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
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
(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
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(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 . . . . . . . . . . . . . . . . . . . . . .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
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(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 Operator12
(g) Rates, Routes and Divisions. . . . . . . . . . . . . 13
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(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
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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
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(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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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-
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.
(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.
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(o) "CSX" means CSX Corporation.
(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 -- $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.
-4-
(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.
(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.
-5-
(qq) "Railcar" means, except as otherwise provided in
the Accounting Plan, each railroad freight car, locomotive,
caboose or other equipment (including RoadRailer 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 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 " means bimodal freight hauling
equipment manufactured by or under license from "RoadRailer ", 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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(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).
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(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 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.
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(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 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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(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;
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(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 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.
-11-
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 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.
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(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 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:
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(A) the current CRC Lincoln Secondary between
Carleton, MI and Hold Out Signal at Lincoln Yard;
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 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.
-15-
(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.
-16-
(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.
(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.
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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.
(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.
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(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 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.
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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 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 crewcosts
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
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(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:
(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 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 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).
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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).
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(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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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").
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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.
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(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 assignment shall not relieve the assigning party from
the performance and discharge of such obligations and
liabilities.
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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.
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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
Title: Vice President - Law and
General Counsel - CSX
Corporation, authorized agent
for CSX Transportation, Inc.
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/ J. L. Manetta
Title: Senior Vice President
Operation
CONSOLIDATED RAIL CORPORATION
By: /s/ Timothy O'Toole
Title: President
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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
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*The term "parent" means CSXT and/or Norfolk Southern Railway Co.
("NSR") and is not intended to describe the legal relationship
between the parties.
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consolidate - 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.
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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.
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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.
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- 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.