AGREEMENT
This Agreement ("Agreement") is entered into this 25 day of September,
1995, between Union Pacific Corporation, Union Pacific Railroad Company,
Missouri Pacific Railroad Company (collectively referred to as "UP"), and
Southern Pacific Rail Corporation, Southern Pacific Transportation Company, The
Denver & Rio Grande Western Railroad Company, St. Louis Southwestern Railway
Company and SPCSL Corp. (collectively referred to as "SP", with both UP and SP
also hereinafter referred to collectively as "UP/SP"), on the one hand, and
Burlington Northern Railroad Company ("BN") and The Xxxxxxxx, Topeka and Santa
Fe Railway Company ("Santa Fe"), hereinafter collectively referred to as "BNSF",
on the other hand, concerning the proposed acquisition of Southern Pacific Rail
Corporation by UP Acquisition Corporation, and the resulting common control of
UP and SP pursuant to the application pending before the Interstate Commerce
Commission ("ICC") in Finance Docket No. 32760, Union Pacific Corporation, Union
Pacific Railroad Company, and Missouri Pacific Railroad Company -- Control and
Merger -- Southern Pacific Rail Corporation, Southern Pacific Transportation
Company, St. Louis Southwestern Railway Company, SPCSL Corp., and The Denver and
Rio Grande Western Railroad Company.
NOW, THEREFORE, in consideration of their mutual promises, UP/SP and BNSF
agree as follows:
1. Western Trackage Rights
a) UP/SP shall grant to BNSF trackage rights on the following lines:
o SP's line between Denver, Colorado and Salt Lake City, Utah;
o UP's line between Salt Lake City, Utah and Ogden, Utah;
o SP's line between Ogden, Utah and Little Mountain Utah;
o UP's line between Salt Lake City, Utah and Alazon, Nevada;
o UP's and SP's lines between Alazon and Weso, Nevada;
o SP's line between Weso, Nevada and Oakland, California via SP's
line between Sacramento and Oakland referred to as the "Cal-P"
(subject to traffic restrictions as set forth in Section 1g);
o UP's line between Weso, Nevada and Stockton, California; and
o SP's line between Oakland and San Jose, California.
b) The trackage rights granted under this section herein shall be bridge
rights for the movement of overhead traffic only, except for the local access
specified herein. BNSF shall receive access on such lines only to industries
which are presently served (either directly or by reciprocal switch) only by
both UP and SP and by no other railroad at points listed on Exhibit A to this
Agreement. BNSF shall also receive the right to interchange with the Nevada
Northern at Shafter, Nevada; with the Utah Railway Company at the Utah Railway
Junction and Provo; and with the Salt Lake, Garfield and Western at Salt Lake
City.
c) Access to industries at points open to BNSF shall be direct or
through reciprocal switch. New customers locating at points open to BNSF under
this Agreement shall be open to both UP/SP and BNSF. The geographic limits
within which new industries shall be open to BNSF service shall generally
correspond to the territory within which, prior to the merger of UP and SP, a
new customer could have constructed a facility that would have been open to
service by both UP and SP, either directly or through reciprocal switch. In
negotiating the trackage rights agreements pursuant to Section 9f of this
Agreement, the parties shall agree on the mileposts defining these geographic
limitations. Where switching districts have been established they shall be
presumed to establish these geographic limitations.
d) Forty-five (45) days before initiating service to a customer, BNSF
must elect whether its service shall be (i) direct, (ii) through reciprocal
switch, or (iii) with UP/SP's prior agreement, using a third party contractor to
perform switching for itself or both railroads.
-2-
e) For Reno area intermodal traffic, BNSF may use SP's intermodal ramp
at Sparks with UP/SP providing intermodal terminal services to BNSF for normal
and customary charges. If expansion of this facility is required to accommodate
the combined needs of UP/SP and BNSF, then the parties shall share in the cost
of such expansion on a pro rata basis allocated on the basis of the relative
number of lifts for each party in the 12-month period preceding the date
construction begins.
f) Except as hereinafter provided, the trackage rights and access rights
granted pursuant to this section shall be for rail traffic of all kinds, carload
and intermodal, for all commodities.
g) On SP's line between Weso and Oakland via the "Cal-P," BNSF shall be
entitled to move only (i) intermodal trains moving between (x) Weso and points
east or Keddie and points north and (y) Oakland and (ii) one manifest train/day
in each direction. Intermodal trains are comprised of over ninety percent (90%)
multi-level automobile equipment and/or flat cars carrying trailers and
containers in single or double stack configuration. Manifest trains shall be
carload business and shall be (a) operated without the use of helpers and (b)
equipped with adequate motive power to achieve the same horsepower per trailing
ton as comparable UP/SP trains. If UP/SP operates manifest trains requiring the
use of helpers then BNSF's manifest trains may be operated in the same fashion
provided that BNSF furnishes the necessary helper service. BNSF may also
utilize the "Cal-P" for one manifest train per day moving to or from Oakland via
Keddie and Bieber; provided, however, that BNSF may only operate one manifest
train/day in each direction via the "Cal-P" regardless of where the train
originates or terminates. The requirement to use helpers, does not apply to
movement over the "Cal-P."
h) At BNSF's request, UP/SP shall provide train and engine crews and
required support personnel and services in accordance with UP/SP's operating
practices necessary to handle BNSF trains moving between Salt Lake City and
Oakland. UP/SP shall be reimbursed for providing such employees on a cost plus
reasonable additives basis and for any incremental cost associated with
providing employees such as lodging or crew transportation expense. BNSF must
also give UP/SP
-3-
reasonable advance notice of its need for employees in order to allow UP/SP time
to have adequate trained crews available. All UP/SP employees engaged in or
connected with the operation of BNSF's trains shall, solely for purposes of
standard joint facility liability, be deemed to be "sole employees" of BNSF. If
UP/SP adds to its labor force to comply with a request or requests from BNSF to
provide employees, then BNSF shall be responsible for any labor protection,
guarantees or reserve board payments for such incremental employees resulting
from any change in BNSF operations or traffic levels.
i) UP/SP agree that their affiliate Central California Traction Company
shall be managed and operated so as to provide non-discriminatory access to
industries on its line on the same and no less favorable basis as provided UP
and SP.
j) If BNSF desires to operate domestic high cube double stacks over
Xxxxxx Pass, then BNSF shall be responsible to pay for the cost of achieving
required clearances. UP/SP shall pay BNSF one-half of the original cost of any
such work funded by BNSF if UP/SP subsequently decides to begin moving domestic
high cube double stacks over this route. If UP/SP initiates and funds the
clearance program, then BNSF shall pay one half of the original cost at such
time as BNSF begins to use the line for domestic high cube double stacks.
k) BNSF agrees to waive its right under Section 9 of the Agreement dated
April 13, 1995, and agreements implementing that agreement to renegotiate
certain compensation terms of such agreement in the event of a merger,
consolidation or common control of SP by UP. BNSF also agrees to waive any
restrictions on assignment in the 1990 BN-SP agreement covering trackage rights
between Kansas City and Chicago.
-4-
2. I-5 Corridor
a) UP/SP shall sell to BNSF UP's line between Bieber and Keddie,
California. UP/SP shall retain the right to use the portion of this line
between MP 0 and MP 2 for the purpose of turning equipment. UP/SP shall pay
BNSF a normal and customary trackage rights charge for this right.
b) BNSF shall grant UP/SP overhead trackage rights on BN's line between
Chemult and Bend, Oregon for rail traffic of all kinds, carload and intermodal,
for all commodities.
c) The parties will, under the procedures established in Section 9f of
this Agreement, establish a proportional rate agreement incorporating the terms
of the "Term Sheet for UP/SP- BNSF Proportional Rate Agreement Covering I-5
Corridor"attached hereto as Exhibit B.
3. Southern California Access
a) UP/SP shall grant access to BNSF to serve industries at all stations
in Southern California presently served (either directly or through reciprocal
switch) only by both UP and SP and by no other railroad at points listed on
Exhibit A to this Agreement.
b) UP/SP shall grant BNSF overhead trackage rights on UP's line between
Riverside and Ontario, California for the sole purpose of moving rail traffic of
all kinds, carload and intermodal, for all commodities to industries at Ontario
presently served (either directly or through reciprocal switch) only by both UP
and SP and by no other railroad.
c) UP/SP shall grant BNSF overhead trackage rights on UP's line from
Basta, California to Fullerton and La Habra, California for the sole purpose of
moving rail traffic of all kinds, carload and intermodal, for all commodities to
industries at Fullerton and La Habra presently served (either directly or
through reciprocal switch) only by both UP and SP and by no other railroad.
-5-
d) BNSF shall grant UP/SP overhead trackage rights on Santa Fe's line
between Barstow and Mojave, California for rail traffic of all kinds, carload
and intermodal for all commodities.
e) UP/SP shall work with BNSF to facilitate access by BNSF to the Ports
of Los Angeles and Long Beach. Other than as legally precluded, UP/SP shall (a)
extend the term of the present agreement dated November 21, 1981, to continue
until completion of Alameda Corridor, (b) amend that agreement to apply to all
carload and intermodal traffic, and (c) grant BNSF the right to invoke such
agreement to provide loop service utilizing UP's and Santa Fe's lines to the
Ports at BNSF's option to allow for additional operating capacity. UP/SP's
commitment is subject to available capacity. Any incremental capacity related
projects necessary to accommodate BNSF traffic shall be the sole responsibility
of BNSF.
4. South Texas Trackage Rights and Purchase
a) UP/SP shall grant to BNSF trackage rights on the following lines:
o UP's line between Ajax and San Antonio;
o UP's line between Houston (Algoa) and Brownsville;
o UP's line between Xxxx and Corpus Christi;
o UP's line between Ajax and Sealy;
o SP's line between San Antonio and Eagle Pass (with parity and
equal access to the Mexican border crossing at Eagle Pass);
o UP's line between Xxxx (connection to Georgetown RR) and Xxxxxx;
o UP's line between Temple and Waco;
o UP's line between Temple and Xxxxxx;
o UP's line between Xxxxxx and Smithville; and
o SP's line between El Paso and Sierra Xxxxxx.
b) The trackage rights granted under this section shall be bridge rights
for movement of overhead traffic only, except for the local access specified
herein. BNSF shall receive access on such
-6-
lines only to industries which are presently served (either directly or by
reciprocal switch) only by both UP and SP and by no other railroad at points
listed on Exhibit A to this Agreement. BNSF shall also have the right to
interchange with (i) the Tex-Mex Railway at Corpus Christi and Robstown, (ii)
the Georgetown RR at Xxxx, and (iii) the FNM at Brownsville (Matamoros, Mexico).
c) Access to industries at points open to BNSF shall be direct or
through reciprocal switch. New customers locating at points open to BNSF under
this Agreement shall be open to both UP/SP and BNSF. The geographic limits
within which new industries shall be open to BNSF service shall generally
correspond to the territory within which, prior to the merger of UP and SP, a
new customer could have constructed a facility that would have been open to
service by both UP and SP, either directly or through reciprocal switch. In
negotiating the trackage rights agreements pursuant to Section 9f of this
Agreement the parties shall define mileposts defining these geographic
limitations. Where switching districts have been established they shall be
presumed to establish these geographic limitations.
d) Forty-five (45) days before initiating service to a customer, BNSF
must elect whether its service shall be (i) direct, (ii) through reciprocal
switch, or (iii) with UP/SP's prior agreement, using a third party contractor to
perform switching for itself or both railroads.
e) The trackage rights and access rights granted pursuant to this
section shall be for rail traffic of all kinds, carload and intermodal, for all
commodities.
f) In lieu of BNSF's conducting actual trackage rights operations
between Houston, Corpus Christi, Harlingen and Brownsville (including FNM
interchange) UP/SP agrees, upon request by BNSF, to handle BNSF's business on a
haulage basis for a reasonable fee. UP/SP shall accept, handle, switch and
deliver traffic moving under haulage without any discrimination in promptness,
quality of service, or efficiency in favor of comparable traffic moving in
UP/SP's account.
-7-
g) UP/SP shall sell to BNSF UP's line between Dallas and Waxahachie with
UP retaining trackage rights to exclusively serve local industries on the
Dallas-Waxahachie line.
h) Upon the effectiveness of the trackage rights to Eagle Pass under
this section, BNSF's right to obtain haulage services from UP/SP to and from
Eagle Pass pursuant to the agreement between BNSF and SP dated April 13, 1995
and subsequent haulage agreement between those parties shall no longer apply,
provided BNSF shall continue to have the right to use trackage at or near Eagle
Pass as specified in that agreement for use in connection with trackage rights
under this Agreement.
5. Eastern Texas - Louisiana Trackage Rights and Purchase
a) UP/SP shall grant to BNSF trackage rights on the following lines:
o SP's line between Houston, Texas and Iowa Junction in Louisiana;
and
o UP's and SP's lines near Avondale (SP MP 16.9) and West Bridge
Junction (SP MP 10.5).
b) The trackage rights granted under this section shall be bridge rights
for the movement of overhead traffic only, except for the local access specified
herein. BNSF shall receive access on such lines only to industries which are
presently served (either directly or by reciprocal switch) only by both UP and
SP and by no other railroad at points listed on Exhibit A to this Agreement.
c) Access to industries at points open to BNSF shall be direct or
through reciprocal switch. New customers locating at points open to BNSF under
this Agreement shall be open to both UP/SP and BNSF. The geographic limits
within which new industries shall be open to BNSF service shall generally
correspond to the territory within which, prior to the merger of UP and SP, a
new customer could have constructed a facility that would have been open to
service by both UP and SP, either directly or through reciprocal switch. In
negotiating the trackage rights agreements pursuant to Section 9f of this
Agreement the parties shall define mileposts defining these geographic
limitations
-8-
where switching districts have been established they shall be presumed to
establish these geographic limitations.
d) Forty-five (45) days before initiating service to a customer, BNSF
must elect whether its service shall be (i) direct, (ii) through reciprocal
switching, or (iii) with UP/SP's prior agreement, through use of a third party
to perform switching for itself or both railroads.
e) UP/SP shall grant BNSF the right to use SP's Xxxxxx 0X xx Xxxxxxx,
Xxxxx.
f) Trackage rights and access rights granted pursuant to this section
shall be for rail traffic of all kinds, carload and intermodal, for all
commodities.
g) UP/SP shall sell to BNSF SP's line between Iowa Junction in Louisiana
and near Avondale, Louisiana (SP MP 16.9). UP/SP shall retain full trackage
rights including the right to serve all local industries on the line for the
trackage rights charges set forth in Section 9a of this Agreement. UP/SP shall
retain rights for the Louisiana and Delta Railroad (L&D) to serve as UP/SP's
agent between Iowa Junction and points served by the L&D. BNSF agrees that the
purchase of this line is subject to contracts between SP and the L&D. UP/SP
shall cause L&D to pay BNSF compensation equal to that set forth in Table I in
Section 9 of this Agreement for operations between Lafayette and Iowa Junction.
h) UP/SP shall sell to BNSF UP's Westwego, Louisiana intermodal
terminal; a portion of SP's Avondale yard as shown on Exhibit C; and SP's
Lafayette yard.
6. Houston - Memphis Trackage Rights
a) UP/SP shall grant to BNSF overhead trackage rights on the following
lines:
o SP's line between Houston, Texas and Fair Oaks, Arkansas via
Cleveland and Pine Bluff;
-9-
o UP's line between Fair Oaks and Bridge Junction;
o SP's line between Brinkley and Briark, Arkansas; and
o UP's line between Pine Bluff and North Little Rock, Arkansas.
b) In lieu of conducting actual operations between Pine Bluff and North
Little Rock, Arkansas, UP/SP agrees, upon request by BNSF, to handle BNSF's
business on a haulage basis for a reasonable fee.
c) The trackage rights granted herein shall be bridge rights for the
movement of overhead traffic only, except for the local access specified herein.
BNSF shall receive access on such lines only to industries which are presently
served (either directly or by reciprocal switch) only by both UP and SP and by
no other railroad at points listed on Exhibit A to this Agreement. BNSF shall
also have the right to interchange with the Little Rock and Western Railway at
Little Rock.
d) Access to industries at points open to BNSF shall be direct or
through reciprocal switch. New customers locating at points open to BNSF under
this Agreement shall be open to both UP/SP and BNSF. The geographic limits
within which new industries shall be open to BNSF service shall generally
correspond to the territory within which, prior to the merger of UP and SP, a
new customer could have constructed a facility that would have been open to
service by both UP and SP, either directly or through reciprocal switch. In
negotiating the trackage rights agreements pursuant to Section 9f of this
Agreement the parties shall agree on the mileposts defining these geographic
limitations. Where switching districts have been established they shall be
presumed to establish these geographic limitations.
e) Forty-five (45) days before initiating service to a customer, BNSF
must elect whether its service shall be (i) direct, (ii) through reciprocal
switch, or (iii) with UP/SP's prior agreement, using a third party contractor to
perform switching for itself or both railroads.
-10-
f) The trackage rights and access rights granted pursuant to this
section shall be for rail traffic of all kinds, carload and intermodal, for all
commodities.
g) BNSF shall grant to UP/SP overhead trackage rights on BN's line
between West Memphis and Xxxxxxx Junction. UP/SP shall be responsible for
upgrading this line as necessary for its use. If BNSF uses this line for
overhead purposes to connect its line to the trackage rights lines, BNSF shall
share in one-half of the upgrading cost.
7. St. Louis Area Coordinations
a) UP/SP agree to cooperate with BNSF to facilitate efficient access by
BNSF to other carriers at and through St. Louis via The Xxxxx & Southern Railway
Company (A&S). If BNSF requests, UP/SP agree to construct or cause to be
constructed for the use of both BNSF and UP/SP a faster connection between the
BN and UP lines at Grand Avenue and a third track from Grand Avenue to near
Gratiot Street Tower at the sole cost and expense of BNSF. Upon completion of
such construction, UP/SP shall grant to BNSF overhead trackage rights on UP's
line between Grand Avenue and Gratiot Street.
b) UP wishes to secure dispatching authority for the MacArthur Bridge
across the Mississippi River at St. Louis. Dispatching is currently controlled
by the Terminal Railroad Association of St. Louis (TRRA). BNSF agrees that it
will cause its interest on the TRRA Board or any shares it owns in the TRRA, to
be voted in favor of transferring dispatching control of the MacArthur Bridge to
UP if such matter is presented to the TRRA Board or its shareholders for action.
Such dispatching shall be performed in a manner to ensure that all users are
treated equally.
c) If BNSF desires to use the A&S Gateway Yard, upon transfer of
MacArthur Bridge dispatching to UP, UP/SP shall assure that charges assessed by
the A&S to BNSF for use of Gateway Yard are equivalent to those assessed other
non-owners of A&S.
-11-
d) UP/SP and BNSF agree to provide each other reciprocal detour rights
between Bridge Junction-West Memphis and St. Louis in the event of flooding,
subject to the availability of sufficient capacity to accommodate the detour.
8. Additional Rights
a) UP/SP shall grant BNSF overhead trackage rights on SP's line between
Richmond and Oakland, California for rail traffic of all kinds, carload and
intermodal, for all commodities to enable BNSF to connect via SP's line with the
Oakland Terminal Railroad ("OTR") and to access the Oakland Joint Intermodal
Terminal ("JIT"), or similar public intermodal facility, at such time as the JIT
is built. BNSF shall pay 50% of the cost (up to $2,000,000 maximum) for
upgrading to mainline standards and reverse signaling of SP's No. 1 track
between Emeryville (MP 8) and Xxxxx (MP 13.1). Compensation for these trackage
rights shall be at the rate of 3.48 xxxxx per ton mile for business moving in
the "I-5 Corridor" and 3.1 xxxxx per ton mile on all other carload and
intermodal business and 3.0 xxxxx per ton mile for bulk business escalated in
accordance with the provisions of Section 12 of this Agreement. UP/SP shall
assess no additional charges against BNSF for access to the JIT and the OTR.
b) BNSF shall waive any payment by UP/SP of the Seattle Terminal 5
access charge.
c) BNSF shall grant to UP overhead trackage rights on BN's line between
Saunders, Wisconsin and access to the MERC dock in Superior, Wisconsin.
d) BNSF shall grant UP the right to use the Pokegama connection at
Xxxxxxxx, Wisconsin (i.e., the southwest quadrant connection at Xxxxxxxx).
e) BNSF shall waive SP's requirement to pay any portion of the
Tehachapi tunnels clearance improvements pursuant to the 1993 Agreement between
Santa Fe and SP.
-12-
f) BNSF shall allow UP to exercise its rights to use the Hyundai lead at
Portland Terminal 6 without any contribution to the cost of constructing such
lead.
g) BNSF shall allow UP/SP to enter or exit SP's Chicago-Kansas City-
Xxxxxxxxxx trackage rights at Buda, Earlville, and west of Edelstein, Illinois.
UP/SP shall be responsible for the cost of any connections required.
h) BNSF will amend the agreement dated April 13, 1995, between BNSF and
SP to allow SP to enter and exit Santa Fe's line solely for the purposes of
permitting SP or its agent to pick up and set out interchange business,
including reciprocal switch business at Newton, Kansas, and switching UP
industry at that point.
i) It is the intent of the parties that this Agreement result in the
preservation of service by two competing railroad companies for all customers
listed on Exhibit A to this Agreement presently served by both UP and SP and no
other railroad (2-to-1 customers).
The parties recognize that some 2-to-1 customers will not be able to
avail themselves of BNSF service by virtue of the trackage rights and line sales
contemplated by this Agreement. For example, 2-to-1 customers located at
Herlong, CA, Turlock, CA, Tyler, TX, Defense, TX, College Station, TX, Great
Southwest, TX, Victoria, TX, Sugarland, TX, Sinton, TX, points on the former
Galveston, Houston & Xxxxxxxxx Railroad served only by UP and SP, Harbor, LA,
Paragould, AR, Forrest City, AR, Dexter Jct., MO, Preston, KS and Herington, KS,
are not accessible under the trackage rights and line sales covered by this
Agreement. Accordingly, UP/SP agree to enter into arrangements with BNSF under
which, through trackage rights, haulage, ratemaking authority or other mutually
acceptable means, BNSF will be able to provide competitive service to 2-to-1
customers at the foregoing points and to any 2-to-1 customers who are not
located at points expressly referred to in this Agreement or Exhibit A to this
Agreement.
-13-
j) In the event, for any reason, any of the trackage rights granted
under this Agreement cannot be implemented because of the lack of sufficient
legal authority to carry out such grant, then UP/SP shall be obligated to
provide an alternative route routes, or means of access of commercially
equivalent utility at the same level of cost to BNSF as would have been provided
by the originally contemplated rights.
9. Trackage Rights - General Provisions
a) The compensation for operations under this Agreement shall be set at
the levels shown in the following table:
Table I
Trackage Rights Compensation
(xxxxx per ton-mile)
Xxxxxx-Xxxxxxxx/Richmond All Other Lines
------------------------ ---------------
Intermodal and Carload 3.48 3.1
Bulk (67 cars or more of 3.0 3.0
one commodity in one
car type)
These rates shall apply to all equipment moving in a train consist
including locomotives. The rates shall be escalated in accordance with the
procedures described in Section 12 of this Agreement. The owning line shall be
responsible for maintenance of its line in the ordinary course including rail
relay and tie replacement. The compensation for such maintenance shall be
included in the xxxxx per ton mile rates received by such owning line under this
Agreement.
b) BNSF and UP/SP will conduct a joint inspection to determine necessary
connections and sidings or siding extensions associated with connections,
necessary to implement the trackage rights granted under this Agreement. The
cost of such facilities shall be borne by the party receiving the trackage
rights which such facilities are required to implement. Either party shall have
the right to cause the other party to construct such facilities. If the owning
carrier decides to utilize such
-14-
facilities constructed by it for the other party, it shall have the right to do
so upon payment to the other party of one-half (1/2) the original cost of
constructing such facilities.
c) Capital expenditures on the lines over which BNSF has been granted
trackage rights pursuant to this Agreement (the trackage rights lines) will be
handled as follows:
i) UP/SP shall bear the cost of all capacity improvements that
are necessary to achieve the benefits of its merger as outlined
in the application filed with the ICC for authority for UP to
control SP. The operating plan filed by UP/SP in support of
the application shall be given presumptive weight in
determining what capacity improvements are necessary to achieve
these benefits.
ii) Any capacity improvements other than those covered by
subparagraph (i) above shall be shared by the parties based
upon their respective usage of the line in question, except as
otherwise provided in subparagraph (iii) below. That
respective usage shall be determined by the 12 month period
prior to the making of the improvement on a gross ton mile
basis.
(iii) For 18 months following UP's acquisition of control of SP,
BNSF shall not be required to share in the cost of any capital
improvements under the provision of subparagraph (ii) above.
(iv) BNSF and UP/SP agree that a capital reserve fund of $25
million, funded out of the purchase price listed in Section 10
of this Agreement, shall be established. This capital reserve
fund shall, with BNSF's prior consent which will not
unreasonably be withheld, be drawn down to pay for capital
projects on the trackage rights lines that are required to
accommodate the operations of both UP/SP and BNSF on those
lines, but in any event shall not be used for expenditures
covered by subparagraph (i) above. Any disputes over whether a
project is required to accommodate the operation of both
parties shall be referred to binding arbitration under Section
15 of this Agreement.
-15-
d) The management and operation of the trackage rights line shall be
under the exclusive direction and control of the owning carrier. The owning
carrier shall have the unrestricted power to change the management and
operations on and over joint trackage as in its judgement may be necessary,
expedient or proper for the operations thereof intended. Trains of the parties
utilizing joint trackage shall be given equal dispatch without any
discrimination in promptness, quality of service, or efficiency in favor of
comparable UP/SP traffic.
Owner shall keep and maintain the trackage rights lines at no less than
the track standard designated in the current timetable for the applicable lines
subject to the separate trackage rights agreement. The parties agree to
establish a joint service committee to regularly review operations over the
trackage rights lines.
e) Each party shall be responsible for any and all costs relating to
providing employee protection benefits, if any, to its employees prescribed by
law, governmental authority or employee protective agreements where such costs
and expenses are attributable to or arise by reason of that party's operation of
trains over joint trackage. To the extent that it does not violate existing
agreements, for a period of three years following acquisition of control of SP
by UP, BNSF and UP/SP shall give preference to each other's employees when
hiring employees needed to carry out trackage rights operations or operate lines
being purchased. The parties shall provide each other with lists of available
employees by craft or class to whom such preference shall be granted. Nothing
in this Section 9.e) is intended to create an obligation to hire any specific
employee.
f) The trackage rights grants described in this Agreement, and the
purchase and sale of line segments shall be included in separate trackage rights
and line sale agreement documents respectively of the kind and containing such
provisions as are normally and customarily utilized by the parties, including
exhibits depicting specific rail line segments, and other provisions dealing
with maintenance, improvements, and liability, subject to more specific
provisions described for each grant and sale contained in this Agreement and the
general provisions described in this section. BNSF and UP/SP shall elect which
of their constituent railroads shall be a party to each such trackage rights
-16-
agreement and line sale and shall have the right to assign the agreement among
their constituent railroads. The parties shall use their best efforts to
complete such agreements by June 1, 1996. If agreement is not reached by June
1, 1996 either party may request that any outstanding matters be resolved by
binding arbitration with the arbitration proceeding to be completed within sixty
(60) days of its institution. In the event such agreements are not completed by
the date the grants of such trackage rights are to be effective, it is intended
that operations under such grants shall be commenced and governed by this
Agreement.
g) All locations referenced herein shall be deemed to include all areas
within the present designated switching limits of the location, and access to
such locations shall include the right to locate and serve new auto and
intermodal facilities at such locations and to build yards or other facilities
to support trackage rights operations.
h) If requested by BNSF, UP/SP will provide to BNSF reciprocal switching
services at the 2-to-1 points covered in this Agreement at rates which will
fully reimburse UP/SP for its costs plus a reasonable return.
i) It is the intent of the parties that BNSF shall, where sufficient
volume exists, be able to utilize its own terminal facilities to handle such
local traffic. These locations include Salt Lake City, Ogden, Brownsville and
San Antonio, and other locations where such volume develops. Facilities or
portions thereof presently utilized by UP or SP at such locations shall be
acquired from UP/SP by lease or purchase at normal and customary charges. Upon
request of BNSF and subject to availability and capacity, UP/SP shall provide
BNSF with terminal support services including fueling, running repairs and
switching. UP/SP shall also provide intermodal terminal services at Salt Lake
City, Reno, and San Antonio. UP/SP shall be reimbursed for such services at
UP's normal and customary charges. Where terminal support services are not
required, BNSF shall not be assessed additional charges for train movements
through a terminal.
-17-
j) BNSF may, subject to UP/SP's consent, use agents for limited feeder
service on the trackage rights lines.
k) BNSF shall have the right to inspect the UP and SP lines over which
it obtains trackage rights under this agreement and require UP/SP to make such
improvements under this section as BNSF deems necessary to facilitate its
operations at BNSF's sole expense. Any such inspection must be completed and
improvements identified to UP/SP within one year of the effectiveness of the
trackage rights.
l) BNSF shall have the right to connect for movement in all directions
with the trackage rights lines where its present lines (including existing
trackage rights), lines to be purchased under this Agreement, and the trackage
rights lines intersect.
10. Compensation for Sale of Line Segments
a) BNSF shall pay UP/SP the following amounts for the lines it is
purchasing pursuant to this Agreement:
Line Segment Purchase Price
------------ --------------
Keddie-Bieber $ 30 million
Dallas-Waxahachie 20 million
Iowa Jct.-Avondale MP 16.9 100 million
(includes UP's Westwego
intermodal yard; SP's
Avondale "New" yard;
and SP's Lafayette yard)
b) The purchase shall be subject to the following terms:
(i) the condition of the lines at closing shall be at least as good
as their current conditions as reflected in the current
timetable and slow orders (slow orders to be measured by total
mileage at each level of speed restrictions).
(ii) includes track and associated structures together with
right-of-way and facilities needed for operations.
-18-
(iii) indemnity for environmental liabilities attributable to UP/SP's
prior operations.
(iv) standard provisions for sales of this nature involving title,
liens, encumbrances other than those specifically reserved or
provided for by this Agreement.
(v) assignment of associated operating agreements (road crossings,
crossings for wire and pipelines, etc.). Non-operating
agreements shall not be assigned.
(vi) removal by Seller, from a conveyance, within 60 days of the
closing of any sale, of any non-operating real property without
any reduction in the agreed upon purchase price.
(vii) the purchase will be subject to easements or other agreements
involving telecommunications, fibre optics or pipeline rights
or operations in effect at the time of sale.
BNSF shall have the right to inspect the line segments and associated
property to be sold and records associated therewith for a period of ninety days
from the date of this Agreement to determine the condition and title of such
property. At the end of such period, BNSF shall have the right to decline to
purchase any specific line segment or segments. In such event UP/SP shall grant
BNSF overhead trackage rights on any such segment with compensation to be paid,
in the case of Avondale-Iowa Junction on the basis of the charges set forth in
Section 9a of this Agreement, and in the case of Keddie-Bieber on a typical
joint facility basis with maintenance and operating costs to be shared on a
usage basis (gross ton miles used to allocate usage) and annual interest rental
equal to the depreciated book value times the then current cost of capital as
determined by the ICC times a usage basis (gross ton miles). In the case of
Dallas-Waxahachie, operation would continue under the existing trackage rights
agreement.
11. Term
This Agreement shall be effective upon execution for a term of ninety-nine
years, provided, however, that the grants of rights under Section 1 through 8
shall be effective only upon UP's acquisition of control of SP, and provided
further that BNSF may terminate this Agreement by notice to UP/SP given before
the close of business on September 26, 1995, in which case this Agreement
-19-
shall have no further force or effect. This Agreement and all agreements
entered into pursuant or in relation hereto shall terminate, and all rights
conferred pursuant thereto shall be cancelled and deemed void ab initio, if, in
a Final Order, the application for authority for UP to control SP has been
denied or has been approved on terms unacceptable to the applicants, provided,
however, that if this Agreement becomes effective and is later terminated, any
liabilities arising from the exercise of rights under Sections 1 through 8
during the period of its effectiveness shall survive such termination. For
purposes of this Section 11, "Final Order" shall mean an order of the Interstate
Commerce Commission, any successor agency, or a court with lawful jurisdiction
over the matter which is no longer subject to any further direct judicial review
(including a petition for writ of certiorari) and has not been stayed or
enjoined.
12. Adjustment of Charges
All trackage rights charges under this Agreement shall be subject to
adjustment annually beginning as of the effective date of this Agreement to
reflect seventy percent (70%) of increases or decreases in Rail Cost Adjustment
Factor, not adjusted for changes in productivity ("RCAF- U") published by the
ICC or successor agency or other organizations. In the event the RCAF-U is no
longer maintained, the parties shall select a substantially similar index and
failing to agree on such an index, the matter shall be referred to binding
arbitration under Section 15 of this Agreement. The parties will agree on an
appropriate adjustment factor for switching, haulage and other charges.
Upon every fifth anniversary of the effective date of this Agreement,
either party may request on ninety (90) days notice that the parties jointly
review the operations of the adjustment mechanism and renegotiate its
application. If the parties do not agree on the need for or extent of
adjustment to be made upon such renegotiation, either party may request binding
arbitration under Section 15 of this Agreement. It is the intention of the
parties that rates and charges for trackage rights and services under this
Agreement reflect the same basic relationship to operating costs as upon
execution of this Agreement.
-20-
13. Assignability
This Agreement and any rights granted hereunder may not be assigned in
whole or in part without the prior consent of the other parties except as
provided in this Section. No party may permit or admit any third party to the
use of all or any of the trackage to which it has obtained rights under this
Agreement, nor under the guise of doing its own business, contract or make any
arrangement to handle as its own trains, locomotives, cabooses or cars of any
such third party which in the normal course of business would not be considered
the trains, locomotives, cabooses or cars of that party. In the event of an
authorized assignment, this Agreement and the operating rights hereunder shall
be binding upon the successors and assigns of the parties. This Agreement may
be assigned by either party without the consent of the other only as a result of
a merger, corporate reorganization, consolidation, change of control or sale of
substantially all of its assets.
14. Government Approvals
The parties agree to cooperate with each other and make whatever filings
or applications, if any, are necessary to implement the provisions of this
Agreement or of any separate agreements made pursuant to Section 9f and whatever
filings or applications may be necessary to obtain any approval that may be
required by applicable law for the provisions of such agreements. BNSF agrees
not to oppose the primary application or any related applications in Finance
Docket No. 32760 (collectively the "control case"), and not to seek any
conditions in the control case, not to support any requests for conditions filed
by others, and not to assist others in pursuing their requests. BNSF shall
remain a party in the control case, but shall not participate further in the
control case other than to support this Agreement, to protect the commercial
value of the rights granted to BNSF by this Agreement, and to oppose requests
for conditions by other parties which adversely affect BNSF; provided, however,
that BNSF agrees to reasonably cooperate with UP/SP in providing testimony to
the ICC necessary to demonstrate that this Agreement and the operations to be
conducted thereunder shall provide effective competition at the locations
covered by the Agreement. UP/SP agree to support this Agreement and its
implementation and warrant that it has not entered into agreements with other
parties granting rights to other parties granted to BNSF under this Agreement.
UP/SP agree to ask
-21-
the ICC to impose this Agreement as a condition to approval of the control case.
During the pendency of the control case, UP and SP shall not, without BNSF's
written consent, enter into agreements with other parties which would grant
rights to other parties granted to BNSF or inconsistent with those granted to
BNSF under this Agreement which would substantially impair the overall economic
value of rights to BNSF under this Agreement.
15. Arbitration
Unresolved disputes and controversies concerning any of the terms and
provisions of this Agreement or the application of charges hereunder shall be
submitted for binding arbitration under Commercial Arbitration Rules of the
American Arbitration Association which shall be the exclusive remedy of the
parties.
16. Further Assurances
The parties agree to execute such other and further documents and to
undertake such acts as shall be reasonable and necessary to carry out the intent
and purposes of this Agreement.
17. No Third Party Beneficiaries
This Agreement is intended for the sole benefit of the signatories to this
Agreement. Nothing in this Agreement is intended or may be construed to give
any person, firm, corporation or other entity, other than the signatories
hereto, their permitted successors and permitted assigns, and their affiliates
any legal or equitable right, remedy or claim under this Agreement.
18. Confidentiality
The parties may make all other terms of this Agreement known to the
public through a press release previously reviewed and approved by the other
parties, and may address it in subsequent communications to the ICC or others.
The parties agree, however, that the financial terms of this Agreement are
confidential and shall not be disclosed, without the consent of the other party,
to individuals not employed by or acting as counsel for or consultants to UP/SP
or BNSF, except as
-22-
required by law, provided the parties may make appropriate disclosure of such
terms to government entities or as required in connection with the process of
seeking government approval of the control case, or of this Agreement under
applicable ICC confidentiality procedures.
UNION PACIFIC CORPORATION UNION PACIFIC RAILROAD
COMPANY
By: /s/ X.X. Xxxxxxxx By: /s/ X.X. Xxxxxxxx
Title:________________________ Title:__________________________
SOUTHERN PACIFIC RAIL
CORPORATION
By: /s/ Xxxx X. Xxxx
Title:__________________________
MISSOURI PACIFIC SOUTHERN PACIFIC
RAILROAD COMPANY TRANSPORTATION COMPANY
By: /s/ X.X. Xxxxxxxx By: /s/ Xxxx X. Xxxx
Title:________________________ Title:__________________________
THE DENVER & RIO GRANDE SPCSL CORP.
WESTERN RAILROAD COMPANY
By: /s/ Xxxx X. Xxxx By: /s/ Xxxx X. Xxxx
Title:________________________ Title:__________________________
ST. LOUIS SOUTHWESTERN
RAILWAY COMPANY
By: /s/ Xxxx X. Xxxx
Title:________________________
BURLINGTON NORTHERN THE XXXXXXXX, TOPEKA AND
RAILROAD COMPANY SANTA FE RAILWAY COMPANY
By: /s/ Xxxx X. Ice By: /s/ Xxxx X. Ice
Title:________________________ Title:__________________________
-23-
EXHIBIT A
Points Referred to in Section 1b
Provo UT
Salt Lake City UT
Ogden UT
Ironton UT
Gatex UT
Pioneer UT
Garfield/Smelter/Magna UT (access to Kennecott private railway)
Geneva UT
Clearfield UT
Xxxxx Cross UT
Relico UT
Xxxxx UT
Little Mountain UT
Xxxxx Industrial Park UT
Points on paired track from Weso NV to Alazon NV
Reno NV (intermodal and automotive only --
BNSF must establish its own automotive facility)
Points between Oakland CA and San Jose CA
San Jose CA
Warm Springs CA
Fremont CA
Points in the Livermore CA area (including Pleasanton CA,
Radum CA, and Trevamo CA)
West Sacramento CA
Melrose Drill Track near Oakland CA
Points Referred to in Section 0x
Xxxxxxx XX
Xx Xxxxx XX
Xxxxxxxxx XX
Points Referred to in Section 4b
Brownsville TX
Port of Brownsville TX
Harlingen TX
Corpus Christi TX
Victoria TX
San Antonio TX
Halsted TX (LCRA plant)
Waco TX
Points on Sierra Xxxxxx-El Paso line
Points Referred to in Section 5b
Baytown TX
Xxxxxx TX
Orange TX
Mont Belvieu TX
Points Referred to in Xxxxxxx 0x
Xxxxxx XX
Pine Bluff AR
Fair Oaks AR
Xxxxxxx AR
Little Rock AR
North Little Rock AR
East Little Rock AR
Paragould AR
2
EXHIBIT B
TERM SHEET FOR
UP/SP-BNSF PROPORTIONAL RATE
AGREEMENT COVERING
I-5 CORRIDOR
Concept
BNSF trackage rights in the "I-5" corridor will allow BNSF to handle
traffic on a single line basis that currently moves via joint BN-SP routes.
This Agreement will enable UPSP to compete with BNSF for that traffic and to
make rates, using the proportional rates, to and from all points UP/SP serves in
the covered territory described below.
Covered Territory
Traffic moving between the following areas north of Portland, Oregon
and west of Xxxxxxxx and Havre, Montana:
o Canadian interchanges in Vancouver area
o Points north of Seattle and west of Cascades
o Points south of and including Seattle and west of Cascades
o Washington points east of Cascades and west of and including Spokane
o Points east of Spokane and west of Xxxxxxxx and Havre
and points in
o Arizona,
o California,
o Colorado,
o New Mexico,
o Nevada,
o Oregon,
o Utah,
o Texas west of Monahans and Xxxxxxxxx, and
o connections to Mexico at El Paso and to the west.
Traffic Covered
Traffic covered will be all commodities (carload, intermodal and bulk)
moving both southbound and northbound. All cars loaded or made empty on BNSF
lines in the Covered Territory (including reloads) and cars received in
interchange.
Proportional Rates
A third party, such as a major accounting firm or other established
transportation consultant (the "consultant"), will be employed to compute the
proportional rates. The mileage prorate shall be the ratio of (a) BNSF miles
between areas north of Portland or interchange north of Portland and SP
interchange at Portland to (b) BNSF single-line miles from BNSF origin or
interchange to BNSF destination or interchange.
The consultant will develop a table of net ton mile rates (net of
refunds, allowances, and rebates). This table will be in matrix form based on
commodity, car type, and area xxxxx xx Xxxxxxxx, Xxxxxx. The rates shown in the
matrix will be by commodity at the 3-digit STCC level and by car type for
movement between each of the areas north of Portland, Oregon, and the Portland
interchange. The net ton mile rates will be based on movements between each of
the areas north of Portland and the group of states (including connections to
Mexico) listed above. The initial rates will be derived based on the BN-SP
portion of BN-SP interline rates (net of refunds, allowances, and rebates) in
effect in the quarter preceding acquisition of SP by UP.
The net ton mile rate for each commodity/car type shall be a weighted
average of the rates applicable to movements of each such commodity/car type
between the points listed above. An example of this computation is attached.
New rates will be derived each subsequent quarter. In subsequent
quarters, the rates will include a prorate of both SP-BNSF interline rates (net
of refunds, allowances, and rebates) and BNSF single-line rates (net of refunds,
allowances, and rebates). At such time as a rate can be developed for a
particular commodity/car type on the basis of a BNSF single-line rate then
future rate adjustments for such commodity/car type shall be based solely on
BNSF single-line rates. All computations of net ton mile rates will be based on
rates that actually moved traffic.
UP/SP agree that any rate it publishes will reflect the proportional
rate from the latest quarterly study and BNSF's division shall be that amount.
Movements using proportional rates shall be interline BNSF-UP/SP movements and
will be billed accordingly. Proportional rates used by UP/SP in contracts will
be escalated on the same basis as UP/SP's rates are escalated. BNSF and UP/SP
will establish procedures to ensure that in settling interline accounts UP/SP's
and BNSF's revenue south of Portland is not disclosed to the other.
Application
The net ton mile rates in each cell of the matrix will be applied to
the BN mileage and the associated net tons from areas north of Portland to
Portland interchange to develop the proportional rate to the Portland
interchange.
Service
BNSF shall accept, handle, switch and deliver traffic moving under
this Agreement without any discrimination in promptness, quality of service, or
efficiency in favor of comparable traffic moving in BNSF's account. UP/SP has
the right to provide equipment. BNSF will work with UP/SP to establish and
provide trackage for strategically located car distribution points in BN
territory. To the extent justified by business volumes, BNSF will continue
operating Vancouver, BC-Portland (SP interchange) trains comparable to BN Nos.
111 and 112. BNSF will cooperate with UP/SP to establish necessary blocks to
provide efficient and competitive service on traffic moving under the
proportional rate.
Third Party Consultant
The third party consultant shall be jointly employed by UP/SP and
BNSF. The parties will share equally in the expense of employing such third
party consultant. Both UP/SP and BNSF shall have the right to audit the work of
the third party consultant and agree to share any irregularities found in this
work and cooperate to work with the third party consultant to establish
procedures to promptly correct those deficiencies. The third party consultant
shall be required to remain impartial between UP/SP and BNSF. Any breach of the
impartiality requirement shall result in the termination of such third party
consultant and the selection of a new consultant by the parties.
Example of Revenue Per Ton Mile
Calculation by Origin-Destination Cell
Cell Includes Car Type and Commodity
Assumption: Move 1 Move 2
------ ------
1. BNSF Revenue Per Car From $5000 $2000
O/D Areas North of Portland to
Destination States
2. BNSF Miles From O/D Areas North 1000 500
of Portland to Destination States
3. BNSF Net Tons From O/D Areas 100 50
North of Portland to Destination States
4. BNSF Number of Carloads From O/D 10 5
Areas North of Portland to Destination States
5. BNSF Miles Between Actual Point of 300 200
Origin to Interchange and Portland
A. Revenue/NTM Factor (Computed by Consultant for Each Call in Matrix)
((Summation (1) x (4))/((2) x (3)))/Summation (4) (for all moves)
(((5000 x 10)/(1000 x 100)) + ((2000 x 5)/(500 x 50)))/(10 + 5)
= $0.06/NTM
B. Compute BNSF Division on a Specific Move
(A) x (5) x (3)
$0.06 x 300 x 100 = $1800
$0.06 x 200 x 50 = $ 600
EXHIBIT C
[Schematic of SP's Avondale rail yard]
