce the benefits to either CSX
or NSC from the transactions contemplated by this Agreement and the Ancillary
Agreements, then the materially affected party may in its sole discretion (i)
accept such condition and proceed with the transactions contemplated by this
Agreement and the Ancillary Agreements, or (ii) appeal such condition to the
courts and postpone the Closing Date for up to thirty months (and its election
under this Section 8.4(d)) until final action on its appeal, and (iii) if such
appeal is unsuccessful, reject the condition and proceed in accordance with the
terms of the Amended and Restated Voting Trust Agreement.
Section 8.5. Other Approvals. (a) The parties shall as expeditiously
as possible use their reasonable best efforts to obtain any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity (other than the STB which is covered by Section 8.4) or private Person
required to be obtained or made by the parties or their respective Affiliates to
effectuate the purposes of this Agreement or the Ancillary Agreements and the
transactions contemplated herein and therein, which actions shall include,
without limitation, furnishing all information required under or in connection
with approvals of or filings with any such Governmental Entity or private
Person. Each party shall reasonably cooperate with each other in connection with
the foregoing. CRC will use reasonable commercial efforts to transfer and assign
to NYC and PRR all Contracts which are to be transferred pursuant to Article II,
it being understood that CRC shall not seek any consents of any third party
unless requested to do so by NYC, in the case of a Contract that is a NYC
Allocated Asset, or PRR, in the case of a Contract that is a PRR Allocated
Asset, and in no event shall CRC be obligated to make payments to third parties
in order to obtain such consents.
(b) All Contracts and rights which are Allocated Assets and are not
transferred pursuant to Section 8.5(a) shall be handled in accordance with the
following procedure: (i) CRC or its Affiliates shall continue to be bound
thereby and to hold the rights thereunder and (ii) NYC, in the case of a
Contract that is a NYC Allocated Asset, and PRR, in the case of a Contract that
is a PRR Allocated Asset, shall pay, perform and discharge fully all of the
obligations of CRC or its Affiliates thereunder from and after the Closing Date.
CRC or its Affiliates shall, without further consideration therefor, pay, assign
and remit promptly to NYC or PRR, as appropriate, all monies, rights and other
consideration received in respect of such performance. CRC or its Affiliates
shall exercise or exploit the rights and options under all such Contracts only
as reasonably directed by NYC, in the case of a Contract that is a NYC Allocated
Asset, and PRR, in the case of a Contract that is a PRR Allocated Asset, and at
NYC's or PRR's expense.
Section 8.6. [Intentionally Omitted.]
Section 8.7. Risk of Loss; Forced Disposal. (a) In the event of any
loss or damage to or destruction of, prior to the Closing, any or all of the
Allocated Assets by fire or other casualty, the title to and other rights
associated with such Allocated Assets shall nevertheless pass to NYC or PRR as
provided for herein without any liability or obligation on the part of any of
the parties or their respective Affiliates as a result of such loss, damage or
destruction and without any adjustment of the Percentage; provided, however,
that at the Closing, CRC shall transfer to NYC or PRR, as the case may be, CRC's
or its Affiliates' rights to any proceeds of any casualty insurance policies
covering such damage or destruction plus the net proceeds, if any, actually
collected by CRC or its Affiliates under the provisions of the casualty
insurance policies, if any, covering such loss, damage or destruction.
(b) If any of the Allocated Assets are disposed of by CRR, CRC or
their respective Affiliates because of conditions imposed by the STB prior to
the Closing, in lieu of the transfer of such Allocated Assets, CRR, CRC or their
respective Affiliates shall deliver to NYC or PRR, as the case may be, the
benefit of any net after-tax consideration attributable to any such Allocated
Assets received by CRR, CRC or their respective Affiliates pursuant to such
disposition.
Section 8.8. Public Statements; Public Filings. Any written news
releases prior to the Closing and any other disclosure required to be filed
prior to the Closing with any Governmental Entity (other than routine
information and filings with the Securities and Exchange Commission) pertaining
to this Agreement, the Ancillary Agreements or the transactions contemplated
hereby or thereby will be subject to prior review by both CSX and NSC prior to
release.
Section 8.9. Restructuring of CRC. (a) It is the parties' intent
that, at some time after the Closing Date, CRC will transfer PRR or the assets
and liabilities of PRR to NSC, transfer NYC or the assets and liabilities of NYC
to CSX or otherwise separate PRR (for the benefit of NSC) and NYC (for the
benefit of CSX) from CRC in the most efficient manner for U.S. federal income
tax purposes (the transaction separating PRR from CRC for the benefit of NSC
hereinafter referred to as the "PRR Restructuring", and the transaction
separating NYC from CRC for the benefit of CSX hereinafter referred to as the
"NYC Restructuring"). A Restructuring shall not be consummated unless (i) CRC
obtains a private letter ruling from the Internal Revenue Service (the
"Service") substantially to the effect that such Restructuring qualifies as a
tax-free transaction (except with respect to gain or income required to be
recognized with respect to intercompany items or excess loss accounts pursuant
to regulations under Section 1502 of the Code or with respect to gain or income
recognized in the Restructuring under Section 356 or Section 361 of the Code as
the result of the receipt of "other property or money" within the meaning of
such sections, provided that the amount of such gain or income recognized by CRR
or its Affiliates is not substantial) under the Code (the "Ruling"), or the
parties otherwise agree to proceed with such Restructuring on the basis of an
opinion of tax counsel generally to the same effect, (ii) any required approval
of the STB is obtained, (iii) Tax indemnities mutually satisfactory to CSX and
NSC have been agreed to and (iv) the conveyance of the CRR Parent interests is
structured in a way to ensure to the mutual satisfaction of CSX and NSC that
after a Restructuring, NSC (in the case of the PRR Restructuring) and CSX (in
the case of the NYC Restructuring) continue to hold their respective Percentage
of the equity and 50 percent of the vote with respect to the Retained Assets and
the Retained Liabilities and NSC (in the case of the PRR Restructuring) has no
continuing interest whatsoever in NYC and CSX (in the case of the NYC
Restructuring) has no continuing interest whatsoever in PRR. In addition, a PRR
Restructuring shall not be consummated if, based upon the written opinion of
outside tax counsel to CSX, such Restructuring would more likely than not impair
the ability to consummate a subsequent NYC Restructuring, and a NYC
Restructuring shall not be consummated if, based upon the written opinion of
outside tax counsel to NSC, such Restructuring would more likely than not impair
the ability to consummate a subsequent PRR Restructuring. The parties agree that
the application referred to in Section 8.4(b) shall not seek the authority to
effect any transaction referred to in this Section 8.5.
(b) CRC shall seek a Ruling at the request of either CSX or NSC or
both of them. If CRC seeks a Ruling at the request of either CSX or NSC or both
of them, after consultation with the party or parties requesting the Ruling, CRC
shall prepare the Ruling request and any supplements or materials relating
thereto that are required to be submitted to the Service in connection with the
Ruling request (each, an "IRS Submission"). Each IRS Submission shall be true
and correct in all material respects, and all material facts relating to the
requested Ruling shall be disclosed to the Service. CRC shall provide CSX and
NSC with a reasonable opportunity to review and comment on each IRS Submission
prior to the filing of such IRS Submission with the Service, and no IRS
Submission shall be filed with the Service unless the party or parties
requesting the Ruling have agreed in writing as to the contents of such IRS
Submission prior to such filing. CRC shall provide CSX and NSC with copies of
each IRS Submission as filed with the Service. Neither CRC nor its Affiliates or
representatives shall conduct any communications with the Service concerning the
Ruling request, including meetings or conferences with personnel from the
Service, whether in person, telephonically or otherwise, without notifying CSX
and NSC and giving CSX and NSC the opportunity to participate. CRC shall provide
CSX and NSC with copies of any correspondence between CRC and the Service with
respect to the Ruling request.
(c) If the requirements of clauses (i), (ii), (iii) and (iv) of the
second sentence of Section 8.9(a) are satisfied and no opinion meeting the
requirements of the third sentence of Section 8.9(a) is delivered with respect
to a Restructuring, NSC (in the case of the PRR Restructuring) and CSX (in the
case of the NYC Restructuring) shall have the right, consistent with the Ruling
(or opinion of counsel, if applicable), to exchange some or all of its interests
in CRR Parent for PRR (in the case of the PRR Restructuring) and NYC (in the
case of the NYC Restructuring). At the request of PRR (in the case of a PRR
Restructuring) or NYC (in the case of a NYC Restructuring) CRR Parent, CRR, CRC
and their respective Affiliates shall take all action necessary or convenient in
the reasonable opinion of PRR (in the case of a PRR Restructuring) or NYC (in
the case of a NYC Restructuring) to effect a Restructuring that is permitted
under Section 8.9(a).
Section 8.10. Provision of Corporate Records. As soon as practicable
after the Closing Date CRC shall (a) deliver to or to the order of NYC all NYC
Books and Records in the possession of CRC or its Affiliates and (b) deliver to
or to the order of PRR all PRR Books and Records in the possession of CRC or its
Affiliates; provided that Books and Records that relate to and are necessary for
the operation of both the NYC Allocated Assets and the PRR Allocated Assets will
be duplicated and included in both the NYC Books and Records and the PRR Books
and Records; and provided further that copies of Books and Records necessary or
useful to the operation of Shared Assets Areas, Continuing CRC Management, SSO
Facilities and other Retained Assets shall be maintained at CRC. Such NYC Books
and Records and PRR Books and Records shall be the property of NYC and PRR,
respectively, but shall be retained and made available readily to CRC for review
and duplication, subject to the limitations set forth in Section 8.11, until the
earlier of notice from CRC that such records are no longer needed by CRC and the
seventh anniversary of the Closing Date, but in all events until the tax year to
which the Books and Records pertain is closed or settled with the Service and/or
state tax authorities, unless a longer retention period is otherwise required by
law.
Section 8.11. Access to Information. From and after the Closing
Date, the parties shall afford (and CSX and NSC shall cause NYC and PRR to
afford) each other and each other's authorized accountants, counsel and other
designated representatives reasonable access and duplicating rights (with
copying costs to be borne by the requesting party) during normal business hours
and at such other times as may be agreed upon to all books and records and
documents, communications, items and matters, including computer programs and
data within each other's knowledge, possession or control relating to the
Assets, the Allocated Liabilities, the Retained Liabilities or the conduct of
CRC's and its Affiliates' businesses, insofar as such access is reasonably
required by a party or NYC or PRR and is consistent with applicable law (and
shall use reasonable efforts to cause persons or firms possessing relevant items
or information to give similar access). Items or information may be requested
under this Section 8.11 only for the following purposes: audit, accounting,
legal proceedings, litigation, tax preparation, transition planning and
implementation planning purposes, as well as for purposes of fulfilling
disclosure and reporting obligations. Information shall be provided pursuant to
this Section 8.11 in accordance with reasonable procedures established by the
parties in order to ensure compliance with the provisions of Section 8.13 and
8.14.
Section 8.12. Production of Witnesses and Individuals. From and
after the Closing Date, CRR Parent, CRC, NYC, PRR, CSX and NSC shall use
reasonable efforts to make available to each other, upon written request, their
respective officers, directors, employees and agents for fact finding,
consultation and interviews and as witnesses to the extent that any such person
may reasonably be required in connection with any Action in which the requesting
party may from time to time be involved relating to the transactions
contemplated by this Agreement and the Ancillary Agreements, the Assets, the
Allocated Liabilities, the Retained Liabilities or the conduct of CRC's and its
Affiliates' business. Except as otherwise agreed between the parties, the
parties agree to reimburse each other for reasonable documented out-of-pocket
expenses (but not labor charges, salary payments or overheads) incurred by the
other in connection with providing individuals and witnesses pursuant to this
Section 8.12.
Section 8.13. Confidentiality. The parties shall hold (and CSX and
NSC shall cause NYC and PRR to hold), and shall cause their respective officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or, in the
opinion of its independent legal counsel, by other requirements of law, all
information furnished it by another party, NYC or PRR or their respective
representatives pursuant to this Agreement or the Ancillary Agreements (except
to the extent that such information can be shown to have been (i) available to
such Person on a non-confidential basis prior to its disclosure by the other
Person, (ii) in the public domain through no fault of such Person or (iii) later
lawfully acquired from other sources by the Person to which it was furnished),
and no Person shall release or disclose such information to any other person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who shall be bound by the provisions of this Section
8.13. In the event that a subpoena, discovery or other request that arguably
calls for production or disclosure of such confidential information is received,
the Person receiving such request must promptly notify in writing the Person
whose information has been requested. The Person receiving such request shall
provide the Person whose confidential information has been requested, a
reasonable opportunity to review such information and to assert any rights it
may have with respect to the potential disclosure of such confidential
information. Each party shall be deemed to have satisfied its obligation to hold
confidential information concerning or supplied by the other parties, NYC or PRR
if it exercises the same care as it takes to preserve confidentiality for its
own similar information.
Section 8.14. Privileged Matters. (a) The parties agree that from
and after the Control Date CRC and its Affiliates will maintain, preserve and
assert all privileges, including, without limitation, privileges arising under
or relating to the attorney-client relationship (which shall include, without
limitation, the attorney-client and work product privileges) that relate
directly or indirectly to the Assets, the Allocated Liabilities or the Retained
Liabilities or CRC's and its Affiliates' business for any period prior to the
Closing Date ("Privileges"). CRC shall not waive any Privilege that could be
asserted under applicable law without the prior written consent of CSX and NSC.
The rights and obligations created by this Section 8.14 shall apply to all
information as to which, but for the transactions contemplated by this Agreement
and the Ancillary Agreements, CRC would have been entitled to assert or did
assert the protection of a Privilege ("Privileged Information"), including but
not limited to (i) any and all information generated prior to the Closing Date
but which, after the Closing, is in the possession of CSX, NSC, NYC or PRR (ii)
all communications subject to a Privilege occurring prior to the Closing Date
between counsel for CRC and any person who, at the time of the communication,
was an employee of CRC, regardless of whether such employee is or becomes an
employee of CSX, NSC, NYC or PRR and (iii) all information generated, received
or arising after the Closing that refers or relates to Privileged Information
generated, received or arising prior to the Closing.
(b) From and after the Control Date, upon receipt by CRC or any of
its Affiliates of any subpoena, discovery or other request that arguably calls
for the production or disclosure of Privileged Information or if CRC or any of
its Affiliates obtains knowledge that any current or former employee of CRC or
any of its Affiliates has received any subpoena, discovery or other request
which arguably calls for the production or disclosure of Privileged Information,
CRC shall promptly notify in writing CSX, NSC, NYC and PRR of the existence of
the request and shall provide CSX and NSC a reasonable opportunity to review the
information and to assert any rights it may have under this Section 8.14 or
otherwise to prevent the production or disclosure of Privileged Information. CRC
will not produce or disclose any information arguably covered by a Privilege
under this Section 8.13 unless (i) CSX and NSC have both provided their written
consent to such production or disclosure or (ii) a court of competent
jurisdiction has entered a final, nonappealable order finding that the
information is not entitled to protection under any applicable privilege.
(c) If there is a reasonable likelihood that the waiver by CRC of
any Privilege could expose CSX, NSC, NYC or PRR to Liability or could prejudice
the other party's position in pending or threatened litigation, otherwise
adversely affect CSX, NSC, NYC or PRR, CRC will promptly notify in writing CSX
and NSC prior to such waiver, and, at CSX's and NSC's request, CRC will assert
or preserve the Privilege, as applicable, if CRC's interests will not be
adversely affected by its assertion or preservation of the Privilege.
Section 8.15. Administration of Actions. After the Closing Date, (a)
NYC shall have exclusive authority and control over the investigation,
prosecution, defense and appeal of all Actions relating primarily to NYC, the
NYC Allocated Assets, the NYC Allocated Liabilities or a Retained Liability
(except for Retained Liabilities for which the monetary claim is more than
$500,000 or injunctive relief is sought) which arose at the location of a NYC
Allocated Asset, or with which a NYC Allocated Asset is most significantly
involved (each, an "NYC Action"), and may settle or compromise, or consent to
the entry of any judgment with respect to, any such NYC Action without the
consent of CRC, NSC or PRR and (b) PRR shall have exclusive authority and
control over the investigation, prosecution, defense and appeal of all Actions
relating primarily to PRR, the PRR Allocated Assets, the PRR Allocated
Liabilities, or a Retained Liability (except for Retained Liabilities for which
the monetary claim is more than $500,000 or injunctive relief is sought), which
arose at the location of a PRR Allocated Asset or with which a PRR Allocated
Asset is most significantly involved (each a "PRR Action"), and may settle or
compromise, or consent to the entry of any judgment with respect to, any such
PRR Action without the consent of CRC, CSX or NYC; provided that neither NYC or
PRR may settle or compromise, or consent to the entry of any judgment with
respect to, any such Action without the prior written consent of the other if
such settlement, compromise or consent to such judgment (i) includes any form of
injunctive relief binding upon such other party or CRC or (ii) does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
other party or CRC and any Affiliates of CRC subject to such Action of a full
and final release from all liability in respect to such claim or litigation.
After the Closing Date with respect to an Action not covered under clauses (a)
or (b) of the foregoing sentence (including Actions relating to Corporate Level
Liabilities), the handling, administration and disposition of such Actions shall
be the joint responsibility of CSX and NSC and the costs thereof shall be
Corporate Level Liabilities. In assigning joint responsibility for the
administration, handling and disposition of Actions to CSX and NSC, hereunder it
is not the parties' intent that CSX and NSC will actually administer, handle and
dispose of such Actions jointly, but rather that CSX and NSR will agree on the
most practical and efficient arrangements with the objective of eliminating
unnecessary duplication of effort and minimizing overall costs. The costs and
expenses of the administration and handling of such Actions shall be Corporate
Level Liabilities; provided that the salaries of, expenses incurred by and
overheads associated with full-time employees of CSX or NSC while engaged in
investigating or handling such Actions shall be the responsibility of the
employing party and shall not be Corporate Level Liabilities.
Section 8.16. Administration of FELA Claims. (a) The administration,
handling and disposition of FELA Claims (whenever made) that are Corporate Level
Liabilities shall be (i) the responsibility of the party controlling the
Allocated Asset where the incident or incidents giving rise to the FELA Claim
occurred, or (ii) the responsibility of the party controlling the Allocated
Asset most significantly involved if the FELA Claim arises from an incident or
incidents occurring at multiple locations on Allocated Assets, or (iii) the
joint responsibility of CSX and NSC if the FELA Claim arises from an incident or
incidents occurring at unknown locations or a location not otherwise covered by
clauses (i) or (ii) of this sentence. In assigning joint responsibility for the
administration, handling and disposition of FELA Claims to CSX and NSC under the
foregoing clause (iii), it is not the parties' intent that CSX and NSC will
actually administer, handle and dispose of such actions jointly, but rather that
CSX and NSR will agree on the most practical and efficient arrangements with the
objective of eliminating unnecessary duplication of effort and minimizing
overall costs. The costs and expenses of the administration, handling and
disposition of (A) FELA Claims made prior to the Closing Date and (B) all other
FELA Claims that are Corporate Level Liabilities, shall be Corporate Level
Liabilities and shall be borne by CSX and NSC in proportion to their respective
Percentages; provided that the salaries of, expenses incurred by and overheads
associated with full-time employees of CSX or NSC while engaged in investigating
or handling such FELA Claims shall be the responsibility of the employing party
and shall not be Corporate Level Liabilities; provided, further that the party
responsible for the administration of FELA Claims which are Retained Liabilities
shall, before agreeing to any single settlement of a FELA Claim or group of
related FELA Claims, involving a payment of more than $1 million, obtain the
written consent of the other party. Failure of either party to respond to such a
request for consent within fourteen days of receipt of such request shall be
deemed to constitute consent.
(b) The administration, handling and disposition of FELA Claims (and
the costs and expenses thereof) that are made on or after the Control Date and
that are NYC Allocated Liabilities pursuant to Section 2.8(c) hereof shall be
the responsibility of CSX. The administration, handling and disposition of FELA
Claims (and the costs and expenses thereof) that are made on or after the
Control Date and that are PRR Allocated Liabilities pursuant to Section 2.8(c)
hereof shall be the responsibility of NSC.
Section 8.17. Tax Matters. (a) From the date hereof until the
Closing Date, CRR and Green (i) shall timely and duly file, or cause to be
timely and duly filed, all Tax Returns of CRR, CRC and their respective
Affiliates required to be filed on or prior to the Closing Date and (ii) other
than Taxes being contested in good faith, shall timely pay, or cause to be
timely paid, all Taxes required to be paid by CRR, CRC or their respective
Affiliates. From the Control Date until the Closing Date, CRR and Green, with
respect to each of CRR, CRC and their respective Affiliates, shall not settle or
compromise any Tax Liability, agree to any adjustment to any Tax attribute,
change any method of accounting or make any election with respect to Taxes
without first obtaining the prior written consent of CSX and NSC. CRR and its
Subsidiaries agree to be included in a consolidated federal income tax return of
Green.
(b) From and after the Closing Date, the Tax Allocation
Agreement shall govern the rights and obligations of Green, CRR, CRC, CRR
Industries, PRR and NYC with respect to Tax matters involving the operations of
CRC, PRR and NYC.
Section 8.18. Committees. Within 90 days following the execution of
this Agreement, two committees shall be established by CSX and NSC: the "Buffalo
Committee" and the "Vickers Committee". Both committees shall consist of
representatives appointed by CSX and representatives appointed by NSC. The
Buffalo Committee will examine the CP-Draw drawbridge and interlocking in
Buffalo, New York and will investigate ways of minimizing or eliminating
conflict between CSX and NSC traffic flows through the area after the Closing
Date. The Vickers Committee will examine the Vickers crossing in Toledo, Ohio
and will investigate ways of minimizing or eliminating conflict between CSX and
NSC traffic flows through the area after the Closing Date. Within 90 days of
appointment, each such committee will prepare a report detailing options for
solving the traffic conflict problems, along with cost estimates for each such
option.
Section 8.19. Chicago Gateway Access. CSXT and NSR will preserve and enhance
the independent competitive capability of each to move traffic to and through
the Chicago Gateway (as defined in Schedule 3) by adhering to the
requirements of Schedule 3.
Section 8.20. Car Hire and Car Service. The parties recognize that
industry rules, including the AAR Car Service Rules, may pose problems with
respect to the payment and collection of car hire in connection with Equipment
that is included in Retained Assets and that is used or operated with the
Allocated Assets and with the Shared Assets Areas. The parties shall use their
reasonable best efforts and take all actions, including seeking changes in
industry rules, as may be necessary or appropriate to allow each party, in the
most favorable manner possible, to collect car hire on the Equipment allocated
to it pursuant to Section 2.6 hereof and to pay the car hire due for cars used
or operated with Allocated Assets and with the Shared Assets Areas.
ARTICLE IX
CONDITIONS PRECEDENT TO THE CLOSING
Section 9.1. Conditions Precedent to Obligations. The respective
obligations of CSX, NSC, CRR Parent, CRR and CRC to effect the transactions
contemplated by Article II shall be subject to the fulfillment or mutual waiver
at or prior to the Closing Date of the following conditions:
(a) No preliminary or permanent injunction or other order or decree
issued by a court of competent jurisdiction or any other legal restraint or
prohibition which prevents the consummation of the transactions contemplated by
this Agreement or the Ancillary Agreements shall be in effect and no statute,
rule or regulation shall have been enacted by any Governmental Entity
prohibiting the consummation of the transactions contemplated by this Agreement
or the Ancillary Agreements.
(b) The STB shall have issued a decision (which decision shall not
have been stayed or enjoined) that constitutes a final order approving,
exempting or otherwise authorizing, as of such date, consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements as may
require such authorization and neither party shall have exercised a right to
postpone pursuant to Section 8.4(c).
(c) Each of CSX and NSC shall have reasonably determined that it
has obtained sufficient labor implementing agreements so as to be authorized by
law to effect the transactions contemplated by Article II and Article VI.
ARTICLE X
INDEMNIFICATION
Section 10.1. Indemnification. (a) Subject to the provisions of this
Article X, CRR Parent and CRR jointly and severally shall indemnify, defend and
hold harmless the other parties and any director, officer, employee or agent of
any of them from and against any and all Damages asserted against, relating to,
imposed upon or incurred by any such Person, directly or indirectly, by reason
of or resulting from:
(i) the breach or nonperformance of any agreement of CRR Parent,
CRR, CRC or any of their respective Affiliates (other than NYC and PRR)
contained in or made pursuant to this Agreement or any of the Ancillary
Agreements; and
(ii) any Retained Liability.
(b) Subject to the provisions of this Article X, CSX and CSXT
jointly and severally shall indemnify, defend and hold harmless the other
parties and any director, officer, employee or agent of any of them from and
against any and all Damages asserted against, relating to, imposed upon or
incurred by any such Person, directly or indirectly, by reason of or resulting
from:
(i) the untruth or inaccuracy of any representation or warranty of
CSX, CSXT or their respective Affiliates contained in or made pursuant to
this Agreement or any of the Ancillary Agreements; and
(ii) the breach or non-performance of any agreement of CSX, CSXT or
their respective Affiliates contained in or made pursuant to this
Agreement or any of the Ancillary Agreements.
(c) Subject to the provisions of this Article X, NSC and NSR jointly
and severally shall indemnify, defend and hold harmless the other parties and
any director, officer, employee or agent of any of them from and against any and
all Damages asserted against, relating to, imposed upon or incurred by any such
Person, directly or indirectly, by reason of or resulting from:
(i) the untruth or inaccuracy of any representation or warranty
of NSC, NSR or their respective Affiliates
contained in or made pursuant to this Agreement or any of
the Ancillary Agreements; and
(ii) the breach or non-performance of any agreement of NSC, NSR or
their respective Affiliates contained in or made pursuant to this
Agreement or any of the Ancillary
Agreements.
Section 10.2. Indemnification Procedures. (a) If any Action shall be
threatened or instituted or any claim or demand shall be asserted against any
Indemnified Party in respect of which indemnification may be sought under the
provisions of this Agreement, the Indemnified Party shall promptly cause written
notice of the assertion of any such claim, demand or Action of which it has
knowledge to be forwarded to the Indemnifying Party. Such notice shall contain a
reference to the provisions hereof or of such other agreement, instrument or
certificate delivered pursuant hereto, in respect of which such claim is being
made. The Indemnified Party's failure to give the Indemnifying Party prompt
notice shall not preclude the Indemnified Party from obtaining indemnification
from the Indemnifying Party under this Article X unless the Indemnified Party's
failure has materially prejudiced the Indemnifying Party's ability to defend the
claim, demand or Action.
(b) If the Indemnified Party seeks indemnification from the
Indemnifying Party as a result of a claim or demand being made by a third party
(a "Third Party Claim"), the Indemnifying Party shall have the right to promptly
assume the control of the defense of any Action with respect to such Third Party
Claim, including, at its own expense, employment by it of counsel reasonably
satisfactory to the Indemnified Party. The Indemnified Party may, in its sole
discretion and at its own expense, employ counsel to represent it in the defense
of the Third Party Claim, and in such event counsel for the Indemnifying Party
shall cooperate with counsel for the Indemnified Party in such defense, provided
that the Indemnifying Party shall direct and control the defense of such Third
Party Claim or proceeding. The Indemnifying Party shall not consent to the entry
of any judgment, except with the written consent of the Indemnified Party, and
shall not enter into any settlement of such Third Party Claim without the
written consent of the Indemnified Party which does not include as an
unconditional term thereof the release of the Indemnified Party from all
Liability in respect of such Third Party Claim.
Section 10.3. Remedies. (a) Each party acknowledges and agrees that
the other parties would be irreparably damaged in the event any of the
provisions of this Agreement were not performed by it in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that each
party shall be entitled to an injunction or injunctions to prevent breaches of
such provisions and to specifically enforce such provisions, in addition to any
other remedy to which such party may be entitled, at law or in equity.
(b) In no event shall any party be liable to the other parties for
any consequential, indirect, incidental, punitive or other similar damages
including but not limited to lost profits for any breach or default, or any act
or omission arising out of or in any way relating to, this Agreement, the
Assets, the Retained Liabilities, the Allocated Liabilities, the Ancillary
Agreements, the transactions contemplated herein or therein or any matter or
theory concerning or relating to any of the foregoing, under any form or theory
of action whatsoever whether in contract, tort or otherwise.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Amendment. This Agreement may be amended by the
parties at any time by an instrument in writing signed on behalf of each
party.
Section 11.2. Extension; Waiver. At any time prior to the Closing
Date the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
Section 11.3. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given on the date delivered if
delivered personally (including by reputable overnight courier), on the date
transmitted if sent by telecopy (which is confirmed) or on the date received if
mailed by registered or certified mail (return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) If to CSX, CSXT or CRR Parent, to:
CSX Corporation
One James Center
901 East Cary Street
Richmond, Virginia 23219
Telecopy number: 804-783-1380
Attention: Mark G. Aron, Esq.
and Peter J. Shudtz, Esq.
CSX Transportation
500 Water Street
Jacksonville, Florida 32202
Telecopy number: 904-366-5436
Attention: P. Michael Giftos, Esq.
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy number: 212-403-2000
Attention: Pamela S. Seymon, Esq.
(b) If to NSC, NSR or CRR Parent, to:
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510
Telecopy number: 757-629-2750
Attention: James C. Bishop, Jr., Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy number: 212-735-2000
Attention: Randall H. Doud, Esq.
(c) If to CRR or CRC, to:
Conrail Inc.
2001 Market Street
Philadelphia, PA 19103
Telecopy number: 215-209-4068
Attention: General Counsel
All notices regarding matters requiring handling within thirty days will be
given by overnight mail or confirmed telecopy.
Section 11.4. Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.5. Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto and the Ancillary Agreements and other documents
and instruments referred to herein) and the Merger Agreement, collectively,
constitute the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except the April 8 Agreement to the extent the April 8
Agreement covers matters not addressed or amended hereby and the CRR Holdings
LLC Agreement; provided that it is the intent of the parties hereto that this
Agreement shall be an effectuation of the April 8 Agreement consistent with the
terms of the April 8 Agreement and that the provisions of this Agreement should
be interpreted to give effect to the April 8 Agreement; and provided further
that in the event of any inconsistency between the terms of this Agreement and
the April 8 Agreement this Agreement shall prevail; and provided further that
CSX and NSC agree that the fourth paragraph of Item III of Exhibit A to the
April 8 Agreement (at page two thereof) in respect of Lake Erie coal dock
capacity is rescinded and no longer in effect.
Section 11.6. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party and their respective
successors and assigns and is not intended to confer upon any other Person any
rights or remedies, except for the rights of an Indemnified Party as
contemplated by Article X.
Section 11.7. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof; provided, however, that the laws of the respective jurisdictions of
incorporation of each of the parties shall govern the relative rights,
obligations, powers, duties and other internal affairs of such party and its
board of directors.
Section 11.8. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
Section 11.9. Assignment. (a) Except as provided in Section 11.9(b), neither
this Agreement (including the documents and instruments referred to herein) nor
any of the rights, interests or obligations hereunder, shall be assigned by any
party, including by operation of law, without the prior written consent of the
other parties which may be withheld at the sole discretion of the relevant
party.
(b) Any party without the consent of the other parties may assign
all or any part of its rights and obligations under this Agreement to (i) any of
its controlled Subsidiaries or (ii) any successor in the event of a merger,
consolidation, sale of all or substantially all its assets, liquidation or
dissolution, if such assignee executes and delivers to the other parties hereto
an agreement reasonably satisfactory in form and substance to such other party
under which such assignee, which is reasonably satisfactory to the other party,
assumes and agrees to perform and discharge all the obligations and liabilities
of the assigning party; provided that any such assignment shall not relieve the
assigning party from the performance and discharge of such obligations and
liabilities.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted assignees.
Section 11.10. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, such provision is to be intended to be ineffective only to the most
limited extent possible in such context and the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 11.11. Lack of Control; Effect on CRR and its Controlled
Subsidiaries. (a) None of CSX, CSXT, NSC or NSR shall be liable for failing to
take any action which they are required to take under this Agreement if the time
when CSX, CSXT, NSC or NSR is required to take such action occurs prior to the
Control Date and such action requires the assistance or cooperation of CRR or
its Board of Directors, which assistance is requested but not provided;
provided, however, that CSX and NSC shall use their best efforts to obtain such
assistance or cooperation and, after the Control Date, will be required to take
such action if, as and when required by this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement (which term for purposes of this Section 11.11(b) shall include the
Exhibits and Schedules hereto and the Ancillary Agreements and other documents
and instruments referred to herein), except as expressly set forth in Section
3.2, neither CRR nor any of its controlled Subsidiaries shall be bound by the
terms of this Agreement (other than Section 8.17) or subject to any Liabilities
or obligations hereunder (other than under Section 8.17) at any time prior to
the Control Date. CRR and CSX shall continue to be bound by those terms of the
Merger Agreement that by their terms survive beyond June 2, 1997, including,
without limitation, Attachment A to the CRR Disclosure Schedule delivered in
connection with the Third Amendment; provided that in the event of any
inconsistency between the terms of this Agreement and the terms of such
Attachment A, the terms of such Attachment A shall prevail.
Section 11.12. Dispute Resolution. Any dispute, controversy or claim
(or any failure by the parties to agree on a matter as to which this Agreement
expressly or implicitly contemplates subsequent agreement by the parties, except
for matters left to the sole discretion of a party) arising out of or relating
to this Agreement, or the breach, termination or validity hereof, shall be
finally settled through binding arbitration by a sole, disinterested arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall be jointly selected by the parties but, if the
parties do not agree on an arbitrator within thirty days after demand for
arbitration is made by a party, they shall request that the arbitrator be
designated by the American Arbitration Association. The award of the arbitrator
shall be final and conclusive upon the parties. Each party to the arbitration
shall pay the compensation, costs, fees and expenses of its own witnesses,
experts and counsel. The compensation and any costs and expenses of the
arbitrator shall be borne equally by the parties. The arbitrator shall have the
power to require the performance of acts found to be required by this Agreement
and to require the cessation or nonperformance of acts found to be prohibited by
this Agreement. The arbitrator shall not have the power to award consequential
or punitive damages. The arbitrator's award shall be binding and conclusive upon
the parties to the fullest extent permitted by law. Judgment upon the award
rendered may be entered in any court having jurisdiction thereof, which court
may order appropriate relief at law or equity. All proceedings relating to any
such arbitration, and all testimony, written submissions and award of the
arbitrator therein, shall be private and confidential as among the parties, and
shall not be disclosed to any other Person, except as required by law and except
as reasonably necessary to prosecute or defend any judicial action to enforce,
vacate or modify such arbitration award.
Section 11.13. CRC Status. The parties intend that after the Closing
Date CRC and its Affiliates shall be a rail carrier that performs transportation
services for the account of CSXT or NSR, as the case may be, or as agent or
subcontractor of CSXT or NSR, as the case may be.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
CSX CORPORATION
By: /s/ JOHN W. SNOW
----------------
Name: John W. Snow
Title: Chairman, President & Chief
Executive Officer
CSX TRANSPORTATION, INC. (for itself and
on behalf of its controlled
Subsidiaries)
By: /s/A. R. CARPENTER
------------------
Name: A. R. Carpenter
Title: President and Chief Executive
Officer
NORFOLK SOUTHERN CORPORATION
By: /s/ DAVID R. GOODE
------------------
Name: David R. Goode
Title:
NORFOLK SOUTHERN RAILWAY COMPANY (for
itself and on behalf of its controlled
Subsidiaries)
By: /s/ DAVID R. GOODE
------------------
Name: David R. Goode
Title:
CONRAIL INC. (for itself and on behalf of
its controlled Subsidiaries)
By: /s/ TIMOTHY O'TOOLE
-------------------
Name: Timothy O'Toole
Title:
<PAGE>
CONSOLIDATED RAIL CORPORATION
By: /s/ TIMOTHY O'TOOLE
-------------------
Name: Timothy O'Toole
Title:
CRR HOLDINGS LLC
By: /s/ JOHN W. SNOW
----------------
Name: John W. Snow
Title:
<PAGE>
SCHEDULE 1
ASSETS
Attached to and incorporated in this Schedule 1 are the following
attachments:
(i) Attachment I, which is the line segment allocation list identifying
each Route owned, operated or used by CRC and its Affiliates and
indicating as to each Route whether it is included in the NYC Allocated
Assets, the PRR Allocated Assets or the Retained Assets; and
(ii) Attachment II, which is a system map showing all Routes comprising
the CRC rail system and indicating by color coding the Routes which are to
be NYC Allocated Assets, PRR Allocated Assets and Retained Assets,
respectively; Attachment II is intended to show graphically the Routes
described in Attachment I.
ITEM 1 - NYC ALLOCATED ASSETS
The "NYC Allocated Assets" shall include all of CRR's, CRC's and their
respective Affiliates' right, title and interest in and to the following Assets:
(A) Routes and Assets Related to Routes. All Routes identified as NYC
Allocated Assets in Attachment I and Attachment II (i.e., those lines colored in
red and/or orange on Attachment II, except for those lines already owned by CSXT
or its Affiliates), together with the following Assets that are related to such
Routes (except as otherwise expressly provided in this Schedule 1 or the
Ancillary Agreements):
(1) the track structure (rails, ties, other track
material, grading, bridges, tunnels, culverts, etc.);
(2) the underlying right-of-way, operating and
non-operating, regardless of its width, and associated
structures and fixtures;
(3) except in the areas where the parties' respective Routes are
approximately equidistant from the Asset in question (where in
each case other arrangements are made pursuant to one or more
Ancillary Agreements), appurtenant yards, sidings, switch
tracks and repair or other maintenance facilities;
(4) real estate (whether or not used for operating purposes)
adjacent or in proximity to the Routes included in the NYC
Allocated Assets, or underlying, adjacent or in proximity to
those structures or facilities described in the preceding
clauses (2) and (3) and the following clause (5);
(5) signal, communications and computer facilities and
equipment on the right-of-way and (to the extent used to
operate the Routes included in the NYC Allocated Assets)
off the right-of-way;
(6) tools and supplies located on and along, and automobiles,
hi-rail cars and trucks assigned to, the Routes included in
the NYC Allocated Assets, including repair materials and local
repair equipment, except system stockpiles of inventory,
material and supplies and Work Equipment;
(7) Contracts (other than Transportation Contracts) relating to a
Route included in NYC Allocated Assets, including without
limitation trackage and other operating rights, public and
private grade crossing agreements, side track and industrial
track agreements, pipeline and wireline agreements, building
and yard maintenance agreements, leases, licenses, reversions,
longitudinal easements and other occupancy agreements, and the
rents, security deposits and profits arising therefrom or in
connection therewith;
(8) muniments of title, all original valuation maps, land
schedules, track charts, surveys, bridge and other drawings,
bridge inspection reports, environmental reports, permits,
signal and communications plans, other engineering
documentation, deeds (including such originals of acquisition
or out-conveyances as may be in CRC's possession), current
billing records (including billing addresses and, if in a
computer format, the data and the programs), real estate work
files, property tax records (and any computer database for
such records), and all other Books and Records relating to a
Route included in NYC Allocated Assets;
(9) mineral rights or easements of any sort held by CRR, CRC or
their respective Affiliates located on, over, across and/or in
the real estate or property heretofore described in this
paragraph (A); and
(10) royalties or other payments in respect of real estate or other
Assets heretofore described in this paragraph (A).
(B) Philadelphia Offices. The CRC headquarters office building
located at Philadelphia, PA, and the CRC information technology center building
located at Philadelphia, PA and all FF&E located at such facilities.
(C) Yards and Yard Access. The following CRC yards, land and yard
access tracks:
(1) Seneca Yard (Buffalo, NY) (subject to access and
use by NSR pursuant to Ancillary Agreement);
(2) 59th Street ("Panhandle") Yard site (Chicago, IL);
(3) Collinwood Yard (Cleveland, OH);
(4) Former "local yard" and intermodal terminal at
Buckeye (Columbus, OH);
(5) Buckeye Yard Lead track from the north limit of
"CP Buckeye" to "CP Darby" (Columbus, OH);
(6) West track between "CP 138" and "CP 136"
(Columbus, OH);
(7) Portion of Piqua Yard (Fort Wayne, IN) to be
agreed upon between NSR and CSXT;
(8) Hawthorne Yard (Indianapolis, IN) (subject to
access and use by NSR pursuant to Ancillary Agreement);
(9) North Bergen intermodal terminal (New Jersey);
(10) South Kearny intermodal terminal including APL leased areas;
however, NSR to have access to the APL leased terminal and NSR
to have the right to serve APL and any successor lessee to APL
using such leased premises;
(11) Greenwich Yard (Philadelphia), but excluding yard tracks and
areas used to support the movement of local freight (including
port traffic, but excluding intermodal) and to support the
movement of rail traffic to and from the ore pier, which
tracks and areas will be included in Retained Assets;
(12) Track from CP Field to Pier 122 (Greenwich Yard
area, Philadelphia);
(13) Stanley Yard (Toledo, OH);
(14) Elizabeth Yard (Trumbull Street Yard), but subject to use of
and access to two tracks by NSR to support E-Rail Intermodal
Facility as provided in Ancillary Agreements; and
(15) Manville Yard (subject to use by CRC, CSX and NSR
pursuant to Ancillary Agreements).
(D) Miscellaneous Property. The following Assets:
(1) Developable property west of CRC's Chemical Coast
Secondary in northern New Jersey in the vicinity of the
current CRC Elizabethport Yard (Trumbull St. Yard);
(2) Indianapolis Division headquarters building,
offices and land; and
(3) Albany Division headquarters building, offices and
land.
(E) Stock Ownership and Other Interests. The following
interests:
(1) 50% of the issued and outstanding capital stock in
Lakefront Dock & Railroad Terminal Company;
(2) 100% of the issued and outstanding capital stock
in St. Lawrence & Adirondack Railway;
(3) 50% of the issued and outstanding capital stock in
Albany Port Railroad Corp.; and
(4) 10.125% of the issued and outstanding capital
stock in TTX Company.
ITEM 2 - PRR ALLOCATED ASSETS
The "PRR Allocated Assets" shall include all of CRR's, CRC's and their
respective Affiliates' right, title and interest in and to the following Assets:
(A) Routes and Assets Related to Routes. All Routes identified as PRR
Allocated Assets in Attachment I and Attachment II (i.e., those lines colored in
green and/or yellow on Attachment II, except for those lines already owned by
NSR or its Affiliates), together with the following Assets that are related to
such Routes (except as otherwise expressly provided in this Schedule 1 or the
Ancillary Agreements):
(1) the track structure (rails, ties, other track material,
grading, bridges, tunnels, culverts, etc.);
(2) the underlying right-of-way, operating and non-operating,
regardless of its width, and associated structures and
fixtures;
(3) except in the areas where the parties' respective Routes are
approximately equidistant from the Asset in question (where in
each case other arrangements are made pursuant to one or more
Ancillary Agreements), appurtenant yards, sidings, switch tracks
and repair or other maintenance facilities;
(4) real estate (whether or not used for operating purposes) adjacent
or in proximity to the Routes included in the PRR Allocated
Assets, or underlying, adjacent or in proximity to those
structures or facilities described in the preceding clauses (2)
and (3) and the following clause (5);
(5) signal, communications and computer facilities and equipment on
the right-of-way and (to the extent used to operate the Routes
included in the PRR Allocated Assets) off the right-of-way;
(6) tools and supplies located on and along, and automobiles, hi-rail
cars and trucks assigned to, the Routes included in the PRR
Allocated Assets, including repair materials and local repair
equipment, except system stockpiles of inventory, material and
supplies and Work Equipment;
(7) Contracts (other than Transportation Contracts) relating to a
Route included in PRR Allocated Assets, including without
limitation trackage and other operating rights, public and
private grade crossing agreements, side track and industrial
track agreements, pipeline and wireline agreements, building and
yard maintenance agreements, leases, licenses, reversions,
longitudinal easements and other occupancy agreements, and the
rents, security deposits and profits arising therefrom or in
connection therewith;
(8) muniments of title, all original valuation maps, land schedules,
track charts, surveys, bridge and other drawings, bridge
inspection reports, environmental reports, permits, signal and
communications plans, other engineering documentation, deeds
(including such originals of acquisition or out-conveyances as
may be in CRC's possession), current billing records (including
billing addresses and, if in a computer format, the data and the
programs), real estate work files, property tax records (and any
computer database for such records), and all other Books and
Records relating to a Route included in PRR Allocated Assets;
(9) mineral rights or easements of any sort held by CRR, CRC or their
respective Affiliates located on, over, across and/or in the real
estate or property heretofore described in this paragraph (A);
and
(10) royalties or other payments in respect of real estate or other
Assets heretofore described in this paragraph (A).
(B) Altoona and Hollidaysburg Shops. The CRC car and locomotive repair shops
located at Altoona, PA and Hollidaysburg, PA and all rolling-stock-related and
locomotive-related inventory and supplies (including rolling-stock-related and
locomotive-related system stockpiles) located at such facilities (subject to
provisions of Section 2.7 of the Agreement) and all FF&E located on or at such
facilities.
(C) Yards and Yard Access. The following CRC yards, land
and yard access tracks:
(1) Ashtabula Harbor facilities (subject to access and use by CSX
pursuant to Ancillary Agreements);
(2) Rockport Yard (Cleveland, OH);
(3) Buckeye Hump Yard (Columbus, OH);
(4) East track between "CP 138" and "CP 136"
(Columbus, OH);
(5) the right of way east of and parallel to the single track portion
of the Columbus Line immediately north of "CP 136" (the current end of double
track), and the Clintonville Siding east of the single track portion;
(6) portion of Piqua Yard (Fort Wayne, IN) used by or for Triple
Crown Services Company, together with portion of Piqua Yard to be
agreed upon between NSR and CSXT;
(7) Croxton Yard (New Jersey);
(8) E-Rail intermodal facility (New Jersey);
(9) Morrisville intermodal facility;
(10) Airline Jct. Yard (Toledo, OH); and (11) Stanley E Yard
(Toledo, OH).
(D) Miscellaneous Property. The following CRC assets and
properties:
(1) Developable property east of CRC's Chemical Coast Secondary in
the vicinity of the E-Rail intermodal facility (northern New
Jersey);
(2) real estate comprising a portion of the right-of-way (east of the
current single track) between PRR's Clintonville Siding and the
north end of the double track at CP 136 on which NSR may
construct new track;
(3) real estate comprising a portion of the right-of-way on which the
Buckeye Yard lead track is located to enable NSR to construct a
parallel track to the Buckeye Yard lead track (Buckeye Yard,
Columbus, OH) (constructions to be governed by an Ancillary
Agreement);
(4) Pittsburgh Division headquarters building, offices and land;
(5) Dearborn Division headquarters building, offices and land; and
(6) All undeveloped property that is part of, adjacent to or in the
vicinity of Lincoln Yard (Detroit, MI).
(7) All real estate, trackage, track material and other Assets
comprising CRC's abandoned Danville Secondary, together with all
other Assets lying on, adjacent to or in the vicinity of the CRC
right-of-way between Schneider and Danville, IL, including
without limitation all Assets comprising such Danville Secondary
thereon or adjacent thereto necessary for construction of
connections at Schneider and Danville (excluding any NYC
Allocated Assets). (If NSR elects to restore the line between
Schneider and Danville, CSXT shall have the option to share in
the costs of the line restoration on a reasonable basis that is
mutually agreeable and, if CSXT elects so to share in such
restoration costs, CSXT shall be granted overhead trackage rights
on such line on a fair basis taking into consideration the cost
paid by CSXT for such restoration.)
(E) Stock Ownership and Other Interests. The following
interests:
(1) 16.67% of the issued and outstanding capital stock in The Belt
Railway Company of Chicago;
(2) 25.64% of the issued and outstanding capital stock in Peoria
and Pekin Union Railway Company;
(3) 100% of the issued and outstanding capital stock in TCV, Inc.
(which owns a 50% partnership interest in Triple Crown
Services Company); and
(4) 11.682% of the issued and outstanding capital
stock in TTX Company.
ITEM 3 - RETAINED ASSETS
The "Retained Assets" shall include all of CRR's, CRC's and their respective
Affiliates' right, title and interest in and to the following Assets:
(A) Routes and Assets Related to Routes. Routes within the Shared Asset Areas
identified as Retained Assets in Attachment I and Attachment II (i.e., those
lines colored in blue on Attachment II), together with the following Assets
within the Shared Asset Areas that are related to such Routes (except as
otherwise expressly provided in this Schedule 1 or the Ancillary Agreements):
(1) the track structure (rails, ties, other track material,
grading, bridges, tunnels, culverts, etc.);
(2) the underlying right-of-way, operating and non-operating,
regardless of its width, and associated structures and
fixtures;
(3) appurtenant yards, sidings, switch tracks and repair or other
maintenance facilities (including but not limited to Oak Island
Yard, auto terminals at Doremus Avenue, Greenville and Ridgefield
Heights);
(4) real estate (whether or not used for operating purposes) adjacent
or in proximity to the Routes included in the Retained Assets, or
underlying, adjacent or in proximity to those structures or
facilities described in the preceding clauses (2) and (3) and the
following clause (5);
(5) signal, communications and computer facilities and equipment on
the right-of-way and (to the extent used to operate the Routes
included in Retained Assets) off the right-of-way;
(6) tools and supplies located on and along, and automobiles, hi-rail
cars and trucks assigned to, the Routes included in the Retained
Assets, including repair materials and local repair equipment,
except system stockpiles of inventory, material and supplies and
Work Equipment;
(7) Contracts (other than Transportation Contracts) relating to a
Route included in Retained Assets, including without limitation
trackage and other operating rights, public and private grade
crossing agreements, side track and industrial track agreements,
pipeline and wireline agreements, building and yard maintenance
agreements, leases, licenses, reversions, longitudinal easements
and other occupancy agreements, and the rents, security deposits
and profits arising therefrom or in connection therewith;
(8) muniments of title, all original valuation maps, land schedules,
track charts, surveys, bridge and other drawings, bridge
inspection reports, environmental reports, permits, signal and
communications plans, other engineering documentation, deeds
(including such originals of acquisition or out-conveyances as
may be in CRC's possession), current billing records (including
billing addresses and, if in a computer format, the data and the
programs), real estate work files, property tax records (and any
computer database for such records), and all other Books and
Records relating to a Route included in Retained Assets;
(9) mineral rights or easements of any sort held by CRR, CRC or any
of their respective Affiliates located on, over, across and/or in
the real estate or property heretofore described in this
paragraph (A); and
(10) royalties or other payments in respect of real estate or other
Assets heretofore described in this paragraph (A).
(B) The "Retained Assets" shall include the SSO Facilities which shall
be as follows:
(1) the building and offices, together with underlying land, of the
Philadelphia Division headquarters located at Mt. Laurel, NJ
within the Philadelphia/South Jersey Shared Assets Area;
(2) the Customer Service Center building and offices, together with
underlying land, located at Pittsburgh, PA;
(3) use of the office space in the Dearborn Division headquarters
building (the building and land are included in the PRR Allocated
Assets) currently used for the crew management facility until the
crew management facility is discontinued;
(4) the system maintenance-of-way equipment center building located
adjacent to Canton Yard in Canton, OH on land included in the PRR
Allocated Assets;
(5) the signal repair center building located within Buckeye Yard at
Columbus, OH on land included in the PRR Allocated Assets;
(6) the offices of the system freight claims facility located at
Buffalo, NY on land included in the NYC Allocated Assets;
(7) the offices of the system non-revenue billing facility and land
located at Bethlehem, PA;
(8) the system rail welding plant building located at Lucknow
(Harrisburg, PA) on land at Harrisburg Yard that is included in
the PRR Allocated Assets;
(9) use of the offices located at Conway Yard, Pittsburgh, PA
(the building and land are included in the PRR Allocated Assets),
for the system road foreman/engineer training center until such
center is discontinued; and
(10) the police operations center offices and land at Mt. Laurel, NJ.
(C) 51% of the issued and outstanding capital stock in Indiana Harbor Belt
Railroad Co. (subject to provisions of Ancillary Agreement referred to in
Schedule 4, Item 4(E)(1)).
ITEM 4 - POOLED ASSETS
The "Pooled Assets" shall include the following Assets of CRR, CRC and
their respective Affiliates:
(A) Non-Operating property and improvements not in proximity to an Allocated
Asset or a Retained Asset.
(B) Employee benefit plans and Assets of such plans.
(C) System stockpiles of inventory, materials and supplies regardless of
location (other than those at Hollidaysburg and Altoona shops which shall be
subject to Section 2.7 of the Agreement).
(D) The following interests:
(1) 100% of the issued and outstanding capital stock in Merchants
Despatch Trans. Corp.;
(2) 100% of the issued and outstanding capital stock in CRC
Properties, Inc.; and
(3) 100% of the issued and outstanding capital stock in CRR
Investments, Inc.
However, if any of the Assets of the entities identified in clauses
(D)(1) through (3) above are part of the Routes included in the NYC Allocated
Assets (Item 1(A) above) or the PRR Allocated Assets (Item 2(A) above), then the
Assets of such entity will be designated as and included in the NYC Allocated
Assets or the PRR Allocated Assets, as the case may be; provided that if such
assets are valued at greater than $1 million, then there shall be an equitable
adjustment by way of a cash payment from NYC or PRR, as the case may be, to the
other equal to the CSX's or NSC's respective Percentage, as the case may be,
applied against the value of such Assets or failing such payment, by way of
including CRC cash equal to the value of such Assets in the NYC Allocated Assets
or the PRR Allocated Assets as the case may be.
(E) The following interests:
(1) 100% of the issued and outstanding capital stock
in CRR Industries, Inc.;
(2) 100% of the issued and outstanding capital stock
in Conrail Direct, Inc.;
(3) 100% of the issued and outstanding capital stock
in CG Projects, Inc.;
(4) 100% of the issued and outstanding capital stock
in PennCentral Comm. Co.;
(5) 100% of the issued and outstanding capital stock
in General American Ins. Co.; and
(6) 19.136% of the issued and outstanding capital
stock in Amtech Logistics Corp.
(F) CRC's rights and interests in and with respect to the following:
(1) Locomotive Management Services Partnership (a partnership with
General Electric relating to use of locomotives); and
(2) EMP (bilateral agreements relating to use of
containers by CRC, NSR and UP).
The parties intend that CRC's rights and interests with respect to LMS and EMP
will be shared based on their respective Percentage, that both CSXT and NSR will
participate therein and that, in the case of EMP, CSX will participate as a
partner.
NOTE: Notwithstanding any provision of this Schedule, to the extent an item
herein describes an Ancillary Agreement between the parties the form of which is
set forth as an Exhibit to this Agreement, such description shall be for
purposes of identification only, and the terms of such Ancillary Agreement shall
control.
<PAGE>
Conrail Line Allocation
Attachment I
All CRC lines are not listed herein. Lines listed include main line routes,
primary branch lines and other lines which may need clarification. Lines pertain
to allocated CRC ownership or where identified (TR) to assumed present CRC
freight rights. Customer access is attributed to the acquiror of the line on
which the customer is located, unless otherwise identified in the Transaction
Agreement. Lines not specifically listed are to be acquired by the
owner/acquirer of the CRC route/line to which they connect. In the case that a
line not listed connects to a line allocated to PRR and to a line allocated to
NYC, allocation will be determined at a later date.
NYC ALLOCATED ASSETS
Primary Route And Extension Acquisitions
NY/NJ to Cleveland - Water Level Route & Extensions
Segmt From To
1 South End N. Bergen Yd NJSelkirk/Albany Term. NY
1 Poughkeepsie NY New York City NY TR
1 Poughkeepsie NY New York City NY
1 New York City NY White Plains NY TR
1 Selkirk/Albany Term. NY
1 Selkirk NY Poughkeepsie NY
2 Selkirk/Albany Term. NY Syracuse NY
3 Syracuse NY Buffalo NY
3 Lyons Yard NY
4 Buffalo NY Ashtabula OH
5 Ashtabula OH Cleveland Terminal OH
5 Portion of Kinsman OH
Conn.
5 Portion of 44 I.T OH
5 All of 45 I.T.(including
Dock 22, 24, & 26 Lds) OH
5 Old Line
Lead(Cleveland) OH
40 Boston MA Selkirk/Albany Term. NY
41 Syracuse NY Adirondack Jct. PQ
41 Adirondack Jct. PQ Montreal (St. Luc) PQ TR
41 Woodard NY Oswego NY
41 Syracuse NY Hawk NY
41 Hawk NY Port of Oswego NY TR
43 Frontier Yard NY
43 Belt Line Branch NY
42 Buffalo Terminal NY Niagra Falls/Lockport NY
42 Lockport NY West Somerset NY TR
94 Syracuse NY NYSW/FL Connections NY
165 Boston Terminal MA
165 Selkirk/Boston Line MA MA Branch Lines MA
165 Selkirk/Boston Line MA MA Branch Lines MA TR
1 West 30th St. I.T. NY
1 Fremont Secondary NY
166 New York City NY Connecticut Branch
Lines TR
166 Connecticut Branch
Lines
166 Connecticut Branch
Lines (including Amtrak) TR
3 Churchville NY Wayneport NY
3 Mortimer NY Avon NY
3 Rochester Branch NY
Crestline to Chicago-Pennsylvania Route & Extensions
17 Crestline OH Dunkirk OH
17 Bucyrus Yard Track and
Connector OH
18 Dunkirk OH Fort Wayne IN
18 Decatur Sec. & Hunt I.T. IN
From NS via CR
19 Fort Wayne IN Warsaw IN
From NS via CR
20 Warsaw IN Chicago Terminal
(Clarke Jct.) IN
18 Adams IN Decatur IN
Berea to E. St. Louis Route & Extensions
21 Cleveland Terminal OH Crestline OH
122 Crestline OH Galion OH
22 Galion OH Ridgeway OH
23 Ridgeway OH Indianapolis IN
24 Indianapolis IN Terre Haute IN
25 Terre Haute IN Effingham IL
26 Effingham IL St. Elmo IL
27 St. Elmo IL E. St. Louis IL
27 Anderson IN Emporia IN
55 Columbus(CP138) OH Galion OH
55 Columbus(Hocking) OH Columbus(CP138) OH
55 Neil I.T. OH
83 Terre Haute IN Danville IL
151 Danville IL Olin IN
80 Pekin R.T IL
100 Indianapolis Terminal IN
99 Indianapolis IN Rock Island IN
100 Indianapolis IN Crawfordsville/
Bringhurst st IN
154 Indianapolis IN Shelbyville IN
105 HN Cabin IL Valley Jct. IL
106 St. Elmo IL Salem IL TR
98 Terre Haute IN Beehunter IN TR
28 Muncie(Walnut Street) IN New Castle R.T. IN TR
28 New Castle RT IN
28 Muncie I.T. IN
Columbus to Toledo Route & Extensions
53 Mounds Connector OH
53 Western Branch OH
53 Buckeye Yard Lead OH
53 Columbus OH Ridgeway OH
52 Ridgeway OH Blanchard OH
51 Blanchard OH Toledo Terminal OH
51 Toledo Terminal OH Woodville OH
(Caruthers Sec. and
I.T.)
51 Toledo Terminal OH Stonyridge OH
51 Main Freight Tk. & Wye OH
51 Stanley Yard and
Interlocking OH
51 Eastern R.T. OH
51 Lakefront Docks Lead
Tracks OH
Bowie to Woodzell, MD
90 Bowie MD Morgantown MD
90 Brandywine MD Chalk Point MD
NY/NJ to Philadelphia (West Trenton Line)
182 Manville Yard & Lead NJ
182 Drill Track Lead NJ
182 Philadelphia/Greenwich PA North NJ Terminal NJ
Yd.
182 Park Jct. PA Belmont PA
182 Phil PA CP-Field/CP-Gray PA
182 Eastwick PA Vicinity of CP- PA
Field/CP-Gray
Washington, DC to Landover, MD
33 Washington Terminal DC TR
33 Washington (RO) DC Landover MD
Quakertown Branch
130 Philadelphia Terminal PA Quakertown PA TR
Chicago Area
192 Porter IN Ivanhoe IN
190 Panhandle Stub IN South of 49th Street IL
190 Ivanhoe IN Westernmost point of IN
CR Ownership
Monongahela
113 Monongahela RR PA/ Subject
WV to joint
use
agreement
PRR ALLOCATED ASSETS
Primary Route And Extension Acquisitions
Segmt From To
NJ Terminal to Crestline - Pennsylvania Route & Extensions
10 North NJ Terminal NJ Somerville NJ
10 Somerville NJ Allentown PA
10 Little Falls NJ Dover NJ TR
10 Orange NJ Denville NJ TR
10 Dover NJ Rockport NJ TR
10 Rockport NJ Phillipsburg NJ
10 Phillipsburg PA E. Stroudsburg PA
10 Allentown Terminal PA
186 Orange NJ North Jersey TerminalNJ TR
170 North Jersey Terminal NJ Little Falls NJ TR
182 Bound Brook NJ Ludlow NJ TR
11 Allentown PA Reading PA
12 Reading PA Harrisburg PA
12 Harrisburg Terminal PA
13 Harrisburg PA Pittsburgh PA
13 Creekside PA Homer City PA TR
13 Conemaugh Line via Saltsburg PA
13 Pittsburgh PA W. Brownsville PA
113 Monongahela RR PA/ WV
13 Central City PA South Fork PA
13 Pittsburgh Terminal PA
13 Monongahela PA Marianna PA
14 Pittsburgh Terminal PA
14 Pittsburgh PA Salem OH
14 Salem OH Alliance OH
14 Beaver Falls PA Wampum PA
15 Alliance OH Cleveland Terminal OH
120 Mantua OH Cleveland Terminal OH
120 Portion of Kinsman OH
Conn.
120 Portion of 44 I.T. OH
(including Dock 20 Ld.)
16 Alliance OH Crestline OH
114 Alliance OH Omal OH
114 Rochester PA Yellow Creek OH
114 E. Steubenville WV Weirton WV
114 Steubenville Branches OH
Bridge
114 Pittsburgh Branches PA
45 Ashtabula OH Youngstown OH
162 Ashtabula Harbor OH Ashtabula OH
46 Niles OH Latimer OH
46 Alliance OH Youngstown OH
46 Gem I.T. - Lordstown OH
48 Youngstown OH Rochester PA
87 Allentown PA Hazelton PA
CP Harris PA Cloe PA TR
Cloe PA Shelocta PA
Tyrone PA Lock Haven PA TR
Cleveland to Chicago - Water Level Route
6 Cleveland Terminal OH Toledo Terminal OH
6 Elyria OH Lorain OH
159 Toledo Terminal OH Sylvania OH
7 Toledo Terminal OH Goshen IN
107 Elkhart IN Goshen IN
8 Elkhart IN Porter IN
Philadelphia to Washington (NEC) Route & Extensions
31 Philadelphia Terminal PA Perryville MD TR
31 Wilmington Terminal DE
32 Perryville MD Baltimore MD TR
32 Baltimore Terminal MD
32 Claremont R.T. MD
32 Loneys Lane Lead MD
32 Grays Yard MD TR
33 Balt. BayView MD Landover MD TR
33 Baltimore Terminal MD
33 Baltimore MD Cockeysville MD
33 Landover MD Union Station DC TR
34 Pocomoke MD New Castle Jct DE TR
34 Harrington DE Frankford/ DE
Indian River
131 Newark DE Porter DE TR
Michigan Operations (Excluding Joint Detroit Area)
50 Toledo Terminal OH Detroit Terminal MI
60 Detroit Terminal MI Jackson MI
61 Jackson MI Kalamazoo MI
62 Kalamazoo MI Elkhart IN
70 Jackson MI Lansing MI
71 Kalamazoo MI Grand Rapids MI
71 Kalamazoo I.T. MI
71 Comstock I.T. MI
156 Kalamazoo MI Porter IN TR
Eastern PA Lines & Extensions
37 Philadelphia Terminal PA Reading PA
37 Reading Terminal
37 Thorndale PA Woodbourne PA
37 Portion of Stoney PA
Creek Branch
37 West Falls Yard PA
37 Venice I.T. PA
136 Leola/Chesterbrook PA
Lines
137 Philadelphia PA Lancaster PA TR
Terminal
111 Lancaster PA Royalton PA TR
112 Lancaster PA Lititz/Columbia PA
Indiana Lines & Extensions
84 Anderson IN Warsaw IN
85 Warsaw IN Goshen IN
163 Marion IN Red Key IN
101 Layfayette I.T. IN Lancaster
Buffalo to NY/NJ Terminal Route & Extensions
44 NJ/NY Jct. NJ Suffern NY TR
44 Suffern NY Port Jervis NY
44 Port Jervis NY Binghamton NY
44 Binghamton NY Waverly NY
44 NJ/NY Jct. NJ Spring Valley NY TR
44 Paterson Jct. NJ Ridgewood NJ TR
38 Waverly NY Buffalo NY
88 Waverly NY Mehoopany PA
89 Sayre PA Ludlowville NY
93 Lyons NY Himrods Jct NY
95 Corning NY Himrods Jct NY
171 North Jersey Terminal NJ Paterson Jct NJ TR
171 Paterson Jct. NJ North Newark NJ
171 NJ/NY Jct. NJ North Jersey TerminalNJ TR
Buffalo to Harrisburg and South
35 Perryville MD Harrisburg PA
35 Carlisle PA Harrisburg PA
35 Wago PA York (area) PA
35 Harrisburg PA Shocks PA
36 Williamsport MD Harrisburg PA
39 Harrisburg PA Buffalo NY
39 Watsontown PA Strawberry Ridge PA
4 Ebenezer Jct. NY Lackawanna NY
91 Hornell NY Corry PA
91 Corry PA Erie PA TR
91 Youngstown OH Oil City PA
Cincinnati, OH to Columbus, OH to Charleston, WV
54 Columbus OH Cincinnati OH
54 Cincinnati Terminal OH
56 Columbus Terminal OH Truro OH
57 Truro OH Charleston WV
150 Charleston WV Cornelia WV
150 Charleston WV Morris Fork WV
Chicago South/Illinois Operations
193 Osborne IN Hartsdale IN
193 Hartsdale IN Chicago Heights IL
82 Hartsdale IN Schneider IN
81 Schneider IN Hennepin IL
97 Keensburg IL Carol IL
152 Schneider IN Wheatfield IN
Chicago Market
194 Western Ave Cicero/Elsdon IL
Operations/Loop
194 Western Ave. I.T. IL
194 Old Western Ave. I.T. IL
194 North Joint Tracks IL
194 Elevator Lead & Tri- IL
River Dock
195 Chicago IL Porter IN
196 Clarke Jct. IN CP501 IN
196 CP 509 IL Calumet Park IL
194 CR&I Branch IL
194 49th Street I.T. IL
194 75th Street IL 51st Street IL TR
197 Port of Indiana IN
196 Bernice I.T. IL
190 CP502 IN Osborne IN
CRC RETAINED ASSETS - DETROIT SHARED ASSETS AREA
Segmt From To
Detroit Line Gibraltar(MP20) MI CP West Detroit MI
Michigan Line CP Townline MI CP 15th Street MI
Part TR
North Yard Branch CP Bay City Jct MI North Yard MI
Sterling Secondary North Yard MI Sterling Yard MI
Junction Yard
Secondary CP Townline MI River Rouge Yard MI
Marsh Industrial River Rouge MI Tecumsah Yard MI
Track Yard
Lincoln Industrial Ecorse Jct. MI Carleton MI
Track
Term. East Ind. Mack Yard MI North Yard MI
Track
Term. West Ind. North Yard MI Fullerton MI
Track
Highland Park Ind. Fullerton MI West Belt Jct. MI
Track
Utica Industrial Sterling Yard MI Ford Utica Plant MI
Track
Forman Wye Track Fort St - MI NS Drawbridge MI
Rougemere
Overhead Rights West Belt Jct. MI Delray MI TR
on CSXT
Local Rights on Oak MI End of Track - W. MI TR
CSXT Detroit
Rights on Delray Connecting RR
CRC RETAINED ASSETS - SOUTH JERSEY/PHILADELPHIA SHARED ASSETS AREA
Segmt From To
NEC (Amtrak) Zoo PA Trenton NJ TR
Harrisburg Line Zoo PA Overbrook PA TR
(Amtrak)
Delair Branch CP Park PA Pavonia Yard NJ
West Chester Line Arsenal PA Media PA TR
(SEPTA)
Chestnut Hill W. N. Philadelphia PA Midvale PA TR
Line (SEPTA)
Midvale Yard/ PA
Midvale I.T.
Main Line (SEPTA) Market East PA Newtown Jct. PA TR
Chester Secondary Eastwick PA Essington PA
Chester Industrial Essington PA Marcus Hook PA
Track
Bordertown Pavonia NJ Trenton NJ
Secondary
Beasley's Pt. CP Brown NJ Palermo NJ
Secondary Part TR
Vineland Secondary CP Brown NJ Landis NJ
Millville Landis NJ Manumiskin NJ
Industrial Track
Manumuskin Ind. Manumuskin NJ WW RR Connection NJ
Track
Penns Grove Woodbury NJ Deepwater NJ
Secondary
Salem Running Woodbury NJ Swedesboro NJ
Track
Pemberton Ind. CP Jersey NJ Mt. Holly NJ
Track Part TR
Grenloch CP Brown NJ Bellmawr NJ
Industrial Track
Shell Industrial Shell NJ End of Track NJ
Track
Bustleton Ind. Holmes PA Bustleton PA
Track
Morrisville Line CP "MA" PA Morris PA
Fairless Spur Morrisville Yd.PA Fairless Works PA
Richmond Ind. Nice PA Pt. Richmond PA
Track
60th Street Ind. Essington PA End of Track PA
Track
Camden Running CP Brown NJ Pavonia NJ
Track Part TR
Philadelphia Belt PA TR
Line
Swanson St. IT South PA
Philadelphia
Port of Philadelphia PA
Pier I22 PA
Blue Line Wayne Jct. PA Nice PA
Connecting Track
CRC RETAINED ASSETS - NORTH JERSEY/NEW YORK SHARED ASSETS AREA
Segmt From To
NEC (Amtrak) Trenton NJ Penn Station NY NY TR
Raritan Valley Aldene NJ Bound Brook NJ TR
Line (NJT)
North Coast Line Rahway(Union) NJ Neptune Yard NJ TR
(NJT)
Bayonne Line (NJT) Bayonne NJ Greenville NJ TR
Southern Secondary Red Bank NJ Glidden NJ TR
(NJT)
Freehold Secondary Freehold NJ Farmingdale NJ TR
(NJT)
Lehigh Line CP Port Reading NJ Oak Island Yard NJ
Jct.
River Line CP Waldo NJ North Bergen NJ
Port Reading Bound Brook NJ PD Port Reading NJ
Secondary
Chemical Coast "PN" Oak Island NJ Perth Amboy NJ
Secondary
P&H Branch Lane NJ Hack NJ
Nave - Croxton Nave NJ CP-Croxton NJ
Running Tk.
Northern Running CP-Croxton NJ North Bergen NJ
Track
Marion Running Hack NJ CP-Croxton NJ
Track
National Docks Oak Island NJ Nave NJ
Secondary
Amboy Secondary South Amboy NJ Monmouth Jct. NJ
(Midway)
Bonhamton/Raritan Metuchen NJ Perth Amboy NJ
Ind. Tks.
Linden Industrial Carteret NJ Linden NJ
Track
Perth Amboy Center NJ
GSA Lead NS Lehigh Line NJ CSX Trenton Line NJ
Conn.
Reformatory Ind. Carteret NJ Chrome Yard NJ
Track
Elizabeth Ind. Aldene NJ Elizabeth NJ
Track
Hightstown Ind. Jamesburg NJ Hightstown NJ
Track
Toms River Ind. Lakehurst NJ Ciba NJ
Track
Meadows #1 Track NJ NJ
Port Newark/Port NJ NJ
Elizabeth Access
Auto Terminal Lead Ridgefield NJ NJ Heights
Greenville Yard Greenville NJ NJ
and Lead
ATTACHMENT II
[Attachment II - not provided in this filing - is a detailed map of the entire
Consolidated Rail Corporation (CRC) rail system, indicating by color coding the
Routes which are to be NYC Allocated Assets, PRR Allocated Assets and Retained
Assets, respectively; Attachment II is intended to show graphically the
Routes described in Attachment I.]
SCHEDULE 2
MAJOR DECISIONS
1. From and after the Control Date, except by resolution of the CRC
Board, none of CRR, CRC or any of their respective Affiliates (other than NYC
and PRR) shall (other than as is necessary or convenient in connection with a
Restructuring or is expressly set forth in this Agreement or the Ancillary
Agreements), in any single transaction or series of transactions, take or commit
to take any of the following actions:
(a) any action which would require or cause NYC or PRR to
declare, make or pay any Distributions;
(b) conduct any business other than, or engage in any transaction
not substantially related to and in the ordinary course of, the business of CRC
and its Affiliates (other than NYC and PRR) as contemplated under this Agreement
and the Ancillary Agreements (the "Continuing CRC Business");
(c) make any loans, advances or capital contributions to, or
investments in, any other Person except CRC's wholly owned Subsidiaries;
(d) acquire any business or assets, other than assets acquired
in the ordinary course of the Continuing CRC Business;
(e) consolidate with or merge into any Person or otherwise
engage in any business combination;
(f) issue, sell, adjust, split, combine, subdivide, reclassify,
transfer, pledge, redeem or otherwise acquire any shares of its capital stock;
(g) sell, transfer, lease, sublease, license or otherwise dispose of
any assets (including leasehold interests and intangible assets) not in the
ordinary course of the Continuing CRC Business or in excess of $100,000 in
aggregate value in any 12 month period;
(h) commit to or make any capital expenditure other than in
compliance in all material respects with the capital expenditure budget adopted
by the CRC Board from time to time;
(i) commence or settle any litigation for equitable relief or for an
amount in excess of $100,000 in any such commencement or settlement or series of
related commencements or settlements;
(j) form or participate in a joint venture or partnership
outside the ordinary course of the Continuing CRC Business or involving over
$100,000 in assets or over $100,000 in revenues;
(k) enter into or amend Contracts outside the ordinary course of the
Continuing CRC Business or with a notional value in excess of $100,000 or for a
period in excess of 12 months; provided that in respect of Contracts that are
Allocated Assets, CRC shall follow NYC's (in the case of Contracts that are NYC
Allocated Assets) or PRR's (in the case of Contracts that are PRR Allocated
Assets) reasonable instructions in respect of such Contracts and no CRC Board
approval shall be necessary for CRC to take such actions;
(l) create liens on or encumbrances of assets outside the ordinary
course of the Continuing CRC Business or with an aggregate net book value in
excess of $50,000;
(m) incur, assume, pre-pay, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for any
indebtedness for borrowed money except in the ordinary course of the Continuing
CRC Business;
(n) declare, make or pay any Distributions, other than Distributions
to CRC by its wholly owned Subsidiaries (other than NYC and PRR);
(o) appoint or terminate any executive management;
(p) enter into or amend any written employment
agreement or contract or employee benefit plan or employee policy;
(q) appoint or replace the independent auditors of CRR, CRC and
their respective Affiliates;
(r) unless required by law or a change in generally accepted
accounting principles in the United States, make any material change in the
accounting methods of CRR, CRC and their respective Affiliates;
(s) dissolve, liquidate or wind up CRR, CRC or their respective
Affiliates or commence a voluntary proceeding seeking reorganization or similar
relief;
(t) approve, enter into or perform any transactions with any
director, officer or employee of CRR, CRC or their respective Affiliates, or
with an Affiliate of CSX or NSC, respectively, or with any partner, family
member or other person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with any
such director, officer or employee;
(u) transfer, pledge, create a security interest, or otherwise part
with ownership or possession, in whole or part, of its membership interest in
NYC or PRR; or
(v) any other action that could be reasonably expected to have a
material impact on the performance, financial condition or prospects of CRR, CRC
or their respective Affiliates.
2. Except by resolution of the CRC Board, CRC shall not (other than
as is necessary or convenient in connection with a Restructuring) in its
capacity as the sole member of NYC and PRR, respectively, amend or restate the
NYC LLC Agreement or the PRR LLC Agreement, or suffer or permit NYC or PRR, as
the case may be, to take or commit to any of the following actions:
(a) declare, make or pay any Distributions;
(b) conduct any business other than, or engage in any transaction
not substantially related to and in the ordinary course of, the business of NYC
or PRR, as the case may be, as contemplated under the Transaction Agreement and
the Ancillary Agreements or the freight transportation business generally;
(c) consolidate with or merge into any Person or otherwise
engage in any business combination;
(d) issue, sell, adjust, split, combine, subdivide, reclassify,
transfer, pledge, redeem or otherwise acquire any interest in NYC or PRR, as the
case may be;
(e) sell, transfer, lease, sublease, license, exchange or otherwise
dispose of all or substantially all of their Assets, respectively (including
leasehold interests and intangible Assets);
(f) dissolve, liquidate or wind up or commence a voluntary
proceeding seeking reorganization or similar relief;
(g) enter into any agreement or arrangement with respect to, or
engage in, any transaction (i) between NYC or PRR, as the case may be, on the
one hand, and CRC or its Affiliates, on the other hand, and (ii) between the NYC
or PRR, as the case may be, on the one hand, and CSX or NSC and their respective
Affiliates, on the other hand, other than such a transaction which is on arm's
length terms;
(h) transfer, provide trackage or operating rights or otherwise
grant the right to use any railroad line (regardless of whether the grantor's
rights depend on ownership or trackage rights or a combination thereof) which is
part of any Main Line within the States of New Jersey or New York, or the area
within twenty-five miles of the city of Philadelphia, PA (or consent to any such
action by the "Operator" under the CSXT Operating Agreement or the NSR Operating
Agreement). As used in the preceding sentence, "Main Line" means a line of
railroad that has daily rail service, but does not include any branch line
connecting to a Main Line and does not include the Main Line that lies east of
the Hudson River and south of Selkirk, NY; or
(i) amend any material provision of the CSXT Operating Agreement,
the CSXT Equipment Lease, the NSR Operating Agreement or the NSR Equipment
Lease.
<PAGE>
<PAGE>
SCHEDULE 3
PRESERVATION OF FAIR ACCESS TO CHICAGO GATEWAY
(a) For purposes of this Schedule 3, the following terms shall have
the following meanings:
(i) "Chicago Area" means the geographic area in the States of
Illinois and Indiana located within a 100-mile radius of the office
building presently located at One First National Plaza in Chicago,
Illinois;
(ii) "Chicago Area Terminal Railroad" means any railroad,
whether currently in existence or later created, whose primary business is
the provision of terminal or switching services within the Chicago Area
including, without limitation, the Indiana Harbor Belt Line Railroad
Company, the Belt Railway Company of Chicago, the Baltimore and Ohio
Chicago Terminal Railroad Company and the Elgin, Joliet and Eastern
Railroad Company; and
(iii) "Chicago Gateway" means railroad lines and interchange,
dispatching and other related facilities necessary to the function of
carrying by railroad freight moving through the Chicago Area generally in
the direction from east to west or west to east, whether by interchange
between carriers in the Chicago Area or by single-line service between
points east of the Chicago Area and points west of the Chicago Area and
passing through the Chicago Area.
(b) If CSXT or NSR shall after the Control Date acquire, directly or
indirectly, ownership, or rights to exercise effective voting control, of any
voting stock in any Chicago Area Terminal Railroad (the "Interests"), the party
acquiring such Interests (the "Acquiror") shall, at the request of the other
party, sell or transfer to the other party, on terms and conditions
substantially the same on a pro rata per Interest basis as those governing the
Acquiror's acquisition of Interests, one-half of such newly acquired Interests,
provided, however, that if the Interests would give the Acquiror control, not
theretofore held, of a Chicago Area Terminal Railroad, the Acquiror's obligation
to sell or transfer shall attach to the lesser of (A) one-half of all the
Interests (not solely newly acquired Interests) it holds in that Chicago Area
Terminal Railroad, or (B) such portion of all the Interests (not solely newly
acquired Interests) it holds in that Chicago Area Terminal Railroad as necessary
to equalize the Interests of each party. The sale or transfer price for each
such Interest shall be the per Interest price paid by the Acquiror for the newly
acquired Interests.
(c) Neither CSXT nor NSR shall, following the Control Date, enter
into any arrangement with any Chicago Area Terminal Railroad, or any other
railroad operating in the Chicago Area related to the Chicago Gateway, under
which, in connection with the grant by such Chicago Area Terminal Railroad or
such other railroad of trackage rights or similar operating rights to either
CSXT or NSR, such Chicago Area Terminal Railroad or other railroad shall agree
not to grant trackage rights or similar operating rights to the other of CSXT or
NSR, with respect to such Chicago Area Terminal Railroad or the lines of such
other railroad related to the Chicago Gateway.
(d) Should CSX or CSXT enter into a transaction in which either one
shall be acquired by Burlington Northern Santa Fe Corporation ("BNSF"), or in
which CSX or CSXT acquires BNSF, or in which substantially all of the rail
operations of CSXT and BNSF shall be otherwise combined and put under common
control or be merged together in any manner, at the request of CSX and any
successor thereto made no later than one year following the consummation of such
transaction, NSR shall sell and transfer to CSXT or its successor, at fair
value, the Streator Line from Osborne, IN to Streator, IL (being the rail line
located between Osborne, IN, and Schneider, IN, and Wheatfield, IN, and Moronts,
IL), including all dispatching control with respect to said line. As used in
this subsection, the term "fair value" shall mean the fair market value as
determined by the parties by agreement or, failing agreement, as determined by
binding arbitration. Any such sale and transfer shall be subject to all
requisite governmental and regulatory approvals.
(e) Any dispute concerning the interpretation or application of this Schedule 3
shall be finally settled by binding arbitration pursuant to Section 11.12 of the
Transaction Agreement. In any such arbitration, the arbitrator(s) shall have the
authority to direct, subject to any required governmental or regulatory
approvals and in accordance with any contractual limitations on transfer or
assignment contained in any agreement with third parties (except one made in
contravention of this Schedule 3), CSXT, NSR or both to transfer to each other
ownership or control of voting stock in any Chicago Area Terminal Railroad, or
to direct the release by a party violating subsection (c) of any obligation of
exclusivity made in such violation, as are necessary to carry out the purposes
of this Schedule 3.
<PAGE>
<PAGE>
SCHEDULE 4
SCHEDULE OF TRACKAGE RIGHTS,
HAULAGE, SHARED ASSET AND OTHER OPERATING AGREEMENTS
ITEM 1 - TRACKAGE RIGHTS AGREEMENTS
All Trackage Rights Agreements referred to in Items 1.A and 1.B below will
be substantially in the form of the Trackage Rights Agreement attached
hereto as Exhibit C-1 (in the case of those referred to in Item 1.A.) or
C-2 (in the case of those referred to in Item 1.B.) and will be between
the operator of the involved rail line, the owner, and the tenant road.
Forms of addenda and/or assignments relating to the trackage rights
referred to in Item 1.A. are included with Exhibit C-1 and forms of
addenda and/or assignments relating to the trackage rights referred to in
Item 1.B. are included with Exhibit C-2. Unless otherwise provided herein,
a trackage rights tenant shall only have the right to enter on and exit
from the trackage rights lines at points other than the endpoints where
the tenant may make a connection with its existing railroad line and joint
CSXT/NSR lines ("Point of Permitted Entry or Exit"). If, in the opinion of
the tenant, a new or upgraded connection is required at a Point of
Permitted Entry or Exit other than the endpoints, or, if in the opinion of
the tenant, other upgrading, including but not limited to switches, power
switches, signals, communications, etc., is required for operational
efficiency, the landlord will, subject to its own operational needs,
cooperate and the tenant will be responsible for funding that
construction/upgrading at actual cost or a cost mutually agreed to by CSXT
and NSR. Where a tenant has access to 2-to-1 points via trackage rights,
the tenant may at its option access the points via haulage.
A. NSR on CSXT: CSXT will grant to NSR trackage rights on the
following rail lines which will be owned or operated by CSXT after the
Closing Date:
1. Junction - Hadley (Fort Wayne, IN): NSR rights to operate over and
share with CSXT the former CRC line between Junction and Hadley (the
crossing of the former Pennsylvania RR and NYC&SL west of Fort
Wayne).
2. Lafayette, IN - Crawfordsville (area): assignment of overhead
trackage rights on CSXT s Lafayette Crawfordsville, IN line to serve
2-to-1 shippers at Crawfordsville, IN, and to move overhead between
Lafayette and Indianapolis.
3. Crawfordsville, IN - Indianapolis (area): overhead trackage rights
on CRC's Crawfordsville - Indianapolis line to serve 2-to-1
shippers, the GM metal fabrication plant and the INRD via Hawthorne
Yard.
4. Indianapolis: overhead trackage rights on CRC's
Crawfordsville Branch from Woods to Washington Street in
Indianapolis to serve 2-to-1 shippers, the GM metal fabrication
plant and the INRD via Hawthorne Yard.
5. Indianapolis: overhead trackage rights on CSXT between Washington
Street and Pine in Indianapolis to serve 2-to-1 shippers, the GM metal
fabrication plant and the INRD via Hawthorne Yard.
6. Buffalo (CP 437) - Niagara Falls (Suspension Bridge):
overhead trackage rights on CRC s Belt Line Branch and Niagara Branch
to connect with, or with trackage of Canadian carriers at Suspension
Bridge.
7. Philadelphia(Park Jct.) - Anacostia Jct., MD: NSR is
assigned CRC s overhead trackage rights on CSXT.
8. Landover - RO (Alexandria, VA): overhead trackage
rights on CRC s Landover Line.
9. Cleveland, OH: overhead trackage rights on CRC s Short
Line from Quaker to Berea, OH.
10. Cleveland, OH: overhead trackage rights on CRC s Chicago Line
(allocated to CSXT) from CP 181 to Collinwood Yard for purposes of
interchange with CSXT.
11. Crestline, OH - Fort Wayne (Mike), IN: overhead trackage rights on CRC
s Fort Wayne Line (which is to be allocated to CSXT), with train limits
as follows:
- 8 total trains/day between Crestline and
Bucyrus
- 6 total trains/day between Bucyrus and Fort Wayne including
rights to serve 2-1 customers at Upper Sandusky.
NSR trains over the above limits are subject to negotiations
between CSXT and NSR for NSR contribution to CSXT investment needed for
additional capacity. NS will supervise the dispatching of the Ft. Wayne to
Crestline line until CSXT haulage over CRC Chicago Line between Berea and
Chicago is terminated. NS will control the Bucyrus interlocking
permanently.
12. Fort Wayne(Mike), IN - Chicago(Clarke Jct., IN): overhead trackage rights
on former CRC Fort Wayne Line (Ft. Wayne - Chicago, now NSR), with ten
total trains/day limit (limit does not apply in Fort Wayne terminal). NSR
trains over the above limits are subject to negotiations between CSXT and
NSR for NSR contribution to CSXT investment needed for additional
capacity. NSR will dispatch the line until CSXT haulage over CRC Chicago
Line between Berea and Chicago is terminated.
13. Porter - Gibson Interlocking, IN: overhead trackage rights on CRC s
Porter Branch.
14. CP Hocking - CP 138 (Columbus, OH): overhead trackage rights on CRC
Buckeye Line from "CP Hocking" to "CP 138".
15. Scioto - CP Mounds (Columbus, OH): overhead trackage rights on CRC
Western Branch from Scioto to "CP Mounds," including the Mounds
Connection.
16. CP Buckeye - CP Darby (Columbus, OH): overhead trackage rights on
Buckeye Yard Lead from "CP Buckeye" to "CP Darby".
17. CP 138 - MP 133.5 (Columbus, OH): overhead trackage rights on the CSXT -
assigned west track of the CRC Columbus Line from CP 138" to the vicinity
of Milepost 133.5 (point of new NS connection).
18. Parsons Yard - Scioto (Columbus, OH): overhead trackage rights on
CSXT between the south end of Parsons Yard (connection with
Watkins - Parsons transfer track) and Scioto.
19. Lima, OH - Sidney, OH: overhead trackage rights on
CSXT's Toledo Subdivision to serve 2-to-1 customers at Sidney.
20. Bound Brook, NJ - Woodbourne, PA: overhead trackage rights for
twelve total trains/day limit on CRC s Trenton Line for dimensional
trains until Pattenburg Tunnel on CRC s Lehigh line is cleared of
dimensional restrictions, not to exceed three years.
21. Piqua Yard - Mike Interlocking (Fort Wayne, IN): NSR overhead
rights to operate trains for Triple Crown Services Company
between Piqua Yard and Mike interlocking (Fort Wayne).
22. Muncie, IN - Indianapolis (area): overhead trackage rights on CRC s
Indianapolis Line, South Anderson Cutoff and part of Dow Secondary
to serve 2-to-1 shippers the GM metal fabrication plant and the INRD
via Hawthorne Yard.
23. Toledo Terminal: overhead rights on CSXT-controlled
portion of former Toledo Terminal Railroad.
24. Erie, PA: overhead trackage rights on CRC between
Downing Avenue and Wallace Street in Erie, PA, subject to
restriction against NSR use of CRC Chicago line main tracks.
25. CP Short - Parma, OH: overhead trackage rights on CRC Short Line
from CP Short to Parma to serve but not directly switch Parma
auto plant.
26. McCook - Franklin Park, IL: overhead trackage rights granted by
B&OCT.
27. Pine Junction, IN - McCook, IL: overhead trackage
rights on B&OCT.
B. CSXT on NSR: NSR will grant to CSXT trackage rights on the
following rail lines which will be owned or operated by NSR after the
Closing Date:
1. CP River (West Falls), PA - Abrams, PA: overhead
trackage rights on CRC s Harrisburg Line for dimensional traffic.
2. CP King (Norristown), PA - Woodbourne (CP Wood), PA: overhead
trackage rights on CRC s Morrisville Line for dimensional traffic
plus incidental rights on short portion of SEPTA s Norristown Line.
3. Berea, OH - CP 181 (Cleveland, OH): overhead trackage
rights on CRC s existing Chicago Line.
4. CP Short - CP 190 (Cleveland, OH) and Berea, OH - Lorain and
Fairlane, OH: overhead trackage rights on CRC's line allocated to
NSR and rights to serve 2-to-1 Ford Motor plants at Avon Lake and
Fairlane.
5. CP Hocking - Buckeye Yard: overhead trackage rights on
CRC Buckeye Line from "CP Hocking" to Buckeye Yard.
6. Bannon - Scioto, OH: overhead trackage rights on CRC
Western Branch from Bannon to Scioto.
7. CP 139 - Buckeye Yard: overhead trackage rights on CRC
Cincinnati Line from CP 139" to Buckeye Yard, via the Miami Lead.
8. CP 138 - MP 133.5 (Columbus, OH): overhead trackage
rights on the NSR-assigned east track of the CRC Columbus Line from CP 138
to the vicinity of MP 133.5 (point of new NSR connection).
9. CP Camp - CP 139 (Columbus): overhead trackage rights
on CRC Auburn Connection from "CP Camp" to "CP 139".
10. Bannon - Watkins Yard: overhead trackage rights on NSR from Bannon to
the south (RR east) end of NSR Watkins Yard (connection with Watkins -
Parsons transfer track).
11. Youngstown (Center St.) - Ashtabula Harbor, OH: overhead trackage rights
on CRC Youngstown Line to access Ashtabula Harbor facilities and the
Water Level Route.
12. Osborne, IN - Streator, IL: overhead trackage rights on CRC Kankakee Line,
Kankakee Secondary and Streator Secondary for up to 8 total trains/day to
connect with, or with trackage of other intersecting railroads. CSXT
trains over the above limits are subject to negotiations between CSXT and
NSR for CSXT contribution to investment needed for additional capacity.
13. Clarke Jct., IN - CP 501: overhead trackage rights on CRC's Fort Wayne
Line between Clarke Junction, IN and CP 501.
14. Pine, IN - Rock Island Jct. (Chicago, IL): CSXT overhead trackage rights
on CRC's Chicago Line (allocated to NSR).
15. CP Short - CP Belt, OH: CSXT overhead trackage rights to allow CSXT to
serve but not directly switch 2-to-1 Ford Motor Company plant at CP Belt,
OH.
16. Ecorse Junction - Delray (Detroit, MI): overhead trackage rights on
existing NSR tracks in the Detroit area from Ecorse Junction to Delray,
MI.
17. Bucyrus - Sandusky: overhead trackage rights on NSR between Bucyrus and
Sandusky to serve a 2-to-1 shipper at Sandusky, OH.
18. Brighton Park - Ash Street (Chicago IL): overhead trackage rights on
CRC's Western Avenue Industrial Track from crossover connection with
B&OCT at Brighton Park to Ash Street (Chicago, IL).
19. CP 509 - 63rd Street (Chicago, IL): overhead trackage rights on CRC's
Chicago line limited, in combination with NSR haulage of CSXT trains, to a
total of 6 trains/day in each direction between the above points for
trains entering or leaving NSR trackage at Clarke Junction up to a maximum
of three years.
C. CRC ASSIGNMENTS TO NSR/CSXT: CRC will assign to NSR and
CSXT existing CRC rights with respect to the Northeast Corridor as
follows (see Ancillary Agreement governing assignment of CRC rights as
to Northeast Corridor):
NEC RIGHTS/OPERATING DEFINITION
1. Zoo Tower - Penn Station trackage: Rights shall be
shared equally by NSR and CSXT and, in the event of an operating
conflict, trains will be scheduled alternately.
2. Baltimore - Zoo Tower Trackage: CSXT shall be limited
to 4 trains a day.
3. Landover - Baltimore: Rights will be shared equally by
NSR and CSXT and, in the event of an operating conflict, trains
will be scheduled alternately.
4. Washington Union Station - Landover, MD: Rights shall
be shared equally by NSR and CSXT and, in the event of an
operating conflict, trains will be scheduled alternately.
NEC RIGHTS/COMMERCIAL DEFINITION
1. Philadelphia (Zoo) - New York (Penn Station): Will be part of the
North Jersey Shared Assets Area and the South Jersey/Philadelphia
Shared Assets Area where NSR and CSXT will have equal customer
access.
2. Washington, D.C. - Philadelphia (Zoo): Will be
exclusive to NSR.
3. North of New York (Penn Station): Will be exclusive to
CSXT.
ITEM 2 - CSX/NSC HAULAGE AGREEMENTS
The Haulage Agreement referred to in Item 2.A.1 will be substantially in
the form of the Haulage Agreement included with Exhibit D and will be
between the operator of the involved rail line (and with the owner, if
appropriate) and the tenant road. The assignment of the Haulage Agreement
referred to in Item 2.A.2 will be in the form included with Exhibit D.
A. NSR Haulage for CSXT on NSR Lines:
1. Berea, OH - Chicago (63rd St.): Overhead haulage for
CSXT by NSR on CRC s Chicago Line for maximum of six merchandise
and/or intermodal trains/day each way to the Park Manor Yard at
63rd St. in Chicago, until CRC s Ft. Wayne Line (Ft. Wayne -
Chicago now NS) is upgraded, up to a maximum of 3 years.
2. Normal, IL - Lafayette, IN: Assignment to CSXT of
CRC's Haulage Agreement with NSR for 2-to-1 automotive traffic
only.
ITEM 3 - SHARED ASSETS AGREEMENTS
1. North Jersey Shared Assets Agreement among CRC, CSXT and NSR
(attached as Exhibit G), covering the following matters:
(1) North Jersey Shared Assets Area
(2) North Jersey CSXT/NSR Trackage
2. Philadelphia\Southern Jersey Shared Assets Agreement among CRC, CSXT
and NSR (attached as Exhibit H), covering the following matters:
(1) Philadelphia/South Jersey Shared Assets
Area
(2) Philadelphia/South Jersey NS/CSXT
Trackage
3. Detroit Area Shared Assets Agreement among CRC, CSXT and NSR
(attached as Exhibit I), covering the following matters:
(1) Detroit Shared Assets Area
(2) Detroit Dispatching
(3) NSR/CSXT trackage Rights - Detroit
ITEM 4 - OTHER OPERATING AGREEMENTS
A. INTERLOCKING AGREEMENTS (CSXT-Controlled) between CSXT and
NSR as to which the interlocking will be controlled by CSXT:
1. Ashtabula Interlocking (crossing of the existing CRC
Youngstown Line and Chicago Line at Ashtabula, OH)
2. CP-Mounds Interlocking (Columbus, OH)
3. Warsaw Interlocking (Warsaw, IN)
4. Crestline Interlocking (Crestline, OH)
B. INTERLOCKING AGREEMENTS (NSR-Controlled) between NSR and
CSXT as to which the interlocking will be controlled by NSR: 1.
Buckeye Interlocking (Columbus, OH)
2. Mike Interlocking (Fort Wayne, IN)
3. Bucyrus Interlocking (Bucyrus, OH)
C. INTERLOCKING SEPARATION AGREEMENTS between NSR and CSXT as to which the
interlocking will be "separated" (i.e., divided so that each operator is
not subject to the control of the other when making moves on the
operator's own lines through a point) prior to or as soon as possible
after the Closing Date:
1. CP 138 Interlocking (Columbus, OH)
2. Short Interlocking (Cleveland, OH)
3. Berea Interlocking (Berea, OH)
D. SWITCHING AND/OR YARD ACCESS AGREEMENTS between CSXT and
NSR:
1. Ashtabula - Agreement between NSR and CSXT providing for CSXT use of
and access to Ashtabula Harbor facilities owned by CRC, up to a
proportion of the total ground storage, throughput and tonnage
capacity of the facilities equal to the Percentage
2. Yard Access Agreement - Agreement between CSXT and NSR providing for
access by NSR to yard tracks in Seneca Yard at Buffalo, NY (yard to
be assigned to CSXT) sufficient for the origination and termination
of trains, at the end of the existing CRC Buffalo Line to be
assigned to NSR, for purposes of improved interchange with the South
Buffalo RR.
3. Ford (Rockport) - Agreement between NSR and CSXT providing for NSR
switching for CSXT at the Ford engine plant in Cleveland (located on
NSR portion of CRC lines in Cleveland).
4. GM Parma - Agreement between CSXT and NSR providing for CSXT
switching for NSR at Parma auto plant located on the CSXT Portion of
CRC in Cleveland.
5. Indianapolis Switching - Agreement between CSXT and NSR relating to
NSR's use of Hawthorne Yard providing that NSR will have sufficient
tracks and space for the arrival, departure and make-up of trains
and will have reasonable access to and from the designated tracks;
also providing for CSXT switching for NSR at 2-to-1 shippers in
Indianpolis, the GM metal fabrication plant, and the INRD.
6. GM Lordstown - Agreement between CSXT and NSR for switching at GM
assembly plant at Lordstown, OH.
7. Lorain Switching: Agreement between CSXT and NSR
providing for NSR switching for CSXT at Lorain/Avon Lake auto
plant located in Lorain, OH.
8. Fairlane Switching: Agreement between CSXT and NSR
providing for NSR switching for CSXT at Fairlane auto plant
located in Fairlane, OH.
9. Crawfordsville Switching: Agreement between CSXT and
NSR providing for CSXT switching for NSR at 2-to-1 customers
located in Crawfordsville, IN.
10. Sidney Switching: Agreement between CSXT and NSR providing for
CSXT switching for NSR at 2-to-1 customers located in Sidney, OH.
11. Sandusky Switching: Agreement between CSXT and NSR providing for
NSR switching for CSXT at a 2-to-1 customer at Sandusky, OH.
12. Upper Sandusky Switching: Agreement between CSXT and NSR providing
for CSXT switching for NSR at 2-to-1 customers at Upper Sandusky,
OH.
E. MISCELLANEOUS AGREEMENTS between NSR and CSXT:
1. IHB Agreement: Agreement among CRC, CSXT and NSR
covering matters relating to Indiana Harbor Belt.
2. Monongahela Agreement - Agreement among NSR and CSXT
providing for shared access to and joint use by CSXT of NSR
assigned, controlled, operated and maintained lines serving the Monongahela
coal fields' current and future facilities.
3. Temporary Lease Agreement between NSR or its designee
and CSXT providing interim use by CSXT of the Park Manor (63rd St.,
Chicago, IL) intermodal facility during the period of CSXT's interim
haulage between Chicago and Berea.
4. Letter Agreement providing for NSR and CSXT
construction projects:
(a) NSR construction of connection in eastern Cleveland, OH (granting to
NSR rights to construct a connection in eastern Cleveland to make
direct moves between NSR's Cleveland-Buffalo Line and the CRC's
existing Chicago
Line, using NSR rights over existing CRC Cleveland Short Line
to be assigned to CSXT)
(b) North of the current end of double track at CP 136 (Columbus, OH),
NSR will be assigned the right of way east of the single
remaining track and the Clintonville Siding (which is also east
of the single remaining track), with the right to connect these
two segments of track, at NSR's expense, at CP 136 and the
Clintonville Siding into a continuous track east of and parallel
to the single remaining track. Another new connection will be
constructed, at NSR expense, between the Clintonville Siding and
the existing NSR Bellevue - Portsmouth main line in the vicinity
of Milepost 133.5, where both the NSR and CRC rights of way are
parallel and level. CSXT shall, at its option and expense, have
the right to construct a connection from its assigned track
(i.e., the west located track of the right of way) to the new NSR
Clintonville Siding, so that both tracks can be utilized for
operational flexibility between the vicinity of Milepost 133.5 to
CP 138, under the control of the respective assignee of each
track.
(c) Construction of Junction - Hadley trackage (a line relocation
project underway in Fort Wayne will force NSR and CSXT to share the
former CRC line between Junction and Hadley (the crossing of the
former Pennsylvania RR and NYC&SL west of Fort Wayne); if NSR and
CSXT decide that capacity needs mandate an additional track, NSR and
CSXT will equally share the cost of constructing a new track between
Junction and Hadley on the north side of the existing track, and
ownership of the south track will revert to NSR and ownership of the
north track will revert to CSXT).
5. Construction at Buckeye Yard - Letter Agreement
providing for NSR to have the right to construct a parallel track to
the Buckeye Yard lead track (at
Buckeye Yard, Columbus, OH) in order to provide for the proper functioning of
Buckeye Yard.
6. Construction from Field - Belmont - Letter Agreement giving NSR the right
to reconstruct, own and control an additional track where practical
between Belmont and CP Field.
7. Deed of Easement between CSXT and NSR providing for
conveyance by CSXT to NSR of a free easement (for NSR relocation of
mainline in Erie, PA area) along existing CRC right of way through
Erie, PA (assigned to CSXT) to replace NSR right of way through streets
in downtown Erie at its expense. NSR will have trackage rights in Erie
to connect its route from Corry to its existing Buffalo - Cleveland
line if such connection can be achieved without using the CR Buffalo -
Cleveland line.
8. Letter agreement between NSR and CSXT providing that (i) NSR's existing
Fort Wayne - to - Chicago (former CRC line) line will be transferred to
CSXT as part of a like kind exchange transaction for the Streator line and
(ii) if CSXT were to merge with BNSF and if CSXT requests, then NSR would
transfer the Streator Line from Osborne, IN including the dispatching
control, for fair value.
9. Piqua Yard (Fort Wayne) - Letter Agreement between NSR and CSXT providing
for division of space in Piqua Yard and determine most efficient means of
utilizing the physical plant in Fort Wayne; Triple Crown Services Company
will retain its current space in Piqua Yard and the right to have NSR
operate its trains between Piqua Yard and Mike interlocking.
10. E-Rail Support Tracks - Letter Agreement between CSXT and NSR providing
for access by NSR to use up to two tracks located on NYC allocated
property of Elizabethport Yard (Trumbell St. Yard) for support of PRR's
E-Rail intermodal facility.
11. Agreement between CSXT and NSR providing for assignment of CRC rights over
CSXT lines to NSR (except as otherwise provided in the Transaction
Agreement) and for assignment of CRC rights over NSR lines to CSXT (except
as otherwise provided in the Transaction Agreement).
12. Letter Agreement between NSR and CSXT providing CSXT the right to
construct an Eastwick connection to provide a contiguous route through
Philadelphia, via CP Field and portions of CR's Harrisburg and Trenton
Lines to CP River and points north.
13. Letter Agreement among CRC, NSR and CSXT providing for assignment by CRC
of rights relating to the Northeast Corridor.
14. Letter Agreement between NSR and CSXT providing for (i) assignment to both
NSR and CSXT of CRC's trackage rights over BNSF to access BNSF's Willow
Springs Yard (Chicago), subject to approval of BNSF, and (ii) if such
trackage rights are assigned, CSXT's right to construct a connection in
the vicinity of Ash Street (Chicago) to enable CSXT to use these rights,
if necessary.
NOTE: Notwithstanding any provision of this Schedule, to the extent an item
herein describes an Ancillary Agreement between the parties the form of which is
set forth as an Exhibit to this Agreement, such description shall be for
purposes of identification only, and the terms of such Ancillary Agreement shall
control.
CSXT and NSR will cooperate with one another for the construction of various
connections and improvements of the involved carriers referred to in their
respective Operating Plans.
Exhibit 10.2
AMENDMENT NO. 1
to the
TRANSACTION AGREEMENT
by and among
CSX CORPORATION,
CSX TRANSPORTATION, INC.,
NORFOLK SOUTHERN CORPORATION,
NORFOLK SOUTHERN RAILWAY COMPANY,
CONRAIL INC.,
CONSOLIDATED RAIL CORPORATION
and
CRR HOLDINGS LLC
Dated as of June 10, 1997
<PAGE>
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 dated as of August 22, 1998 is by and among by and
among CSX CORPORATION, a Virginia corporation ("CSX"), CSX TRANSPORTATION, INC.,
a Virginia corporation, for itself and on behalf of its controlled Subsidiaries
(collectively, "CSXT"), NORFOLK SOUTHERN CORPORATION, a Virginia corporation
("NSC"), NORFOLK SOUTHERN RAILWAY COMPANY, a Virginia corporation, for itself
and on behalf of its controlled Subsidiaries (collectively, "NSR"), CONRAIL
INC., a Pennsylvania corporation, for itself and on behalf of its controlled
Subsidiaries (collectively, "CRR"), CONSOLIDATED RAIL CORPORATION, a
Pennsylvania corporation ("CRC"), and CRR HOLDINGS LLC, a Delaware limited
liability company ("CRR Parent"). CSX, CSXT, NSC, NSR, CRR, CRC and CRR Parent
have entered into that certain Transaction Agreement dated as of June 10, 1998
(the "Agreement"). The parties to the Agreement have determined to amend the
Agreement to increase the size of the Board of Directors of CRR Parent under the
Agreement as set forth herein. Accordingly, the parties agree as follows:
SECTION 1. Definitions. Capitalized terms used in this
Amendment and not defined herein shall have the meanings assigned to such terms
in the Agreement.
SECTION 2. Amendments of the Agreement. The Agreement is hereby
amended pursuant to and in compliance with Section 11.1 as set forth below:
(a) The text of subsection 4.2(a) is hereby deleted in its
entirety and the following substituted therefor:
"Following the Control Date, the business and affairs of
CRC shall be managed under the direction of the CRC Board
consisting of eight persons divided into two classes of
three directors. Four directors shall be designated by CSX
(the "CSX Directors") and four directors shall be
designated by NSC (the "NSC Directors")."
SECTION 3. Effectiveness. This Amendment shall become
effective as of August 22, 1998 (the "Amendment Date").
SECTION 4. Integration; Confirmation. On and after the Amendment
Date, each reference in the Agreement to "this Agreement," "herein," "hereunder"
or words of similar import, and each reference in any Note or other document
delivered in connection with the Agreement shall be deemed to be a reference to
the Agreement as amended by this Amendment, and the Agreement as so amended
shall be read as a single integrated document. Except as specifically amended by
this Amendment, all other terms and provisions of the Agreement shall continue
in full force and effect and unchanged and are hereby confirmed in all respects.
SECTION 5. Counterparts. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 6. Governing Law. This Amendment shall be construed
in accordance with and governed by the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
CSX CORPORATION
By: /s/PAUL R. GOODWIN
------------------
Name: Paul R. Goodwin
Title: Executive Vice President -
Finance and Chief Financial
Officer
CSX TRANSPORTATION, INC. (for itself and on
behalf of its controlled Subsidiaries)
By: /s/ MICHAEL J. WARD
--------------------
Name: Michael J. Ward
Title: Executive Vice President -
Finance and Chief Financial
Officer
NORFOLK SOUTHERN CORPORATION
By: /s/S.C. TOBIAS
--------------
Name: S. C. Tobias
Title: Vice Chairman and Chief
Operating Officer
NORFOLK SOUTHERN RAILWAY COMPANY
(for itself and behalf of its controlled
Subsidiaries)
By: /s/S.C. TOBIAS
--------------
Name: S. C. Tobias
Title: Vice President and Chief
Operating Officer
CONRAIL INC. (for itself and on behalf of
its controlled Subsidiaries)
By: /s/TIMOTHY O'TOOLE
------------------
Name: Timothy O'Toole
Title: President
CONSOLIDATED RAIL CORPORATION
By: /s/TIMOTHY O'TOOLE
------------------
Name: Timothy O'Toole
Title: President
CRR HOLDINGS LLC
By: /s/S. C. TOBIAS
---------------
Name: S. C. Tobias
Title: Vice President
Exhibit 10.3
Execution Copy
AMENDMENT NO. 2 TO
TRANSACTION AGREEMENT
THIS AMENDMENT NO. 2 TO THE TRANSACTION AGREEMENT (this "Amendment"),
dated as of June 1, 1999, by and among CSX CORPORATION, a Virginia corporation
("CSX"), CSX TRANSPORTATION, INC., a Virginia corporation, for itself and on
behalf of its controlled Subsidiaries (collectively, "CSXT"), NORFOLK SOUTHERN
CORPORATION, a Virginia corporation ("NSC"), NORFOLK SOUTHERN RAILWAY COMPANY, a
Virginia corporation, for itself and on behalf of its controlled Subsidiaries
(collectively, "NSR"), CONRAIL INC., a Pennsylvania corporation, for itself and
on behalf of its controlled Subsidiaries (collectively, "CRR"), CONSOLIDATED
RAIL CORPORATION, a Pennsylvania corporation ("CRC"), and CRR HOLDINGS LLC, a
Delaware limited liability company ("CRR Parent").
WHEREAS, the parties have previously entered into that certain
Transaction Agreement, dated as of June 10, 1997, as amended by Amendment No. 1
to Transaction Agreement, dated as of August 22, 1998 and the System Support
Operations Agreement dated as of May 15, 1999, relating to Section 2.3 hereof
(the "Transaction Agreement");
WHEREAS, the parties are on the date hereof consummating the Closing (as
defined in the Transaction Agreement) and entering into various documents and
instruments to effectuate the same, including Ancillary Agreements ("Closing
Documents");
WHEREAS, in connection with the parties' preparations for the Closing,
the parties have identified certain provisions of the Transaction Agreement for
which the Parties desire to clarify their understandings and agreements with
respect to such provisions and to make interim provisions with respect to
certain Transaction Agreement matters which are currently in dispute;
WHEREAS, the parties have determined that it is in the best interests of
their respective companies to amend the Transaction Agreement as set forth in
this Amendment;
WHEREAS, it is the intent of the parties that, except as expressly
amended hereby, the Transaction Agreement shall remain unamended and in full
force and effect;
NOW, THEREFORE, the parties hereby amend the Transaction Agreement as
follows:
SECTION 1. References; Interpretation.
--------------------------
(a) Unless otherwise specifically defined herein, each term used
herein which is defined in the Transaction Agreement has the meaning assigned to
such term in the Transaction Agreement. Each reference to "hereof", "hereunder",
"herein" and "hereby" and each reference to "this Agreement" and each other
similar reference contained in the Transaction Agreement shall from and after
the date of this Amendment refer to the Transaction Agreement as amended hereby.
<PAGE>
(b) The parties hereby expressly agree that the Closing is being
consummated, and the Closing Documents are being delivered, pursuant to and in
furtherance of the Transaction Agreement and shall be interpreted as such
consistent with the terms of the Transaction Agreement and in furtherance of the
terms of the Transaction Agreement to the greatest extent possible. Therefore,
in the event of any inconsistency between the terms of the Transaction Agreement
and any Closing Document, the terms of the Transaction Agreement shall prevail,
except to the extent such Closing Document provides otherwise.
SECTION 2. Transportation Contracts.
------------------------
(a) The beginning of the first sentence of Subsection 2.2(c)(iii)
of the Transaction Agreement is amended to read as follows:
"(iii) The following decision rules shall be
applied on an annual basis with tentative settlements to the
extent required by subsection (c)(ii) on a quarterly basis 90
days after the end of the quarter and an annual true-up 90 days
after the end of the year:"
(b) Subsection 2.2(c)(iii)(C)(aa)(x) of the Transaction Agreement
is hereby amended and restated in its entirety by deleting the existing
provision and inserting the following:
"(x) If the origin station is Local to NSR and the
destination station is on the NYC Allocated Assets and Local to
CSXT, then the allocation shall be on a joint line basis between
NSR and CSXT with the interchange to be negotiated between NSR
and CSXT and the revenues to be split based upon an ICC Docket
28300 mileage prorate with a minimum division of 25% to each of
NSR and CSXT; and"
(c) Subsection 2.2 (c) (iii) (C) (bb) (x) of the Transaction
Agreement is hereby amended and restated in its entirety by deleting the
existing provision and inserting the following:
"(x) If the origin station is Local to CSXT and the
destination station is on the PRR Allocated Assets and Local to
NSR, then the allocation shall be on a joint line basis between
CSXT and NSR with the interchange to be negotiated between CSXT
and NSR and the revenues to be split based upon an ICC Docket
28300 mileage prorate with a minimum division of 25% to each of
CSXT and NSR; and"
SECTION 3. FELA Matters.
------------
(a) Section 2.8(c) of the Transaction Agreement is hereby amended
and restated in its entirety by deleting the existing provision and inserting
the following:
2
<PAGE>
"(c) Except for liabilities that are the
responsibility of any Person pursuant to any of the Ancillary
Agreements, all liabilities associated with the handling and
disposition of FELA Claims ("FELA Liabilities") of CRR, CRC and
their Affiliates shall be allocated as follows: (i) FELA
Liabilities that arise from incidents or exposures occurring
prior to the Closing Date shall be Retained Liabilities; (ii) to
the extent FELA Liabilities arise from incidents or exposures
occurring in part prior, and in part on or after, the Closing
Date, that portion of the FELA Liability arising prior to the
Closing Date shall be Retained Liability; and, (iii) to the
extent FELA Liabilities arise from incidents or exposures
occurring on or after the Closing Date, they shall be the
responsibility of the party then employing the injured employee.
Notwithstanding the provisions of the foregoing sentence, if any
single incident occurring between the Control Date and the
Closing Date results in FELA Liability which exceeds CRC's
insurance coverage by $10 million or more, the amount by which
such liability exceeds $10 million in excess of CRC's insurance
coverage shall be a PRR Allocated Liability if the incident
occurred on or relates primarily to PRR Allocated Assets and
shall be a NYC Allocated Liability if the incident occurred on or
relates primarily to NYC Allocated Assets. CRC will obtain
insurance, in form and amount satisfactory to the parties hereto,
indemnifying PRR and NYC against the liability to which either
may be subject under this paragraph.
(b) Section 8.15 of the Transaction Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"Section 8.15. Administration of Actions. After the
-------------------------
Closing Date, (a) NYC shall have exclusive authority and control
over the investigation, prosecution, defense and appeal of all
Actions relating primarily to NYC, the NYC Allocated Assets, the
NYC Allocated Liabilities or a Retained Liability (except for
Retained Liabilities for which the monetary claim is more than
$500,000 or injunctive relief is sought) which arose at the
location of a NYC Allocated Asset, or with which a NYC Allocated
Asset is most significantly involved (each, an "NYC Action"), and
may settle or compromise, or consent to the entry of any judgment
with respect to, any such NYC Action without the consent of CRC,
NSC or PRR and (b) PRR shall have exclusive authority and control
over the investigation, prosecution, defense and appeal of all
Actions relating primarily to PRR, the PRR Allocated Assets, the
PRR Allocated Liabilities, or a Retained Liability (except for
Retained Liabilities for which the monetary claim is more than
$500,000 or injunctive relief is sought), which arose at the
location of a PRR Allocated Asset or with which a PRR Allocated
Asset is most significantly involved (each a "PRR Action"), and
may settle or compromise, or consent to the entry of any judgment
with respect to, any such PRR Action without the consent of CRC,
CSX or NYC.
3
<PAGE>
"Notwithstanding the foregoing, neither NYC or PRR
may settle or compromise, or consent to the entry of any judgment
with respect to, any such Action without the prior written
consent of the other if such settlement, compromise or consent to
such judgment (i) includes any form of injunctive relief binding
upon such other party or CRC or (ii) does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such other party or CRC and any Affiliates of CRC
subject to such Action of a full and final release from all
liability in respect to such claim or litigation. After the
Closing Date with respect to an Action not covered under clauses
(a) and (b) of the foregoing sentence (including Actions relating
to Retained Liabilities), the handling, administration and
disposition of such Actions shall be the joint responsibility of
CSX and NSC and the costs thereof shall be Corporate Level
Liabilities. In assigning joint responsibility for the
administration, handling and disposition of Actions to CSX and
NSC, hereunder it is not the parties' intent that CSX and NSC
will actually administer, handle and dispose of such Actions
jointly, but rather that CSX and NSC will agree on the most
practical and efficient arrangements with the objective of
eliminating unnecessary duplication of effort and minimizing
overall costs. The costs and expenses of the administration and
handling of such Actions shall be Corporate Level Liabilities;
provided that salaries and overheads associated with the salaries
of full time employees of CSX or NSC while engaged in
investigation or handling such Actions shall be the
responsibility of the employing party and are Corporate Level
Liabilities only to the extent that they are covered by insurance
or are otherwise reimbursable by CRR or CRC pursuant to a
separate agreement with CSX or NSC.
"The provisions of this Section 8.15 shall apply
except as may be otherwise provided in a separate agreement among
CRC, CSX and/or NSC and except as may be provided by action of
the CRC Board."
(c) Section 8.16 of the Transaction Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"Section 8.16. Administration of FELA Claims. (a)
-----------------------------
Except as provided pursuant to separate agreement between CSX and
NSC, the administration, handling and disposition of FELA Claims
(whenever made) that arise from incidents or exposures occurring
prior to the Closing Date shall be (i) the responsibility of the
parent of the party operating the Allocated Asset where the
incident or incidents giving rise to the FELA Claim occurred, or
(ii) the responsibility of the parent of the party operating the
Allocated Asset most significantly involved if the FELA Claim
arises from an incident or incidents occurring at multiple
locations on Allocated Assets, or (iii) the joint responsibility
of CSX and NSC if the FELA Claim arises from an incident or
incidents occurring at unknown locations or a location not
4
<PAGE>
otherwise covered by clauses (i) or (ii) of this sentence. In
assigning joint responsibility for the administration, handling
and disposition of FELA Claims to CSX and NSC under the foregoing
clause (iii), it is not the parties' intent that CSX and NSC will
actually administer, handle and dispose of such actions jointly,
but rather that CSX and NSC will agree on the most practical and
efficient arrangements with the objective of eliminating
unnecessary duplication of effort and minimizing overall costs.
The costs and expenses associated with the administration,
handling and disposition of FELA Claims that arise from incidents
or exposures occurring prior to the Closing Date shall be borne
by CRR; provided that salaries and overheads associated with the
salaries of full time employees of CSX or NSC while engaged in
investigation or handling such FELA Claims shall be the
responsibility of the employing party and are Corporate Level
Liabilities only to the extent that they are covered by insurance
or are otherwise reimbursable by CRR or CRC pursuant to a
separate agreement with CSX or NSC; provided, further that the
party responsible for the administration of FELA Claims which are
Retained Liabilities shall, before agreeing to any single
settlement of a FELA Claim or group of related FELA Claims,
involving a payment of more than $1 million, obtain the written
consent of the other party. Failure of either party to respond to
such a request for consent within fourteen days of receipt of
such request shall be deemed to constitute consent."
SECTION 4. CRC Pension Plan Matters.
------------------------
(a) Section 6.3(c) of the Transaction Agreement is hereby amended
by inserting the following after the word "Percentage":
", as adjusted to reflect any Separation Costs required to be
borne by CSX or NSC pursuant to Section 6.2(i) and to reflect any
timing differences in the transfers of assets and liabilities to
CSX and NSC pension plans based on actual investment experience."
(b) Section 6.3(c) of the Transaction Agreement is further
amended by deleting the last sentence thereof and replacing it with the
following:
"The Consolidated Rail Corporation Pension Fund Investment
Committee shall approve the manner and amounts to be transferred
to CSX and NSC pension plans with respect to transfers of
employees to CSX and NSC payrolls and this Section 6.3(c)."
SECTION 5. Insurance Matters. Section 2.11 of the Transaction
-----------------
Agreement is hereby deleted in its entirety and the following is substituted
therefor:
"2.11 Insurance Proceeds: Except as otherwise provided in
------------------
this Agreement, the proceeds of any insurance recoveries from
5
<PAGE>
insurance carried by CRR, CRC or their respective Affiliates on
or prior to the Closing Date and third party recoveries in the
nature of insurance or indemnity covering Assets, Retained
Liabilities or Allocated Liabilities, which are received on or
after the Closing Date, shall accrue to the benefit of and be
held by or paid over to CRC, NYC or PRR in proportion to the
obligation each bears under this Agreement for the particular
Liabilities to which the recoveries are applicable."
SECTION 6. Confirmation of Transaction Agreement. In all respects
-------------------------------------
not inconsistent with the terms and provisions of this Amendment, the
Transaction Agreement is hereby ratified, adopted, approved and confirmed.
SECTION 7. Miscellaneous. The provisions of Article XI of the
-------------
Transaction Agreement are hereby expressly incorporated by reference into this
Amendment, and each provision thereof shall have the same force and effect as if
fully set forth herein (except to the extent such provision is amended,
modified, supplemented, altered, rescinded or superseded by this Amendment).
[The remainder of this page has been intentionally left blank.]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date and year first above written.
CSX CORPORATION
By: /s/ GREGORY R. WEBER
--------------------
Name: Gregory R. Weber
Title: Vice President and
Treasurer
CSX TRANSPORTATION, INC., for itself
and on behalf of its controlled
Subsidiaries
By: /s/ PETER J. SHUDTZ
-------------------
Name: Peter J. Shudtz
Title: Vice President - Law &
General Counsel - CSX
Corporation, authorized
agent for CSX
Transportation, Inc.
NORFOLK SOUTHERN CORPORATION
By: /s/ STEPHEN C. TOBIAS
---------------------
Name: Stephen C. Tobias
Title: Vice Chairman and Chief
Operating Officer
NORFOLK SOUTHERN RAILWAY COMPANY,
for itself and on behalf of its
controlled Subsidiaries
By: /s/ J. L. MANETTA
-----------------
Name: J. L. Manetta
Title: Senior Vice President -
Operations
CONRAIL INC., for itself and on
behalf of its controlled
Subsidiaries
By: /s/TIMOTHY O'TOOLE
------------------
Name: Timothy O'Toole
Title: President and Chief
Executive Officer
7
<PAGE>
CONSOLIDATED RAIL CORPORATION
By: /s/JOHN MCKELVEY
----------------
Name: John McKelvey
Title: Chief Financial Officer
CRR HOLDINGS LLC
By: /s/ D. R. GOODE
---------------
Name: D. R. Goode
Title: Co-chairman and Company
Chief Executive Officer
8
Exhibit 10.4
OPERATING AGREEMENT
dated as of June 1, 1999
by and between
NEW YORK CENTRAL LINES LLC
as Owner,
and
CSX TRANSPORTATION, INC.
as Operator
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS AND USAGE.............................................1
SECTION 1.1 Definitions and Usage....................................1
ARTICLE II - OPERATION OF ALLOCATED ASSETS....................................1
SECTION 2.1 Operation of Allocated Assets............................1
SECTION 2.2 Term of Agreement........................................1
ARTICLE III - OPERATING FEE AND CERTAIN EXPENSES..............................2
SECTION 3.1 Operating Fee; Supplemental Operating Fees. ............2
SECTION 3.2 Method of Payment........................................2
SECTION 3.3 Late Payment.............................................2
SECTION 3.4 No Set-off, Counterclaims, etc...........................2
SECTION 3.5 Tax Provisions...........................................3
ARTICLE IV - REPRESENTATIONS, WARRANTIES AND AGREEMENTS.......................5
SECTION 4.1 Disclaimer of Warranties.................................5
SECTION 4.2 Operator To Exercise Certain Rights......................5
SECTION 4.3 Representations and Warranties of the Operator...........6
SECTION 4.4 Representations and Warranties of the Owner..............7
ARTICLE V - LIENS, QUIET ENJOYMENT............................................7
SECTION 5.1 Liens....................................................7
SECTION 5.2 Quiet Enjoyment..........................................8
ARTICLE VI - SETTLEMENT ACCOUNT...............................................8
SECTION 6.1 Maintenance of Settlement Account........................8
SECTION 6.2 Payment of Settlement Account Balance....................8
SECTION 6.3 Confirmation of Settlement Account.......................9
ARTICLE VII - OPERATION; MAINTENANCE..........................................9
SECTION 7.1 Operation and Maintenance................................9
SECTION 7.2 Modification............................................10
<PAGE>
Page
ARTICLE VIII - OBSOLESCENCE TERMINATION; ABANDONMENT.........................11
SECTION 8.1 Obsolescence Termination; Abandonment....................11
SECTION 8.2 Conditions of Termination...............................11
ARTICLE IX- TERMINATION......................................................12
SECTION 9.1 Termination. ..........................................12
SECTION 9.2 Owner Assignment, Lease or Sale of Allocated Asset......12
SECTION 9.3 Governmental Approvals..................................12
SECTION 9.4 Severable Modifications.................................12
ARTICLE X - LOSS, DESTRUCTION, CONDEMNATION, DAMAGE, ETC.....................13
SECTION 10.1 Replacement; Payment...................................13
SECTION 10.2 Applications During Event of Default...................14
SECTION 10.3 Application of Article VII.............................14
ARTICLE XI - INDEMNITIES.....................................................14
SECTION 11.1 Indemnity by Operator..................................14
SECTION 11.2 Indemnity by Owner.....................................15
SECTION 11.3 Indemnification Procedures..............................15
ARTICLE XII - ASSIGNMENTS....................................................16
SECTION 12.1 Operator Assignments....................................16
SECTION 12.2 Merger, Consolidation, Etc..............................16
SECTION 12.3 Owner Assignments......................................16
ARTICLE XIII - INSPECTION; MARKINGS..........................................16
SECTION 13.1 Rights to Information..................................16
SECTION 13.2 Markings...............................................17
ARTICLE XIV - EVENTS OF DEFAULT..............................................17
SECTION 14.1 Events of Default......................................17
- ii -
<PAGE>
Page
ARTICLE XV - REMEDIES........................................................18
SECTION 15.1 Remedies...............................................18
SECTION 15.2 Owner Rights............................................19
SECTION 15.3 Exercise of Other Rights or Remedies...................19
SECTION 15.4 Subject to Governmental Action.........................19
ARTICLE XVI - RIGHT TO PERFORM...............................................20
SECTION 16.1 Right to Perform.......................................20
ARTICLE XVII - RENEWAL OPTIONS...............................................20
SECTION 17.1 Renewal Notice.........................................20
ARTICLE XVIII - CERTAIN NOTICES AND INFORMATION..............................21
SECTION 18.1 Notices................................................21
SECTION 18.2 Notice of Event of Default.............................21
SECTION 18.3 Information Regarding Allocated Assets.................21
ARTICLE XIX - CONFIDENTIALITY................................................22
SECTION 19.1 Confidentiality........................................22
ARTICLE XX - MISCELLANEOUS...................................................22
SECTION 20.1 Dispute Resolution.....................................22
SECTION 20.2 Documentary Conventions................................22
Appendix
Appendix A: Definitions
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<PAGE>
OPERATING AGREEMENT
This OPERATING AGREEMENT (this "Agreement") is entered into as of June
1, 1999, by and between New York Central Lines LLC, a Delaware limited liability
company, as Owner and CSX Transportation, Inc., a Virginia Corporation, as
Operator.
ARTICLE I
Definitions and Usage
---------------------
SECTION 1.1 Definitions and Usage. Unless the context otherwise
-----------------------
requires, capitalized terms used herein shall have the respective meanings
assigned to them in Appendix A to this Agreement. Terms used, but not defined,
----------
in this Agreement or in Appendix A shall have the respective meanings assigned
----------
to them in the Transaction Agreement.
ARTICLE II
Operation of Allocated Assets
-----------------------------
SECTION 2.1 Operation of Allocated Assets. (a) The Owner hereby agrees
------------------------------
with the Operator, and the Operator hereby agrees with the Owner, that the
Operator shall have the license, right and obligation to use and operate the
Allocated Assets for the term referred to in Section 2.2 hereof on the terms and
conditions set forth in this Agreement. Except as otherwise specifically
provided in this Agreement, the Operator may use and operate the Allocated
Assets in such manner and for such purposes as the Operator considers necessary
or appropriate.
(b) The Owner hereby agrees that the Operator shall, effective as
of the Closing Date, have the right to receive and retain for its own benefit
and use and in its own name all revenues, tolls, rents, receipts, issues,
profits and income of every character arising from or associated with the
operation and use of the Allocated Assets.
SECTION 2.2 Term of Agreement. Immediately upon the execution hereof,
-----------------
without necessity of any further act or evidence by either party hereto, the
Allocated Assets shall be deemed delivered by the Owner to the Operator for the
Term and, if the Operator elects to exercise its renewal option pursuant to
Article XVII hereof, for any Renewal Term, in either case, all pursuant to the
terms of this Agreement, unless this Agreement shall have been earlier
terminated in accordance with its terms.
<PAGE>
ARTICLE III
Operating Fee and Certain Expenses
----------------------------------
SECTION 3.1 Operating Fee; Supplemental Operating Fees. The Operator
----------------------------------------------
shall pay to the Owner the Operating Fee commencing on the first Payment Date
and on each Payment Date thereafter for the duration of the Term and any Renewal
Term. Subject to any applicable Governmental Action, the Operating Fee shall be
recalculated on each Valuation Date to reflect the Fair Market Rental Value of
the Allocated Assets then subject to this Agreement. Supplemental Operating Fees
shall be paid by the Operator when due under the terms of this Agreement.
SECTION 3.2 Method of Payment. All Operating Fees and Supplemental
------------------
Operating Fees (to the extent Supplemental Operating Fees are not paid directly
by the Operator) shall be paid by the Operator to the Owner at the Owner's
office or at such other place in the U.S. as the Owner shall specify to the
Operator at least five (5) Business Days prior to the date such payment is due.
Each payment of Operating Fees and Supplemental Operating Fees shall be made by
the Operator in immediately available funds prior to 12:00 noon, New York time
at the place of payment, on the date when such payment shall be due.
SECTION 3.3 Late Payment. In the event any Operating Fees or
-------------
Supplemental Operating Fees shall not be paid on the due date thereof to the
Owner, the Operator shall pay to the Owner on written demand, interest (to the
extent permitted by Applicable Law) on such overdue amount from the due date
thereof (without regard to any grace period) to the date of payment thereof at
the Overdue Rate.
SECTION 3.4 No Set-off, Counterclaims, etc. THIS AGREEMENT IS A NET
---------------------------------
AGREEMENT. THE OPERATOR'S OBLIGATION TO PAY ALL PAYMENTS OF OPERATING FEES AS
AND WHEN THE SAME SHALL BECOME DUE AND PAYABLE IN ACCORDANCE WITH THE TERMS OF
THIS AGREEMENT SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE SUBJECT TO
ANY ABATEMENT OR DIMINUTION BY SET-OFF, DEDUCTION, COUNTERCLAIM, RECOUPMENT,
AGREEMENT, DEFENSE, SUSPENSION, DEFERMENT, INTERRUPTION OR OTHERWISE, AND UNTIL
SUCH TIME AS ALL AMOUNTS REQUIRED TO BE PAID UNDER THIS AGREEMENT SHALL HAVE
BEEN PAID, THE OPERATOR SHALL NOT HAVE ANY RIGHT TO TERMINATE THIS AGREEMENT OR
TO BE RELEASED, RELIEVED OR DISCHARGED FROM ITS OBLIGATION TO MAKE, AND SHALL
NOT SUSPEND, REDUCE OR DISCONTINUE, ANY PAYMENT OF OPERATING FEES FOR ANY REASON
WHATSOEVER (EXCEPT AS MAY BE EXPRESSLY PROVIDED HEREIN), including, without
limitation:
(a) any default, misrepresentation, negligence, misconduct or
other action or inaction of any kind by the Owner or any other Person, whether
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<PAGE>
under or in connection with this Agreement or any other agreement relating to
this Agreement or in connection with any unrelated transaction;
(b) the insolvency, bankruptcy, reorganization or cessation of
existence, or discharge or forgiveness of indebtedness of any Person referred to
in clause (a) above;
(c) the invalidity, unenforceability or impossibility of
performance of this Agreement for any reason;
(d) any defect in the title, condition, design, operation or
fitness for use of, or any Lien or other restriction of any kind upon, all or
any part of any Allocated Asset, any loss or destruction of, or damage to, any
Allocated Asset or any interruption in or cessation of the ownership,
possession, operation or use of any Allocated Asset for any reason whatsoever;
(e) any restriction, prevention or curtailment of or interference
with any Allocated Asset or the use thereof or any part thereof for any reason
whatsoever, including, without limitation, by any Governmental Authority;
(f) any Applicable Law now or hereafter in force;
(g) any failure to obtain any required Governmental Action for a
transfer of rights or title to the Owner, the Operator or any other Person;
(h) any amendment or other change of, or any assignment of any
rights under, this Agreement, or any waiver or other action or inaction under or
in respect of this Agreement, or any exercise or nonexercise of any right or
remedy under or in respect of this Agreement; and
(i) any other cause, circumstance, happening or event whatsoever,
foreseen or unforeseen, whether similar or dissimilar to any of the foregoing.
The Operator hereby waives and hereby agrees to waive at any future time
at the request of the Owner, to the extent now or then permitted by Applicable
Law, any and all rights that the Operator may have or that at any time hereafter
may be conferred upon it, by statute, regulation or otherwise, to terminate,
cancel, quit or surrender this Agreement other than in accordance with the
express terms hereof. Each Operating Fee payment shall be final and the Operator
agrees not to seek to recover all or any part of any such payment (except for
amounts paid to the Owner which the Owner in good faith agrees have been paid in
error) from the Owner for any reason under any circumstance whatsoever.
SECTION 3.5 Tax Provisions. (a) During the Term and any Renewal Term,
---------------
the Operator shall pay when due, all Taxes, other than Excluded Taxes (as
hereinafter defined), imposed on the Owner, based upon the Allocated Assets or
arising out of the use, lease, possession or operation of the Allocated Assets
during that period. For purposes of this Section, (i) Owner shall mean the Owner
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<PAGE>
and its Affiliates and (ii) Excluded Taxes shall mean (A) all Taxes based, in
whole or in part, on net income or gross income (including, without limitation,
any minimum tax) of the Owner or which are in substitution for, or relieve the
Owner from, any Tax based upon or measured by the Owner's net income or gross
income, together with any interest, penalties, additions to tax or additional
amounts that may become payable in respect thereof; (B) business and occupation
taxes, and gross receipts taxes (unless in the nature of a sales tax) of the
Owner and Taxes based upon the equity interests of the Owner; and (C) interest,
fines and penalties to the extent due to the acts or omissions of the Owner in
connection with Excluded Taxes. The Operator shall not be required to pay any
Tax it is obligated to pay under the provisions of this Section 3.5 during the
time it shall reasonably and in good faith and by appropriate legal or
administrative proceedings contest the validity or amount thereof.
(b) The Owner shall have the right and obligation, at its own
expense, to prepare and file all Tax returns required to be filed by the Owner
under Applicable Law. Prior to the Owner's filing of any Tax returns for Taxes
required to be paid by the Operator under paragraph (a) of this Section 3.5, the
Owner shall provide such returns to the Operator for its review and approval,
which approval will not be unreasonably withheld or delayed.
(c) The Operator and its assignees and designees shall have the
right (but only to the extent the Owner shall have such right, by contract or
otherwise) to control at its expense any audit or examination by any
Governmental Authority, or any judicial proceeding, relating to any Taxes
required to be paid by it under paragraph (a) of this Section 3.5.
(d) During the Term and any Renewal Term, the Operator and any of
its designees shall be entitled to claim federal, state and local tax benefits
(including, without limitation, deductions and credits) arising out of
Operator's expenditures in the use, possession or operation of the Allocated
Assets by the Operator, or any of its respective assignees or designees, and the
improvements thereto, that the Operator, or any of its designees is entitled to
claim under federal, state and local laws and regulations. These tax benefits
include but are not limited to: (i) deductions for depreciation or amortization
attributable to property (both tangible and intangible) owned by the Operator,
or any of its assignees or designees, including improvements made to any of the
Allocated Assets by any of them, as well as expenditures made by any of them
that are required to be capitalized under sections 263 or 263A or some other
section of the Code; (ii) deductions for expenditures made by the Operator, or
any of its assignees or designees, deductible as ordinary and necessary business
expenses under section 162 of the Code; (iii) deductions for losses attributable
to property (both tangible and intangible) owned by the Operator, or any of its
assignees or designees, deductible under section 165 of the Code; and (iv) any
federal, state or local credits applicable to the use, lease, possession or
operation of the Allocated Assets by the Operator, or any of its assignees or
designees, and improvements thereto. The Owner is entitled to deductions for
Taxes of the Owner paid by the Operator under paragraph (a) of this Section 3.5
and treated as rent paid by the Operator under this Agreement and taxable income
received by the Owner under section 1.162-11(a) of the Income Tax Regulations.
- 4 -
<PAGE>
ARTICLE IV
Representations, Warranties and Agreements
------------------------------------------
SECTION 4.1 Disclaimer of Warranties. AS BETWEEN THE OWNER AND THE
--------------------------
OPERATOR, THE EXECUTION OF THIS AGREEMENT SHALL BE CONCLUSIVE PROOF OF
ACCEPTANCE BY THE OPERATOR OF EACH ALLOCATED ASSET AS BEING IN COMPLIANCE WITH
ALL REQUIREMENTS OF THIS AGREEMENT. THE OWNER AND THE OPERATOR TAKE EACH SUCH
ALLOCATED ASSET "AS IS" AND "WHERE IS", AND THE OPERATOR ACKNOWLEDGES THAT THE
OWNER HAS NOT MADE, NOR SHALL BE DEEMED TO HAVE MADE, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, MERCHANTABILITY, DESIGN, QUALITY, DURABILITY,
OPERATION OR FITNESS FOR USE OR PURPOSE OF EACH SUCH ALLOCATED ASSET OR ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO
EACH SUCH ALLOCATED ASSET OR OTHERWISE, IT BEING AGREED THAT ALL RISKS INCIDENT
THERETO ARE TO BE BORNE, AS BETWEEN THE OWNER AND THE OPERATOR, BY THE OPERATOR
IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN ANY SUCH ALLOCATED ASSET, OF ANY
NATURE WHETHER PATENT OR LATENT, AND THAT THE OWNER SHALL NOT HAVE ANY
RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO, except that the Owner hereby
represents, warrants and covenants that each such Allocated Asset shall be free
of Owner Liens on the Closing Date and except as otherwise provided in the
Transaction Agreement. The provisions of this Section 4.1 have been negotiated,
and the foregoing provisions are intended to be a complete exclusion and
negation of any other warranties made by the Owner, express or implied, with
respect to any Allocated Asset, whether arising pursuant to Applicable Law now
or hereafter in effect or otherwise. Nothing contained in this Section 4.1 shall
in any way diminish or otherwise affect any right the Operator may have with
respect to any Allocated Asset against any third Person. The Owner shall not at
any time be required to inspect any Allocated Asset, and any actual inspection
by the Owner shall not be deemed to affect or modify the provisions of this
Section 4.1.
<PAGE>
SECTION 4.2 Operator To Exercise Certain Rights. (a) The Owner hereby
-------------------------------------
authorizes the Operator, at the Operator's expense, to exercise in the name of
and on behalf of the Owner and the Operator, as their interests may appear, the
right and power to deal with any third party lessor, lessee, licensor, licensee,
seller, manufacturer, shipper or any other Persons (including agents and
consultants thereof) with respect to any Allocated Asset or who are party to any
Assigned Rights (each a "Third Party Provider") and the right to enforce (by
legal action or otherwise) against such Third Party Provider all rights, powers
and privileges of the Owner and to receive all benefits of the Owner with
respect to such Third Party Provider, under any Contract, Assigned Right,
express or implied warranty, indemnity or otherwise; provided, that if an Event
of Default shall have occurred and be continuing (and until all Events of
Default then outstanding shall no longer be continuing) the Owner may terminate
- 5 -
<PAGE>
the authority of the Operator under this Section 4.2. Any amount paid to the
Owner or Operator pursuant to the Operator's exercise of its authority under
this Section 4.2 shall be paid to the Operator. After the end of the Term or any
Renewal Term with respect to any Allocated Asset or after the termination of
this Agreement with respect to such Allocated Asset pursuant to Article XIV, (a)
the Operator shall have no further rights, powers, privileges or benefits under
this Section 4.2 and (b) all amounts payable by any Third Party Provider paid
with respect to periods arising thereafter shall be paid to, and retained by,
the Owner or any other Person as shall then be the owner of the Allocated Asset
as to which such payment is made.
(b) The Operator shall, with the Owner's prior consent, have the
right and power to execute and deliver on behalf of the Owner, the extension,
renewal, amendment or modification of any Assigned Rights or any other Contract
in respect of the Allocated Assets.
(c) The Owner shall as expeditiously as possible use its
reasonable efforts to obtain or transfer to the Operator any Governmental Action
or the consent, authorization, or approval of any private Person required to be
made, obtained or transferred to effectuate the purposes of this Agreement and
the transactions contemplated herein, which actions shall include furnishing all
information required under or in connection with such Governmental Action or the
approvals of, or filing with such private Person.
(d) The Operator shall pay, perform and discharge fully all of
the obligations of the Owner or its Affiliates under all Assigned Rights and
Contracts that are Allocated Assets from and after the Closing Date. Such
payments shall be considered Supplemental Operating Fees. The Owner or its
Affiliates shall, without further consideration therefor, pay, assign and remit
promptly to the Operator, as appropriate, all monies, rights and other
consideration received in respect of such performance. The Owner or its
Affiliates shall exercise or exploit the rights and options under all such
Contracts only as reasonably directed by the Operator.
SECTION 4.3 Representations and Warranties of the Operator. The Operator
----------------------------------------------
represents and warrants to the Owner as of the Closing Date as follows:
(a) Due Organization, etc. The Operator (i) is a corporation duly
----------------------
organized and validly existing under the laws of the Commonwealth of Virginia,
(ii) has the power and authority to enter into and perform its obligations under
this Agreement and (iii) has obtained all Governmental Action required to use or
hold the Allocated Assets in accordance with this Agreement, and to enter into
and perform its obligations under this Agreement.
(b) Due Authorization, Non-Contravention, etc. The execution,
---------------------------------------------
delivery and performance of this Agreement have been duly authorized by all
necessary corporate action on the part of the Operator, do not and will not
conflict with, result in any violation of, or constitute any default under, any
provision of any Organic Document of the Operator or Applicable Law.
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<PAGE>
(c) Due Execution. This Agreement has been duly executed and
--------------
delivered by the Operator, and constitutes the legal, valid and binding
obligation of the Operator enforceable against the Operator in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
SECTION 4.4 Representations and Warranties of the Owner. The Owner
----------------------------------------------
represents and warrants to the Operator as of the Closing Date as follows:
(a) Due Organization, etc. The Owner (i) is a limited liability
------------------------
company duly organized and validly existing under the laws of the State of
Delaware, (ii) has the power and authority to enter into and perform its
obligations under this Agreement and (iii) has obtained all Governmental Action
required to enter into and perform its obligations under this Agreement.
(b) Due Authorization, Non-Contravention, etc. The execution,
---------------------------------------------
delivery and performance of this Agreement have been duly authorized by all
necessary company action on the part of the Owner, do not and will not conflict
with, result in any violation of, or constitute any default under, any provision
of any Organic Document of the Owner or Applicable Law.
(c) Due Execution. This Agreement has been duly executed and
--------------
delivered by the Owner, and constitutes the legal, valid and binding obligation
of the Owner enforceable against the Owner in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the court before
which any proceeding therefor may be brought.
ARTICLE V
Liens; Quiet Enjoyment
----------------------
SECTION 5.1 Liens. The Operator shall not directly or indirectly create,
-----
incur, assume or suffer to exist any Lien (other than Permitted Liens) on any
Allocated Asset. The Operator will promptly, at its own expense, take such
action as may be necessary duly to discharge any such Lien. The Operator's
obligations under this Section 5.1 with respect to any such Lien on any
Allocated Asset resulting from a claim arising prior to the termination of this
Agreement with respect to such Allocated Asset shall survive such termination.
The Operator agrees that, upon the termination of this Agreement, the Allocated
Assets shall be returned to the Owner free and clear of Liens, other than Owner
Liens.
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<PAGE>
SECTION 5.2 Quiet Enjoyment. Notwithstanding any other provision of this
---------------
Agreement, so long as no Event of Default shall have occurred and be continuing,
as between the Operator and Owner, the Operator shall have the exclusive rights
to possession, control and use of all Allocated Assets and neither the Owner nor
any Person acting or claiming through the Owner will take any action that shall
interfere with the peaceful and quiet enjoyment or the possession and use or
nonuse of any Allocated Asset by the Operator, and the Operator shall have the
right to possess and use or not use such Allocated Asset in its sole discretion,
subject always to the terms and conditions of this Agreement. The foregoing is
not intended to limit the inspection rights of the Allocated Assets granted by
the Operator pursuant to Section 13.1 hereof.
ARTICLE VI
Settlement Account
------------------
SECTION 6.1 Maintenance of Settlement Account. The Operator shall
------------------------------------
maintain a non-cash book account (the "Settlement Account") to reflect amounts
owed by the Operator to the Owner as a result of transactions described in
Sections 7.1(e), 8.1 and 10.1(a)(ii) hereof.
SECTION 6.2 Payment of Settlement Account Balance. The Operator shall
---------------------------------------
pay to the Owner an amount equal to the then balance of the Settlement Account
upon: (i) the sixth (6th), twelfth (12th), eighteenth (18th) and twenty-fourth
(24th) anniversaries of the Closing Date, (ii) the expiration of the Term (or,
if earlier, the termination of this Agreement), (iii) the sixth (6th)
anniversary of the first day of each Renewal Term, (iv) the end of each Renewal
Term (or, if earlier, the termination of this Agreement), and (v) thirty (30)
calendar days after the date on which a Substantial Allocated Asset (a) is not
repaired or replaced under Section 7.1(e) hereof, (b) is abandoned, sold or
otherwise disposed of under Section 8.1 hereof or (c) suffers an Event of Loss
and is not replaced under Section 10.1(a)(i) hereof (each, a "Settlement Account
Payment Date").
SECTION 6.3 Confirmation of Settlement Account. Within sixty (60) days
-----------------------------------
of the crediting of an amount to the Settlement Account, the Appraisal Procedure
shall be used to confirm that credits to the Settlement Account were based on
the fair market value of the relevant Allocated Assets consistent with the terms
of this Agreement. The Settlement Account shall be adjusted consistent with the
outcome of the Appraisal Procedure and the payments made pursuant to Section 6.2
hereof shall reflect any such adjustments.
ARTICLE VII
Operation; Maintenance
----------------------
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<PAGE>
SECTION 7.1 Operation and Maintenance. The Operator shall at all times
--------------------------
at its own expense during the Term and during any Renewal Term:
(a) use the Allocated Assets in such manner and for such purposes
as the Operator considers necessary or appropriate in connection with the
operation of its business;
(b) keep and maintain such books, records and title documents
relating to the Allocated Assets, and the acquisition, construction and
installation of Modifications thereto and the payment of the purchase price of
such Modifications, as the Operator considers appropriate consistent with the
Operator's customary business practices;
(c) maintain the Allocated Assets in accordance with the
Operator's customary practice;
(d) inspect, service, maintain, store, use, operate, repair,
replace, modify and improve the Allocated Assets in compliance in all material
respects with Applicable Law (including all applicable environmental and
occupational safety laws), and in compliance in all material respects with all
applicable licenses and permits relating to the Allocated Assets issued by any
Governmental Authority; provided, the Operator may in good faith by appropriate
proceedings contest the validity or application of any such Applicable Law in
any reasonable manner which does not involve any risk of the imposition of
criminal liability on the Owner, or any material danger of any fine, penalty, or
other imposition upon the Owner for which the Operator has not acknowledged its
obligation to indemnify the Owner pursuant to this Agreement; and
(e) in case of any damage to any Allocated Asset, other than
damage constituting an Event of Loss, at its election, in either case at its own
expense, (i) repair such Allocated Asset so as to restore its utility consistent
with the Operator's customary practice with respect to similar assets owned by
the Operator (as determined solely by the Operator) or (ii) replace such
Allocated Asset with an asset (which will become an Allocated Asset) having a
fair market value (as determined solely by the Operator) equivalent to that of
the damaged Allocated Asset immediately prior to the damage (assuming, in either
case, such Allocated Asset was then in the condition and state of repair
required to be maintained by the terms of this Agreement), with such alterations
and additions as may be made at the Operator's election pursuant to and subject
to the conditions of Section 7.2 hereof; provided, however, that the Operator
need not repair or replace any Allocated Asset to the extent that such Allocated
Asset is not necessary to the operation of the Allocated Assets considered as a
whole (as determined solely by the Operator), in which event the Operator shall
credit to the Settlement Account the fair market value of such Allocated Asset
as of the date immediately prior to the damage (assuming such Allocated Asset
was then in the condition and state of repair required to be maintained by the
terms of this Agreement). Upon the crediting of the Settlement Account with the
fair market value of such Allocated Asset, such Allocated Asset shall no longer
be subject to this Agreement and the Owner shall convey to the Operator or its
- 9 -
<PAGE>
designee, ownership of and title to such Allocated Asset. Notwithstanding the
foregoing, until payment by the Operator to the Owner of the amount credited to
the Settlement Account on the next succeeding Settlement Account Payment Date,
such Allocated Asset shall be deemed to continue to be subject to this Agreement
solely for the purpose of calculating the Operating Fee.
SECTION 7.2 Modification.
------------
(a) The Operator shall at its expense make any Modification to
any Allocated Asset required (i) by Applicable Law or in order to operate,
maintain, service, store, or use such Allocated Asset in accordance with
Applicable Law, as soon as practicable after any such requirement may arise or
(ii) in order for the Operator to comply with the provisions of this Agreement
(all such Modifications being referred to herein as "Required Modifications");
provided, that the Operator may, so long as no Event of Default shall have
occurred and be continuing, in good faith by appropriate proceedings contest the
validity or application of any Applicable Law in any reasonable manner which
does not involve any reasonably foreseeable risk of the imposition of criminal
liability on the Owner, or any material danger of any fine, penalty or other
imposition upon the Owner for which the Operator has not acknowledged its
obligation to indemnify the Owner pursuant to this Agreement. The Operator at
its expense, from time to time, may make any Modification to any Allocated Asset
that the Operator in its discretion may deem desirable in the proper conduct of
the Operator's business (all such Modifications which are not Required
Modifications being referred to herein as "Optional Modifications"); provided
that any construction of new trackage or facilities appurtenant to but not
located on such Allocated Assets shall, at Operator's election, be deemed not to
be Modifications hereunder and not subject to this Agreement.
(b) Title to each Modification shall vest as follows:
(i) in the case of each (A) Required Modification or
(B) other Nonseverable Modification, whether or not the Owner shall have
financed or provided financing (in whole or in part) for such Modification, the
Owner shall, without further act, effective on the date such Modification
shall have been incorporated into the modified Allocated Asset, acquire title to
such Modification free and clear of all Liens other than Permitted Liens; or
(ii) in the case of each Severable Modification, the
Operator shall retain title to such Modification and the Operator may (subject
to Section 7.2(c) hereof) remove such Modification at its expense at any time
so long as the modified Allocated Asset remains in or is restored by the
Operator to the condition required by this Agreement.
- 10 -
<PAGE>
Immediately upon title to a Modification vesting in the Owner pursuant
to this Section 7.2(b), such Modification shall, without further act, become
subject to this Agreement and be deemed part of the applicable Allocated Asset
for all purposes.
(c) Subject to compliance with Applicable Law, the Operator may
remove, at its expense, any Severable Modification; provided, that the Operator,
at its expense shall repair any damage to the Allocated Asset from which a
Severable Modification has been removed caused by such removal; provided,
further, that in the event the Operator shall not have removed any Severable
Modification to which the Operator shall have title as provided in Section
7.2(b)(ii) prior to the end of the Term or any Renewal Term, title to such
Severable Modification shall vest in the Owner upon the expiration of such Term
or Renewal Term.
ARTICLE VIII
Obsolescence Termination; Abandonment
-------------------------------------
SECTION 8.1 Obsolescence Termination; Abandonment. Except as may
----------------------------------------
otherwise be contemplated in this Agreement, the Operator may not dispose of, or
otherwise convey or transfer any interest in the Allocated Assets to any Person.
Unless an Event of Default shall have occurred and be continuing, if the
Operator has determined that an Allocated Asset is uneconomic or surplus to, or
no longer necessary for, the Operator's operating requirements as determined by
the Operator in its sole judgment, the Operator shall have the right, with the
Owner's consent, to abandon or sell or otherwise dispose of such Allocated Asset
(as agent for the Owner) in which event the Operator may retain the sale
proceeds (net of selling expenses), if any, received for such Allocated Asset
and shall credit to the Settlement Account the fair market value (as of the time
of the abandonment, sale or other disposition) of such Allocated Asset (which,
in no event, shall be less than the sale proceeds, net of selling expenses,
received for such Allocated Asset). Upon the crediting of the Settlement Account
with the fair market value of such Allocated Asset, such Allocated Asset shall
no longer be subject to this Agreement and the Owner shall convey to the
Operator or its designee, ownership of and title to such Allocated Asset.
Notwithstanding the foregoing, until payment by the Operator to the Owner of the
amount credited to the Settlement Account on the next succeeding Settlement
Account Payment Date, such Allocated Asset shall be deemed to continue to be
subject to this Agreement solely for the purpose of calculating the Operating
Fee.
SECTION 8.2 Conditions of Termination. As a condition to a termination,
-------------------------
abandonment or other disposition pursuant to this Article VIII, any necessary
Governmental Actions in connection therewith shall have been obtained by and at
the expense of the Operator. Upon the Operator's request, the Owner shall
cooperate fully with the Operator in seeking and obtaining all necessary
Governmental Actions in connection with the termination or abandonment of any
Allocated Asset.
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<PAGE>
ARTICLE IX
Termination
-----------
SECTION 9.1 Termination. (a) Unless the Operator exercises its renewal
-----------
option under Article XVII, upon termination of this Agreement, the Operator
shall, at its risk, cost and expense, cause the Allocated Assets subject to this
Agreement at such time to be (i) free and clear of all Liens other than Owner
Liens, (ii) in compliance with the maintenance and operating provisions of this
Agreement, and (iii) otherwise capable of being maintained, used and operated
substantially in compliance with Applicable Law for the operation of a railroad
appropriate to conditions existing at such time.
(b) Upon the termination of this Agreement, the Operator will, at
the Operator's expense, promptly and duly execute and deliver to the Owner such
documents and take such further actions as the Owner may reasonably request in
order to effect the return of the Allocated Assets, including any Assigned
Right, to the Owner or its designee.
SECTION 9.2 Owner Assignment, Lease or Sale of Allocated Asset. The
------------------------------------------------------
Operator agrees that during the last year of the Term or any Renewal Term, it
will cooperate in all reasonable respects with efforts of the Owner to lease,
sell, assign or otherwise transfer any Allocated Asset to any designee of the
Owner.
SECTION 9.3 Governmental Approvals. The Operator shall cooperate and
-----------------------
assist the Owner, at the expense of the Owner, in transferring or obtaining all
Governmental Actions which may be necessary for the Owner or its designee, as
the case may be, to operate, lease, purchase, assume or otherwise be a party to
or beneficiary of any returned Allocated Asset.
SECTION 9.4 Severable Modifications. At any time after the Operator has
-----------------------
notified the Owner that it has determined not to renew this Agreement pursuant
to Article XVII, or operational responsibility for the Allocated Assets reverts
to the Owner, the Operator shall at the Owner's request, advise the Owner of the
nature and condition of all Severable Modifications owned by the Operator
pursuant to Section 7.2(b)(ii) hereof which the Operator has removed or intends
to remove from the Allocated Assets in accordance with Section 7.2(c) hereof.
The Operator may (and shall, if so directed by Owner), at its sole cost, expense
and risk, remove from any Allocated Asset any Severable Modification; provided,
that any such Modification not removed pursuant to this Section 9.4 shall be
deemed to be part of the Allocated Asset to which it relates for all purposes
hereof and title to such Modification shall thereupon vest in the Owner free and
clear of all Liens, other than Owner Liens.
ARTICLE X
Loss, Destruction, Condemnation, Damage, etc.
---------------------------------------------
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<PAGE>
SECTION 10.1 Replacement; Payment.
--------------------
(a) Upon the occurrence of an Event of Loss, or an event which
with the passage of time would become an Event of Loss, with respect to any
Allocated Asset, the Operator shall:
(i) replace the Allocated Asset which suffered the Event
of Loss, with a replacement asset (which will become an Allocated Asset)
which has a fair market value equivalent to that of the Allocated Asset which
suffered the Event of Loss (as determined solely by the Operator) immediately
prior to such Event of Loss (assuming such Allocated Asset was then in the
condition and state of repair required by this Agreement); or
(ii) the Operator may retain the sale proceeds, if any,
received for the Allocated Asset suffering the Event of Loss and shall credit to
the Settlement Account the fair market value of such Allocated Asset
immediately prior to such Event of Loss (assuming such Allocated Asset was
then in the condition and state of repair required by this Agreement), which
fair market value in no event shall be less than the sale proceeds (net of
selling expenses) received for such Allocated Asset. Upon the crediting of
the Settlement Account with the fair market value of such Allocated Asset,
such Allocated Asset shall no longer be subject to this Agreement and the Owner
shall convey to the Operator or its designee, ownership of and title to such
Allocated Asset. Notwithstanding the foregoing, until payment by the Operator
to the Owner of the amount credited to the Settlement Account on the next
succeeding Settlement Account Payment Date, the Allocated Asset suffering the
Event of Loss shall be deemed to continue to be subject to this Agreement solely
for the purpose of calculating the Operating Fee.
(b) Upon compliance by the Operator with Section 10.1(a)(i), (i)
this Agreement shall continue with respect to any replacement Allocated Asset as
though no Event of Loss had occurred, (ii) the Owner shall convey "as is" "where
is", free and clear of all Owner Liens, without recourse or warranty (except as
to the ability and authority of the Owner to transfer and convey such Allocated
Asset free and clear of Owner Liens), to the Operator or its designee all right,
title and interest of the Owner in and to the Allocated Asset being replaced by
executing and delivering to the Operator or its designee such bills of sales and
other documents or instruments as the Operator or its designee may reasonably
request to evidence such conveyance, and (iii) the Owner shall assign to the
Operator all claims it may have against any other Person arising from the event
which gave rise to the replacement.
(c) Upon compliance by the parties with Section 10.1(a)(ii), the
Owner shall convey "as is" "where is", free and clear of all Owner Liens,
without recourse or warranty (except as to the ability and authority of the
Owner to transfer and convey such Allocated Asset free and clear of Owner
Liens), to the Operator or its designee all right, title and interest of the
Owner in and to such Allocated Asset by executing and delivering to the Operator
or its designee such bills of sales and other documents or instruments as the
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<PAGE>
Operator or its designee may reasonably request to evidence such conveyance.
SECTION 10.2 Applications During Event of Default. Any amount that shall
------------------------------------
be payable to the Operator pursuant to this Agreement arising out of any
warranty, governmental award or otherwise received in respect of any Allocated
Asset shall not be paid to the Operator or, if it shall have been previously
paid to the Operator, shall not be retained by the Operator but shall be paid to
the Owner, if at the time of such payment any Event of Default shall have
occurred and be continuing. In such event, all such amounts shall be paid to and
held by the Owner in trust as security for the obligations of the Operator to
make payments under this Agreement or applied by the Owner toward payment of any
of such obligations of the Operator at the time due hereunder. At such time as
there shall not be continuing any Event of Default all such amounts at the time
held by the Owner in excess of the amount, if any, that the Owner shall have
elected to apply as above provided shall be paid to the Operator.
SECTION 10.3 Application of Article VII. Article VII shall not apply to
--------------------------
any Allocated Asset after an Event of Loss has occurred with respect to such
Allocated Asset; provided, that the foregoing shall not limit the obligations of
the Operator under Article VII hereof with respect to any replacement Allocated
Asset.
ARTICLE XI
Indemnities
-----------
SECTION 11.1 Indemnity by Operator. (a) The Operator assumes and shall
---------------------
be fully responsible for all liabilities attributable in any way to the
Allocated Assets, or to operations on or over the Allocated Assets, except for
(i) Retained Liabilities and any other liabilities with respect to which it is
the responsibility of any Person other than the Operator under the terms of the
Transaction Agreement and the Ancillary Agreements to indemnify the Owner, and
(ii) liabilities that arise prior to the Closing Date referred to in Section
2.8(b)(i) or Section 2.8(c) of the Transaction Agreement; provided, that for the
purposes of this Section 11.1(a), the term "Ancillary Agreements" as used in the
parenthetical included in Sections 2.8(b) and 2.8(c) of the Transaction
Agreement shall be deemed not to include this Agreement. To that end, the
Operator agrees to and shall protect, indemnify and hold wholly harmless the
Owner and its directors, officers, employees and agents (each an "Owner
Indemnified Person") from and against any Damages arising from or attributable
to the liabilities assumed by the Operator under the first sentence of this
Section 11.1(a).
(b) Upon payment in full of any indemnity pursuant to this
Section 11.1, the Operator shall, to the extent of such payment and so long as
no Event of Default shall have occurred and be continuing, be subrogated to any
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<PAGE>
rights of the Owner Indemnified Person in respect of the matter against which
such indemnity was given (other than with respect to any insurance policies
carried by such Owner Indemnified Person).
SECTION 11.2 Indemnity by Owner. (a) The Owner shall be fully
--------------------
responsible for all liabilities allocated to it under Section 2.8(b)(i) of the
Transaction Agreement. The Owner shall be fully responsible for all liabilities
allocated to it under Section 2.8(c) of the Transaction Agreement and shall, to
the extent not obtained by CRC as required by Section 2.8(c) of the Transaction
Agreement, obtain within 60 days after the Closing Date insurance to cover such
liabilities from and after the Closing Date. To that end, the Owner agrees to
and shall protect, indemnify and hold wholly harmless the Operator and its
directors, officers, employees and agents (each, an "Operator Indemnified
Person") from and against any and all Damages arising from or attributable to
(i) Retained Liabilities and any other liabilities with respect to which it is
the responsibility of any Person other than the Operator under the terms of the
Transaction Agreement and the Ancillary Agreements to indemnify the Owner, and
(ii) liabilities that arise prior to the Closing Date referred to in Section
2.8(b)(i) and Section 2.8(c) of the Transaction Agreement; provided, that for
the purposes of this Section 11.2(a), the term "Ancillary Agreements" as used in
the parenthetical included in Sections 2.8(b) and 2.8(c) of the Transaction
Agreement shall be deemed not to include this Agreement.
(b) Upon payment in full of any indemnity pursuant to this
Section 11.2, the Owner shall, to the extent of such payment, be subrogated to
any rights of the Operator Indemnified Person in respect of the matter against
which such indemnity was given (other than with respect to any insurance
policies carried by such Operator Indemnified Person).
SECTION 11.3 Indemnification Procedures. (a) If any Action shall be
---------------------------
threatened or instituted or any claim or demand shall be asserted against any
Indemnified Party in respect of which indemnification may be sought under the
provisions of this Agreement, the Indemnified Party shall promptly cause written
notice of the assertion of any such claim, demand or Action of which it has
knowledge to be forwarded to the Indemnifying Party. Such notice shall contain a
reference to the provisions hereof or of such other agreement, instrument or
certificate delivered pursuant hereto, in respect of which such claim is being
made. The Indemnified Party's failure to give the Indemnifying Party prompt
notice shall not preclude the Indemnified Party from obtaining indemnification
from the Indemnifying Party under this Article XI unless the Indemnified Party's
failure has materially prejudiced the Indemnifying Party's ability to defend the
claim, demand or Action.
(b) If the Indemnified Party seeks indemnification from the
Indemnifying Party as a result of a claim or demand being made by a third party
(a "Third Party Claim"), the Indemnifying Party shall have the right promptly to
assume the control of the defense of any Action with respect to such Third Party
Claim, including, at its own expense, employment by it of counsel reasonably
satisfactory to the Indemnified Party. The Indemnified Party may, in its sole
discretion and at its own expense, employ counsel to represent it in the defense
of the Third Party Claim, and in such event counsel for the Indemnifying Party
- 15 -
<PAGE>
shall cooperate with counsel for the Indemnified Party in such defense, provided
that the Indemnifying Party shall direct and control the defense of such Third
Party Claim or proceeding. The Indemnifying Party shall not consent to the entry
of any judgment, except with the written consent of the Indemnified Party, and
shall not enter into any settlement of such Third Party Claim without the
written consent of the Indemnified Party which does not include as an
unconditional term thereof the release of the Indemnified Party from all
Liability in respect of such Third Party Claim.
ARTICLE XII
Assignments
-----------
SECTION 12.1 Operator Assignments. Except as otherwise provided in this
--------------------
Agreement, the Operator may not, without the prior written consent of the Owner,
and subject to any applicable Governmental Actions, assign, transfer, sublease
or otherwise grant the right to use any Allocated Asset or its interest therein
or rights with respect thereto, including any Assigned Right. Except as
otherwise provided in this Agreement, the Operator may, with the prior written
consent of the Owner, and subject to any applicable Government Actions, assign,
transfer, sublease or otherwise grant the right to use any Allocated Asset or
its interest therein or rights with respect thereto, including any Assigned
Right.
SECTION 12.2 Merger, Consolidation, Etc. The Operator, without the
-----------------------------
consent of the Owner, may assign all or any part of its rights and obligations
under this Agreement to (i) any of its controlled Subsidiaries or (ii) any
successor in the event of a merger, consolidation, sale of all or substantially
all its assets, liquidation or dissolution, if such assignee executes and
delivers to the Owner an agreement reasonably satisfactory in form and substance
to the Owner under which such assignee assumes and agrees to perform and
discharge all the obligations and liabilities of the Operator; provided that any
such assignment shall not relieve the Operator from the performance and
discharge of such obligations and liabilities.
SECTION 12.3 Owner Assignments. The Owner shall not transfer or assign
------------------
any part of its right, title and interest in this Agreement or any Allocated
Assets used hereunder without the prior written consent of the Operator.
ARTICLE XIII
Inspection; Markings
--------------------
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<PAGE>
SECTION 13.1 Rights to Information. The Owner may at its own expense,
----------------------
upon reasonable prior notice to the Operator during the normal business hours of
the Operator, no more frequently than once in any calendar year, inspect the
Allocated Assets and the books and records of the Operator relating to the
maintenance and performance of such Allocated Assets and make copies and
extracts therefrom, and may discuss such matters with the Operator's officers.
Upon the occurrence and during the continuance of an Event of Default, the Owner
may inspect such books and records at any time, which inspections shall be at
the expense of the Operator. The Owner also shall have the right at any time to
obtain information regarding the condition and state of repair of any Allocated
Asset, compliance by the Operator with Article VII hereof and the absence of an
Event of Default.
SECTION 13.2 Markings. The Operator shall affix to certain Allocated
--------
Assets agreed to by the Operator and Owner identifying labels, plates or tags
each setting forth such information as the Operator and Owner may agree. The
Operator covenants and agrees to replace any such label, plate or tag which may
be removed or destroyed or become illegible, and the Operator shall indemnify
each Owner Indemnified Person against any liability, loss or expense incurred by
such Owner Indemnified Person as a result of the failure to maintain such
markings.
ARTICLE XIV
Events of Default
-----------------
SECTION 14.1 Events of Default. Each of the following events shall
-----------------
constitute an Event of Default (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any Governmental Authority):
(a) the Operator shall fail to make any payment of (i) the
Operating Fee when due and such failure shall continue unremedied for a period
of thirty (30) Business Days and (ii) any Supplemental Operating Fees due under
this Agreement and such failure shall continue unremedied for a period of thirty
(30) Business Days; or
(b) the Operator shall fail to perform or observe any other
material covenant, condition or agreement to be performed or observed by it
under this Agreement and such failure shall continue unremedied for a period of
one hundred twenty (120) Business Days after notice thereof shall have been
given to the Operator by the Owner; provided, that the continuation of any such
failure or breach (other than a failure or breach curable by payment of money)
for a period longer than such one hundred twenty (120) Business Day period shall
not constitute an Event of Default if (i) such default is curable but cannot be
cured within such one hundred twenty (120) Business Day period and (ii) the
Operator is diligently pursuing the cure of such default; provided, further,
that any such failure or breach (other than a failure or breach curable by
payment of money) shall constitute an Event of Default if such failure is not
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<PAGE>
cured within the earlier of the last Business Day of the Term and any Renewal
Term and four hundred fifty (450) days from the date notice thereof has been
given to the Operator; or
(c) The Operator (i) shall commence a voluntary Insolvency
Proceeding, (ii) shall seek the appointment of a trustee, receiver, liquidator,
sequestrator, custodian or other similar official of the Operator or any
substantial part of the Operator's property, (iii) shall acquiesce in or consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary Insolvency Proceeding commenced against it, (iv)
shall make a general assignment for the benefit of creditors, or (v) shall fail
generally to pay its undisputed debts as they become due; or
(d) an involuntary Insolvency Proceeding shall be commenced
against the Operator seeking liquidation, reorganization or other relief with
respect to such Person or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, assignee, sequestrator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed or unstayed for a period of
one hundred twenty (120) consecutive Business Days.
ARTICLE XV
Remedies
--------
SECTION 15.1 Remedies. Upon the occurrence of any Event of Default and
--------
at any time thereafter so long as the same shall be continuing, the Owner may,
at its option, declare by written notice to the Operator this Agreement to be in
default; and at any time thereafter so long as such Event of Default shall not
have been remedied, the Owner may do one or more of the following with respect
to the Allocated Assets:
(a) sell the Allocated Assets at public or private sale, as the
Owner may determine, or otherwise dispose of, hold, use, operate, lease to
others or keep unused the Allocated Assets as the Owner, in its sole discretion,
may determine, all free and clear of any rights of Operator;
(b) whether or not the Owner shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a) above,
the Owner, by written notice to the Operator, may demand that the Operator pay
to the Owner, and the Operator shall pay to the Owner, any accrued but unpaid
Operating Fees (together with interest, if any, on such amount at the Overdue
Rate from such specified payment date until the date of actual payment of such
amount); or
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<PAGE>
(c) terminate this Agreement and the rights of the Operator to
use the Allocated Assets pursuant hereto.
The Owner may exercise one or more remedies in respect of certain
Allocated Assets and one or more other remedies in respect of other Allocated
Assets.
No termination of this Agreement, in whole or in part, or exercise of
any remedy under this Article XV shall, except as specifically provided herein,
relieve the Operator of any of its liabilities and obligations hereunder, all of
which then outstanding shall survive such termination, repossession or exercise
of remedy. In addition, the Operator shall be liable for any and all Fees and
Expenses and other costs and expenses incurred by the Owner by reason of the
occurrence of any Event of Default or the exercise of the remedies of the Owner
with respect thereto. At any sale of any Allocated Assets or any part thereof
pursuant to this Article XV, the Owner may bid for and purchase such property.
SECTION 15.2 Owner Rights. To the fullest extent permitted by Applicable
------------
Law, each and every right, power and remedy herein specifically given to the
Owner or otherwise in this Agreement shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given or now
or hereafter existing at law, in equity or by statute, and each and every right,
power and remedy whether specifically given herein or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by the Owner, and the exercise or the beginning of the exercise of any
power or remedy shall not be construed to be a waiver of the right to exercise
at the same time or thereafter any other right, power or remedy. No delay or
omission by the Owner in the exercise of any right, power or remedy or in the
pursuit of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of the Operator or to be an
acquiescence therein. No express or implied waiver by the Owner of any Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Event of Default.
SECTION 15.3 Exercise of Other Rights or Remedies. In addition to all
-------------------------------------
rights and remedies provided in this Article XV, the Owner may exercise any
other right or remedy that may be available to it under Applicable Law or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof.
SECTION 15.4 Subject to Governmental Action. The exercise of any right
-------------------------------
or remedy provided for in this Article XV shall be subject to any applicable
Governmental Action.
ARTICLE XVI
Right to Perform
----------------
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<PAGE>
SECTION 16.1 Right to Perform. If the Owner shall fail to make any
-----------------
payment or perform under, or comply with, any contract, lease, license or other
agreement in respect of the Allocated Assets to which the Owner is a party, the
Operator may (but shall have no duty to do so) make such payment or perform or
comply with such agreement, and the Operating Fee shall be reduced in the amount
of such payment and the amount of all expenses of the Operator (including Fees
and Expenses) incurred in connection with such payment or the performance of or
compliance with such agreement.
ARTICLE XVII
Renewal Options
---------------
SECTION 17.1 Renewal Notice.
--------------
(a) The Operator shall have the option to renew this Agreement
twice. Not less than one (1) year before expiration of the Term or the initial
Renewal Term, the Operator may deliver to the Owner a notice (the "Renewal
Notice") of the Operator's election to renew this Agreement in respect of all,
but not less than all, Allocated Assets for a renewal period of five (5) years
(or, if there has already been a renewal period, an additional renewal period of
five (5) years), or such other period of time as the Owner and the Operator
shall mutually agree (each such period, a "Renewal Term").
(b) All terms of this Agreement shall continue in full force and
effect during each such Renewal Term.
(c) In the event the Operator elects to renew this Agreement, the
Renewal Term will commence on the day immediately following the expiration of
the Term or initial Renewal Term and continue until the end of such Renewal
Term.
(d) The Renewal Notice, once given, shall be irrevocable and the
option to renew this Agreement shall expire if the Operator does not deliver the
Renewal Notice by the times provided in Section 17.1(a) hereof.
(e) Notwithstanding the foregoing, the Operator shall have no
right to renew this Agreement if any Event of Default exists on the date of
delivery of the Renewal Notice or the commencement of the Renewal Term.
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<PAGE>
ARTICLE XVIII
Certain Notices and Information
-------------------------------
SECTION 18.1 Notices. Any notice expressly required by this Agreement to
-------
be given to the Owner or the Operator shall be deemed delivered on the date sent
by registered mail, or by such other means as the parties hereto may agree, and
shall be addressed to them as follows:
(a) If to Owner:
New York Central Lines LLC
2001 Market Street
Philadelphia, Pennsylvania 19103
Attention: Vice President-General Counsel
Copy to:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(b) If to Operator:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
Each party may from time to time change its address in this Section 18.1 by
written notice delivered to the other party.
SECTION 18.2 Notice of Event of Default. Promptly after an executive
--------------------------
officer of the Operator shall have actual knowledge of the occurrence or
existence of any Event of Default or any event which, with the passing of time
or giving of notice, would constitute an Event of Default, the Operator shall so
notify the Owner and set forth in reasonable detail the circumstances
surrounding such event or Event of Default and shall specify what actions the
Operator has taken or intends to take to cure such event or Event of Default.
SECTION 18.3 Information Regarding Allocated Assets. The Operator shall
---------------------------------------
promptly furnish the information at such times and in such format as is
regularly produced by the Operator concerning the condition, maintenance and use
of the Allocated Assets as the Owner may reasonably request.
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<PAGE>
ARTICLE XIX
Confidentiality
---------------
SECTION 19.1 Confidentiality. The parties hereto shall hold, and shall
---------------
cause their respective officers, employees, agents, consultants and advisors to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its independent legal counsel, by
other requirements of law, all information furnished it by the other party
hereto, or their respective representatives, pursuant to this Agreement (except
to the extent that such information can be shown to have been (i) available to
such party on a non-confidential basis prior to its disclosure by the other
party, (ii) in the public domain through no fault of such party or (iii) later
lawfully acquired from other sources by the party to which it was furnished),
and no party shall release or disclose such information to any other Person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who shall be bound by the provisions of this Section
19.1. In the event that a subpoena, discovery or other request that arguably
calls for production or disclosure of such confidential information is received,
the party receiving such request must promptly notify in writing the party whose
information has been requested. The party receiving such request shall provide
the party whose confidential information has been requested, a reasonable
opportunity to review such information and to assert any rights it may have with
respect to the potential disclosure of such confidential information. Each party
shall be deemed to have satisfied its obligation to hold confidential
information concerning or supplied by the other party hereto, if it exercises
the same care as it takes to preserve confidentiality for its own similar
information.
ARTICLE XX
Miscellaneous
-------------
SECTION 20.1 Dispute Resolution. Except as otherwise specifically
-------------------
provided for herein, any dispute, controversy or claim (or any failure by the
parties to agree on a matter as to which this Agreement expressly or implicitly
contemplates subsequent agreement by the parties, except for matters left to the
sole discretion of a party) arising out of or relating to this Agreement, or the
breach, termination or validity hereof or thereof, shall be settled in
accordance with the provision of Section 11.12 of the Transaction Agreement.
SECTION 20.2 Documentary Conventions. This Agreement shall be governed
------------------------
by, and construed in accordance with, all the Documentary Conventions.
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<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have each caused this Operating Agreement to be duly executed as of the date
first above written.
NEW YORK CENTRAL LINES LLC,
as OWNER
By: /s/C. A. COOK
-------------
Name: C. A. Cook
Title: Vice President and Assistant
Secretary
CSX TRANSPORTATION, INC.,
as OPERATOR
By: /s/PETER J. SHUDTZ
------------------
Name: Peter J. Shudtz
Title: Vice President - Law and General
Counsel- CSX Corporation, authorized
agent for CSX Transportation, Inc.
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<PAGE>
APPENDIX A
----------
to Operating Agreement
DEFINITIONS AND RULES OF USAGE
Rules of Usage
--------------
The terms defined below shall have the respective meanings set forth
below for all purposes, and such meanings shall be equally applicable to both
the singular and plural forms of the terms defined. "Include", "includes" and
"including" shall be deemed to be followed by "without limitation" whether or
not they are in fact followed by such words or words of like import. "Writing",
"written" and comparable terms refer to printing, typing, lithography and other
means of reproducing words in a visible form. Any instrument or Applicable Law
defined or referred to below or in any instrument that recites it is to be
construed in accordance with this Appendix means such instrument or Applicable
Law as from time to time amended, modified or supplemented, including (in the
case of instruments) by waiver or consent and (in the case of Applicable Laws)
by succession of comparable successor Applicable Laws and includes (in the case
of instruments) references to all attachments thereto and instruments
incorporated therein; provided, that any reference to the Bankruptcy Code shall
mean the Bankruptcy Code as in effect on the date of reference thereto and
applicable to the relevant case. References to any Person are, unless the
context otherwise requires, also to its successors and assigns. "Hereof",
"herein", "hereunder" and comparable terms refer to the entire instrument in
which such terms are used and not to any particular article, section or other
subdivision thereof or attachment thereto. References to any gender include,
unless the context otherwise requires, references to all genders, and references
to the singular include, unless the context otherwise requires, references to
the plural and vice versa. "Shall" and "will" have equal force and effect.
References in an instrument to "Article", "Section" or another subdivision or to
an attachment are, unless the context otherwise requires, to an article, section
or subdivision of or an attachment to such instrument.
Definitions
-----------
"Action" shall mean any action, claim, suit, arbitration, inquiry,
------
subpoena, discovery request, proceeding or investigation by or before any
Governmental Authority or forum or authority having jurisdiction over the matter
involving or related to any Owner Indemnified Person, any Operator Indemnified
Person or the Allocated Assets.
"Affiliate" means, with respect to a specified Person, any Person that
---------
directly or indirectly controls, is controlled by or is under common control
with, the specified Person or any trust for the benefit of such Person or any
entities controlled by such Person; provided that (a) NYC shall not be an
Affiliate of CSX and its Subsidiaries or NSC and its Subsidiaries, (b) PRR shall
not be an Affiliate of NSC and its Subsidiaries or CSX and its Subsidiaries and
<PAGE>
(c) CSX and NSC and their respective Subsidiaries shall not be Affiliates of CRR
or CRR Parent and their respective Subsidiaries and vice versa.
"Agreement" means this Operating Agreement, dated as of the Closing
---------
Date, between the Owner and the Operator.
"Allocated Asset" means the assets identified in or pursuant to the
----------------
Transaction Agreement as the NYC Allocated Assets other than (i) the assets
identified in Item 1(E) of Schedule 1 to the Transaction Agreement, and (ii)
such items of inventory as may subsequently be agreed to by the parties from
time to time.
"Applicable Law" means, with respect to any Person or to any Allocated
---------------
Asset, all laws, ordinances, judgments, decrees, injunctions, writs and orders
of any Governmental Authority and any Governmental Actions applicable to or
having jurisdiction over such Person or Allocated Asset.
"Appraisal Procedure" means a procedure whereby (i) an independent
--------------------
third-party appraiser chosen jointly by the Owner and the Operator determines
the reasonableness of the fair market value of the Allocated Assets credited to
the Settlement Account if the fair market value of the Allocated Assets exceeds
$50,000 or determines the Fair Market Rental Value of the Allocated Assets, or
(ii) the reasonableness of the fair market value of the Allocated Assets
credited to the Settlement Account is certified by an officer of the Operator if
the fair market value is $50,000 or less. The fees and expenses of the appraiser
shall be divided equally between the Owner and the Operator.
"arises prior" means that the circumstances giving rise to the liability
------------
have transpired prior to the applicable date, whether or not such liability has
been discovered, asserted or accrued prior to such date. If the circumstances
giving rise to a liability bridge the Closing Date, the parties will apportion
it to pre-Closing Date and post-Closing Date periods, with disagreement being
subject to the dispute resolution provisions of Section 20.1 of the Agreement.
"Assigned Rights" means Contracts and rights included in the Allocated
----------------
Assets (including, but not limited to, transportation contracts).
"Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
----------------
amended from time to time, and the rules and regulations promulgated thereunder.
"Business Day" means any day other than a Saturday, Sunday or other day
------------
on which banks are authorized or required to be closed in New York, New York and
Richmond, Virginia.
"Closing Date" is the date of this Agreement.
------------
"Contracts" means any contract, lease, loan agreement, deed, easement,
---------
license, reversion, mortgage, security agreement, trust indenture or other
<PAGE>
agreement or instrument to which the Owner is a party or by which it is bound or
to which any of the Allocated Assets is subject.
"Contractual Obligation" means, with respect to any Person, any
------------------------
provision of any security issued by such Person or of any Contract to which such
Person is a party or by which it or any of its property is bound.
"CRC" means Consolidated Rail Corporation, a Pennsylvania corporation.
---
"CRR" means Conrail Inc., a Pennsylvania corporation.
---
"CSX" means CSX Corporation, a Virginia corporation.
---
"CSXT" means CSX Transportation, Inc., a Virginia corporation.
----
"Documentary Conventions" means, with respect to the Agreement and any
------------------------
instrument that states in substance that it is governed by the Documentary
Conventions, that, except as otherwise expressly provided therein:
(a) Documentary Convention--Survival. The representations,
----------------------------------
warranties and agreements of the parties contained or provided for in
such instrument and the parties' obligations under any and all thereof
shall survive the execution and delivery of such instrument and the
expiration or other termination of the Agreement and shall be and
continue in effect notwithstanding the fact that any party may waive
compliance with any other term, provision or condition of the Agreement.
(b) Documentary Convention--Governing Law. Such instrument shall
--------------------------------------
become effective upon delivery and shall in all respects be governed by,
and construed in accordance with, the laws (excluding principles of
conflict of laws) of the Commonwealth of Virginia applicable to
agreements made and to be performed entirely within such state,
including all matters of construction, validity and performance.
(c) Documentary Convention--Counterparts. Except as otherwise
-------------------------------------
specifically provided in the Agreement, such instrument may be executed
by the parties thereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument. To make proof
of such instrument, it shall only be necessary to produce one such
counterpart executed by each party thereto. All signatures need not be
on the same counterpart.
(d) Documentary Convention--Method of Payment. All amounts
---------------------------------------------
required to be paid by any party to such instrument to any other party,
either thereunder or under the Agreement shall be paid in such
- 3 -
<PAGE>
immediately available and freely transferable Dollars as at the time of
payment shall be legal tender for the payment of public and private
debts, by wire transfer, or other method of payment acceptable to the
payee, of immediately available funds to the account of the payee as
such payee may specify by notice to the other parties.
(e) Documentary Convention--Parties in Interest; Limitation on
-------------------------------------------------------------
Rights of Others. The terms of such instrument shall be binding upon,
----------------
and inure to the benefit of, the parties thereto and their permitted
successors and assigns. Nothing in such instrument shall be construed to
give any Person (other than the parties thereto and their permitted
successors and assigns and as expressly provided therein) any legal or
equitable right, remedy or claim under or in respect of such instrument
or any covenants, conditions or provisions contained therein.
(f) Documentary Convention--Table of Contents; Headings. The
------------------------------------------------------
table of contents, if any, and headings, if any, of the various
articles, sections and other subdivisions of such instrument are for
convenience of reference only and shall not modify, define or limit any
of the terms or provisions of such instrument. To the extent of any
inconsistency between the headings and any text, such text shall govern.
(g) Documentary Convention--Entire Agreement; Amendment and
------------------------------------------------------------
Waiver. The Agreement, the other Ancillary Agreements and the
------
Transaction Agreement constitute the entire agreement of the parties
thereto with respect to the subject matter thereof and supersede all
prior written and oral agreements and understandings with respect to
such subject matter. Neither the Agreement nor any of the terms hereof
may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or
modification shall be sought and subject to any other limitations on
amendments set forth in the Agreement, the other Ancillary Agreements
and the Transaction Agreement. Any amendment, modification or supplement
to the Agreement shall be subject to any applicable Governmental Action.
No failure or delay of any party in exercising any power or right under
this Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any
other or further exercise thereof or the exercise of any other right or
power.
(h) Documentary Convention--Severability. Any provision of such
-------------------------------------
instrument that shall be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
provisions thereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by Applicable Law,
the parties to such instrument waive any provision of law that renders
any provision thereof prohibited or unenforceable in any respect.
- 4 -
<PAGE>
(i) Documentary Convention--Payment on Business Days. If any
payment under such instrument is required to be made on a day other than
a Business Day, the date of payment shall be extended to the next
Business Day without any additional interest for such extension period
so long as payment is made on such Business Day.
"Dollars" or "$" means dollars in the lawful currency of the United
------- -
States of America..
"Event of Default" has the meaning set forth in Section 14.1 of the
----------------
Agreement.
"Event of Loss" means, with respect to any Allocated Asset, the
---------------
occurrence of any of the following events: (a) the loss or theft of such
Allocated Asset to the extent that such Allocated Asset is not recovered within
one hundred eighty (180) days of such event or, if earlier, the expiration of
the Term or any Renewal Term, (b) the destruction of or damage to such Allocated
Asset or any part thereof to such extent as shall render repair of such
Allocated Asset uneconomical to the Operator or unfit or unsuitable for its
intended use, which destruction or damage is an actual or constructive total
loss, (c) the requisition of use of such Allocated Asset for an indefinite
period or for a stated period in excess of one hundred eighty (180) days or, if
earlier, which ends later than the expiration of the Term or any Renewal Term by
any Governmental Authority under power of eminent domain or otherwise, (d) the
condemnation, confiscation, seizure or requisition of title to such Allocated
Asset by a Governmental Authority, (e) any damage to such Allocated Asset which
results in an insurance settlement on the basis of an actual or constructive
total loss, (f) the prohibition by Applicable Law of the use of such Allocated
Asset by the Operator or any other Person for a period of one hundred eighty
(180) consecutive days from the date of such prohibition or, if earlier, the end
of the Term or any Renewal Term. The date of occurrence of an Event of Loss in
respect of any Allocated Asset shall be deemed to be, (1) in the event of damage
to such item, the date of such damage, (2) in the event of a condemnation or
requisition of title by a Governmental Authority, the date thereof, and (3) in
the event of an Event of Loss under clause (a), (c) or (f) of the first sentence
of this definition, the date of expiration of the period referred to in said
clause.
"Excluded Taxes" has the meaning set forth in Section 3.5 of the
--------------
Agreement.
"Fair Market Rental Value" means, as to the Allocated Assets, the fair
------------------------
market rental value that would be obtained in an arm's length transaction
between an informed and willing lessee and an informed and willing lessor, in
either case under no compulsion to lease, for the lease of the Allocated Assets,
disregarding the fact (if applicable) that the Allocated Assets are subject to
the Agreement and assuming that Article VII of the Agreement shall have been
complied with in all respects. Subject to the foregoing, the Fair Market Rental
Value as to the Allocated Assets shall be such value determined in accordance
with the Appraisal Procedure.
"Fees and Expenses" means, with respect to any Person in connection with
-----------------
any transaction or occurrence, the Person's reasonable fees and expenses
(including attorneys' fees and legal expenses) for such transaction or
occurrence.
- 5 -
<PAGE>
"Governmental Action" means all authorizations, consents, approvals,
--------------------
waivers, exceptions, variances, franchises, permissions, permits and licenses
of, and filings and declarations with, Governmental Authorities.
"Governmental Authority" means any federal, state, municipal, county,
-----------------------
local or foreign governmental Person, authority or agency, court, regulatory
commission, stock exchange or other similar body.
"Income Tax Regulations" means the regulations promulgated by the U.S.
----------------------
Department of the Treasury pursuant to the Code.
"Indemnifying Party" means a Person who is required or requested to
-------------------
provide indemnification under Article XI of the Agreement.
"Indemnified Party" means any Owner Indemnified Person or Operator
-----------------
Indemnified Person.
"Insolvency Proceeding" means any case or proceeding under bankruptcy,
----------------------
insolvency, reorganization, receivership, moratorium or other laws providing
relief to debtors.
"Lien" means any lien, mortgage, encumbrance, pledge, charge, lease,
----
easement, servitude or security interest or any interests similar to the
foregoing, including those existing under any conditional sales or other title
retention agreement or the filing of or agreement to deliver any financing
statement under the UCC.
"Modification" means, with respect to any Allocated Asset, any
------------
modification, alteration, addition, upgrade or improvement to such Allocated
Asset.
"Nonseverable Modification" means any Required Modification and any
--------------------------
Modification which is not readily removable without impairing the fair market
value, residual value, condition, remaining useful life or utility of the
Allocated Asset to which such Modification relates immediately prior to such
Modification.
"NSC" means Norfolk Southern Corporation, a Virginia corporation.
---
"NSR" means Norfolk Southern Railway Company, a Virginia corporation.
---
"NYC" means New York Central Lines LLC, a Delaware limited liability
---
company.
"Operating Fee" means the operating fee agreed to from time to time by
-------------
the Owner and Operator based on the Fair Market Rental Value of the Allocated
Assets as set forth in a supplement to this Agreement. The Operating Fee for
the first six years of this Agreement shall be as follows:
- 6 -
<PAGE>
June 1, 1999 through May 31, 2000 -- $118 million June 1, 2000
through May 31, 2001 -- $121 million June 1, 2001 through May 31,
2002 -- $134 million June 1, 2002 through May 31, 2003 -- $147
million June 1, 2003 through May 31, 2004 -- $164 million June 1,
2004 through May 31, 2005 -- $179 million
"Operator" means CSXT or any permitted successor or assign.
--------
"Operator Indemnified Person" has the meaning set forth in Section 11.2
---------------------------
of the Agreement.
"Optional Modification" has the meaning set forth in Section 7.2(a) of
---------------------
the Agreement.
"Organic Document" means, with respect to any Person, as applicable, the
----------------
certificate or articles of incorporation, partnership agreement, limited
liability company agreement, certificate of formation, membership agreement,
by-laws and all other organizational documents of such Person.
"Overdue Rate" means the rate determined on the first Business Day of
-------------
each calendar month equal to the lesser of (i) the prime rate set forth in The
Wall Street Journal and (ii) the maximum rate allowed by Applicable Law.
"Owner" means NYC, a Delaware limited liability company.
-----
"Owner Indemnified Person" has the meaning set forth in Section 11.1 of
------------------------
the Agreement.
"Owner Lien" means a Lien (i) which results from acts of, or any failure
----------
to act by, or as a result of claims against, the Owner, (ii) in favor of any
taxing authority by reason of the non-payment by the Owner, or (iii) which
results from acts of, or any failure to act by, the Owner in violation of its
obligations under the Agreement.
"Payment Date" means monthly in arrears on the 15th day of each calendar
------------
month to cover the preceding calendar month's usage or, if such day is not a
Business Day, the next succeeding Business Day.
"Permitted Liens" means, with respect to any Allocated Asset,
---------------
(a) The respective rights and interests of the Operator and
Owner under the Agreement,
(b) Owner Liens,
- 7 -
<PAGE>
(c) Liens for Taxes which are not yet due or so long as no Event
of Default shall have occurred and be continuing are being contested in good
faith by appropriate proceedings which suspend the collection thereof; provided,
that such proceedings shall not involve any material danger of the sale,
forfeiture or loss of such Allocated Asset or any part thereof or interest
therein or the reasonably foreseeable risk of imposition of any criminal
liability on the Owner or any other material liability not indemnified against
by the Operator,
(d) Liens of mechanics, materialmen, laborers, employees or
suppliers and similar Liens arising by operation of law, in each case incurred
by the Operator in the ordinary course of business for sums that are not overdue
for more than sixty (60) days or so long as no Event of Default shall have
occurred and be continuing are being contested in good faith by negotiations or
by appropriate proceedings which suspend the collection thereof; provided, that
such contest does not involve any material danger of the sale, forfeiture or
loss of such Allocated Asset or any part thereof or interest therein or the
reasonably foreseeable risk of imposition of any criminal liability on the Owner
or any other material liability not indemnified against by the Operator,
(e) Liens arising out of any judgments or awards against the
Operator with respect to which (i) at the time an appeal or proceeding for
review is being prosecuted in good faith, (ii) there shall have been secured a
stay of execution pending such appeal or proceeding for review, (iii) during
such proceeding there is not, and such proceeding does not involve, any material
danger of the sale, forfeiture or loss of such Allocated Asset or any part
thereof or any interest therein or the risk of imposition of any criminal
liability on the Owner or any other liability not indemnified against by the
Operator, and (iv) if such Liens have specifically attached to any Allocated
Asset, the Operator has provided the Owner with security reasonably satisfactory
to the Owner, in the amount of such claims,
(f) Liens, rights of way, easements and other rights to use the
Allocated Assets (including licenses for private crossings) common in the
railroad industry arising out of the ordinary course of business of the
Operator, and
(g) Liens consented to by the Owner.
"Person" shall mean any individual, corporation, partnership, limited
------
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PRR" means Pennsylvania Lines LLC, a Delaware limited liability
---
company.
"Renewal Notice" has the meaning set forth in Section 17.1(a) of the
--------------
Agreement.
"Renewal Term" has the meaning set forth in Section 17.1(a) of the
------------
Agreement.
- 8 -
<PAGE>
"Required Modification" has the meaning set forth in Section 7.2(a) of
---------------------
the Agreement.
"Settlement Account" has the meaning set forth in Section 6.1 of the
------------------
Agreement.
"Settlement Account Payment Date" has the meaning set forth in Section
-------------------------------
6.2 of the Agreement.
"Severable Modification" means any Modification which is not a
----------------------
Nonseverable Modification.
"Substantial Allocated Asset" means (i) an Allocated Asset with a fair
-----------------------------
market value in excess of $25 million or (ii) a group of Allocated Assets that
(a) are sold, transferred or otherwise disposed of during any calendar year to
the same Person (including Affiliates of such Person) or the same group of
Persons (including Affiliates of such Persons) and (b) have an aggregate fair
market value in excess of $25 million.
"Supplemental Operating Fees" means all amounts payable by the Operator
----------------------------
pursuant to the terms of the Agreement, including indemnities payable by the
Operator pursuant to Section 11.1 hereof, other than the Operating Fee.
"Tax" means all taxes (including income, franchise, excise, real and
---
personal property, sales, use, payroll and withholding and other taxes) imposed
by any federal, state, local, foreign or international taxing authority or
Governmental Authority, whether in the form of assessments, levies, imposts,
duties, charges, assessments, withholdings or otherwise, now existing or
hereafter created or adopted, together with all interest, penalties and
additions imposed with respect to such amounts.
"Term" means the period commencing on the Closing Date and terminating
----
on the 25th anniversary thereof.
"Termination Date" means the date on which the Term or any Renewal Term,
----------------
whichever is later, terminates.
"Third Party Claim" has the meaning set forth in Section 11.3(b) of the
-----------------
Agreement.
"Third Party Provider" has the meaning set forth in Section 4.2(a) of
--------------------
the Agreement.
"Transaction Agreement" means the Transaction agreement among CSX, CSXT,
---------------------
NSC, NSR, CRC, CRR and CRR Holdings LLC dated as of June 10, 1997.
"Valuation Date" means: (i) the Closing Date, (ii) the sixth (6th),
---------------
twelfth (12th), eighteenth (18th), and twenty-fourth (24th) anniversaries of the
- 9 -
<PAGE>
Closing Date, (iii) the first day of each Renewal Term; (iv) the sixth (6th)
anniversary of the first day of each Renewal Term, (v) a Settlement Account
Payment Date (if not already a Valuation Date pursuant to other clauses of this
definition), and (vi) such other dates as the parties hereto may agree.
- 10 -
Exhibit 10.5
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
NORTH JERSEY
Dated as of June 1, 1999
By and Among
CONSOLIDATED RAIL CORPORATION,
CSX TRANSPORTATION, INC. and
NORFOLK SOUTHERN RAILWAY COMPANY
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................................1
(a) AAR............................................................1
(b) Accounting Plan................................................1
(c) Action.........................................................2
(d) Adjacent Improvements..........................................2
(e) Bill...........................................................2
(f) Billing Month..................................................2
(g) Board of Managers..............................................2
(h) Budgeted Capital Expenditures..................................2
(i) Capital Expenditure Budget.....................................2
(j) Capital Expenditure Statement..................................2
(k) CRC Administrative Office......................................2
(l) CRC Board......................................................2
(m) CRC Train......................................................2
(n) CRC Train Usage Percentage.....................................2
(o) CSX............................................................3
(p) CSXT Operating Agreement.......................................3
(q) Damage(s)......................................................3
(r) Dispute Letter.................................................3
<PAGE>
Page
(s) Excluded Taxes.................................................3
(t) Expense Statement..............................................3
(u) GAAP...........................................................3
(v) General Manager................................................3
(w) Governmental Entity............................................3
(x) Interest Rental................................................3
(y) Jointly-Operated Facility......................................4
(z) Lesser Insured Operator........................................4
(aa) Letter Agreement...............................................4
(bb) Liabilities....................................................4
(cc) Nonseverable Improvement.......................................4
(dd) NSC............................................................4
(ee) NSR Operating Agreement........................................4
(ff) NYC............................................................4
(gg) Operating Budget...............................................5
(hh) Operating Plan.................................................5
(ii) Operator.......................................................5
(jj) Operator Consequential Damages.................................5
(kk) Operator's Expense Percentage..................................5
(ll) Operator's Facility............................................5
- ii -
<PAGE>
Page
(mm) Operator Train.................................................5
(nn) Person.........................................................5
(oo) Program Maintenance............................................5
(pp) Program Maintenance Proposal...................................5
(qq) PRR............................................................6
(rr) Railcar........................................................6
.
(ss) Reimbursable Expenses..........................................6
(tt) Renewal Term...................................................6
(uu) RoadRailer(R)..................................................6
(vv) Routine Maintenance............................................6
(ww) Severable Improvement..........................................6
(xx) Shared Asset Value.............................................6
(yy) Shared Assets..................................................6
(zz) Shared Assets Area.............................................7
(aaa) STB............................................................7
(bbb) Switching and Yard Services....................................7
(ccc) Tax or Taxes...................................................7
(ddd) Temporary Services.............................................7
(eee) Tier One Damages...............................................7
(fff) Tier Two Damages...............................................8
- iii -
<PAGE>
Page
(ggg) Total Train Usage Percentage...................................8
(hhh) Transaction Agreement..........................................8
(iii) Usage Statement................................................8
(jjj) USOA...........................................................8
(kkk) Valuation Date.................................................8
(lll) Zone...........................................................8
Section 2. Management........................................................8
(a) CRC Board......................................................8
(b) General Manager................................................9
(c) Employees.....................................................10
(d) CRC Responsibilities..........................................10
(e) Impartiality..................................................10
(f) Independent Contractors.......................................10
- iv -
<PAGE>
Section 3. Operations.......................................................10
(a) Operator's Rights.............................................10
(b) Use...........................................................11
(c) Grant of Rights...............................................11
(d) Switching and Yard Services...................................13
(e) Operating Protocols...........................................13
(f) Freight Traffic to Remain in Account of Each Operator.........13
<PAGE>
Page
(g) Rates, Routes and Divisions...................................14
(h) Shipper Bills.................................................14
(i) Service Responsibility........................................14
(j) Dispatching...................................................14
(k) Railcar Weighing..............................................15
(l) Freight Claims................................................15
(m) Freight Car Repairs...........................................15
(n) Train Services................................................15
(o) Wrecking Service..............................................16
(p) Admission of Third Parties....................................16
Section 4. Equipment and Properties.........................................16
(a) Procurement...................................................16
(b) Contribution of Locomotives by Operators......................16
(c) Locomotive Service and Repair.................................16
Section 5. Maintenance......................................................17
(a) Routine Maintenance...........................................17
(b) CRC Program Maintenance.......................................17
(c) Maintenance Standards.........................................18
Section 6. Capital Improvements.............................................18
(a) Proposed Projects.............................................18
- v -
<PAGE>
Page
(b) CRC Board Approved Projects...................................18
(c) Nonseverable Improvement Projects.............................18
(d) Severable Improvement Projects................................19
(e) Capital Improvements as Shared Assets.........................20
(f) Title to Severable Improvements...............................20
(g) Noninterference...............................................20
(h) Switch Connections............................................20
(i) Adjacent Improvements.........................................21
(j) Operator's Facilities.........................................21
Section 7. Accounting.......................................................21
(a) Books of Record and Account...................................21
(b) Financial Statements..........................................21
Section 8. Costs and Budgets................................................22
(a) CRC Costs.....................................................22
(b) Employee Cost Reimbursement...................................22
(c) Capital Expenditure Budget....................................22
(d) Operating Budget..............................................23
Section 9. Cost Sharing.....................................................23
(a) Accounting Plan...............................................23
(b) Usage Statement...............................................24
- vi -
<PAGE>
Page
(c) Expense Statement.............................................25
(d) Capital Expenditure Statement.................................25
(e) Bills.........................................................25
(f) Payment.......................................................26
(g) Disputed Bills................................................26
Section 10. Access..........................................................26
Section 11. Liability.......................................................26
(a) Operators' Sole Responsibility................................27
(b) Operators' Joint Responsibility...............................27
(c) CRC Responsibility - Allocation and Insurance.................27
(d) Process.......................................................28
(e) Indemnification...............................................29
(f) Specified Level Damages.......................................29
(g) Substance Abuse Exception.....................................31
(h) Transaction Agreement.........................................31
(i) Damages.......................................................31
Section 12. No Partnership..................................................31
Section 13. Arbitration.....................................................32
Section 14. Term............................................................32
Section 15. Force Majeure...................................................32
- vii -
<PAGE>
Page
Section 16. Entire Agreement................................................32
Section 17. Amendment and Waiver............................................33
Section 18. Severability....................................................33
Section 19. Remedies........................................................33
(a) Entitlement to Certain Remedies...............................33
(b) Preclusion of Certain Remedies................................33
Section 20. Interpretation..................................................33
Section 21. Headings........................................................34
Section 22. Parties.........................................................34
Section 23. Assignment......................................................34
(a) Limitation....................................................34
(b) Successor.....................................................34
Section 24. Notices.........................................................34
Section 25. Governing Law...................................................35
EXHIBIT A - Operating Protocols
- viii -
<PAGE>
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
NORTH JERSEY
This SHARED ASSETS AREA OPERATING AGREEMENT ("Agreement") dated
as of June 1, 1999, is by and among Consolidated Rail Corporation ("CRC"), CSX
Transportation, Inc. ("CSXT") and Norfolk Southern Railway Company ("NSR").
W I T N E S S E T H:
WHEREAS, all capitalized terms in this Agreement have the
respective meanings set forth in Section 1; and
WHEREAS, CSX owns all of the common stock of and controls CSXT,
NSC owns all of the common stock of and controls NSR, and CSX and NSC jointly
control CRC; and
WHEREAS, CSXT, NSR and CRC desire that the Shared Assets shall be
owned, operated and maintained by CRC and used by or for the exclusive benefit
of CSXT and NSR, and that CSXT and NSR shall each have full and equal rights to
use the Shared Assets to provide competitive railway freight transportation
services to, from and between all places within the Shared Assets Area.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, CRC, CSXT and NSR hereby agree
as follows:
Section 1.....Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "AAR" means the Association of American Railroads.
(b) "Accounting Plan" means the plan of accounting adopted
pursuant to Section 9(a).
(c) "Action" means any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any
Governmental Entity.
<PAGE>
(d) "Adjacent Improvement" means a capital improvement, such as a
spur, which provides access to customers and local industries and which (i) is
on property which is not part of the Shared Assets and (ii) will be directly
(without intermediate connection to another railroad) attached to trackage
included within the Shared Assets.
(e) "Bill" means a bill delivered by CRC to an Operator pursuant
to Section 9(e).
(f) "Billing Month" means the calendar month for which
information is shown on a Usage Statement.
(g) "Board of Managers" means any Board of Managers which may be
appointed by the CRC Board pursuant to Section 2(a)(ii).
(h) "Budgeted Capital Expenditures" means capital expenditures
included on a Capital Expenditure Budget which has been approved by the CRC
Board.
(i) "Capital Expenditure Budget" means a written budget
specifying proposed capital expenditures to be made by CRC with respect to
Shared Assets for the periods of time specified in such budget, and the proposed
sources of the capital required to make such expenditures.
(j) "Capital Expenditure Statement" means a statement delivered
by CRC pursuant to Section 9(d).
(k) "CRC Administrative Office" means the administrative office
of CRC located at Philadelphia, Pennsylvania, or at such other place designated
by CRC in a notice it delivers to CSXT and NSR.
(l) "CRC Board" means the Board of Directors of CRC.
(m) "CRC Train" means a train operated by CRC and performing
services pursuant to Sections 3(c) or (d).
(n) "CRC Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the total number of loaded and empty
Railcars in the account of such Operator in CRC Trains, by (ii) the total number
of loaded and empty Railcars in the accounts of both Operators in CRC Trains,
during such time period in such Zone.
(o) "CSX" means CSX Corporation.
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(p) "CSXT Operating Agreement" means the agreement, dated June 1,
1999, between CSXT and NYC providing for the use, operation and maintenance by
CSXT of certain assets owned or leased by NYC.
(q) "Damage(s)" means all assessments, fines, losses, damages,
liabilities, and costs and expenses related thereto, including, without
limitation, interest, penalties and attorneys' and consultants' fees and also
expressly including, without limitation, all liabilities arising after the
effective date hereof under the Federal Employers Liability Act, as amended, and
environmental laws.
(r) "Dispute Letter" means a letter delivered by an Operator
pursuant to Section 9(g)(i).
(s) "Excluded Taxes" means: (A) all Taxes based, in whole or in
part, on net income or gross income (including, without limitation, any minimum
tax) of CRC or which are in substitution for, or relieve CRC from, any Tax based
upon or measured by CRC's net income or gross income, together with any
interest, penalties, additions to tax or additional amounts that may become
payable in respect thereof; (B) business and occupation taxes, and gross
receipts taxes (unless in the nature of a sales tax) of CRC and Taxes based upon
the equity interests of CRC; and (C) interest, fines and penalties to the extent
due to the acts or omissions of CRC in connection with such Excluded Taxes.
(t) "Expense Statement" means a statement delivered by CRC
pursuant to Section 9(c).
(u) "GAAP" at any time means generally accepted accounting
principles in effect at such time.
(v) "General Manager" means the chief executive officer of CRC.
(w) "Governmental Entity" means any federal, state, local or
foreign court, administrative agency or commission or other governmental or
regulatory authority or commission or any arbitration tribunal.
(x) "Interest Rental" means an amount representing a fair
periodic return on the Shared Asset Value as of the most recent preceding
Valuation Date as determined by such appraiser as CSXT and NSR may select. The
Interest Rental for the first six years of this Agreement shall be as follows:
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June 1, 1999 through May 31, 2000 -- $14 million June 1, 2000
through May 31, 2001 -- $14 million June 1, 2001 through May 31,
2002 -- $16 million June 1, 2002 through May 31, 2003 -- $18
million June 1, 2003 through May 31, 2004 -- $20 million June 1,
2004 through May 31, 2005 -- $22 million
(y) "Jointly-Operated Facility" means a facility or yard which is
operated by or for a rail carrier and one or more other rail carriers.
(z) "Lesser Insured Operator" means the Operator which has the
lesser (as between the Operators) amount of available insurance benefits as
specified in Section 11(f)(i)(A.1)(2).
(aa) "Letter Agreement" means the letter agreement dated May 1,
1999 between NSC and CSX relating to the settlement of certain matters.
(bb) "Liabilities" means any and all debts, liabilities and
obligations of any kind whatsoever, whether or not accrued, contingent or
reflected on a balance sheet, known or unknown, absolute, determined,
determinable or otherwise, including, without limitation, those arising under
any law, rule, regulation, action, order or consent decree of any Governmental
Entity or any judgment in any Action of any kind or award of any arbitrator of
any kind and those arising under any contract.
(cc) "Nonseverable Improvement" means a capital improvement which
is integral to the operation of the Shared Assets and is not readily removable.
(dd) "NSC" means Norfolk Southern Corporation.
(ee) "NSR Operating Agreement" means the agreement, dated June 1,
1999, between NSR and PRR providing for the use, operation and maintenance by
NSR of certain assets owned or leased by PRR.
(ff) "NYC" means New York Central Lines LLC, a Delaware limited
liability company.
(gg) "Operating Budget" means a written budget specifying
estimated operating revenues and expenses and working capital requirements of
CRC with respect to the Shared Assets for the periods of time specified in such
budget.
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(hh) "Operating Plan" means the plan for road train and local
train schedules and classifications and related operating protocols for the
Shared Assets Area as may be agreed to, and modified from time to time, by CRC,
CSXT and NSR.
(ii) "Operator" means either CSXT or NSR.
(jj) "Operator Consequential Damages" means consequential,
indirect, incidental or other similar damage, injury or loss to an Operator.
(kk) "Operator's Expense Percentage" means for an Operator the
percentage obtained by multiplying 100 by the quotient obtained by dividing (i)
the total Reimbursable Expenses (except for Interest Rental, Taxes, insurance
costs and any other CRC expenses not apportioned between the Operators on a
usage basis) payable by such Operator for a particular period, by (ii) the total
Reimbursable Expenses (except for Interest Rental, Taxes, insurance costs and
any other CRC expenses not apportioned between the Operators on a usage basis)
payable by both Operators for such period.
(ll) "Operator's Facility" means a present, expanded or new
facility or yard which is owned or controlled exclusively by an Operator.
(mm) "Operator Train" means a train operated by an Operator and
performing services in accordance with Sections 3(a) and 3(c).
(nn) "Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company or other legal entity or organization.
(oo) "Program Maintenance" means scheduled renewal of track,
signals, structures and other fixed facilities performed by system or production
gangs assembled to accomplish a specific task or tasks.
(pp) "Program Maintenance Proposal" means a written proposal
prepared by CRC, CSXT or NSR which describes specific Program Maintenance which
the preparer of such proposal believes is necessary or desirable to maintain the
Shared Assets in a safe operating condition to permit or facilitate (i) the
performance by CRC of its services pursuant to this Agreement, or (ii) the use
of Shared Assets by the Operators, and which specifies a budget for such Program
Maintenance.
(qq) "PRR" means Pennsylvania Lines LLC, a Delaware limited
liability company.
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(rr) "Railcar" means, except as otherwise provided in the
Accounting Plan, each railroad freight car, locomotive, caboose or other
equipment (including RoadRailer(R) or comparable bimodal freight hauling
equipment in the account of either Operator) furnished in substitution of
railroad equipment, loaded or empty, which an Operator originates, terminates,
switches or moves on or overhead to any Shared Assets, except that (i) a single
standard flat car not exceeding 96 feet in length (excluding articulated flat
cars) shall count as a single Railcar, (ii) freight rail cars consisting of
articulated units bearing AAR Car Type Codes "Q" and "S" shall count as multiple
Railcars based on the second (numeric) digit of the Car Type Code for such
articulated units (by way of example, a car consisting of AAR Car Type Code
"S566" would be counted as five Railcars) (or corresponding car type codes and
digits if the AAR Car Type Codes should be modified at any time during the term
of this Agreement), and (iii) a single unit of RoadRailer(R) equipment (or
comparable bimodal freight hauling equipment in the account of either Operator)
shall count as one-half (1/2) of a Railcar.
(ss) "Reimbursable Expenses" means the expenses shown on an
Expense Statement, minus the revenues, if any, shown on such Expense Statement.
(tt) "Renewal Term" means the term of extension of this Agreement
under Section 14.
(uu) "RoadRailer(R)" means bimodal freight hauling equipment
manufactured by or under license from "RoadRailer(R)", a division of Wabash
National Corporation, and capable of movement over the highway when pulled by a
tractor and on the rails using locomotive power.
(vv) "Routine Maintenance" means day-to-day repairs to track,
signals, structures and other fixed facilities that are not part of Program
Maintenance.
(ww) "Severable Improvement" means a capital improvement which
is not a Nonseverable Improvement.
(xx) "Shared Asset Value" means at any date the value of the
Shared Assets, except leases and other contract rights granted by either
Operator to CRC, as of the most recent preceding Valuation Date as determined by
such appraiser as CSXT and NSR may select.
(yy) "Shared Assets" means all tracks, lands, easements, rights
of way, structures, facilities, appurtenances and rights related thereto, which
CRC owns, leases or otherwise has the right to operate over (including those
segments over which CRC or an Operator possesses operating rights pursuant to
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Section 3(c)), and which are used for railway purposes in the Shared Assets
Area, including the properties, rights, equipment, inventory and supplies,
whether owned or leased, described or referred to in Item 3A of Schedule 1
(including Attachments I and II) of the Transaction Agreement, but excluding
Operator's Facilities.
(zz) "Shared Assets Area" means the geographical area comprising
the Shared Assets and Operator Facilities and Jointly-Operated Facilities
directly (without intermediate connection to another railroad) attached to
trackage included within the Shared Assets, which is designated as the "North
Jersey" Shared Assets Area.
(aaa) "STB" means the Surface Transportation Board or, if there
shall be no Surface Transportation Board, any federal agency which is charged
with the function of approving combinations by rail carriers or persons
controlling them, or of other arrangements between rail carriers, and granting
exemptions from other laws with respect thereto or regulating other specific
functions with respect to the context in which such term is employed or any
successor entity thereof.
(bbb) "Switching and Yard Services" means the service of
classifying and assembling trains for the account of an Operator in
Jointly-Operated Facilities; movement of loaded or empty Railcars between yards
and local industries; and switching trains and Railcars at yards, terminals and
local industries.
(ccc) "Tax" or "Taxes" means taxes of any kind, levies or other
similar assessments, customs, duties, imposts, charges or fees, including,
without limitation, income taxes, gross receipts, ad valorem, excise, real or
personal property, sales, use, payroll, withholding, unemployment, transfer and
gains taxes or other governmental taxes imposed by or payable to the United
States, or any state, local or foreign government or subdivision thereof, and in
each instance such term shall include any interest, penalties or additions to
tax attributable to such Tax or Taxes.
(ddd) "Temporary Services" means services provided by CSXT or NSR
employees in the operation, maintenance or repair of any Shared Asset on an
emergency basis with the prior approval of the General Manager or senior CRC
employee who is directly responsible for the operation or maintenance of such
Shared Asset.
(eee) "Tier One Damages" means those Damages defined as Tier One
Damages in Section 11(f)(i)(A.1).
(fff) "Tier Two Damages" means those Damages defined as Tier Two
Damages in Section 11(f)(i)(B.1).
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(ggg) "Total Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the sum of the total number of loaded and
empty Railcars in the account of such Operator in CRC Trains and the total
number of loaded and empty Railcars in the account of such Operator in Operator
Trains, by (ii) the sum of the total number of loaded and empty Railcars in the
accounts of both Operators in CRC Trains and the total number of loaded and
empty Railcars in the accounts of both Operators in Operator Trains, during such
period in such Zone.
(hhh) "Transaction Agreement" means the Transaction Agreement
dated as of June 10, 1997, among CSX, CSXT, NSC, NSR, Conrail Inc., CRC and CRR
Holdings LLC.
(iii) "Usage Statement" means a statement delivered by CRC
pursuant to Section 9(b).
(jjj) "USOA" means the uniform system of accounts prescribed for
class I railroads by the STB or any successor federal agency that shall succeed
to the functions of the STB in prescribing uniform systems of accounts for rail
carriers; provided, that if there shall be no STB and no such federal agency,
USOA shall mean such system of accounts as is generally maintained by rail
carriers consistent with GAAP as applied in the rail industry.
(kkk) "Valuation Date" means the date of this Agreement and
thereafter the sixth (6th), twelfth (12th), eighteenth (18th) and twenty-fourth
(24th) anniversaries of the date of this Agreement and the first day of each
Renewal Term.
(lll) "Zone" means a designated geographic section, or designated
facilities, of the Shared Assets Area as established and described in the
Accounting Plan.
Section 2 Management.
(a) CRC Board.
(i) The CRC Board shall manage the Shared Assets.
(ii) The CRC Board may appoint a Board of Managers, a
committee, a CRC officer or other persons to have such duties and
authority with respect to the Shared Assets as may be assigned to them
from time to time by the CRC Board.
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(iii) Any Board of Managers appointed by the CRC Board
shall be comprised of an equal number of individuals (and their
successors) nominated by CSXT and nominated by NSR.
(iv) The CRC Board shall remove from any Board of
Managers (A) at the direction of CSXT, any person who was nominated by
CSXT, and (B) at the direction of NSR, any person who was nominated by
NSR.
(b) General Manager.
(i) The General Manager shall not at any time have been
an employee of CSXT or NSR or any of their affiliates unless otherwise
agreed to by both Operators, and shall be appointed by the CRC Board.
(ii) The General Manager shall manage and supervise the
ownership, operation, maintenance and use of the Shared Assets in
accordance with directives and policies of the CRC Board and this
Agreement, subject to the authority of the CRC Board, and through such
Shared Assets Area superintendents and other Shared Assets Area
executives as are appointed by the General Manager with the approval of
the CRC Board. The General Manager shall report to the CRC Board. The
General Manager shall perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR.
(iii) The General Manager may be removed from office
prior to the expiration of his or her term at any time by a majority of
the CRC Board for any reason or for no reason. Upon the written request
of CSXT or NSR to the CRC Board, the General Manager shall also be
removed from office prior to the expiration of his or her term for
serious misconduct, which shall mean conduct that would make it
unreasonable to retain the General Manager, including but not limited to
conduct such as: (A) violation of applicable alcohol or drug use
policies, (B) fraud, (C) embezzlement or other act of dishonesty against
CRC, CSXT or NSR or any of their customers or suppliers, (D) activities
willfully undertaken by the General Manager which reflect adversely upon
the reputation of CRC, CSXT or NSR, (E) refusal to perform or
substantial neglect of the responsibilities assigned to the General
Manager, (F) failure to perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR after 45
days' written notice from an Operator describing such failure, (G) any
violation of any law or rule or regulation of any Governmental Entity
which results in serious adverse consequences to CRC, CSXT or NSR, or
(H) any material violation of any directive or policy of the CRC Board
or any statutory or common law duty of loyalty to CRC. If a majority of
the CRC Board in response to such a request of CSXT or NSR fails to
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direct the removal of the General Manager, the dispute may be submitted
by either Operator for resolution by binding arbitration pursuant to
Section 13, provided, however, that in any such arbitration to resolve a
dispute under this Section 2(b)(iii), the hearing shall commence no
later than 30 days following the appointment of the arbitrator and the
award shall be rendered no later than 30 days following the completion
of the hearing.
(c) Employees. The General Manager and all persons who operate
and maintain the Shared Assets shall be employees of CRC, except for CSXT or NSR
employees who provide Temporary Services and employees of Operators or
independent contractors which provide services pursuant to contracts or
arrangements in accordance with Section 2(f).
(d) CRC Responsibilities. CRC shall be responsible for safely and
efficiently operating, controlling and managing the use of the Shared Assets,
impartially as between CSXT and NSR in accordance with directives and policies
of the CRC Board, and with responsible business practices which are consistent
with those used by CSXT and NSR in the operation of their businesses, and are
designed to achieve the lowest cost of the safe and efficient operation, use and
maintenance of the Shared Assets.
(e) Impartiality. CRC shall perform all of its obligations
pursuant to this Agreement on an impartial and non-discriminatory basis as
between CSXT and NSR, giving no preference to either of them in providing
Switching and Yard Services, in the control of train dispatching over the Shared
Assets, or in any other way whatsoever.
(f) Independent Contractors. CRC may, at least to the extent it
may do so immediately prior to the date of this Agreement, procure the use of
equipment or facilities owned by independent contractors, or services provided
by independent contractors (using their own employees), with respect to the
operation, maintenance and use of Shared Assets, including, without limitation,
accounting, computer and other administrative services, and the furnishing of
equipment and mechanical services. For purposes of this Section 2(f),
independent contractors may include CSXT or NSR.
Section 3 Operations.
(a) Operator's Rights. CRC hereby grants to each Operator full
operating rights to operate its own trains (staffed by a road crew) and
equipment, with its own crews and equipment and at its own expense, over any and
all tracks included in the Shared Assets, and to use all of the Shared Assets in
connection with the operation of such trains or equipment, for the following
purposes:
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(i) Movement by such Operator of trains (staffed by a
road crew) through the Shared Assets Area between two geographical
locations outside the Shared Assets Area;
(ii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and an Operator's Facility or a Jointly-Operated Facility which is
within the Shared Assets Area;
(iii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and local industries which are within the Shared Assets Area;
(iv) Movement by such Operator of trains (staffed by a
road crew) between Operator's Facilities or Jointly-Operated Facilities
which are within the Shared Assets Area and local industries which are
within the Shared Assets Area;
(v) Movement, handling, pick-up, set off, switching,
transfer and interchange of Railcars, blocks of Railcars or trains
(staffed by a road crew) to, from or at local industries, Operator's
Facilities or Jointly-Operated Facilities, in connection with movements
described in Sections 3(a)(i) through (iv), to the extent provided for
in the Operating Plan agreed to and modified by the parties from time to
time; and
(vi) such other purposes as may be agreed upon by CRC,
CSXT and NSR.
(b) Use. The crews of each train operated by an Operator on
Shared Assets shall be qualified under and shall comply with applicable laws and
regulations as well as the safety and operating rules of CRC.
(c) Grant of Rights. Subject to reasonable compensation and other
terms established in the Accounting Plan, and in each case for the purpose of
Switching and Yard Services performed by CRC pursuant to Section 3(d) and
movement of Operator Trains pursuant to Section 3(a):
(i) CSXT hereby grants to CRC and NSR overhead
operating rights to operate CRC trains and NSR trains, respectively,
with their own crews, over the following CSXT rail line segments:
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(A) the current CRC River line between CP2 and the
Ridgefield Heights Auto Facility (including the right to serve
such Ridgefield Heights Auto Facility); and
(B) such other CSXT line segments access to and use
of which by CRC and NSR are necessary to effectuate the train
operations and services contemplated by this Agreement.
(ii) CSXT hereby grants to CRC full operating rights to
operate CRC trains, with its own crews, over the CSXT rail line segments
within and through the area outlined on red on Exhibit 6 to the Letter
Agreement to access and serve on an unimpeded basis (i) customers
located on the real estate shown outlined in red on Exhibit 6 and (ii)
customers that are located north or west of the area outlined in red and
that are accessed via track #283 or via #274. Such trackage rights are
subject to relocation by CSXT or NYC, provided that CRC shall continue
to have the right to serve the customers referred to in the foregoing
sentence from the tracks to which such relocation is made and to operate
on an unimpeded basis over such relocated tracks. CRC shall have the
right to switch, classify and store up to (but not more than) twenty
(20) cars at a time on tracks designated from time to time by CSXT
within the area outlined in red on Exhibit 6, but solely with respect to
service provided to customers on the trackage rights described in this
Section 3(c)(ii).
(iii) NSR hereby grants to CRC and CSXT overhead
operating rights to operate CRC trains and CSXT trains, with their own
crews, over such NSR line segments access to and use of which by CRC and
CSXT are necessary to effectuate the train operations and services
contemplated by this Agreement.
(iv) NSR hereby grants to CRC full operating rights to
operate CRC trains, with its own crews, over the NSR rail line segments
within and through the area shown in green on Exhibit 7 to the Letter
Agreement to access and serve on an unimpeded basis the customers
located on the real estate shown in green on Exhibit 7. Such trackage
rights are subject to relocation by NSR or PRR, provided that CRC shall
continue to have the right to serve the customers referred to in the
foregoing sentence from the tracks to which such relocation is made and
to operate on an unimpeded basis over such relocated tracks. CRC shall
have the right to switch, classify and store up to (but not more than)
twenty (20) cars at a time on tracks designated from time to time by NSR
within the area colored green on Exhibit 7, but solely with respect to
service provided to customers on the trackage rights described in this
Section 3(c)(iv).
(v) CSXT hereby grants to CRC and NSR the right to use
Manville Yard for the purpose of basing local trains, classifying and
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assembling trains and switching Railcars, but not for the purpose of
serving local industries located at such yard.
When required by the CSXT Operating Agreement and the NSR Operating Agreement,
CSXT and NSR have obtained the consent of NYC and PRR, respectively, for the
grant of rights referred to in this Section 3(c). Notwithstanding any other
provision of this Agreement, each rail line segment identified in this Section
3(c) shall be dispatched, maintained, operated and controlled by the Operator
which granted the rights with respect to such segment, provided that such
dispatching, maintenance, operation and control shall be performed on an
impartial and non-discriminatory basis as between the Operators. Trains operated
by an Operator pursuant to operating rights granted under this Section 3(c)
shall be governed by and subject to the Operating Plan.
(d) Switching and Yard Services.
(i)....At the request of and as agent for each Operator,
CRC shall perform Switching and Yard Services required by such Operator
within the Shared Assets Area, including without limitation any such
services which such Operator may be responsible for performing or having
performed for a shipper or other Person.
(ii)...Except as otherwise provided in Section 3(a), and
other than within an Operator's Facility, neither Operator shall with
its own equipment or with its own crews perform any Switching and Yard
Service within the Shared Assets Area for itself or for any other
Person.
(e) Operating Protocols. From time to time, NSR, CSXT and CRC may
mutually establish Shared Assets Area Operating Plans, General Dispatching
Guidelines, Car Movement Guidelines, Switching/Blocking Requirements and other
operating protocols and rules concerning operations within the Shared Assets
Area, for the purpose of assuring timely train operations, fluid movement of all
railcars, equal and impartial handling of Operators' trains and railcars,
minimization in the number of empty cars in the Shared Assets Area, and overall
operating efficiency in the Shared Assets Area. The current Operating Protocols
have been agreed upon by NSR, CSXT and CRC and are set forth as Exhibit A to
this Agreement. The Operating Protocols may be modified only upon mutual
agreement of all parties.
(f) Freight Traffic To Remain in Account of Each Operator.
Switching and Yard Services and other services performed by CRC for either
Operator under this Agreement shall be performed as agent for, and for the
account of, such Operator. All freight traffic and Railcars handled within the
Shared Assets Area, including traffic and Railcars handled by CSXT or NSR
pursuant to Sections 3(a) and 3(c), and traffic and Railcars handled by CRC
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pursuant to Sections 3(c) and 3(d), shall at all times remain in the waybill,
car hire and revenue accounts of either CSXT or NSR.
(g) Rates, Routes and Divisions. Each Operator shall have
exclusive and independent authority to establish all rates, charges, service
terms, routes and divisions, and to collect all freight revenues, relating to
freight traffic transported for its account to, from and within the Shared
Assets Area (except those Shared Assets Area line segments over which such
Operator possesses only overhead operating rights pursuant to Section 3(c)). CRC
shall not participate or appear in any rates, routes or divisions relating to
any freight traffic whatsoever to, from and within the Shared Assets Area, and
shall not be entitled to or responsible for any freight charges relating to such
freight traffic. CRC shall not quote or establish any rate or service terms
applicable to freight transportation services to, from and within the Shared
Assets Area, enter into transportation contracts with any Person (other than an
Operator) for freight transportation services to, from and within the Shared
Assets Area, or undertake to perform any for-hire transportation services
directly, in its own name or for its own account for any Person (other than an
Operator). The transfer or exchange of freight traffic between CSXT and CRC, and
between NSR and CRC, within the Shared Assets Area shall not constitute an
interchange of freight traffic or freight rail cars for purposes of determining
rates, routes, divisions or interline settlements relating to any such freight
traffic.
(h) Shipper Bills. Neither Operator shall inform the other or CRC
of any rates or charges to shippers to which such Operator provides freight
transportation services in the Shared Assets Area, and no copies of any shipper
bill of lading or waybill shall be given by such Operator to the other or to CRC
except to the extent that such documents are exchanged between rail carriers in
the usual course of interline shipments and documenting.
(i) Service Responsibility. Each Operator shall at all times be
solely responsible for obtaining, supplying and routing Railcars other than
locomotives, for all Railcar ownership costs (including per-diem charges and
mileage allowances) and for providing service to its shippers within the Shared
Assets Area pursuant to its transportation contracts or other prices with its
shippers, including interline accounting, and all car hire and demurrage or
detention charges associated with Railcars in its account within the Shared
Assets Area.
(j) Dispatching. CRC shall, from local locations or a location
agreed upon by CSXT and NSR, control the dispatching, scheduling and movement
of, and Switching and Yard Services for, all trains (including Operator Trains
and CRC Trains) over the Shared Assets (other than Operator's Facilities, unless
requested to do so by the Operator thereof) without any discrimination at any
time in favor of or against either Operator, but in accordance with written
policies and priorities for categories of freight, type of Railcar, size of
train and train destinations established from time to time by the General
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Manager and approved by the CRC Board to achieve the maximum efficiency and
lowest aggregate Shared Asset costs of CRC and the Operators, provided, however,
that CSXT and NSR from time to time shall consider, and in the sole discretion
of each may adopt, mutually acceptable arrangements giving each Operator one
controlled route through the Shared Assets Area to the extent practicable and,
if the parties fail to adopt mutually acceptable arrangements giving either
Operator such a controlled route, CRC shall control dispatching, scheduling and
train movements over the affected Shared Assets as heretofore provided. CRC
shall also control the dispatching, scheduling, movement and Switching and Yard
Services for all CRC Trains and Operator Trains over the current CRC River Line
between CP 2 and CP 5. Dispatching, scheduling and movement of trains performed
by either Operator under this Section 3(j) shall conform to the same standards
of non-discrimination, written policies and priorities applicable to the control
of such functions by CRC at other locations included within the Shared Assets
Area.
(k) Railcar Weighing. All Railcars for the account of an Operator
which originate or terminate on Shared Assets and which require weighing shall
be weighed by and at the expense of such Operator or its customer, and at no
cost to CRC.
(l) Freight Claims. The Operators shall agree among themselves on
the most fair, practical and efficient arrangements for handling and
administering freight loss and damage claims with the intent that (i) each
Operator shall be responsible for losses occurring to lading either in its
possession or in the possession of CRC for the account of such Operator, and
(ii) the Operators shall follow relevant AAR rules and formulas in providing for
the allocation of losses which are either of undetermined origin or in Railcars
handled in interline service by or for the account of both Operators.
(m) Freight Car Repairs. If any Railcars are bad ordered while on
the Shared Assets and must be set out from a CRC Train or Operator Train, CRC
shall promptly return such Railcars to the Operator in whose account such
Railcars reside in accordance with such Operator's instructions. CRC shall
furnish, at such Operator's expense, required labor and material to perform, and
shall perform, light repairs on such bad ordered Railcars as necessary to make
such Railcars legal and safe for movement. CRC shall bill such Operator for the
costs of such light repairs in accordance with the Field and Office Manuals of
the AAR Interchange Rules in effect at the time such repairs are performed. CRC
shall bill directly to and collect from the applicable Operator charges for
repair items that, under the AAR Interchange Rules, are the responsibility of
the Railcar owner and/or the handling line carriers. Each Operator may rebill
charges for repair items that are the responsibility of the Railcar owner and/or
the handling line carriers. If any such bad ordered Railcar cannot be made legal
and safe for movement by the performance of light repairs, CRC shall, at such
Operator's expense, arrange for appropriate removal of the affected Railcar in
accordance with such Operator's instructions.
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(n) Train Services. Actual costs incurred by CRC to provide
special services (other than services otherwise provided for in this Agreement)
at the request of an Operator with respect to trains, locomotives and Railcars
for the account of such Operator, shall be paid by such Operator to CRC,
provided that the costs and terms of similar special services rendered to each
Operator shall be without discrimination between Operators as to cost and terms,
giving due allowance to any differences in the costs of providing such services.
(o) Wrecking Service. Wrecking service or wrecking train service
required in connection with services contemplated by this Agreement shall be
provided by CRC (or its designee) as promptly as possible.
(p) Admission of Third Parties. Notwithstanding any other
provision in this Agreement, no party may permit any Person (other than a party
hereto) to have access to, operate over or use any Shared Asset without the
prior approval of all parties, which approval may be given or refused in the
sole discretion of each party.
Section 4.....Equipment and Properties.
(a) Procurement. CRC shall procure, operate and maintain all
equipment, real property rights and improvements thereon which are reasonably
required for (i) CRC to operate the Shared Assets, and (ii) the Operators to
move trains over the Shared Assets, in each case in accordance with this
Agreement.
(b) Contribution of Locomotives by Operators. Upon reasonable
request by the General Manager, the Operators shall furnish to CRC, through
full-service lease or other mutually satisfactory arrangements, locomotives
reasonably required by CRC for the performance of its obligations under this
Agreement. The respective obligations of each Operator to furnish such
locomotives shall be based, insofar as reasonably practicable, upon the
Operator's CRC Train Usage Percentage during the calendar month preceding such
request for the Shared Assets Area or Zone in which such locomotives are needed
by CRC. It is the parties' intention that (i) the arrangements pursuant to which
such locomotives are furnished by either Operator to CRC shall provide that
heavy maintenance, repair and overhaul shall be the responsibility of such
Operator, (ii) locomotives furnished by either Operator to CRC may, in order to
permit maintenance, repair and overhaul of such locomotive units, be exchanged
for other locomotive units furnished by such Operator, and (iii) the respective
obligations of each Operator to furnish such locomotives upon request by the
General Manager shall be adjusted on at least a monthly or more frequent basis.
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(c) Locomotive Service and Repairs. At the request of an
Operator, CRC shall furnish required labor and material to perform, and shall
perform, fueling and servicing of any Operator's locomotive, as well as light
repairs on any Operator's locomotive as necessary to make such locomotive legal
and safe for movement. CRC shall bill such Operator (or other owner of such
locomotive) for the costs of such fueling, servicing and light repairs in
accordance with industry practice in effect at the time such fueling, services
or repairs are performed. If any such locomotive cannot be made safe for
movement by the performance of light repairs, CRC shall, at the expense of such
Operator (or other owner of such locomotive), arrange for appropriate removal of
such locomotive in accordance with such Operator's instructions.
Section 5. Maintenance.
(a) Routine Maintenance.
(i) CRC shall be responsible for Routine Maintenance
when necessary or desirable to maintain the Shared Assets in a safe
operating condition, and to permit and facilitate (A) the performance by
CRC of its obligations pursuant to this Agreement, and (B) the use of
Shared Assets by the Operators in accordance with this Agreement.
(ii) CSXT or NSR, directly or through their respective
affiliates, may perform the work which CRC performed prior to the date
of this Agreement when (A) CRC does not possess the skills needed for
such work, (B) CRC lacks the necessary employees to do such work in a
timely fashion, or (C) CRC does not possess the equipment needed to do
such work. CRC and the party performing the work shall agree to a
reasonable fee for such work prior to performance. CRC, CSXT and NSR may
agree to have additional work performed either by CSXT, NSR or their
affiliates.
(b) CRC Program Maintenance.
(i) The General Manager shall prepare and submit to the
CRC Board a Program Maintenance plan concurrently with the submission of
an Operating Budget and the Capital Expenditure Budget to the CRC Board.
(ii) Any of CRC, CSXT or NSR may at any time deliver a
Program Maintenance Proposal to the other two of them and to the General
Manager and each member of the CRC Board.
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(iii) The CRC Board shall either (A) approve any or all
of such Program Maintenance Proposals and plan with such changes as it
deems appropriate, include the costs thereof in a pending or amended
Capital Expenditure Budget, and direct the General Manager to cause the
maintenance described in approved Program Maintenance Proposals or plan
to be performed in accordance with Sections 5(b)(iv) and (v), or (B)
disapprove any or all of such Program Maintenance Proposals or plan.
(iv) Program Maintenance shall be the responsibility of
CSXT and NSR pursuant to contracts or arrangements with CRC, and CRC
shall not perform Program Maintenance, except for Program Maintenance
which can be provided by Persons other than CSXT or NSR at a lower cost
to CRC than the CSXT or NSR cost thereof.
(v) CRC shall select, to perform each Program
Maintenance project or program, the Operator which CRC reasonably
determines will perform such project or program at the least cost to CRC
consistent with safe and efficient operations, and taking into account
scheduling considerations, based on written proposals submitted by each
Operator.
(c) Maintenance Standards. Unless otherwise authorized by the CRC
Board, the General Manager shall prepare and submit to the CRC Board proposals
(including the Program Maintenance plan submitted pursuant to Section 5(b)) for
the performance of such Routine Maintenance and Program Maintenance as is
reasonably necessary to keep and maintain the Shared Assets substantially in
their condition as of the date of this Agreement. If the CRC Board fails either
to approve or disapprove by majority vote any such proposal within 45 days after
it was submitted to the CRC Board, the disagreement over the propriety or need
for any of the Routine Maintenance or Program Maintenance included in such
proposal may be submitted by either Operator for resolution by binding
arbitration pursuant to Section 13.
Section 6. Capital Improvements. Except as provided in Section
5, all capital improvements involving Shared Assets shall be governed by the
following provisions:
(a) Proposed Projects. Either Operator, CRC or the General
Manager may propose to the CRC Board from time to time capital improvement
projects. Each such project shall be reviewed by the CRC Board, which may
approve or disapprove by majority vote, or fail to approve, such projects.
(b) CRC Board Approved Projects. Each Operator shall be
responsible for an equal share of the initial budgeted funding of each capital
improvement project which has been approved by the CRC Board and is included in
an approved Capital Expenditure Budget, except as provided in Section 6(c). A
final accounting shall be made to adjust the initial budgeted funding to the
actual project cost as specified in the Accounting Plan.
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(c) Nonseverable Improvement Projects.
(i) At the written request of an Operator delivered to
the other, each Operator shall, within 45 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
proposal with respect to a Nonseverable Improvement project which was
neither approved nor disapproved by majority vote by the CRC Board
within 45 days after such project was proposed to the CRC Board (A)
describing any changes which such Operator proposes be made to such
project and specifying a schedule, budget and allocations between the
Operators of initial capital costs of such Nonseverable Improvement, or
(B) proposing that it not be made.
(ii) The arbitrator receiving the proposals referred to
in Section 6(c)(i) (A) shall consider (1) the degree, if any, to which
the construction, operation and use of such Nonseverable Improvement
would impair or interfere with the use of Shared Assets by CRC or either
Operator, or conflict with any pending capital improvements included in
an approved Capital Expenditure Budget, and (2) the budget and
allocations between the Operators of initial capital costs of such
Nonseverable Improvement as proposed by each Operator, and (B) shall
determine within 45 days of such receipt which of such proposals shall
be implemented, or that such Nonseverable Improvement shall not be made,
and the CRC Board shall approve any proposal which such arbitrator
determines shall be implemented.
(d) Severable Improvement Projects.
(i) Each Operator shall have the unilateral right to
construct and exclusively fund any Severable Improvement which was not
approved by the CRC Board.
(ii) Each Severable Improvement funded exclusively by
an Operator shall be used exclusively by that Operator, which shall be
solely responsible for maintaining such Severable Improvement at its own
expense, until such time that the other Operator gives written notice
that it desires also to use such Severable Improvement, stating the
amount which such other Operator is prepared to pay to the Operator
which initially funded such Severable Improvement for the right to use
such Severable Improvement.
(iii) If the Operators are unable to agree on the amount
of such payment within 45 days after the notice referred to in Section
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6(d)(ii) was given, then at the written request of an Operator delivered
to the other after 45 days but before 60 days after such notice was
given, each Operator shall, within 15 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
statement setting forth the proposed payment by the second Operator, and
the arbitrator shall within 45 days of such receipt determine which of
such proposed amounts shall apply, which shall be binding on both
Operators and paid promptly.
(iv) Such Severable Improvement shall become a
Nonseverable Improvement at the time such second Operator pays the
amount so determined and, thereafter, maintenance and other costs
associated with the operation of such improvement shall be apportioned
between the Operators as provided in this Agreement.
(e) Capital Improvements as Shared Assets. Upon completion, all
capital improvements approved by the CRC Board and all Nonseverable Improvements
shall become part of the Shared Assets owned by CRC subject to all provisions of
this Agreement, free and clear of all Operator liens.
(f) Title to Severable Improvements. Each Operator shall retain
title to all Severable Improvements exclusively funded by such Operator. At any
time during the term of this Agreement, an Operator may remove (at its sole
expense) any Severable Improvement which it exclusively funded, provided that
such Operator has repaired (at its sole expense) any damage to a Shared Asset
caused by such removal and has restored the related Shared Assets substantially
to their condition at the time such Severable Improvements were made. In the
event an Operator shall not have removed any Severable Improvement to which the
Operator shall have title prior to the expiration or termination of this
Agreement, title to such Severable Improvement shall vest in CRC, free and clear
of all Operator liens, upon such expiration or termination.
(g) Noninterference. The construction, operation and use of
Severable Improvements by an Operator shall not impair or interfere with the use
of Shared Assets by CRC or the other Operator, nor shall any Severable
Improvement conflict with any pending capital improvements included in an
approved Capital Expenditure Budget.
(h) Switch Connections. CRC shall, upon the written request of
one or both Operators, provide for switch and turnout connections from Shared
Asset tracks to a private sidetrack owned by a shipper or other Person, if such
request:
(i) includes the commitment of the Operator or both
Operators making such request, or
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(ii) is accompanied by a written undertaking from such
shipper or other Person, in each case satisfactory to CRC, to pay to CRC all
costs incurred from time to time by CRC to provide for such switch and turnout
connections within 30 days after it delivers a bill for such costs to such
Operator, Operators, shipper or other Person.
(i) Adjacent Improvements.
(i) In the event an Operator constructs, acquires or
funds the cost of an Adjacent Improvement (whether or not such Adjacent
Improvement is ultimately owned by such Operator), the other Operator
shall be entitled to share usage of such Adjacent Improvement by giving
written notice stating the amount which such other Operator is prepared
to pay to the first Operator for such right. If the Operators are unable
to agree on the amount of such payment within 45 days after such notice
was given, then at the written request of an Operator delivered to the
other after 45 days but before 60 days after such notice was given, the
matter shall be submitted for resolution by binding arbitration pursuant
to Section 13 and the provisions of Section 6(d)(iii) shall apply to
determine the amount of such payment.
(ii) After the second Operator pays the amount so
determined, if the first Operator owns or has a property interest in the
Adjacent Improvement, the provisions of this Section 6 shall be applied
as if such improvement were a Nonseverable Improvement. If a shipper or
another Person unrelated to the first Operator owns such Adjacent
Improvement, the second Operator shall be entitled to share fully the
rights of the first Operator in connection with such Adjacent
Improvement in consideration of the initial payment.
(j) Operator's Facilities. The foregoing provisions of this
Section 6 shall not apply to any capital improvement (including, but not limited
to, a transloading facility or automotive ramp) within an Operator's Facility or
the current CRC developable property encompassing current CRC Elizabethport Yard
(Trumbull Street Yard) or the CRC developable property east of current CRC's
Chemical Coast Secondary and adjacent to the E-Rail intermodal facility
(northern New Jersey).
Section 7. Accounting.
(a) Books of Record and Account. CRC shall keep proper books of
record and account, in which full and correct entries shall be made of all CRC
transactions, costs, expenses and revenues in accordance with GAAP and the USOA,
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as modified by the Accounting Plan. All expense and revenue transactions related
to the Shared Assets Area shall be readily identifiable by distinct accounting
codes.
(b) Financial Statements. CRC shall deliver to each Operator (i)
within 30 days after the end of each calendar month, a summary income statement
and a summary balance sheet showing as of the last day of and for such calendar
month, major categories of CRC revenue, expense, assets and liabilities, (ii)
within 30 days after the last day of each CRC fiscal quarter, interim financial
statements as of and for the fiscal quarter ended on such day, similar to
statements described in Rule 10-01 of Regulation S-X under the Securities
Exchange Act of 1934, as amended, as modified by the Accounting Plan, and (iii)
within 30 days after the last day of each CRC fiscal year, statements of income
and cash flow and a balance sheet as of and for the fiscal year ended on such
day, prepared in accordance with GAAP and the USOA, as modified by the
Accounting Plan.
Section 8. Costs and Budgets.
(a) CRC Costs. CRC shall pay (and, except for Excluded Taxes,
CSXT and NSR shall, pursuant to Section 9, reimburse CRC for) all of the costs
and expenses to maintain its ownership of the Shared Assets and to operate and
maintain the Shared Assets, including but not limited to all Taxes and
assessments, licenses, permits and any other governmental authorizations
required to own, operate and maintain the Shared Assets, the principal of and
interest and premium, if any, on, and all other costs of, its indebtedness and
all other costs of its capital.
(b) Employee Cost Reimbursement. CRC shall reimburse CSXT and NSR
for the wages, pro rata portion of fringe benefits, other direct employment
costs (including additives) and other actual employee-related costs of any CSXT
or NSR employee, respectively, who provides Temporary Services.
(c) Capital Expenditure Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each CRC fiscal year, a Capital Expenditure Budget for such fiscal year,
specifying for such year the schedule of Program Maintenance and Shared
Asset capital improvements to be performed and constructed for the
benefit of both Operators during such fiscal year and the months therein
during which such expenditures are proposed to be made, for approval, or
modification and approval, by the CRC Board.
(ii) The General Manager shall not permit any capital
expenditure to be made by CRC, CSXT or NSR except in accordance with the
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Capital Expenditure Budget in effect from time to time, Severable
Improvements exclusively funded by an Operator and emergency capital
expenditures made (A) to preserve, or to mitigate a serious diminution
in, the value and usefulness of a Shared Asset to CRC, CSXT and NSR, or
(B) to prevent or mitigate a serious disruption in the operation and use
of the Shared Assets by or for CRC, CSXT or NSR.
(iii) Any Capital Expenditure Budget may be amended in
writing at any time by the CRC Board.
(d) Operating Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each fiscal year of CRC, an Operating Budget for such fiscal year
showing the budget amounts of revenues and expenses for each month
during such fiscal year, for approval, or modification and approval, by
the CRC Board.
(ii) The General Manager shall use all reasonable
efforts to prevent CRC expenses with respect to Shared Assets for a
period from exceeding the amounts shown on the Operating Budget for such
period.
(iii) The General Manager shall give prompt written
notice to each member of the CRC Board of any actual or, in the judgment
of the General Manager, probable, material change in the revenues,
expenses or working capital requirements shown on the Operating Budget
for any period.
(iv) Any Operating Budget may be amended in writing at
any time by the CRC Board.
Section 9. Cost Sharing.
(a) Accounting Plan. The parties shall develop and implement a
written plan of accounting containing a detailed description, by category of
cost and location, of the costs associated with the management and operation of
the Shared Assets Area and the method by which such costs shall be fairly and
properly apportioned among the parties. Such plan of accounting may include
separate accounting and sharing of costs for particular Zones, and shall conform
to the following general principles:
(i) Forty two percent (42%) of Interest Rental shall be
apportioned to CSXT and fifty eight percent (58%) of Interest Rental
shall be apportioned to NSR;
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(ii) Locomotive ownership, lease, fueling, light repair
and servicing costs incurred by CRC within the Shared Assets Area or
each Zone (except costs incurred by CRC and charged directly to an
Operator pursuant to Section 4(c)) shall be apportioned between the
Operators on the basis of the CRC Train Usage Percentages;
(iii) Crew compensation and other crew costs incurred by
CRC within the Shared Assets Area or each Zone with respect to CRC
Trains shall be apportioned between the Operators on the basis of the
CRC Train Usage Percentages;
(iv) General and administrative, supervisory and
overhead expenses incurred by CRC within the Shared Assets Area or for
functions related to the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(v) Dispatching and train control costs (including,
without limitation, labor, equipment, materials and maintenance
expenses) incurred by CRC with respect to the Shared Assets Area shall
be apportioned between the Operators on the basis of the CRC Train Usage
Percentages;
(vi) Police and other costs incurred by CRC with respect
to security within the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(vii) Damage paid by CRC pursuant to Section 11(c) shall
be apportioned between the
Operators in accordance with Section 11(b);
(viii) All other costs incurred by CRC with respect to the
Shared Assets Area or each Zone (except Taxes and insurance) shall be
apportioned between the Operators on the basis of the Total Train Usage
Percentages;
(ix) Taxes (other than Excluded Taxes) incurred by CRC
with respect to the Shared Assets Area or each Zone shall be apportioned
between the Operators on the basis of the Operator's Expense Percentages
for the period to which such Taxes relate; and
(x) Insurance costs incurred by CRC with respect to
Shared Assets within the Shared Assets Area or each Zone shall be
apportioned between the Operators on the basis of the Operator's Expense
Percentages for the period to which such insurance costs relate;
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If the parties are unable to agree on the terms and provisions of the Accounting
Plan, such disagreement may be submitted by either Operator for resolution by
binding arbitration pursuant to Section 13.
(b) Usage Statement. CRC shall deliver to each Operator prior to
the last day of each calendar month, a written statement showing for the prior
Billing Month:
(i) the total number of loaded and empty Railcars in
the account of each Operator in CRC Trains which performed Switching and
Yard Services or operated directly between customer facilities in each
Zone;
(ii) the total number of loaded and empty Railcars moved
by or for such Operator in Operator Trains which operated overhead or
directly to Jointly-Operated Facilities, Operators' Facilities or
customer facilities in each Zone;
(iii) the calculation of the CRC Train Usage Percentage
and the Total Train Usage Percentage for each Operator for each Zone,
and (A) all Railcars in a train shall be deemed to be on Shared Assets when the
first or last Railcar of such train is on Shared Assets and (B) each time that a
Railcar is removed from or added to a train in the Shared Assets Area shall
constitute a separate movement of such Railcar.
(c) Expense Statement. Concurrently with the delivery of each
Usage Statement to the Operators, CRC shall deliver to the Operators a statement
showing (i) the expenses incurred by CRC to own, operate and maintain the Shared
Assets during the Billing Month, (ii) the revenues, if any, derived by CRC from
the ownership and operation of the Shared Assets during such Billing Month, and
(iii) the Reimbursable Expenses for such Billing Month, in each case computed in
accordance with GAAP and the USOA, as modified by the Accounting Plan.
(d) Capital Expenditure Statement. Concurrently with the delivery
of each Usage Statement to the Operators, CRC shall deliver to the Operators a
statement showing the estimated Budgeted Capital Expenditures for the calendar
month immediately succeeding the calendar month in which such statement is
delivered.
(e) Bills. Concurrently with the delivery to the Operators of a
Usage Statement for a Billing Month, CRC shall deliver to each Operator a bill
(a "Bill") showing for such Billing Month:
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(i) one hundred and two percent (102%) of the amount of
each Reimbursable Expense apportioned to such Operator for such Billing
Month under the Accounting Plan;
(ii) one-twelfth of fifty percent (50%) of the annual
amount of Budgeted Capital Expenditures approved by the CRC Board; and
(iii) one-twelfth of the Interest Rental apportioned to
such Operator.
(f) Payment. Each Operator shall pay to CRC the amount shown on
each Bill as being payable by such Operator, on or before the 30th day after the
date of such Bill regardless of whether or not such Operator disputes the
accuracy of any amount or calculation shown on such Bill.
(g) Disputed Bills.
(i) Any dispute by an Operator of the accuracy of any
amount or calculation shown on any Bill shall be described and specified
in reasonable detail in a Dispute Letter from such Operator to CRC and
the other Operator within two years after the date of such Bill.
(ii) Any amounts or calculations shown on any Bill which
are not disputed in accordance with Section 9(g)(i) shall conclusively
be deemed to be accurate and shall be binding on each Operator and CRC.
(iii) CRC and both Operators shall promptly endeavor to
resolve the disputes described in each Dispute Letter, and if they fail
to agree to a resolution of such disputes within 60 days of the delivery
of such Dispute Letter to CRC, then the firm of independent public
accountants which has been engaged as auditors for CRC shall be engaged
to resolve such disputes in accordance with GAAP and the USOA, as
modified by the Accounting Plan, and the written resolution of such
disputes signed by such accounting firm shall be binding on each
Operator and CRC.
(iv) Any adjustments to Bills which result from the
resolution of Dispute Letter disputes shall be reflected as charges or
credits on the first Bills delivered by CRC to the Operators after such
disputes have been resolved.
(v) The fees in connection with the resolution of any
Dispute Letter disputes of the accounting firm which has been engaged as
auditor for CRC shall be paid fifty percent (50%) by CSXT and fifty
percent (50%) by NSR.
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Section 10. Access. CRC shall give to each Operator during
normal CRC Administrative Office business hours, access to inspect and make
copies of any and all books of record and accounts relating to this Agreement,
all of which shall be maintained by CRC at the CRC Administrative Office.
Section 11. Liability. Except as otherwise provided in Section
3(l) (Freight Claims), Section 11(f) (Specified Level Damages) and Section 11(g)
(Substance Abuse Exceptions), the responsibility between and among CRC, CSXT and
NSR for all Damage arising out of, incidental to or occurring in connection with
this Agreement shall be apportioned without consideration of fault or negligence
of any kind or degree in accordance with the remaining provisions of this
Section 11. The provisions of this Section 11 are intended to inure only to the
benefit of the parties hereto and their corporate successors and affiliates, and
not to create any benefits for any third parties.
(a) Operators' Sole Responsibility. Except as otherwise provided
in Section 11(f) (Specified Level Damages) and Section 11(g) (Substance Abuse
Exceptions), each Operator shall assume and bear all responsibility for Damage
to its own trains, locomotives and equipment, to Railcars and lading in its
possession or being handled for its account and for the death of or injury to
its own employees.
(b) Operators' Joint Responsibility.
(i) Train Usage. Except as otherwise provided in (1)
Section 11(b)(ii) (First Year), (2) Section 11(a) (Operators' Sole
Responsibility), (3) Section 11(c)(i) (CRC Damages Generally), (4)
Section 11(c)(ii)(B) (No Reallocation for Insurance), (5) Section 11(f)
(Specified Level Damages), and (6) Section 11(g) (Substance Abuse
Exceptions), and subject to Section 11(c)(ii)(A) (Net of Insurance), all
Damage shall be apportioned between the Operators in proportion to their
respective Total Train Usage Percentages in the Zone in which the
incident giving rise to such Damage occurred for the 12 calendar month
period immediately preceding the incident giving rise to such Damage.
(ii) First Year. If an incident giving rise to Damage
for which the Operators are jointly responsible under Section 11(b)(i)
(Train Usage) occurs before June 1, 2000, responsibility for such Damage
shall be borne equally by the Operators, with each being liable for
one-half (1/2) of the damages.
(c) CRC Responsibility - Allocation and Insurance.
(i) CRC Damages Generally. Except as otherwise provided
in this Section 11(c), all Damages incurred by CRC, including, without
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limitation, those Damages apportioned to CRC under Section 11(f)
(Specified Level Damages) shall be CRC expenses, allocated as provided
in Section 11(b) (Operators' Joint Responsibility), and included in
Expense Statements charged to the Operators.
(ii) (A) Net of Insurance.
(1) Notwithstanding any other provision in
this Agreement (but subject to Section 11(c)(ii)(B) (No
Reallocation for Insurance)), all Damages (including
without limitation, loss or destruction of, or damage to,
CRC's own property) charged to the Operators, under the
Expense Statements or otherwise, shall be net of any CRC
insurance. It is the intent of the parties (a) for CRC to
look first to any insurance proceeds available to it
before attempting to recover any such Damages from the
Operators and (b) for the Operators' obligation to make
direct payment to CRC not to include any obligation to
make direct payment for any Damages covered by insurance
procured by or on behalf of CRC.
(2) If and to the extent that CRC is an
insured under, or otherwise provided coverage under, an
insurance policy or policies each of which provides
coverage for both CRC and one Operator but not the other
Operator, and regardless of whether two or more of these
policies shall be in existence or have different
deductible-retention amounts and/or limits of recovery,
then the amount of insurance proceeds deemed "available"
under Section 11(c)(ii)(A)(1) to which CRC shall look
before either Operator shall have any obligation for
direct payment shall, as to each Operator, be the maximum
available limit of the insurance providing coverage for
both that Operator and CRC.
(B) No Reallocation for Insurance. When part of the
apportioned Damage will be satisfied from insurance coverage
under this Section 11(c), and part paid directly by the Operator,
the insured portion of the Damage shall be apportioned among or
between CRC and the Operators (and consequently between or among
their insurers) in the same manner and amounts as it would have
been apportioned if the loss were not net of insurance. If any
such allocation results in one party hereto suffering a greater
uninsured loss than the other(s) because of differing deductibles
or self-retentions, that difference in coverage shall not be a
basis for any reapportionment or reallocation of Damage.
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(d) Process. Each Operator shall be responsible for the payment,
handling, administration and disposition of all Damage for which it bears
exclusive responsibility under Section 11(a) (Operators' Sole Responsibility),
and both Operators shall have joint responsibility for the payment, handling,
administration and disposition of all Damage for which they are jointly
responsible under Section 11(b) (Operators' Joint Responsibility) and Section
11(c) (CRC Responsibility - Allocation and Insurance). In assigning joint
responsibility to both Operators, it is not the intent of this Agreement that
the Operators will actually act jointly, but rather that the Operators will
agree between themselves on the most practical and efficient arrangements for
handling, administering, and disposing of Damage for which they bear joint
responsibility, with the objective of eliminating unnecessary duplication of
effort and minimizing overall costs.
(e) Indemnification. Each party to this Agreement covenants and
agrees to (i) fully indemnify and save harmless the other parties to this
Agreement from and against any payments which are the responsibility of such
party under this Agreement, and all expenses, including attorneys' fees and
expenses and other expenses of any court or regulatory proceeding, incurred by
such other parties in defending any claim that they are liable for such
payments, and (ii) defend such other parties against such claims with counsel
selected by such party and reasonably acceptable to such other parties.
(f) Specified Level Damages.
(i) Damages Amount. Section 11(a) (Operators' Sole
Responsibility) and Section 11(b) (Operators' Joint Responsibility)
shall apply directly only when the total amount of all Damages resulting
from a single incident is $25 million or less. Responsibility for
Damages resulting from a single incident for which Damages exceed $25
million shall be allocated as stated in this Section 11(f)(i).
(A.1) Tier One Damages Defined. In this Section
11(f), "Tier One Damages" for any incident occurring during and
between June 1, 1999 and May 31, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
the greater of:
(1) $25 million of Damages; or
(2) the lowest amount of Damages which, when
allocated among all parties, results in an allocation to
either Operator of Damages in an amount equal to all
insurance benefits available to that Operator (called the
"Lesser Insured Operator") which has the lesser (as
between the Operators) amount of insurance benefits
available to it, including, without limitation, insurance
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to which CRC looks under Section 11(c) (CRC Responsibility
- Allocation and Insurance). In determining insurance
benefits available to the Lesser Insured Operator, both
property and liability insurance shall be considered but
(I) only to the extent benefits are actually available in
connection with that incident and (II) they shall be
calculated separately (i.e., property insurance benefits
shall not be considered in any determination of available
liability insurance benefits and vice versa).
In this Section 11(f), "Tier One Damages" for any incident
occurring on or after June 1, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
only the first $25 million of Damages incurred by the parties,
unless otherwise agreed by the parties.
(A.2) Allocation of Tier One Damages. Tier One
Damages shall be allocated among the parties as follows:
(1) Any Damage for which each Operator would
otherwise be solely responsible under Section 11(a)
(Operators' Sole Responsibility) shall be allocated as
provided in Section 11(a);
(2) Any and all CRC Damages other than those
specified in preceding Section 11(f)(i)(A.2)(1)
(including, without limitation, Damage to its trains,
locomotives and equipment, whether owned or leased, to
Railcars and lading in its possession or being handled for
its account, and to the property of any others, as well as
any Damage arising from or in connection with the death of
or injury to any persons, including, without limitation,
its own employees) shall be allocated and paid as provided
in Section 11(c) (CRC Responsibility - Allocation and
Insurance); and
(3) Any and all other Damages shall be
allocated as provided in Section 11(b) (Operators' Joint
Responsibility).
(B.1) Tier Two Damages Defined. In this Section
11(f), "Tier Two Damages" shall include (1) those Damages
allocated to Tier Two under Section 11(g) (Substance Abuse
Exceptions) and (2) all of those Damages in excess of the
aggregate Tier One Damages calculated under Section
11(f)(i)(A.1).
- 30 -
<PAGE>
(B.2) Allocation of Tier Two Damages. Tier Two
Damages shall be allocated between or among the parties hereto in
proportion to their respective fault or negligence in causing the
Damage.
(ii) Dispute Resolution. Any dispute between or among
the parties hereto in determining their respective fault or negligence
in causing the Damage or otherwise relating to their respective
responsibilities for Damage arising out of, incidental to or occurring
in connection with any incident shall be submitted for resolution by
binding arbitration pursuant to Section 13 (Arbitration).
(iii) Amendment of Certain Amounts. The $25 million
amount referred to in this Section 11(f) may be adjusted every five
years following the date of this Agreement with the prior approval of
all parties, which approval may be given or refused in the sole
discretion of each party.
(g) Substance Abuse Exceptions. Each Operator shall assume and
bear all responsibility for Damage to the extent caused by acts or omissions of
any of its employees while under the influence of drugs or alcohol, and Sections
11(b) (Operators' Joint Responsibility) and Section 11(f) (Specified Level
Damages) shall not apply to any such Damage. If, but for the operation of this
Section 11(g), all or any Damages from an incident would otherwise have been
Tier One Damages under Section 11(f) (Specified Level Damages), the portion of
the Damages caused by acts or omissions of any the employee(s) while under the
influence of drugs or alcohol shall be Tier Two Damages, and allocated under
Section 11(f)(i)(B.2) (Allocation of Tier Two Damages), and the remaining
portion of the Damages from that incident shall be included in, and allocated
under, Tier One or Tier Two under the otherwise applicable provisions for
Section 11(f)(i).
(h) Transaction Agreement. Section 2.8 of the Transaction
Agreement shall control any conflict between Sections 11(b) and (c) and said
Section 2.8.
(i) Damages. As used in this Section 11 only, the term
"Damage(s)" shall exclude:
(i) Operator Consequential Damages (which are always
borne by the Operator which sustained them); and
(ii) any claim by any party, in its own right, against
any other party for exemplary or punitive damages, but not for
allocation under this Section 11 of exemplary or punitive damages
claimed against that party by a third person not a party hereto.
- 31 -
<PAGE>
With regard to exemplary and punitive Damages the parties acknowledge and agree
that, with regard to the subject of this Agreement, the intent and agreement of
the parties is that no party shall bring or recover any claim for exemplary or
punitive damages, in its own right, against any other party, but that any party
will allocate, in accordance with this Section 11, exemplary or punitive Damages
from any claim against it by a third person not a party hereto.
Section 12. No Partnership. Nothing in this Agreement shall be
construed to establish a partnership or joint venture between or among CRC, CSXT
or NSR or any of their affiliates or associates.
Section 13. Arbitration. Any dispute, controversy or claim (or
any failure by the parties to agree on a matter as to which this Agreement
expressly or implicitly contemplates subsequent agreement by the parties, except
for matters left to the sole discretion of a party) arising out of or relating
to this Agreement, or the breach, termination or validity hereof, shall be
finally settled through binding arbitration by a sole, disinterested arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall be jointly selected by the parties but, if the
parties do not agree on an arbitrator within 30 days after demand for
arbitration is made by a party, they shall request that the arbitrator be
designated by the American Arbitration Association. The award of the arbitrator
shall be final, binding and conclusive upon the parties. Each party to the
arbitration shall pay the compensation, costs, fees and expenses of its own
witnesses, experts and counsel. The compensation and any costs and expenses of
the arbitrator shall be borne equally by the parties. The arbitrator shall have
the power to require the performance of acts found to be required by this
Agreement, and to require the cessation or nonperformance of acts found to be
prohibited by this Agreement. The arbitrator shall not have the power to award
consequential or punitive damages. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof, which court may award
appropriate relief at law or in equity. All proceedings relating to any such
arbitration, and all testimony, written submissions and award, of the arbitrator
therein, shall be private and confidential as among the parties, and shall not
be disclosed to any other Person, except as required by law and except as
reasonably necessary to prosecute or defend any judicial action to enforce,
vacate or modify such arbitration award.
Section 14. Term. This Agreement shall become effective as of
the date first above written and shall remain in effect until the twenty-fifth
(25th) anniversary of such date, subject to the right of CSXT and NSR to agree
prior to the twenty-third (23rd) anniversary of such date to extend this
Agreement for a renewal period of five (5) years; and if so extended, to agree
prior to the twenty-eighth (28th) anniversary of such date to further extend
this Agreement for an additional renewal period of five (5) years (each such
period, a "Renewal Term").
- 32 -
<PAGE>
Section 15. Force Majeure. The obligations, other than payment
obligations, of the parties to this Agreement shall be subject to force majeure
(which shall include strikes, riots, floods, accidents, Acts of God, and other
causes or circumstances beyond the control of the party claiming such force
majeure as an excuse for non-performance), but only as long as, and to the
extent that, such force majeure shall prevent performance of such obligations.
Section 16. Entire Agreement. This Agreement and the Transaction
Agreement, including the other Ancillary Agreements (as defined in the
Transaction Agreement) constitute the entire agreement and supersede all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except the letter agreement dated
April 8, 1997 between CSX and NSC to the extent such April 8, 1997 letter
agreement covers matters not addressed or amended hereby or in the Transaction
Agreement or the Ancillary Agreements (as defined in the Transaction Agreement);
provided that it is the intent of the parties that this Agreement shall be an
effectuation of such April 8, 1997 letter agreement consistent with its terms,
and that the provisions of this Agreement shall be interpreted to give effect to
such April 8, 1997 letter agreement; and provided further that, in the event of
any inconsistency between the terms of this Agreement and such April 8, 1997
letter agreement, this Agreement shall prevail.
Section 17. Amendment and Waiver. Any amendment to this
Agreement must be in writing and executed and delivered by CRC, CSXT and NSR,
subject to any jurisdiction of the STB. Any waiver of any term or provision of
this Agreement must be in writing and executed and delivered by the party
entitled to enforcement of such term or provision.
Section 18. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, such provision is intended to be ineffective only to the most limited
extent possible in such context and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 19. Remedies.
(a) Entitlement to Certain Remedies. Each party acknowledges and
agrees that the other parties would be irreparably damaged in the event any of
the provisions of this Agreement were not performed by it in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
each party shall be entitled to an injunction or injunctions to prevent breaches
of such provisions and to specifically enforce such provisions, in addition to
- 33 -
<PAGE>
any other remedy to which such party may be entitled, at law or in equity.
(b) Preclusion of Certain Remedies. In no event shall any party
be liable to the other parties for any consequential, indirect, incidental,
punitive or other similar damages including, but not limited to, lost profits
for any breach or default, or any act or omission arising out of or in any way
relating to this Agreement, under any form or theory of action whatsoever,
whether in contract, tort or otherwise. The foregoing is not intended to alter
or limit the allocation of responsibility for Damage as provided in Section 11.
Section 20. Interpretation. This Agreement was drafted jointly
by CSXT and NSR, each of which was advised by its own counsel and other advisors
concerning all of the terms and provisions hereof; accordingly, any ambiguity
herein should not be construed in favor of or against any of them.
Section 21. Headings. Headings of Sections and paragraphs in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of any term or provision of this Agreement.
Section 22....Parties. This Agreement shall inure to the benefit
of and be binding upon CRC, CSXT and NSR and any successor of any of them by
operation of law, and any assignee agreed to by them in accordance with Section
23, and nothing in this Agreement is intended or shall be construed to give any
other Person any legal or equitable right, remedy or claim under or with respect
to this Agreement or any term or provision hereof.
Section 23. Assignment.
(a) Limitation. Except as provided in Section 23(b), neither this
Agreement (including the documents and instruments referred to herein) nor any
of the rights, interests or obligations hereunder, shall be assigned by any
party, including by operation of law, without the prior written consent of the
other parties (except to a controlled subsidiary), which consent may be given or
refused in the sole discretion of each party.
(b) Successor. Any party without the consent of the other parties
may assign all of its rights and obligations under this Agreement only to any
successor in the event of a merger, consolidation, sale of all or substantially
all its assets (but only if such sale includes all routes and lines owned by
such party to access the Shared Assets), if such assignee executes and delivers
to the other parties hereto an agreement reasonably satisfactory in form and
substance to such other party under which such assignee, which is reasonably
satisfactory to the other party, assumes and agrees to perform and discharge all
- 34 -
<PAGE>
the obligations and liabilities of the assigning party; provided that any such
assignment shall not relieve the assigning party from the performance and
discharge of such obligations and liabilities.
Section 24. Notices. Any notice given by CRC, CSXT or NSR to the
others under this Agreement shall be deemed delivered on the date sent by
registered mail, or by such other means as they may agree, and shall be
addressed to them as follows:
(A) If to CSXT:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(B) If to NSR:
Senior Vice President Operations
Norfolk Southern Railway Company
Three Commercial Place
Norfolk, Virginia 23510-2191
(C) If to CRC:
President and Chief Executive Officer
Consolidated Rail Corporation
2001 Market Street
Two Commerce Square
Philadelphia, Pennsylvania 19101
and each of them may from time to time change its address in this Section 24 by
written notice delivered to the others.
Section 25. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without regard to principles of conflicts of laws.
- 35 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in counterparts by their duly authorized officials as of the day
first above written.
CSX TRANSPORTATION, INC.
By: /s/PETER J. SHUDTZ
------------------
Peter J. Shudtz
Title: Vice President - Law and General Counsel - CSX
Corporation, authorized agent for CSX Transportation,
Inc.
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/ J. L. MANETTA
------------------
J. L. Manetta
Title: Senior Vice President Operations
CONSOLIDATED RAIL CORPORATION
By: /s/TIMOTHY O'TOOLE
------------------
Timothy O'Toole
Title: President
- 36 -
<PAGE>
EXHIBIT A
OPERATING PROTOCOLS
Consolidated Rail Corporation
Shared Assets Area
Terminal Capacity Guidelines
Yard Operations
o Cars loaded or empty moving outbound to either parent* company, which have
been made up for train departure at either a serving merchandise yard,
Automotive Terminal or jointly used Intermodal Facility will be considered
available at the published departure time for scheduled trains and the later
of 4 hours after notice to the parent or actual available time (set time)
for non-scheduled or extra trains. Cars remaining available for departure
in excess of ten (10) hours will be subject to a charge of $141.00 per car.
Thereafter, for every eight (8) hours that the same cars continue to remain
on track, along with all other cars of the same block codes within the
originating dispatch yard, will be subject to an additional charge of
$141.00 per car.
o Cars loaded or empty assembled for outbound train dispatch to either parent
company will be considered available at published departure time for such
scheduled trains. The Shared Assets Areas management will provide four (4)
hours advance notice prior to set time on non-scheduled or extra trains
before they will be considered available for departure.
o Management of Shared Assets Areas may refuse an inbound train of the same
category when a specific destination terminal has been holding more than one
(1) intermodal, automotive, manifest or unit train of a parent for power
and/or crew beyond ten (10) hours of scheduled departure or availability and
conditions within the involved destination terminal preclude the effective
handling of the offered inbound trains.
o Acts of God, Mainline blockages, labor strikes or other causes to a
cessation of consistent service beyond the control of a parent company will
be considered by the management of the Shared Assets Areas as to the
legitimacy of any assessment.
o Opportunities for the Shared Assets Areas management to consolidate
- ---------------------
*The term "parent" means CSXT and/or Norfolk Southern Railway Co. ("NSR") and is
not intended to describe the legal relationship between the parties.
1
<PAGE>
trains for the benefit of a specific Shared Assets Area operation and
the involved parent, as mutually agreed by the parties, will not result in
charges on cars designated for the annulled train resulting from said
consolidation.
o An inventory of hold cars awaiting disposition within any given Shared
Assets Area territory should not exceed thirty (30) cars per day for either
CSXT or NSR individually. The Shared Assets Areas management may elect to
limit receipt of inbound car flow from the delinquent parent for the
affected Shared Assets Areas territory, in accordance with the guidelines
for holding trains. Any loaded or empty car including those in unit train
consists carrying a "No Bill" status more than twenty-four (24) hours will
be assessed $10.00 per hour in excess thereof.
o Trains inbound to the Shared Assets Area territory must have proper car and
train documents. If this information is lacking, the Shared Area managers,
at their discretion, may hold trains outside the boundaries of the Shared
Assets Area until proper documentation is received.
o Regardless of company of employment, any qualified crew in the Shared Area
may operate any locomotive, regardless of ownership, in that area for the
purposes of positioning/hostling or movement of light power between yards.
Held Trains
o In recognition of terminal fluidity and capacity utilization, the Shared
Assets Areas management can require, in coordination with a parent's command
center, an inbound train to be held outside the boundaries of a Shared
Assets Area.
- Such notification must be given with enough notice for the parent to
chamber the train at a location that minimizes disruption to
operations.
- Decisions by the Director of Train Operations of Shared Assets Areas
management are final in this regard. Neither parent may compel the
Shared Assets Areas management to accept trains.
- Similarly, the decision to hold out a train other than temporary holds
is recognized as a serious action, which will be done only after all
other alternatives are exhausted. Data on these actions will be
maintained by Shared Assets Areas management and will be regularly
available for briefing to the Conrail's Board of Directors at its
pleasure.
2
<PAGE>
Storage
o Neither parent company may store or pre-position cars on Shared Assets
Area's tracks, including yard and industrial tracks to which they have
access. Empty cars routed to the Shared Assets Areas must have a customer
destination assigned, and must be loaded without beginning to accrue charges
as described in Conrail's Demurrage Tariff in effect on May 1, 1999. When it
is determined that cars cannot be delivered to the customer within 60 hours
of arrival, a call will be made to the parent's operations center. After
such a call is made, except in extraordinary cases, these cars will then be
placed on the parent's first available outbound train.
o CSXT and NS will independently establish such demurrage and car storage
arrangements with customers as each deems proper. Should customers keep or
store cars on SAA tracks beyond the time at which charges would begin to
accrue as called for in Conrail's Demurrage Tariff in effect on May 1, 1999,
then the parent road will be assessed $100 per car per day to cover the
operational cost of congestion and inefficient use of Shared Assets Areas
facilities.
o CSXT and NSR recognize that certain customers are currently provided car
storage within the Shared Asset Areas, and that this storage may be
essential to the functioning of the business of these customers. CSXT, NSR
and Shared Assets will review current pools and by consent of all three
parties approve their makeup and location based on operating efficiencies.
Thereafter pools will be regularly reviewed for the provision of such
storage to avoid congestion. Any request for additional car storage for any
Shared Assets Area customers must be approved by the Parents, who will
consider the availability of additional space with a view toward assuring
that operations in the Shared Assets Area remain fluid and will not be
affected by providing such car storage.
Interchange
o CSXT and NSR will not interchange cars to each other within the Shared
Assets Areas locations unless specifically provided through separate
agreements. No open interchanges have been established except at industries.
3
<PAGE>
Blocking
o To ensure the equal and fair use of the Shared Assets Area capacity by its
parent companies, the following car classification requirements will govern:
- Each parent company will be required to block inbound trains for the
Shared Assets Areas. Each parent will make the number of blocks called
for in the split-date Operating Plan. Failure to comply with inbound
blocking requirements and execute appropriate setoffs (unless otherwise
directed by Shared Assets
management) within the Shared Assets Area will result in an assessment
of $50.00 per loaded or empty car.
- Management of the Shared Assets Areas will be required to block outbound
trains. Parent companies will receive the number of blocks at each
Shared Assets Area terminal that is called for in the split-date
Operating Plan.
- Changes to the number of blocks made by or delivered to a Shared Asset
terminal may be made only by mutual consent of all three parties.
- Parent companies, except by joint agreement, may not compel the Shared
Assets Areas management to make a greater number of blocks at any
terminal, beyond the number of called for in the split-date Operating
Plan.
- Each parent may change the definition of its own specific blocks
originating at a Shared Assets Area terminal.
Hours of Service and Recrews
o Train crews on parent trains approaching a Shared Assets Area must have
sufficient time to terminate in or exit the Shared Assets Areas before
hours-of-service laws require them to rest. Sufficient time is considered
the trains scheduled elapsed time to terminate in or pass through the Shared
Assets Area. The Shared Assets Areas management may grant an exception if
the train can make it to its destination without undue disruption.
o Shared Assets Areas shall have the option to provide T&E relief service for
any road train on the hours-of-service law, regardless of parent company.
- Such relief will be provided after coordination with the appropriate
parent's operations center indicating the involved parent will provide
no relief crew.
4
<PAGE>
- Recrews will be at the sole cost and expense of the parent whose train
is recrewed at full cost plus a $500 surcharge.
- If specific trains frequently require recrews, Shared Assets Areas
management may request the parent to change its schedule or slotting of
subject train with the right to repeatedly hold that train for a recrew
outside the Shared Assets Areas as set forth under the "held trains"
provision until such appropriate adjustments are made to the
non-conforming schedule.
- Data on trains recrewed will be maintained by Shared Assets Areas
management and will be regularly available for briefing to Conrail's
Board of Directors at its pleasure.
Charges
o The charges paid by either owner under these protocols will be made to a
Conrail "passive income" account, which will be administered by Conrail.
Changes
o These terminal capacity guidelines will be reviewed at the request of any of
the three parties (CSXT, NSR, and/or CSAO). Proposed changes are subject to
the arbitration provisions of the Shared Asset Area Operating Agreements in
the event CSXT and NSR cannot agree.
5
Exhibit 10.6
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
SOUTH JERSEY/PHILADELPHIA
Dated as of June 1, 1999
By and Among
CONSOLIDATED RAIL CORPORATION,
CSX TRANSPORTATION, INC. and
NORFOLK SOUTHERN RAILWAY COMPANY
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................................1
(a) AAR............................................................1
(b) Accounting Plan................................................1
(c) Action.........................................................2
(d) Adjacent Improvements..........................................2
(e) Bill...........................................................2
(f) Billing Month..................................................2
(g) Board of Managers..............................................2
(h) Budgeted Capital Expenditures..................................2
(i) Capital Expenditure Budget.....................................2
(j) Capital Expenditure Statement..................................2
(k) CRC Administrative Office......................................2
(l) CRC Board......................................................2
(m) CRC Train......................................................2
(n) CRC Train Usage Percentage.....................................2
(o) CSX............................................................3
(p) CSXT Operating Agreement.......................................3
(q) Damage(s)......................................................3
(r) Dispute Letter.................................................3
<PAGE>
Page
(s) Excluded Taxes.................................................3
(t) Expense Statement..............................................3
(u) GAAP...........................................................3
(v) General Manager................................................3
(w) Governmental Entity............................................3
(x) Interest Rental................................................3
(y) Jointly-Operated Facility......................................4
(z) Lesser Insured Operator........................................4
(aa) Letter Agreement...............................................4
(bb) Liabilities....................................................4
(cc) Nonseverable Improvement.......................................4
(dd) NSC............................................................4
(ee) NSR Operating Agreement........................................4
(ff) NYC............................................................4
(gg) Operating Budget...............................................4
(hh) Operating Plan.................................................5
(ii) Operator.......................................................5
(jj) Operator Consequential Damages.................................5
(kk) Operator's Expense Percentage..................................5
(ll) Operator's Facility............................................5
- ii -
<PAGE>
Page
(mm) Operator Train.................................................5
(nn) Person.........................................................5
(oo) Program Maintenance............................................5
(pp) Program Maintenance Proposal...................................5
(qq) PRR............................................................5
(rr) Railcar........................................................6
.
(ss) Reimbursable Expenses..........................................6
(tt) Renewal Term...................................................6
(uu) RoadRailer(R)..................................................6
(vv) Routine Maintenance............................................6
(ww) Severable Improvement..........................................6
(xx) Shared Asset Value.............................................6
(yy) Shared Assets..................................................6
(zz) Shared Assets Area.............................................7
(aaa) STB............................................................7
(bbb) Switching and Yard Services....................................7
(ccc) Tax or Taxes...................................................7
(ddd) Temporary Services.............................................7
(eee) Tier One Damages...............................................7
(fff) Tier Two Damages...............................................7
- iii -
<PAGE>
Page
(ggg) Total Train Usage Percentage...................................7
(hhh) Transaction Agreement..........................................8
(iii) Usage Statement................................................8
(jjj) USOA...........................................................8
(kkk) Valuation Date.................................................8
(lll) Zone...........................................................8
Section 2. Management........................................................8
(a) CRC Board......................................................8
(b) General Manager................................................9
(c) Employees......................................................9
(d) CRC Responsibilities..........................................10
(e) Impartiality..................................................10
(f) Independent Contractors.......................................10
Section 3. Operations.......................................................10
(a) Operator's Rights.............................................10
(b) Use...........................................................11
(c) Grant of Rights...............................................11
(d) Switching and Yard Services...................................13
(e) Operating Protocols...........................................13
(f) Freight Traffic to Remain in Account of Each Operator.........13
- iv -
<PAGE>
Page
(g) Rates, Routes and Divisions...................................13
(h) Shipper Bills.................................................14
(i) Service Responsibility........................................14
(j) Dispatching...................................................14
(k) Railcar Weighing..............................................14
(l) Freight Claims................................................14
(m) Freight Car Repairs...........................................15
(n) Train Services................................................15
(o) Wrecking Service..............................................15
(p) Admission of Third Parties....................................15
Section 4. Equipment and Properties.........................................15
(a) Procurement...................................................15
(b) Contribution of Locomotives by Operators......................16
(c) Locomotive Service and Repair.................................16
Section 5. Maintenance......................................................16
(a) Routine Maintenance...........................................16
(b) CRC Program Maintenance.......................................17
(c) Maintenance Standards.........................................17
Section 6. Capital Improvements.............................................18
(a) Proposed Projects.............................................18
- v -
<PAGE>
Page
(b) CRC Board Approved Projects...................................18
(c) Nonseverable Improvement Projects.............................18
(d) Severable Improvement Projects................................19
(e) Capital Improvements as Shared Assets.........................19
(f) Title to Severable Improvements...............................19
(g) Noninterference...............................................20
(h) Switch Connections............................................20
(i) Adjacent Improvements.........................................20
(j) Operator's Facilities.........................................21
Section 7. Accounting.......................................................21
(a) Books of Record and Account...................................21
(b) Financial Statements..........................................21
Section 8. Costs and Budgets................................................21
(a) CRC Costs.....................................................21
(b) Employee Cost Reimbursement...................................21
(c) Capital Expenditure Budget....................................21
(d) Operating Budget..............................................22
Section 9. Cost Sharing.....................................................22
(a) Accounting Plan...............................................22
(b) Usage Statement...............................................24
- vi -
<PAGE>
Page
(c) Expense Statement.............................................24
(d) Capital Expenditure Statement.................................24
(e) Bills.........................................................25
(f) Payment.......................................................25
(g) Disputed Bills................................................25
Section 10. Access..........................................................26
Section 11. Liability.......................................................26
(a) Operators' Sole Responsibility................................26
(b) Operators' Joint Responsibility...............................26
(c) CRC Responsibility - Allocation and Insurance.................27
(d) Process.......................................................28
(e) Indemnification...............................................28
(f) Specified Level Damages.......................................28
(g) Substance Abuse Exceptions....................................30
(h) Transaction Agreement.........................................30
(i) Damages.......................................................30
Section 12. No Partnership..................................................31
Section 13. Arbitration.....................................................31
Section 14. Term............................................................31
Section 15. Force Majeure...................................................32
- vii -
<PAGE>
Page
Section 16. Entire Agreement................................................32
Section 17. Amendment and Waiver............................................32
Section 18. Severability....................................................32
Section 19. Remedies........................................................32
(a) Entitlement to Certain Remedies...............................32
(b) Preclusion of Certain Remedies................................33
Section 20. Interpretation..................................................33
Section 21. Headings........................................................33
Section 22. Parties.........................................................33
Section 23. Assignment......................................................33
(a) Limitation....................................................33
(b) Successor.....................................................33
Section 24. Notices.........................................................34
Section 25. Governing Law...................................................34
EXHIBIT A - Operating Protocols
- viii -
<PAGE>
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
SOUTH JERSEY/PHILADELPHIA
This SHARED ASSETS AREA OPERATING AGREEMENT ("Agreement") dated
as of June 1, 1999, is by and among Consolidated Rail Corporation ("CRC"), CSX
Transportation, Inc. ("CSXT") and Norfolk Southern Railway Company ("NSR").
W I T N E S S E T H:
WHEREAS, all capitalized terms in this Agreement have the
respective meanings set forth in Section 1; and
WHEREAS, CSX owns all of the common stock of and controls CSXT,
NSC owns all of the common stock of and controls NSR, and CSX and NSC jointly
control CRC; and
WHEREAS, CSXT, NSR and CRC desire that the Shared Assets shall be
owned, operated and maintained by CRC and used by or for the exclusive benefit
of CSXT and NSR, and that CSXT and NSR shall each have full and equal rights to
use the Shared Assets to provide competitive railway freight transportation
services to, from and between all places within the Shared Assets Area.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, CRC, CSXT and NSR hereby agree
as follows:
Section 1.....Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "AAR" means the Association of American Railroads.
(b) "Accounting Plan" means the plan of accounting adopted
pursuant to Section 9(a).
(c) "Action" means any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any
Governmental Entity.
<PAGE>
(d) "Adjacent Improvement" means a capital improvement, such as a
spur, which provides access to customers and local industries and which (i) is
on property which is not part of the Shared Assets and (ii) will be directly
(without intermediate connection to another railroad) attached to trackage
included within the Shared Assets.
(e) "Bill" means a bill delivered by CRC to an Operator pursuant
to Section 9(e).
(f) "Billing Month" means the calendar month for which
information is shown on a Usage Statement.
(g) "Board of Managers" means any Board of Managers which may be
appointed by the CRC Board pursuant to Section 2(a)(ii).
(h) "Budgeted Capital Expenditures" means capital expenditures
included on a Capital Expenditure Budget which has been approved by the CRC
Board.
(i) "Capital Expenditure Budget" means a written budget
specifying proposed capital expenditures to be made by CRC with respect to
Shared Assets for the periods of time specified in such budget, and the proposed
sources of the capital required to make such expenditures.
(j) "Capital Expenditure Statement" means a statement delivered
by CRC pursuant to Section 9(d).
(k) "CRC Administrative Office" means the administrative office
of CRC located at Philadelphia, Pennsylvania, or at such other place designated
by CRC in a notice it delivers to CSXT and NSR.
(l) "CRC Board" means the Board of Directors of CRC.
(m) "CRC Train" means a train operated by CRC and performing
services pursuant to Sections 3(c) or (d).
(n) "CRC Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the total number of loaded and empty
Railcars in the account of such Operator in CRC Trains, by (ii) the total number
of loaded and empty Railcars in the accounts of both Operators in CRC Trains,
during such time period in such Zone.
(o) "CSX" means CSX Corporation.
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(p) "CSXT Operating Agreement" means the agreement, dated June 1,
1999, between CSXT and NYC providing for the use, operation and maintenance by
CSXT of certain assets owned or leased by NYC.
(q) "Damage(s)" means all assessments, fines, losses, damages,
liabilities, and costs and expenses related thereto, including, without
limitation, interest, penalties and attorneys' and consultants' fees and also
expressly including, without limitation, all liabilities arising after the
effective date hereof under the Federal Employers Liability Act, as amended, and
environmental laws.
(r) "Dispute Letter" means a letter delivered by an Operator
pursuant to Section 9(g)(i).
(s) "Excluded Taxes" means: (A) all Taxes based, in whole or in
part, on net income or gross income (including, without limitation, any minimum
tax) of CRC or which are in substitution for, or relieve CRC from, any Tax based
upon or measured by CRC's net income or gross income, together with any
interest, penalties, additions to tax or additional amounts that may become
payable in respect thereof; (B) business and occupation taxes, and gross
receipts taxes (unless in the nature of a sales tax) of CRC and Taxes based upon
the equity interests of CRC; and (C) interest, fines and penalties to the extent
due to the acts or omissions of CRC in connection with such Excluded Taxes.
(t) "Expense Statement" means a statement delivered by CRC
pursuant to Section 9(c).
(u) "GAAP" at any time means generally accepted accounting
principles in effect at such
time.
(v) "General Manager" means the chief executive officer of CRC.
(w) "Governmental Entity" means any federal, state, local or
foreign court, administrative agency or commission or other governmental or
regulatory authority or commission or any arbitration tribunal.
(x) "Interest Rental" means an amount representing a fair
periodic return on the Shared Asset Value as of the most recent preceding
Valuation Date as determined by such appraiser as CSXT and NSR may select. The
Interest Rental for the first six years of this Agreement shall be as follows:
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<PAGE>
June 1, 1999 through May 31, 2000 -- $18 million June 1, 2000
through May 31, 2001 -- $18 million June 1, 2001 through May 31,
2002 -- $20 million June 1, 2002 through May 31, 2003 -- $22
million June 1, 2003 through May 31, 2004 -- $25 million June 1,
2004 through May 31, 2005 -- $27 million
(y) "Jointly-Operated Facility" means a facility or yard which is
operated by or for a rail carrier and one or more other rail carriers.
(z) "Lesser Insured Operator" means the Operator which has the
lesser (as between the Operators) amount of available insurance benefits as
specified in Section 11(f)(i)(A.1)(2).
(aa) "Letter Agreement" means the letter agreement dated May 1,
1999 between NSC and CSX relating to the settlement of certain matters.
(bb) "Liabilities" means any and all debts, liabilities and
obligations of any kind whatsoever, whether or not accrued, contingent or
reflected on a balance sheet, known or unknown, absolute, determined,
determinable or otherwise, including, without limitation, those arising under
any law, rule, regulation, action, order or consent decree of any Governmental
Entity or any judgment in any Action of any kind or award of any arbitrator of
any kind and those arising under any contract.
(cc) "Nonseverable Improvement" means a capital improvement which
is integral to the operation of the Shared Assets and is not readily removable.
(dd) "NSC" means Norfolk Southern Corporation.
(ee) "NSR Operating Agreement" means the agreement, dated June 1,
1999, between NSR and PRR providing for the use, operation and maintenance by
NSR of certain assets owned or leased by PRR.
(ff) "NYC" means New York Central Lines LLC, a Delaware limited
liability company.
(gg) "Operating Budget" means a written budget specifying
estimated operating revenues and expenses and working capital requirements of
CRC with respect to the Shared Assets for the periods of time specified in such
budget.
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<PAGE>
(hh) "Operating Plan" means the plan for road train and local
train schedules and classifications and related operating protocols for the
Shared Assets Area as may be agreed to, and modified from time to time, by CRC,
CSXT and NSR.
(ii) "Operator" means either CSXT or NSR.
(jj) "Operator Consequential Damages" means consequential,
indirect, incidental or other similar damage, injury or loss to an Operator.
(kk) "Operator's Expense Percentage" means for an Operator the
percentage obtained by multiplying 100 by the quotient obtained by dividing (i)
the total Reimbursable Expenses (except for Interest Rental, Taxes, insurance
costs and any other CRC expenses not apportioned between the Operators on a
usage basis) payable by such Operator for a particular period, by (ii) the total
Reimbursable Expenses (except for Interest Rental, Taxes, insurance costs and
any other CRC expenses not apportioned between the Operators on a usage basis)
payable by both Operators for such period.
(ll) "Operator's Facility" means a present, expanded or new
facility or yard which is owned or controlled exclusively by an Operator.
(mm) "Operator Train" means a train operated by an Operator and
performing services in accordance with Sections 3(a) and 3(c).
(nn) "Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company or other legal entity or organization.
(oo) "Program Maintenance" means scheduled renewal of track,
signals, structures and other fixed facilities performed by system or production
gangs assembled to accomplish a specific task or tasks.
(pp) "Program Maintenance Proposal" means a written proposal
prepared by CRC, CSXT or NSR which describes specific Program Maintenance which
the preparer of such proposal believes is necessary or desirable to maintain the
Shared Assets in a safe operating condition to permit or facilitate (i) the
performance by CRC of its services pursuant to this Agreement, or (ii) the use
of Shared Assets by the Operators, and which specifies a budget for such Program
Maintenance.
(qq) "PRR" means Pennsylvania Lines LLC, a Delaware limited
liability company.
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<PAGE>
(rr) "Railcar" means, except as otherwise provided in the
Accounting Plan, each railroad freight car, locomotive, caboose or other
equipment (including RoadRailer(R) or comparable bimodal freight hauling
equipment in the account of either Operator) furnished in substitution of
railroad equipment, loaded or empty, which an Operator originates, terminates,
switches or moves on or overhead to any Shared Assets, except that (i) a single
standard flat car not exceeding 96 feet in length (excluding articulated flat
cars) shall count as a single Railcar, (ii) freight rail cars consisting of
articulated units bearing AAR Car Type Codes "Q" and "S" shall count as multiple
Railcars based on the second (numeric) digit of the Car Type Code for such
articulated units (by way of example, a car consisting of AAR Car Type Code
"S566" would be counted as five Railcars) (or corresponding car type codes and
digits if the AAR Car Type Codes should be modified at any time during the term
of this Agreement), and (iii) a single unit of RoadRailer(R) equipment (or
comparable bimodal freight hauling equipment in the account of either Operator)
shall count as one-half (1/2) of a Railcar.
(ss) "Reimbursable Expenses" means the expenses shown on an
Expense Statement, minus the revenues, if any, shown on such Expense Statement.
(tt) "Renewal Term" means the term of extension of this Agreement
under Section 14.
(uu) "RoadRailer(R)" means bimodal freight hauling equipment
manufactured by or under license from "RoadRailer(R)", a division of Wabash
National Corporation, and capable of movement over the highway when pulled by a
tractor and on the rails using locomotive power.
(vv) "Routine Maintenance" means day-to-day repairs to track,
signals, structures and other fixed facilities that are not part of Program
Maintenance.
(ww) "Severable Improvement" means a capital improvement which
is not a Nonseverable Improvement.
(xx) "Shared Asset Value" means at any date the value of the
Shared Assets, except leases and other contract rights granted by either
Operator to CRC, as of the most recent preceding Valuation Date as determined by
such appraiser as CSXT and NSR may select.
(yy) "Shared Assets" means all tracks, lands, easements, rights
of way, structures, facilities, appurtenances and rights related thereto, which
CRC owns, leases or otherwise has the right to operate over (including those
segments over which CRC or an Operator possesses operating rights pursuant to
Section 3(c)), and which are used for railway purposes in the Shared Assets
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<PAGE>
Area, including the properties, rights, equipment, inventory and supplies,
whether owned or leased, described or referred to in Item 3A of Schedule 1
(including Attachments I and II) of the Transaction Agreement, but excluding
Operator's Facilities.
(zz) "Shared Assets Area" means the geographical area comprising
the Shared Assets and Operator Facilities and Jointly-Operated Facilities
directly (without intermediate connection to another railroad) attached to
trackage included within the Shared Assets, which is designated as the "South
Jersey/Philadelphia" Shared Assets Area.
(aaa) "STB" means the Surface Transportation Board or, if there
shall be no Surface Transportation Board, any federal agency which is charged
with the function of approving combinations by rail carriers or persons
controlling them, or of other arrangements between rail carriers, and granting
exemptions from other laws with respect thereto or regulating other specific
functions with respect to the context in which such term is employed or any
successor entity thereof.
(bbb) "Switching and Yard Services" means the service of
classifying and assembling trains for the account of an Operator in
Jointly-Operated Facilities; movement of loaded or empty Railcars between yards
and local industries; and switching trains and Railcars at yards, terminals and
local industries.
(ccc) "Tax" or "Taxes" means taxes of any kind, levies or other
similar assessments, customs, duties, imposts, charges or fees, including,
without limitation, income taxes, gross receipts, ad valorem, excise, real or
personal property, sales, use, payroll, withholding, unemployment, transfer and
gains taxes or other governmental taxes imposed by or payable to the United
States, or any state, local or foreign government or subdivision thereof, and in
each instance such term shall include any interest, penalties or additions to
tax attributable to such Tax or Taxes.
(ddd) "Temporary Services" means services provided by CSXT or NSR
employees in the operation, maintenance or repair of any Shared Asset on an
emergency basis with the prior approval of the General Manager or senior CRC
employee who is directly responsible for the operation or maintenance of such
Shared Asset.
(eee) "Tier One Damages" means those Damages defined as Tier One
Damages in Section 11(f)(i)(A.1).
(fff) "Tier Two Damages" means those Damages defined as Tier Two
Damages in Section 11(f)(i)(B.1).
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<PAGE>
(ggg) "Total Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the sum of the total number of loaded and
empty Railcars in the account of such Operator in CRC Trains and the total
number of loaded and empty Railcars in the account of such Operator in Operator
Trains, by (ii) the sum of the total number of loaded and empty Railcars in the
accounts of both Operators in CRC Trains and the total number of loaded and
empty Railcars in the accounts of both Operators in Operator Trains, during such
period in such Zone.
(hhh) "Transaction Agreement" means the Transaction Agreement
dated as of June 10, 1997, among CSX, CSXT, NSC, NSR, Conrail Inc., CRC and CRR
Holdings LLC.
(iii) "Usage Statement" means a statement delivered by CRC
pursuant to Section 9(b).
(jjj) "USOA" means the uniform system of accounts prescribed for
class I railroads by the STB or any successor federal agency that shall succeed
to the functions of the STB in prescribing uniform systems of accounts for rail
carriers; provided, that if there shall be no STB and no such federal agency,
USOA shall mean such system of accounts as is generally maintained by rail
carriers consistent with GAAP as applied in the rail industry.
(kkk) "Valuation Date" means the date of this Agreement and
thereafter the sixth (6th), twelfth (12th), eighteenth (18th) and twenty-fourth
(24th) anniversaries of the date of this Agreement and the first day of each
Renewal Term.
(lll) "Zone" means a designated geographic section, or designated
facilities, of the Shared Assets Area as established and described in the
Accounting Plan.
Section 2 Management.
(a) CRC Board.
(i) The CRC Board shall manage the Shared Assets.
(ii) The CRC Board may appoint a Board of Managers, a
committee, a CRC officer or other persons to have such duties and
authority with respect to the Shared Assets as may be assigned to them
from time to time by the CRC Board.
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(iii) Any Board of Managers appointed by the CRC Board
shall be comprised of an equal number of individuals (and their
successors) nominated by CSXT and nominated by NSR.
(iv) The CRC Board shall remove from any Board of
Managers (A) at the direction of CSXT, any person who was nominated by
CSXT, and (B) at the direction of NSR, any person who was nominated by
NSR.
(b) General Manager.
(i) The General Manager shall not at any time have been
an employee of CSXT or NSR or any of their affiliates unless otherwise
agreed to by both Operators, and shall be appointed by the CRC Board.
(ii) The General Manager shall manage and supervise the
ownership, operation, maintenance and use of the Shared Assets in
accordance with directives and policies of the CRC Board and this
Agreement, subject to the authority of the CRC Board, and through such
Shared Assets Area superintendents and other Shared Assets Area
executives as are appointed by the General Manager with the approval of
the CRC Board. The General Manager shall report to the CRC Board. The
General Manager shall perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR.
(iii) The General Manager may be removed from office
prior to the expiration of his or her term at any time by a majority of
the CRC Board for any reason or for no reason. Upon the written request
of CSXT or NSR to the CRC Board, the General Manager shall also be
removed from office prior to the expiration of his or her term for
serious misconduct, which shall mean conduct that would make it
unreasonable to retain the General Manager, including but not limited to
conduct such as: (A) violation of applicable alcohol or drug use
policies, (B) fraud, (C) embezzlement or other act of dishonesty against
CRC, CSXT or NSR or any of their customers or suppliers, (D) activities
willfully undertaken by the General Manager which reflect adversely upon
the reputation of CRC, CSXT or NSR, (E) refusal to perform or
substantial neglect of the responsibilities assigned to the General
Manager, (F) failure to perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR after 45
days' written notice from an Operator describing such failure, (G) any
violation of any law or rule or regulation of any Governmental Entity
which results in serious adverse consequences to CRC, CSXT or NSR, or
(H) any material violation of any directive or policy of the CRC Board
or any statutory or common law duty of loyalty to CRC. If a majority of
the CRC Board in response to such a request of CSXT or NSR fails to
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<PAGE>
direct the removal of the General Manager, the dispute may be submitted
by either Operator for resolution by binding arbitration pursuant to
Section 13, provided, however, that in any such arbitration to resolve a
dispute under this Section 2(b)(iii), the hearing shall commence no
later than 30 days following the appointment of the arbitrator and the
award shall be rendered no later than 30 days following the completion
of the hearing.
(c) Employees. The General Manager and all persons who operate
and maintain the Shared Assets shall be employees of CRC, except for CSXT or NSR
employees who provide Temporary Services and employees of Operators or
independent contractors which provide services pursuant to contracts or
arrangements in accordance with Section 2(f).
(d) CRC Responsibilities. CRC shall be responsible for safely and
efficiently operating, controlling and managing the use of the Shared Assets,
impartially as between CSXT and NSR in accordance with directives and policies
of the CRC Board, and with responsible business practices which are consistent
with those used by CSXT and NSR in the operation of their businesses, and are
designed to achieve the lowest cost of the safe and efficient operation, use and
maintenance of the Shared Assets.
(e) Impartiality. CRC shall perform all of its obligations
pursuant to this Agreement on an impartial and non-discriminatory basis as
between CSXT and NSR, giving no preference to either of them in providing
Switching and Yard Services, in the control of train dispatching over the Shared
Assets, or in any other way whatsoever.
(f) Independent Contractors. CRC may, at least to the extent it
may do so immediately prior to the date of this Agreement, procure the use of
equipment or facilities owned by independent contractors, or services provided
by independent contractors (using their own employees), with respect to the
operation, maintenance and use of Shared Assets, including, without limitation,
accounting, computer and other administrative services, and the furnishing of
equipment and mechanical services. For purposes of this Section 2(f),
independent contractors may include CSXT or NSR.
Section 3 Operations.
(a) Operator's Rights. CRC hereby grants to each Operator full
operating rights to operate its own trains (staffed by a road crew) and
equipment, with its own crews and equipment and at its own expense, over any and
all tracks included in the Shared Assets, and to use all of the Shared Assets in
connection with the operation of such trains or equipment, for the following
purposes:
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<PAGE>
(i) Movement by such Operator of trains (staffed by a
road crew) through the Shared Assets Area between two geographical
locations outside the Shared Assets Area;
(ii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and an Operator's Facility or a Jointly-Operated Facility which is
within the Shared Assets Area;
(iii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and local industries which are within the Shared Assets Area;
(iv) Movement by such Operator of trains (staffed by a
road crew) between Operator's Facilities or Jointly-Operated Facilities
which are within the Shared Assets Area and local industries which are
within the Shared Assets Area;
(v) Movement, handling, pick-up, set off, switching,
transfer and interchange of Railcars, blocks of Railcars or trains
(staffed by a road crew) to, from or at local industries, Operator's
Facilities or Jointly-Operated Facilities, in connection with movements
described in Sections 3(a)(i) through (iv), to the extent provided for
in the Operating Plan agreed to and modified by the parties from time to
time; and
(vi) such other purposes as may be agreed upon by CRC,
CSXT and NSR.
(b) Use. The crews of each train operated by an Operator on
Shared Assets shall be qualified under and shall comply with applicable laws and
regulations as well as the safety and operating rules of CRC.
(c) Grant of Rights. Subject to reasonable compensation and other
terms established in the Accounting Plan, and in each case for the purpose of
Switching and Yard Services performed by CRC pursuant to Section 3(d) and
movement of Operator Trains pursuant to Section 3(a):
(i) CSXT hereby grants to CRC and NSR overhead
operating rights to operate CRC trains and NSR trains, respectively,
with their own crews, over the following CSXT rail line segments:
(A) the current CRC line between CP Phil and CP
Field and between CP Arsenal and CP Gray; and
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<PAGE>
(B) such other CSXT line segments access to and use
of which by CRC and NSR are necessary to effectuate the train
operations and services contemplated by this Agreement.
(ii) CSXT hereby grants to CRC and NSR full operating
rights to operate CRC trains and NSR trains, respectively, with their
own crews, over the following CSXT rail line segments:
(A) the current CRC Trenton line between Park Jct.
and CP Newtown (at the approximate boundary of the Shared Assets
Area);
(B) between CP River and point PH-22I (which point
is shown in Exhibit 1 to the Letter Agreement) located in
Greenwich Yard;
(C) the Eastwick Connection constructed by CSXT on
the current CRC right-of-way between Eastwick and CP Field; and
(D) tracks over the northern part of Greenwich
Yard, as shown in beige on Exhibit 1 to the Letter Agreement, for
the purpose of serving on an unimpeded basis the Ameriport
intermodal facility and local industry north of Greenwich Yard.
The coloration of such beige area is representative only, because
the trackage rights are over such clear tracks (whether within or
parallel to such beige areas) as designated from time to time by
the Greenwich Yard yardmaster. CRC and NSR shall have an
unimpeded double stack cleared route ("Cleared Route") for the
purpose stated above. To the extent NYC or CSXT does any
construction currently or in the future that may cause a track
realignment or relocation, it will assure that NSR and CRC will
continue to have the Cleared Route.
(iii) CSXT hereby grants to CRC full operating rights to
operate CRC trains with their own crews on an unimpeded basis over the
CSXT rail line between points PH-22D and PH-22E as shown on Exhibit 1 to
the Letter Agreement.
(iv) NSR hereby grants to CRC and CSXT overhead
operating rights to operate CRC trains and CSXT trains, with their own
crews, over such NSR line segments access to and use of which by CRC and
CSXT are necessary to effectuate the train operations and services
contemplated by this Agreement.
(v) NSR hereby grants to CRC and CSXT full operating
rights to operate CRC trains and CSXT trains, respectively, with their
own crews, over the current Amtrak Lancaster line between Zoo and 52nd
Street.
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<PAGE>
(vi) NSR hereby grants to CRC and CSXT the right to use
West Falls Yard for the purpose of basing local trains, classifying and
assembling trains and switching Railcars, but not for the purpose of
serving local industries located at such yard.
(vii) CRC hereby grants to CSXT unimpeded trackage rights
to operate CSXT trains with their own crews over CRC's Track 354 from
point PH-22I to the connection at point PH-22H with NYC's Track 234, as
shown on Exhibit 1 to the Letter Agreement.
When required by the CSXT Operating Agreement and the NSR Operating Agreement,
CSXT and NSR have obtained the consent of NYC and PRR, respectively, for the
grant of rights referred to in this Section 3(c). Notwithstanding any other
provision of this Agreement, each rail line segment identified in this Section
3(c) shall be dispatched, maintained, operated and controlled by the Operator
which granted the rights with respect to such segment, provided that such
dispatching, maintenance, operation and control shall be performed on an
impartial and non-discriminatory basis as between the Operators. Trains operated
by an Operator pursuant to operating rights granted under this Section 3(c)
shall be governed by and subject to the Operating Plan.
(d) Switching and Yard Services.
(i) At the request of and as agent for each Operator,
CRC shall perform Switching and Yard Services required by such Operator
within the Shared Assets Area, including without limitation any such
services which such Operator may be responsible for performing or having
performed for a shipper or other Person.
(ii) Except as otherwise provided in Section 3(a), and
other than within an Operator's Facility, neither Operator shall with
its own equipment or with its own crews perform any Switching and Yard
Service within the Shared Assets Area for itself or for any other
Person.
(e) Operating Protocols. From time to time, NSR, CSXT and CRC may
mutually establish Shared Assets Area Operating Plans, General Dispatching
Guidelines, Car Movement Guidelines, Switching/Blocking Requirements and other
operating protocols and rules concerning operations within the Shared Assets
Area, for the purpose of assuring timely train operations, fluid movement of all
railcars, equal and impartial handling of Operators' trains and railcars,
minimization in the number of empty cars in the Shared Assets Area, and overall
operating efficiency in the Shared Assets Area. The current Operating Protocols
have been agreed upon by NSR, CSXT and CRC and are set forth as Exhibit A to
this Agreement. The Operating Protocols may be modified only upon mutual
agreement of all parties.
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(f) Freight Traffic To Remain in Account of Each Operator.
Switching and Yard Services and other services performed by CRC for either
Operator under this Agreement shall be performed as agent for, and for the
account of, such Operator. All freight traffic and Railcars handled within the
Shared Assets Area, including traffic and Railcars handled by CSXT or NSR
pursuant to Sections 3(a) and 3(c), and traffic and Railcars handled by CRC
pursuant to Sections 3(c) and 3(d), shall at all times remain in the waybill,
car hire and revenue accounts of either CSXT or NSR.
(g) Rates, Routes and Divisions. Each Operator shall have
exclusive and independent authority to establish all rates, charges, service
terms, routes and divisions, and to collect all freight revenues, relating to
freight traffic transported for its account to, from and within the Shared
Assets Area (except those Shared Assets Area line segments over which such
Operator possesses only overhead operating rights pursuant to Section 3(c)). CRC
shall not participate or appear in any rates, routes or divisions relating to
any freight traffic whatsoever to, from and within the Shared Assets Area, and
shall not be entitled to or responsible for any freight charges relating to such
freight traffic. CRC shall not quote or establish any rate or service terms
applicable to freight transportation services to, from and within the Shared
Assets Area, enter into transportation contracts with any Person (other than an
Operator) for freight transportation services to, from and within the Shared
Assets Area, or undertake to perform any for-hire transportation services
directly, in its own name or for its own account for any Person (other than an
Operator). The transfer or exchange of freight traffic between CSXT and CRC, and
between NSR and CRC, within the Shared Assets Area shall not constitute an
interchange of freight traffic or freight rail cars for purposes of determining
rates, routes, divisions or interline settlements relating to any such freight
traffic.
(h) Shipper Bills. Neither Operator shall inform the other or CRC
of any rates or charges to shippers to which such Operator provides freight
transportation services in the Shared Assets Area, and no copies of any shipper
bill of lading or waybill shall be given by such Operator to the other or to CRC
except to the extent that such documents are exchanged between rail carriers in
the usual course of interline shipments and documenting.
(i) Service Responsibility. Each Operator shall at all times be
solely responsible for obtaining, supplying and routing Railcars other than
locomotives, for all Railcar ownership costs (including per-diem charges and
mileage allowances) and for providing service to its shippers within the Shared
Assets Area pursuant to its transportation contracts or other prices with its
shippers, including interline accounting, and all car hire and demurrage or
detention charges associated with Railcars in its account within the Shared
Assets Area.
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(j) Dispatching. CRC shall, from local locations or a location
agreed upon by CSXT and NSR, control the dispatching, scheduling and movement
of, and Switching and Yard Services for, all trains (including Operator Trains
and CRC Trains) over the Shared Assets (other than Operator's Facilities, unless
requested to do so by the Operator thereof) without any discrimination at any
time in favor of or against either Operator, but in accordance with written
policies and priorities for categories of freight, type of Railcar, size of
train and train destinations established from time to time by the General
Manager and approved by the CRC Board to achieve the maximum efficiency and
lowest aggregate Shared Asset costs of CRC and the Operators.
(k) Railcar Weighing. All Railcars for the account of an Operator
which originate or terminate on Shared Assets and which require weighing shall
be weighed by and at the expense of such Operator or its customer, and at no
cost to CRC.
(l) Freight Claims. The Operators shall agree among themselves on
the most fair, practical and efficient arrangements for handling and
administering freight loss and damage claims with the intent that (i) each
Operator shall be responsible for losses occurring to lading either in its
possession or in the possession of CRC for the account of such Operator, and
(ii) the Operators shall follow relevant AAR rules and formulas in providing for
the allocation of losses which are either of undetermined origin or in Railcars
handled in interline service by or for the account of both Operators.
(m) Freight Car Repairs. If any Railcars are bad ordered while on
the Shared Assets and must be set out from a CRC Train or Operator Train, CRC
shall promptly return such Railcars to the Operator in whose account such
Railcars reside in accordance with such Operator's instructions. CRC shall
furnish, at such Operator's expense, required labor and material to perform, and
shall perform, light repairs on such bad ordered Railcars as necessary to make
such Railcars legal and safe for movement. CRC shall bill such Operator for the
costs of such light repairs in accordance with the Field and Office Manuals of
the AAR Interchange Rules in effect at the time such repairs are performed. CRC
shall bill directly to and collect from the applicable Operator charges for
repair items that, under the AAR Interchange Rules, are the responsibility of
the Railcar owner and/or the handling line carriers. Each Operator may rebill
charges for repair items that are the responsibility of the Railcar owner and/or
the handling line carriers. If any such bad ordered Railcar cannot be made legal
and safe for movement by the performance of light repairs, CRC shall, at such
Operator's expense, arrange for appropriate removal of the affected Railcar in
accordance with such Operator's instructions.
(n) Train Services. Actual costs incurred by CRC to provide
special services (other than services otherwise provided for in this Agreement)
at the request of an Operator with respect to trains, locomotives and Railcars
for the account of such Operator, shall be paid by such Operator to CRC,
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provided that the costs and terms of similar special services rendered to each
Operator shall be without discrimination between Operators as to cost and terms,
giving due allowance to any differences in the costs of providing such services.
(o) Wrecking Service. Wrecking service or wrecking train service
required in connection with services contemplated by this Agreement shall be
provided by CRC (or its designee) as promptly as possible.
(p) Admission of Third Parties. Notwithstanding any other
provision in this Agreement, no party may permit any Person (other than a party
hereto) to have access to, operate over or use any Shared Asset without the
prior approval of all parties, which approval may be given or refused in the
sole discretion of each party.
Section 4 Equipment and Properties.
(a) Procurement. CRC shall procure, operate and maintain all
equipment, real property rights and improvements thereon which are reasonably
required for (i) CRC to operate the Shared Assets, and (ii) the Operators to
move trains over the Shared Assets, in each case in accordance with this
Agreement.
(b) Contribution of Locomotives by Operators. Upon reasonable
request by the General Manager, the Operators shall furnish to CRC, through
full-service lease or other mutually satisfactory arrangements, locomotives
reasonably required by CRC for the performance of its obligations under this
Agreement. The respective obligations of each Operator to furnish such
locomotives shall be based, insofar as reasonably practicable, upon the
Operator's CRC Train Usage Percentage during the calendar month preceding such
request for the Shared Assets Area or Zone in which such locomotives are needed
by CRC. It is the parties' intention that (i) the arrangements pursuant to which
such locomotives are furnished by either Operator to CRC shall provide that
heavy maintenance, repair and overhaul shall be the responsibility of such
Operator, (ii) locomotives furnished by either Operator to CRC may, in order to
permit maintenance, repair and overhaul of such locomotive units, be exchanged
for other locomotive units furnished by such Operator, and (iii) the respective
obligations of each Operator to furnish such locomotives upon request by the
General Manager shall be adjusted on at least a monthly or more frequent basis.
(c) Locomotive Service and Repairs. At the request of an
Operator, CRC shall furnish required labor and material to perform, and shall
perform, fueling and servicing of any Operator's locomotive, as well as light
repairs on any Operator's locomotive as necessary to make such locomotive legal
and safe for movement. CRC shall bill such Operator (or other owner of such
locomotive) for the costs of such fueling, servicing and light repairs in
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accordance with industry practice in effect at the time such fueling, services
or repairs are performed. If any such locomotive cannot be made safe for
movement by the performance of light repairs, CRC shall, at the expense of such
Operator (or other owner of such locomotive), arrange for appropriate removal of
such locomotive in accordance with such Operator's instructions.
Section 5 Maintenance.
(a) Routine Maintenance.
(i) CRC shall be responsible for Routine Maintenance
when necessary or desirable to maintain the Shared Assets in a safe
operating condition, and to permit and facilitate (A) the performance by
CRC of its obligations pursuant to this Agreement, and (B) the use of
Shared Assets by the Operators in accordance with this Agreement.
(ii) CSXT or NSR, directly or through their respective
affiliates, may perform the work which CRC performed prior to the date
of this Agreement when (A) CRC does not possess the skills needed for
such work, (B) CRC lacks the necessary employees to do such work in a
timely fashion, or (C) CRC does not possess the equipment needed to do
such work. CRC and the party performing the work shall agree to a
reasonable fee for such work prior to performance. CRC, CSXT and NSR may
agree to have additional work performed either by CSXT, NSR or their
affiliates.
(b) CRC Program Maintenance.
(i) The General Manager shall prepare and submit to the
CRC Board a Program Maintenance plan concurrently with the submission of
an Operating Budget and the Capital Expenditure Budget to the CRC Board.
(ii) Any of CRC, CSXT or NSR may at any time deliver a
Program Maintenance Proposal to the other two of them and to the General
Manager and each member of the CRC Board.
(iii) The CRC Board shall either (A) approve any or all
of such Program Maintenance Proposals and plan with such changes as it
deems appropriate, include the costs thereof in a pending or amended
Capital Expenditure Budget, and direct the General Manager to cause the
maintenance described in approved Program Maintenance Proposals or plan
to be performed in accordance with Sections 5(b)(iv) and (v), or (B)
disapprove any or all of such Program Maintenance Proposals or plan.
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(iv) Program Maintenance shall be the responsibility of
CSXT and NSR pursuant to contracts or arrangements with CRC, and CRC
shall not perform Program Maintenance, except for Program Maintenance
which can be provided by Persons other than CSXT or NSR at a lower cost
to CRC than the CSXT or NSR cost thereof.
(v) CRC shall select, to perform each Program
Maintenance project or program, the Operator which CRC reasonably
determines will perform such project or program at the least cost to CRC
consistent with safe and efficient operations, and taking into account
scheduling considerations, based on written proposals submitted by each
Operator.
(c) Maintenance Standards. Unless otherwise authorized by the CRC
Board, the General Manager shall prepare and submit to the CRC Board proposals
(including the Program Maintenance plan submitted pursuant to Section 5(b)) for
the performance of such Routine Maintenance and Program Maintenance as is
reasonably necessary to keep and maintain the Shared Assets substantially in
their condition as of the date of this Agreement. If the CRC Board fails either
to approve or disapprove by majority vote any such proposal within 45 days after
it was submitted to the CRC Board, the disagreement over the propriety or need
for any of the Routine Maintenance or Program Maintenance included in such
proposal may be submitted by either Operator for resolution by binding
arbitration pursuant to Section 13.
Section 6 Capital Improvements. Except as provided in Section
5, all capital improvements involving Shared Assets shall be governed by the
following provisions:
(a) Proposed Projects. Either Operator, CRC or the General
Manager may propose to the CRC Board from time to time capital improvement
projects. Each such project shall be reviewed by the CRC Board, which may
approve or disapprove by majority vote, or fail to approve, such projects.
(b) CRC Board Approved Projects. Each Operator shall be
responsible for an equal share of the initial budgeted funding of each capital
improvement project which has been approved by the CRC Board and is included in
an approved Capital Expenditure Budget, except as provided in Section 6(c). A
final accounting shall be made to adjust the initial budgeted funding to the
actual project cost as specified in the Accounting Plan.
(c) Nonseverable Improvement Projects.
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(i) At the written request of an Operator delivered to
the other, each Operator shall, within 45 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
proposal with respect to a Nonseverable Improvement project which was
neither approved nor disapproved by majority vote by the CRC Board
within 45 days after such project was proposed to the CRC Board (A)
describing any changes which such Operator proposes be made to such
project and specifying a schedule, budget and allocations between the
Operators of initial capital costs of such Nonseverable Improvement, or
(B) proposing that it not be made.
(ii) The arbitrator receiving the proposals referred to
in Section 6(c)(i) (A) shall consider (1) the degree, if any, to which
the construction, operation and use of such Nonseverable Improvement
would impair or interfere with the use of Shared Assets by CRC or either
Operator, or conflict with any pending capital improvements included in
an approved Capital Expenditure Budget, and (2) the budget and
allocations between the Operators of initial capital costs of such
Nonseverable Improvement as proposed by each Operator, and (B) shall
determine within 45 days of such receipt which of such proposals shall
be implemented, or that such Nonseverable Improvement shall not be made,
and the CRC Board shall approve any proposal which such arbitrator
determines shall be implemented.
(d) Severable Improvement Projects.
(i) Each Operator shall have the unilateral right to
construct and exclusively fund any Severable Improvement which was not
approved by the CRC Board.
(ii) Each Severable Improvement funded exclusively by
an Operator shall be used exclusively by that Operator, which shall be
solely responsible for maintaining such Severable Improvement at its own
expense, until such time that the other Operator gives written notice
that it desires also to use such Severable Improvement, stating the
amount which such other Operator is prepared to pay to the Operator
which initially funded such Severable Improvement for the right to use
such Severable Improvement.
(iii) If the Operators are unable to agree on the amount
of such payment within 45 days after the notice referred to in Section
6(d)(ii) was given, then at the written request of an Operator delivered
to the other after 45 days but before 60 days after such notice was
given, each Operator shall, within 15 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
statement setting forth the proposed payment by the second Operator, and
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the arbitrator shall within 45 days of such receipt determine which of
such proposed amounts shall apply, which shall be binding on both
Operators and paid promptly.
(iv) Such Severable Improvement shall become a
Nonseverable Improvement at the time such second Operator pays the
amount so determined and, thereafter, maintenance and other costs
associated with the operation of such improvement shall be apportioned
between the Operators as provided in this Agreement.
(e) Capital Improvements as Shared Assets. Upon completion, all
capital improvements approved by the CRC Board and all Nonseverable Improvements
shall become part of the Shared Assets owned by CRC subject to all provisions of
this Agreement, free and clear of all Operator liens.
(f) Title to Severable Improvements. Each Operator shall retain
title to all Severable Improvements exclusively funded by such Operator. At any
time during the term of this Agreement, an Operator may remove (at its sole
expense) any Severable Improvement which it exclusively funded, provided that
such Operator has repaired (at its sole expense) any damage to a Shared Asset
caused by such removal and has restored the related Shared Assets substantially
to their condition at the time such Severable Improvements were made. In the
event an Operator shall not have removed any Severable Improvement to which the
Operator shall have title prior to the expiration or termination of this
Agreement, title to such Severable Improvement shall vest in CRC, free and clear
of all Operator liens, upon such expiration or termination.
(g) Noninterference. The construction, operation and use of
Severable Improvements by an Operator shall not impair or interfere with the use
of Shared Assets by CRC or the other Operator, nor shall any Severable
Improvement conflict with any pending capital improvements included in an
approved Capital Expenditure Budget.
(h) Switch Connections. CRC shall, upon the written request of
one or both Operators, provide for switch and turnout connections from Shared
Asset tracks to a private sidetrack owned by a shipper or other Person, if such
request:
(i) includes the commitment of the Operator or both
Operators making such request, or
(ii) is accompanied by a written undertaking from such
shipper or other Person,
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in each case satisfactory to CRC, to pay to CRC all costs incurred from time to
time by CRC to provide for such switch and turnout connections within 30 days
after it delivers a bill for such costs to such Operator, Operators, shipper or
other Person.
(i) Adjacent Improvements.
(i) In the event an Operator constructs, acquires or
funds the cost of an Adjacent Improvement (whether or not such Adjacent
Improvement is ultimately owned by such Operator), the other Operator
shall be entitled to share usage of such Adjacent Improvement by giving
written notice stating the amount which such other Operator is prepared
to pay to the first Operator for such right. If the Operators are unable
to agree on the amount of such payment within 45 days after such notice
was given, then at the written request of an Operator delivered to the
other after 45 days but before 60 days after such notice was given, the
matter shall be submitted for resolution by binding arbitration pursuant
to Section 13 and the provisions of Section 6(d)(iii) shall apply to
determine the amount of such payment.
(ii) After the second Operator pays the amount so
determined, if the first Operator owns or has a property interest in the
Adjacent Improvement, the provisions of this Section 6 shall be applied
as if such improvement were a Nonseverable Improvement. If a shipper or
another Person unrelated to the first Operator owns such Adjacent
Improvement, the second Operator shall be entitled to share fully the
rights of the first Operator in connection with such Adjacent
Improvement in consideration of the initial payment.
(j) Operator's Facilities. The foregoing provisions of this
Section 6 shall not apply to any capital improvement (including, but not limited
to, a transloading facility or automotive ramp) within an Operator's Facility.
Section 7 Accounting.
(a) Books of Record and Account. CRC shall keep proper books of
record and account, in which full and correct entries shall be made of all CRC
transactions, costs, expenses and revenues in accordance with GAAP and the USOA,
as modified by the Accounting Plan. All expense and revenue transactions related
to the Shared Assets Area shall be readily identifiable by distinct accounting
codes.
(b) Financial Statements. CRC shall deliver to each Operator (i)
within 30 days after the end of each calendar month, a summary income statement
and a summary balance sheet showing as of the last day of and for such calendar
month, major categories of CRC revenue, expense, assets and liabilities, (ii)
within 30 days after the last day of each CRC fiscal quarter, interim financial
statements as of and for the fiscal quarter ended on such day, similar to
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statements described in Rule 10-01 of Regulation S-X under the Securities
Exchange Act of 1934, as amended, as modified by the Accounting Plan, and (iii)
within 30 days after the last day of each CRC fiscal year, statements of income
and cash flow and a balance sheet as of and for the fiscal year ended on such
day, prepared in accordance with GAAP and the USOA, as modified by the
Accounting Plan.
Section 8 Costs and Budgets.
(a) CRC Costs. CRC shall pay (and, except for Excluded Taxes,
CSXT and NSR shall, pursuant to Section 9, reimburse CRC for) all of the costs
and expenses to maintain its ownership of the Shared Assets and to operate and
maintain the Shared Assets, including but not limited to all Taxes and
assessments, licenses, permits and any other governmental authorizations
required to own, operate and maintain the Shared Assets, the principal of and
interest and premium, if any, on, and all other costs of, its indebtedness and
all other costs of its capital.
(b) Employee Cost Reimbursement. CRC shall reimburse CSXT and NSR
for the wages, pro rata portion of fringe benefits, other direct employment
costs (including additives) and other actual employee-related costs of any CSXT
or NSR employee, respectively, who provides Temporary Services.
(c) Capital Expenditure Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each CRC fiscal year, a Capital Expenditure Budget for such fiscal year,
specifying for such year the schedule of Program Maintenance and Shared
Asset capital improvements to be performed and constructed for the
benefit of both Operators during such fiscal year and the months therein
during which such expenditures are proposed to be made, for approval, or
modification and approval, by the CRC Board.
(ii) The General Manager shall not permit any capital
expenditure to be made by CRC, CSXT or NSR except in accordance with the
Capital Expenditure Budget in effect from time to time, Severable
Improvements exclusively funded by an Operator and emergency capital
expenditures made (A) to preserve, or to mitigate a serious diminution
in, the value and usefulness of a Shared Asset to CRC, CSXT and NSR, or
(B) to prevent or mitigate a serious disruption in the operation and use
of the Shared Assets by or for CRC, CSXT or NSR.
(iii) Any Capital Expenditure Budget may be amended in
writing at any time by the CRC Board.
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(d) Operating Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each fiscal year of CRC, an Operating Budget for such fiscal year
showing the budget amounts of revenues and expenses for each month
during such fiscal year, for approval, or modification and approval, by
the CRC Board.
(ii) The General Manager shall use all reasonable
efforts to prevent CRC expenses with respect to Shared Assets for a
period from exceeding the amounts shown on the Operating Budget for such
period.
(iii) The General Manager shall give prompt written
notice to each member of the CRC Board of any actual or, in the judgment
of the General Manager, probable, material change in the revenues,
expenses or working capital requirements shown on the Operating Budget
for any period.
(iv) Any Operating Budget may be amended in writing at
any time by the CRC Board.
Section 9 Cost Sharing.
(a) Accounting Plan. The parties shall develop and implement a
written plan of accounting containing a detailed description, by category of
cost and location, of the costs associated with the management and operation of
the Shared Assets Area and the method by which such costs shall be fairly and
properly apportioned among the parties. Such plan of accounting may include
separate accounting and sharing of costs for particular Zones, and shall conform
to the following general principles:
(i) Forty two percent (42%) of Interest Rental shall be
apportioned to CSXT and fifty eight percent (58%) of Interest Rental
shall be apportioned to NSR;
(ii) Locomotive ownership, lease, fueling, light repair
and servicing costs incurred by CRC within the Shared Assets Area or
each Zone (except costs incurred by CRC and charged directly to an
Operator pursuant to Section 4(c)) shall be apportioned between the
Operators on the basis of the CRC Train Usage Percentages;
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(iii) Crew compensation and other crew costs incurred by
CRC within the Shared Assets Area or each Zone with respect to CRC
Trains shall be apportioned between the Operators on the basis of the
CRC Train Usage Percentages;
(iv) General and administrative, supervisory and
overhead expenses incurred by CRC within the Shared Assets Area or for
functions related to the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(v) Dispatching and train control costs (including,
without limitation, labor, equipment, materials and maintenance
expenses) incurred by CRC with respect to the Shared Assets Area shall
be apportioned between the Operators on the basis of the CRC Train Usage
Percentages;
(vi) Police and other costs incurred by CRC with respect
to security within the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(vii) Damage paid by CRC pursuant to Section 11(c) shall
be apportioned between the Operators in accordance with Section 11(b);
(viii) All other costs incurred by CRC with respect to the
Shared Assets Area or each Zone (except Taxes and insurance) shall be
apportioned between the Operators on the basis of the Total Train Usage
Percentages;
(ix) Taxes (other than Excluded Taxes) incurred by CRC
with respect to the Shared Assets Area or each Zone shall be apportioned
between the Operators on the basis of the Operator's Expense Percentages
for the period to which such Taxes relate; and
(x) Insurance costs incurred by CRC with respect to
Shared Assets within the Shared Assets Area or each Zone shall be
apportioned between the Operators on the basis of the Operator's Expense
Percentages for the period to which such insurance costs relate;
If the parties are unable to agree on the terms and provisions of the Accounting
Plan, such disagreement may be submitted by either Operator for resolution by
binding arbitration pursuant to Section 13.
(b) Usage Statement. CRC shall deliver to each Operator prior to
the last day of each calendar month, a written statement showing for the prior
Billing Month:
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(i) the total number of loaded and empty Railcars in
the account of each Operator in CRC Trains which performed Switching and
Yard Services or operated directly between customer facilities in each
Zone;
(ii) the total number of loaded and empty Railcars moved
by or for such Operator in Operator Trains which operated overhead or
directly to Jointly-Operated Facilities, Operators' Facilities or
customer facilities in each Zone;
(iii) the calculation of the CRC Train Usage Percentage
and the Total Train Usage Percentage for each Operator for each Zone,
and (A) all Railcars in a train shall be deemed to be on Shared Assets when the
first or last Railcar of such train is on Shared Assets and (B) each time that a
Railcar is removed from or added to a train in the Shared Assets Area shall
constitute a separate movement of such Railcar.
(c) Expense Statement. Concurrently with the delivery of each
Usage Statement to the Operators, CRC shall deliver to the Operators a statement
showing (i) the expenses incurred by CRC to own, operate and maintain the Shared
Assets during the Billing Month, (ii) the revenues, if any, derived by CRC from
the ownership and operation of the Shared Assets during such Billing Month, and
(iii) the Reimbursable Expenses for such Billing Month, in each case computed in
accordance with GAAP and the USOA, as modified by the Accounting Plan.
(d) Capital Expenditure Statement. Concurrently with the delivery
of each Usage Statement to the Operators, CRC shall deliver to the Operators a
statement showing the estimated Budgeted Capital Expenditures for the calendar
month immediately succeeding the calendar month in which such statement is
delivered.
(e) Bills. Concurrently with the delivery to the Operators of a
Usage Statement for a Billing Month, CRC shall deliver to each Operator a bill
(a "Bill") showing for such Billing Month:
(i) one hundred and two percent (102%) of the amount of
each Reimbursable Expense apportioned to such Operator for such Billing
Month under the Accounting Plan;
(ii) one-twelfth of fifty percent (50%) of the annual
amount of Budgeted Capital Expenditures approved by the CRC Board; and
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(iii) one-twelfth of the Interest Rental apportioned to
such Operator.
(f) Payment. Each Operator shall pay to CRC the amount shown on
each Bill as being payable by such Operator, on or before the 30th day after the
date of such Bill regardless of whether or not such Operator disputes the
accuracy of any amount or calculation shown on such Bill.
(g) Disputed Bills.
(i) Any dispute by an Operator of the accuracy of any
amount or calculation shown on any Bill shall be described and specified
in reasonable detail in a Dispute Letter from such Operator to CRC and
the other Operator within two years after the date of such Bill.
(ii) Any amounts or calculations shown on any Bill which
are not disputed in accordance with Section 9(g)(i) shall conclusively
be deemed to be accurate and shall be binding on each Operator and CRC.
(iii) CRC and both Operators shall promptly endeavor to
resolve the disputes described in each Dispute Letter, and if they fail
to agree to a resolution of such disputes within 60 days of the delivery
of such Dispute Letter to CRC, then the firm of independent public
accountants which has been engaged as auditors for CRC shall be engaged
to resolve such disputes in accordance with GAAP and the USOA, as
modified by the Accounting Plan, and the written resolution of such
disputes signed by such accounting firm shall be binding on each
Operator and CRC.
(iv) Any adjustments to Bills which result from the
resolution of Dispute Letter disputes shall be reflected as charges or
credits on the first Bills delivered by CRC to the Operators after such
disputes have been resolved.
(v) The fees in connection with the resolution of any
Dispute Letter disputes of the accounting firm which has been engaged as
auditor for CRC shall be paid fifty percent (50%) by CSXT and fifty
percent (50%) by NSR.
Section 10 Access. CRC shall give to each Operator during
normal CRC Administrative Office business hours, access to inspect and make
copies of any and all books of record and accounts relating to this Agreement,
all of which shall be maintained by CRC at the CRC Administrative Office.
Section 11 Liability. Except as otherwise provided in Section
3(l) (Freight Claims), Section 11(f) (Specified Level Damages) and Section 11(g)
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(Substance Abuse Exceptions), the responsibility between and among CRC, CSXT and
NSR for all Damage arising out of, incidental to or occurring in connection with
this Agreement shall be apportioned without consideration of fault or negligence
of any kind or degree in accordance with the remaining provisions of this
Section 11. The provisions of this Section 11 are intended to inure only to the
benefit of the parties hereto and their corporate successors and affiliates, and
not to create any benefits for any third parties.
(a) Operators' Sole Responsibility. Except as otherwise provided
in Section 11(f) (Specified Level Damages) and Section 11(g) (Substance Abuse
Exceptions), each Operator shall assume and bear all responsibility for Damage
to its own trains, locomotives and equipment, to Railcars and lading in its
possession or being handled for its account and for the death of or injury to
its own employees.
(b) Operators' Joint Responsibility.
(i) Train Usage. Except as otherwise provided in (1)
Section 11(b)(ii) (First Year), (2) Section 11(a) (Operators' Sole
Responsibility), (3) Section 11(c)(i) (CRC Damages Generally), (4)
Section 11(c)(ii)(B) (No Reallocation for Insurance), (5) Section 11(f)
(Specified Level Damages), and (6) Section 11(g) (Substance Abuse
Exceptions), and subject to Section 11(c)(ii)(A) (Net of Insurance), all
Damage shall be apportioned between the Operators in proportion to their
respective Total Train Usage Percentages in the Zone in which the
incident giving rise to such Damage occurred for the 12 calendar month
period immediately preceding the incident giving rise to such Damage.
(ii) First Year. If an incident giving rise to Damage
for which the Operators are jointly responsible under Section 11(b)(i)
(Train Usage) occurs before June 1, 2000, responsibility for such Damage
shall be borne equally by the Operators, with each being liable for
one-half (1/2) of the damages.
(c) CRC Responsibility - Allocation and Insurance.
(i) CRC Damages Generally. Except as otherwise provided
in this Section 11(c), all Damages incurred by CRC, including, without
limitation, those Damages apportioned to CRC under Section 11(f)
(Specified Level Damages) shall be CRC expenses, allocated as provided
in Section 11(b) (Operators' Joint Responsibility), and included in
Expense Statements charged to the Operators.
(ii) (A) Net of Insurance.
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(1) Notwithstanding any other provision in
this Agreement (but subject to Section 11(c)(ii)(B) (No
Reallocation for Insurance)), all Damages (including
without limitation, loss or destruction of, or damage to,
CRC's own property) charged to the Operators, under the
Expense Statements or otherwise, shall be net of any CRC
insurance. It is the intent of the parties (a) for CRC to
look first to any insurance proceeds available to it
before attempting to recover any such Damages from the
Operators and (b) for the Operators' obligation to make
direct payment to CRC not to include any obligation to
make direct payment for any Damages covered by insurance
procured by or on behalf of CRC.
(2) If and to the extent that CRC is an
insured under, or otherwise provided coverage under, an
insurance policy or policies each of which provides
coverage for both CRC and one Operator but not the other
Operator, and regardless of whether two or more of these
policies shall be in existence or have different
deductible-retention amounts and/or limits of recovery,
then the amount of insurance proceeds deemed "available"
under Section 11(c)(ii)(A)(1) to which CRC shall look
before either Operator shall have any obligation for
direct payment shall, as to each Operator, be the maximum
available limit of the insurance providing coverage for
both that Operator and CRC.
(B) No Reallocation for Insurance. When part of the
apportioned Damage will be satisfied from insurance coverage
under this Section 11(c), and part paid directly by the Operator,
the insured portion of the Damage shall be apportioned among or
between CRC and the Operators (and consequently between or among
their insurers) in the same manner and amounts as it would have
been apportioned if the loss were not net of insurance. If any
such allocation results in one party hereto suffering a greater
uninsured loss than the other(s) because of differing deductibles
or self-retentions, that difference in coverage shall not be a
basis for any reapportionment or reallocation of Damage.
(d) Process. Each Operator shall be responsible for the payment,
handling, administration and disposition of all Damage for which it bears
exclusive responsibility under Section 11(a) (Operators' Sole Responsibility),
and both Operators shall have joint responsibility for the payment, handling,
administration and disposition of all Damage for which they are jointly
responsible under Section 11(b) (Operators' Joint Responsibility) and Section
11(c) (CRC Responsibility - Allocation and Insurance). In assigning joint
responsibility to both Operators, it is not the intent of this Agreement that
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the Operators will actually act jointly, but rather that the Operators will
agree between themselves on the most practical and efficient arrangements for
handling, administering, and disposing of Damage for which they bear joint
responsibility, with the objective of eliminating unnecessary duplication of
effort and minimizing overall costs.
(e) Indemnification. Each party to this Agreement covenants and
agrees to (i) fully indemnify and save harmless the other parties to this
Agreement from and against any payments which are the responsibility of such
party under this Agreement, and all expenses, including attorneys' fees and
expenses and other expenses of any court or regulatory proceeding, incurred by
such other parties in defending any claim that they are liable for such
payments, and (ii) defend such other parties against such claims with counsel
selected by such party and reasonably acceptable to such other parties.
(f) Specified Level Damages.
(i) Damages Amount. Section 11(a) (Operators' Sole
Responsibility) and Section 11(b) (Operators' Joint Responsibility)
shall apply directly only when the total amount of all Damages resulting
from a single incident is $25 million or less. Responsibility for
Damages resulting from a single incident for which Damages exceed $25
million shall be allocated as stated in this Section 11(f)(i).
(A.1) Tier One Damages Defined. In this Section
11(f), "Tier One Damages" for any incident occurring during and
between June 1, 1999 and May 31, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
the greater of:
(1) $25 million of Damages; or
(2) the lowest amount of Damages which, when
allocated among all parties, results in an allocation to
either Operator of Damages in an amount equal to all
insurance benefits available to that Operator (called the
"Lesser Insured Operator") which has the lesser (as
between the Operators) amount of insurance benefits
available to it, including, without limitation, insurance
to which CRC looks under Section 11(c) (CRC Responsibility
- Allocation and Insurance). In determining insurance
benefits available to the Lesser Insured Operator, both
property and liability insurance shall be considered but
(I) only to the extent benefits are actually available in
connection with that incident and (II) they shall be
calculated separately (i.e., property insurance benefits
shall not be considered in any determination of available
liability insurance benefits and vice versa).
- 29 -
<PAGE>
In this Section 11(f), "Tier One Damages" for any incident
occurring on or after June 1, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
only the first $25 million of Damages incurred by the parties,
unless otherwise agreed by the parties.
(A.2) Allocation of Tier One Damages. Tier One
Damages shall be allocated among the parties as follows:
(1) Any Damage for which each Operator would
otherwise be solely responsible under Section 11(a)
(Operators' Sole Responsibility) shall be allocated as
provided in Section 11(a);
(2) Any and all CRC Damages other than those
specified in preceding Section 11(f)(i)(A.2)(1)
(including, without limitation, Damage to its trains,
locomotives and equipment, whether owned or leased, to
Railcars and lading in its possession or being handled for
its account, and to the property of any others, as well as
any Damage arising from or in connection with the death of
or injury to any persons, including, without limitation,
its own employees) shall be allocated and paid as provided
in Section 11(c) (CRC Responsibility - Allocation and
Insurance); and
(3) Any and all other Damages shall be
allocated as provided in Section 11(b) (Operators' Joint
Responsibility).
(B.1) Tier Two Damages Defined. In this Section
11(f), "Tier Two Damages" shall include (1) those Damages
allocated to Tier Two under Section 11(g) (Substance Abuse
Exceptions) and (2) all of those Damages in excess of the
aggregate Tier One Damages calculated under Section
11(f)(i)(A.1).
(B.2) Allocation of Tier Two Damages. Tier Two
Damages shall be allocated between or among the parties hereto in
proportion to their respective fault or negligence in causing the
Damage.
(ii) Dispute Resolution. Any dispute between or among
the parties hereto in determining their respective fault or negligence
in causing the Damage or otherwise relating to their respective
responsibilities for Damage arising out of, incidental to or occurring
in connection with any incident shall be submitted for resolution by
binding arbitration pursuant to Section 13 (Arbitration).
- 30 -
<PAGE>
(iii) Amendment of Certain Amounts. The $25 million
amount referred to in this Section 11(f) may be adjusted every five
years following the date of this Agreement with the prior approval of
all parties, which approval may be given or refused in the sole
discretion of each party.
(g) Substance Abuse Exceptions. Each Operator shall assume and
bear all responsibility for Damage to the extent caused by acts or omissions of
any of its employees while under the influence of drugs or alcohol, and Sections
11(b) (Operators' Joint Responsibility) and Section 11(f) (Specified Level
Damages) shall not apply to any such Damage. If, but for the operation of this
Section 11(g), all or any Damages from an incident would otherwise have been
Tier One Damages under Section 11(f) (Specified Level Damages), the portion of
the Damages caused by acts or omissions of any the employee(s) while under the
influence of drugs or alcohol shall be Tier Two Damages, and allocated under
Section 11(f)(i)(B.2) (Allocation of Tier Two Damages), and the remaining
portion of the Damages from that incident shall be included in, and allocated
under, Tier One or Tier Two under the otherwise applicable provisions for
Section 11(f)(i).
(h) Transaction Agreement. Section 2.8 of the Transaction
Agreement shall control any conflict between Sections 11(b) and (c) and said
Section 2.8.
(i) Damages. As used in this Section 11 only, the term
"Damage(s)" shall exclude:
(i) Operator Consequential Damages (which are always
borne by the Operator which sustained them); and
(ii) any claim by any party, in its own right, against
any other party for exemplary or punitive damages, but not for
allocation under this Section 11 of exemplary or punitive damages
claimed against that party by a third person not a party hereto.
With regard to exemplary and punitive Damages the parties acknowledge and agree
that, with regard to the subject of this Agreement, the intent and agreement of
the parties is that no party shall bring or recover any claim for exemplary or
punitive damages, in its own right, against any other party, but that any party
will allocate, in accordance with this Section 11, exemplary or punitive Damages
from any claim against it by a third person not a party hereto.
- 31 -
<PAGE>
Section 12 No Partnership. Nothing in this Agreement shall be
construed to establish a partnership or joint venture between or among CRC, CSXT
or NSR or any of their affiliates or associates.
Section 13 Arbitration. Any dispute, controversy or claim (or
any failure by the parties to agree on a matter as to which this Agreement
expressly or implicitly contemplates subsequent agreement by the parties, except
for matters left to the sole discretion of a party) arising out of or relating
to this Agreement, or the breach, termination or validity hereof, shall be
finally settled through binding arbitration by a sole, disinterested arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall be jointly selected by the parties but, if the
parties do not agree on an arbitrator within 30 days after demand for
arbitration is made by a party, they shall request that the arbitrator be
designated by the American Arbitration Association. The award of the arbitrator
shall be final, binding and conclusive upon the parties. Each party to the
arbitration shall pay the compensation, costs, fees and expenses of its own
witnesses, experts and counsel. The compensation and any costs and expenses of
the arbitrator shall be borne equally by the parties. The arbitrator shall have
the power to require the performance of acts found to be required by this
Agreement, and to require the cessation or nonperformance of acts found to be
prohibited by this Agreement. The arbitrator shall not have the power to award
consequential or punitive damages. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof, which court may award
appropriate relief at law or in equity. All proceedings relating to any such
arbitration, and all testimony, written submissions and award, of the arbitrator
therein, shall be private and confidential as among the parties, and shall not
be disclosed to any other Person, except as required by law and except as
reasonably necessary to prosecute or defend any judicial action to enforce,
vacate or modify such arbitration award.
Section 14 Term. This Agreement shall become effective as of
the date first above written and shall remain in effect until the twenty-fifth
(25th) anniversary of such date, subject to the right of CSXT and NSR to agree
prior to the twenty-third (23rd) anniversary of such date to extend this
Agreement for a renewal period of five (5) years; and if so extended, to agree
prior to the twenty-eighth (28th) anniversary of such date to further extend
this Agreement for an additional renewal period of five (5) years (each such
period, a "Renewal Term").
Section 15 Force Majeure. The obligations, other than payment
obligations, of the parties to this Agreement shall be subject to force majeure
(which shall include strikes, riots, floods, accidents, Acts of God, and other
causes or circumstances beyond the control of the party claiming such force
majeure as an excuse for non-performance), but only as long as, and to the
extent that, such force majeure shall prevent performance of such obligations.
- 32 -
<PAGE>
Section 16. Entire Agreement. This Agreement and the Transaction
Agreement, including the other Ancillary Agreements (as defined in the
Transaction Agreement) constitute the entire agreement and supersede all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except the letter agreement dated
April 8, 1997 between CSX and NSC to the extent such April 8, 1997 letter
agreement covers matters not addressed or amended hereby or in the Transaction
Agreement or the Ancillary Agreements (as defined in the Transaction Agreement);
provided that it is the intent of the parties that this Agreement shall be an
effectuation of such April 8, 1997 letter agreement consistent with its terms,
and that the provisions of this Agreement shall be interpreted to give effect to
such April 8, 1997 letter agreement; and provided further that, in the event of
any inconsistency between the terms of this Agreement and such April 8, 1997
letter agreement, this Agreement shall prevail.
Section 17 Amendment and Waiver. Any amendment to this
Agreement must be in writing and executed and delivered by CRC, CSXT and NSR,
subject to any jurisdiction of the STB. Any waiver of any term or provision of
this Agreement must be in writing and executed and delivered by the party
entitled to enforcement of such term or provision.
Section 18 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, such provision is intended to be ineffective only to the most limited
extent possible in such context and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 19 Remedies.
(a) Entitlement to Certain Remedies. Each party acknowledges and
agrees that the other parties would be irreparably damaged in the event any of
the provisions of this Agreement were not performed by it in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
each party shall be entitled to an injunction or injunctions to prevent breaches
of such provisions and to specifically enforce such provisions, in addition to
any other remedy to which such party may be entitled, at law or in equity.
(b) Preclusion of Certain Remedies. In no event shall any party
be liable to the other parties for any consequential, indirect, incidental,
punitive or other similar damages including, but not limited to, lost profits
for any breach or default, or any act or omission arising out of or in any way
relating to this Agreement, under any form or theory of action whatsoever,
whether in contract, tort or otherwise. The foregoing is not intended to alter
or limit the allocation of responsibility for Damage as provided in Section 11.
- 33 -
<PAGE>
Section 20. Interpretation. This Agreement was drafted jointly
by CSXT and NSR, each of which was advised by its own counsel and other advisors
concerning all of the terms and provisions hereof; accordingly, any ambiguity
herein should not be construed in favor of or against any of them.
Section 21. Headings. Headings of Sections and paragraphs in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of any term or provision of this Agreement.
Section 22. Parties. This Agreement shall inure to the benefit
of and be binding upon CRC, CSXT and NSR and any successor of any of them by
operation of law, and any assignee agreed to by them in accordance with Section
23, and nothing in this Agreement is intended or shall be construed to give any
other Person any legal or equitable right, remedy or claim under or with respect
to this Agreement or any term or provision hereof.
Section 23. Assignment.
(a) Limitation. Except as provided in Section 23(b), neither this
Agreement (including the documents and instruments referred to herein) nor any
of the rights, interests or obligations hereunder, shall be assigned by any
party, including by operation of law, without the prior written consent of the
other parties (except to a controlled subsidiary), which consent may be given or
refused in the sole discretion of each party.
(b) Successor. Any party without the consent of the other parties
may assign all of its rights and obligations under this Agreement only to any
successor in the event of a merger, consolidation, sale of all or substantially
all its assets (but only if such sale includes all routes and lines owned by
such party to access the Shared Assets), if such assignee executes and delivers
to the other parties hereto an agreement reasonably satisfactory in form and
substance to such other party under which such assignee, which is reasonably
satisfactory to the other party, assumes and agrees to perform and discharge all
the obligations and liabilities of the assigning party; provided that any such
assignment shall not relieve the assigning party from the performance and
discharge of such obligations and liabilities.
Section 24. Notices. Any notice given by CRC, CSXT or NSR to the
others under this Agreement shall be deemed delivered on the date sent by
registered mail, or by such other means as they may agree, and shall be
addressed to them as follows:
- 34 -
<PAGE>
(A) If to CSXT:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(B) If to NSR:
Senior Vice President Operations
Norfolk Southern Railway Company
Three Commercial Place
Norfolk, Virginia 23510-2191
(C) If to CRC:
President and Chief Executive Officer
Consolidated Rail Corporation
2001 Market Street
Two Commerce Square
Philadelphia, Pennsylvania 19101
and each of them may from time to time change its address in this Section 24 by
written notice delivered to the others.
Section 25. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without regard to principles of conflicts of laws.
- 35 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in counterparts by their duly authorized officials as of the day
first above written.
CSX TRANSPORTATION, INC.
By: /s/PETER J. SHUDTZ
------------------
Peter J. Shudtz
Title: Vice President - Law and General Counsel - CSX
Corporation, authorized agent for CSX Transportation,
Inc.
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/J. L. MANETTA
----------------
J. L. Manetta
Title: Senior Vice President Operations
CONSOLIDATED RAIL CORPORATION
By: /s/TIMOTHY O'TOOLE
------------------
Timothy O'Toole
Title: President
- 36 -
<PAGE>
EXHIBIT A
OPERATING PROTOCOLS
Consolidated Rail Corporation
Shared Assets Area
Terminal Capacity Guidelines
Yard Operations
o Cars loaded or empty moving outbound to either parent* company, which have
been made up for train departure at either a serving merchandise yard,
Automotive Terminal or jointly used Intermodal Facility will be considered
available at the published departure time for scheduled trains and the later
of 4 hours after notice to the parent or actual available time (set time)
for non-scheduled or extra trains. Cars remaining available for departure
in excess of ten (10) hours will be subject to a charge of $141.00 per car.
Thereafter, for every eight (8) hours that the same cars continue to remain
on track, along with all other cars of the same block codes within the
originating dispatch yard, will be subject to an additional charge of
$141.00 per car.
o Cars loaded or empty assembled for outbound train dispatch to either parent
company will be considered available at published departure time for such
scheduled trains. The Shared Assets Areas management will provide four (4)
hours advance notice prior to set time on non-scheduled or extra trains
before they will be considered available for departure.
o Management of Shared Assets Areas may refuse an inbound train of the same
category when a specific destination terminal has been holding more than one
(1) intermodal, automotive, manifest or unit train of a parent for power
and/or crew beyond ten (10) hours of scheduled departure or availability and
conditions within the involved destination terminal preclude the effective
handling of the offered inbound trains.
o Acts of God, Mainline blockages, labor strikes or other causes to a
cessation of consistent service beyond the control of a parent company will
be considered by the management of the Shared Assets Areas as to the
legitimacy of any assessment.
o Opportunities for the Shared Assets Areas management to consolidate
- ---------------------
*The term "parent" means CSXT and/or Norfolk Southern Railway Co. ("NSR") and is
not intended to describe the legal relationship between the parties.
1
<PAGE>
trains for the benefit of a specific Shared Assets Area operation and
the involved parent, as mutually agreed by the parties, will not result in
charges on cars designated for the annulled train resulting from said
consolidation.
o An inventory of hold cars awaiting disposition within any given Shared
Assets Area territory should not exceed thirty (30) cars per day for either
CSXT or NSR individually. The Shared Assets Areas management may elect to
limit receipt of inbound car flow from the delinquent parent for the
affected Shared Assets Areas territory, in accordance with the guidelines
for holding trains. Any loaded or empty car including those in unit train
consists carrying a "No Bill" status more than twenty-four (24) hours will
be assessed $10.00 per hour in excess thereof.
o Trains inbound to the Shared Assets Area territory must have proper car and
train documents. If this information is lacking, the Shared Area managers,
at their discretion, may hold trains outside the boundaries of the Shared
Assets Area until proper documentation is received.
o Regardless of company of employment, any qualified crew in the Shared Area
may operate any locomotive, regardless of ownership, in that area for the
purposes of positioning/hostling or movement of light power between yards.
Held Trains
o In recognition of terminal fluidity and capacity utilization, the Shared
Assets Areas management can require, in coordination with a parent's command
center, an inbound train to be held outside the boundaries of a Shared
Assets Area.
- Such notification must be given with enough notice for the parent to
chamber the train at a location that minimizes disruption to
operations.
- Decisions by the Director of Train Operations of Shared Assets Areas
management are final in this regard. Neither parent may compel the
Shared Assets Areas management to accept trains.
- Similarly, the decision to hold out a train other than temporary holds
is recognized as a serious action, which will be done only after all
other alternatives are exhausted. Data on these actions will be
maintained by Shared Assets Areas management and will be regularly
available for briefing to the Conrail's Board of Directors at its
pleasure.
2
<PAGE>
Storage
o Neither parent company may store or pre-position cars on Shared Assets
Area's tracks, including yard and industrial tracks to which they have
access. Empty cars routed to the Shared Assets Areas must have a customer
destination assigned, and must be loaded without beginning to accrue charges
as described in Conrail's Demurrage Tariff in effect on May 1, 1999. When it
is determined that cars cannot be delivered to the customer within 60 hours
of arrival, a call will be made to the parent's operations center. After
such a call is made, except in extraordinary cases, these cars will then be
placed on the parent's first available outbound train.
o CSXT and NS will independently establish such demurrage and car storage
arrangements with customers as each deems proper. Should customers keep or
store cars on SAA tracks beyond the time at which charges would begin to
accrue as called for in Conrail's Demurrage Tariff in effect on May 1, 1999,
then the parent road will be assessed $100 per car per day to cover the
operational cost of congestion and inefficient use of Shared Assets Areas
facilities.
o CSXT and NSR recognize that certain customers are currently provided car
storage within the Shared Asset Areas, and that this storage may be
essential to the functioning of the business of these customers. CSXT, NSR
and Shared Assets will review current pools and by consent of all three
parties approve their makeup and location based on operating efficiencies.
Thereafter pools will be regularly reviewed for the provision of such
storage to avoid congestion. Any request for additional car storage for any
Shared Assets Area customers must be approved by the Parents, who will
consider the availability of additional space with a view toward assuring
that operations in the Shared Assets Area remain fluid and will not be
affected by providing such car storage.
Interchange
o CSXT and NSR will not interchange cars to each other within the Shared
Assets Areas locations unless specifically provided through separate
agreements. No open interchanges have been established except at industries.
3
<PAGE>
Blocking
o To ensure the equal and fair use of the Shared Assets Area capacity by its
parent companies, the following car classification requirements will govern:
- Each parent company will be required to block inbound trains for the
Shared Assets Areas. Each parent will make the number of blocks called
for in the split-date Operating Plan. Failure to comply with inbound
blocking requirements and execute appropriate setoffs (unless otherwise
directed by Shared Assets
management) within the Shared Assets Area will result in an assessment
of $50.00 per loaded or empty car.
- Management of the Shared Assets Areas will be required to block outbound
trains. Parent companies will receive the number of blocks at each
Shared Assets Area terminal that is called for in the split-date
Operating Plan.
- Changes to the number of blocks made by or delivered to a Shared Asset
terminal may be made only by mutual consent of all three parties.
- Parent companies, except by joint agreement, may not compel the Shared
Assets Areas management to make a greater number of blocks at any
terminal, beyond the number of called for in the split-date Operating
Plan.
- Each parent may change the definition of its own specific blocks
originating at a Shared Assets Area terminal.
Hours of Service and Recrews
o Train crews on parent trains approaching a Shared Assets Area must have
sufficient time to terminate in or exit the Shared Assets Areas before
hours-of-service laws require them to rest. Sufficient time is considered
the trains scheduled elapsed time to terminate in or pass through the Shared
Assets Area. The Shared Assets Areas management may grant an exception if
the train can make it to its destination without undue disruption.
o Shared Assets Areas shall have the option to provide T&E relief service for
any road train on the hours-of-service law, regardless of parent company.
- Such relief will be provided after coordination with the appropriate
parent's operations center indicating the involved parent will provide
no relief crew.
4
<PAGE>
- Recrews will be at the sole cost and expense of the parent whose train
is recrewed at full cost plus a $500 surcharge.
- If specific trains frequently require recrews, Shared Assets Areas
management may request the parent to change its schedule or slotting of
subject train with the right to repeatedly hold that train for a recrew
outside the Shared Assets Areas as set forth under the "held trains"
provision until such appropriate adjustments are made to the
non-conforming schedule.
- Data on trains recrewed will be maintained by Shared Assets Areas
management and will be regularly available for briefing to Conrail's
Board of Directors at its pleasure.
Charges
o The charges paid by either owner under these protocols will be made to a
Conrail "passive income" account, which will be administered by Conrail.
Changes
o These terminal capacity guidelines will be reviewed at the request of any of
the three parties (CSXT, NSR, and/or CSAO). Proposed changes are subject to
the arbitration provisions of the Shared Asset Area Operating Agreements in
the event CSXT and NSR cannot agree.
5
Exhibit 10.7
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
DETROIT
Dated as of June 1, 1999
By and Among
CONSOLIDATED RAIL CORPORATION,
CSX TRANSPORTATION, INC. and
NORFOLK SOUTHERN RAILWAY COMPANY
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................................1
(a) AAR............................................................1
(b) Accounting Plan................................................1
(c) Action.........................................................2
(d) Adjacent Improvements..........................................2
(e) Bill...........................................................2
(f) Billing Month..................................................2
(g) Board of Managers..............................................2
(h) Budgeted Capital Expenditures..................................2
(i) Capital Expenditure Budget.....................................2
(j) Capital Expenditure Statement..................................2
(k) CRC Administrative Office......................................2
(l) CRC Board......................................................2
(m) CRC Train......................................................2
(n) CRC Train Usage Percentage.....................................2
(o) CSX............................................................3
(p) CSXT Operating Agreement.......................................3
(q) Damage(s)......................................................3
(r) Dispute Letter.................................................3
<PAGE>
Page
(s) Excluded Taxes.................................................3
(t) Expense Statement..............................................3
(u) GAAP...........................................................3
(v) General Manager................................................3
(w) Governmental Entity............................................3
(x) Interest Rental................................................3
(y) Jointly-Operated Facility......................................4
(z) Lesser Insured Operator........................................4
(aa) Liabilities....................................................4
(bb) Nonseverable Improvement.......................................4
(cc) NSC............................................................4
(dd) NSR Operating Agreement........................................4
(ee) NYC............................................................4
(ff) Operating Budget...............................................4
(gg) Operating Plan.................................................5
(hh) Operator.......................................................5
(ii) Operator Consequential Damages.................................5
(jj) Operator's Expense Percentage..................................5
(kk) Operator's Facility............................................5
(ll) Operator Train.................................................5
- ii -
<PAGE>
Page
(mm) Person.........................................................5
(nn) Program Maintenance............................................5
(oo) Program Maintenance Proposal...................................5
(pp) PRR............................................................5
(qq) Railcar........................................................6
.
(rr) Reimbursable Expenses..........................................6
(ss) Renewal Term...................................................6
(tt) RoadRailer(R)..................................................6
(uu) Routine Maintenance............................................6
(vv) Severable Improvement..........................................6
(ww) Shared Asset Value.............................................6
(xx) Shared Assets..................................................6
(yy) Shared Assets Area.............................................7
(zz) STB............................................................7
(aaa) Switching and Yard Services....................................7
(bbb) Tax or Taxes...................................................7
(ccc) Temporary Services.............................................7
(ddd) Tier One Damages...............................................7
(eee) Tier Two Damages...............................................7
(fff) Total Train Usage Percentage...................................8
- iii -
<PAGE>
Page
(ggg) Transaction Agreement..........................................8
(hhh) Usage Statement................................................8
(iii) USOA...........................................................8
(jjj) Valuation Date.................................................8
(kkk) Zone...........................................................8
Section 2. Management........................................................8
(a) CRC Board......................................................8
(b) General Manager................................................9
(c) Employees.....................................................10
(d) CRC Responsibilities..........................................10
(e) Impartiality..................................................10
(f) Independent Contractors.......................................10
Section 3. Operations.......................................................10
(a) Operator's Rights.............................................10
(b) Use...........................................................11
(c) Grant of Rights...............................................11
(d) Switching and Yard Services...................................12
(e) Operating Protocols...........................................12
(f) Freight Traffic to Remain in Account of Each Operator.........12
(g) Rates, Routes and Divisions...................................13
- iv -
<PAGE>
Page
(h) Shipper Bills.................................................13
(i) Service Responsibility........................................13
(j) Dispatching...................................................13
(k) Railcar Weighing..............................................14
(l) Freight Claims................................................14
(m) Freight Car Repairs...........................................14
(n) Train Services................................................15
(o) Wrecking Service..............................................15
(p) Admission of Third Parties....................................15
Section 4. Equipment and Properties.........................................15
(a) Procurement...................................................15
(b) Contribution of Locomotives by Operators......................15
(c) Locomotive Service and Repair.................................16
Section 5. Maintenance......................................................16
(a) Routine Maintenance...........................................16
(b) CRC Program Maintenance.......................................17
(c) Maintenance Standards.........................................17
Section 6. Capital Improvements.............................................18
(a) Proposed Projects.............................................18
(b) CRC Board Approved Projects...................................18
- v -
<PAGE>
Page
(c) Nonseverable Improvement Projects.............................18
(d) Severable Improvement Projects................................18
(e) Capital Improvements as Shared Assets.........................19
(f) Title to Severable Improvements...............................19
(g) Noninterference...............................................19
(h) Switch Connections............................................20
(i) Adjacent Improvements.........................................20
(j) Operator's Facilities.........................................20
Section 7. Accounting.......................................................21
(a) Books of Record and Account...................................21
(b) Financial Statements..........................................21
Section 8. Costs and Budgets................................................21
(a) CRC Costs.....................................................21
(b) Employee Cost Reimbursement...................................21
(c) Capital Expenditure Budget....................................21
(d) Operating Budget..............................................22
Section 9. Cost Sharing.....................................................22
(a) Accounting Plan...............................................22
(b) Usage Statement...............................................24
(c) Expense Statement.............................................24
- vi -
<PAGE>
Page
(d) Capital Expenditure Statement.................................24
(e) Bills.........................................................25
(f) Payment.......................................................25
(g) Disputed Bills................................................25
Section 10. Access..........................................................26
Section 11. Liability.......................................................26
(a) Operators' Sole Responsibility................................26
(b) Operators' Joint Responsibility...............................26
(c) CRC Responsibility - Allocation and Insurance.................27
(d) Process.......................................................28
(e) Indemnification...............................................28
(f) Specified Level Damages.......................................28
(g) Substance Abuse Exception.....................................30
(h) Transaction Agreement.........................................30
(i) Damages.......................................................30
Section 12. No Partnership..................................................31
Section 13. Arbitration.....................................................31
Section 14. Term............................................................31
Section 15. Force Majeure...................................................32
Section 16. Entire Agreement................................................32
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Page
Section 17. Amendment and Waiver............................................32
Section 18. Severability....................................................32
Section 19. Remedies........................................................32
(a) Entitlement to Certain Remedies...............................32
(b) Preclusion of Certain Remedies................................33
Section 20. Interpretation..................................................33
Section 21. Headings........................................................33
Section 22. Parties.........................................................33
Section 23. Assignment......................................................33
(a) Limitation....................................................33
(b) Successor.....................................................33
Section 24. Notices.........................................................34
Section 25. Governing Law...................................................34
EXHIBIT A - Operating Protocols
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<PAGE>
SHARED ASSETS AREA
OPERATING AGREEMENT
FOR
DETROIT
This SHARED ASSETS AREA OPERATING AGREEMENT ("Agreement") dated
as of June 1, 1999, is by and among Consolidated Rail Corporation ("CRC"), CSX
Transportation, Inc. ("CSXT") and Norfolk Southern Railway Company ("NSR").
W I T N E S S E T H:
WHEREAS, all capitalized terms in this Agreement have the
respective meanings set forth in Section 1; and
WHEREAS, CSX owns all of the common stock of and controls CSXT,
NSC owns all of the common stock of and controls NSR, and CSX and NSC jointly
control CRC; and
WHEREAS, CSXT, NSR and CRC desire that the Shared Assets shall be
owned, operated and maintained by CRC and used by or for the exclusive benefit
of CSXT and NSR, and that CSXT and NSR shall each have full and equal rights to
use the Shared Assets to provide competitive railway freight transportation
services to, from and between all places within the Shared Assets Area.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, CRC, CSXT and NSR hereby agree
as follows:
Section 1 Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "AAR" means the Association of American Railroads.
(b) "Accounting Plan" means the plan of accounting adopted
pursuant to Section 9(a).
(c) "Action" means any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any
Governmental Entity.
<PAGE>
(d) "Adjacent Improvement" means a capital improvement, such as a
spur, which provides access to customers and local industries and which (i) is
on property which is not part of the Shared Assets and (ii) will be directly
(without intermediate connection to another railroad) attached to trackage
included within the Shared Assets.
(e) "Bill" means a bill delivered by CRC to an Operator pursuant
to Section 9(e).
(f) "Billing Month" means the calendar month for which
information is shown on a Usage Statement.
(g) "Board of Managers" means any Board of Managers which may be
appointed by the CRC Board pursuant to Section 2(a)(ii).
(h) "Budgeted Capital Expenditures" means capital expenditures
included on a Capital Expenditure Budget which has been approved by the CRC
Board.
(i) "Capital Expenditure Budget" means a written budget
specifying proposed capital expenditures to be made by CRC with respect to
Shared Assets for the periods of time specified in such budget, and the proposed
sources of the capital required to make such expenditures.
(j) "Capital Expenditure Statement" means a statement delivered
by CRC pursuant to Section 9(d).
(k) "CRC Administrative Office" means the administrative office
of CRC located at Philadelphia, Pennsylvania, or at such other place designated
by CRC in a notice it delivers to CSXT and NSR.
(l) "CRC Board" means the Board of Directors of CRC.
(m) "CRC Train" means a train operated by CRC and performing
services pursuant to Sections 3(c) or (d).
(n) "CRC Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the total number of loaded and empty
Railcars in the account of such Operator in CRC Trains, by (ii) the total number
of loaded and empty Railcars in the accounts of both Operators in CRC Trains,
during such time period in such Zone.
(o) "CSX" means CSX Corporation.
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<PAGE>
(p) "CSXT Operating Agreement" means the agreement, dated June 1,
1999, between CSXT and NYC providing for the use, operation and maintenance by
CSXT of certain assets owned or leased by NYC.
(q) "Damage(s)" means all assessments, fines, losses, damages,
liabilities, and costs and expenses related thereto, including, without
limitation, interest, penalties and attorneys' and consultants' fees and also
expressly including, without limitation, all liabilities arising after the
effective date hereof under the Federal Employers Liability Act, as amended, and
environmental laws.
(r) "Dispute Letter" means a letter delivered by an Operator
pursuant to Section 9(g)(i).
(s) "Excluded Taxes" means: (A) all Taxes based, in whole or in
part, on net income or gross income (including, without limitation, any minimum
tax) of CRC or which are in substitution for, or relieve CRC from, any Tax based
upon or measured by CRC's net income or gross income, together with any
interest, penalties, additions to tax or additional amounts that may become
payable in respect thereof; (B) business and occupation taxes, and gross
receipts taxes (unless in the nature of a sales tax) of CRC and Taxes based upon
the equity interests of CRC; and (C) interest, fines and penalties to the extent
due to the acts or omissions of CRC in connection with such Excluded Taxes.
(t) "Expense Statement" means a statement delivered by CRC
pursuant to Section 9(c).
(u) "GAAP" at any time means generally accepted accounting
principles in effect at such time.
(v) "General Manager" means the chief executive officer of CRC.
(w) "Governmental Entity" means any federal, state, local or
foreign court, administrative agency or commission or other governmental or
regulatory authority or commission or any arbitration tribunal.
(x) "Interest Rental" means an amount representing a fair
periodic return on the Shared Asset Value as of the most recent preceding
Valuation Date as determined by such appraiser as CSXT and NSR may select. The
Interest Rental for the first six years of this Agreement shall be as follows:
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<PAGE>
June 1, 1999 through May 31, 2000 -- $6 million June 1, 2000
through May 31, 2001 -- $7 million June 1, 2001 through May 31,
2002 -- $7 million June 1, 2002 through May 31, 2003 -- $8
million June 1, 2003 through May 31, 2004 -- $8 million June 1,
2004 through May 31, 2005 -- $9 million
(y) "Jointly-Operated Facility" means a facility or yard which is
operated by or for a rail carrier and one or more other rail carriers.
(z) "Lesser Insured Operator" means the Operator which has the
lesser (as between the Operators) amount of available insurance benefits as
specified in Section 11(f)(i)(A.1)(2).
(aa) "Liabilities" means any and all debts, liabilities and
obligations of any kind whatsoever, whether or not accrued, contingent or
reflected on a balance sheet, known or unknown, absolute, determined,
determinable or otherwise, including, without limitation, those arising under
any law, rule, regulation, action, order or consent decree of any Governmental
Entity or any judgment in any Action of any kind or award of any arbitrator of
any kind and those arising under any contract.
(bb) "Nonseverable Improvement" means a capital improvement which
is integral to the operation of the Shared Assets and is not readily removable.
(cc) "NSC" means Norfolk Southern Corporation.
(dd) "NSR Operating Agreement" means the agreement, dated June 1,
1999, between NSR and PRR providing for the use, operation and maintenance by
NSR of certain assets owned or leased by PRR.
(ee) "NYC" means New York Central Lines LLC, a Delaware limited
liability company.
(ff) "Operating Budget" means a written budget specifying
estimated operating revenues and expenses and working capital requirements of
CRC with respect to the Shared Assets for the periods of time specified in such
budget.
(gg) "Operating Plan" means the plan for road train and local
train schedules and classifications and related operating protocols for the
Shared Assets Area as may be agreed to, and modified from time to time, by CRC,
CSXT and NSR.
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<PAGE>
(hh) "Operator" means either CSXT or NSR.
(ii) "Operator Consequential Damages" means consequential,
indirect, incidental or other similar damage, injury or loss to an Operator.
(jj) "Operator's Expense Percentage" means for an Operator the
percentage obtained by multiplying 100 by the quotient obtained by dividing (i)
the total Reimbursable Expenses (except for Interest Rental, Taxes, insurance
costs and any other CRC expenses not apportioned between the Operators on a
usage basis) payable by such Operator for a particular period, by (ii) the total
Reimbursable Expenses (except for Interest Rental, Taxes, insurance costs and
any other CRC expenses not apportioned between the Operators on a usage basis)
payable by both Operators for such period.
(kk) "Operator's Facility" means a present, expanded or new
facility or yard which is owned or controlled exclusively by an Operator.
(ll) "Operator Train" means a train operated by an Operator and
performing services in accordance with Sections 3(a) and 3(c).
(mm) "Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company or other legal entity or organization.
(nn) "Program Maintenance" means scheduled renewal of track,
signals, structures and other fixed facilities performed by system or production
gangs assembled to accomplish a specific task or tasks.
(oo) "Program Maintenance Proposal" means a written proposal
prepared by CRC, CSXT or NSR which describes specific Program Maintenance which
the preparer of such proposal believes is necessary or desirable to maintain the
Shared Assets in a safe operating condition to permit or facilitate (i) the
performance by CRC of its services pursuant to this Agreement, or (ii) the use
of Shared Assets by the Operators, and which specifies a budget for such Program
Maintenance.
(pp) "PRR" means Pennsylvania Lines LLC, a Delaware limited
liability company.
(qq) "Railcar" means, except as otherwise provided in the
Accounting Plan, each railroad freight car, locomotive, caboose or other
equipment (including RoadRailer(R) or comparable bimodal freight hauling
equipment in the account of either Operator) furnished in substitution of
railroad equipment, loaded or empty, which an Operator originates, terminates,
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<PAGE>
switches or moves on or overhead to any Shared Assets, except that (i) a single
standard flat car not exceeding 96 feet in length (excluding articulated flat
cars) shall count as a single Railcar, (ii) freight rail cars consisting of
articulated units bearing AAR Car Type Codes "Q" and "S" shall count as multiple
Railcars based on the second (numeric) digit of the Car Type Code for such
articulated units (by way of example, a car consisting of AAR Car Type Code
"S566" would be counted as five Railcars) (or corresponding car type codes and
digits if the AAR Car Type Codes should be modified at any time during the term
of this Agreement), and (iii) a single unit of RoadRailer(R) equipment (or
comparable bimodal freight hauling equipment in the account of either Operator)
shall count as one-half (1/2) of a Railcar.
(rr) "Reimbursable Expenses" means the expenses shown on an
Expense Statement, minus the revenues, if any, shown on such Expense Statement.
(ss) "Renewal Term" means the term of extension of this Agreement
under Section 14.
(tt) "RoadRailer(R)" means bimodal freight hauling equipment
manufactured by or under license from "RoadRailer(R)", a division of Wabash
National Corporation, and capable of movement over the highway when pulled by a
tractor and on the rails using locomotive power.
(uu) "Routine Maintenance" means day-to-day repairs to track,
signals, structures and other fixed facilities that are not part of Program
Maintenance.
(vv) "Severable Improvement" means a capital improvement which
is not a Nonseverable Improvement.
(ww) "Shared Asset Value" means at any date the value of the
Shared Assets, except leases and other contract rights granted by either
Operator to CRC, as of the most recent preceding Valuation Date as determined by
such appraiser as CSXT and NSR may select.
(xx) "Shared Assets" means all tracks, lands, easements, rights
of way, structures, facilities, appurtenances and rights related thereto, which
CRC owns, leases or otherwise has the right to operate over (including those
segments over which CRC or an Operator possesses operating rights pursuant to
Section 3(c)), and which are used for railway purposes in the Shared Assets
Area, including the properties, rights, equipment, inventory and supplies,
whether owned or leased, described or referred to in Item 3A of Schedule 1
(including Attachments I and II) of the Transaction Agreement, but excluding
Operator's Facilities.
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<PAGE>
(yy) "Shared Assets Area" means the geographical area comprising
the Shared Assets and Operator Facilities and Jointly-Operated Facilities
directly (without intermediate connection to another railroad) attached to
trackage included within the Shared Assets, which is designated as the "Detroit"
Shared Assets Area.
(zz) "STB" means the Surface Transportation Board or, if there
shall be no Surface Transportation Board, any federal agency which is charged
with the function of approving combinations by rail carriers or persons
controlling them, or of other arrangements between rail carriers, and granting
exemptions from other laws with respect thereto or regulating other specific
functions with respect to the context in which such term is employed or any
successor entity thereof.
(aaa) "Switching and Yard Services" means the service of
classifying and assembling trains for the account of an Operator in
Jointly-Operated Facilities; movement of loaded or empty Railcars between yards
and local industries; and switching trains and Railcars at yards, terminals and
local industries.
(bbb) "Tax" or "Taxes" means taxes of any kind, levies or other
similar assessments, customs, duties, imposts, charges or fees, including,
without limitation, income taxes, gross receipts, ad valorem, excise, real or
personal property, sales, use, payroll, withholding, unemployment, transfer and
gains taxes or other governmental taxes imposed by or payable to the United
States, or any state, local or foreign government or subdivision thereof, and in
each instance such term shall include any interest, penalties or additions to
tax attributable to such Tax or Taxes.
(ccc) "Temporary Services" means services provided by CSXT or NSR
employees in the operation, maintenance or repair of any Shared Asset on an
emergency basis with the prior approval of the General Manager or senior CRC
employee who is directly responsible for the operation or maintenance of such
Shared Asset.
(ddd) "Tier One Damages" means those Damages defined as Tier One
Damages in Section 11(f)(i)(A.1).
(eee) "Tier Two Damages" means those Damages defined as Tier Two
Damages in Section 11(f)(i)(B.1).
(fff) "Total Train Usage Percentage" means for an Operator for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the sum of the total number of loaded and
empty Railcars in the account of such Operator in CRC Trains and the total
number of loaded and empty Railcars in the account of such Operator in Operator
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<PAGE>
Trains, by (ii) the sum of the total number of loaded and empty Railcars in the
accounts of both Operators in CRC Trains and the total number of loaded and
empty Railcars in the accounts of both Operators in Operator Trains, during such
period in such Zone.
(ggg) "Transaction Agreement" means the Transaction Agreement
dated as of June 10, 1997, among CSX, CSXT, NSC, NSR, Conrail Inc., CRC and CRR
Holdings LLC.
(hhh) "Usage Statement" means a statement delivered by CRC
pursuant to Section 9(b).
(iii) "USOA" means the uniform system of accounts prescribed for
class I railroads by the STB or any successor federal agency that shall succeed
to the functions of the STB in prescribing uniform systems of accounts for rail
carriers; provided, that if there shall be no STB and no such federal agency,
USOA shall mean such system of accounts as is generally maintained by rail
carriers consistent with GAAP as applied in the rail industry.
(jjj) "Valuation Date" means the date of this Agreement and
thereafter the sixth (6th), twelfth (12th), eighteenth (18th) and twenty-fourth
(24th) anniversaries of the date of this Agreement and the first day of each
Renewal Term.
(kkk) "Zone" means a designated geographic section, or designated
facilities, of the Shared Assets Area as established and described in the
Accounting Plan.
Section 2 Management.
(a) CRC Board.
(i) The CRC Board shall manage the Shared Assets.
(ii) The CRC Board may appoint a Board of Managers, a
committee, a CRC officer or other persons to have such duties and
authority with respect to the Shared Assets as may be assigned to them
from time to time by the CRC Board.
(iii) Any Board of Managers appointed by the CRC Board
shall be comprised of an equal number of individuals (and their
successors) nominated by CSXT and nominated by NSR.
(iv) The CRC Board shall remove from any Board of
Managers (A) at the direction of CSXT, any person who was nominated by
CSXT, and (B) at the direction of NSR, any person who was nominated by
NSR.
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<PAGE>
(b) General Manager.
(i) The General Manager shall not at any time have been
an employee of CSXT or NSR or any of their affiliates unless otherwise
agreed to by both Operators, and shall be appointed by the CRC Board.
(ii) The General Manager shall manage and supervise the
ownership, operation, maintenance and use of the Shared Assets in
accordance with directives and policies of the CRC Board and this
Agreement, subject to the authority of the CRC Board, and through such
Shared Assets Area superintendents and other Shared Assets Area
executives as are appointed by the General Manager with the approval of
the CRC Board. The General Manager shall report to the CRC Board. The
General Manager shall perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR.
(iii) The General Manager may be removed from office
prior to the expiration of his or her term at any time by a majority of
the CRC Board for any reason or for no reason. Upon the written request
of CSXT or NSR to the CRC Board, the General Manager shall also be
removed from office prior to the expiration of his or her term for
serious misconduct, which shall mean conduct that would make it
unreasonable to retain the General Manager, including but not limited to
conduct such as: (A) violation of applicable alcohol or drug use
policies, (B) fraud, (C) embezzlement or other act of dishonesty against
CRC, CSXT or NSR or any of their customers or suppliers, (D) activities
willfully undertaken by the General Manager which reflect adversely upon
the reputation of CRC, CSXT or NSR, (E) refusal to perform or
substantial neglect of the responsibilities assigned to the General
Manager, (F) failure to perform his or her responsibilities on an
impartial and non-discriminatory basis as between CSXT and NSR after 45
days' written notice from an Operator describing such failure, (G) any
violation of any law or rule or regulation of any Governmental Entity
which results in serious adverse consequences to CRC, CSXT or NSR, or
(H) any material violation of any directive or policy of the CRC Board
or any statutory or common law duty of loyalty to CRC. If a majority of
the CRC Board in response to such a request of CSXT or NSR fails to
direct the removal of the General Manager, the dispute may be submitted
by either Operator for resolution by binding arbitration pursuant to
Section 13, provided, however, that in any such arbitration to resolve a
dispute under this Section 2(b)(iii), the hearing shall commence no
later than 30 days following the appointment of the arbitrator and the
award shall be rendered no later than 30 days following the completion
of the hearing.
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<PAGE>
(c) Employees. The General Manager and all persons who operate
and maintain the Shared Assets shall be employees of CRC, except for CSXT or NSR
employees who provide Temporary Services and employees of Operators or
independent contractors which provide services pursuant to contracts or
arrangements in accordance with Section 2(f).
(d) CRC Responsibilities. CRC shall be responsible for safely and
efficiently operating, controlling and managing the use of the Shared Assets,
impartially as between CSXT and NSR in accordance with directives and policies
of the CRC Board, and with responsible business practices which are consistent
with those used by CSXT and NSR in the operation of their businesses, and are
designed to achieve the lowest cost of the safe and efficient operation, use and
maintenance of the Shared Assets.
(e) Impartiality. CRC shall perform all of its obligations
pursuant to this Agreement on an impartial and non-discriminatory basis as
between CSXT and NSR, giving no preference to either of them in providing
Switching and Yard Services, in the control of train dispatching over the Shared
Assets, or in any other way whatsoever.
(f) Independent Contractors. CRC may, at least to the extent it
may do so immediately prior to the date of this Agreement, procure the use of
equipment or facilities owned by independent contractors, or services provided
by independent contractors (using their own employees), with respect to the
operation, maintenance and use of Shared Assets, including, without limitation,
accounting, computer and other administrative services, and the furnishing of
equipment and mechanical services. For purposes of this Section 2(f),
independent contractors may include CSXT or NSR.
Section 3 Operations.
(a) Operator's Rights. CRC hereby grants to each Operator full
operating rights to operate its own trains (staffed by a road crew) and
equipment, with its own crews and equipment and at its own expense, over any and
all tracks included in the Shared Assets, and to use all of the Shared Assets in
connection with the operation of such trains or equipment, for the following
purposes:
(i) Movement by such Operator of trains (staffed by a
road crew) through the Shared Assets Area between two geographical
locations outside the Shared Assets Area;
(ii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and an Operator's Facility or a Jointly-Operated Facility which is
within the Shared Assets Area;
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(iii) Movement by such Operator of trains (staffed by a
road crew) between a geographical location outside the Shared Assets
Area and local industries which are within the Shared Assets Area;
(iv) Movement by such Operator of trains (staffed by a
road crew) between Operator's Facilities or Jointly-Operated Facilities
which are within the Shared Assets Area and local industries which are
within the Shared Assets Area;
(v) Movement, handling, pick-up, set off, switching,
transfer and interchange of Railcars, blocks of Railcars or trains
(staffed by a road crew) to, from or at local industries, Operator's
Facilities or Jointly-Operated Facilities, in connection with movements
described in Sections 3(a)(i) through (iv), to the extent provided for
in the Operating Plan agreed to and modified by the parties from time to
time; and
(vi) such other purposes as may be agreed upon by CRC,
CSXT and NSR.
(b) Use. The crews of each train operated by an Operator on
Shared Assets shall be qualified under and shall comply with applicable laws and
regulations as well as the safety and operating rules of CRC.
(c) Grant of Rights. Subject to reasonable compensation and other
terms established in the Accounting Plan, and in each case for the purpose of
Switching and Yard Services performed by CRC pursuant to Section 3(d) and
movement of Operator Trains pursuant to Section 3(a):
(i) CSXT hereby grants to CRC and NSR overhead
operating rights to operate CRC trains and NSR trains, respectively,
with their own crews, over such CSXT line segments access to and use of
which by CRC and NSR are necessary to effectuate the train operations
and services contemplated by this Agreement.
(ii) NSR hereby grants to CRC and CSXT overhead
operating rights to operate CRC trains and CSXT trains, with their own
crews, over such NSR line segments access to and use of which by CRC and
CSXT are necessary to effectuate the train operations and services
contemplated by this Agreement.
When required by the CSXT Operating Agreement and the NSR Operating Agreement,
CSXT and NSR have obtained the consent of NYC and PRR, respectively, for the
grant of rights referred to in this Section 3(c). Notwithstanding any other
provision of this Agreement, each rail line segment identified in this Section
3(c) shall be dispatched, maintained, operated and controlled by the Operator
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<PAGE>
which granted the rights with respect to such segment, provided that such
dispatching, maintenance, operation and control shall be performed on an
impartial and non-discriminatory basis as between the Operators. Trains operated
by an Operator pursuant to operating rights granted under this Section 3(c)
shall be governed by and subject to the Operating Plan.
(d) Switching and Yard Services.
(i) At the request of and as agent for each Operator,
CRC shall perform Switching and Yard Services required by such Operator
within the Shared Assets Area, including without limitation any such
services which such Operator may be responsible for performing or having
performed for a shipper or other Person.
(ii) Except as otherwise provided in Section 3(a), and
other than within an Operator's Facility, neither Operator shall with
its own equipment or with its own crews perform any Switching and Yard
Service within the Shared Assets Area for itself or for any other
Person.
(e) Operating Protocols. From time to time, NSR, CSXT and CRC may
mutually establish Shared Assets Area Operating Plans, General Dispatching
Guidelines, Car Movement Guidelines, Switching/Blocking Requirements and other
operating protocols and rules concerning operations within the Shared Assets
Area, for the purpose of assuring timely train operations, fluid movement of all
railcars, equal and impartial handling of Operators' trains and railcars,
minimization in the number of empty cars in the Shared Assets Area, and overall
operating efficiency in the Shared Assets Area. The current Operating Protocols
have been agreed upon by NSR, CSXT and CRC and are set forth as Exhibit A to
this Agreement. The Operating Protocols may be modified only upon mutual
agreement of all parties.
(f) Freight Traffic To Remain in Account of Each Operator.
Switching and Yard Services and other services performed by CRC for either
Operator under this Agreement shall be performed as agent for, and for the
account of, such Operator. All freight traffic and Railcars handled within the
Shared Assets Area, including traffic and Railcars handled by CSXT or NSR
pursuant to Sections 3(a) and 3(c), and traffic and Railcars handled by CRC
pursuant to Sections 3(c) and 3(d), shall at all times remain in the waybill,
car hire and revenue accounts of either CSXT or NSR.
(g) Rates, Routes and Divisions. Each Operator shall have
exclusive and independent authority to establish all rates, charges, service
terms, routes and divisions, and to collect all freight revenues, relating to
freight traffic transported for its account to, from and within the Shared
Assets Area (except those Shared Assets Area line segments over which such
Operator possesses only overhead operating rights pursuant to Section 3(c)). CRC
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<PAGE>
shall not participate or appear in any rates, routes or divisions relating to
any freight traffic whatsoever to, from and within the Shared Assets Area, and
shall not be entitled to or responsible for any freight charges relating to such
freight traffic. CRC shall not quote or establish any rate or service terms
applicable to freight transportation services to, from and within the Shared
Assets Area, enter into transportation contracts with any Person (other than an
Operator) for freight transportation services to, from and within the Shared
Assets Area, or undertake to perform any for-hire transportation services
directly, in its own name or for its own account for any Person (other than an
Operator). The transfer or exchange of freight traffic between CSXT and CRC, and
between NSR and CRC, within the Shared Assets Area shall not constitute an
interchange of freight traffic or freight rail cars for purposes of determining
rates, routes, divisions or interline settlements relating to any such freight
traffic.
(h) Shipper Bills. Neither Operator shall inform the other or CRC
of any rates or charges to shippers to which such Operator provides freight
transportation services in the Shared Assets Area, and no copies of any shipper
bill of lading or waybill shall be given by such Operator to the other or to CRC
except to the extent that such documents are exchanged between rail carriers in
the usual course of interline shipments and documenting.
(i) Service Responsibility. Each Operator shall at all times be
solely responsible for obtaining, supplying and routing Railcars other than
locomotives, for all Railcar ownership costs (including per-diem charges and
mileage allowances) and for providing service to its shippers within the Shared
Assets Area pursuant to its transportation contracts or other prices with its
shippers, including interline accounting, and all car hire and demurrage or
detention charges associated with Railcars in its account within the Shared
Assets Area.
(j) Dispatching. CRC shall, from local locations or a location
agreed upon by CSXT and NSR, control the dispatching, scheduling and movement
of, and Switching and Yard Services for, all trains (including Operator Trains
and CRC Trains) over the Shared Assets (other than Operator's Facilities, unless
requested to do so by the Operator thereof) without any discrimination at any
time in favor of or against either Operator, but in accordance with written
policies and priorities for categories of freight, type of Railcar, size of
train and train destinations established from time to time by the General
Manager and approved by the CRC Board to achieve the maximum efficiency and
lowest aggregate Shared Asset costs of CRC and the Operators, provided, however,
that CSXT shall control the dispatching, scheduling, movement and Switching and
Yard Services for all CRC Trains and Operator Trains over the following Shared
Asset rail segments:
(A) the current CRC Lincoln Secondary between Carleton,
MI and Hold Out Signal at Lincoln Yard;
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and NSR shall control the dispatching, scheduling, movement and Switching and
Yard Services for all CRC Trains and Operator Trains over the following Shared
Asset rail segments:
(B) the current CRC Detroit Line between Trenton, MI
and CP YD;
(C) the current CRC Junction Yard Secondary between CP
YD and CP Townline, including New Wye Runner; and
(D) the current CRC Lincoln Running Track between
Ecorse Jct. and the connection with NSR.
Dispatching, scheduling and movement of trains performed by either Operator
under this Section 3(j) shall conform to the same standards of
non-discrimination, written policies and priorities applicable to the control of
such functions by CRC at other locations included within the Shared Assets Area.
(k) Railcar Weighing. All Railcars for the account of an Operator
which originate or terminate on Shared Assets and which require weighing shall
be weighed by and at the expense of such Operator or its customer, and at no
cost to CRC.
(l) Freight Claims. The Operators shall agree among themselves on
the most fair, practical and efficient arrangements for handling and
administering freight loss and damage claims with the intent that (i) each
Operator shall be responsible for losses occurring to lading either in its
possession or in the possession of CRC for the account of such Operator, and
(ii) the Operators shall follow relevant AAR rules and formulas in providing for
the allocation of losses which are either of undetermined origin or in Railcars
handled in interline service by or for the account of both Operators.
(m) Freight Car Repairs. If any Railcars are bad ordered while on
the Shared Assets and must be set out from a CRC Train or Operator Train, CRC
shall promptly return such Railcars to the Operator in whose account such
Railcars reside in accordance with such Operator's instructions. CRC shall
furnish, at such Operator's expense, required labor and material to perform, and
shall perform, light repairs on such bad ordered Railcars as necessary to make
such Railcars legal and safe for movement. CRC shall bill such Operator for the
costs of such light repairs in accordance with the Field and Office Manuals of
the AAR Interchange Rules in effect at the time such repairs are performed. CRC
shall bill directly to and collect from the applicable Operator charges for
repair items that, under the AAR Interchange Rules, are the responsibility of
the Railcar owner and/or the handling line carriers. Each Operator may rebill
charges for repair items that are the responsibility of the Railcar owner and/or
the handling line carriers. If any such bad ordered Railcar cannot be made legal
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and safe for movement by the performance of light repairs, CRC shall, at such
Operator's expense, arrange for appropriate removal of the affected Railcar in
accordance with such Operator's instructions.
(n) Train Services. Actual costs incurred by CRC to provide
special services (other than services otherwise provided for in this Agreement)
at the request of an Operator with respect to trains, locomotives and Railcars
for the account of such Operator, shall be paid by such Operator to CRC,
provided that the costs and terms of similar special services rendered to each
Operator shall be without discrimination between Operators as to cost and terms,
giving due allowance to any differences in the costs of providing such services.
(o) Wrecking Service. Wrecking service or wrecking train service
required in connection with services contemplated by this Agreement shall be
provided by CRC (or its designee) as promptly as possible.
(p) Admission of Third Parties. Notwithstanding any other
provision in this Agreement, no party may permit any Person (other than a party
hereto) to have access to, operate over or use any Shared Asset without the
prior approval of all parties, which approval may be given or refused in the
sole discretion of each party.
Section 4 Equipment and Properties.
(a) Procurement. CRC shall procure, operate and maintain all
equipment, real property rights and improvements thereon which are reasonably
required for (i) CRC to operate the Shared Assets, and (ii) the Operators to
move trains over the Shared Assets, in each case in accordance with this
Agreement.
(b) Contribution of Locomotives by Operators. Upon reasonable
request by the General Manager, the Operators shall furnish to CRC, through
full-service lease or other mutually satisfactory arrangements, locomotives
reasonably required by CRC for the performance of its obligations under this
Agreement. The respective obligations of each Operator to furnish such
locomotives shall be based, insofar as reasonably practicable, upon the
Operator's CRC Train Usage Percentage during the calendar month preceding such
request for the Shared Assets Area or Zone in which such locomotives are needed
by CRC. It is the parties' intention that (i) the arrangements pursuant to which
such locomotives are furnished by either Operator to CRC shall provide that
heavy maintenance, repair and overhaul shall be the responsibility of such
Operator, (ii) locomotives furnished by either Operator to CRC may, in order to
permit maintenance, repair and overhaul of such locomotive units, be exchanged
for other locomotive units furnished by such Operator, and (iii) the respective
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obligations of each Operator to furnish such locomotives upon request by the
General Manager shall be adjusted on at least a monthly or more frequent basis.
(c) Locomotive Service and Repairs. At the request of an
Operator, CRC shall furnish required labor and material to perform, and shall
perform, fueling and servicing of any Operator's locomotive, as well as light
repairs on any Operator's locomotive as necessary to make such locomotive legal
and safe for movement. CRC shall bill such Operator (or other owner of such
locomotive) for the costs of such fueling, servicing and light repairs in
accordance with industry practice in effect at the time such fueling, services
or repairs are performed. If any such locomotive cannot be made safe for
movement by the performance of light repairs, CRC shall, at the expense of such
Operator (or other owner of such locomotive), arrange for appropriate removal of
such locomotive in accordance with such Operator's instructions.
Section 5 Maintenance.
(a) Routine Maintenance.
(i) CRC shall be responsible for Routine Maintenance
when necessary or desirable to maintain the Shared Assets in a safe
operating condition, and to permit and facilitate (A) the performance by
CRC of its obligations pursuant to this Agreement, and (B) the use of
Shared Assets by the Operators in accordance with this Agreement.
(ii) CSXT or NSR, directly or through their respective
affiliates, may perform the work which CRC performed prior to the date
of this Agreement when (A) CRC does not possess the skills needed for
such work, (B) CRC lacks the necessary employees to do such work in a
timely fashion, or (C) CRC does not possess the equipment needed to do
such work. CRC and the party performing the work shall agree to a
reasonable fee for such work prior to performance. CRC, CSXT and NSR may
agree to have additional work performed either by CSXT, NSR or their
affiliates.
(b) CRC Program Maintenance.
(i) The General Manager shall prepare and submit to the
CRC Board a Program Maintenance plan concurrently with the submission of
an Operating Budget and the Capital Expenditure Budget to the CRC Board.
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(ii) Any of CRC, CSXT or NSR may at any time deliver a
Program Maintenance Proposal to the other two of them and to the General
Manager and each member of the CRC Board.
(iii) The CRC Board shall either (A) approve any or all
of such Program Maintenance Proposals and plan with such changes as it
deems appropriate, include the costs thereof in a pending or amended
Capital Expenditure Budget, and direct the General Manager to cause the
maintenance described in approved Program Maintenance Proposals or plan
to be performed in accordance with Sections 5(b)(iv) and (v), or (B)
disapprove any or all of such Program Maintenance Proposals or plan.
(iv) Program Maintenance shall be the responsibility of
CSXT and NSR pursuant to contracts or arrangements with CRC, and CRC
shall not perform Program Maintenance, except for Program Maintenance
which can be provided by Persons other than CSXT or NSR at a lower cost
to CRC than the CSXT or NSR cost thereof.
(v) CRC shall select, to perform each Program
Maintenance project or program, the Operator which CRC reasonably
determines will perform such project or program at the least cost to CRC
consistent with safe and efficient operations, and taking into account
scheduling considerations, based on written proposals submitted by each
Operator.
(c) Maintenance Standards. Unless otherwise authorized by the CRC
Board, the General Manager shall prepare and submit to the CRC Board proposals
(including the Program Maintenance plan submitted pursuant to Section 5(b)) for
the performance of such Routine Maintenance and Program Maintenance as is
reasonably necessary to keep and maintain the Shared Assets substantially in
their condition as of the date of this Agreement. If the CRC Board fails either
to approve or disapprove by majority vote any such proposal within 45 days after
it was submitted to the CRC Board, the disagreement over the propriety or need
for any of the Routine Maintenance or Program Maintenance included in such
proposal may be submitted by either Operator for resolution by binding
arbitration pursuant to Section 13.
Section 6 Capital Improvements. Except as provided in Section
5, all capital improvements involving Shared Assets shall be governed by the
following provisions:
(a) Proposed Projects. Either Operator, CRC or the General
Manager may propose to the CRC Board from time to time capital improvement
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projects. Each such project shall be reviewed by the CRC Board, which may
approve or disapprove by majority vote, or fail to approve, such projects.
(b) CRC Board Approved Projects. Each Operator shall be
responsible for an equal share of the initial budgeted funding of each capital
improvement project which has been approved by the CRC Board and is included in
an approved Capital Expenditure Budget, except as provided in Section 6(c). A
final accounting shall be made to adjust the initial budgeted funding to the
actual project cost as specified in the Accounting Plan.
(c) Nonseverable Improvement Projects.
(i) At the written request of an Operator delivered to
the other, each Operator shall, within 45 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
proposal with respect to a Nonseverable Improvement project which was
neither approved nor disapproved by majority vote by the CRC Board
within 45 days after such project was proposed to the CRC Board (A)
describing any changes which such Operator proposes be made to such
project and specifying a schedule, budget and allocations between the
Operators of initial capital costs of such Nonseverable Improvement, or
(B) proposing that it not be made.
(ii) The arbitrator receiving the proposals referred to
in Section 6(c)(i) (A) shall consider (1) the degree, if any, to which
the construction, operation and use of such Nonseverable Improvement
would impair or interfere with the use of Shared Assets by CRC or either
Operator, or conflict with any pending capital improvements included in
an approved Capital Expenditure Budget, and (2) the budget and
allocations between the Operators of initial capital costs of such
Nonseverable Improvement as proposed by each Operator, and (B) shall
determine within 45 days of such receipt which of such proposals shall
be implemented, or that such Nonseverable Improvement shall not be made,
and the CRC Board shall approve any proposal which such arbitrator
determines shall be implemented.
(d) Severable Improvement Projects.
(i) Each Operator shall have the unilateral right to
construct and exclusively fund any Severable Improvement which was not
approved by the CRC Board.
(ii) Each Severable Improvement funded exclusively by
an Operator shall be used exclusively by that Operator, which shall be
solely responsible for maintaining such Severable Improvement at its own
expense, until such time that the other Operator gives written notice
that it desires also to use such Severable Improvement, stating the
amount which such other Operator is prepared to pay to the Operator
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which initially funded such Severable Improvement for the right to use
such Severable Improvement.
(iii) If the Operators are unable to agree on the amount
of such payment within 45 days after the notice referred to in Section
6(d)(ii) was given, then at the written request of an Operator delivered
to the other after 45 days but before 60 days after such notice was
given, each Operator shall, within 15 days of the delivery of such
request, submit to an arbitrator in accordance with Section 13 a written
statement setting forth the proposed payment by the second Operator, and
the arbitrator shall within 45 days of such receipt determine which of
such proposed amounts shall apply, which shall be binding on both
Operators and paid promptly.
(iv) Such Severable Improvement shall become a
Nonseverable Improvement at the time such second Operator pays the
amount so determined and, thereafter, maintenance and other costs
associated with the operation of such improvement shall be apportioned
between the Operators as provided in this Agreement.
(e) Capital Improvements as Shared Assets. Upon completion, all
capital improvements approved by the CRC Board and all Nonseverable Improvements
shall become part of the Shared Assets owned by CRC subject to all provisions of
this Agreement, free and clear of all Operator liens.
(f) Title to Severable Improvements. Each Operator shall retain
title to all Severable Improvements exclusively funded by such Operator. At any
time during the term of this Agreement, an Operator may remove (at its sole
expense) any Severable Improvement which it exclusively funded, provided that
such Operator has repaired (at its sole expense) any damage to a Shared Asset
caused by such removal and has restored the related Shared Assets substantially
to their condition at the time such Severable Improvements were made. In the
event an Operator shall not have removed any Severable Improvement to which the
Operator shall have title prior to the expiration or termination of this
Agreement, title to such Severable Improvement shall vest in CRC, free and clear
of all Operator liens, upon such expiration or termination.
(g) Noninterference. The construction, operation and use of
Severable Improvements by an Operator shall not impair or interfere with the use
of Shared Assets by CRC or the other Operator, nor shall any Severable
Improvement conflict with any pending capital improvements included in an
approved Capital Expenditure Budget.
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(h) Switch Connections. CRC shall, upon the written request of
one or both Operators, provide for switch and turnout connections from Shared
Asset tracks to a private sidetrack owned by a shipper or other Person, if such
request:
(i) includes the commitment of the Operator or both
Operators making such request, or
(ii) is accompanied by a written undertaking from such
shipper or other Person,
in each case satisfactory to CRC, to pay to CRC all costs incurred from time to
time by CRC to provide for such switch and turnout connections within 30 days
after it delivers a bill for such costs to such Operator, Operators, shipper or
other Person.
(i) Adjacent Improvements.
(i) In the event an Operator constructs, acquires or
funds the cost of an Adjacent Improvement (whether or not such Adjacent
Improvement is ultimately owned by such Operator), the other Operator
shall be entitled to share usage of such Adjacent Improvement by giving
written notice stating the amount which such other Operator is prepared
to pay to the first Operator for such right. If the Operators are unable
to agree on the amount of such payment within 45 days after such notice
was given, then at the written request of an Operator delivered to the
other after 45 days but before 60 days after such notice was given, the
matter shall be submitted for resolution by binding arbitration pursuant
to Section 13 and the provisions of Section 6(d)(iii) shall apply to
determine the amount of such payment.
(ii) After the second Operator pays the amount so
determined, if the first Operator owns or has a property interest in the
Adjacent Improvement, the provisions of this Section 6 shall be applied
as if such improvement were a Nonseverable Improvement. If a shipper or
another Person unrelated to the first Operator owns such Adjacent
Improvement, the second Operator shall be entitled to share fully the
rights of the first Operator in connection with such Adjacent
Improvement in consideration of the initial payment.
(j) Operator's Facilities. The foregoing provisions of this
Section 6 shall not apply to any capital improvement (including, but not limited
to, a transloading facility or automotive ramp) within an Operator's Facility.
Section 7 Accounting.
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(a) Books of Record and Account. CRC shall keep proper books of
record and account, in which full and correct entries shall be made of all CRC
transactions, costs, expenses and revenues in accordance with GAAP and the USOA,
as modified by the Accounting Plan. All expense and revenue transactions related
to the Shared Assets Area shall be readily identifiable by distinct accounting
codes.
(b) Financial Statements. CRC shall deliver to each Operator (i)
within 30 days after the end of each calendar month, a summary income statement
and a summary balance sheet showing as of the last day of and for such calendar
month, major categories of CRC revenue, expense, assets and liabilities, (ii)
within 30 days after the last day of each CRC fiscal quarter, interim financial
statements as of and for the fiscal quarter ended on such day, similar to
statements described in Rule 10-01 of Regulation S-X under the Securities
Exchange Act of 1934, as amended, as modified by the Accounting Plan, and (iii)
within 30 days after the last day of each CRC fiscal year, statements of income
and cash flow and a balance sheet as of and for the fiscal year ended on such
day, prepared in accordance with GAAP and the USOA, as modified by the
Accounting Plan.
Section 8 Costs and Budgets.
(a) CRC Costs. CRC shall pay (and, except for Excluded Taxes,
CSXT and NSR shall, pursuant to Section 9, reimburse CRC for) all of the costs
and expenses to maintain its ownership of the Shared Assets and to operate and
maintain the Shared Assets, including but not limited to all Taxes and
assessments, licenses, permits and any other governmental authorizations
required to own, operate and maintain the Shared Assets, the principal of and
interest and premium, if any, on, and all other costs of, its indebtedness and
all other costs of its capital.
(b) Employee Cost Reimbursement. CRC shall reimburse CSXT and NSR
for the wages, pro rata portion of fringe benefits, other direct employment
costs (including additives) and other actual employee-related costs of any CSXT
or NSR employee, respectively, who provides Temporary Services.
(c) Capital Expenditure Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each CRC fiscal year, a Capital Expenditure Budget for such fiscal year,
specifying for such year the schedule of Program Maintenance and Shared
Asset capital improvements to be performed and constructed for the
benefit of both Operators during such fiscal year and the months therein
during which such expenditures are proposed to be made, for approval, or
modification and approval, by the CRC Board.
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(ii) The General Manager shall not permit any capital
expenditure to be made by CRC, CSXT or NSR except in accordance with the
Capital Expenditure Budget in effect from time to time, Severable
Improvements exclusively funded by an Operator and emergency capital
expenditures made (A) to preserve, or to mitigate a serious diminution
in, the value and usefulness of a Shared Asset to CRC, CSXT and NSR, or
(B) to prevent or mitigate a serious disruption in the operation and use
of the Shared Assets by or for CRC, CSXT or NSR.
(iii) Any Capital Expenditure Budget may be amended in
writing at any time by the CRC Board.
(d) Operating Budget.
(i) The General Manager shall prepare and submit to
each member of the CRC Board at least 30 days prior to the beginning of
each fiscal year of CRC, an Operating Budget for such fiscal year
showing the budget amounts of revenues and expenses for each month
during such fiscal year, for approval, or modification and approval, by
the CRC Board.
(ii) The General Manager shall use all reasonable
efforts to prevent CRC expenses with respect to Shared Assets for a
period from exceeding the amounts shown on the Operating Budget for such
period.
(iii) The General Manager shall give prompt written
notice to each member of the CRC Board of any actual or, in the judgment
of the General Manager, probable, material change in the revenues,
expenses or working capital requirements shown on the Operating Budget
for any period.
(iv) Any Operating Budget may be amended in writing at
any time by the CRC Board.
Section 9 Cost Sharing.
(a) Accounting Plan. The parties shall develop and implement a
written plan of accounting containing a detailed description, by category of
cost and location, of the costs associated with the management and operation of
the Shared Assets Area and the method by which such costs shall be fairly and
properly apportioned among the parties. Such plan of accounting may include
separate accounting and sharing of costs for particular Zones, and shall conform
to the following general principles:
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(i) Forty two percent (42%) of Interest Rental shall be
apportioned to CSXT and fifty eight percent (58%) of Interest Rental
shall be apportioned to NSR;
(ii) Locomotive ownership, lease, fueling, light repair
and servicing costs incurred by CRC within the Shared Assets Area or
each Zone (except costs incurred by CRC and charged directly to an
Operator pursuant to Section 4(c)) shall be apportioned between the
Operators on the basis of the CRC Train Usage Percentages;
(iii) Crew compensation and other crew costs incurred by
CRC within the Shared Assets Area or each Zone with respect to CRC
Trains shall be apportioned between the Operators on the basis of the
CRC Train Usage Percentages;
(iv) General and administrative, supervisory and
overhead expenses incurred by CRC within the Shared Assets Area or for
functions related to the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(v) Dispatching and train control costs (including,
without limitation, labor, equipment, materials and maintenance
expenses) incurred by CRC with respect to the Shared Assets Area shall
be apportioned between the Operators on the basis of the CRC Train Usage
Percentages;
(vi) Police and other costs incurred by CRC with respect
to security within the Shared Assets Area shall be apportioned between
the Operators on the basis of the CRC Train Usage Percentages;
(vii) Damage paid by CRC pursuant to Section 11(c) shall
be apportioned between the Operators in accordance with Section 11(b);
(viii) All other costs incurred by CRC with respect to the
Shared Assets Area or each Zone (except Taxes and insurance) shall be
apportioned between the Operators on the basis of the Total Train Usage
Percentages;
(ix) Taxes (other than Excluded Taxes) incurred by CRC
with respect to the Shared Assets Area or each Zone shall be apportioned
between the Operators on the basis of the Operator's Expense Percentages
for the period to which such Taxes relate; and
(x) Insurance costs incurred by CRC with respect to
Shared Assets within the Shared Assets Area or each Zone shall be
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apportioned between the Operators on the basis of the Operator's Expense
Percentages for the period to which such insurance costs relate;
If the parties are unable to agree on the terms and provisions of the Accounting
Plan, such disagreement may be submitted by either Operator for resolution by
binding arbitration pursuant to Section 13.
(b) Usage Statement. CRC shall deliver to each Operator prior to
the last day of each calendar month, a written statement showing for the prior
Billing Month:
(i) the total number of loaded and empty Railcars in
the account of each Operator in CRC Trains which performed Switching and
Yard Services or operated directly between customer facilities in each
Zone;
(ii) the total number of loaded and empty Railcars moved
by or for such Operator in Operator Trains which operated overhead or
directly to Jointly-Operated Facilities, Operators' Facilities or
customer facilities in each Zone;
(iii) the calculation of the CRC Train Usage Percentage
and the Total Train Usage Percentage for each Operator for each Zone,
and (A) all Railcars in a train shall be deemed to be on Shared Assets when the
first or last Railcar of such train is on Shared Assets and (B) each time that a
Railcar is removed from or added to a train in the Shared Assets Area shall
constitute a separate movement of such Railcar.
(c) Expense Statement. Concurrently with the delivery of each
Usage Statement to the Operators, CRC shall deliver to the Operators a statement
showing (i) the expenses incurred by CRC to own, operate and maintain the Shared
Assets during the Billing Month, (ii) the revenues, if any, derived by CRC from
the ownership and operation of the Shared Assets during such Billing Month, and
(iii) the Reimbursable Expenses for such Billing Month, in each case computed in
accordance with GAAP and the USOA, as modified by the Accounting Plan.
(d) Capital Expenditure Statement. Concurrently with the delivery
of each Usage Statement to the Operators, CRC shall deliver to the Operators a
statement showing the estimated Budgeted Capital Expenditures for the calendar
month immediately succeeding the calendar month in which such statement is
delivered.
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(e) Bills. Concurrently with the delivery to the Operators of a
Usage Statement for a Billing Month, CRC shall deliver to each Operator a bill
(a "Bill") showing for such Billing Month:
(i) one hundred and two percent (102%) of the amount of
each Reimbursable Expense apportioned to such Operator for such Billing
Month under the Accounting Plan;
(ii) one-twelfth of fifty percent (50%) of the annual
amount of Budgeted Capital Expenditures approved by the CRC Board; and
(iii) one-twelfth of the Interest Rental apportioned to
such Operator.
(f) Payment. Each Operator shall pay to CRC the amount shown on
each Bill as being payable by such Operator, on or before the 30th day after the
date of such Bill regardless of whether or not such Operator disputes the
accuracy of any amount or calculation shown on such Bill.
(g) Disputed Bills.
(i) Any dispute by an Operator of the accuracy of any
amount or calculation shown on any Bill shall be described and specified
in reasonable detail in a Dispute Letter from such Operator to CRC and
the other Operator within two years after the date of such Bill.
(ii) Any amounts or calculations shown on any Bill which
are not disputed in accordance with Section 9(g)(i) shall conclusively
be deemed to be accurate and shall be binding on each Operator and CRC.
(iii) CRC and both Operators shall promptly endeavor to
resolve the disputes described in each Dispute Letter, and if they fail
to agree to a resolution of such disputes within 60 days of the delivery
of such Dispute Letter to CRC, then the firm of independent public
accountants which has been engaged as auditors for CRC shall be engaged
to resolve such disputes in accordance with GAAP and the USOA, as
modified by the Accounting Plan, and the written resolution of such
disputes signed by such accounting firm shall be binding on each
Operator and CRC.
(iv) Any adjustments to Bills which result from the
resolution of Dispute Letter disputes shall be reflected as charges or
credits on the first Bills delivered by CRC to the Operators after such
disputes have been resolved.
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(v) The fees in connection with the resolution of any
Dispute Letter disputes of the accounting firm which has been engaged as
auditor for CRC shall be paid fifty percent (50%) by CSXT and fifty
percent (50%) by NSR.
Section 10 Access. CRC shall give to each Operator during
normal CRC Administrative Office business hours, access to inspect and make
copies of any and all books of record and accounts relating to this Agreement,
all of which shall be maintained by CRC at the CRC Administrative Office.
Section 11 Liability. Except as otherwise provided in Section
3(l) (Freight Claims), Section 11(f) (Specified Level Damages) and Section 11(g)
(Substance Abuse Exceptions), the responsibility between and among CRC, CSXT and
NSR for all Damage arising out of, incidental to or occurring in connection with
this Agreement shall be apportioned without consideration of fault or negligence
of any kind or degree in accordance with the remaining provisions of this
Section 11. The provisions of this Section 11 are intended to inure only to the
benefit of the parties hereto and their corporate successors and affiliates, and
not to create any benefits for any third parties.
(a) Operators' Sole Responsibility. Except as otherwise provided
in Section 11(f) (Specified Level Damages) and Section 11(g) (Substance Abuse
Exceptions), each Operator shall assume and bear all responsibility for Damage
to its own trains, locomotives and equipment, to Railcars and lading in its
possession or being handled for its account and for the death of or injury to
its own employees.
(b) Operators' Joint Responsibility.
(i) Train Usage. Except as otherwise provided in (1)
Section 11(b)(ii) (First Year), (2) Section 11(a) (Operators' Sole
Responsibility), (3) Section 11(c)(i) (CRC Damages Generally), (4)
Section 11(c)(ii)(B) (No Reallocation for Insurance), (5) Section 11(f)
(Specified Level Damages), and (6) Section 11(g) (Substance Abuse
Exceptions), and subject to Section 11(c)(ii)(A) (Net of Insurance), all
Damage shall be apportioned between the Operators in proportion to their
respective Total Train Usage Percentages in the Zone in which the
incident giving rise to such Damage occurred for the 12 calendar month
period immediately preceding the incident giving rise to such Damage.
(ii) First Year. If an incident giving rise to Damage
for which the Operators are jointly responsible under Section 11(b)(i)
(Train Usage) occurs before June 1, 2000, responsibility for such Damage
shall be borne equally by the Operators, with each being liable for
one-half (1/2) of the damages.
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(c) CRC Responsibility - Allocation and Insurance.
(i) CRC Damages Generally. Except as otherwise provided
in this Section 11(c), all Damages incurred by CRC, including, without
limitation, those Damages apportioned to CRC under Section 11(f)
(Specified Level Damages) shall be CRC expenses, allocated as provided
in Section 11(b) (Operators' Joint Responsibility), and included in
Expense Statements charged to the Operators.
(ii) (A) Net of Insurance.
(1) Notwithstanding any other provision in
this Agreement (but subject to Section 11(c)(ii)(B) (No
Reallocation for Insurance)), all Damages (including
without limitation, loss or destruction of, or damage to,
CRC's own property) charged to the Operators, under the
Expense Statements or otherwise, shall be net of any CRC
insurance. It is the intent of the parties (a) for CRC to
look first to any insurance proceeds available to it
before attempting to recover any such Damages from the
Operators and (b) for the Operators' obligation to make
direct payment to CRC not to include any obligation to
make direct payment for any Damages covered by insurance
procured by or on behalf of CRC.
(2) If and to the extent that CRC is an
insured under, or otherwise provided coverage under, an
insurance policy or policies each of which provides
coverage for both CRC and one Operator but not the other
Operator, and regardless of whether two or more of these
policies shall be in existence or have different
deductible-retention amounts and/or limits of recovery,
then the amount of insurance proceeds deemed "available"
under Section 11(c)(ii)(A)(1) to which CRC shall look
before either Operator shall have any obligation for
direct payment shall, as to each Operator, be the maximum
available limit of the insurance providing coverage for
both that Operator and CRC.
(B) No Reallocation for Insurance. When part of the
apportioned Damage will be satisfied from insurance coverage
under this Section 11(c), and part paid directly by the Operator,
the insured portion of the Damage shall be apportioned among or
between CRC and the Operators (and consequently between or among
their insurers) in the same manner and amounts as it would have
been apportioned if the loss were not net of insurance. If any
such allocation results in one party hereto suffering a greater
uninsured loss than the other(s) because of differing deductibles
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or self-retentions, that difference in coverage shall not be a
basis for any reapportionment or reallocation of Damage.
(d) Process. Each Operator shall be responsible for the payment,
handling, administration and disposition of all Damage for which it bears
exclusive responsibility under Section 11(a) (Operators' Sole Responsibility),
and both Operators shall have joint responsibility for the payment, handling,
administration and disposition of all Damage for which they are jointly
responsible under Section 11(b) (Operators' Joint Responsibility) and Section
11(c) (CRC Responsibility - Allocation and Insurance). In assigning joint
responsibility to both Operators, it is not the intent of this Agreement that
the Operators will actually act jointly, but rather that the Operators will
agree between themselves on the most practical and efficient arrangements for
handling, administering, and disposing of Damage for which they bear joint
responsibility, with the objective of eliminating unnecessary duplication of
effort and minimizing overall costs.
(e) Indemnification. Each party to this Agreement covenants and
agrees to (i) fully indemnify and save harmless the other parties to this
Agreement from and against any payments which are the responsibility of such
party under this Agreement, and all expenses, including attorneys' fees and
expenses and other expenses of any court or regulatory proceeding, incurred by
such other parties in defending any claim that they are liable for such
payments, and (ii) defend such other parties against such claims with counsel
selected by such party and reasonably acceptable to such other parties.
(f) Specified Level Damages.
(i) Damages Amount. Section 11(a) (Operators' Sole
Responsibility) and Section 11(b) (Operators' Joint Responsibility)
shall apply directly only when the total amount of all Damages resulting
from a single incident is $25 million or less. Responsibility for
Damages resulting from a single incident for which Damages exceed $25
million shall be allocated as stated in this Section 11(f)(i).
(A.1) Tier One Damages Defined. In this Section
11(f), "Tier One Damages" for any incident occurring during and
between June 1, 1999 and May 31, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
the greater of:
(1) $25 million of Damages; or
(2) the lowest amount of Damages which, when
allocated among all parties, results in an allocation to
either Operator of Damages in an amount equal to all
insurance benefits available to that Operator (called the
- 28 -
<PAGE>
"Lesser Insured Operator") which has the lesser (as
between the Operators) amount of insurance benefits
available to it, including, without limitation, insurance
to which CRC looks under Section 11(c) (CRC Responsibility
- Allocation and Insurance). In determining insurance
benefits available to the Lesser Insured Operator, both
property and liability insurance shall be considered but
(I) only to the extent benefits are actually available in
connection with that incident and (II) they shall be
calculated separately (i.e., property insurance benefits
shall not be considered in any determination of available
liability insurance benefits and vice versa).
In this Section 11(f), "Tier One Damages" for any incident
occurring on or after June 1, 2000 shall, except as otherwise
provided in Section 11(g) (Substance Abuse Exceptions), include
only the first $25 million of Damages incurred by the parties,
unless otherwise agreed by the parties.
(A.2) Allocation of Tier One Damages. Tier One
Damages shall be allocated among the parties as follows:
(1) Any Damage for which each Operator would
otherwise be solely responsible under Section 11(a)
(Operators' Sole Responsibility) shall be allocated as
provided in Section 11(a);
(2) Any and all CRC Damages other than those
specified in preceding Section 11(f)(i)(A.2)(1)
(including, without limitation, Damage to its trains,
locomotives and equipment, whether owned or leased, to
Railcars and lading in its possession or being handled for
its account, and to the property of any others, as well as
any Damage arising from or in connection with the death of
or injury to any persons, including, without limitation,
its own employees) shall be allocated and paid as provided
in Section 11(c) (CRC Responsibility - Allocation and
Insurance); and
(3) Any and all other Damages shall be
allocated as provided in Section 11(b) (Operators' Joint
Responsibility).
(B.1) Tier Two Damages Defined. In this Section
11(f), "Tier Two Damages" shall include (1) those Damages
allocated to Tier Two under Section 11(g) (Substance Abuse
Exceptions) and (2) all of those Damages in excess of the
aggregate Tier One Damages calculated under Section
11(f)(i)(A.1).
- 29 -
<PAGE>
(B.2) Allocation of Tier Two Damages. Tier Two
Damages shall be allocated between or among the parties hereto in
proportion to their respective fault or negligence in causing the
Damage.
(ii) Dispute Resolution. Any dispute between or among
the parties hereto in determining their respective fault or negligence
in causing the Damage or otherwise relating to their respective
responsibilities for Damage arising out of, incidental to or occurring
in connection with any incident shall be submitted for resolution by
binding arbitration pursuant to Section 13 (Arbitration).
(iii) Amendment of Certain Amounts. The $25 million
amount referred to in this Section 11(f) may be adjusted every five
years following the date of this Agreement with the prior approval of
all parties, which approval may be given or refused in the sole
discretion of each party.
(g) Substance Abuse Exceptions. Each Operator shall assume and
bear all responsibility for Damage to the extent caused by acts or omissions of
any of its employees while under the influence of drugs or alcohol, and Sections
11(b) (Operators' Joint Responsibility) and Section 11(f) (Specified Level
Damages) shall not apply to any such Damage. If, but for the operation of this
Section 11(g), all or any Damages from an incident would otherwise have been
Tier One Damages under Section 11(f) (Specified Level Damages), the portion of
the Damages caused by acts or omissions of any the employee(s) while under the
influence of drugs or alcohol shall be Tier Two Damages, and allocated under
Section 11(f)(i)(B.2) (Allocation of Tier Two Damages), and the remaining
portion of the Damages from that incident shall be included in, and allocated
under, Tier One or Tier Two under the otherwise applicable provisions for
Section 11(f)(i).
(h) Transaction Agreement. Section 2.8 of the Transaction
Agreement shall control any conflict between Sections 11(b) and (c) and said
Section 2.8.
(i) Damages. As used in this Section 11 only, the term
"Damage(s)" shall exclude:
(i) Operator Consequential Damages (which are always
borne by the Operator which sustained them); and
(ii) any claim by any party, in its own right, against
any other party for exemplary or punitive damages, but not for
allocation under this Section 11 of exemplary or punitive damages
claimed against that party by a third person not a party hereto.
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<PAGE>
With regard to exemplary and punitive Damages the parties acknowledge and agree
that, with regard to the subject of this Agreement, the intent and agreement of
the parties is that no party shall bring or recover any claim for exemplary or
punitive damages, in its own right, against any other party, but that any party
will allocate, in accordance with this Section 11, exemplary or punitive Damages
from any claim against it by a third person not a party hereto.
Section 12 No Partnership. Nothing in this Agreement shall be
construed to establish a partnership or joint venture between or among CRC, CSXT
or NSR or any of their affiliates or associates.
Section 13 Arbitration. Any dispute, controversy or claim (or
any failure by the parties to agree on a matter as to which this Agreement
expressly or implicitly contemplates subsequent agreement by the parties, except
for matters left to the sole discretion of a party) arising out of or relating
to this Agreement, or the breach, termination or validity hereof, shall be
finally settled through binding arbitration by a sole, disinterested arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall be jointly selected by the parties but, if the
parties do not agree on an arbitrator within 30 days after demand for
arbitration is made by a party, they shall request that the arbitrator be
designated by the American Arbitration Association. The award of the arbitrator
shall be final, binding and conclusive upon the parties. Each party to the
arbitration shall pay the compensation, costs, fees and expenses of its own
witnesses, experts and counsel. The compensation and any costs and expenses of
the arbitrator shall be borne equally by the parties. The arbitrator shall have
the power to require the performance of acts found to be required by this
Agreement, and to require the cessation or nonperformance of acts found to be
prohibited by this Agreement. The arbitrator shall not have the power to award
consequential or punitive damages. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof, which court may award
appropriate relief at law or in equity. All proceedings relating to any such
arbitration, and all testimony, written submissions and award, of the arbitrator
therein, shall be private and confidential as among the parties, and shall not
be disclosed to any other Person, except as required by law and except as
reasonably necessary to prosecute or defend any judicial action to enforce,
vacate or modify such arbitration award.
Section 14 Term. This Agreement shall become effective as of
the date first above written and shall remain in effect until the twenty-fifth
(25th) anniversary of such date, subject to the right of CSXT and NSR to agree
prior to the twenty-third (23rd) anniversary of such date to extend this
Agreement for a renewal period of five (5) years; and if so extended, to agree
prior to the twenty-eighth (28th) anniversary of such date to further extend
this Agreement for an additional renewal period of five (5) years (each such
period, a "Renewal Term").
- 31 -
<PAGE>
Section 15 Force Majeure. The obligations, other than payment
obligations, of the parties to this Agreement shall be subject to force majeure
(which shall include strikes, riots, floods, accidents, Acts of God, and other
causes or circumstances beyond the control of the party claiming such force
majeure as an excuse for non-performance), but only as long as, and to the
extent that, such force majeure shall prevent performance of such obligations.
Section 16. Entire Agreement. This Agreement and the Transaction
Agreement, including the other Ancillary Agreements (as defined in the
Transaction Agreement) constitute the entire agreement and supersede all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except the letter agreement dated
April 8, 1997 between CSX and NSC to the extent such April 8, 1997 letter
agreement covers matters not addressed or amended hereby or in the Transaction
Agreement or the Ancillary Agreements (as defined in the Transaction Agreement);
provided that it is the intent of the parties that this Agreement shall be an
effectuation of such April 8, 1997 letter agreement consistent with its terms,
and that the provisions of this Agreement shall be interpreted to give effect to
such April 8, 1997 letter agreement; and provided further that, in the event of
any inconsistency between the terms of this Agreement and such April 8, 1997
letter agreement, this Agreement shall prevail.
Section 17 Amendment and Waiver. Any amendment to this
Agreement must be in writing and executed and delivered by CRC, CSXT and NSR,
subject to any jurisdiction of the STB. Any waiver of any term or provision of
this Agreement must be in writing and executed and delivered by the party
entitled to enforcement of such term or provision.
Section 18 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, such provision is intended to be ineffective only to the most limited
extent possible in such context and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 19 Remedies.
(a) Entitlement to Certain Remedies. Each party acknowledges and
agrees that the other parties would be irreparably damaged in the event any of
the provisions of this Agreement were not performed by it in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
each party shall be entitled to an injunction or injunctions to prevent breaches
of such provisions and to specifically enforce such provisions, in addition to
any other remedy to which such party may be entitled, at law or in equity.
- 32 -
<PAGE>
(b) Preclusion of Certain Remedies. In no event shall any party
be liable to the other parties for any consequential, indirect, incidental,
punitive or other similar damages including, but not limited to, lost profits
for any breach or default, or any act or omission arising out of or in any way
relating to this Agreement, under any form or theory of action whatsoever,
whether in contract, tort or otherwise. The foregoing is not intended to alter
or limit the allocation of responsibility for Damage as provided in Section 11.
Section 20 Interpretation. This Agreement was drafted jointly
by CSXT and NSR, each of which was advised by its own counsel and other advisors
concerning all of the terms and provisions hereof; accordingly, any ambiguity
herein should not be construed in favor of or against any of them.
Section 21. Headings. Headings of Sections and paragraphs in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of any term or provision of this Agreement.
Section 22 Parties. This Agreement shall inure to the benefit
of and be binding upon CRC, CSXT and NSR and any successor of any of them by
operation of law, and any assignee agreed to by them in accordance with Section
23, and nothing in this Agreement is intended or shall be construed to give any
other Person any legal or equitable right, remedy or claim under or with respect
to this Agreement or any term or provision hereof.
Section 23. Assignment.
(a) Limitation. Except as provided in Section 23(b), neither this
Agreement (including the documents and instruments referred to herein) nor any
of the rights, interests or obligations hereunder, shall be assigned by any
party, including by operation of law, without the prior written consent of the
other parties (except to a controlled subsidiary), which consent may be given or
refused in the sole discretion of each party.
(b) Successor. Any party without the consent of the other parties
may assign all of its rights and obligations under this Agreement only to any
successor in the event of a merger, consolidation, sale of all or substantially
all its assets (but only if such sale includes all routes and lines owned by
such party to access the Shared Assets), if such assignee executes and delivers
to the other parties hereto an agreement reasonably satisfactory in form and
substance to such other party under which such assignee, which is reasonably
satisfactory to the other party, assumes and agrees to perform and discharge all
the obligations and liabilities of the assigning party; provided that any such
- 33 -
<PAGE>
assignment shall not relieve the assigning party from the performance and
discharge of such obligations and liabilities.
Section 24. Notices. Any notice given by CRC, CSXT or NSR to the
others under this Agreement shall be deemed delivered on the date sent by
registered mail, or by such other means as they may agree, and shall be
addressed to them as follows:
(A) If to CSXT:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(B) If to NSR:
Senior Vice President Operations
Norfolk Southern Railway Company
Three Commercial Place
Norfolk, Virginia 23510-2191
(C) If to CRC:
President and Chief Executive Officer
Consolidated Rail Corporation
2001 Market Street
Two Commerce Square
Philadelphia, Pennsylvania 19101
and each of them may from time to time change its address in this Section 24 by
written notice delivered to the others.
Section 25. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without regard to principles of conflicts of laws.
- 34 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in counterparts by their duly authorized officials as of the day
first above written.
CSX TRANSPORTATION, INC.
By: /s/PETER J. SHUDTZ
------------------
Peter J. Shudtz
Title: Vice President - Law and General
Counsel - CSX Corporation,
authorized agent for CSX
Transportation, Inc.
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/J. L. MANETTA
----------------
J. L. Manetta
Title: Senior Vice President Operations
CONSOLIDATED RAIL CORPORATION
By: /s/TIMOTHY O'TOOLE
------------------
Timothy O'Toole
Title: President
- 35 -
<PAGE>
EXHIBIT A
OPERATING PROTOCOLS
Consolidated Rail Corporation
Shared Assets Area
Terminal Capacity Guidelines
Yard Operations
o Cars loaded or empty moving outbound to either parent* company, which have
been made up for train departure at either a serving merchandise yard,
Automotive Terminal or jointly used Intermodal Facility will be considered
available at the published departure time for scheduled trains and the later
of 4 hours after notice to the parent or actual available time (set time)
for non-scheduled or extra trains. Cars remaining available for departure
in excess of ten (10) hours will be subject to a charge of $141.00 per car.
Thereafter, for every eight (8) hours that the same cars continue to remain
on track, along with all other cars of the same block codes within the
originating dispatch yard, will be subject to an additional charge of
$141.00 per car.
o Cars loaded or empty assembled for outbound train dispatch to either parent
company will be considered available at published departure time for such
scheduled trains. The Shared Assets Areas management will provide four (4)
hours advance notice prior to set time on non-scheduled or extra trains
before they will be considered available for departure.
o Management of Shared Assets Areas may refuse an inbound train of the same
category when a specific destination terminal has been holding more than one
(1) intermodal, automotive, manifest or unit train of a parent for power
and/or crew beyond ten (10) hours of scheduled departure or availability and
conditions within the involved destination terminal preclude the effective
handling of the offered inbound trains.
o Acts of God, Mainline blockages, labor strikes or other causes to a
cessation of consistent service beyond the control of a parent company will
be considered by the management of the Shared Assets Areas as to the
legitimacy of any assessment.
o Opportunities for the Shared Assets Areas management to consolidate
- ---------------------
*The term "parent" means CSXT and/or Norfolk Southern Railway Co. ("NSR") and is
not intended to describe the legal relationship between the parties.
1
<PAGE>
trains for the benefit of a specific Shared Assets Area operation and
the involved parent, as mutually agreed by the parties, will not result in
charges on cars designated for the annulled train resulting from said
consolidation.
o An inventory of hold cars awaiting disposition within any given Shared
Assets Area territory should not exceed thirty (30) cars per day for either
CSXT or NSR individually. The Shared Assets Areas management may elect to
limit receipt of inbound car flow from the delinquent parent for the
affected Shared Assets Areas territory, in accordance with the guidelines
for holding trains. Any loaded or empty car including those in unit train
consists carrying a "No Bill" status more than twenty-four (24) hours will
be assessed $10.00 per hour in excess thereof.
o Trains inbound to the Shared Assets Area territory must have proper car and
train documents. If this information is lacking, the Shared Area managers,
at their discretion, may hold trains outside the boundaries of the Shared
Assets Area until proper documentation is received.
o Regardless of company of employment, any qualified crew in the Shared Area
may operate any locomotive, regardless of ownership, in that area for the
purposes of positioning/hostling or movement of light power between yards.
Held Trains
o In recognition of terminal fluidity and capacity utilization, the Shared
Assets Areas management can require, in coordination with a parent's command
center, an inbound train to be held outside the boundaries of a Shared
Assets Area.
- Such notification must be given with enough notice for the parent to
chamber the train at a location that minimizes disruption to
operations.
- Decisions by the Director of Train Operations of Shared Assets Areas
management are final in this regard. Neither parent may compel the
Shared Assets Areas management to accept trains.
- Similarly, the decision to hold out a train other than temporary holds
is recognized as a serious action, which will be done only after all
other alternatives are exhausted. Data on these actions will be
maintained by Shared Assets Areas management and will be regularly
available for briefing to the Conrail's Board of Directors at its
pleasure.
2
<PAGE>
Storage
o Neither parent company may store or pre-position cars on Shared Assets
Area's tracks, including yard and industrial tracks to which they have
access. Empty cars routed to the Shared Assets Areas must have a customer
destination assigned, and must be loaded without beginning to accrue charges
as described in Conrail's Demurrage Tariff in effect on May 1, 1999. When it
is determined that cars cannot be delivered to the customer within 60 hours
of arrival, a call will be made to the parent's operations center. After
such a call is made, except in extraordinary cases, these cars will then be
placed on the parent's first available outbound train.
o CSXT and NS will independently establish such demurrage and car storage
arrangements with customers as each deems proper. Should customers keep or
store cars on SAA tracks beyond the time at which charges would begin to
accrue as called for in Conrail's Demurrage Tariff in effect on May 1, 1999,
then the parent road will be assessed $100 per car per day to cover the
operational cost of congestion and inefficient use of Shared Assets Areas
facilities.
o CSXT and NSR recognize that certain customers are currently provided car
storage within the Shared Asset Areas, and that this storage may be
essential to the functioning of the business of these customers. CSXT, NSR
and Shared Assets will review current pools and by consent of all three
parties approve their makeup and location based on operating efficiencies.
Thereafter pools will be regularly reviewed for the provision of such
storage to avoid congestion. Any request for additional car storage for any
Shared Assets Area customers must be approved by the Parents, who will
consider the availability of additional space with a view toward assuring
that operations in the Shared Assets Area remain fluid and will not be
affected by providing such car storage.
Interchange
o CSXT and NSR will not interchange cars to each other within the Shared
Assets Areas locations unless specifically provided through separate
agreements. No open interchanges have been established except at industries.
3
<PAGE>
Blocking
o To ensure the equal and fair use of the Shared Assets Area capacity by its
parent companies, the following car classification requirements will govern:
- Each parent company will be required to block inbound trains for the
Shared Assets Areas. Each parent will make the number of blocks called
for in the split-date Operating Plan. Failure to comply with inbound
blocking requirements and execute appropriate setoffs (unless otherwise
directed by Shared Assets
management) within the Shared Assets Area will result in an assessment
of $50.00 per loaded or empty car.
- Management of the Shared Assets Areas will be required to block outbound
trains. Parent companies will receive the number of blocks at each
Shared Assets Area terminal that is called for in the split-date
Operating Plan.
- Changes to the number of blocks made by or delivered to a Shared Asset
terminal may be made only by mutual consent of all three parties.
- Parent companies, except by joint agreement, may not compel the Shared
Assets Areas management to make a greater number of blocks at any
terminal, beyond the number of called for in the split-date Operating
Plan.
- Each parent may change the definition of its own specific blocks
originating at a Shared Assets Area terminal.
Hours of Service and Recrews
o Train crews on parent trains approaching a Shared Assets Area must have
sufficient time to terminate in or exit the Shared Assets Areas before
hours-of-service laws require them to rest. Sufficient time is considered
the trains scheduled elapsed time to terminate in or pass through the Shared
Assets Area. The Shared Assets Areas management may grant an exception if
the train can make it to its destination without undue disruption.
o Shared Assets Areas shall have the option to provide T&E relief service for
any road train on the hours-of-service law, regardless of parent company.
- Such relief will be provided after coordination with the appropriate
parent's operations center indicating the involved parent will provide
no relief crew.
4
<PAGE>
- Recrews will be at the sole cost and expense of the parent whose train
is recrewed at full cost plus a $500 surcharge.
- If specific trains frequently require recrews, Shared Assets Areas
management may request the parent to change its schedule or slotting of
subject train with the right to repeatedly hold that train for a recrew
outside the Shared Assets Areas as set forth under the "held trains"
provision until such appropriate adjustments are made to the
non-conforming schedule.
- Data on trains recrewed will be maintained by Shared Assets Areas
management and will be regularly available for briefing to Conrail's
Board of Directors at its pleasure.
Charges
o The charges paid by either owner under these protocols will be made to a
Conrail "passive income" account, which will be administered by Conrail.
Changes
o These terminal capacity guidelines will be reviewed at the request of any of
the three parties (CSXT, NSR, and/or CSAO). Proposed changes are subject to
the arbitration provisions of the Shared Asset Area Operating Agreements in
the event CSXT and NSR cannot agree.
5
Exhibit 10.8
MONONGAHELA USAGE AGREEMENT
Dated as of June 1, 1999
By and Among
CSX TRANSPORTATION, INC.
NORFOLK SOUTHERN RAILWAY COMPANY
PENNSYLVANIA LINES LLC
NEW YORK CENTRAL LINES LLC
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................................4
Section 2. Description of Monongahela.......................................10
Section 3. Customer Service.................................................11
Section 4. Usage of Subject Trackage........................................11
Section 5. Miscellaneous Operations Provisions..............................12
Section 6. Car Hire.........................................................19
Section 7. Accounting Records...............................................19
Section 8. Repairs and Lading Adjustments...................................20
Section 9. Usage Charges....................................................21
A. Transportation Costs..........................................21
B. Other Usage Charges...........................................21
Section 10. Maintenance of the Monongahela..................................27
Section 11. Capital Improvements............................................29
Section 12. Labor Claims....................................................32
Section 13. Freight Claims..................................................32
Section 14. Liability.......................................................33
(a) Sole Responsibility ..........................................33
(b) NSR-CSXT Joint Responsibility.................................34
(c) Process.......................................................34
(d) Indemnification...............................................35
<PAGE>
Page
(e) Specified Level Damages.......................................35
(f) Exceptions....................................................36
(g) Damages.......................................................36
(h) Limitation....................................................37
Section 15. No Partnership..................................................37
Section 16. Arbitration.....................................................37
Section 17. Force Majeure...................................................39
Section 18. Entire Agreement................................................39
Section 19. Amendment and Waiver............................................40
Section 20. Severability....................................................40
Section 21. Remedies........................................................40
Section 22. Interpretation..................................................41
Section 23. Headings........................................................41
Section 24. Parties.........................................................42
Section 25. Assignment......................................................42
Section 26. Term............................................................43
Section 27. Termination of Other Agreements.................................45
Section 28. Notices.........................................................45
Section 29. Governing Law...................................................47
- ii -
<PAGE>
MONONGAHELA USAGE AGREEMENT
This Monongahela Usage Agreement ("Agreement") made this 1st day
of June, 1999, by and between NORFOLK SOUTHERN RAILWAY COMPANY, hereinafter
referred to as "NSR", PENNSYLVANIA LINES LLC, hereinafter referred to as "PRR",
and CSX TRANSPORTATION, INC., hereinafter referred to as "CSXT," and NEW YORK
CENTRAL LINES LLC, hereinafter referred to as "NYC";
WITNESSETH:
WHEREAS, all capitalized terms in this Agreement have the
respective meanings set forth in Section 1; and
WHEREAS, Consolidated Rail Corporation ("CRC") is a wholly owned
subsidiary of Conrail Inc. ("CRR"); and
WHEREAS, CSX Corporation ("CSX") owns all of the common stock of
and controls CSXT, Norfolk Southern Corporation ("NSC") owns all of the common
stock of and controls NSR, and CSX and NSC jointly control CRC; and
WHEREAS, pursuant to the Transaction Agreement, certain assets of
CRC have been allocated to PRR, which is a wholly-owned subsidiary of CRC, to be
operated by NSR under the terms of the NSR Operating Agreement; and
WHEREAS, NSR and CSXT have agreed, and the STB has approved in
Finance Docket No. 33388, that certain tracks comprising all the rail facilities
described in Section 2 of this Agreement (hereinafter "Monongahela"), shall be
allocated to PRR pursuant to the Transaction Agreement, and pursuant to the NSR
<PAGE>
Operating Agreement, be operated by NSR, and NSR shall control, operate and
maintain the Monongahela under this Agreement, provided, however, that NYC shall
have equal access, pursuant to the terms of this Agreement, through full use of
the Monongahela to all current and future customer facilities located on or
accessed from the Monongahela; and
WHEREAS, pursuant to the Transaction Agreement, certain assets of
CRC (including equal access to the Monongahela that is the subject of this
Agreement) have been allocated to NYC, which is a wholly-owned subsidiary of
CRC, to be operated by CSXT under the terms of the CSXT Operating Agreement; and
WHEREAS, pursuant to the CSXT Operating Agreement, NYC is
assigning to CSXT all of its rights and obligations to operate NYC's assets,
including all of its rights and obligations with respect to the Monongahela set
forth in this Agreement, and thus CSXT, pursuant to this Agreement and the CSXT
Operating Agreement, shall have all of the rights and obligations conferred by
or imposed under this Agreement during the term of the CSXT Operating Agreement;
WHEREAS, under provisions of this Agreement and the CSXT
Operating Agreement, CSXT, as the assignee of NYC, shall have equal access
through full use of the Monongahela to all current and future customer
facilities located on or accessed from the Monongahela; and
- 2 -
<PAGE>
WHEREAS, in accordance with the terms of this Agreement, NSR and
CSXT shall share all maintenance and other expenses as specifically described
herein which relate directly to the Monongahela on a joint usage basis; and
WHEREAS, NSR and CSXT shall be able to provide separately
transportation service to all customers on or accessed from the Monongahela and,
except as provided herein, no access fees shall be charged NYC for the joint
usage; provided, however, the Operating Fee payable by CSXT to NYC under the
CSXT Operating Agreement includes an arm's-length charge for the assignment by
NYC to CSXT of access to the Monongahela; and
WHEREAS, as provided herein, NSR and CSXT will work together to
develop the expansion of existing and future facilities serving customers
located on or accessed from the Monongahela; and
WHEREAS, NSR and CSXT are agreeable to such an arrangement under
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, covenants and
agreements set forth herein, and for good and valuable consideration, the
receipt and sufficiency of which is acknowledged, CSXT and NSR hereby agree as
follows:
- 3 -
<PAGE>
Section 1. Definitions.
For purposes of this Agreement, the following terms have the
following meanings:
(a) "AAA" means the American Arbitration Association.
(b) "AAR" means the Association of American Railroads.
(c) "Accounting Plan" means the plan of accounting adopted
pursuant to Section 9(B)(a).
(d) "Action" means any action, claim, suit, arbitration,
inquiry, subpoena, discovery request, proceeding or investigation by or before
any Governmental Entity.
(e) "Bill" means a bill delivered by NSR to CSXT pursuant to
Section 9(B)(e).
(f) "Billing Month" means the calendar month for which
information is shown on a Usage Statement.
(g) "Budgeted Capital Expenditures" means capital expenditures
included on a Capital Expenditure Budget which has been agreed upon by NSR and
CSXT.
(h) "CCBU" means CSXT's Cumberland Coal Business Unit, currently
headquartered in Cumberland, MD, or any successor thereof.
(i) "CSXT Operating Agreement" has the meaning set forth in the
Transaction Agreement.
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(j) "Capital Expenditure Budget" means a written budget
specifying proposed capital expenditures to be made on the Monongahela for the
periods of time specified in such budget and the proposed sources of the capital
required to make such expenditures.
(k) "Capital Expenditure Statement" means a statement delivered
by NSR pursuant to Section 9(B)(d).
(l) "Carpenter/Tobias Letter" means the letter agreement dated
April 28, 1998, concerning the operation of the Monongahela.
(m) "Damage(s)" means all assessments, fines, losses, damages,
liabilities, and costs and expenses related thereto, including, without
limitation, interest, penalties and attorneys' and consultants' fees and also
expressly including, without limitation, all liabilities arising after the
effective date hereof under the Federal Employers Liability Act, as amended, and
environmental laws.
(n) "Dispute Letter" means a letter delivered by CSXT pursuant to
Section 9(B)(g).
(o) "Expense Statement" means a statement delivered by
NSR pursuant to Section 9(B)(c).
(p) "GAAP" at any time means generally accepted accounting
principles in effect at such time.
(q) "Governmental Entity" means any federal, state, local or
foreign court, administrative agency or commission or other governmental or
regulatory authority or commission or any arbitration tribunal.
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(r) "Liabilities" means any and all debts, liabilities and
obligations of any kind whatsoever, whether or not accrued, contingent or
reflected on a balance sheet, known or unknown, absolute, determined,
determinable or otherwise, including, without limitation, those arising under
any law, rule, regulation, action, order or consent decree of any Governmental
Entity or any judgment in any Action of any kind or award of any arbitrator of
any kind and those arising under any contract.
(s) "Monongahela Train" means a train operated by NSR for NSR or
for CSXT and serving customers located on the Monongahela.
(t) "Monongahela Train Usage Percentage" means for either NSR or
CSXT, for a particular time period, the percentage obtained by multiplying 100
by the quotient obtained by dividing (1) the total number of loaded and empty
Railcars in the account of NSR or CSXT, as the case may be, that are in
Monongahela Trains, by (2) the sum of the total number of loaded and empty
Railcars in the accounts of both NSR and CSXT that are in Monongahela Trains,
during such period for each Zone.
(u) "Nonseverable Improvement" means a capital improvement which
is integral to the operation of the Monongahela and is not readily removable.
(v) "NSR Operating Agreement" has the meaning set forth in the
Transaction Agreement.
(w) "Railcar" means, except as otherwise provided in the
Accounting Plan, each railroad freight car, locomotive, caboose or other
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equipment (including RoadRailer(R) equipment (or comparable bimodal freight
hauling equipment in either NSR's or CSXT's account)) furnished in substitution
of railroad equipment, loaded or empty, which an Operator originates,
terminates, switches or moves on or overhead within the Monongahela, except that
(i) a single standard flat car not exceeding 96 feet in length (excluding
articulated flat cars) shall count as a single Railcar, (ii) freight railcars
consisting of articulated units bearing AAR car type codes "Q" and "S" shall
count as multiple Railcars based on the second (numeric) digit of the car type
code for such articulated units (by way of example, a car consisting of AAR Car
Type Code "S566" would be counted as five Railcars) (or corresponding car type
codes and digits if the AAR car type codes should be modified at any time during
the term of this Agreement), and (iii) a single unit of RoadRailer(R) equipment
(or comparable bimodal freight hauling equipment in either NSR's or CSXT's
account) shall count as one-half (1/2) of a Railcar.
(x) "Railroad Consequential Damages" means consequential,
indirect, incidental or other similar damage, injury or loss to either NSR or
CSXT.
(y) "Reimbursable Expenses" means the expenses shown on an
Expense Statement, minus the revenues, if any, shown on such Expense Statement.
(z) "RoadRailer(R) means bimodal freight hauling equipment
manufactured by or under license from "RoadRailer(R), a division of Wabash
National Corporation, and capable of movement over the highway when pulled by a
tractor and on the rails using locomotive power.
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(aa) "Severable Improvement" means a capital improvement that is
not a Nonseverable Improvement, and specifically includes but is not limited to,
track extensions to customer facilities.
(bb) "STB" means the Surface Transportation Board, or if there
shall be no Surface Transportation Board, any federal agency which is charged
with the function of approving combinations by rail carriers or persons
controlling them, or of other arrangements between such rail carriers, and
granting exemptions from other laws with respect thereto or regulating other
specific functions with respect to the context in which such term is employed or
any successor entity thereof.
(cc) "Tax" or "Taxes" means taxes, levies or other similar
assessments, customs, duties, imposts, charges or fees, including, without
limitation, ad valorem, excise, real or personal property, sales, use, payroll,
withholding, unemployment, transfer and gains taxes or other governmental taxes
imposed by or payable to the United States, or any state, local or foreign
government or subdivision thereof, and in each instance such term shall include
any interest, penalties or additions to tax attributable to such Tax or Taxes.
(dd) "Total Monongahela Train Usage Percentage" means for either
NSR or CSXT, for a particular time period, the percentage obtained by
multiplying 100 by the quotient obtained by dividing (1) the total number of
loaded and empty Railcars in the account of NSR or CSXT, as the case may be,
that are in Monongahela Trains by (2) the sum of the total number of loaded and
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empty Railcars in the accounts of both NSR and CSXT that are in Monongahela
Trains, during such period for the entire Monongahela.
(ee) "Total Train Usage Percentage" means for either NSR or CSXT
for a particular time period, the percentage obtained by multiplying 100 by the
quotient obtained by dividing (i) the total number of loaded and empty Railcars
in the account of either NSR or CSXT, as the case may be, by (ii) the sum of the
total number of loaded and empty Railcars in the accounts of both NSR and CSXT,
during such period on the Monongahela.
(ff) "Train Usage Percentage" means for either NSR or CSXT for a
particular time period and Zone, the percentage obtained by multiplying 100 by
the quotient obtained by dividing (i) the total number of loaded and empty
Railcars in the account of either NSR or CSXT, as the case may be, by (ii) the
sum of the total number of loaded and empty Railcars in the accounts of both NSR
and CSXT, during such period in such Zone.
(gg) "Transaction Agreement" means the Transaction Agreement
dated as of June 10, 1997, among CSX, CSXT, NSC, NSR, Conrail Inc., CRC and CRR
Holdings LLC.
(hh) "Usage Statement" means a statement delivered by NSR
pursuant to Section 9(B)(b).
(ii) "USOA" means the uniform system of accounts prescribed for
class I railroads by the STB or any successor federal agency that shall succeed
to the functions of the STB in prescribing uniform systems of accounts for rail
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carriers; provided, that if there shall be no STB and no such federal agency,
USOA shall mean such system of accounts as is generally maintained by rail
carriers consistent with GAAP as applied in the rail industry.
(jj) "Zone" refers to the division of the Monongahela for
accounting purposes, into the following three segments.
Zone 1:MP 0.0 CP BROWN to CP 85 WAYNESBURG (including
Manor Branch) Zone 2:CP 85 WAYNESBURG to MP W27.3 FEDERAL
2 MINE Zone 3:MP 0.0 CP BROWN to MP 79.6 LOVERIDGE
Section 2. Description of Monongahela.
The Monongahela is defined as the trackage described in the
definition of Zones set forth above, and as shown on Exhibit "A", which is
attached and made a part hereof (which includes CRC's Waynesburg Southern
Branch), and includes all existing and future spurs, sidings, leads, industry,
switching, loading, side, team and other tracks extending therefrom, together
with the right to use the Manor Branch shown on Exhibit "A", which is attached
hereto and made a part hereof. Monongahela includes the track structure (rails,
ties, ballast, etc., including structures supporting the track), right of way,
communication facilities, signal facilities and all other appurtenances thereto.
The Monongahela also includes all future Nonseverable Improvements. The
Monongahela excludes any tracks or facilities constructed beyond the limits of
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the Zones described above, or connecting to CP 58, MP 0.0 or MP 66.4
(Rivesville) from outside the Zones.
Section 3. Customer Service.
Both NSR and CSXT shall be able to provide separately and
independently rail transportation service to all customers on or accessed from
the Monongahela with their own equipment and crews.
Section 4. Use of Subject Trackage.
(a) CSXT shall have equal access to the Monongahela, as more
specifically provided herein.
(b) Subject to the terms of this Agreement, NSR shall have
control of the management and operation of the Monongahela. However, should CSXT
be dissatisfied with the fairness and equality of treatment of CSXT's movements
by NSR's Monongahela dispatchers, NSR and CSXT shall attempt to resolve these
dispatching concerns. If the attempt does not resolve CSXT's concerns about
Monongahela dispatching, CSXT shall have the right to request a change of
control of Monongahela dispatching to CSXT. If NSR disagrees with such request
for change in dispatching control, NSR and CSXT agree to submit that request to
binding arbitration as provided in Section 16 of this Agreement. From time to
time, but not more frequently than 12 months after the last change in
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dispatching control or arbitration, the party not controlling dispatching may
again seek a change and require arbitration.
Section 5. Miscellaneous Operations Provisions.
(a) When operating over the Monongahela, locomotives and crews
shall be equipped to communicate with the controlling dispatcher on radio
frequencies normally used in directing train movements on the Monongahela.
(b) Procedures for qualification and occupancy of the Monongahela
shall be arranged by the local supervision of NSR and CSXT, and shall be fair
and impartial as between NSR and CSXT.
(c) Before locomotives or equipment of NSR and CSXT enter onto
Monongahela, the employees shall request permission from the dispatcher in
charge of the Monongahela. Further, NSR and CSXT shall ascertain that the
trackage is clear and shall await confirmation from the dispatcher that such
permission has been issued to allow NSR and/or CSXT movements on or over the
Monongahela. Upon completing its operations and clearing the Monongahela, NSR or
CSXT, as the case may be, shall notify the dispatcher that it has completed its
operations and that its equipment is in the clear for other operations or has
moved off of Monongahela. Once NSR or CSXT has notified the dispatcher it is in
the clear or has cleared the Monongahela, NSR or CSXT shall not reenter the
Monongahela without again obtaining permission from the dispatcher.
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(d) The operation and equal access to the mines on the
Monongahela (the "Mines") will be governed by the loading demand of the Mines,
while always taking into account the customer's choice of carrier for the
particular movement. Trains will be scheduled onto the Monongahela based on the
Mines' request. The current practice of the Mines in providing a seven day
loading schedule of required loading will continue. The scheduling and
sequencing will be coordinated between the Mines and designated NSR and CSXT
representatives. All parties will work towards a monthly loading projection to
facilitate advanced planning and scheduling.
A rolling 36 hour loading schedule will be coordinated and
maintained by the Mines, NSR and CSXT, and will be updated every four hours. The
loading schedule will be the governing vehicle for sequencing trains on the
Monongahela by the dispatcher. This will allow each carrier to have sufficient
notification to ensure trains are positioned to protect loading on the
Monongahela. NSR and CSXT will develop scheduled running times from their
staging facilities to the entrance to the Monongahela. NSR and CSXT will
jointly develop running times from the entrance points to each of the Mines.
Changes in the train loading schedule or train ordering
will be coordinated jointly between NSR and CSXT to assure demand is met for all
Mines. In the event either an NSR or CSXT train fails to make the loading
schedule, every effort will be made to coordinate and resequence the
loading schedule to facilitate both carriers. The governing factor is to
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provide the appropriate NSR or CSXT trains required by the Mines. NSR and
CSXT agree to coordinate and implement an operating plan for the
Monongahela (the "Operating Plan") to ensure efficient movement of traffic
on the Monongahela. Related to the Operating Plan, Accounting Plan and
this Agreement is the Carpenter/Tobias Letter. The Carpenter/Tobias Letter
was executed in furtherance of this Agreement, the Operating Plan and the
Monongahela Accounting Plan and shall be enforceable according to its terms.
In the event that coal producers on the Monongahela need to change the loading
sequence once trains are positioned on the Monongahela, every attempt will
be made to have the original carrier secure the loading, subject to customer
approval.
A Service Standards Committee ("Committee") shall be
established with equal local representation from NSR and CSXT including General
Manager Coal Operations and General Manager CCBU or other representatives for
CSXT and the Superintendent of the Pittsburgh Division and the AVP
Transportation, or other representatives, for NSR. The Committee is charged
with developing and agreeing upon the contents of a "Report Card" for the
service on the Monongahela. The Report Card will attempt to provide a
mechanism to determine whether impartial access (as measured by train
performance, dispatching and maintenance) to all Mines is being provided. The
Committee will meet on a quarterly basis, or more frequently if required, to
review service, dispatching, maintenance and other issues as they arise. The
Committee's goal is to resolve all issues encompassing the operation on the
Monongahela.
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(e) NSR and CSXT shall comply with the provisions of the Federal
Locomotive Inspection Act and the Federal Safety Appliance Act, as amended, and
any other federal and state and local laws, regulations and rules respecting the
operation, condition, inspection and safety of its trains, locomotives, cars and
equipment while such trains, locomotives, cars, and equipment are being operated
over the Monongahela.
(f) CSXT in its use of the Monongahela shall comply in all
respects with the safety rules, operating rules and other regulations of NSR,
and the movement of CSXT trains, locomotives, cars, and equipment over the
Monongahela shall at all times be subject to the orders of the transportation
officers of NSR; provided that all such rules, regulations, practices and orders
must be impartially administered as between NSR and CSXT. NSR and CSXT trains
shall not include locomotives, cars or equipment which exceed the width, height,
weight or other restrictions or capacities of the Monongahela as published in
Railway Line Clearances, and no train shall contain locomotives, cars or
equipment which require speed restrictions or other movement restrictions that
would violate operating rules and regulations applicable to the Monongahela,
except with the concurrence of NSR which shall not be unreasonably withheld.
(g) CSXT shall make such arrangements with NSR as may be required
to have all CSXT employees who shall operate its trains, locomotives, cars and
equipment over the Monongahela qualified for operation thereover, and CSXT shall
pay to NSR, upon receipt of bills therefor, any cost incurred by NSR in
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connection with the cost of pilots furnished by NSR, until such time as such
employees are deemed by the appropriate examining officer of NSR to be properly
qualified for operation over Monongahela.
(h) In the event of any investigation or hearing concerning the
violation of any operating rule or practice by CSXT's employees while on the
Monongahela, CSXT shall be notified in advance of any such investigation or
hearing and such investigation or hearing may be attended by any official
designated by CSXT, and any such investigation or hearing shall be conducted in
accordance with the collective bargaining agreements, if any, that pertain to
CSXT's employee or employees required to attend such hearings.
(i) NSR shall have the right to exclude from the Monongahela any
employee of CSXT determined by above, to be in violation of NSR's rules,
regulations, orders, practices, or instructions issued by NSR's timetable or
otherwise. CSXT shall release, indemnify, defend, and save harmless NSR and its
parent corporation, subsidiaries and affiliates, and all of their respective
directors, officers, agents and employees from and against any and all claims
and expenses resulting from such reasonable and lawful exclusion.
(j) The railcars, trains, locomotives, cars and equipment of NSR
and CSXT shall be operated without prejudice or partiality to either party and
in such manner as shall afford the most economical and efficient movement of all
traffic.
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(k) In the event that a train of CSXT shall be forced to stop on
the Monongahela, due to mechanical failure of CSXT's equipment, or any other
cause not resulting from an accident or derailment, and such train is unable to
proceed, or if a train of CSXT fails to maintain the minimum speeds required on
the Monongahela, or if in emergencies, crippled or otherwise defective Railcars
are set out of CSXT's trains on the Monongahela, NSR shall arrange for motive
power or such other assistance as may be necessary to haul, help or push such
trains or Railcars, or to properly move the disabled equipment in the clear or
off the Monongahela, and CSXT shall reimburse NSR for the cost of rendering any
such assistance. If such assistance cannot be commenced within a reasonable
time, CSXT shall have the option through coordination with NSR, to provide such
assistance itself. If a train of NSR becomes unable to proceed or maintain the
required minimum speed or NSR Railcars become crippled and are set out, NSR
shall promptly clear off such trains or Railcars so as not to impede movements
on the Monongahela.
(l) If it becomes necessary to move, make repairs to, adjust or,
transfer the lading of crippled or defective Railcars, such work shall be done
by NSR, and if the Railcar is in the account of CSXT, CSXT shall reimburse NSR
for the cost thereof. If the Railcar is in the account of NSR, such cost shall
be borne by NSR and not shared pursuant to Section 9.
(m) In the event NSR and CSXT agree that NSR should retain
employees or provide additional employees for the sole benefit of CSXT, the
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parties hereto shall enter into a separate agreement under which CSXT shall bear
all cost and expense for any such retained or additional employees provided,
including without limitation all cost and expense associated with labor
protective payments which are made by NSR and which would not have been incurred
had the retained or additional employees not been provided.
(n) Notwithstanding the provisions of Section 14, for the
purposes of this Section 5, the word "equipment" shall mean and be confined to
(i) cabooses, (ii) vehicles and machinery which are capable of being operated on
railroad tracks that, at the time of an occurrence, are being operated on the
Monongahela and (iii) vehicles and machinery that, at the time of an occurrence,
are on the Monongahela or its right of way for the purpose of maintenance,
repair or inspection thereof or the clearing of wrecks thereon.
(o) Whenever CSXT's or NSR's use of the Monongahela requires
rerailing, wrecking service or wrecking train service, NSR shall perform or
provide such service. The cost of rerailing and the repair and restoration of
roadbed, track and structures shall be borne 100% by CSXT if the Railcars are in
CSXT's account or 100% by NSR if they are in NSR's account. Any other cost,
liability and expense related to the foregoing, including without limitation
loss of, damage to, or destruction of any property whatsoever and injury to and
death of any person or persons whomsoever or any damage to or destruction of the
environment whatsoever, including without limitation land, air, water, wildlife,
and vegetation, resulting therefrom, shall be apportioned in accordance with the
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provisions of Section 14 hereof. All locomotives, railcars, and equipment and
salvage from the same so picked up and removed which is owned by or under the
management and control of or used by CSXT at the time of such wreck, shall be
promptly delivered to CSXT. If such assistance cannot be commenced within a
reasonable time, CSXT shall have the option to provide such assistance itself.
Section 6. Car Hire.
All NSR and CSXT Railcars shall remain in the respective accounts
of NSR and CSXT at all times. NSR and CSXT Railcars and lading being moved in
their respective trains pursuant to this Agreement shall be the sole property of
that party. NSR and CSXT shall each pay and collect or cause to be paid and
collected all car hire and mileage charges pertaining to their respective
Railcars, and neither NSR nor CSXT shall have any responsibility for any such
car hire or mileage charges in the other party's account however incurred.
Section 7. Accounting Records.
The records of each party hereto, insofar as they pertain to
matters covered by this Agreement, shall be retained for a period of three (3)
calendar years and shall be open at all reasonable times to inspection by the
other party during such period. These records shall include train consist (list)
indicating car initial and number with associated car type code.
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Section 8. Repairs and Lading Adjustments.
If any CSXT Railcars are bad ordered en route and it is necessary
that they be set out, such Railcars, after being promptly repaired, shall be
returned or delivered to CSXT. NSR shall at the expense of CSXT, furnish
required labor and material, and perform light repairs on such bad ordered
equipment to make it safe for movement. For liability purposes only, the
employees and equipment of NSR while in any manner so engaged or while en route
to or returning from such repair assignment shall be considered sole CSXT
employees and exclusive CSXT equipment. In the case of such repairs by NSR to
CSXT Railcars, billing therefor shall be in accordance with the Field and Office
Manuals of the AAR Interchange Rules, or similar rules providing "industry
standard" procedures which are in effect at the time such work is performed,
hereinafter called "Interchange Rules". NSR shall prepare and submit billing
directly to and collect from the car owners for car owner responsibility items
as determined under the Interchange Rules and NSR shall prepare and submit
billing directly to and collect from CSXT for handling line responsibility items
as determined under the Interchange Rules. NSR shall also submit billing to and
collect from CSXT any charges for repair to freight cars that are car owner
responsibility items as determined under the Interchange Rules, should said car
owner refuse or otherwise fail to make payment therefor. In the event NSR
Railcars are bad ordered en route and set out, repaired, or work is performed on
such Railcars, as provided above, all such costs shall be borne by NSR and not
shared pursuant to Section 9.
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Section 9. Usage Charges.
A. Transportation Costs. The Carpenter/Tobias letter states that
--------------------
NSR will provide crews to operate CSXT trains between the Mines and CSXT's
Newell Yard or the Alicia or LaBelle barge terminals (or such other locations as
may be mutually agreed upon). Transportation costs associated with NSR's
operation of CSXT trains shall be as set forth in the Accounting Plan. To the
extent NSR and CSXT will be performing service over the Monongahela by operating
their own trains with their own crews, any and all costs directly associated
with the operation of such trains and crews shall be borne by the party
operating such trains and crews.
B. Other Usage Charges. Given the rights of equal access to the
--------------------
Monongahela, the parties agree that certain costs directly related to the
maintenance and operation of the Monongahela shall be shared based upon usage.
Accordingly, the parties agree to the following:
(a) The parties shall develop and implement a written Accounting
Plan containing a detailed description, by category of cost and location, of the
costs directly associated with the management and operation of the Monongahela
and the method by which such costs shall be fairly and properly apportioned
between the parties. Such Accounting Plan will include separate accounting and
sharing of costs as mutually agreed for particular Zones or for the overall
Monongahela, as the case may be, and shall conform to the following general
principles:
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(i) General and administrative, supervisory and
overhead expenses incurred within the Monongahela or for functions directly
related to the Monongahela shall be apportioned on the basis of the Total
Train Usage Percentages, or Total Monongahela Train Usage Percentages,
whichever is applicable as provided in the Accounting Plan;
(ii) Dispatching (where dispatching is located on the
Monongahela or where dispatching is devoted 100% to the Monongahela),
maintenance of dispatching equipment and train control costs (including labor,
materials and maintenance expenses) incurred with respect to the Monongahela
shall be apportioned on the basis of the Total Train Usage Percentages, or
Total Monongahela Train Usage Percentages, whichever is applicable as provided
in the Accounting Plan;
(iii) Police and other costs incurred with respect to
security within the Monongahela shall be apportioned on the basis of the Total
Train Usage Percentages, or Total Monongahela Train Usage Percentages, whichever
is applicable as provided in the Accounting Plan;
(iv) Damage paid by NSR pursuant to Section 14 shall be
apportioned in accordance with Section 14;
(v) Taxes (excluding income taxes) incurred with
respect to the Monongahela or individual Zones thereof shall be apportioned
between NSR and CSXT on the basis of the Total Train Usage Percentages, or
Total Monongahela Train Usage Percentages, whichever is applicable as
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provided in the Accounting Plan, or Train Usage Percentage for the individual
Zone, if capable of determination, for the period for which such Taxes apply;
(vi) The cost of premiums for liability and property
insurance, other than self-insurance, incurred with respect to the Monongahela
or individual Zones thereof shall be apportioned between NSR and CSXT on the
basis of (w) Total Train Usage Percentage, (x) Train Usage Percentage for the
individual Zone, (y) Total Monongahela Train Usage Percentage, or (z)
Monongahela Train Usage Percentage for the individual Zone, whichever is
applicable, as provided in the Accounting Plan, if capable of determination
for the period for which such Insurance costs apply;
(vii) The expense of installation and maintenance of AEI
readers including, but not limited to, those in the vicinity of CP 58
(existing), CP 85 Waynesburg, MP 0.5 and MP 66.0 shall be borne 50% by NSR and
50% by CSXT;
(viii) Section 14 of this Agreement deals with the
apportionment of Liability between the parties. Any payments made by NSR
pursuant to Section 14(a) which arise from the death or injury to NSR
employees, when such NSR employees are "joint employees," such as
Maintenance of Way, Signal, Dispatch, Bridge and Building, Mechanical and other
employees whose work on the Monongahela is other than revenue train
operations, shall be paid by NSR in accordance with Section 14(a), but
apportioned based on Total Train Usage Percentage or Train Usage Percentage for
the individual Zone, whichever is applicable as provided in the Accounting
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Plan; provided, however, should such employee Liability expense arise from work
performed as a result of capital improvements at the sole cost of NSR or CSXT,
then that party shall be fully responsible for all such payments; and
(ix) Maintenance of track structure (rails, ties,
ballast, etc., including structures supporting the track), right of way,
tunnels, communication facilities, signal facilities and all other appurtenances
thereto shall be apportioned on the basis of the Total Train Usage Percentage,
for the entire Monongahela or Train Usage Percentage for each Zone, whichever
is applicable, as provided in the Accounting Plan.
(x) Any other costs shall be reimbursed as otherwise
provided in this Agreement.
If the parties are unable to agree on the terms and
provisions of the Accounting Plan, such disagreement may be submitted by
either NSR or CSXT for resolution by binding arbitration pursuant to Section
16.
(b) NSR shall deliver to CSXT prior to the last day of each
calendar month, a written statement (the "Usage Statement") showing for the
prior Billing Month:
(i) the total number of Railcars moved by NSR or CSXT
on the Monongahela and in each Zone; and
(ii) the calculation of the Total Train Usage
Percentage, the Train Usage Percentage, Total Monongahela Train Usage Percentage
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and Monongahela Train Usage Percentage for each party for each Zone, and (A)
all Railcars in a train shall be deemed to be on the Monongahela, or a Zone,
as the case may be, when the first or last Railcar of such train is on the
Monongahela, or a Zone, as the case may be, and (B) each time that a Railcar
is removed from or added to a train on the Monongahela, or a Zone, as the
case may be, shall constitute a separate movement of such Railcar.
(c) Concurrently with the delivery of each Usage Statement, NSR
shall deliver to CSXT a statement (the "Expense Statement") showing the expenses
incurred by NSR and CSXT during the Billing Month, computed in accordance with
GAAP and the USOA, as modified by the Accounting Plan.
(d) Concurrently with the delivery of each Usage Statement, NSR
shall deliver to CSXT a statement (the "Capital Expenditure Statement") showing
the estimated Budgeted Capital Expenditures for the calendar month immediately
succeeding the calendar month in which such statement is delivered.
(e) Concurrently with the delivery of a Usage Statement for a
Billing Month, NSR shall deliver to CSXT a bill (a "Bill") showing for such
Billing Month:
(i) the amount of each Reimbursable Expense payable by
CSXT for such Billing Month calculated in accordance with the Accounting Plan;
and
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(ii) CSXT's percentage of the amount of Budgeted Capital
Expenditures and shown on the Capital Expenditure Statement delivered with such
Usage Statement.
(f) CSXT shall pay to NSR the amount shown on each Bill on or
before the 30th day after the date of such Bill regardless of whether or not
CSXT disputes the accuracy of any amount or calculation shown on such Bill.
(g) Disputed Bills:
(i) Any dispute by CSXT of the accuracy of any amount
or calculation shown on any Bill, shall be described and specified in reasonable
detail in a Dispute Letter from CSXT to NSR within two (2) years after the date
of such Bill.
(ii) Any amounts or calculations shown on any Bill which
are not disputed in accordance with this section 9 shall conclusively be deemed
to be accurate and shall be binding on both parties.
(iii) CSXT and NSR shall promptly endeavor to resolve the
disputes described in each Dispute Letter, and if they fail to agree to a
resolution of such disputes within 45 days of the delivery of such
Dispute Letter, then a firm of independent public accountants shall be
selected jointly by CSXT and NSR (or if they do not agree on such firm, then
such firm shall be selected by arbitration pursuant to Section 16) to resolve
such disputes, in each case in accordance with GAAP and the USOA, as modified
by the Accounting Plan, and the written resolution of such disputes signed by
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such accounting firm shall be binding on CSXT and NSR.
(iv) Any adjustments to Bills which result from the
resolution of Dispute Letter disputes shall be reflected as charges or credits
on the first Bills delivered by NSR to CSXT after such disputes have been
resolved.
(v) The costs of NSR's and CSXT's auditors in connection
with the resolution of any Dispute Letter disputes shall be paid by each
respective party, and the fees of any independent public accounting firm
engaged to resolve such disputes shall be paid 50 percent by NSR and 50 percent
by CSXT.
(h) At the option of either party hereto, the Accounting Plan
provided for in this Section 9 may be opened for reevaluation every year from
the effective date of this Agreement. Such reevaluation may include the
definition of the Zones and any modifications needed thereto. In the event the
parties fail to reach agreement upon reevaluation, such failure shall not
constitute a breach of this Agreement, and the parties shall continue to be
bound by the terms of compensation provided in this Section 9 until the matter
is settled or submitted to binding arbitration as outlined in Section 16.
Section 10. Maintenance of the Monongahela.
(a) NSR shall be responsible to maintain, repair and renew the
infrastructure of the Monongahela. NSR shall keep and maintain the Monongahela
in good condition for the use herein contemplated. NSR shall take all reasonable
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steps to ensure that any interruptions to train operations shall be kept to a
minimum. Furthermore, except as may be otherwise provided in Section 14, CSXT
shall not by reason of failure or neglect on the part of NSR to maintain, repair
or renew the Monongahela, have or make any claim or demand against NSR or its
parent corporation, subsidiaries or affiliates, including PRR, or their
respective directors, officers, agents or employees for any injury to or death
of any person or persons whomsoever, or for any damage to or loss or destruction
of any property whatsoever, or for any damages of any nature suffered by CSXT
resulting from any such failure or neglect.
(b) The Monongahela will be jointly inspected by each party's
Chief Engineer or their designees at any time upon mutual agreement, but not
less than once every three (3) years to determine if appropriate track standards
are maintained, and to review the performance of any capital plan for the
Monongahela as pertains to maintenance of track, signals, right of way and
appurtenances thereto. On or before August 15 of each year, NSR will provide
CSXT with a capital improvement plan covering the next three (3) years.
(c) Existing and future connections or facilities which are
jointly used by the parties hereto shall continue to be maintained, repaired and
renewed by and at the expense of both parties apportioned in accordance with
Sections 9 and 11 and the Accounting Plan, which shall become a part hereof.
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Section 11. Capital Improvements.
Capital Improvements on the Monongahela shall be governed by the
following provisions:
(a) From time to time, NSR or CSXT may propose to each other
construction of capital improvement projects ("Project"). Each Project shall be
reviewed promptly by the other party. If approved by both parties, NSR and CSXT
shall be responsible for an equal share of the budgeted initial funding, as
approved in the Capital Expenditure Budget, for the approved Project. A final
accounting will be made to adjust the initial budgeted funding to the actual
project cost as specified in the Accounting Plan.
(b) If a proposed project is not approved, and the proposed
Project would be a Nonseverable Improvement of the Monongahela which may be used
in the normal course of business by NSR or CSXT, then the following procedure
shall occur:
(i) At the written request of either NSR or CSXT
delivered to the other, each party shall, within 45 days of the delivery of
such request, submit to an arbitrator in accordance with Section 16 a written
proposal with respect to a Nonseverable Improvement Project which was not agreed
upon by the parties (1) describing any changes from the initial request which
such party proposes be made to such Project and specifying a schedule, budget
and allocations between NSR and CSXT of the capital costs of such Nonseverable
Improvement or (2) proposing that it not be made.
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(ii) The arbitrator receiving the proposals referred to
in Section 11(b)(i) (A) shall consider (1) the degree, if any, to which the
construction, operation and use of such Nonseverable Improvement would impair
or interfere with the use of the Monongahela, conflict with any pending capital
improvements, or be necessary or unnecessary to the operations of a particular
party, and (2) the budget and allocations between NSR and CSXT of the capital
costs of such Nonseverable Improvement as proposed by NSR and CSXT and (B) shall
determine within 45 days of such receipt which of such proposals shall be
accepted, or that such Nonseverable Improvement shall not be made. The
arbitrator's decision shall be binding and enforceable upon NSR to fund and
cause the Nonseverable Improvement to be made in accordance with such
decision and upon CSXT to fund such Nonseverable Improvement in accordance
with such decision, unless the decision is that such Nonseverable Improvement
shall not be made.
(c) Severable Improvements:
(i) (A) NSR shall have the right to cause the
construction, at its sole expense, and (B) CSXT shall have the right to require
NSR to cause the construction, but at CSXT's sole expense, of any Severable
Improvement which has not been agreed upon by the parties to be funded on a
shared basis.
(ii) Each Severable Improvement funded exclusively by
NSR or CSXT shall be used exclusively by NSR or CSXT, as the case may be, and
each party shall be solely responsible for the cost of maintaining such
Severable Improvement (recognizing that in either case the actual performance
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of such maintenance shall be the responsibility of NSR), until such time that
the other party gives written notice that it desires also to use such
Severable Improvement, stating the amount which such other party is prepared
to pay to the party which initially funded such Severable Improvement for
the right to use such Severable Improvement.
(iii) If the parties are unable to agree on the amount of
such payment within 45 days after such notice was given, then at the written
request of a party delivered to the other after 45 days but before 60 days after
such notice was given, NSR and CSXT, within 15 days of the delivery of such
request, shall submit to an arbitrator in accordance with Section 16 a
written statement setting forth the proposed payment by the other party, and
the arbitrator shall within 45 days of such receipt determine which of such
proposed amounts shall apply, which shall be binding on both parties and
paid promptly. Upon payment of the amount determined by the arbitrator,
the improvement shall become a Nonseverable Improvement.
(d) Upon completion, all capital improvements shall become part
of the Monongahela owned by PRR subject to all provisions of this Agreement.
(e) Subject to all of the provisions hereof, the parties will
work together to develop the expansion of existing and future facilities serving
customers located on or accessed from the Monongahela.
(f) The construction, operation and use of a Severable
Improvement by a party shall not unduly impair or interfere with the use of a
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Severable Improvement by the other party, nor shall any Severable Improvement
unduly impair or interfere with train operations on the Monongahela. No
Severable Improvement shall unduly impair or interfere with any pending or
proposed capital improvements included in an approved Capital Expenditure
Budget.
Section 12. Labor Claims.
Each party shall indemnify and hold harmless the other party
against any and all costs and payments, including benefits, allowances, and
arbitration, administrative, and litigation expenses, arising out of claims or
grievances made by or on behalf of or lawsuits brought by or on behalf of its
own employees or their collective bargaining representatives, either pursuant to
employee protective conditions imposed by a governmental agency upon the
agency's approval or exemption of this Agreement and operations hereunder or
pursuant to a collective bargaining agreement. It is the parties' intention that
each party shall bear the full costs of protection of its own employees under
employee protective conditions that may be imposed, and of grievances filed by
its own employees arising under its collective bargaining agreements with its
employees.
Section 13. Freight Claims.
The parties shall agree between themselves on the most fair,
practical and efficient arrangements for handling and administering freight loss
and damage claims with the intent that (a) each party shall be responsible for
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losses occurring to lading in its possession for the account of such party and
(b) the parties shall follow relevant AAR rules and formulas in providing for
the allocation of losses which are either of undetermined origin or in Railcars
handled in interline service by or for the account of both parties.
Section 14. Liability.
Except as otherwise provided in Section 13 and this Section 14,
the responsibility between CSXT and NSR for all Damage arising out of,
incidental to or occurring in connection with this Agreement shall be
apportioned without consideration of fault or negligence of any kind or degree
as follows:
(a) Sole Responsibility. Except as otherwise provided in Section
14(e) (Specified Level Damages) and Section 14(f) (Exceptions), each party shall
assume and bear all responsibility for Damage to its own trains, locomotives and
equipment, to Railcars and lading in its possession or being handled for its
account, and for the death of or injury to its own employees. Subject to Section
14(f) (Exceptions), for the purpose of this Section 14(a):
(i) when NSR employees are engaged in capital
improvements at the sole cost of CSXT under Section 9(B)(a)(viii), such
employees engaged in such capital improvements shall be treated as if they were
CSXT employees; and
(ii) when NSR is operating trains for CSXT, NSR employees
engaged in moving, inspecting, preparing, handling, being transported to or
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from, transporting such employees to or from, or other similar activities
directly related to the movement of CSXT trains shall be treated as if they
were CSXT employees and such trains shall be CSXT trains.
(b) NSR-CSXT Joint Responsibility. (i) Except as otherwise
provided in Section 14(b)(ii) with regard to Damages occurring in the first 12
months of operation and in Sections 14(a) (Sole Responsibility), Section 14(e)
(Specified Level Damages) and Section 14(f) (Exceptions), the parties shall
jointly assume and bear all responsibility for all Damage in proportion to their
respective Train Usage Percentages in the Zone in which the incident giving rise
to such Damage occurred for the 12 calendar month period immediately preceding
the incident giving rise to such Damage.
(ii) In the event an incident giving rise to Damage for
which the parties are jointly responsible occurs during the 12-month period
immediately following the date of this Agreement, responsibility for such
Damage shall be borne equally by the parties with each being liable for
one-half (1/2) of the damages.
(c) Process. Each party shall be responsible for the payment,
handling, administration and disposition of all Damage for which it bears
exclusive responsibility under Section 14(a), and both parties shall have joint
responsibility for the payment, handling, administration and disposition of all
Damage for which they are jointly responsible under Section 14(b). In assigning
joint responsibility to both parties, it is not the intent of this Agreement
that the parties will actually act jointly, but rather that the parties will
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agree between themselves on the most practical and efficient arrangements for
handling, administering, and disposing of Damage for which they bear joint
responsibility, with the objective of eliminating unnecessary duplication of
effort and minimizing overall costs.
(d) Indemnification. Each party to this Agreement covenants and
agrees to (i) fully indemnify and save harmless the other party to this
Agreement from and against any payments which are the responsibility of such
party under this Agreement, and all expenses, including attorneys' fees and
expenses and other expenses of any court or regulatory proceeding, incurred by
such other parties in defending any claim that it is liable for such payments,
and (ii) defend such other party against such claims with counsel selected by
such party and reasonably acceptable to such other party.
(e) Specified Level Damages. Sections 14(a) (Sole Responsibility)
and 14(b) (NSR-CSXT Joint Responsibility) shall apply directly only when the
total amount of all Damages resulting from a single incident is $25 million or
less. Responsibility for Damages resulting from a single incident for which
Damages exceed $25 million shall be classified as "Tier One Damages" or "Tier
Two Damages" and allocated as stated in subparagraphs (i), (ii) and (iii) of
this Section 14(e).
(i) In this Section 14(e), "Tier One Damages" for any
incident include the greater of (1) $25 million of Damages or (2) an
amount equal to all combined liability insurance benefits available to
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whichever of NSR or CSXT has the lesser (as between them) amount of
insurance benefits available to it applicable to that incident, but only
to the extent that benefits are actually available.
(ii) Tier One Damages shall be allocated between NSR and
CSXT in accordance with Sections 14(a) (Sole Responsibility) and 14(b)
(NSR-CSXT Joint Responsibility).
(iii) In this Section 14(e), "Tier Two Damages" include
all of those Damages in excess of the Tier One Damages calculated under
Section 14(e)(i). Tier Two Damages shall be allocated between the
parties hereto in proportion to their respective fault or negligence in
causing the Damage.
(f) Exceptions. Each party shall assume and bear all
responsibility for Damage to the extent caused by acts or omissions of any of
its employees while under the influence of drugs or alcohol and Sections 14(b)
and (e) shall not apply to any such Damage. Notwithstanding any other provision
of this Agreement including, without limitation, both clauses of the last
sentence of Section 14(a) and Section 9(B)(a)(viii), no NSR employee handling a
CSXT train or performing other functions on the Monongahela shall be treated as
a CSXT employee for purposes of this Section 14(f).
(g) Damages. As used in this Section 14 only, the term
"Damage(s)" shall exclude Railroad Consequential Damages (which are always borne
by whichever of NSR or CSXT sustained them) and claims for exemplary and
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punitive Damages. With regard to exemplary and punitive Damages, the parties
acknowledge and agree that, with regard to the subject of this Agreement, the
intent and agreement of the parties is that no party shall bring or recover any
claim for exemplary or punitive damages, in its own right, against any other
party, but that any party will allocate, in accordance with this Section 14,
exemplary or punitive Damages from any claim against it by a third person not a
party hereto.
(h) Limitation. The parties hereto acknowledge that, pursuant to
the penultimate paragraph of the Carpenter/Tobias Letter, CSXT can elect to
operate its own trains with its own crews, and if CSXT exercises that election
in the future and runs its own trains with its own crews, the provisions of
clause (ii) of the last sentence of Section 14(a) shall not apply during any
such CSXT operations.
Section 15. No Partnership.
Nothing in this Agreement shall be construed to establish a
partnership or joint venture between or among CSXT or NSR or any of their
affiliates or associates.
Section 16. Arbitration.
Any dispute, controversy or claim (or any failure by the parties
to agree on a matter as to which this Agreement expressly or implicitly
contemplates subsequent agreement by the parties, except for matters left to the
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<PAGE>
sole discretion of a party) arising out of or relating to this Agreement, or the
breach, termination or validity hereof, shall be finally settled through binding
arbitration by a sole, disinterested arbitrator in accordance with the
Commercial Arbitration Rules of the AAA. The arbitrator shall be jointly
selected by the parties, but if the parties do not agree on an arbitrator within
30 days after demand for arbitration is made by a party, they shall request that
the arbitrator be designated by the AAA. The award of the arbitrator shall be
final, binding and conclusive upon the parties. Each party to the arbitration
shall pay the compensation, costs, fees and expenses of its own witnesses,
experts and counsel. The compensation, and any costs and expenses of the
arbitrator, shall be borne equally by the parties. The arbitrator shall have the
power to require the performance of acts, found to be required by this
Agreement, and to require the cessation or nonperformance of acts found to be
prohibited by this Agreement. The arbitrator shall not have the power to award
consequential or punitive damages. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof, which court may award
appropriate relief at law or in equity. All proceedings relating to any such
arbitration, and all testimony, written submissions and award of the arbitrator
therein, shall be private and confidential as between the parties, and shall not
be disclosed to any third party, except as required by law and except as
reasonably necessary to prosecute or defend any judicial action to enforce,
vacate or modify such arbitration award.
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Section 17. Force Majeure.
The obligations, other than payment obligations, of the parties
to this Agreement shall be subject to force majeure (which shall include
strikes, riots, floods, accidents, Acts of God, and other causes or
circumstances beyond the control of the party claiming such force majeure as an
excuse for non-performance), but only as long as, and to the extent that, such
force majeure shall prevent performance of such obligations.
Section 18. Entire Agreement.
This Agreement, the Carpenter/Tobias Letter, and the Transaction
Agreement (including the other Ancillary Agreements, as defined in the
Transaction Agreement) constitute the entire agreement and supersede all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except the letter agreement dated
April 8, 1997 between CSX and NSC to the extent such April 8, 1997 letter
agreement covers matters not addressed or amended hereby or in the Transaction
Agreement or the Ancillary Agreements (as defined in the Transaction Agreement);
provided that it is the intent of the parties that this Agreement shall be an
effectuation of such April 8, 1997 letter agreement consistent with its terms,
and that the provisions of this Agreement should be interpreted to give effect
to such April 8, 1997 letter agreement; and provided further that, in the event
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of any inconsistency between the terms of this Agreement and such April 8, 1997
letter agreement, this Agreement shall prevail.
Section 19. Amendment and Waiver.
Any amendment to this Agreement must be in writing and executed
and delivered by CSXT, NSR, PRR, and NYC subject to any jurisdiction of the STB.
Any waiver of any term or provision of this Agreement must be in writing and
executed and delivered by the party entitled to enforcement of such term or
provision.
Section 20. Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, such provision is to be
intended to be ineffective only to the most limited extent possible in such
context and the remainder of the terms, provisions, covenants and restrictions
of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 21. Remedies.
(a) Each party acknowledges and agrees that the other parties
would be irreparably damaged in the event any of the provisions of this
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Agreement were not performed by it in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that each party shall be
entitled to an injunction or injunctions to prevent breaches of such provisions
and to specifically enforce such provisions, in addition to any other remedy to
which such party may be entitled, at law or in equity.
(b) In no event shall any party be liable to the other parties
for any consequential, indirect, incidental, punitive or other similar damages
including but not limited to lost profits for any breach or default, or any act
or omission arising out of or in any way relating to this Agreement, under any
form or theory of action whatsoever, whether in contract, tort or otherwise.
Section 22. Interpretation.
This Agreement was drafted jointly by CSXT, NSR, PRR and NYC,
each of which was advised by its own counsel and other advisors concerning all
of the terms and provisions hereof; accordingly, any ambiguity herein should not
be construed in favor of or against any of them.
Section 23. Headings.
Headings of sections in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of any term
or provision of this Agreement.
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Section 24. Parties.
This Agreement shall inure to the benefit of and be binding upon
NSR, CSXT, PRR, and NYC and any successor of any of them by operation of law,
and any assignee agreed to by them in accordance with Section 25, and nothing in
this Agreement is intended or shall be construed to give any other person any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any term or provision hereof.
Section 25. Assignment.
(a) Except as provided herein, neither this Agreement (including
the documents and instruments referred to herein) nor any of the rights,
interests or obligations hereunder, shall be assigned by any party, including by
operation of law, without the prior written consent of the other parties, except
to a controlled subsidiary, or in the case of PRR, to NS, NSR or a subsidiary or
affiliate of NS, and in the case of NYC, to CSX, CSXT or a subsidiary or
affiliate of CSX.
(b) (i) Except as otherwise provided herein, in the event either
of NSR or PRR proposes to sell or transfer its interest in all or any portion of
the Monongahela, CSXT shall have the right of first refusal to purchase such
interest at the same price, and substantially the same terms and conditions
offered to NSR or PRR; provided CSXT must make such offer within 30 days of
receiving notification from NSR or PRR of the price, terms and conditions being
offered by such other prospective purchaser.
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(ii) In the event CSXT or NYC proposes to sell or transfer
its operating rights on all or any portion of the Monongahela, NSR shall have
the right of first refusal to purchase such rights at the same price, and
substantially the same terms and conditions offered to CSXT or NYC, provided
NSR must make such offer within 30 days of receiving notification from CSXT
or NYC of the price, terms and conditions being offered by such other
prospective purchaser.
(c) Any party without the consent of the other party may assign
all of its rights and obligations under this Agreement only to any successor in
the event of a merger, consolidation, sale of all or substantially all its
assets, including all routes and lines owned by such party to access the
Monongahela, if such assignee executes and delivers to the other party hereto an
agreement reasonably satisfactory in form and substance to such other party
under which such assignee, which is reasonably satisfactory to the other party,
assumes and agrees to perform and discharge all the obligations and Liabilities
of the assigning party; provided that any such assignment shall not relieve the
assigning party from the performance and discharge of such obligations and
Liabilities.
Section 26. Term.
(a) This Agreement shall become effective as of the date first
above written and shall remain in effect until the 25th anniversary of such
date, and shall remain in effect continuously thereafter unless and until
terminated by CSXT or, if the CSXT Operating Agreement shall have terminated, by
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NYC, in its sole discretion, upon (90) days written notice.
(b) The rights, benefits, duties and obligations running from or
to NSR under this Agreement shall in all events expire (except liabilities
incurred prior to termination) upon the earlier of: (i) termination of this
Agreement or (ii) termination of the NSR Operating Agreement (including any
renewals thereof) and the rights, benefits, duties and obligations running from
or to CSXT under this Agreement shall in all events expire (except liabilities
incurred prior to termination) upon the earlier of (i) termination of this
Agreement or (ii) termination of the CSXT Operating Agreement (including any
renewals thereof). Notwithstanding any other provision of this Agreement, (1)
upon termination of the NSR Operating Agreement, the rights, benefits, duties
and obligations running from or to NSR under this Agreement shall run from or to
PRR, and (2) upon termination of the CSXT Operating Agreement, the rights,
benefits, duties and obligations running from or to CSXT under this Agreement
shall run from or to NYC. In the event PRR is unable or unwilling to carry out
the duties and obligations of NSR or fails to designate an operator reasonably
satisfactory to NYC to do so, then NYC, or an operator designated by NYC and
satisfactory to PRR, shall have the option to carry out such duties and
obligations related solely to the Monongahela.
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Section 27. Termination of Other Agreement.
This Agreement, upon the effective date hereof, supersedes and
terminates the agreement by and between The Monongahela Railway Company (now
CRC) and CSXT dated October 19, 1990, relating to CSXT trackage rights between
Brown, Pennsylvania, and Catawba Junction (Rivesville), West Virginia.
Section 28. Notices.
Any notice given by CSXT, NSR, PRR, or NYC to the others under
this Agreement shall be deemed delivered on the date sent by registered mail, or
by such other means as they may agree, and shall be addressed to them as
follows:
(a) If to CSXT:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
(b) If to NSR:
Senior Vice President Operations
Norfolk Southern Railway Company
Three Commercial Place
Norfolk, Virginia 23510-2191
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(c) If to PRR:
PRR
2001 Market Street
Philadelphia, Pennsylvania 19103
Attention: Vice President-General Counsel
Copy to:
Senior Vice President Operations
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510
(d) If to NYC:
NYC
2001 Market Street
Philadelphia, Pennsylvania 19103
Attention: Vice President-General Counsel
Copy to:
Executive Vice President and Chief Operating Officer
CSX Transportation, Inc.
500 Water Street, J120
Jacksonville, Florida 32202
and each of them may from time to time change its address in this Section 28 by
written notice delivered to the others.
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Section 29. Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, without regard to principles of
conflicts of laws.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in counterparts by their duly authorized officials as of the day
first above written.
CSX TRANSPORTATION, INC.
By: /s/PETER J. SHUDTZ
------------------
Peter J. Shudtz
Title: Vice President - Law and General
Counsel - CSX Corporation,
authorized agent for CSX
Transportation, Inc.
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/J. L. MANETTA
----------------
J. L. Manetta
Title: Senior Vice President Operations
PENNSYLVANIA LINES LLC
By: /s/JAMES D. MCGEEHAN
--------------------
James D. McGeehan
Title: Assistant Treasurer
NEW YORK CENTRAL LINES LLC
By: /s/ C. A. COOK
---------------
C. A. Cook
Title: Vice President and Secretary
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EXHIBIT "A"
[MAP]
Map of Monongahela Mine District
Exhibit 99.1
Contact: Elisabeth J. Gabrynowicz
(804) 782-1449
Kathleen A. Burns
(904) 366-2949
CSX OPERATING NEW RAIL NETWORK
Conrail properties integrated into 23,000-mile system
RICHMOND, Va., June 1, 1999 - More than two years of intensive planning
and unprecedented testing come to fruition today as CSX Corporation (NYSE: CSX)
begins operating its share of Conrail.
"This is an historic day," said John W. Snow, chairman, president and
chief executive officer. "Today our vision of creating a revitalized and
competitive eastern rail system will begin to be realized."
The "new" CSX Transportation Inc. (CSXT), the rail unit of CSX, will now
operate about 4,400 more route miles of track. About 6,200 former Conrail
employees join the CSXT ranks today.
"The integration planning process has been the most extensive and
comprehensive ever, with two primary goals in mind - safety and customer
service," said A. R. "Pete" Carpenter, president and CEO of CSXT. "CSXT and
Conrail employees have worked hard to get us to this point - but we all know
that the real work is just beginning. Our job now is to implement the
integration well."
Over the last two years, CSXT has hired more than 1,500 train crew
members, purchased nearly 300 new locomotives and invested more than $500
million in capital improvements in preparation for the integration.
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CSXT's expanded rail system will offer broader market reach for
shippers, single-line service to every major market in the eastern United States
and direct rail access to more ports than any railroad in the nation. For the
first time in a generation, rail competition will be reintroduced to the
Northeastern United States. The new network is expected to take more than a
million truckloads off the highways as improved service attracts more freight to
rail.
CSX and Norfolk Southern Corporation announced the joint acquisition of
Conrail in April 1997 and filed with the federal Surface Transportation Board
(STB) in June of that year their joint application to acquire and allocate
Conrail's predominantly Northeastern routes. The STB voted unanimously on June
8, 1998, to approve the transaction. The acquisition has received broad and
ongoing support from shippers, labor unions, public officials, safety and health
organizations and environmental groups.
CSX Transportation and its 34,500 employees provide rail transportation
and distribution services over a 22,700 route mile network in 23 states, the
District of Columbia and two Canadian provinces. CSXT is a business unit of CSX
Corporation, based in Richmond, Va., an international transportation company
providing rail, intermodal, container-shipping and contract logistics services
worldwide.
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CSX's Internet address: http://www.csx.com
