EXECUTION VERSION
LIMITED LIABILITY
COMPANY AGREEMENT
OF
PAN AM SOUTHERN LLC
BY AND BETWEEN
NORFOLK SOUTHERN RAILWAY COMPANY
AND
BOSTON AND MAINE CORPORATION
AS OF
APRIL 9, 2009
TABLE OF CONTENTS
SECTION 1
THE COMPANY
1.1
Formation and Continuation. 15
1.2
Name. 15
1.3
Purpose;
Powers. 15
1.4
Principal
Place of Business, Chief Executive Office and Registered Office. 15
1.5
Term.. 16
1.6
Filings;
Agent for Service of Process. 16
1.7
Title
to Property. 16
1.8
Payments
of Individual Obligations. 17
SECTION 2
MEMBERS' CAPITAL CONTRIBUTIONS
2.1
Initial
Capital Contributions. 17
2.2
Initial
Capital Accounts. 17
2.3
Subsequent
Capital Contributions. 17
2.4
Withdrawal
and Return of Capital 17
SECTION 3
ALLOCATIONS
3.1
Profits. 17
3.2
Losses. 18
3.3
Special
Allocations. 18
3.4
Loss
Limitation. 20
3.5
Other
Allocation Rules. 20
3.6
Tax
Allocations; Code Section 704(c). 21
3.7
Revaluation
of Capital Accounts. 21
3.8
Membership
Interests. 21
SECTION 4
DISTRIBUTIONS
4.1
Distributions. 22
4.2
Priority
Distributions. 22
4.3
Amounts
Withheld. 22
4.4
Limitations
on Distributions. 22
4.5
Distributions
and Allocations in Respect of a Transferred Membership Interest 22
SECTION 5
MANAGEMENT
5.1
Manner
of Operations. 23
5.2
Management
Committee. 23
5.3
Committees
of, or reporting to, the Management Committee. 24
5.4
Meetings
of Management Committee. 25
5.5
Action
by Unanimous Written Consent 26
5.6
Management
Committee Decisions. 26
5.7
Budget
and Business Plan; Investment Policies. 29
5.8
Officers. 29
5.9
Exculpation
and Indemnification. 30
5.10
Fiduciary
Duty; Exculpation. 31
5.11
Interparty
Matters. 31
5.12
Industrial
Development Projects. 31
SECTION 6
ROLE OF MEMBERS
6.1
Rights
or Powers. 32
6.2
Voting
Rights. 32
6.3
Meetings
of the Members. 32
6.4
Required
Member Consents. 33
6.5
Member
Compensation. 33
6.6
Members'
Liability. 34
6.7
Partition. 34
6.8
Transactions
Between a Member and the Company. 34
6.9
Other
Instruments. 34
6.10
Advise of
Changes. 34
6.11
NS Change
in Control. 34
SECTION 7
ACCOUNTING BOOKS AND RECORDS
7.1
Accounting
Books and Records. 35
7.2
Reports. 36
7.3
Tax
Matters. 37
SECTION 8
AMENDMENTS
8.1
Amendments. 39
SECTION 9
TRANSFERS
9.1
Restrictions
on Transfers. 39
9.2
Permitted
Transfers. 39
9.3
Conditions
to Permitted Transfers. 40
9.4
Prohibited
Transfers. 41
9.5
Rights
of Unadmitted Assignees. 41
9.6
Admission
of New and Substituted Members. 42
9.7
Representations
Regarding Transfers; Legend. 43
SECTION
10
EVENTS OF DEFAULT
10.1
Events of
Default 43
10.2
Remedies
Upon an Event of Default 43
SECTION
11
DISSOLUTION AND WINDING UP
11.1
Dissolution
Events. 45
11.2
Winding
Up. 45
11.3
Compliance
With Certain Requirements of Regulations; Deficit Capital Accounts. 46
11.4
Distributions
in Kind. 46
11.5
Rights of
Members. 46
11.6
Notice of
Dissolution/Termination. 47
11.7
Allocations
During Period of Liquidation. 47
11.8
Character
of Liquidating Distributions. 47
11.9
The
Liquidator. 47
SECTION
12
MISCELLANEOUS
12.1
Notices. 48
12.2
Certificates. 49
12.3
Binding
Effect 50
12.4
Time. 50
12.5
Headings. 50
12.6
Prior
Agreements. 50
12.7
Severability. 50
12.8
Incorporation
by Reference. 50
12.9
Variation
of Terms. 51
12.10
Counterpart
Execution. 51
12.11
Third Party
Beneficiaries. 51
12.12
Governing
Law... 51
12.13
Confidentiality. 51
SECTION
13
DISPUTE RESOLUTION
13.1
Reference
to JOC. 51
13.2
Reference
for Formal Dispute Resolution. 51
13.3
Formal
Dispute Resolution. 51
LIMITED LIABILITY
COMPANY AGREEMENT
OF
PAN AM SOUTHERN
LLC
This Limited Liability Company Agreement (this "Agreement")
of Pan Am Southern LLC, a Delaware limited liability company (the "Company"),
is entered into pursuant to and in accordance with the Delaware Limited
Liability Company Act (the "Act") and shall be effective as of April 9, 2009 (the
"Effective Date"), by and between Norfolk Southern Railway Company, a Virginia
corporation (such corporation or any Permitted Transferee thereof, the "NS
Member"), and Boston and Maine Corporation, a Delaware corporation ("B&M"
and, together with any Permitted Transferee thereof, the "Pan Am Member"), as
the Members pursuant to the provisions of the Act.
RECITALS
WHEREAS
, the NS Member, Pan Am Railways, Inc. ("Pan
Am"), B&M, a wholly-owned subsidiary of Pan Am, and Springfield Terminal
Railway Company, a wholly-owned subsidiary of Pan Am ("Springfield Terminal",
and together with Pan Am and B&M, the "Pan Am System Parties") have entered
into a Transaction Agreement (the "Transaction Agreement"), dated as of May 15,
2008, which provides, among other things, for B&M to contribute an
undivided interest in the railroad lines originally owned or operated by B&M
or its Subsidiary, the Vermont & Massachusetts Railway, generally in New
York, Vermont, Connecticut, Massachusetts, and New Hampshire (the "Line") and
certain other related assets (together with the Line, the "Assets"), to the
Company and for the NS Parent to cause the NS Member to make capital contributions
to the Company as described in Schedule 2.2 of the Transaction Agreement, in
each case in accordance with the provisions thereof;
WHEREAS
, by executing this Agreement and the related
Certificate of Formation and filing the Certificate of Formation with the
Secretary of State of the State of Delaware, the parties hereto are hereby and
thereby forming the Company; and
WHEREAS
, the parties hereto desire to enter into
this Agreement to set forth their rights and obligations as members of the
Company.
NOW, THEREFORE
, in consideration of the foregoing
facts and the mutual covenants and agreements herein contained, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
DEFINITIONS
Capitalized words and phrases used in this Agreement have
the following meanings:
"AAA"
means the American Arbitration Association.
"Acceptance Agreement"
shall have the meaning set
forth in
Section 10.2(d)
.
"Acceptance Period"
shall have the meaning set forth
in
Section 10.2(c)
.
"Act"
shall have the meaning set forth in the Recitals.
"Adjusted Capital Account Deficit"
means, with
respect to any Member, the deficit balance, if any, in such Member's Capital
Account as of the end of the relevant Fiscal Year, after giving effect to the
following adjustments:
(a) Credit to such Capital Account any amounts which
such Member is deemed to be obligated to restore pursuant to the penultimate
sentences in Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) Debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account
Deficit is intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
"Affiliate"
means, with respect to any specified
Person, (i) any other Person who, directly or indirectly, controls, is under
common control with, or is controlled by, such specified Person, (ii) any other
Person who is a director, officer, manager, member, partner or trustee of the
specified Person or a Person described in clause (i) of this definition or any
spouse of the specified Person or any such other Person, (iii) any relative of
the specified Person or any other Person described in clause (ii) of this
definition, or (iv) any Person of which the specified Person and/or any one or
more of the Persons specified in clause (i), (ii) or (iii) of this definition,
individually or in the aggregate, beneficially own 10% or more of any class of
Voting Securities.
"Agreement"
shall have the meaning set forth in the
Preamble. Words such as "herein," "hereinafter," "hereof," "hereto" and "hereunder"
refer to this Agreement as a whole, unless the context otherwise requires.
"Assets"
shall have the meaning set forth in the Recitals.
"Assignment and Assumption Agreement Regarding Passenger
Rail Operations"
means that agreement dated as of April 9, 2009 by and
between Springfield Terminal and the Company generally providing for the
partial assignment of the Springfield Terminal operating rights over the tracks
of Massachusetts Bay Transportation Authority.
"Auditors"
means the independent registered public
accounting firm from time to time engaged by the Company to audit its financial
statements and results of operations. The Auditors shall initially be Gray,
Gray and Gray, LLP. Successor Auditors shall be appointed by the Management
Committee in accordance with
Section 5.6
.
"Ayer Switching Agreement"
means that Ayer Switching
Agreement, dated as of the date hereof, between Springfield Terminal and the
Company, generally governing the switching by the Company of certain railcars
of Springfield Terminal.
"B&M"
shall have the meaning set forth in the
Introductory Paragraph.
"Bankruptcy"
means, with respect to any Person, a
Voluntary Bankruptcy or an Involuntary Bankruptcy (as each such term is defined
herein).
"Bill of Sale"
shall mean that bill of sale
generally providing for the contribution to the Company by the Pan Am System
Parties of all personal property included in the Assets.
"Budget"
shall have the meaning set forth in
Section
5.7(a)
.
"Business"
means the business conducted by the
Company, including owning, managing and maintaining the Assets, and making
certain capital improvements to the same, and performing certain haulage and
other freight railroad transportation services, generally as a private carrier.
"Business Day"
means a day of the year on which
banks are not required or authorized to close in New York City.
"Business Plan"
shall have the meaning set forth in
Section
5.7(a)
.
"Capital Account"
means, with respect to any Member,
the Capital Account maintained for such Member in accordance with the following
provisions:
(a) To each Member's Capital Account there shall be
credited (1) such Member's Capital Contributions, (2) such Member's
distributive share of Profits and any items in the nature of income or gain
which are specially allocated pursuant to
Section 3.3
and (3) the amount
of any Company liabilities assumed by such Member or which are secured by any
Property distributed to such Member. The principal amount of a promissory note
which is not readily traded on an established securities market and which is
contributed to the Company by the maker of the note (or a Member related to the
maker of the note within the meaning of Regulations Section
1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of any
Member until the Company makes a taxable disposition of the note or until (and
to the extent) principal payments are made on the note, all in accordance with
Regulations Section 1.704-1(b)(2)(iv)(d)(2).
(b) To each Member's Capital Account there shall be
debited (1) the amount of money and the Gross Asset Value of any Property
distributed to such Member pursuant to any provision of this Agreement, (2)
such Member's distributive share of Losses and any items in the nature of
expenses, deductions or losses which are specially allocated pursuant to
Section
3.3
and (3) the amount of any liabilities of such Member assumed by the
Company or which are secured by any Property contributed by such Member to the
Company.
(c) In the event a Membership Interest is
Transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to
the Transferred Membership Interest.
(d) In determining the amount of any liability for
purposes of subparagraphs (a) and (b) above, there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with Regulations Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the
Management Committee shall determine that it is prudent to modify the manner in
which the Capital Accounts or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Company or any
Members), are computed in order to comply with such Regulations, the Management
Committee may make such modification, provided that it is not likely to have a
material effect on the amounts distributed to any Person pursuant to
Section
11
upon the dissolution of the Company. The Management Committee also
shall (i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Members and the amount of capital
reflected on the Company's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b).
"Capital Contribution"
means, with respect to any
Member, the amount of money and the initial Gross Asset Value of any Property
(other than money) contributed to the Company with respect to the Membership
Interest in the Company held or purchased by such Member.
"Capital Project"
means those capital expenditures
relating to the Line as set forth in the Budgets (including any Rollover
Budgets) approved in accordance with this Agreement.
"Capital Project Process"
shall have the meaning set
forth in
Section 5.3(b)
.
"Capital Projects and Facility Management Agreement"
means that Capital Projects and Facility Management Agreement, dated as of the
date hereof, by and among the Company, Springfield Terminal, B&M and NSR,
generally concerning the construction of the Capital Projects and the hiring of
the initial operators for certain specified facilities.
"Capital Recovery Contributed Book Items"
means
Depreciation attributable to the Assets contributed to the Company as described
in Section 2.3 of the Transaction Agreement.
"
Capital Recovery Contributed Tax Deductions
" means
depreciation and amortization that are allowed as a deduction for federal
income-tax purposes and that relate solely to the tax basis of the Assets
contributed to the Company as described in Section 2.3 of the Transaction
Agreement as determined on the date of their contribution to the Company.
"
Capital Recovery Purchased Book Items
" means (i)
Depreciation attributable to the Assets purchased by the Company as described
in Section 3 of the Transaction Agreement and attributable to the first $87,500,000
of Capital Projects to the extent such $87,500,000 is not allowed as a
deductible expense for federal income-tax purposes, and (ii) expenses (including
any and all deductions associated with Rev. Proc. 2002-65) attributable to the
first $87,500,000 of Capital Projects allowed as a deductible expense for
federal income-tax purposes.
"
Capital Recovery Purchased Tax Deductions
" means
expenses, depreciation, amortization, and other cost recovery deductions
(including any and all deductions associated with Rev. Proc. 2002-65) that are
allowed as a deduction for federal income-tax purposes and that relate solely
(i) to the Assets purchased by the Company as described in Section 3 of the
Transaction Agreement and (ii) to the first $87,500,000 of Capital Projects.
"Capital Transaction"
shall mean any of the following:
(i) a sale, exchange, transfer, assignment or other disposition of all or
substantially all of the Company's Property or all or substantially all of the
rights in the Company's Property; (ii) any condemnation or deeding in lieu of
condemnation of all or substantially all of the Company's Property; (iii) any
financing or refinancing of the Company's Property; (iv) any fire or other
casualty to all or substantially all of the Company's Property to the extent
that such funds are not paid to a lender or used to restore, rebuild or repair
the Company Property; and (v) any other transaction the proceeds of which, in
accordance with generally accepted accounting principles, are considered
capital in nature.
"Certificate of Formation"
means the Certificate of
Formation filed with the Secretary of State of the State of Delaware pursuant
to the Act to form the Company, as originally executed and amended, modified,
supplemented or restated from time to time, as the context requires.
"Claims"
shall have the meaning set forth in
Section
5.9(a)
.
"Closing Date"
shall be the date the initial Capital
Contributions are made under
Section 2.1(a)
.
"CN"
shall mean Canadian National Railway Company.
"CoC Trackage Rights"
shall have the meaning given
to that term in
Section 6.11
.
"Code"
means the United States Internal Revenue Code
of 1986, as amended from time to time.
"Committee Representative"
shall have the meaning
set forth in
Section 5.2(b)
.
"Company"
means the limited liability company formed
pursuant to this Agreement and the Certificate of Formation and the limited
liability company continuing the business of this Company in the event of
dissolution of the Company as herein provided.
"Company Minimum Gain"
has the same meaning as the
term, "partnership minimum gain," in Regulations Section 1.704-2(b)(2) and
1.704-2(d).
"CSX"
shall mean CSX Transportation, Inc.
"Damages"
shall have the meaning set forth in
Section
10.2(b)
.
"Default Sale Notice"
shall have the meaning set
forth in
Section 10.2(c)
.
"Delaware Courts"
shall have the meaning set forth
in
Section 13.3(a)
.
"Depreciation"
means, for each Fiscal Year, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year, except that if the Gross
Asset Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Fiscal Year, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the federal
income tax deprecation, amortization or other cost recovery deduction for such
Fiscal Year bears to such beginning adjusted tax basis; provided, however, that
if the adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Management Committee.
"Dispute"
shall have the meaning set forth in
Section
13.1
.
"Dissolution Event"
shall have the meaning set forth
in
Section 11.1
.
"Effective Date"
shall have the meaning set forth in
the Introductory Paragraph.
"Exchange Act"
means the Securities Exchange Act of
1934.
"Fair Value"
means the fair market value as
determined by unanimous mutual agreement reached by the Members, or in the
event the Members are unable to agree, as determined by an independent
investment banking firm or firms or, in the case of any asset or other item not
customarily valued by an investment banking firm, a qualified independent appraiser
of the type customarily engaged in the valuation thereof (a "Qualified
Appraiser"), in accordance with the following procedure. In the case of any
event which gives rise to a requirement to determine "Fair Value" hereunder,
the Management Committee shall be responsible for initiating the process by
which Fair Value shall be determined as promptly as practicable, but in any
event within twenty (20) days following such event and if the procedures
contemplated herein in connection with determining Fair Value have not been
complied with fully, then any such determination of Fair Value for any purpose
hereunder shall be deemed to be preliminary and subject to adjustment pending
full compliance with such procedures. Upon the occurrence of an event requiring
the determination of Fair Value, the Management Committee shall give each
Member notice of such event, and the Members shall engage in direct good faith
discussions to arrive at a mutually agreeable determination of Fair Value. In
the event the Members are unable to arrive at a mutually agreeable
determination within thirty (30) days of the notice, an independent investment
banking firm of national standing or Qualified Appraiser of national standing,
as the case may be, selected by unanimous agreement of the Members shall make
such determination and render such opinion. The determination so made shall be
conclusive and binding on the Members. The fees and expenses of the investment
banking firm or Qualified Appraiser retained for such purpose shall be paid by
the Company.
"Fiscal Quarter"
means any of the following:
(a) the period commencing on the date hereof and
ending on the earliest to follow the Closing Date of March 31, June 30 and
September 30 of the year in which the Closing Date occurs,
(b) any subsequent three (3) month period commencing
on each of January 1, April 1, July 1 and October 1 and ending on the last date
before the next such date, and
(c) the period commencing on the immediately
preceding January 1, April 1, July 1, or October 1, as the case may be, and
ending on the date on which all Property is distributed to the Members pursuant
to
Section 11
.
"Fiscal Year"
means any of the following:
(a) the period commencing on the date hereof and
ending on December 31 of the year in which the Closing Date occurs,
(b) any subsequent twelve (12) month period
commencing on January 1, and
(c) the period commencing on the immediately
preceding January 1, and ending on the date on which all Property is
distributed to the Members pursuant to
Section 11
.
"Freight Rail Common Carrier"
shall mean Springfield
Terminal, NSR, or such other freight rail common carrier that the Company, in
accordance with the Agreement, admits to the entirety or any portion of the
Line by way of haulage or trackage rights.
"GAAP"
means generally accepted accounting
principles as in effect in the United States of America, consistently applied.
"General Manager"
means that individual so
designated and appointed by the Railroad Operator who shall be responsible for
directing the day-to-day operations, management and supervision of the Railroad
Operator and shall be the single point of contact for the Members with respect
to all such matters.
"Gross Asset Value"
means with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
contribution as determined by the Management Committee.
(b) The Gross Asset Values of all Company assets
shall be adjusted to equal their respective gross fair market values (taking
Code Section 7701(g) into account), as determined by the Management Committee
as of the following times: (A) the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more than a de minimis
Capital Contribution; (B) the distribution by the Company to a Member of more
than a de minimis amount of Company property as consideration for an interest
in the Company; and (C) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), provided that an adjustment described
in clauses (A) and (B) of this paragraph shall be made only if the Management
Committee reasonably determines that such adjustment is necessary to reflect
the relative economic interests of the Members in the Company.
(c) The Gross Asset Value of any Company asset
distributed to any Member shall be adjusted to equal the gross fair market
value (taking Code Section 7701(g) into account) of such asset on the date of
distribution as determined by the Management Committee.
(d) The Gross Asset Values of Company assets shall
be increased (or decreased) to reflect any adjustments to the adjusted tax
basis of such assets pursuant to Code Section 734(b) or Code Section 743(b),
but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulations Section 1.704-1(b)-(2)(iv)(m)
and subparagraph (f) of the definition of "Profits" and "Losses"; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
subparagraph (d) to the extent that an adjustment pursuant to subparagraph (c)
is required in connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (d).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to subparagraph (a), (b) or (c), such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset, for purposes of computing Profits and Losses.
"Harvard Trackage Rights"
shall mean the trackage
rights granted pursuant to the Springfield Terminal Joint Use Agreement.
"Indemnified Parties"
shall have the meaning set
forth in
Section 10.2(f)
.
"Indemnified Persons"
shall have the meaning set
forth in
Section 5.9
.
"Investment Policies"
shall have the meaning set
forth in
Section 5.7(b)
.
"Industrial
Development Project"
shall mean a modification to the trackage owned or
operated by the Company in order to permit new or expanded access to rail
service by one or more new or potential rail service customer(s), which
modification takes place on the property owned or operated by the Company,
provided, however, that no bulk transload, intermodal, and an auto distribution
facility shall be considered an Industrial Development Project.
"Involuntary Bankruptcy"
means, with respect to any
Person, without the consent or acquiescence of such Person, the entering of an
order for relief or approving a petition for relief or reorganization or any
other petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or other similar relief under any
present or future bankruptcy, insolvency or similar statute, law or regulation,
or the filing of any such petition against such Person which petition shall not
be dismissed within ninety (90) days, or without the consent or acquiescence of
such Person, the entering of any order appointing a trustee, custodian,
receiver or liquidator of such Person or of all or any substantial part of the
Property of such Person which order shall not be dismissed within ninety (90)
days.
"IRS"
means the Internal Revenue Service.
"Issuance Items"
shall have the meaning set forth in
Section 3.3(h)
.
"Items"
shall have the meaning set forth in
Section
3.4
.
"Joint Operating Committee"
or
"JOC"
shall
have the meaning set forth in
Section 5.3(c)
.
"JV Transaction
Agreements"
means, collectively, (i) the Transaction Agreement (ii) this
Company Agreement, (iii) the NSR Joint Use Agreement, (iv) the Assignment and
Assumption Agreement Regarding Passenger Rail Operations, (v) the Miscellaneous
Assignment and Assumption Agreement, (vi) the Bill of Sale, (vii) the
Transportation Agreement Assignment and Divisions Allocation Agreement, (viii)
the Ayer Switching Agreement, (ix) the Springfield Terminal Joint Use
Agreement, (x) the Capital Projects and Facility Management Agreement, (xi) the
Railroad Operating Agreement, and (xii) the Option Agreement.
"Line"
shall have the meaning set forth in the Recitals.
"Liquidation Period"
shall have the meaning set
forth in
Section 11.7
.
"Liquidator"
shall have the meaning set forth in
Section
11.9(a)
.
"Losses"
shall have the meaning set forth in the
definition of "Profits."
"Major Decision"
shall have the meaning set forth in
Section 5.6
.
"Management Committee"
shall have the meaning set
forth in
Section 5.2(a)
.
"Members"
means the Persons (i) who are referred to
as such in the opening paragraph of this Agreement or who have become a new or
substituted Member by acquisition of a Membership Interest pursuant to the
terms of this Agreement and (ii) who have not ceased to be a Member.
"Member Nonrecourse Debt"
has the same meaning as
the term "partner nonrecourse debt" in Section 1.704-2(b)(4) of the
Regulations.
"Member Nonrecourse Debt Minimum Gain"
means an
amount, with respect to each Member Nonrecourse Debt, equal to the Company
Minimum Gain that would result if such Member Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Regulations.
"Member Nonrecourse Deductions"
has the same meaning
as the term "partner nonrecourse deductions" in Sections 1.704-2(i)(1)
and 1.704-2(i)(2) of the Regulations.
"Membership Interest"
means an ownership interest in
the Company or any portion of or interest in such interest, including any and
all benefits to which the holder of such interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement, the number of such Membership
Interests being reflected on Exhibit C hereto.
"Miscellaneous Assignment and Assumption Agreement"
means the Assignment and Assumption Agreement, dated the date hereof, by and
between Pan Am, on behalf of itself and its subsidiaries, including B&M and
Springfield Terminal, and the Company.
"Net Cash Flow"
means for any period the gross cash
proceeds of the Company for such period (excluding Capital Contributions) less
the portion thereof used to pay or establish reserves for all Company expenses,
debt payments, capital improvements, replacements, and contingencies, all as
determined by the Management Committee. "Net Cash Flow" shall not be reduced
by depreciation, amortization, cost recovery deductions, or similar allowances,
but shall be increased by any reductions of reserves previously established
pursuant to the first sentence of this definition.
"Net Cash Flow Forecast"
shall have the meaning set
forth in
Section 5.7(a)
.
"Nonrecourse Deductions"
shall have the meaning set
forth in Section 1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability"
shall have the meaning set
forth in Section 1.704-2(b)(3) of the Regulations.
"Notice"
shall have the meaning set forth in
Section
12.1
.
"NS Change in Control"
shall mean: (1) the
establishment of a voting trust as described in 49 C.F.R. Part 1013 -
Guidelines for the Proper Use of Voting Trusts, or any subsequent regulation,
with regard to the acquisition by CSX or CN, or a subsidiary of either, of a
controlling block of voting securities of the NS Member or any entity having
direct or indirect control over the NS Member, including but not limited to the
NS Parent; (2) the submission to the STB by CSX or CN, or a subsidiary of
either, of any application, petition for exemption, or notice of exemption
seeking approval, or exemption from approval, to effect a change in control of
the NS Member or any entity having direct or indirect control over the NS
Member; or (3) not taking into account the NS Member's Membership Interest in
the Company, the sale, transfer or other distribution of all or substantially
all of the assets of NSR to CSX or CN, or a subsidiary of either.
"NS Member"
shall have the meaning set forth in the
Preamble.
"NS Member's Membership Interests"
shall have the
meaning set forth in
Section 3.8
.
"NS Parent"
means Norfolk Southern Corporation, a
Virginia corporation and the ultimate parent of the NS Member.
"NSR"
means Norfolk Southern Railway Company, a
Virginia corporation and an operating subsidiary of the NS Parent.
"NSR Joint Use Agreement"
shall mean the Joint
Use Agreement, dated as of the date hereof, by and between NSR, Springfield
Terminal and the Company, generally providing for certain haulage and trackage
rights.
"Officers"
means Persons designated as officers of
the Company by the Management Committee for so long as any such Person remains
an Officer in accordance with the terms of this Agreement.
"Option Agreement"
shall mean that agreement dated
as of May 1, 2008 by and among NSR, B&M and Pan Am generally concerning the
grant of an option to NSR to acquire a certain percentage interest in the
Assets.
"Pan Am"
shall have the meaning set forth in the Recitals.
"Pan Am Change in Control"
shall mean: (1) the establishment
of a voting trust as described in 49 C.F.R. Part 1013 - Guidelines for the
Proper Use of Voting Trusts, or any subsequent regulation, with regard to the
acquisition of a controlling block of voting securities of the Pan Am Member, Pan
Am, B&M or Springfield Terminal, or any entity having direct or indirect
control over any of the same, including but not limited to the Pan Am Parent;
(2) the submission to the STB (other than pursuant to 49 U.S.C. 11323(a)(4)
where the only carriers involved are (a) one or more of the Pan Am Member, Pan
Am, B&M or Springfield Terminal, or any entity having direct or direct
control over any of the same, including but not limited to the Pan Am Parent,
and (b) the Company) of any application, petition for exemption, or notice of
exemption seeking approval, or exemption from approval, to effect a change in
control of the Pan Am Member, Pan Am, B&M or Springfield Terminal or any
entity having direct or indirect control over any of the same; (3) any
Permitted Transfer as described in
Section 9.2 clauses (f) or (g)
; or
(4) not taking into account the Pan Am Member's membership interest in the
Company, the sale, transfer or other distribution of all or substantially all
of the assets of the Pan Am Member, Pan Am, B&M or Springfield Terminal.
"Pan Am Member"
shall have the meaning set forth in
the Recitals.
"Pan Am Member's Membership Interests"
shall have
the meaning set forth in
Section 3.8
.
"Pan Am Parent"
shall mean Pan Am Systems, Inc., a Florida
corporation, and the ultimate parent of the Pan Am Member.
"Pan Am System Parties"
shall have the meaning set
forth in the Recitals.
"Permitted Transfer"
shall have the meaning set
forth in
Section 9.2
.
"Permitted Transferees"
means a transferee pursuant
to a Permitted Transfer.
"Person"
means an individual or a partnership,
corporation, trust, association, limited liability company or other entity.
"Profit and Loss Allocation Percentage Interest"
shall be each Member's Membership Interest as reflected on Exhibit A.
"Profits"
and
"Losses"
means, for each Fiscal
Year, an amount equal to the Company's taxable income or loss for such Fiscal
Year, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss, deduction or credit required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments (without duplication):
(a) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this definition of "Profits" and "Losses" shall be added to
such taxable income or loss;
(b) Any expenditures of the Company described in
Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Profits or Losses pursuant to this definition of "Profits"
and "Losses" shall be subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any
Company asset is adjusted pursuant to subparagraphs (b) or (c) of the
definition of Gross Asset Value, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the Gross Asset Value of the
asset) or loss (if the adjustment decreases the Gross Asset Value of the asset)
from the disposition of such asset and shall be taken into account for purposes
of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of
Property with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
Property disposed of, notwithstanding that the adjusted tax basis of such
Property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such Fiscal
Year, computed in accordance with the definition of Depreciation;
(f) To the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) is required,
pursuant to Regulations Section 1.704-(b)(2)(iv)(m)(4), to be taken into
account in determining Capital Accounts as a result of a distribution other
than in liquidation of a Member's interest in the Company, the amount of such
adjustments shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases such basis) from
the disposition of such asset and shall be taken into account for purposes of
computing Profits and Losses; and
(g) Notwithstanding any other provision of this
definition, any items which are specially allocated pursuant to
Section 3.3
shall not be taken into account in computing Profits or Losses.
The amounts of the items of Company income, gain, loss,
deduction or credit available to be specially allocated pursuant to
Section
3.3
shall be determined by applying the rules analogous to those set forth
in subparagraphs (a) through (g) above.
"Property"
means all real and personal property
acquired by the Company, including cash, and any improvements thereto, and
shall include both tangible and intangible property.
"Proposed Capital Projects"
means those capital
expenditures anticipated to be constructed over the three (3) year period
commencing on the date hereof, as identified more specifically in Exhibit B.
"Qualified Appraiser"
shall have the meaning set
forth in the definition of "Fair Value".
"Rail Carrier"
means a Freight Rail Common Carrier
or a passenger rail carrier.
"Railroad Operating Agreement"
means the Railroad
Operating Agreement, dated as of the date hereof, between the Company and Springfield
Terminal, generally concerning the railroad operating and administrative
services provided by Springfield Terminal for the Company.
"Railroad Operator"
means the Springfield Terminal
or such other Person as the Management Committee may designate pursuant to this
Agreement and the Railroad Operating Agreement, which shall be responsible for performing
day-to-day railroad operations for the Company.
"Regulations"
means the Treasury Regulations,
including temporary and proposed Regulations, promulgated under the Code, as
such regulations are amended from time to time.
"Rollover Budget"
shall have the meaning set forth
in
Section 5.7(a)
.
"Rules"
shall have the meaning set forth in
Section
13.3(b)
.
"Securities Act"
means the Securities Act of 1933.
"Springfield Terminal"
shall have the meaning set
forth in the Recitals.
"Springfield Terminal Joint Use Agreement"
means the
trackage rights agreement, dated as of the date hereof, among NSR, Springfield
Terminal and the Company, generally providing for the grant, by the Company to
Springfield Terminal, of certain trackage rights.
"Tax Matters Partner"
shall mean the "tax matters
partner," as that term is defined in Section 6231(a)(7) of the Code of the
Company, with all of the rights, duties and powers provided for in Sections
6221 through 6234 of the Code.
"Transaction Agreement"
shall have the meaning set
forth in the Recitals.
"Transfer"
means, as a noun, any voluntary or
involuntary transfer, distribution, sale, pledge, assignment or hypothecation
or other disposition and, as a verb, voluntarily or involuntarily to transfer,
sell, pledge, assign or hypothecate or otherwise dispose of.
"Transportation Agreement Assignment and Divisions
Allocation Agreement"
means that agreement dated as of April 9, 2009
generally providing for the assignment of existing customer transportation
agreements and setting forth the respective divisions for transportation
services to be provided by the Company under certain existing and future
contract and tariff movements.
"Voluntary Bankruptcy"
means, with respect to any
Person, any of the following:
(a) the inability of such Person generally to pay
its debts as such debts become due, or an admission in writing by such Person
of its inability to pay its debts generally or a general assignment by such
Person for the benefit of creditors.
(b) the filing of any petition or answer by such
Person seeking to adjudicate itself as bankruptcy or insolvent, or seeking for
itself any liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of such Person or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking, consenting to, or acquiescing in the entry of an order for relief or
the appointment of a receiver, trustee, custodian or other similar official for
such Person or for any substantial part of its Property, or
(c) corporate action taken by such Person to
authorize any of the actions set forth above.
"Voting Securities"
shall mean any securities of any
Person which vote generally in the election of directors.
"Wholly-Owned Affiliate"
of any Person means
(a) an Affiliate of such Person one hundred percent
(100%) of the voting stock or beneficial ownership of which is owned by such
Person, or by any Person who, directly or indirectly, owns one hundred percent
(100%) of the voting stock or beneficial ownership of such Person,
(b) an Affiliate of such Person who, directly or
indirectly, owns one hundred percent (100%) of the voting stock or beneficial
ownership of such Person, and
(c) any Wholly-Owned Affiliate of any Affiliate
described in clause (a) or clause (b).
SECTION 1
THE COMPANY
1.1
Formation and Continuation
. The Members hereby agree to organize the Company
as a limited liability company under and pursuant to the provisions of the Act
and upon the terms and conditions set forth in this Agreement. The rights and
liabilities of the Members shall be as provided under the Act, the Certificate
of Formation and this Agreement.
1.2
Name
. The name of the Company shall be Pan Am Southern
LLC and all business of the Company shall be conducted in such name or, in the
discretion of the Management Committee, under any other name.
1.3
Purpose; Powers
.
(a)
Generally
.
(i) The purpose of the Company is to engage in the Business and in any other
lawful activity for which a limited liability company may be organized under
the Act.
(ii) The Company has the power to do any and all acts necessary, appropriate,
proper, advisable, incidental or convenient to or in furtherance of the
purposes of the Company set forth in
Section 1.3(a)
and has, without
limitation, any and all powers that may be exercised on behalf of the Company
by the Management Committee pursuant to
Section 5
.
(b)
Carrier Status
.
(i) Notwithstanding the generality of
Section 1.3(a)
, the Members
intend that the Company shall be a rail carrier, as that term is defined in 49
U.S.C. § 10101(5), that performs transportation services over the Line.
(ii) The Company may participate or appear in any rates, routes or divisions
relating to any freight traffic whatsoever to, from and over the Line, and
shall be entitled to or responsible for any freight charges relating to such
freight traffic. The Company may quote or establish any rate and service terms
applicable to freight transportation services to, from or over the Line, enter
into transportation contracts with persons, provide for freight transportation
services to, from or over the Line, and undertake to perform any for-hire
transportation services directly, in its own name or for its own account, for
any person, subject to
Section 5.6(xxi)
.
1.4
Principal Place of Business, Chief Executive Office and
Registered Office
. The principal place of business and chief executive
office of the Company shall be located at the offices of Pan Am Railways, 400
Amherst Street, Suite 405, Nashua, NH 03063, or in such other place as the
Management Committee may determine from time to time. The registered office of
the Company in the State of Delaware initially is located at c/o The Corporation
Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware
19801.
1.5
Term
. The term of the
Company commenced on the date the Certificate of Formation was filed in the
office of the Secretary of State of the State of Delaware in accordance with
the Act and shall continue until the winding up and liquidation of the Company
and its business is completed following a Dissolution Event, as provided in
Section
11
.
1.6
Filings; Agent for Service of Process
.
(a) The Members shall promptly after the execution of this Agreement cause
the Certificate of Formation to be filed in the Office of the Secretary of
State of the State of Delaware in accordance with the provisions of the Act.
The Management Committee shall take, or cause to be taken, any and all actions
reasonably necessary to perfect and maintain the status of the Company as a
limited liability company under the laws of the State of Delaware, including
the preparation and filing of such amendments to the Certificate of Formation
and such other assumed name certificates, documents, instruments and
publications as may be required by law, including, without limitation, action
to reflect:
(i) A change in the Company name,
(ii) A correction of false or erroneous statements in the Certificate of
Formation or the desire of the Members to make a change in any statement
therein in order that it shall accurately represent the agreement among the
Members, or
(iii) A change in the time for dissolution of the Company if approved by the
Members as evidenced by an amendment to this Agreement (approved as provided
herein).
(b)
The Members and the Management Committee shall execute and cause to be
filed original or amended certificates and shall take any and all other actions
as may be reasonably necessary to perfect and maintain the status of the
Company as a limited liability company or similar type of entity under the laws
of any other jurisdictions in which the Company engages in business.
(c)
The registered agent for service of process on the Company in the State
of Delaware shall be The Corporation Trust Company or any successor as
appointed by the Members in accordance with the Act.
(d)
Upon the dissolution and completion of the winding up and liquidation of
the Company in accordance with
Section 11
, the Management Committee
(and, if necessary and requested by the Management Committee, the Members)
shall promptly execute and cause to be filed certificates of cancellation,
statements of intent to dissolve and articles of dissolution in accordance with
the Act and the laws of any other jurisdictions in which the Management
Committee deems such filing necessary or advisable.
1.7
Title to Property
.
All Property owned by the Company shall be owned
by the Company as an entity and no Member shall have any ownership interest in
such Property in its individual name, and each Member's Membership Interests in
the Company shall be personal property for all purposes. At all times after
the date hereof, the Company shall hold title to all of its Property in the
name of the Company and not in the name of any Member.
1.8
Payments of Individual Obligations
.
The Company's credit and assets shall be used
solely for the benefit of the Company and no asset of the Company shall be
Transferred or encumbered for, or in payment of, any individual obligation of
any Member.
SECTION
2
MEMBERS' CAPITAL CONTRIBUTIONS
2.1
Initial Capital Contributions
.
(a) Pursuant to the Transaction Agreement and simultaneously with the
execution of this Agreement, (i) the NS Member has made the initial Capital
Contribution described in
Section 2.2(a)
of the Transaction Agreement and
in that certain Funding Agreement dated April 9, 2009 among the Pan Am System
Parties and the NS Member, and (ii) the Pan Am Member has made an initial
Capital Contribution described in
Section 2.3(a)
of the Transaction
Agreement.
(b) Pursuant to the Transaction Agreement and simultaneously with the execution
of this Agreement, the Pan Am Member has also contributed or caused to be
contributed to the Company, and the Company has assumed, the Assumed
Liabilities (as such term is defined in Section 2.4 of the Transaction
Agreement).
2.2
Initial Capital Accounts
. The Company shall establish an individual Capital
Account for each Member. The Company shall determine and maintain each Capital
Account in accordance with Regulations Section 1.704-1(b)(2)(iv). The initial Capital
Accounts of the Members as of the date hereof are as reflected
in Exhibit 2.2.
2.3
INTENTIONALLY OMITTED
.
2.4
Withdrawal and Return of Capital
. No Member shall withdraw any of its capital
without the consent of the other Members, except upon the dissolution or
liquidation of the Company to the extent provided in this Agreement. Under
circumstances requiring or permitting a return of any Capital Contribution, no
Member shall have the right to receive property other than cash except as may
be specifically provided in
Section 11.2(d)
.
SECTION 3
ALLOCATIONS
3.1
Profits
. After giving
effect to the special allocations set forth in
Section 3.3
, Profits for
any Fiscal Year shall be allocated to the Members as follows:
(a) First, Profits shall be allocated to each Member in an amount necessary
to offset any previous allocations of Loss to such Member pursuant to
Section
3.4
.
(b) Second, Profits less any amounts allocated under
Section 3.1(a)
shall be allocated to the Members in proportion to their respective Profit and
Loss Allocation Percentage Interests.
3.2
Losses
.
After giving effect to the special allocations
set forth in
Section 3.3
and subject to
Section 3.4
, Losses for
any Fiscal Year shall be allocated to the Members in proportion to their Profit
and Loss Allocation Percentage Interests.
3.3
Special Allocations
. The following special allocations shall be made
in the following order:
(a)
Minimum Gain Chargeback
. Except as otherwise provided in Regulations
Section 1.704-2(f), notwithstanding any other provision of this
Section 3
,
if there is a net decrease in Company Minimum Gain during any Fiscal Year, each
Member shall be specially allocated items of Company income and gain for such
Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to
such Members share of the net decrease in Company Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2). This
Section 3.3(a)
is intended to
comply with the minimum gain chargeback requirement in Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
(b)
Member Minimum Gain Chargeback
. Except as otherwise provided in Regulations
Section 1.704-2(i)(4), notwithstanding any other provision of this
Section 3
,
if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable
to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a
share of the Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount
equal to such Member's share of the net decrease in Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations Sections
1.704-2(i)(4) and 1.704-2(j)(2). This
Section 3.3(b)
is intended to
comply with the minimum gain chargeback requirement in Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(c)
Qualified Income Offset
. In the event any Member unexpectedly receives any
adjustments, allocations, or distributions described in Regulations Sections
1.704-1(b)(2)(ii)
(d)(4)
, 1.704-1(b)(2)(ii)
(d)(5)
, or
1.704-1(b)(2)(ii)
(d)(6)
, items of Company income and gain shall be
specially allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of the Member as quickly as possible, provided that an allocation
pursuant to this
Section 3.3(c)
shall be made only if and to the extent
that the Member would have an Adjusted Capital Account Deficit after all other
allocations provided for in this
Section 3
have been tentatively made as
if this
Section 3.3(c)
were not in the Agreement.
(d)
Gross Income Allocation
. In the event any Member has a deficit Capital
Account at the end of any Fiscal Year which is in excess of the sum of the
amount such Member is deemed obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Member shall be specially allocated items of Company income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this
Section 3.3(d)
shall be made only if and to the extent
that such Member would have a deficit Capital Account in excess of such sum
after all other allocations provided for in this
Section 3
have been
made as if
Section 3.3(c)
and this
Section 3.3(d)
were not in the
Agreement.
(e)
Nonrecourse Deductions
. Nonrecourse Deductions for any Fiscal Year shall
be specially allocated to the Members in proportion to their respective Profit
and Loss Allocation Percentage Interests.
(f)
Member Nonrecourse Deductions
. Any Member Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(g)
Section 754 Adjustments
. To the extent an adjustment to the adjusted tax
basis of any Company asset, pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Regulations Sections 1.704-1(b)(2)(iv)(
m
)(2)
or 1.704-1(b)(2)(iv)(
m
)(4), to be taken into account in determining
Capital Accounts as the result of a distribution to a Member in complete
liquidation of such Member's interest in the Company, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their Percentage Interests in the event Regulations
Section 1.704-1(b)(2)(iv)(
m
)(2) applies, or to the Member to whom such
distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(
m
)(4)
applies.
(h)
Allocations Relating to Taxable Issuance of a
Membership Interest
. Any income, gain, loss or deduction realized as a
direct or indirect result of the issuance of a Membership Interest by the
Company to a Member (the "Issuance Items") shall be allocated among the Members
so that, to the extent possible, the net amount of such Issuance Items,
together with all other allocations under this Agreement to each Member shall
be equal to the net amount that would have been allocated to each such Member
if the Issuance Items had not been realized.
(i)
Guaranteed Payments
. To the extent any compensation paid to any Member
by the Company, including any fees payable by the Company to any Member, is
determined by the Internal Revenue Service not to be a guaranteed payment under
Code Section 707(c) or is not paid to the Member other than in its capacity as
a partner (Member) within the meaning of Code Section 707(a), the Member shall
be specially allocated gross income of the Company in an amount equal to the
amount of that compensation.
(j)
Capital Recovery Contributed Book Items
. The Capital Recovery Contributed Book Items shall
be specially allocated ninety-nine (99) percent to the Pan Am Member and one
(1) percent to the NS Member.
(k)
Capital Recovery Purchased Book Items
. The Capital Recovery Purchased Book Items shall be
specially allocated one (1) percent to the Pan Am Member and ninety-nine (99) percent
to the NS Member.
(l)
Special Allocations of Gain from
Capital Transactions.
Gain for each item of Property arising from a
Capital Transaction (computed by reference to Gross Asset Value) in excess of
any gain allocated pursuant to
Sections 3.3(a)
and
(b)
above
shall be allocated to a Member up to and in proportion to the excess of (i) the
amounts allocated to the Member pursuant to
Sections 3.3(j)
and
(k)
above, over (ii) the sum of (A) amounts previously allocated to such Member
pursuant to this
Section 3.3(l)
, (B) the amount of gain allocated to the
Member pursuant to
Sections 3.3(a)
and
(b)
above, and (C) such
Member's remaining share of Company Minimum Gain and Member Nonrecourse Minimum
Gain. Any remaining gain from a Capital Transaction shall be allocated between
the Members pursuant to
Section 3.1
. Gain for tax purposes shall be
consistent with the allocations under this
Section 3.3(l)
and
Section
3.6
.
3.4
Loss Limitation
. Losses allocated pursuant to
Section 3.2
,
together with Capital Recovery Contributed Book Items and Capital Recovery Purchased
Book Items allocated pursuant to
Sections 3.3(j)
and
3.3(k)
(the "Items"),
shall not exceed the maximum amount of Losses and Items that can be allocated
without causing any Member to have an Adjusted Capital Account Deficit at the
end of any Fiscal Year. In the event some but not all of the Members would
have Adjusted Capital Account Deficits as a consequence of an allocation of
Losses and Items pursuant to
Section 3.2
and
Sections 3.3(j)
and
3.3(k)
,
the limitation set forth in this
Section 3.4
shall be applied on a
Member by Member basis and Losses and Items not allocable to any Member as a
result of such limitation shall be allocated to the other Members in accordance
with the positive balances in such Member's Capital Accounts (including the
adjustment described in subparagraphs (a) and (b) of the definition of "Adjusted
Capital Account Deficit") so as to allocate the maximum permissible Losses and
Items to each Member under Regulations Section 1.704-1(b)(2)(ii)
(d)
.
Subsequent Profits shall be specially allocated hereunder to charge back any
Losses and Items disproportionately allocated to the Members pursuant to this
Section
3.4
, pro rata in accordance with the amount of such excess Losses and Items
allocated hereunder and not charged back hereby.
3.5
Other Allocation Rules
.
(a) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Management
Committee using any permissible method under Code Section 706 and the
Regulations thereunder.
(b) The Members are aware of the income tax consequences of the allocations
made by this
Section 3
and hereby agree to be bound by the provisions of
this
Section 3
in reporting their shares of Company income and loss for
income tax purposes.
(c) Solely for purposes of determining a Member's proportionate share of the
"excess nonrecourse liabilities" of the Company within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company Profits
are in proportion to their Percentage Interests.
(d) To the extent permitted by Regulations Section 1.704-2(h)(3), the
Management Committee shall endeavor to treat distributions of Net Cash Flow as
having been made from the proceeds of a Nonrecourse Liability or a Member
Nonrecourse Debt only to the extent that such distributions would cause or
increase an Adjusted Capital Account Deficit for any Member.
(e)
In the event the IRS adjusts the amount of any fees, interest, or other
amounts paid to a Member or an Affiliate of a Member pursuant to this Agreement
or any other agreement between the Company and such Member or Affiliate, and
such amounts are or were treated as deductible by the Company, whether in
reliance upon Section 162, 163, 707(a) or 707(c) of the Code or otherwise, then
(i) In the case of an upward adjustment, there shall be allocated to the
Member who received (or whose Affiliate received) or is treated as having
received such payments an amount of loss or deduction for the taxable year in
or with respect to which such fees, interest or other amounts were adjusted
equal to the amount of the increase of such fees, interest, or other amounts,
and
(ii) In the case of a downward adjustment, there shall be allocated to the
Member who received (or whose Affiliate received) or is treated as having
received such payment an amount of gross income for the taxable year in or with
respect to which such fees, interest, or other amounts were adjusted equal to
the amount of the decrease of such fees, interest, or other amounts.
3.6
Tax Allocations; Code Section 704(c)
.
In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, deduction and credit with respect to any
Property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such Property to the Company for federal income
tax purposes and its initial Gross Asset Value (computed in accordance with the
definition of Gross Asset Value) using the traditional method set forth in
Regulations Section 1.704-3(b).
3.7
Revaluation of Capital Accounts
. Capital Accounts shall not be revalued in
connection with the Capital Contributions described in Schedule 2.2(a) of the
Transaction Agreement and described in
Section 2.1(a)
and
2.3(a) and (b)
of this Agreement.
3.8
Membership Interests
. The NS Member and the Pan Am Member shall have the Membership Interests reflected
in Exhibit C, and such Membership Interests shall be referred to as the "NS
Member's Membership Interests" and the "Pan Am Member's Membership Interests",
respectively.
3.9
Special Election.
The
Company shall elect on its federal income tax return for its first Fiscal Year
to use the safe harbor method of accounting for track structure expenditures
provided in Rev. Proc. 2002-65 and follow such safe harbor method of accounting
until the Members unanimously agree otherwise.
SECTION 4
DISTRIBUTIONS
4.1
Distributions
. Except as otherwise provided in this
Section 4
or
Section 11
, remaining Net Cash Flow, if any, shall be distributed
upon the approval of the Management Committee.
4.2
Timing and Allocation of
Distribution
s
. Notwithstanding anything to
the contrary in
Section 4.1
, for each Fiscal Year of the Company, Net
Cash Flow shall be distributed on at least an annual basis. Such distribution
of Net Cash Flow shall be made pro rata to the Members in accordance with each
Member's Profit and Loss Allocation Percentage Interest.
4.3
Amounts Withheld
. All amounts withheld pursuant to the Code or any
provision of any state, local or foreign tax law with respect to any payment,
distribution or allocation to the Company or the Members shall be treated as
amounts paid or distributed, as the case may be, to the Members with respect to
which such amount was withheld pursuant to this
Section 4.3
for all
purposes under this Agreement. The Company is authorized to withhold from
payments and distributions, or with respect to allocations to the Members, and
to pay over to any federal, state and local government or any foreign
government, any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law or any foreign law, and
shall allocate any such amounts to the Members with respect to which such
amount was withheld. The withholdings by the Company referred to in this
Section
4.3
shall be made at the appropriate applicable statutory rate under the applicable
tax as determined by the Management Committee.
4.4
Limitations on Distributions
. The Company shall make no distributions to the
Members except (i) as provided by and in accordance with this
Section 4
and
Section 11
or as agreed to by all of the Members and (ii) in
conformance with the Act.
4.5
Distributions and Allocations in Respect of a Transferred
Membership Interest
. If any Membership Interest is Transferred during
any Fiscal Year in compliance with the provisions of
Section 9
or
Section
10
or additional Members are admitted to the Company after the date hereof
on different dates during any Fiscal Year, Profits, Losses, each item thereof,
and all other items attributable to the Transferred Membership Interest or the
newly issued Membership Interest, as the case may be, for such Fiscal Year
shall be divided and allocated among the Members by taking into account their
varying Profit and Loss Allocation Percentage Interests during the Fiscal Year
in accordance with Code Section 706(d), using the interim-closing-of-the-books
method unless the Members agree otherwise in writing. In the case of a
Transferred Interest, all distributions on or before the date of such Transfer
shall be made to the transferor, and all distributions thereafter shall be made
to the transferee. Solely for purposes of making such allocations and
distributions, the Company shall recognize such Transfer not later than the end
of the calendar month during which it is given notice of such Transfer,
provided that, if the Company is given notice of a Transfer at least ten (10)
Business Days prior to the Transfer, the Company shall recognize such Transfer
as of the date of such Transfer, and provided further that if the Company does
not receive a notice stating the date such Membership Interest (or portion
thereof) was Transferred and such other information as the Management Committee
may reasonably require within thirty (30) days after the end of the Fiscal Year
during which the Transfer occurs, then all such items shall be allocated, and
all distributions shall be made, to the Person who, according to the books and
records of the Company, was the owner of the Membership Interest on the la
st day of such Fiscal Year.
SECTION 5
MANAGEMENT
5.1
Manner of Operations
. The Members each
agree to act in good faith to operate the Company in a manner reasonably
designed to maximize the long-term value of the Company as a whole.
5.2
Management Committee
.
(a)
Management by the Management Committee
. Subject to the provisions of this Agreement, the
business, property and affairs of the Company shall be managed, and all powers
of the Company shall be exercised, by or under the direction of a management
committee (the "Management Committee"). Without limiting the generality of the
foregoing, but subject to the express limitations set forth elsewhere in this
Agreement, the Management Committee shall have all necessary powers to manage
and carry out the purpose, business, property and affairs of the Company.
Notwithstanding anything to the contrary herein, the Management Committee shall
cause the Company to effectuate Section 9 of the Transaction Agreement.
(b)
Composition of Management Committee
. The Management Committee shall consist of: (i)
prior to a Pan Am Change in Control, six (6) committee representatives, three (3)
of whom shall be designated by the Pan Am Member and three (3) of whom shall be
designated by the NS Member, and alternates appointed by the Pan Am Member and
the NS Member, respectively, to serve in the absence or unavailability of a
committee representative, or (ii) upon and after a Pan Am Change in Control, immediately
and without the need for any action of any Member or any other Person, five (5)
committee representatives, two (2) of whom shall be designated by the Pan Am
Member and three (3) of whom shall be designated by the NS Member, in each case
with alternates appointed by the Pan Am Member and the NS Member, respectively,
to serve in the absence or unavailability of a committee representative (each,
including alternates, a "Committee Representative"). Each Committee
Representative shall serve at the pleasure of the Member or Members who
designated such Committee Representative. The initial Committee
Representatives are identified in Exhibit 5.2(b) attached hereto. Any
Committee Representative may resign upon written notice to the Member who
designated such Committee Representative and to the Company. The resignation
of any such Committee Representative shall take effect upon receipt of such
notice, or at such later time as shall be specified in such notice. A
Committee Representative may be removed at any time with or without cause by
the Member who originally designated such Committee Representative. Except as
governed by
Section 10
for an Event of Default by a Member, any vacancy
occurring for any reason in the number of Committee Representatives shall be
filled by the Member who originally designated the Committee Representative
whose position has become vacant. A Member shall provide written notice to all
other Members of the identity of a new Committee Representative when that new
Committee Representative is designated, provided, however, that the provision
of said written notice shall not be a prerequisite to said designation nor the
ability of said Committee Representative to participate in the governance of
the Company. The Chairman of the Management Committee shall be appointed by
the Pan Am Member in all even numbered calendar years and by the NS Member in
all odd numbered calendar years, provided that, upon and after a Pan Am Change
in Control, the Chairman of the Management Committee shall be appointed by the
NS Member.
(c)
Independent Activities
. Except as otherwise restricted by the
provisions of this Agreement or any other agreement between the Company and the
Person acting as Committee Representative, each Committee Representative in his
capacity as a Committee Representative shall be required to devote such time to
the affairs of the Company as may be necessary to serve the Company in such
capacity and shall be free to serve any other Person or enterprise in any
capacity that such Committee Representative may deem appropriate in his
discretion.
5.3
Committees of, or reporting to, the Management Committee
.
(a)
Creation of Committees
. Subject to
Section 5.6
, the Management
Committee shall have the power and right (but not the obligation) to create and
disband committees and to determine the duties, responsibilities, activities
and composition thereof. Except as otherwise provided herein, prior to a Pan
Am Change in Control, the Pan Am Member and the NS Member shall each be
entitled to equal representation on any such committee, and, upon and after a
Pan Am Change in Control, the NS Member shall be entitled to a majority of the
representation on any such committee.
(b)
Capital Project Committee
. The Members hereby agree that there
shall be created a Capital Project Committee consisting of: (1) prior to a Pan
Am Change in Control, four Committee Representatives, two of whom shall be
designated by the Pan Am Member and two of whom shall be designated by the NS
Member; and (2) upon and after a Pan Am Change in Control, three Committee
Representatives, two of whom shall be designated by the NS Member and one of
whom shall be designated by the Pan Am Member. The Capital Project Committee
shall establish a process (the "Capital Project Process") utilizing capacity
modeling and field input to determine capacity needs and capital expenditures
with respect to Capital Projects. The Capital Project Process will specify
that the engineering specifications and instructions applicable to any
particular Capital Project shall conform to the then-current NSR internal
specifications and instruction for constructing a similar capital project. The
Capital Project Committee shall be responsible for (i) determining the optimum
use of capital expenditures provided for in the Company's Budget (including any
Rollover Budget) or Business Plan in accordance with the Capital Project
Process and (ii) performing the functions allocated to it pursuant to the
Capital Projects and Facility Management Agreement. The initial designees to
the Capital Project Committee shall be those persons identified in Exhibit
5.3(b)(i) hereto. Except as provided in
Section 5.12
, the Capital
Project Committee shall follow any protocols approved by the Management
Committee in accordance with
Section 5.6
to guide capital expenditures
decisions.
(c)
Joint Operating Committee
. The Members hereby agree that there
shall be created a Joint Operating Committee (the "Joint Operating Committee"
or the "JOC") consisting of the Chief Operations Officer, Chief Marketing
Officer and one other appointed representative, or their respective designees,
of Springfield Terminal and NSR. Prior to a Pan Am Change in Control, the
Joint Operating Committee shall make decisions by the unanimous vote of its
members. Upon and after a Pan Am Change in Control, the NS Member shall have
the right to appoint an additional member to the Joint Operating Committee, and
the Joint Operating Committee shall make decisions based upon a majority vote.
The Joint Operating Committee shall have responsibility for (i) having direct,
day-to-day interface with the General Manager, (ii) monitoring such matters as operations,
performance and scheduling, (iii) seeking the resolution of disputes with respect
to such matters, (iv) reviewing the operating efficiencies of the East
Deerfield repair shops on or before the three-year anniversary of the Closing
Date and (v) reviewing the operation of Springfield Terminal as the Railroad
Operator, and overall railroad operations and business, by focusing on the
following five (5) key performance areas, which review shall be based upon specific
performance metrics that the Joint Operating Committee shall develop: (A)
safety metrics, including injury ratios and accident ratios; (B) service metrics,
including on-time train and service performance; (C) engineering and
maintenance quality, including miles slow-ordered; (D) performance to budget,
including operating ratio; and (E) commercial metrics, including revenue growth
and customer satisfaction.
(d) The Capital Project Committee and the Joint Operating Committee may meet
by telephone or in any manner or place as shall be agreeable to its members.
If, prior to a Pan Am Change in Control, the Capital Project Committee and the Joint
Operating Committee is unable to reach a unanimous vote on any matter, it shall
refer that matter to the Management Committee for resolution.
5.4
Meetings of Management Committee
.
(a)
Notices
. Meetings of the Management Committee shall be
held at least once each calendar quarter and may be called by any Committee
Representative. All meetings shall be held upon fifteen (15) Business Days' notice
by mail or four (4) Business Days' notice delivered personally or by telephone,
e-mail or facsimile stating the business to be transacted at such meeting;
provided, that at least thirty (30) Business Days' notice shall be provided for
any meeting in which approval of any action of the type set forth in clauses
(xxi) or (xxii) of
Section 5.6
is sought. The Committee Representatives
present may adjourn any meeting to another time and place. Notice of any
adjourned meeting shall be given to the Committee Representatives who are not
present at the time of the adjournment thereof in accordance with the second
sentence of this
Section 5.4
. Meetings of the Management Committee
shall be held at the offices of the Company unless another location shall have
been designated in the notice of the meeting or at such place as may be
approved by the Management Committee. Members of the Management Committee may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all Committee Representatives
participating in such meeting can hear one another. Participation in a meeting
in such manner constitutes presence in person at such meeting. No business
other than that stated in the notice shall be transacted at any meeting without
the unanimous consent of all of the Committee Representatives. Any Committee
Representative may authorize in writing any Person to act for it by proxy on
all matters on which a Committee Representative is entitled to act, including
waiving notice of, or voting or participating at, any meeting.
(b)
Quorum
. The presence in person of a majority of the Committee
Representatives (at least one of whom shall be a Committee Representative
appointed by the NS Member if a Major Decision is to be made) shall constitute
a quorum for the transaction of business at a meeting of the Management
Committee duly called in accordance with
Section 5.4(a)
, provided that,
upon and after a Pan Am Change in Control, the presence of at least two
Committee Representatives appointed by the NS Member shall be required so as to
constitute a quorum.
(c)
Vote
. Each Committee Representative shall have one vote
to cast in person or by proxy.
(d)
Action of the Committee
. Except to the extent that this Agreement
expressly requires otherwise (including as provided in
Section 5.6
),
every action or resolution done or made by the majority approval of the
Management Committee at a duly noticed meeting at which a quorum is present is
the action of the Management Committee.
5.5
Action by Unanimous Written Consent
. Any action required or permitted to be taken by
the Management Committee may be taken by the Committee Representatives without
a meeting without prior notice and without a vote, but only if a consent or
consents in writing shall be signed by all of the Committee Representatives.
5.6
Management Committee Decisions
. Notwithstanding anything to the contrary
contained in this Agreement (other than
Section 5.11
), the following actions
are reserved and require the approval of the Management Committee, including
the approval of at least one of the Committee Representatives appointed by the
NS Member, and no committee thereof, nor any officer, agent or other
representative of the Company shall be entitled to authorize or effect any such
action absent such approval (each such action, a "Major Decision"):
(i) Repealing, modifying or amending this
Agreement or any of the JV Transaction Agreements to which the Company is a
party, or waiving compliance with any provision of this Agreement or any of the
JV Transaction Agreements to which the Company is a party;
(ii) Repealing, modifying or amending the Investment
Policies;
(iii) Entering into any agreement with respect to or
consummating any (A) acquisition, divestiture, spin-off, merger, consolidation,
business combination or similar transaction involving equity interests or
assets of the Company, (B) sale, transfer, lease, sublease, license or other
disposition of any property or asset to a third party other than in the
ordinary course of business, or (C) formation of, investment of the funds or
assets of the Company in or other participation in any joint venture or
partnership;
(iv) Entering into any transactions with any Member
or any Affiliate of any Member, other than as contemplated by the Capital
Projects and Facility Management Agreement, the distributions contemplated in
Section
2.4
or
Section 4
or pursuant to the JV Transaction Agreements;
(v) Approving the Budget or the Business Plan or
any changes in, amendments to or deviations from, the Budget (including any
Rollover Budget) or the Business Plan; provided, however, in the event the
Management Committee cannot agree on (A) a Capital Project or (B) the Operating
or Maintenance Budgets, the prior year's budget shall roll forward as provided
in
Section 5.7(a)
;
(vi) Appointing, setting the rate of compensation
of, approving bonuses for, or terminating any employees or Officers of the
Company, if any;
(vii) Approving any change in the number of members
of the Management Committee;
(viii) Declaring, making or paying any dividend or
any other distribution (whether in cash, securities or other property) on any
equity interests of the Company, other than the distributions contemplated in
Section
4
;
(ix) Incurring any indebtedness, guarantee or lien
or making any loans (including any Notes), advances or capital contributions
to, or investments in, any Person, except (A) as provided in the Budget or
Rollover Budget, (B) purchase money financing of assets used in the conduct of
the business of the Company, and (C) as may be reasonable or necessary, in
light of force majeure events or other eventualities, to maintain operations of
the Company and, if any, NSR, on the Line;
(x) Creating any employee equity option, structured
equity, employee stock option plan or other similar plan, making any grants
under any such plan or materially modifying any employee benefit plan;
(xi) Requiring any Capital Contribution beyond those
contributions specified in this Agreement, the JV Transaction Agreements and
any Budget (including any Rollover Budget) adopted pursuant to the terms of
this Agreement;
(xii) Initiating or consenting to the filing of any
petition to place the Company in insolvency, bankruptcy or similar proceedings;
(xiii) Admitting new Members to the Company;
(xiv) Approving any changes in the Profit and Loss
Allocation Percentage Interests of the Members other than as contemplated by
Section
2.3
;
(xv) Commencing, settling or disposing of any
litigation against the Company or any of its assets or properties, except any
settlement or disposition not exceeding $250,000;
(xvi) Except as contemplated by the Capital Projects
and Facility Management Agreement, entering into any agreement, license,
program or arrangement pursuant to which the Company is obligated to make or
receive payments or forgive debt, or amending, terminating or failing to renew
any such contract other than those specified in the Budget (including any
Rollover Budget), other than as may be reasonable or necessary, in light of
force majeure events or other eventualities, to maintain operations of the
Company and, if any, NSR, on the Line;
(xvii) Approving the formation and composition of any
committees of the Management Committee (other than self-effecting changes in
such composition pursuant to this Agreement) and the formation and composition
of the boards or equivalent governing bodies of any subsidiary of the Company;
(xviii) Making any material change in the Company's
accounting practices or policies (other than as required by GAAP) or, prior to
a Pan Am Change in Control, any change in the Auditors;
(xix) Taking any of the actions set forth in clauses
(i) through (xviii) above with respect to any entity of which the Company owns,
directly or indirectly, securities or other ownership interests having the
power to elect a majority of the board of directors or other persons performing
similar functions, or otherwise having the power to direct, manage or control
the conduct of business of such entity or otherwise owning at least ten percent
(10%) of the outstanding ownership interests of such entity;
(xx) Making operating expenses or capital expenditures
beyond those contained in the Budget (including any Rollover Budget), except as
may be reasonable or necessary, in light of force majeure events or other
eventualities, to maintain operations of the Company and, if any, NSR, on the
Line;
(xxi) Entering into an agreement, program or other
arrangement pursuant to which the Company grants or provides to any Person any
operating, haulage, trackage or any other rights that allow access over the
Line, or otherwise expands any such current access rights; or
(xxii) Permitting any Freight Rail Common Carrier to
perform haulage for any rail carrier, whether such Freight Rail Common Carrier
is operating over the Line in haulage or on trackage rights.
5.7
Budget and Business Plan; Investment Policies
.
(a) Attached as Exhibit 5.7(a) to this Agreement is a forecast of the budget
(the "Budget") for the first Fiscal Year, a forecast of a business plan (a
"Business Plan") for the first Fiscal Year, and a forecast of net cash flow (which,
by definition, will reflect any reasonably necessary cash reserve requirements)
(a "Net Cash Flow Forecast") for the first Fiscal Year. On or prior to the
date which is sixty days before the end of each Fiscal Year, commencing with
the Fiscal Year ending December 31, 2009, the Management Committee shall
review, and, if acceptable, approve, a Budget, Business Plan and Net Cash Flow
Forecast for the following Fiscal Year, in each case to be prepared by the
Railroad Operator. The Budget shall consist of a Maintenance Budget and an
Operating Budget (which such Operating Budget shall be prepared in conformance
with the Operating Expense Accounting Plan attached as Appendix D to the
Railroad Operating Agreement), and the Business Plan shall consist of a
Maintenance Plan and an Operating Plan. The Budget, Business Plan and Net Cash
Flow Forecast for the next succeeding Fiscal Year shall upon approval of the
Management Committee in accordance with
Section 5.6
become the Budget,
Business Plan and Net Cash Flow Forecast for such Fiscal Year. If the Management
Committee does not approve a Budget, Business Plan or Net Cash Flow Forecast for
any Fiscal Year prior to the commencement of such year, then the Budget,
Business Plan or Net Cash Flow Forecast for that Fiscal Year shall be the
Budget, Business Plan or Net Cash Flow Forecast, as the case may be, from the
prior Fiscal Year (excluding the prior Fiscal Year's extraordinary and
nonrecurring items, but including any contractually obligated or legally
required commitments or expenditures for the current year), as the case may be,
adjusted, in the case of the Budget based on the "AAR Railroad Cost Indexes - Table
A - Annual indexes of charge-out prices and wage rates (1977 = 100) - East -
Materials prices, wage rates and supplements combined (excluding fuel),"
together with any adjustment of contractual commitments in accordance with
their terms (a "Rollover Budget"). Notwithstanding anything to the contrary
set forth herein, the Budget (including any Rollover Budget), Business Plan and
Net Cash Flow Forecast for any Fiscal Year shall take into account the capital
expenditures for such Fiscal Year set forth in Schedule 2.5 to the Transaction
Agreement and any reserves the Management Committee deems to be reasonably
necessary to conduct the business of the Company as reflected in the Budget and
Business Plan.
(b) Attached as Exhibit 5.7(b) to this Agreement are the investment policies
(the "Investment Policies") pursuant to which the initial Capital Contribution
of the NS Member described in
Section 2.1(a)
, any additional cash
Capital Contributions to the Company, and any other funds shall be invested by
the Company. The Company shall provide a monthly report to the NS Member and
the Pan Am Member detailing the investments made by the Company and the extent
of such holdings.
5.8
Officers
.
(a)
Officers.
Subject to
Section 5.6
, the Management
Committee shall have the authority to appoint and terminate Officers of the
Company and retain and terminate employees, agents and consultants of the
Company and to delegate such duties to any such Officers, employees, agents and
consultants as the Management Committee deems appropriate, including the power,
acting individually or jointly, to represent and bind the Company in all
matters, in accordance with the scope of their respective duties. The setting
and modifications of compensation levels (including bonuses and benefits, if
any) for any such Officers, employees, agents or consultants shall be set by
the approval of the Management Committee in accordance with
Section 5.6
.
(b)
General Manager.
Subject to
Section 5.6
, the Management
Committee shall have the authority to ratify the appointment of the General
Manager, such appointment to be made by the Railroad Operator.
5.9
Exculpation and Indemnification
.
(a)
Indemnified Persons
. The Committee Representatives, the Officers (if
any) and each Member and its Affiliates, and the partners, members,
shareholders, officers, directors, advisory directors, managers, employees and
control persons (as such term is defined in the Securities Act) of each Member
and its Affiliates (collectively, the "Indemnified Persons") shall not be
liable, directly or indirectly, to the Company, any other Member or any other
Person who has an interest in the Company for any act or omission (in relation
to the Company or this Agreement) taken or omitted by such Indemnified Person
in good faith in their capacity as such, provided that such act or omission did
not constitute gross negligence, fraud or willful violation of the law, this
Agreement or the fiduciary duties set forth in
Section 5.10(a)
. To the
fullest extent permitted by applicable law, the Company shall indemnify and
hold harmless each Indemnified Person and may indemnify any other Person
subject to approval and designation of such person for such indemnification by
approval of the Management Committee against all claims, damages, losses,
liabilities and expenses of whatever nature (including reasonable attorneys'
fees and disbursements) ("Claims") relating to activities undertaken in
connection with the Company in their capacity as such, including, but not
limited to, amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and counsel fees and expenses reasonably incurred in
connection with the investigation, defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative body in which such Indemnified Person may be or may have been
involved as a party or otherwise, or with which such Indemnified Person may be
or may have been threatened, while acting as such Indemnified Person; provided
that no indemnity shall be payable hereunder against any liability incurred by
such Indemnified Person by reason of gross negligence, fraud, a willful
violation of the law or a breach of this Agreement or the fiduciary duties set
forth in
Section 5.10(a)
. No Indemnified Person shall settle or
compromise any Claim without the written consent, which consent shall not be
unreasonably withheld, of the Management Committee, subject to
Section 5.6
.
(b)
Advance of Expenses
. Expenses incurred by an Indemnified Person in
defense or settlement of any Claim that may be subject to a right of
indemnification hereunder may be advanced (and must be advanced to Members, the
Committee Representatives and Officers, if any, of the Company) by the Company
prior to the final disposition thereof upon receipt of an undertaking by or on
behalf of the Indemnified Person to repay such amount if it shall ultimately be
determined that the Indemnified Person is not entitled to be indemnified by the
Company.
(c)
Non-Exclusivity
. The right of any Indemnified Person to the
indemnification provided herein shall be cumulative of and in addition to any
and all rights to which such Indemnified Person may otherwise be entitled by
contract or as a matter of law or equity and shall extend to such Indemnified
Person's successors, assigns and legal representatives.
(d)
Satisfaction from Company Assets
. All judgments against the Company or an
Indemnified Person, in respect of which such Indemnified Person is entitled to
indemnification, shall only be satisfied from Company assets and no other
Person shall have any liability with respect thereto.
(e)
Expenses
. The Company is authorized to pay expenses, fees,
withholding taxes and other costs reasonably incurred by the Company,
including, without limitation, expenses incurred in connection with
acquisitions or investments and expenses incurred under this
Section 5.9
.
(f)
Report to the Management Committee
. The Company shall report in
writing to the Management Committee details of any payments made pursuant to
Section
5.9(d)
or
Section 5.9(e)
.
5.10
Fiduciary Duty; Exculpation
.
(a)
Notwithstanding any other provisions of this Agreement, whether express
or implied, or applicable law, the Members agree that, except as to the matters
set forth in
Section 5.12(b)
, to the fullest extent permitted by Section
18-1101(c) of the Act, no Member shall owe any duties at law or in equity
(including fiduciary duties) to the Company or any other Member; provided, that
an Indemnified Person who is a Committee Representative and who shall also be
an employee of a Member shall have a fiduciary duty to such Member and not to
the Company. Notwithstanding the foregoing, nothing in this
Section 5.10
shall eliminate any implied covenant of good faith and fair dealing between any
Member and the Company or the other Members. With regard to matters set forth
in
Section 5.12(b)
, the Members shall require their respective Committee
Representatives to act in the best interests of the Company.
(b)
The provisions of this Agreement, to the extent that they restrict the
duties and liabilities of an Indemnified Person otherwise existing at law or in
equity, are agreed by the Members hereunder to replace such other duties and
liabilities of such Indemnified Person.
5.11
Interparty Matters
.
Notwithstanding anything to the contrary
contained in this Agreement, in the event of any disagreement, dispute or
controversy between any Member or any of its Affiliates (other than the
Company), on the one hand, and the Company, on the other hand, arising out of
or relating to this Agreement or any of the JV Transaction Agreements to which
the Company is a party or is subject or the breach, termination or validity
thereof, the Committee Representatives designated by the other Member shall
control (on behalf of the Company) the conduct or settlement of any such
disagreement, dispute or controversy or any proceedings relating thereto.
5.12
Industrial Development Projects
.
(a)
Notwithstanding anything to the contrary herein, each Member, acting in
its individual capacity and not as a Member or otherwise on behalf of the
Company, shall have the right to directly contract with any new or existing
customer of that Member so as to induce said customer to locate or expand
facilities on the Line.
(b)
The Company shall construct and maintain one or more Industrial
Development Projects if said Industrial Development Project(s) are in the
Company's best interest, giving due consideration to costs, revenues,
contributions, safety, security, and capacity needs of current and projected
expansions of existing or authorized traffic.
5.13
Public Funds.
The Company shall solicit public funding for the capital
projects appearing on Exhibit B hereto, provided, however, that nothing in this
Section 5.13
shall require the Company to receive, without an
affirmative vote of the Management Committee, public funding that would require
the Company to provide third party access to the Company's facilities.
SECTION 6
ROLE OF MEMBERS
6.1
Rights or Powers
.
The Members in their
capacity as Members shall not have any right or power to take part in the
management or control of the Company or its business and affairs or to act for
or bind the Company in any way. Notwithstanding the foregoing, the Members
have all the rights and powers specifically set forth in this Agreement and, to
the extent not inconsistent with this Agreement, in the Act. A Member shall
cease to be a Member at the time such Member ceases to own any Membership
Interests.
6.2
Voting Rights
.
No Member has any voting right except with
respect to those matters specifically reserved for a Member vote which are set
forth in this Agreement and as required in the Act.
6.3
Meetings of the Members.
(a)
Meetings of the Members may be called upon the written request of any
Member. The call shall state the location of the meeting and the nature of the
business to be transacted. Notice of any such meeting, including any meeting
that has been adjourned, shall be given to each Member not less than fifteen
(15) Business Days (or four (4) Business Days if delivered personally or by
telephone, email or facsimile) nor more than forty-five (45) days prior to the
date of such meeting. Members may vote in person, by proxy or by telephone at
such meeting and may waive advance notice of such meeting. Whenever the vote
or consent of Members is permitted or required under the Agreement, such vote
or consent may be given at a meeting of the Members or may be given in
accordance with the procedure prescribed in
Section 6.3(f)
. No business
other than that stated in the notice shall be transacted at any meeting without
the unanimous consent of all of the Members entitled to vote thereat.
(b)
For the purpose of determining the Members entitled to vote on, or to
vote at, any meeting of the Members or any adjournment thereof, the Management
Committee or the Member requesting such meeting may fix, in advance, a date as
the record date for any such determination. Such date shall not be more than
thirty (30) days nor less than ten (10) days before any such meeting, unless
between the setting of the record date and the record date there is a Pan Am
Change in Control. If between the setting of the record date and the record
date there is a Pan Am Change in Control, the NS Member shall be given notice
and the opportunity to set a new record date, which record date may be a date
following the acquisition of any Governmental Approvals as may be reasonable or
necessary for the NS Member to acquire and exercise control of the Company.
(c)
Each Member may authorize any Person or Persons to act for it by proxy
on all matters in which a Member is entitled to participate, including waiving
notice of any meeting, or voting or participating at a meeting. Every proxy
must be signed by the Member or its attorney-in-fact. No proxy shall be valid
after the expiration of eleven (11) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Member executing it.
(d)
Each meeting of Members shall be conducted by an individual Person
selected by the Member entitled to appoint the Chairman of the Management
Committee for the calendar year in which the meeting is held. Except as
otherwise required by law, the presence in person or by proxy of Members able
to appoint more than fifty-nine percent (59%) of the voting members of the
Management Committee shall constitute a quorum for the transaction of business
at a meeting of the Members duly called in accordance with
Section 6.3(a)
.
In case a quorum shall not be present at any meeting, any Member present
thereat, in person or by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
the requisite number of Members shall be present.
(e)
At a meeting, any proposal shall be approved if it receives the
affirmative vote of the Members able to appoint more than fifty-nine percent
(59%) of the voting members of the Management Committee.
(f)
Notwithstanding this
Section 6.3
, any action required or
permitted to be taken at any meeting of the Members may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by each and every Member.
6.4
Required Member Consents
. Notwithstanding any other provision of this
Agreement no action may be taken by the Company (whether by the Management
Committee, or otherwise) in connection with any of the following matters
without the written consent of all of the Members:
(a)
Any act in contravention of this Agreement; or
(b)
Any transaction to liquidate or dissolve the Company.
6.5
Member Compensation
. No Member shall receive any interest, salary or
drawing with respect to its Capital Contributions or its Capital Account or for
services rendered on behalf of the Company, or otherwise, in its capacity as a
Member, except as otherwise provided in this Agreement, any of the JV
Transaction Agreements or in another agreement among the Company and a Member
that received approval by the Management Committee in accordance with
Section
5.6
.
6.6
Members' Liability
. No Member shall be liable under a judgment,
decree or order of a court, or in any other manner for the debts or any other
obligations or liabilities of the Company. A Member shall be liable only to
make its Capital Contributions and shall not be required to restore a deficit
balance in its Capital Account or to lend any funds to the Company or, after
its Capital Contributions have been made, to make any additional contributions,
assessments or payments to the Company, provided that a Member may be required
to repay distributions made to it as provided in
Section 4
or the Act.
A Committee Representative shall not have any personal liability for the
repayment of any Capital Contributions of any Member.
6.7
Partition
. While the Company remains in effect or is
continued, each Member agrees and waives its rights to have any Company
Property partitioned, or to file a complaint or to institute any suit, action
or proceeding at law or in equity to have any Company Property partitioned, and
each Member, on behalf of itself, its successors and its assigns hereby waives
any such right.
6.8
Transactions Between a Member and the Company
. Except as
otherwise provided by applicable law and the provisions of this Agreement or as
contemplated by the Transaction Agreement, subject to the Management Committee's
approval in accordance with
Section 5.6
, any Member or any Affiliate of
any Member may, but is not required to, enter into, directly or indirectly, any
transaction, agreement, joint enterprise or arrangement, guarantee, loan,
advance or investment with the Company provided the same is on an arms length
basis and at fair market value. No Member may, without the approval of the
other Member, enter into, directly or indirectly, any transaction, agreement,
joint enterprise or arrangement, guarantee, loan, advance or investment with
the Company other than on an arms length basis and at fair market value. The
existence of these relationships and acting in such capacities will not result
in the Member being deemed to be participating in the control of the business
of the Company or otherwise affect the limited liability of the Member.
6.9
Other Instruments
. Each Member hereby agrees to execute and deliver
to the Company within five days after receipt of a written request therefor,
such other and further documents and instruments, statements of interest and
holdings, designations, powers of attorney and other instruments and to take
such other action as the Management Committee deems necessary, useful or appropriate
to comply with any laws, rules or relations as may be necessary to enable the
Company to fulfill its responsibilities under this Agreement.
6.10
Advise of Changes
. Each Member hereby agrees to notify the other
Members as soon as practicable of any event, circumstance or fact of which it
has knowledge which has had, or is reasonably likely to have, a material
adverse effect on such Member's ability to fulfill its obligations under this
Agreement.
6.11
NS Change in Control
.
Notwithstanding
anything to the contrary herein, in the event of a NS Change in Control, the
Company shall enter into an agreement with Springfield Terminal granting to Springfield
Terminal overhead trackage rights ("CoC Trackage Rights") between: (a) CPF 312 and
Mechanicville for the sole purpose of interchanging traffic with Canadian
Pacific Railway Company, or its wholly-owned subsidiary, at Mohawk Yard, NY;
(b) CPF 312 and a connection with Vermont Railway at Hoosick Junction; (c) New
England Central Railway at East Northfield, MA, or, should the Company's connection
with New England Central Railway be moved to Millers Falls, MA, at Millers
Falls; and (d) CSXT at Rotterdam Junction, NY. The agreement shall have the
same general terms and conditions as that governing the Harvard Trackage Rights,
except that: (1) the compensation shall be the $0.24 per car mile (indexed
beginning the Effective Date in the same manner as the compensation for the Harvard
Trackage Rights); (2) the route will be over the main line of the Company
between CPF 312 and the relevant entry-exit locations (Mechanicville, Hoosick
Junction, East Northfield (or Millers Falls) and Rotterdam Junction); and (3)
operations will be limited to two train pairs per day - one for carrying out the
interchange with CP and CSXT and one for carrying out the interchange with
Vermont Railway and New England Central. Further, the Company and Springfield
Terminal shall amend the Springfield Terminal Joint Use Agreement to permit an
unlimited number of cars to move via those trackage rights; in all other ways
the Springfield Terminal Joint Use Agreement shall be unmodified. In addition,
the Company shall agree to invest up to $5 million in a capital improvement as
may be reasonably necessary to facilitate the use of the Harvard Trackage Rights
under the amended agreement.
SECTION 7
ACCOUNTING BOOKS AND RECORDS
7.1
Accounting Books and Records
.
(a)
The Company shall keep on site at its principal place of business, or in
such other place as the Management Committee may determine from time to time
(which such location shall be immediately communicated to each Committee
Representative), each of the following:
(i) Separate books of account for the Company which shall show a true and
accurate record of all costs and expenses incurred, all charges made, all
credits made and received, and all income derived in connection with the
conduct of the Company and the operation of the Business in accordance with
this Agreement, and, where costs and expenses, or costs and expenses inputs, are
derived by taking a ratio of Springfield Terminal's costs, the Company shall
show a true and accurate record of Springfield Terminal's total costs subject
to the ratio, as well as true and accurate records of the metrics from which the
applicable ratio is generated,
(ii) A current list of the full name and last known business, residence or
mailing address of each Member and Committee Representative, both past and
present,
(iii) A copy of the Certificate of Formation and all amendments thereto,
together with executed copies of any powers of attorney pursuant to which any
amendment has been executed,
(iv) Copies of the Company's federal, state, and local income tax returns and
reports, if any, until one year after the period of limitations for auditing
the return by the federal government or by any applicable state or local
government expires,
(v) Copies of this Agreement (including any amendments thereto),
(vi) Copies of any writings permitted or required under the Act regarding the
obligation of a Member to perform any enforceable promise to contribute cash or
property or to perform services as consideration for such Member's Capital
Contribution, and
(vii) Any written consents obtained from Members pursuant to the Act regarding
action taken by Members without a meeting.
(b) The Company shall use the accrual method of accounting in preparation of
its financial reports and for tax purposes and shall keep its books and records
accordingly. Any Member or its designated representative has the right to
access and audit, inspect and copy the contents of such books or records and
shall also have access during normal business hours to such additional
financial information, documents, books and records as may be reasonably
requested (including in order to comply with any reporting requirements of such
Member under applicable laws or stock exchange regulations). The rights
granted to a Member pursuant to this
Section 7.1
are expressly subject
to compliance by such Member with the safety, security and confidentiality
procedures and guidelines of the Company, as such procedures and guidelines may
be established from time to time.
(c)
The accounting period of the Company shall be the Fiscal Year.
7.2
Reports
.
(a)
In General
. The Railroad Operator shall be responsible for
causing the preparation of financial reports of the Company and the
coordination of financial matters of the Company with the Company's
accountants.
(b)
Periodic and Other Reports
. The Company shall cause to be delivered to each
Member the financial statements listed in clauses (i) and (ii) below, prepared,
in each case (other than with respect to Member's Capital Accounts, which shall
be prepared in accordance with this Agreement) in accordance with GAAP
consistently applied (and, if required by any Member or its Affiliates for
purposes of reporting under the Exchange Act Regulation S-X), including any
reports as may be required in accordance with the Company's or any of its
Members' status as a rail carrier, and such other reports, representations and
certifications as any Member may reasonably request from time to time, provided
that, if the Management Committee so determines within 30 days thereof, such
other reports shall be provided at such requesting Member's sole cost and
expense. The monthly and quarterly financial statements referred to in clause
(ii) below may be subject to normal year-end audit adjustments.
(i) As soon as practicable following the end of each Fiscal Year (and in any
event not later than 120 days after the end of such Fiscal Year) the Company
shall cause to be delivered to each Member, an income statement and a balance sheet
of the Company as of the end of such Fiscal Year and the related statements of
operations, Members' Capital Accounts and changes therein, and cash flows for
such Fiscal Year, together with appropriate notes to such financial statements
and supporting schedules, all of which shall be audited and certified by the
Auditors, and in each case, to the extent the Company was in existence, setting
forth in comparative form the corresponding figures for the immediately
preceding Fiscal Year end (in the case of the balance sheet) and the two
immediately preceding Fiscal Years (in the case of the statements), and
(ii) As soon as practicable following the end of each month and following the
end of the first eleven months of each Fiscal Year (and in any event not later
than 30 days after the end of each month and the end of each such month), the
Company shall cause to be delivered to each Member, a balance sheet of the
Company as of the end of each such month and each such Fiscal Quarter and the
related statements of operations and cash flows for each such month and each such
Fiscal Quarter and for the Fiscal Year to date, in each case, to the extent the
Company was in existence, setting forth in comparative form the corresponding
figures for the prior Fiscal Year's month and for the prior Year's Fiscal
Quarter and the interim period corresponding to the month and the interim
period just completed.
The periodic statements described in clause (ii) above
shall be accompanied by a written certification of the General Manager that
such statements have been prepared in accordance with GAAP consistently applied
or this Agreement, as the case may be. The Company and the Management
Committee shall also distribute to all Members, at the same time such reports
are circulated, delivered or distributed internally, each and every internal
management report prepared by, for or circulated among senior management of the
Company relating to the business or financial performance of the Company.
7.3
Tax Matters
.
(a)
Partnership Status
. It is the intent of the Members that the Company
be classified as a partnership for U.S. federal, state and local income tax
purposes. The Members hereby agree not to elect to be excluded from the
application of Subchapter K of Chapter 1 of Subtitle A of the Code or any
similar state statute.
(b)
Company Tax Returns
. The Tax Matters Partner (as defined in
Section
7.3(d)
) shall prepare (or cause to be prepared) the U.S. federal and state income
tax returns and information returns (including, but not limited to, employment
tax returns and various Forms 1099) and all other tax and information returns
of the Company in a manner consistent with this Agreement. The federal income
tax return shall contain an election under Section 6231(a)(1)(B)(ii) of the
Code and the regulations thereunder to treat the Company as a partnership to
which the provisions of Sections 6221 through 6234 of the Code, inclusive,
apply. The Tax Matters Partner shall cause the Company's accountants to
prepare and review the necessary federal and state income tax returns and
information returns for the Company, always reporting in a manner that legally
produces the lowest Company taxable income (e.g., reporting depreciation under
the accelerated method rather than under the straight-line or alternative depreciation
system or electing any bonus depreciation that may be allowed in the future).
Each Member shall provide such information, if any, as may be needed by the
Company for purposes of preparing such tax and information returns, provided
that such information is readily available from regularly maintained accounting
records. Prior to April 1st of each year, or sooner as applicable, the Tax
Matters Partner shall deliver to the other Member for its review a copy of the
Company's federal and state income tax returns and information returns in the
form proposed to be filed for each Fiscal Year, and shall reasonably consider
and take into account all reasonable comments to such proposed tax returns and
information returns provided by the other Member at least ten (10) days prior
to the filing date for such returns. After taking into account any such
comments, the Tax Matters Partner shall cause the Company to timely file such
tax returns. Within two (2) Business Days after filing such federal and state
income tax returns and information returns, the Tax Matters Partner shall cause
the Company to deliver to each Member a copy of the Company's federal and state
income tax returns and information returns as filed for each Fiscal Year,
together with any additional tax-related information in the possession of the
Company that such Member may reasonably and timely request in order to properly
prepare its own income tax returns.
(c)
Tax Information
. The U.S. federal and state income tax returns for
the Company (and other tax information if reasonably required by a Member,
including a detailed calculation of each Member's Adjusted Capital Account for
purposes of section 704(b) of the Code) shall be delivered to each Member as
soon as practicable after the end of each Fiscal Year of the Company but not
later than five months after the end of each Fiscal Year. Tax information
needed by each Member for financial reporting purposes shall be delivered to
each Member within three (3) days after the end of each Fiscal Quarter.
(d)
Tax Audits
.
(i) At all times prior to a Pan Am Change in Control, the Pan Member shall
be the "tax matters partner," as that term is defined in Section
6231(a)(7) of the Code (the "Tax Matters Partner"); at all times upon and after
a Pan Am Change in Control, the NS Member shall be the Tax Matters Partner.
The Tax Matters Partner is hereby directed and authorized to take whatever
steps the Tax Matters Partner, in its sole discretion, deems necessary or
desirable to perfect such designation, including, without limitation, filing
any forms or documents with the IRS and taking such other action as from time
to time is required under the Regulations.
(ii) The Tax Matters Partner, in consultation with the other Member, shall
direct the defense of any claims made by the IRS (or by any other taxing
authority) to the extent that such claims relate to the adjustment of Company
items at the Company level and, in connection therewith, shall cause the
Company to retain and to pay the fees and expenses of counsel and other advisors
chosen by the Tax Matters Partner with the consent of the other Member. The
Tax Matters Partner shall promptly deliver to each other Member a copy of all
notices, communications, reports and writings received from the IRS relating to
or potentially resulting in an adjustment of Company items, shall promptly
advise the other Member of the substance of any conversations with the IRS in
connection therewith, and shall keep the other Member advised of all
developments with respect to any proposed adjustments which come to its
attention. In addition, the Tax Matters Partner shall (A) provide in a timely
manner the other Member with a draft copy of any correspondence or filing to be
submitted by the Company in connection with any administrative or judicial
proceedings relating to the determination of Company items at the Company level
reasonably in advance of such submission, (B) incorporate all reasonable
changes or comments to such correspondence or filing requested by the other
Member and (C) provide the other Member with a final copy of correspondence or
filing. The Tax Matters Partner will provide the other Member with notice
reasonably in advance of any meetings or conferences with respect to any
administrative or judicial proceedings relating to the determination of Company
items at the Company level (including any meetings or conferences with counsel
or advisors to the Company with respect to such proceedings), and the other
Member shall have the right to participate, at its sole cost and expense, in
any such meetings or conferences.
(iii) Notwithstanding anything in this
Section 7.3
, the Tax Matters
Partner shall not (A) extend the period of limitations for any tax year for
Federal, state, and local income tax purposes, (B) enter into any settlement
agreement that is binding upon the Members with respect to the determination of
Company items at the Company level, (C) file a petition under Section 6226(a)
of the Code for the readjustment of Company items, or (D) appeal any judicial
decision with respect to any Company item, without the prior consent of the
other Member which consent shall not be unreasonably withheld, conditioned or
delayed.
SECTION 8
AMENDMENTS
8.1
Amendments
. Amendments to this Agreement may be proposed by
any Committee Representative or any Member. Following such proposal, the
Management Committee shall submit to the Members a verbatim statement of any
proposed amendment, and the Management Committee shall include in any such
submission a recommendation as to the proposed amendment. The Management
Committee shall seek the written consent of the Members pursuant to
Section
6.3(f)
on the proposed amendment or shall call a meeting to vote thereon
and to transact any other business that it may deem appropriate. A proposed
amendment shall be adopted and be effective as an amendment hereto only if it
receives the affirmative vote of each of the Members.
SECTION
9
TRANSFERS
9.1
Restrictions on Transfers
. Except as provided in
Section 9.2
of this
Agreement, no Member shall Transfer all or any portion of its Membership
Interest.
9.2
Permitted Transfers
. Subject to the conditions and restrictions set
forth in
Section 9.3
, a Member may at any time Transfer all or any
portion of its Membership Interest to (a) any Wholly-Owned Affiliate of either
the NS Parent or Pan Am Parent, (b) subject to the prior written consent of all
other Members, any Person, (c) any Person that (i) is the surviving Person as
a result of any merger or consolidation of the NS Parent with or into any such
Person or (ii) acquires all or substantially all of the assets of the NS Parent,
(d) any other Member, (e) any administrator, trustee or other Person to whom
the NS Member or the NS Member's Membership Interest is transferred
involuntarily by operation of law, (f) any Person that (i) is the surviving
Person as a result of any merger or consolidation of the Pan Am Parent with or
into any such Person or (ii) acquires all or substantially all of the assets of
the Pan Am Parent, (g) any administrator, trustee or other Person to whom the
Pan Am Member or the Pan Am Member's Membership Interest is transferred involuntarily
by operation of law (any such Transfer being referred to in this Agreement as a
"Permitted Transfer"). Any "Permitted Transfer" described in clauses (a)
through (e) shall not constitute a Pan Am Change in Control and shall not
effect a modification of the rights or obligations of the Members. Any
"Permitted Transfer" described in clauses (f) or (g) (even if such transfer
also is described in clause (a)) shall constitute a Pan Am Change in Control
and shall effect a modification of the rights or obligations of the Members as
further set forth herein.
9.3
Conditions to Permitted Transfers
. A Transfer of a Membership Interest shall not be
treated as a Permitted Transfer under
Section 9.2
unless and until the
following conditions are satisfied:
(a)
Except in the case of a Transfer involuntarily by operation of law, the
transferor and transferee shall execute and deliver to the Company such
documents and instruments of conveyance as may be reasonably necessary or
appropriate in the opinion of counsel to the Company to effect such Transfer.
In the case of a Transfer of a Membership Interest involuntarily by operation
of law, the Transfer shall be confirmed by presentation to the Company of legal
evidence of such Transfer, in form and substance satisfactory to counsel to the
Company. In all cases, the transferor and/or transferee shall reimburse the
Company for all costs and expenses that the Company reasonably incurs in
connection with such Transfer.
(b)
The transferor and transferee shall furnish the Company with the
transferee's taxpayer identification number and any other information
reasonably necessary to permit the Company to file all required federal and
state tax returns and other legally required information, statements or
returns. Without limiting the generality of the foregoing, the Company shall
not be required to make any distribution otherwise provided for in this
Agreement with respect to any transferred Membership Interest until it has received
such information.
(c)
Except in the case of a Transfer of a Membership Interest involuntarily
by operation of law, either (i) such Membership Interest shall be registered
under the Securities Act and any applicable state securities laws or (ii) the
transferor shall provide (unless waived by the Management Committee) an opinion
of counsel which opinion and counsel shall be reasonably satisfactory to the
Management Committee to the effect that such Transfer is exempt from all
applicable registration requirements and that such Transfer will not violate
any applicable laws regulating the Transfer of securities.
(d)
Prior to any such Transfer, the Transferee shall deliver to each Member
a written commitment from such Transferee to be bound by this Agreement and to
comply with the applicable provisions of
Section 9.6
.
(e)
Prior to any such Transfer, the transferor delivers to all other
Members a written explanation about why or why not the Transfer would not cause
the Company to terminate under Section 708(b)(1)(B) of the Code and the
Regulations thereunder as a result of such Transfer.
(f)
Prior to any such Transfer, each other Member delivers to the transferor
either
(i) The Member's written agreement that the Transfer would not cause the
Company to terminate under Section 708(b)(1)(B) of the Code and the Regulations thereunder solely as a result of such Transfer, or
(ii) The Member's written consent for the Transfer.
9.4
Prohibited Transfers
.
Any purported Transfer of a Membership Interest
that is not permitted by the terms of this Agreement shall be null and void and
of no force or effect whatever; provided that, if the Company is required as a
matter of law to recognize a Transfer that is not a Transfer permitted by the
terms of this Agreement (unless the Management Committee, in its sole
discretion and by unanimous action or consent, elects to recognize a Transfer
that is not a Transfer permitted by the terms of this Agreement), the
Membership Interest Transferred shall be strictly limited to the transferor's
rights to allocations and distributions as provided by this Agreement with
respect to the transferred Membership Interest, which allocations and
distributions may be applied (without limiting any other legal or equitable
rights of the Company) to satisfy any debts, obligations, or liabilities for
damages that the transferor or transferee of such Membership Interest may have
to the Company.
In the case of a Transfer or attempted Transfer of a Membership
Interest that is not a Transfer permitted by the terms of this Agreement, the
parties engaging or attempting to engage in such Transfer shall be liable to
indemnify, and hold harmless the Company and the other Members from all cost,
liability, and damage that any of such indemnified Person may incur (including,
without limitation, incremental tax liabilities, attorneys' fees, fees of
experts and accountants, and expenses) as a result of such Transfer or
attempted Transfer and efforts to enforce the indemnity granted hereby.
9.5
Rights of Unadmitted Assignees
. A Person who acquires a Membership Interest, but
who is not admitted as a substituted Member pursuant to
Section 9.6
shall be entitled only to allocations and distributions with respect to such
Membership Interest in accordance with this Agreement, and shall have no right
to any information or accounting of the affairs of the Company, shall not be
entitled to inspect the books or records of the Company, and shall not have any
of the rights of a Member under the Act or this Agreement but shall succeed to
all of the obligations of the Member who purported to transfer a Membership
Interest in violation hereof including without limitation the obligation of the
transferee under this
Section 9
with respect to any subsequent
transfers.
9.6
Admission of New and Substituted Members
. Subject to the other provisions of this
Section
9
, a transferee or acquiree of a Membership Interest shall be admitted to
the Company as a new or substituted Member upon satisfaction of the conditions
set forth in this
Section 9.6
:
(a)
The Membership Interest with respect to which the transferee is being
admitted was acquired by means of a Transfer permitted by the terms of this
Agreement.
(b)
The transferee of the Membership Interest (other than, with respect to
clauses (i) and (ii) below, a transferee that was a Member or a Wholly-Owned
Affiliate of a Member prior to the Transfer) shall, by written instrument in
form and substance reasonably satisfactory to the Management Committee (and, in
the case of clause (iii) below, the transferor Member), (i) make customary
representations and warranties to each non-transferring Member as to its due
organization, authority to become a party to this Agreement, litigation and
required consents, (ii) accept and adopt the terms and provisions of this
Agreement, including
Section 5.2(c)
, this
Section 9
and
Section
10
, and (iii) assume the obligations of the transferor Member under this
Agreement with respect to the transferred Membership Interest. Upon unanimous
agreement of all Members, a transferor Member transferring all but not less than
all of its Membership Interest to any Permitted Transferee shall be released
from all such assumed obligations except (x) those obligations or liabilities
of the transferor Member arising out of a breach of this Agreement, and (y) in
the case of a Transfer to any Person other than a Member or any of its
Affiliates, those obligations or liabilities of the transferor Member based on
events occurring, arising or maturing prior to the date of Transfer.
(c)
A new Member acquiring a Membership Interest from the Company shall by
written instrument in form and substance reasonably satisfactory to the
Management Committee (i) make representations and warranties to the Members
equivalent to those set forth in
Section 9.6(b)(i)
and (ii) accept and
adopt the terms and provisions of this Agreement.
(d)
The transferee or acquiree pays or reimburses the Company for all
reasonable legal, filing, and publication costs that the Company incurs in
connection with the admission of the transferee or acquiree as a Member with
respect to the Transferred Membership Interest.
(e)
Except in the case of a Transfer involuntarily by operation of law, if
required by the Management Committee, the transferee (other than a transferee
that was a Member or a Wholly-Owned Affiliate of a Member prior to the
Transfer) shall deliver to the Company evidence of the authority of such Person
to become a Member and to be bound by all of the terms and conditions of this
Agreement, and the transferee and transferor shall each execute and deliver
such other instruments as the Management Committee reasonably deems necessary
or appropriate to effect, and as a condition to, such Transfer, including
amendments to the Certificate or any other instrument filed with the State of
Delaware or any other state or governmental authority. In the event of an
involuntary Transfer by operation of law the transferee shall succeed to all of
the obligations of the transferring Member under this Agreement but shall not
have any rights (including rights with respect to Management Committee
membership or under
Section 9
) other than with respect to allocations or
distributions under this Agreement.
9.7
Representations Regarding Transfers; Legend
. Each Member hereby represents and warrants to the
Company and the Members that such Member's acquisition of a Membership Interest
hereunder is made as principal for such Member's own account and not for resale
or distribution of such Membership Interest. Each Member further hereby agrees
that the following legends may be placed upon any counterpart of this
Agreement, the Certificate of Formation, or any other document or instrument
evidencing ownership of a Membership Interest:
The Membership Interest represented by this document has not
been registered under any securities laws and the transferability of such
Membership Interest is restricted. Such Membership Interest may not be sold,
assigned, or transferred, nor will any assignee, vendee, transferee, or
endorsee thereof be recognized as having acquired any such Membership Interest
by the issuer for any purposes, unless (1) a registration statement under the
United States Securities Act of 1933, as amended, with respect to such
Membership Interest shall then be in effect and such transfer has been
qualified under all applicable state securities laws or (2) the availability of
an exemption from such registration and qualification shall be established to
the satisfaction of counsel to the Company; and
The Membership Interest represented by this document is subject
to, and is transferable only upon compliance with, the provisions of a limited
liability company agreement, dated as of April 9, 2009. A copy of the
above-referenced agreement is on file at the principal office of the Company.
SECTION
10
EVENTS OF DEFAULT
10.1
Events of Default
. The following acts shall constitute an Event of
Default hereunder:
(a)
A Transfer by any Member that is not a Permitted Transfer;
(b)
Failure of any Member to materially comply with any material covenant or
agreement hereunder in accordance with its terms within thirty (30) days after
receipt of notice thereof; or
(c)
The Bankruptcy of any Member.
10.2
Remedies Upon an Event of Default
. If an Event of Default has occurred and is
continuing:
(a)
The non-defaulting Members may seek specific performance of any covenant
or agreement contained herein, and may seek to enjoin the breach of any
covenant or agreement. It is acknowledged that in such event it would be
impossible to measure in money the damages that would be suffered if the
parties hereto fail to comply with any of the obligations imposed herein on
them and that, in the event of any such failure, an aggrieved party hereto will
be irreparably damaged and will not have an adequate remedy at law. In
addition to being entitled to exercise all rights granted by law, any such
party shall therefore, be entitled to equitable relief from any court having
jurisdiction over such dispute, and if any action should be brought in equity
to enforce any of the provisions of this Agreement, none of the parties shall
raise the defense that there is an adequate remedy at law; and
(b)
Each non-defaulting Member shall be entitled to recover from the
defaulting Member in an appropriate proceeding any and all claims, damages,
losses, liabilities and expenses of whatever nature (including reasonable
attorneys' fees and disbursements) (collectively, "Damages") suffered or
incurred by the Company or the non-defaulting Members as a result of such Event
of Default. No punitive damages shall be awarded as a result of an Event of
Default hereunder.
(c)
If the Event of Default arises from the Bankruptcy of a Member, no less
than five Business Days after the commencement of a Bankruptcy proceeding,
whether Voluntary or Involuntary, such Member shall provide notice of its offer
to sell to all non-defaulting Members (the "Default Sale Notice") all but not
less than all of the Membership Interest of the Company held by such defaulting
Member. Each non-defaulting Member shall have the option within forty-five
days of receiving the Default Sale Notice (the "Acceptance Period") to purchase
all, but not less than all, of its pro rata share (based on the number of
Membership Interests held by such non-defaulting Member as compared to the
total number of Membership Interests held by all non-defaulting Members) of the
Membership Interests offered. The price of the Membership Interests offered by
the defaulting Member shall be the Fair Value of such Membership Interests less
any Damages incurred by the non-defaulting Member that are recoverable pursuant
to
Section 10.2(b)
. If such offer to purchase is accepted such that all
of the Membership Interests of the defaulting Member are purchased, and at
least two Members remain, such Bankruptcy shall not be a Dissolution Event.
(d)
Each non-defaulting Member shall if it so desires, exercise its rights
under
Section 10.2(c)
by delivering to the defaulting Member written
notice of election (the "Acceptance Agreement") prior to 5:00 p.m., Eastern
standard time, on or before the last day of the Acceptance Period. By
delivering the Acceptance Agreement, the non-defaulting Member agrees to
purchase, and the defaulting Member agrees to sell, that portion of the
defaulting Member's Membership Interests which corresponds to the defaulting
Member's pro rata share. The Acceptance Agreement shall identify the committed
source of financing for such purchase or provide evidence that the
non-defaulting Member is able to effect the purchase.
The completion of the sale pursuant to
Section 10.2(c)
shall occur on a date to be mutually agreed between the defaulting Member and
the non-defaulting Member(s), but in no event later than five Business Days
after the latter of (i) the delivery date of the Acceptance Agreement or (ii)
the date on which the last of any required regulatory approvals in connection
with such transaction is received. All payments of the purchase price for a
transaction pursuant to
Section 10.2(c)
shall be made by wire transfer
of immediately available funds to an account or accounts designated by the
defaulting Member for such purpose.
(e)
If the Event of Default arises from a Transfer that is not a Permitted
Transfer, the transferring Member shall take or cause to be taken all action
necessary to reverse such Transfer.
(f)
In addition to the foregoing remedies, each defaulting Member hereby
agrees to indemnify, defend and hold harmless each non-defaulting Member, the
Company, their Affiliates and their respective partners, officers, directors,
agents, representatives, employees and trustees ("Indemnified Parties") from
and against all Damages arising out of or related to such Event of Default.
SECTION
11
DISSOLUTION AND WINDING UP
11.1
Dissolution Events
. The Company shall dissolve and shall commence
winding up and liquidating upon the first to occur of any of the following
(each a "Dissolution Event"):
(i) The unanimous vote of the Members to dissolve, wind up, and liquidate
the Company; or
(ii) A judicial dissolution under Section 18-802 of the Act.
The Members hereby agree that, notwithstanding any
provision of the Act, the Company shall not dissolve prior to the occurrence of
a Dissolution Event. The Members acknowledge that, prior to a Pan Am Change in
Control, the Management Committee has the potential to be deadlocked on certain
decisions, and it is the intent of the Members that such deadlock shall not
constitute grounds for a judicial dissolution under Section 18-802 of the Act.
11.2
Winding Up
. Upon the occurrence of a Dissolution Event, the
Company shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Members, and no Member shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the Company's
business and affairs, provided that all covenants contained in this Agreement
and obligations provided for in this Agreement shall continue to be fully
binding upon the Members until such time as the Property has been distributed
pursuant to this
Section 11.2
and the Certificate of Formation has been
canceled pursuant to the Act. The Liquidator shall be responsible for
overseeing the winding up and dissolution of the Company, which winding up and
dissolution shall be completed within ninety days of the occurrence of the
Dissolution Event. The Liquidator shall take full account of the Company's liabilities
and Property and shall cause the Property or the proceeds from the sale
thereof, to the extent sufficient therefor, to be applied and distributed, to
the maximum extent permitted by law, in the following order:
(a)
First, to creditors (including Members and Committee Representatives who
are creditors, to the extent otherwise permitted by law) in satisfaction of all
of the Company's debts and other liabilities (whether by payment or the making
of reasonable provision for payment thereof), other than liabilities for which
reasonable provision for payment has been made;
(b)
Second, except as provided in this Agreement, to Members and former
Members of the Company in satisfaction of liabilities for distribution under
the Act;
(c)
The balance, if any, to the Members in accordance with their positive
Capital Account balances (after taking into account all adjustments thereto for
contributions, distributions and allocations for the year of dissolution and
all prior periods).
(d)
Notwithstanding the foregoing, in the event of a Dissolution Event, the
holder(s) of the NS Member's Membership Interests shall have a right to in-kind
distribution of the Line upon payment of an amount equal to the difference
between the Fair Value of the Line and the amount the NS Member would otherwise
be entitled to after giving effect to
Section 11.2(a)
through
Section
11.2(c)
above.
(e)
Members or Committee Representatives may receive reasonable compensation
for any services performed pursuant to this
Section 11
.
11.3
Compliance With Certain Requirements of Regulations;
Deficit Capital Accounts
. In the event the Company is "liquidated" within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(
g
), and any Member
has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all Fiscal Years, including
the Fiscal Year during which such liquidation occurs), such Member shall have
no obligation to make any contribution to the capital of the Company with
respect to such deficit, and such deficit shall not be considered a debt owed
to the company or to any other Person for any purpose whatsoever. In the
discretion of the Liquidator, a pro rata portion of the distributions that
would otherwise be made to the Members pursuant to this
Section 11
may be:
(a)
Distributed to a trust established for the benefit of the Members for
the purposes of liquidating Company assets, collecting amounts owed to the
Company, and paying any contingent or unforeseen liabilities or obligations of
the Company. The assets of any such trust shall be distributed to the Members
from time to time, in the reasonable discretion of the Liquidator, in the same
proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to
Section 11.2
;
or
(b)
Withheld to provide a reasonable reserve for Company liabilities
(contingent or otherwise) and to reflect the unrealized portion of any
installment obligations owed to the Company, provided that such withheld
amounts shall be distributed to the Members as soon as practicable.
11.4
Distributions in Kind
. Any non-cash asset distributed to one or more
Members shall first be valued at its Fair Value to determine Profit and Loss
that would have resulted if such asset were sold for such value. Such Profit
or Loss shall then be allocated to reflect such allocation.
11.5
Rights of Members
. In the event of any distribution of Property in
accordance with
Section 11
hereof, except as provided in
Section
11.2(d)
, no Member shall have the right or power to demand or receive
Property other than cash from the Company. If the assets of the Company
remaining after payment or discharge of the debts or liabilities of the Company
are insufficient to return such Capital Contributions, the Members shall have
no recourse against the Company or any other Member or Committee
Representative.
11.6
Notice of Dissolution/Termination
.
(a)
In the event a Dissolution Event occurs, the Management Committee shall
promptly, but in no event later than seven (7) days thereafter, provide written
notice thereof to each of the Members.
(b)
Upon completion of the distribution of the Company's Property as
provided in this
Section 11
, the Company shall be terminated, and the
Liquidator shall cause the filing of the Certificate of Cancellation pursuant
to the Act and shall take all such other actions as may be necessary to
terminate the Company.
11.7
Allocations During Period of Liquidation
. During the period commencing on the first day of
the Fiscal Year during which a Dissolution Event occurs and ending on the date
on which all of the assets of the Company have been distributed to the Members
pursuant to
Section 11.2
(the "Liquidation Period"), the Members shall
continue to share Profits, Losses, gain, loss and other items of Company
income, gain, loss or deduction in the manner provided in
Section 3
.
11.8
Character of Liquidating Distributions
. All payments made
in liquidation of the interest of a Member in the Company shall be made in
exchange for the interest of such Member in Property pursuant to Section
736(b)(1) of the Code, including the interest of such Member in Company
goodwill.
11.9
The Liquidator
.
(a)
Definition
. The "Liquidator" shall mean a Person appointed by
the unanimous vote of the Members to oversee the liquidation of the Company.
(b)
Fees
. The Company is
authorized to pay a reasonable fee to the Liquidator for its services performed
pursuant to this
Section 11
and to reimburse the Liquidator for its
reasonable costs and expenses incurred in performing those services.
(c)
Indemnification
. The Company shall indemnify, save harmless, and
pay all judgments and claims against such Liquidator or any officers,
directors, agents or employees of the Liquidator relating to any liability or
damage incurred by reason of any act performed or omitted to be performed by
the Liquidator, or any officers, directors, agents or employees of the
Liquidator in connection with the liquidation of the Company, including
reasonable attorneys' fees incurred by the Liquidator, officer, director, agent
or employee in connection with the defense of any action based on any such act
or omission, which attorneys' fees may be paid as incurred, except to the
extent such liability or damage is caused by the fraud, intentional misconduct
of, or a knowing violation of the laws by the Liquidator which was material to
the cause of action.
SECTION
12
MISCELLANEOUS
12.1
Notices
. Any notice, payment,
demand, or communication required or permitted to be given by any provision of
this Agreement (each a "Notice") shall be in writing and shall be deemed to
have been delivered, given, and received for all purposes (i) if delivered
personally to the Person or to an officer of the Person to whom the same is
directed or (ii) when the same is actually received, if sent either by express
delivery service or registered or certified mail, postage and charges prepaid
and return receipt requested, or by facsimile, if such facsimile is followed by
a hard copy of the facsimile communication sent promptly thereafter by
registered or certified mail, postage and charges prepaid, addressed as follows
or to such other address as such Person may from time to time specify, by
notice to the Members and Committee Representatives:
|
If to the Company:
|
Chairman
Pan Am Southern LLC
c/o Pan Am Railways
400 Amherst Street, Suite 405
Nashua, NH 03063
|
|
With a copy to the NS Member and the Pan Am Member
|
|
|
If to NS Member:
|
Mike R. McClellan
Vice President - Intermodal and
Automotive Marketing
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510-2191
|
|
With a copy to:
|
Vice President - Law
Norfolk Southern Corporation
Three Commercial Place
Norfolk, VA 23510
(757) 629-2374
(757) 533-4872 (fax)
|
|
If to the Pan Am Member:
|
David A. Fink
President
Pan Am Railways
400 Amherst Street, Suite 405
Nashua, NH 03063
|
|
With a copy to:
|
Robert Culliford
Vice President Law
Pan Am Systems
400 Amherst Street, Suite 405
Nashua, NH 03063
(603) 816-0042
(603) 816-0043 (fax)
|
12.2
Certificates
.
(a)
Right of the Management Committee to Issue Certificates
. If at any time the Management Committee determines
that it is in the best interests of the Company to issue certificates attesting
to the ownership of Membership Interest in the Company by its Members, the
provisions of this Section shall thereafter apply (and prior to such
determination by the Management Committee, if any, this Section shall have no
force or effect).
(b)
Form of Certificates
. Certificates
attesting to the ownership of interests in the Company shall be in such form as
shall be approved unanimously by the Management Committee and shall state that
the Company is a limited liability company formed under the laws of the State
of Delaware, the name of the Member to whom such certificate is issued and that
the certificates represent limited liability company interests within the
meaning of the Act. Each such certificate shall be signed by one Committee Representative
appointed by the Pan Am Member and one Committee Member appointed by the NS
Member and shall include the legends referred to in
Section 9.7
.
(c)
Register
. The transfer register or transfer books and blank
share certificates shall be kept by the Secretary of the Company or by any
transfer agent or registrar designated by the Management Committee for that
purpose.
(d)
Issuance
. The certificates of the Company shall be numbered
and registered in the share register or transfer books of the Company as they
are issued.
(e)
Transfer
. Subject to all provisions hereof relating to
Transfers of Membership Interest, if the Company shall issue certificates in
accordance with the provisions of this Section, Transfers of Membership
Interests shall be made on the register or transfer books of the Company upon
surrender of the certificate therefor, endorsed by the Person named in the
certificate or by an attorney lawfully constituted in writing.
(f)
Record Holder
. Except to the extent that the Company shall have
received written notice of an assignment of a Membership Interest in the
Company, the Company shall be entitled to treat the Person in whose name any
certificates issued by the Company stand on the books of the Company as the
absolute owner thereof, and shall not be bound to recognize any equitable or
other claim to, or interest in, such Membership Interest on the part of any
other Person.
(g)
Lost Destroyed or Mutilated Certificates
. The holder of any certificates issued by the
Company shall promptly notify the Company of any loss, destruction or
mutilation of such certificates, and the Management Committee may cause a new
certificate or certificates to be issued to such holder, in case of mutilation of
the certificate upon the surrender of the mutilated certificate or, in case of
loss or destruction of the certificate, upon satisfactory proof of such loss or
destruction and, if the Management Committee shall so determine, the granting
of an indemnity and/or the deposit of a bond in such form and in such sum, and
with such surety or sureties, as the Management Committee may direct.
12.3
Binding Effect
. Except as otherwise provided in this Agreement
every covenant, term and provision of this Agreement shall be binding upon and
inure to the benefit of the Members and their respective successors,
transferees and assigns.
12.4
Time
. In computing any period of time pursuant to this
Agreement, the day of the act, event or default from which the designated
period of time begins to run shall not be included, but the time shall begin to
run on the next succeeding day. The last day of the period so computed shall
be included, unless it is not a Business Day, in which event the period shall
run until the end of the next day which is a Business Day.
12.5
Headings
. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
12.6
Prior Agreements
. This Agreement, the JV Transaction Agreements and
the Certificate of Formation supersede all prior agreements among the parties
hereto, written or oral, with respect to the operation of the Company or the
transactions referred to herein and specifically any and all term sheets
prepared in respect of such transactions.
12.7
Severability
. Except as otherwise provided in the succeeding
sentence, every provision of this Agreement is intended to be severable, and,
if any term or provision of this Agreement is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement. The preceding sentence of this
Section
12.7
shall be of no force or effect if the consequence of enforcing the
remainder of this Agreement without such illegal or invalid term or provision
would be to cause any Member to lose the material benefit of its economic
bargain.
12.8
Incorporation by Reference
. Every exhibit and other appendix attached to this
Agreement and referred to herein is incorporated in this Agreement by reference
unless this Agreement expressly otherwise provides.
12.9
Variation of Terms
. All terms and any
variations thereof shall be deemed to refer to masculine, feminine, or neuter,
similar or plural, as the identity of the Person or Persons may require.
12.10
Counterpart Execution
. This Agreement may be executed in any number of
counterparts with the same effect as if all of the Members had signed the same
document. All counterparts shall be construed together and shall constitute
one agreement.
12.11
Third Party Beneficiaries
. Except for Indemnified Persons, this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
Person other than the parties hereto.
12.12
Governing Law
. The laws
of the State of Delaware shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties
arising hereunder.
12.13
Confidentiality
. Any information obtained by any Member, its
respective Affiliates and respective employees in connection with this
Agreement or the JV Transaction Agreements shall be subject to the
confidentiality provision set forth in Section 17.5 of the Transaction
Agreement. Notwithstanding anything herein to the contrary, any Member may
share this Agreement and related information with its external auditors, the
IRS any other tax authority or as may otherwise be required by applicable law.
SECTION 13
DISPUTE RESOLUTION
13.1
Reference to JOC
.
Subject to
Sections 5.6
and
5.11
hereof, any dispute, controversy or claim between or among any two or more of
the Company, the NS Member and the Pan Am Member and arising out of or relating
to this Agreement or the breach, termination or validity thereof ("Dispute")
shall be referred to the JOC for resolution and if the JOC is unable to resolve
the dispute, it will be referred, in writing, to the Management Committee to
resolve.
13.2
Reference for Formal Dispute Resolution.
Any Dispute not resolved within sixty (60) days
after receipt by any of the involved parties of written notice of reference of
such Dispute to the Management Committee pursuant to
Section 13.1
, shall
be submitted, by either Member for formal dispute resolution pursuant to
Section
13.3
.
13.3
Formal Dispute Resolution
.
(a) Submission to
Jurisdiction. Each of the Company, the NS Member and the
Pan Am Member hereto hereby (i) consents to submit itself to the exclusive
jurisdiction of any Federal or state court located in the State of Delaware
(the "Delaware Courts") in any action to enforce or in aid of the agreement to
arbitrate in
Section 13.3(b)
herein or for provisional relief to
maintain the status quo or prevent irreparable harm pending the appointment of
the arbitrator, and to the non-exclusive jurisdiction of the Delaware Courts
for enforcement of any award issued hereunder, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (iii) waives any objection based on forum
non conveniens or any other objection to venue thereof.
(b) Dispute Resolution. Except as provided in
Section 10.2
,
each of the Company, the NS Member and the Pan Am Member hereto stipulates and
agrees that any Dispute that is not resolved pursuant to
Section 13.1
will be submitted for formal dispute resolution, if at all, to mandatory and
binding arbitration, in Washington, D.C., by a single arbitrator, under the
Commercial Arbitration Rules and the Large Complex Case Procedures of the AAA
then in effect (the "Rules"), under the following terms and conditions:
(i)
Selection
of Arbitrator
. A single independent arbitrator shall be appointed by
the AAA using the listing, ranking and striking procedure in the Rules.
Any arbitrator appointed by the AAA shall be a retired judge or a practicing
attorney with no less than fifteen years of experience with large commercial
cases and an experienced arbitrator.
(ii)
Conduct
of Arbitration
. The arbitration shall be held and the award shall be
issued in Washington, D.C. In addition to money damages, the arbitrator
may award any remedy provided for under applicable law and the terms of this
Agreement, including, without limitation, specific performance or other forms
of injunctive relief. The arbitrator shall apply the law of the State of
Delaware to the substance of the Dispute and will have no power or authority,
under the rules of the AAA or otherwise, to amend or disregard any provision of
this Agreement.
(iii)
Replacement
of Arbitrator
. Should the arbitrator refuse or be unable to proceed
with arbitration proceedings, a replacement arbitrator will be selected using
the same method of selection as the original arbitrator.
(iv)
Findings
and Conclusions
. The arbitrator will, after reaching judgment and
award, prepare and distribute to the parties a written award including the
findings of fact and conclusions of law relevant to such award and containing
an opinion setting forth the reasons for the giving or denial of any award.
(v)
Time
is of the Essence
. The arbitrator is hereby instructed that time is
of the essence in the arbitration proceeding, and that the arbitrator shall
have the right and authority to issue monetary sanctions against any party if,
upon a showing that such party is unreasonably delaying the proceeding.
(vi)
Temporary
Equitable Relief
. By agreeing to arbitration, the parties do not
intend to deprive any Delaware Court of its jurisdiction to issue a
pre-arbitral injunction, pre-arbitral attachment, or other order in aid of
arbitration proceedings and the enforcement of any award. Without
prejudice to such provisional remedies as may be available under the
jurisdiction of a Delaware Court, the arbitrator shall have full authority to
grant provisional remedies and to direct the parties to request that any court
modify or vacate any temporary or preliminary relief issued by such court, and
to award money damages for the failure of any party to respect the arbitrator's
orders to that effect.
(vii)
Consolidation
.
The parties are committed to the prompt and efficient resolution of Disputes.
Accordingly, if more than one Dispute arise under this Agreement and/or any JV
Transaction Agreement, such Disputes may be brought in a single arbitration.
If more than one arbitration is brought with respect to Disputes under
this Agreement and/or any JV Transaction Agreement, then any party may request
that any arbitration or any new Dispute arising under this Agreement or the JV
Agreement be consolidated into any prior arbitration. The new Dispute or
arbitration shall be so consolidated, provided that the arbitrator for the
prior (or first filed) arbitration determines that (x) the new Dispute or
arbitration presents significant issues of law or fact common with those in the
pending arbitration; (y) no party would be unduly prejudiced and (z)
consolidation under such circumstances would not result in undue delay for the
prior arbitration. Any order of consolidation issued by such arbitrator
shall be final and binding upon the parties. Unless the parties otherwise
agree, the arbitrator appointed first in time shall serve as the arbitrator for
the consolidated arbitration. The parties waive any right they have to appeal
or to seek interpretation, revision or annulment of such order of consolidation
under the Rules or in any court. The Parties agree that upon such an
order of consolidation, they will promptly dismiss any arbitration brought
under this Agreement, the subject of which has been consolidated into another
arbitral proceeding.
(viii)
Discovery
.
Recognizing the express desire of the parties for an expeditious means of
dispute resolution, the arbitrator will allow for limited discovery as may be
reasonable under the circumstances.
(ix)
Costs
and Attorneys' Fees
. Notwithstanding any rule of the AAA to the
contrary, the arbitrators rendering judgment under this
Section 13.3(b)
will have the power to award the costs of the arbitration, including reasonable
attorneys' fees and expenses to the prevailing party or parties in the
arbitration. In any action to enforce this agreement to arbitrate
or any arbitral award rendered hereunder, the court may award costs and
attorneys' fees against the party resisting enforcement.
(x)
Miscellaneous
.
The arbitrator shall not have the power to award consequential or punitive
damages or to determine violations of criminal or antitrust laws. Pending the
written decision of the arbitrator, there shall be no interruption in the
transaction of business under this Agreement, and all payments in respect
thereto shall be made in the same manner as prior to the arising of the dispute
until the matter in dispute shall have been fully determined by arbitration,
and thereupon such payment or restitution shall be made as required by the
written decision of the arbitrator. An arbitrator's award may be appealed in
accord with Section 23 of the Uniform Arbitration Act.
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]
IN WITNESS WHEREOF, the parties have executed and entered
into this Agreement as of the day first above set forth.
NORFOLK SOUTHERN RAILWAY COMPANY
By:
John H. Friedmann
Name: John H. Friedmann
Title:
Vice President
BOSTON AND MAINE CORPORATION
By:
Robert B. Culliford
Name:
Robert B. Culliford
Title:
Senior Vice President
