KANSAS CITY SOUTHERN (Form: 10-Q, Received: 05/09/2006 17:27:44)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended March 31, 2006

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission File Number 1-4717

KANSAS CITY SOUTHERN

(Exact name of Registrant as specified in its charter)


Delaware		44-0663509
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

427 West 12th Street, Kansas City, Missouri (Address of principal executive offices)		64105 (Zip Code)

(816) 983-1303

(Registrant’s telephone number, including area code)

No Changes

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.


Large Accelerated filer þ	Accelerated filer o	Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class	Outstanding at April 30, 2006

Common Stock, $.01 per share par value		75,271,650 Shares

KANSAS CITY SOUTHERN

FORM 10-Q

March 31, 2006

INDEX


		Page

PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Introductory Comments		3
	Consolidated Statements of Income — Three months ended March 31, 2006 and 2005		4
	Consolidated Balance Sheets — March 31, 2006 and December 31, 2005		5
	Consolidated Statements of Cash Flows — Three months ended March 31, 2006 and 2005		6
	Consolidated Statement of Changes in Stockholders’ Equity — Three months ended March 31, 2006		7
	Notes to Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29
Item 4.	Controls and Procedures		29

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		30
Item 1A.	Risk Factors		30
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds		30
Item 3.	Defaults Upon Senior Securities		30
Item 4.	Submission of matters to a Vote of Security Holders		30
Item 5.	Other Information		31
Item 6.	Exhibits		32
SIGNATURES			33
Bylaws
Final Amended and Restated Credit Agreement
Amendment No. 2 to the Transaction Agreement
Limited Liability Company Agreement
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

KANSAS CITY SOUTHERN

FORM 10-Q

March 31, 2006

PART I — FINANCIAL INFORMATION


ITEM 1.	*FINANCIAL STATEMENTS*

Introductory Comments

The Consolidated Financial Statements included herein have been prepared by Kansas City Southern (the “Company” or “KCS”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed, or omitted pursuant to such rules and regulations. The Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. These Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and the notes thereto, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-Q. For the three months ended March 31, 2006, these financial statements include the results of operations and cash flows of Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (“Grupo TFM”) which was consolidated on April 1, 2005, as a result of the acquisition of a controlling interest as of that date. The results of operations for the three months ended March 31, 2005 included Grupo TFM as an equity method investment. Results for the three months ended March 31, 2006 are not necessarily indicative of the results expected for the full year 2006.

KANSAS CITY SOUTHERN

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in millions, except share and per share data)

(Unaudited)


		Three Months Ended
		March 31,

		2006			2005

Revenues		$	388.4		$	198.2
Operating expenses
	Compensation and benefits		94.0			61.3
	Fuel		58.3			26.5
	Purchased services		54.9			20.8
	Equipment costs		44.5			16.2
	Depreciation and amortization		38.4			14.3
	Casualties and insurance		12.6			12.7
	Other		24.4			21.6

Total operating expenses			327.1			173.4

Operating income			61.3			24.8
Equity in net earnings (loss) of unconsolidated affiliates:
	Grupo TFM		—			(1.0	)
	Other		0.5			(1.0	)
Interest expense			(40.6	)		(12.4	)
Exchange loss			(4.2	)		—
Other income			2.9			3.3

Income before income taxes			19.9			13.7
Income tax provision			7.0			5.6

Net income			12.9			8.1
Preferred stock dividends			4.9			2.2

Net income available to common shareholders		$	8.0		$	5.9

Per Share Data
Earnings per common share — basic		$	0.11		$	0.09

Earnings per share — diluted		$	0.11		$	0.09

Weighted average Common shares outstanding (in thousands)
	Basic		73,926			63,501
	Potential dilutive Common shares		1,822			1,308

	Diluted		75,748			64,809

See accompanying notes to consolidated financial statements.

KANSAS CITY SOUTHERN

CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except share amounts)


			March 31,			December 31,
			2006			2005

			(Unaudited)
ASSETS
Current Assets:
	Cash and cash equivalents		$	30.1		$	31.1
	Accounts receivable (net of allowance for doubtful accounts of 24.7 and 24.1) respectively			331.2			315.7
	Inventories			68.6			73.9
	Other current assets			39.8			46.1

		Total current assets		469.7			466.8

Investments				60.9			60.3
Properties (net of accumulated depreciation of $841.1 and $820.4, respectively)				2,302.6			2,298.3
Concession rights (net of $54.4 and $41.2 accumulated amortization, respectively)				1,348.7			1,360.4
Goodwill				10.6			10.6
Deferred income tax asset				151.0			152.2
Restricted funds				6.0			9.0
Other assets				69.1			66.0

	Total assets		$	4,418.6		$	4,423.6


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Debt due within one year		$	133.9		$	38.0
	Accounts and wages payable			230.7			215.4
	Payable to related parties			0.4			0.3
	Current liability related to Grupo TFM acquisition			—			78.3
	Accrued liabilities			255.1			241.7

		Total current liabilities		620.1			573.7

Other Liabilities:
	Long-term debt			1,578.9			1,663.9
	Long-term liability related to Grupo TFM acquisition			81.4			80.4
	Deferred income tax liability			413.5			409.2
	Other noncurrent liabilities and deferred credits			252.6			270.2

		Total other liabilities		2,326.4			2,423.7

Stockholders’ Equity:
	$25 par, 4% Noncumulative, Preferred stock, 840,000 shares authorized, 649,736 shares issued, 242,170 shares outstanding at March 31, 2006 and December 31, 2005			6.1			6.1
	$1 par, 4.25%, Series C — Cumulative Convertible Preferred stock, 400,000 shares authorized, issued and outstanding at March 31, 2006 and December 31, 2005			0.4			0.4
	$1 par, 5.125%,Series D — Cumulative Convertible Preferred stock, 210,000 shares authorized, issued and outstanding at March 31, 2006 and December 31, 2005			0.2			0.2
	$.01 par, Common stock, 400,000,000 shares authorized, 91,369,116 shares issued, 75,273,618 and 73,412,081 shares outstanding at March 31, 2006 and December 31, 2005, respectively			0.7			0.7
	Paid in capital			510.9			473.1
	Retained earnings			954.1			946.1
	Accumulated other comprehensive income			(0.3	)		(0.4	)

		Total stockholders’ equity		1,472.1			1,426.2

	Total liabilities and stockholders’ equity		$	4,418.6		$	4,423.6

See accompanying notes to consolidated financial statements.

KANSAS CITY SOUTHERN

CONSOLIDATED STATEMENTS OF CASH FLOWS


			Three Months Ended
			March 31,

			2006			2005

CASH FLOWS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES:
	Net income		$	12.9		$	8.1
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation and amortization		38.4			14.3
		Deferred income taxes		7.1			7.2
		KCSM employees statutory profit sharing		1.0			—
		Equity in undistributed earnings (losses) of unconsolidated affiliates		(0.5	)		2.0
		Loss (gain) on sales of property		0.1			(0.3	)
	Changes in working capital items
		Accounts receivable		(15.5	)		7.4
		Inventories		5.3			(3.0	)
		Other current assets		6.3			2.6
		Accounts and wages payable		18.5			(10.3	)
		Accrued liabilities		7.5			(0.3	)
	Other, net			(11.8	)		(1.1	)

		Net cash provided by operating activities		69.3			26.6

INVESTING ACTIVITIES:
	Property acquisitions			(67.0	)		(18.9	)
	Proceeds from disposal of property			0.3			0.4
	Investment in and loans to affiliates			(0.2	)		(5.3	)
	Proceeds from the sale of investments			8.2			—
	Acquisition costs			—			(1.8	)
	Cash of Mexrail at date of acquisition			—			3.0
	Other, net			—			1.5

		Net cash used for investing activities		(58.7	)		(21.1	)

FINANCING ACTIVITIES:
	Proceeds from issuance of long-term debt			37.7			5.0
	Repayment of long-term debt			(1.2	)		(7.2	)
	Repayment of debt related to Grupo TFM acquisition			(44.0	)		—
	Debt issuance costs			(1.2	)		(0.1	)
	Proceeds from stock plans			0.8			1.2
	Deferred tax benefit on restricted stock compensation			0.3			—
	Tax benefit realized upon exercise of stock options			0.2			0.4
	Cash dividends paid			(4.2	)		(2.1	)

		Net cash used for financing activities		(11.6	)		(2.8	)

CASH AND CASH EQUIVALENTS:
	Net increase (decrease) in cash and cash equivalents			(1.0	)		2.7
	At beginning of year			31.1			38.6

	At end of period		$	30.1		$	41.3

See accompanying notes to consolidated financial statements.

KANSAS CITY SOUTHERN

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in millions, except share amounts)

(Unaudited)


					$1 Par Cumulative											Accumulated
			$25 Par						$.01 Par							Comprehensive
			Preferred		Series C		Series D		Common		Paid in		Retained			Income
			Stock		4.25%		5.125%		Stock		Capital		Earnings			(Loss)			Total

Balance at December 31, 2005			$	6.1	$	0.4	$	0.2	$	0.7	$	473.1	$	946.1		$	(0.4	)	$	1,426.2
Comprehensive income:
	Net income													12.9
	Amortization of loss related to interest rate swaps																0.1
		Comprehensive income																		13.0
Dividends on $25 Par Preferred Stock ($0.75/share)														(0.1	)					(0.1	)
Dividends on $1 Series C Cumulative Convertible Preferred Stock ($21.25/share)														(2.1	)					(2.1	)
Dividends on $1 Series D Cumulative Convertible Preferred Stock ($12.81/share)														(2.7	)					(2.7	)
Amortization of unearned compensation												1.3								1.3
Stock issued in acquisition of Grupo TFM												35.0								35.0
Options exercised and stock subscribed												1.5								1.5

Balance at March 31, 2006			$	6.1	$	0.4	$	0.2	$	0.7	$	510.9	$	954.1		$	(0.3	)	$	1,472.1

See accompanying notes to consolidated financial statements.

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	Accounting Policies and Interim Financial Statements.

In the opinion of the management of KCS, the accompanying unaudited consolidated financial statements contain all adjustments necessary, which are of a normal and recurring nature, to present fairly the financial position of the Company and its subsidiary companies as of March 31, 2006 and December 31, 2005, the results of its operations for the three months ended March 31, 2006 and 2005, its cash flows for the three months ended March 31, 2006 and 2005, and its changes in stockholders’ equity for the three months ended March 31, 2006. The accompanying consolidated financial statements have been prepared consistently with accounting policies described in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2005. The results of operations for the three month period ended March 31, 2006 are not necessarily indicative of the results to be expected for the full year 2006. For information regarding the Company’s critical accounting policies and estimates, please see Item 7 of the Company’s Annual Report on Form 10-K “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates.” Certain prior year amounts have been reclassified to conform to the current year presentation.

Beginning April 1, 2005, the financial position and results of operations of Grupo TFM and its operating subsidiary Kansas City Southern de Mexico, S.A. de C.V. (“KCSM”) are consolidated into KCS. Management is currently executing post-merger integration plans, which include converting accounting information systems and ensuring that the accounting policies of Grupo TFM are consistent with those of the Company.

Stock-Based Compensation. The Company adopted Statement of Financial Accounting Standards No. 123R (Revised) (“SFAS 123R”), Share-Based Payment, on January 1, 2006. This statement requires KCS to recognize the cost of employee services received in exchange for the Company’s equity instruments. Under SFAS 123R, KCS is required to record compensation expense over an award’s vesting period based on the award’s fair value at the date of grant. KCS has elected to adopt SFAS 123R on a modified prospective basis; accordingly, the financial statements for periods prior to January 1, 2006, will not include compensation cost calculated under the fair value method.

Prior to January 1, 2006, the Company applied Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees, and, therefore, recorded the intrinsic value of stock-based compensation as expense. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (“SFAS 123”), Accounting for Stock-Based Compensation, to stock-based employee compensation prior to January 1, 2006:


Three Months Ended March 31,		2005

Net income (in millions):
	As reported	$	8.1
	Total stock-based compensation expense determined under fair value method, net of income taxes		(0.1	)

	Pro forma	$	8.0
Earnings per Basic share:
	As reported	$	0.09
	Pro forma	$	0.09
Earnings per Diluted share:
	As reported	$	0.09
	Pro forma	$	0.09

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Principles of Consolidation. The accompanying consolidated financial statements are presented using the accrual basis of accounting and include the Company and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The equity method of accounting is used for all entities in which the Company or its subsidiaries have significant influence, but not more than 50% voting interest; the cost method of accounting is generally used for investments of less than 20% voting interest. KCS completed the purchase of the controlling interest in Grupo TFM on April 1, 2005. Beginning April 1, 2005, the financial results of Grupo TFM have been consolidated into KCS. Prior to April 1, 2005 the investment for Grupo TFM was accounted for under the equity method.

Deferred income tax. Deferred income tax is provided, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax.

For Grupo TFM, the deferred tax calculation is dependent to a certain extent, on the Mexican rate of inflation and changes in the exchange rate between the U.S. dollar and the Mexican peso. No provision for deferred U.S. income taxes has been made for the temporary difference between the financial reporting basis and the income tax basis of the Company’s investment in Grupo TFM including those differences attributable to accumulated earnings because the Company does not expect the reversal of the temporary differences to occur in the foreseeable future.

Restricted Cash. In connection with KCS’s acquisition of the controlling interest in Grupo TFM (the “Acquisition”), KCS entered into a consulting agreement (the “Consulting Agreement”) with José F. Serrano International Business, S.A. de C.V. (“JSIB”), a consulting company controlled by Jose Serrano, Chairman of the Board of Grupo TMM, S.A. (“TMM”) which became effective April 1, 2005. Under this agreement, JSIB will provide consulting services to KCS in connection with the portion of the business of KCS in Mexico for a period of three years. As consideration for these services, subject to the terms and conditions of the Consulting Agreement, JSIB receives an annual fee of $3.0 million. The Consulting Agreement required KCS to deposit the total amount of annual fees payable under the Consulting Agreement ($9.0 million) in cash to be held and released in accordance with the terms and conditions of the Consulting Agreement and the applicable escrow agreement. On January 12, 2006, the first $3.0 million annual fee was released from the escrow account. Accordingly the balance in restricted cash was $6.0 million on March 31, 2006. JSIB directs the investment of the escrow fund and all gains and losses accrue in the fund to the benefit of JSIB. Such amounts are payable concurrent with the payment of the annual fee.

Liabilities Related to the Grupo TFM Acquisition. In connection with the acquisition of Grupo TFM and the final resolution of the VAT Claim and Put, as defined in the Amended and Restated Acquisition Agreement dated December 15, 2004 (“Acquisition Agreement”), the Company has recorded certain liabilities payable to TMM, as summarized below.


	•	$47.0 million in Escrow Notes, which are subject to reduction for certain potential losses related to breaches of certain representations, warranties, or covenants in the Acquisition Agreement or claims relating thereto, or under other conditions. The $47.0 million amount is payable on or before April 1, 2007 and accrues interest at a stated rate of 5.0%. The $47.0 million and related interest, is payable in cash or in stock (shares to be determined based on the volume weighted average price (the “VWAP”) 20 days prior to the settlement) at the Company’s discretion. Accordingly, as of March 31, 2006, the Company has included $49.4 million for this liability and the related accrued interest.

	•	A contingent payment of up to $110.0 million payable to TMM as a result of the final resolution of the VAT Claim and Put which will be settled in three parts: (i) $35.0 million in stock (shares to be determined based on the VWAP 20 days prior to the final resolution of the VAT Claim and Put, as defined in the Acquisition Agreement); (ii) $35.0 million in cash upon final resolution of the VAT Claim and Put, as defined in the Acquisition Agreement; and (iii) up to an additional $40.0 million in

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


		cash or stock (shares to be determined based on the VWAP in accordance with the terms of the Acquisition Agreement) payable no more than five years from the final closing date. The liability is non-interest bearing; therefore, at December 31, 2005 the liability was recorded at its present value based on a 5.0% discount rate, consistent with the stated rate of similar interest bearing notes in the Acquisition Agreement.


	On March 13, 2006, in settlement of the obligation to TMM, KCS paid $35 million in cash, issued 1,494,469 shares of KCS Common Stock at the VWAP price of $23.4197, as determined in connection with the Acquisition Agreement, and issued a $40 million, five year note. Accordingly, at March 31, 2006 the Company has recorded a non-current liability of $32.0 million to be settled in 5 years.


	•	The contingent fee of $9.0 million under the Consulting Agreement became payable upon final resolution of the VAT Claim and Put. On March 13, 2006, KCS paid $9.0 million in cash to JSIB.


2.	Stock-Based Compensation.

Effective January 1, 2006 SFAS 123R was adopted requiring the Company to measure the cost of stock awards at grant date fair value in exchange for employee services rendered. All new stock options, Employee Stock Purchase Plan (“ESPP”) awards and restricted stock awards are granted at their market value as of the date of grant. Their fair value is determined as of the date of grant and recorded as compensation expense over the vesting period. Restricted stock awards are valued using the intrinsic value method or their market value as of the date of grant. Stock options and ESPP awards are granted at their market value as of the date of grant, and their fair value is determined using the Black-Scholes pricing method. There were no stock options awarded in the first quarter of 2006.


	*Restricted Stock Awards*

Two new Restricted Stock Awards were granted in the first quarter of 2006 under the Kansas City Southern 1991 Amended and Restated Stock Option and Performance Award. Under the Plan 16 million shares are authorized to be awarded under various equity incentive plans. Restricted Stock granted on January 19, 2006 and February 17, 2006 were 208,502 and 40,000 shares, at grant prices of $25.92 and $24.19, respectively. Awards vest over 5 years and have a contractual term of 10 years. Compensation cost, net of tax, in the first quarter of 2006 totaled $.6 million compared with $.2 million in first quarter of 2005.

The fair value of each share granted is equal to the share price of the Company’s stock on the date of grant. As of March 31, 2006, there was $11.3 million of unrecognized compensation cost related to the Company’s outstanding restricted stock. This cost is expected to be recognized over a weighted-average period of 5 years. The total intrinsic value of the restricted stock outstanding at March 31, 2006 and 2005 was $11.3 million and $4.0 million, respectively. The fair value of shares vested in the first quarter of 2006 was .9 million.

The weighted average grant date fair value of the outstanding restricted stock was as follows:


	2006					2005

				Weighted					Weighted
				Average					Average
	Number of			Exercise		Number of			Exercise
	Shares			Price		Shares			Price

Nonvested restricted stock at January 1,		325,037		$	20.77		—		$	—
Granted		248,502		$	25.64		219,591		$	19.47
Vested		(42,769	)	$	22.30		(11,109	)	$	18.86
Forfeited		(40,000	)	$	22.32		(5,441	)	$	19.44

Nonvested restricted stock at March 31,		490,770		$	22.98		203,041		$	19.50

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	*Stock Options and ESPP Awards*

Stock options typically vest over 5 years and have a 10 year contractual term. During the first quarter of 2006, the Company awarded 140,000 shares to substantially all full-time employees under the Seventeenth Offering of the ESPP granted at 90% of the average market price on either the exercise date or the offering date, whichever is lower. This award vests ratably over one year. Under SFAS 123R both the 10% discount in grant price and the 90% share option are valued to derive the award’s fair value. Total fair value per share used to determine compensation expense was $3.92. The related stock based compensation expense net of tax in the first quarter was less than $.1 million. The factors used in calculating fair value were as follows:


	Three Months Ended March 31,

	2006	2005

Expected dividends	0.00%	0.00%
Expected volatility	14.98%	27.00%
Risk-rate	4.69%	3.27% to 3.46%
Expected returns	1 year	3 to 7 years

Unrecognized compensation expense for all unvested options outstanding as of the date of adoption was determined and accounted for under the “Modified Prospective Method,” while compensation cost for each outstanding grant was ratably recognized over each award’s remaining vesting period. Compensation expense, net of tax, recognized for total unvested options and ESPP awards was $.5 million. The following is a summary of stock option activity for the first quarter of 2006.


	2006

						Weighted-
				Weighted-		Average		Aggregate
				Average		Remaining		Intrinsic
				Exercise		Contractual Term		Value
	Shares			Price		(in years)		(in millions)

Outstanding at January 1		3,707,393			9.11
Exercised		(61,784	)		11.39
Canceled/Expired		(2,539	)		1.05
Granted

Outstanding at March 31		3,643,070			9.08		5.37		56.9

Exercisable at March 31		3,036,740			8.21		4.95		50.1

The total intrinsic value of options exercised during the three months ending March 31, 2006 was .8 million. Unrecognized compensation cost for unvested stock options was $3 million.


3.	Earnings per Share Data.

Basic earnings per common share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Restricted stock granted to employees and officers are included in weighted average shares for purposes of computing basic earnings per common share as they are earned. Diluted earnings per share reflects the potential dilution that could occur if convertible securities were converted into common stock or stock options were exercised. The following is a reconciliation from the weighted average shares used for the basic earnings per share computation to the

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

shares used for the diluted earnings per share computation for the three months ended March 31, 2006 and 2005, respectively (in thousands):


	Three Months Ended
	March 31,

	2006		2005

Basic shares		73,926		63,501
Effect of Dilution: Stock Options		1,822		1,308

Diluted shares		75,748		64,809


	Three Months Ended
	March 31,

	2006		2005

Potentially dilutive shares excluded from the calculation:
Stock options where the exercise price is greater than the average market price of common shares		—		5,000

Convertible preferred stock which are anti-dilutive		20,389,119		13,389,120

Convertible debt instruments which are anti-dilutive		3,689,568		—


4.	Investments.

Investments in unconsolidated affiliates and certain other investments accounted for under the equity method generally include all entities in which the Company or its subsidiaries have significant influence, but not more than 50% voting control. Investments in unconsolidated affiliates at March 31, 2006 include, among others, equity interests in Southern Capital Corporation, LLC (“Southern Capital”), the Panama Canal Railway Company (“PCRC”) and the Mexico Valley Railway and Terminal (Ferrocarril y Terminal del Valle de México, S.A. de C.V., “FTVM”).

PCRC redemption of preferred shares held by International Finance Corporation. On March 28, 2005, PCRC and International Finance Corporation (“IFC”) finalized an agreement whereby PCRC would redeem the shares subscribed and owned by IFC pursuant to the IFC Subscription. Under the agreement, PCRC paid IFC $10.5 million. The IFC preferred shares had a recorded value of $5.0 million and approximately $2.6 million in accrued unpaid dividends. When the transaction was completed, PCRC recorded an additional cost of approximately $2.9 million to reflect the premium paid to IFC. As a result, KCS recorded its share of this cost of approximately $1.5 million in recording its equity in earnings of PCRC in the first quarter of 2005.

Condensed financial information of certain unconsolidated affiliates is shown below. All amounts are presented under U.S. GAAP. Financial information of immaterial unconsolidated affiliates has been omitted:


	*Financial Condition (Dollars in millions) :*


		March 31, 2006						December 31, 2005

						Southern						Southern
		FTVM		PCRC		Capital		FTVM		PCRC		Capital

Current assets		$	40.0	$	6.4	$	10.9	$	35.4	$	5.2	$	5.2
Non-current assets			27.4		81.5		90.4		28.1		81.5		92.8

	Assets	$	67.4	$	87.9	$	101.3	$	63.5	$	86.7	$	98.0

Current liabilities		$	12.5	$	13.2	$	2.9	$	9.3	$	13.9	$	1.0
Non-current liabilities			18.2		72.9		41.2		15.8		71.5		41.2
Equity of stockholders and partners			36.7		1.8		57.2		38.4		1.3		55.8

	Liabilities and equity	$	67.4	$	87.9	$	101.3	$	63.5	$	86.7	$	98.0

KCS’s investment		$	10.6	$	0.9	$	28.6	$	10.9	$	0.6	$	27.9

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	*Operating Results (Dollars in millions) :*


		Three Months Ended
		March 31,

		2006		2005

Revenues and other income:
	Southern Capital	$	4.3	$	5.5
	PCRC		5.7		3.3
	FTVM		13.8		—
	Grupo TFM(1)		—		170.1
Operating costs and other expenses:
	Southern Capital	$	3.1	$	4.0
	PCRC		4.8		6.8
	FTVM		12.6		—
	Grupo TFM(1)		—		170.0
Net Income (loss):
	Southern Capital	$	1.2	$	1.5
	PCRC		0.9		(3.5	)
	FTVM		1.2		—
	Grupo TFM(1)		—		0.1


(1)	Reflects operating results for the quarter ended March 31, 2005. For periods after April 1, 2005, Grupo TFM is reflected in consolidated operating results.


5.	Acquisitions.

In accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations”, the Company allocated the purchase price of its acquisitions to the tangible and intangible assets and liabilities of the acquired entity based on their fair values. The fair values assigned to assets acquired and liabilities assumed were based on valuations prepared by independent third party appraisal firms, published market prices and management estimates.

As of March 31, 2006, the Company has finalized its purchase price allocation relating to the acquisition of both the 38.8% interest of TMM and the acquisition of the 23.9% interest of the Mexican Government. Final adjustments did not have a material impact on the financial statements in the current period. The remaining liability for severance and relocation cost was $4.5 million and $9.9 million at March 31, 2006 and December 31, 2005, respectively. The Company expects to substantially complete the settlement of these liabilities prior to December 31, 2006.


6.	Noncash Investing and Financing Activities.

The Company initiated the Seventeenth Offering of KCS common stock under the Employee Stock Purchase Plan (“ESPP”) during 2006. Approximately 140,000 shares, with an aggregate purchase price of $2.8 million were subscribed under the Seventeenth Offering. Shares under the Seventeenth Offering will be issued to employees in 2007. Under the Seventeenth Offering, for the three months ended March 31, 2006, the Company has received approximately $0.7 million from payroll deductions.

Under the Sixteenth Offering, in the first quarter of 2006, the Company issued approximately 107,344 shares of KCS common stock under the Sixteenth Offering of the ESPP. These shares, with an aggregate purchase price of approximately $1.7 million, were subscribed and paid for through employee payroll deductions in 2005.

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


7.	Derivative Financial Instruments.

The Company does not engage in the trading of derivatives for speculative purposes but uses them for risk management purposes only. In general, the Company enters into derivative transactions in limited situations based on management’s assessment of current market conditions and perceived risks. Management intends to respond to evolving business and market conditions in order to manage risks and exposures associated with the Company’s various operations, and in doing so, may enter into such transactions more frequently as deemed appropriate.


	*Fuel Derivative Transactions*

At March 31, 2006, the Company was a party to one fuel swap agreement for a notional amount of approximately 1.0 million gallons of fuel at a fixed price of $1.67 per gallon. Under the terms of the swap, the Company receives a variable price based upon an average of the spot prices calculated on a monthly basis as reported through a petroleum price reporting service for the month of April 2006, and pays a fixed price determined at the time the Company entered into the swap transaction. The variable price the Company receives is approximately equal to the price the Company pays in the market for locomotive fuel. Cash settlement of the swap will occur on a monthly basis on the fifth business day of the month following the month in which the settlement is calculated.


	*Foreign exchange contracts*

The purpose of Grupo TFM’s foreign exchange contracts is to limit the risks arising from exchange rate fluctuations in its Mexican peso-denominated monetary assets and liabilities. The nature and quantity of any hedging transactions will be determined by management based upon net asset exposure and market conditions.

As of March 31, 2006, Grupo TFM had two Mexican peso call options outstanding in the notional amount of $1.7 million and $1.2 million, respectively, based on the average exchange rate of 12.50 Mexican pesos per dollar and 13.00 Mexican pesos per dollar. These options expire on May 30, 2006 and September 6, 2006, respectively. The premiums paid were $34 thousand and $16 thousand, respectively, and were expensed since these contracts did not qualify for hedge accounting. As of March 31, 2006, Grupo TFM did not have any outstanding forward contracts.


	*Foreign currency balance*

At March 31, 2006, Grupo TFM had monetary assets and liabilities denominated in Mexican pesos of Ps1,385 million and Ps470 million. At March 31, 2006, the exchange rate was 10.87 Mexican pesos per dollar. At December 31, 2005 Grupo TFM had monetary assets and liabilities denominated in Mexican pesos of Ps1,088 million and Ps549 million. At December 31, 2005, the exchange rate was 11.14 Mexican pesos per dollar.


8.	Tex-Mex Loan Agreement.

On July 13, 2005, The Texas Mexican Railway Company (“Tex-Mex”) (a wholly-owned and consolidated subsidiary of Mexrail) entered into an agreement with the Federal Railroad Administration (“FRA”) with an effective date of June 28, 2005 to borrow $50.0 million to be used for safety and infrastructure improvements. These improvements are expected to increase efficiency and capacity in order to accommodate growing cross-border freight rail traffic. The loan is being made under the Railroad Rehabilitation and Improvement Financing Program administered by the FRA. The loan is guaranteed by Mexrail, which has issued a Pledge Agreement in favor of the lender equal to the gross revenues earned by Mexrail on per-car fees charged for traffic crossing the International Rail Bridge located in Laredo, Texas. Amounts available under the loan as of March 31, 2006 and December 31, 2005 were $21.5 million and $28.3 million, respectively.

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


9.	Commitments and Contingencies.

The Company has had no significant changes in its outstanding litigation or other commitments and contingencies from that previously reported in Note 9 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Casualty Claim Reserves. The Company’s casualty and liability reserve for its U.S. business segment is based on a study by an independent third party actuarial firm performed on an undiscounted basis. The reserve is based on claims filed and an estimate of claims incurred but not yet reported. While the ultimate amount of claims incurred is dependent on various factors, it is management’s opinion that the recorded liability is a reasonable estimate of aggregate future claims. Adjustments to the liability are reflected as operating expenses in the period in which the adjustments are known. Casualty claims in excess of self-insurance levels are insured up to certain coverage amounts, depending on the type of claim and year of occurrence. The activity in the reserve for the three months ended March 31, 2006 and 2005 is as follows (in millions):


	Three Months Ended
	March 31,

	2006			2005

Balance as of January 1, 2006 and 2005, respectively	$	103.1		$	52.0
Additions to reserves (including impacts of actuarial studies)		1.5			4.8
Reduction in valuation of acquired reserves		(2.7	)		—
Payments		(5.0	)		(5.5	)

Balance as of March 31, 2006 and 2005, respectively	$	96.9		$	51.3

During the first quarter, the actuarial firm updated the study of casualty reserves based on data through February 28, 2006. Based on that study, the reserves for FELA, third-party, and occupational illness claims were decreased by $4.4 million to reflect favorable loss experience since the date of the prior study.


10.	Other Post Employment Benefits.

The Company provides certain medical, life and other post employment benefits other than pensions to its retirees. The medical and life plans are available to employees not covered under collective bargaining arrangements, who have attained age 60 and rendered at least ten years of service. Individuals employed as of December 31, 1992 were excluded from a specific service requirement. The medical plan is contributory and provides benefits for retirees, their covered dependents and beneficiaries. The medical plan provides for an annual adjustment of retiree contributions, and also contains, depending on the plan coverage selected, certain deductibles, co-payments, coinsurance and coordination with Medicare. The life insurance plan is non-contributory and covers retirees only. The Company’s policy, in most cases, is to fund benefits payable under these plans as the obligations become due. However, certain plan assets (money market funds held by a life insurance company) exist with respect to life insurance benefits. A life insurance company holds these assets and the Company receives an investment return on these assets based on the six-month Treasury Bill rate plus 25 basis points.

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net periodic post employment benefit cost included the following components (in millions):


	Three Months Ended
	March 31,

	2006		2005

Service cost	$	—	$	—
Interest cost		0.1		0.1
Expected return on plan assets		—		—

Net periodic postretirement benefit cost	$	0.1	$	0.1

Under collective bargaining agreements, The Kansas City Southern Railway Company (“KCSR”) participates in a multi-employer benefit plan, which provides certain post-retirement health care and life insurance benefits to eligible union employees and certain retirees. Premiums under this plan are expensed as incurred and were $2.6 million in the year ended December 31, 2005. Based on existing rates, premium amounts are not expected to change substantially during the 2006 compared to 2005.


11.	Business Segments.

Prior to April 1, 2005, KCS operated under one reportable segment, the U.S. Segment. Subsequent to the acquisition of Grupo TFM on April 1, 2005, KCS has two reportable segments, United States (or “U.S.”) and Mexico. Appropriate eliminations of revenue and expenses are recorded in deriving consolidated data. The U.S. segment consists of KCSR, Mexrail, the Gateway Eastern Railway Company, and Tex-Mex as well as corporate expenses. The Mexico segment consists of Grupo TFM, KCSM and Arrendadora TFM and corporate expenses. Each of these segments are supported by separate boards of directors, operate and serve different geographical regions, and are subject to different customs, laws, and tax regulations. For the quarter ended and as of March 31, 2006 key information regarding our segments is as follows:


		Three months ended March 31, 2006 (in millions)

		US		Mexico		Elimination			Consolidated

Revenue		$	212.6	$	175.8	$	—		$	388.4
Operating expenses:
	Compensation and benefits		64.1		29.9		—			94.0
	Fuel		31.5		26.8		—			58.3
	Purchased services		19.7		34.0		1.2			54.9
	Equipment costs		23.9		20.6		—			44.5
	Depreciation and amortization		15.3		23.1		—			38.4
	Casualties and insurance		8.8		3.8		—			12.6
	Other		20.0		5.6		(1.2	)		24.4

Total operating expenses			183.3		143.8		—			327.1

Operating income			29.3		32.0		—			61.3

Capital Expenditures		$	51.8	$	15.2	$	—		$	67.0


	As of March 31, 2006 (in millions)

Total Assets	$	3,276.5	$	2,423.8	$	(1,281.7	)	$	4,418.6
Total Liabilities	$	1,804.5	$	1,224.2	$	(82.2	)	$	2,946.5

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


12.	Transaction with Affiliates.

On November 2, 2005, KCSR entered into an agreement with El-Mo-Mex, Inc. (“El-Mo”) to acquire El-Mo’s equity interest in certain locomotives leased by KCSM from El-Mo. KCSR and an affiliate paid cash in the amount of approximately $32.6 million and assumed approximately $95.9 million of debt and accrued interest to acquire the locomotives. KCSR subsequently purchased the locomotives from the affiliate. On December 20, 2005, KCSR entered into a leveraged lease arrangement, treated for financial reporting purposes as an operating lease, with an unaffiliated third party. Pursuant to the terms of this leveraged lease, KCSR was to sell the locomotives to a trust, which would then lease the locomotives to KCSR for a period of 18 years. The trust also would assume the debt assumed by KCSR in its purchase of the locomotives. Prior to year end, KCSR had completed the sale of 54 of the locomotives to the trust. The remaining 19 units (two of the original 75 were determined to be damaged beyond repair) valued at $32.5 million were sold to the trust in January 2006.


13.	Subsequent Events

KCSM Waiver. On April 7, 2006 KCSM entered into an amendment and waiver (“Amendment and Waiver”) to the credit agreement dated October 24, 2005 (the “2005 KCSM Credit Agreement”). The 2005 KCSM Credit Agreement was amended to (i) exclude certain payment obligations accrued under two locomotive maintenance agreements and under a track maintenance rehabilitation agreement from the definition of Indebtedness, (ii) eliminate certain minimum and multiple borrowing thresholds for peso borrowings under the revolving credit facility and (iii) eliminate the reporting requirement to provide unaudited consolidated financial statements for the fourth fiscal quarter. The Amendment and Waiver also waived (x) certain reporting requirements, including the requirement of KCSM to provide audited consolidated financial statements 90 days after the end of the 2005 fiscal year, provided such reports were delivered by April 30, 2006 and (y) compliance with the Consolidated Leverage Ratio obligations of Section 7.1(c) of the 2005 KCSM Credit Agreement for the four quarters ending December 31, 2005 if compliance therewith was calculated without giving effect to the amendment to the definition of “Indebtedness” in the Amendment and Waiver, provided that KCSM is in compliance therewith after giving effect to the Amendment and Waiver. KCSM is currently in compliance with the 2005 KCSM Credit Agreement after giving effect to the Amendment and Waiver.

KCS/ KCSR 2006 Credit Agreement. On April 28, 2006, KCS and KCSR entered into an amended and restated credit agreement, (the “2006 KCS Credit Agreement”), in an aggregate amount of $371.1 million with The Bank of Nova Scotia and other lenders named in the 2006 KCS Credit Agreement. Proceeds from the credit agreement were used to refinance existing credit facilities. The 2006 KCS Credit Agreement consists of (a) a $125,000,000 revolving credit facility with a letter of credit sublimit of $25,000,000 and swing line advances of up to $15,000,000, and (b) a $246,134,375 term loan facility. The maturity date is April 28, 2011 for the revolving credit facility, the letter of credit facility and swing line loan facility, and April 28, 2013 for the term loan facility. The 2006 KCS Credit Agreement contains covenants that restrict or prohibit certain actions, including, but not limited to, KCS’s ability to incur debt, create or suffer to exist liens, make prepayments of particular debt, pay dividends, make investments, engage in transactions with stockholders and affiliates, issue capital stock, sell certain assets, and engage in mergers and consolidations or in sale-leaseback transactions. In addition, KCS must meet certain consolidated interest coverage ratios, and consolidated leverage ratios. Failure to maintain compliance with covenants could constitute a default. Other events of default include, but are not limited to, certain payment defaults, certain bankruptcy and liquidation proceedings, a change of control, and certain adverse judgments or government actions. Any event of default could trigger acceleration of the time for payment of any amounts outstanding under the 2006 KCS Credit Agreement.

Credit Ratings. On April 10, 2006 Standard & Poor’s Ratings Services lowered its corporate credit rating on KCS and KCSM to ‘B’ from ‘BB-’ and also lowered its ratings on the companies’ senior secured

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

debt to ‘BB-’ from ‘BB+’ and senior unsecured debt to ‘B-’ from ‘B+’. All ratings remain on CreditWatch with negative implications where they were placed on April 4, 2006.

On April 28, 2006 Moody’s Investor Service lowered its ratings on KCS and subsidiaries (“Corporate Family”) to ‘B2’ from ‘B1’ and lowered its ratings on the companies’ senior secured debt to ‘B1’ from ‘Ba3’ and senior unsecured debt to ‘B3’ from ‘B2’. The outlook is negative. These rating actions complete the review of KCS’ ratings initiated by Moody’s Investor Service on April 5, 2006.

KCS and NS Transaction. On December 1, 2005, KCS and its wholly-owned subsidiary KCSR entered into a transaction agreement (the “Transaction Agreement”) with Norfolk Southern Corporation (“NS”) and its wholly-owned subsidiary, The Alabama Great Southern Railroad Company (“AGS”), providing for, among other things, the formation of a limited liability company between the parties relating to the ownership and improvement of the KCSR rail line between Meridian, Mississippi and Shreveport, Louisiana (the “Line”), which is the portion of the KCSR rail line between Dallas, Texas and Meridian known as the “Meridian Speedway”.

On April 10, 2006, KCS and NS announced that the Surface Transportation Board had concluded its environmental impact review and approved the transaction. On May 1, 2006, the Transaction Agreement was consummated. Concurrent with the consummation of the Transaction Agreement, KCS contributed the Line to the limited liability company and AGS transferred $100 million representing the initial investment in the joint venture of which $40 million was distributed to KCS to reimburse it for capital expenditures that KCS made on the Line in the two years immediately preceding the closing. NS will make additional cash contributions over time, resulting in a total cash investment of $300 million.


14.	Condensed Consolidating Financial Information.

KCSR has outstanding $200.0 million of 9 ¹ / 2 % Senior Notes due 2008 and $200.0 million of 7 ¹ / 2 % Senior Notes due 2009. Both of these note issues are unsecured obligations of KCSR, however, they are also jointly and severally and fully and unconditionally guaranteed on an unsecured senior basis by KCS and certain of the subsidiaries (all of which are wholly-owned) within the KCS consolidated group. Grupo TFM, KCSM and Mexrail are non-guarantor subsidiaries. These notes were registered with the SEC and issued in exchange for privately placed notes having substantially identical terms and associated guarantees to the respective exchange note issues.

The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10 “Financial statements of guarantors and issuers of guaranteed securities registered or being registered.” This information is not intended to present the financial position, results of operations and cash flows of the individual companies or groups of companies in accordance with U.S. GAAP.

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF INCOME


		Three Months Ended March 31, 2006 (Dollars in millions)

								Guarantor			Non-Guarantor			Consolidating			Consolidated
		Parent			KCSR			Subsidiaries			Subsidiaries			Adjustments			KCS

Revenues		$	—		$	189.3		$	2.5		$	201.5		$	(4.9	)	$	388.4
Operating expenses		$	4.3			155.2			4.6			167.9			(4.9	)		327.1

	Operating income (loss)		(4.3	)		34.1			(2.1	)		33.6			—			61.3
Equity in net earnings (losses) of unconsolidated affiliates and subsidiaries			19.7			(0.8	)		—			1.5			(19.9	)		0.5
Interest expense			(2.2	)		(15.4	)		(0.3	)		(23.0	)		0.3			(40.6	)
Exchange loss			—			—			—			(4.2	)		—			(4.2	)
Other income & expense			0.1			1.1			—			1.9			(0.2	)		2.9

	Income (loss) before income taxes		13.3			19.0			(2.4	)		9.8			(19.8	)		19.9
Income tax provision (benefit)			0.4			4.7			(0.8	)		2.7			—			7.0

Net income (loss)		$	12.9		$	14.3		$	(1.6	)	$	7.1		$	(19.8	)	$	12.9


		Three Months Ended March 31, 2005 (Dollars in millions)

								Guarantor			Non-Guarantor			Consolidating			Consolidated
		Parent			KCSR			Subsidiaries			Subsidiaries			Adjustments			KCS

Revenues		$	—		$	179.3		$	5.0		$	20.8		$	(6.9	)	$	198.2
Operating expenses			4.0			149.6			4.8			21.9			(6.9	)		173.4

	Operating income (loss)		(4.0	)		29.7			0.2			(1.1	)		—			24.8
Equity in net earnings (losses) of unconsolidated affiliates and subsidiaries			9.9			(1.2	)		—			(2.8	)		(7.9	)		(2.0	)
Interest expense			(0.2	)		(12.2	)		(0.1	)		(0.3	)		0.4			(12.4	)
Other income & expense			1.7			1.6			—			0.4			(0.4	)		3.3

	Income (loss) before income taxes		7.4			17.9			0.1			(3.8	)		(7.9	)		13.7
Income tax provision (benefit)			(0.5	)		7.1			—			(1.0	)		—			5.6

Net income (loss)		$	7.9		$	10.8		$	0.1		$	(2.8	)	$	(7.9	)	$	8.1

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING BALANCE SHEETS


			As of March 31, 2006 (Dollars in millions)

								Guarantor			Non-Guarantor		Consolidating			Consolidated
			Parent			KCSR		Subsidiaries			Subsidiaries		Adjustments			KCS

ASSETS
	Current Assets		$	(55.8	)	$	569.0	$	29.5		$	291.3	$	(364.3	)	$	469.7
	Investments			1,731.3			435.4		—			460.5		(2,566.3	)		60.9
	Properties, net			0.7			1,319.1		236.4			747.0		(0.6	)		2,302.6
	Concession rights			—			—		—			1,348.7		—			1,348.7
	Intangibles and other assets			7.7			24.0		4.9			215.7		(15.6	)		236.7

		Total assets	$	1,683.9		$	2,347.5	$	270.8		$	3,063.2	$	(2,946.8	)	$	4,418.6


LIABILITIES AND EQUITY
	Current liabilities		$	129.2		$	299.1	$	248.8		$	353.6	$	(410.6	)	$	620.1
	Long-term debt			0.2			645.0		0.6			933.1		—			1,578.9
	Payable related to Grupo TFM acquisition			81.4			—		—			—		—			81.4
	Deferred income taxes			(4.9	)		430.6		(1.7	)		5.2		(15.7	)		413.5
	Other liabilities			5.9			107.0		15.4			124.3		—			252.6
	Stockholders’ equity			1,472.1			865.8		7.7			1,647.0		(2,520.5	)		1,472.1

		Total liabilities and equity	$	1,683.9		$	2,347.5	$	270.8		$	3,063.2	$	(2,946.8	)	$	4,418.6


			As of December 31, 2005 (Dollars in millions)

								Guarantor			Non-Guarantor		Consolidating			Consolidated
			Parent			KCSR		Subsidiaries			Subsidiaries		Adjustments			KCS

ASSETS
	Current Assets		$	2.4		$	476.1	$	20.3		$	233.3	$	(265.3	)	$	466.8
	Investments			1,715.4			435.8		—			464.2		(2,555.1	)		60.3
	Properties, net			0.1			1,334.0		239.3			724.9		—			2,298.3
	Concession rights			—			—		—			1,360.4		—			1,360.4
	Goodwill and other assets			10.9			19.6		5.3			218.0		(16.0	)		237.8

		Total assets	$	1,728.8		$	2,265.5	$	264.9		$	3,000.8	$	(2,836.4	)	$	4,423.6


LIABILITIES AND EQUITY
	Current liabilities		$	202.2		$	141.0	$	240.2		$	257.8	$	(267.5	)	$	573.7
	Long-term debt			0.2			738.1		0.6			925.0		—			1,663.9
	Payable related to Grupo TFM acquisition			98.1			—		0.7			26.6		(45.0	)		80.4
	Deferred income taxes			(3.5	)		424.6		(0.5	)		4.5		(15.9	)		409.2
	Other liabilities			5.6			110.5		14.6			139.5		—			270.2
	Stockholders’ equity			1,426.2			851.3		9.3			1,647.4		(2,508.0	)		1,426.2

		Total liabilities and equity	$	1,728.8		$	2,265.5	$	264.9		$	3,000.8	$	(2,836.4	)	$	4,423.6

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS


			Three Months Ended March 31, 2006 (Dollars in millions)

									Guarantor			Non-Guarantor			Consolidating		Consolidated
			Parent			KCSR			Subsidiaries			Subsidiaries			Adjustments		KCS

Net cash flows provided by (used for) operating activities:
	Excluding intercompany activity		$	3.4		$	61.7		$	0.8		$	3.4		$	—	$	69.3
	Intercompany activity			42.9			(63.4	)		(0.5	)		21.0			—		—

		Net cash flows provided by (used for) operating activities		46.3			(1.7	)		0.3			24.4			—		69.3

Investing activities:
	Property additions			—			(30.5	)		—			(36.5	)		—		(67.0	)
	Proceeds from disposal of property			—			—			—			0.3			—		0.3
	Proceeds from sale of investments, net			—			8.2			—			—			—		8.2
	Investments in and loans to affiliates			—			—			—			(0.2	)		—		(0.2	)

		Net		—			(22.3	)		—			(36.4	)		—		(58.7	)

Financing activities:
	Proceeds from issuance of long-term debt			—			28.0			—			9.7			—		37.7
	Repayment of long-term debt			—			(1.1	)		—			(0.1	)		—		(1.2	)
	Repayment of debt related to Grupo TFM acquisition			(44.0	)		—			—			—			—		(44.0	)
	Debt issuance costs			—			(1.2	)		—			—			—		(1.2	)
	Proceeds from stock plans			0.8			—			—			—			—		0.8
	Deferred compensation — restricted stock deferred tax benefit			0.3			—			—			—			—		0.3
	Tax benefit realized upon exercise of stock options			0.2			—			—			—			—		0.2
	Cash dividends paid			(4.2	)		—			—			—			—		(4.2	)

		Net		(46.9	)		25.7			—			9.6			—		(11.6	)

Cash and cash equivalents:
	Net increase (decrease)			(0.6	)		1.7			0.3			(2.4	)		—		(1.0	)
	At beginning of period			0.7			20.7			(0.9	)		10.6			—		31.1

	At end of period		$	0.1		$	22.4			(0.6	)	$	8.2		$	—	$	30.1

KANSAS CITY SOUTHERN

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


			Three Months Ended March 31, 2005 (Dollars in millions)

									Guarantor			Non-Guarantor			Consolidating			Consolidated
			Parent			KCSR			Subsidiaries			Subsidiaries			Adjustments			KCS

Net cash flows provided by (used for) operating activities:
	Excluding intercompany activity		$	16.8		$	11.5		$	2.3		$	(3.5	)	$	(0.1	)	$	27.0
	Intercompany activity			(6.8	)		4.5			(2.8	)		5.1			—			—

		Net cash flows provided by (used for) operating activities		10.0			16.0			(0.5	)		1.6			(0.1	)		27.0

Investing activities:
	Property additions			—			(17.5	)		—			(1.4	)		—			(18.9	)
	Proceeds from disposal of property			—			0.2			0.2			—			—			0.4
	Investments in and loans to affiliates			(5.5	)		—			—			(10.5	)		10.7			(5.3	)
	Acquisition costs			(1.8	)		—			—			—			—			(1.8	)
	Cash acquired from Mexrail			—			—			—			3.0			—			3.0
	Repayment of loans to affiliates			—			—			—			4.5			(4.5	)		—
	Other, net			—			1.4			—			—			0.1			1.5

		Net		(7.3	)		(15.9	)		0.2			(4.4	)		6.3			(21.1	)

Financing activities:
	Proceeds from issuance of long-term debt			—			5.0			—			—			—			5.0
	Repayment of long-term debt			(1.0	)		(6.2	)		—			—			—			(7.2	)
	Capital contribution			—			—			—			5.5			(5.5	)		—
	Proceeds from loans from affiliates			5.2			—			—			—			(5.2	)		—
	Repayment of loans from affiliates			(4.5	)		—			—			—			4.5			—
	Debt issuance costs			—			(0.1	)		—			—			—			(0.1	)
	Proceeds from stock plans			1.2			—			—			—			—			1.2
	Cash dividends paid			(2.1	)		—			—			—			—			(2.1	)

		Net		(1.2	)		(1.3	)		—			5.5			(6.2	)		(3.2	)

Cash and cash equivalents:
	Net increase (decrease)			1.5			(1.2	)		(0.3	)		2.7			—			2.7
	At beginning of period			10.5			27.5			0.2			0.4			—			38.6

	At end of period		$	12.0		$	26.3		$	(0.1	)	$	3.1		$	—		$	41.3


ITEM 2.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*

The discussion set forth below, as well as other portions of this Form 10-Q, contain forward-looking statements that are not based upon historical information. Such forward-looking statements are based upon information currently available to management and management’s perception thereof as of the date of this Form 10-Q. Readers can identify these forward-looking statements by the use of such verbs as expects, anticipates, believes or similar verbs or conjugations of such verbs. The actual results of operations of Kansas City Southern (“We”, “Our”, “KCS” or the “Company”) could materially differ from those indicated in forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Risk Factors” and “ — Cautionary Information” which is on file with the U.S. Securities and Exchange Commission (File No. 1-4717) and which “Risk Factors” and “Cautionary Information” sections are hereby incorporated by reference herein. Readers are strongly encouraged to consider these factors when evaluating forward-looking statements. We will not update any forward-looking statements set forth in this Form 10-Q.

The discussion herein is intended to clarify and focus on the Company’s results of operations, certain changes in its financial position, liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included under Item 1 of this Form 10-Q. This discussion should be read in conjunction with these consolidated financial statements and the related notes thereto, and is qualified by reference thereto.

OVERVIEW

During the first quarter of 2005, we operated under one reportable business segment in the rail transportation industry. Beginning in the second quarter of 2005 with the acquisition of a controlling interest in Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (“Grupo TFM”), we began operating under two reportable business segments, which are defined geographically as United States (“U.S.”) and Mexico. The U.S. segment consists primarily of The Kansas City Southern Railway Company (“KCSR”) and Mexrail Inc., while the Mexico segment includes primarily Grupo TFM and its operating subsidiary Kansas City Southern de Mexico, S.A. de C.V. (“KCSM”). In both the U.S. and the Mexico segments, we generate our revenues and cash flows by providing our customers with freight delivery services both within our regions, and throughout North America through connections with other Class I rail carriers. Our customers conduct business in a number of different industries, including electric-generating utilities, chemical and petroleum products, paper and forest products, agriculture and mineral products, automotive products and intermodal transportation. Appropriate eliminations of revenue and reclassifications of operating revenues and expenses have been recorded in deriving consolidated data. Each of these segments is lead by separate boards of directors, operate and serve different geographical regions, and is subject to different customs, laws, and tax regulations.

For the first quarter of 2005, Grupo TFM was an unconsolidated affiliate, and we used the equity method of accounting to recognize our proportionate share of Grupo TFM’s earnings. On completion of the acquisition of a controlling interest in Grupo TFM on April 1, 2005, KCS began including the operating revenues and expenses of Grupo TFM in its consolidated financial statements. Accordingly, the historical financial information for the first quarter of 2006 is not comparable to the first quarter of 2005 due to the acquisition of Grupo TFM. Effective January 1, 2005, the financial results of Mexrail are included in the U.S. segment of the consolidated financial statements of KCS.

FIRST QUARTER ANALYSIS

Consolidated net income for the first quarter 2006 increased $4.8 million compared to the first quarter of 2005 primarily as a result of an increase in operating income of $36.5 million, partially offset by increased

nonoperating expenses. The increase in operating income was primarily the result of the acquisition of Grupo TFM which accounted for $32.0 million while operating profits for the U.S. segment increased $4.5 million.

On a consolidated basis, both revenues and operating expenses were significantly impacted by the acquisitions completed during the previous year. In addition to the acquisitions, revenue growth for the first quarter of 2006 continues to be driven by targeted rate increases and fuel surcharges that help, to a certain degree, to offset rising fuel prices. Consolidated operating costs generally increased consistent with price increases, particularly compensation and benefits and fuel expense.

2006 OUTLOOK

For the remainder of 2006, management expects the growth in the North American economy to yield improvements and gains in our operating income. By uniting KCSR, Grupo TFM and Mexrail under the common control of KCS, we believe KCS will be a stronger, more competitive railway network. Additionally, we believe that common control of these railroads provides opportunities for enhanced competition and a stronger transportation alternative for cross-border shippers as well as providing KCS with the opportunity to gain additional operating efficiencies. We expect the continued strength of the North American economy to continue to drive higher demand for rail transportation services. With certain exceptions, primarily fuel, increases in variable operating expenses should be proportionate to changes in the volume. Gains in operating efficiencies are expected to be achieved as a result of process improvement initiatives in Mexico as we prepare to implement our transportation operating system in 2006. Fuel prices will continue to have a significant impact on our operating expenses.

Completion of our transaction with the Norfolk Southern Corporation (“NS”) will further strengthen our position in the southeastern U.S. and provide capital for enhancement and expansion of the corridor between Shreveport, Louisiana and Meridian, Mississippi. We believe that this partnership with the NS will provide increased volume with the NS, as well as strengthen our ability to recognize our competitive advantage for multimodal shipments from the ports of Mexico to destinations throughout the U.S. and Canada.


	*RECENT DEVELOPMENTS*

KCS and NS Transaction. On December 1, 2005, KCS and its wholly-owned subsidiary KCSR entered into a transaction agreement (the “Transaction Agreement”) with NS and its wholly-owned subsidiary, The Alabama Great Southern Railroad Company (“AGS”), providing for, among other things, the formation of a limited liability company between the parties relating to the ownership and improvement of the KCSR rail line between Meridian, Mississippi and Shreveport, Louisiana (the “Line”), which is the portion of the KCSR rail line between Dallas, Texas and Meridian known as the “Meridian Speedway”.

On April 10, 2006, KCS and NS announced that the Surface Transportation Board had concluded its environmental impact review and approved the transaction. On May 1, 2006, the Transaction Agreement was consummated. Concurrent with the consummation of the Transaction Agreement, KCS contributed the Line to the limited liability company and AGS, transferred $100 million representing the initial investment in the joint venture of which $40 million was distributed to KCS to reimburse it for capital expenditures that KCS made on the Line in the two years immediately preceding the closing. NS will make additional cash contributions over time, resulting in a total cash investment of $300 million.


	*RESULTS OF OPERATIONS*

Consolidated Net Income. The following table summarizes the income statement components of KCS for the quarters ended March 31, 2006 and 2005, respectively (in millions):


	Three Months Ended
	March 30,						Change

	2006			2005			In Dollars			Percentage

Revenues	$	388.4		$	198.2		$	190.2			96.0%
Operating expenses		327.1			173.4			153.7			88.6%

Operating income		61.3			24.8			36.5			147.2%
Equity in net earnings of unconsolidated affiliates		0.5			(2.0	)		2.5			(125.0%	)
Interest expense		(40.6	)		(12.4	)		(28.2	)		227.4%
Exchange loss (profit), net		(4.2	)		—			(4.2	)		nm
Other income		2.9			3.3			(0.4	)		(12.1%	)

Income before income taxes		19.9			13.7			6.2			45.3%
Income tax provision		7.0			5.6			1.4			25.0%

Net Income		12.9			8.1			4.8			59.3%

nm — percentage not meaningful

U.S. Segment . Operating income for the U.S. segment was $29.3 million for the three months ended March 31, 2006, compared to $24.8 million in the same period in 2005.

U.S. Revenues. Revenue for our U.S. segment constituted approximately 54.7% and 100% of KCS’s consolidated revenue for the quarters ended March 31, 2006 and 2005, respectively. The following table summarizes U.S. revenues, including the consolidated revenues and carload statistics of KCSR and Mexrail, for the quarters ended March 31, 2006 and 2005.


	Revenues										Carloads and Intermodal Units

	(In millions)										(In thousands)
	Three Months Ended										Three Months Ended
	March 31,				Change						March 31,				Change

	2006		2005		In Dollars			Percentage			2006		2005		In Units			Percentage

General commodities:
Chemical and petroleum	$	41.1	$	39.2	$	1.9			4.8%			38.8		40.9		(2.1	)		(5.1%	)
Forest products and metals		59.0		51.5		7.5			14.5%			50.2		54.4		(4.2	)		(7.7%	)
Agricultural and mineral		48.0		45.5		2.5			5.5%			44.1		49.6		(5.5	)		(11.1%	)

Total general commodities		148.1		136.2		11.9			8.7%			133.1		144.9		(11.8	)		(8.1%	)
Intermodal and automotive		17.1		17.9		(0.8	)		(4.5%	)		74.2		80.7		(6.5	)		(8.1%	)
Coal		32.9		30.7		2.2			7.1%			62.1		60.4		1.7			2.8%

Carload revenues and carload and intermodal units		198.1		184.8		13.3			7.2%			269.4		286.0		(16.6	)		(5.8%	)

Other revenues		14.5		13.4		1.1			8.2%

US revenues	$	212.6	$	198.2	$	14.4			7.3%

U.S. operations experienced revenue increases in all commodity groups except for intermodal due to a combination of strategic price adjustments, targeted price improvements and increased fuel surcharge revenue. The following discussion provides an analysis of our revenues by commodity group.

Chemical and petroleum products. U.S. chemical and petroleum products experienced volume increases primarily in the agri-chemicals commodity group due to new business, which was more than offset by volume declines, primarily in the petroleum group, as plants along the Gulf Coast continue to recover from the hurricane.

Forest products and metals. For the quarter ended March 31, 2006, forest products and metals revenue for the U.S. segment experienced flat to modest volume declines in all commodities with the exception of logs and chips carloadings. Declines in logs and chips carload volumes (comprising most of the volume decline in this commodity group) were due to rate adjustments designed to improve yield and were offset in part by increased military carloadings.

Agricultural and mineral products. For the quarter ended March 31, 2006, all commodities experienced increased revenues exclusive of the increase in fuel surcharges. Grain traffic accounts for the majority of the decrease in carloads while revenues were flat.

Coal. Increases in U.S. segment coal revenues for the quarter ended March 31, 2006 compared to the same period in 2005 were due primarily to the addition of two new coal customers that were previously served by other railroads, certain targeted rate increases related to renegotiated contracts and overall increases in carloadings and traffic volumes at certain electric generating stations in response to demand.

U.S. Operating Expenses. For the quarter ended March 31, 2006, U.S. operating expenses increased $9.9 million when compared to the same period in 2005. The following table summarizes U.S. segment operating expenses (in millions) for the quarters ended March 31, 2006 and 2005.


	Three Months Ended
	March 31,				Change

	2006		2005		In Dollars			Percentage

Compensation and benefits	$	64.1	$	61.3	$	2.8			4.6%
Purchased services		19.7		20.8		(1.1	)		(5.3%	)
Fuel		31.5		26.5		5.0			18.9%
Equipment costs		23.9		16.2		7.7			47.5%
Depreciation and amortization		15.3		14.3		1.0			7.0%
Casualties and insurance		8.8		12.7		(3.9	)		(30.7%	)
Other		20.0		21.6		(1.6	)		(7.4%	)

Total consolidated operating expenses	$	183.3	$	173.4	$	9.9			5.7%

Compensation and Benefits. Increases in compensation and benefits expense for the quarter ended March 31, 2006 compared to the same period in 2005 were primarily the result of annual wage and salary rate increases which were effective January 1, 2006, combined with the impact of approximately $1.3 million related to increased stock compensation expense. The average headcount for the year to date period ended March 31, 2006 was substantially the same as 2005.

Purchased Services. Purchased services expense for the quarter ended March 31, 2006 decreased compared to the same period in 2005, primarily due to a reduction in fees related to the settlement of issues in Mexico which occurred in the second and third quarters of 2005.

Fuel. This quarter to quarter increase was a result of the increase in fuel price. Gallons consumed were substantially unchanged from the first quarter 2005. These increases were partially offset by the increased fuel surcharge included in revenues.

Equipment Costs. Equipment costs for the quarter ended March 31, 2006 increased compared to the same period in 2005, primarily due to higher car hire cost resulting from longer cycle times early in the quarter and the addition of locomotives to the KCSR locomotive fleet.

Depreciation and Amortization. Depreciation and amortization expense for the quarter ended March 31, 2006 increased compared to the same period in 2005, as a result of a higher asset base, partially offset by property retirements.

Casualties and Insurance. During the first quarter of 2006, the Company updated its actuarial study of all of its casualty reserves. Based on that study, the reserves for FELA, third-party, and occupational illness claims were decreased by $4.4 million. The net charge to first quarter 2006 operating income was $1.5 million as compared to $4.8 million in the first quarter of 2005.

Mexico Segment. KCS acquired a controlling interest in Grupo TFM effective April 1, 2005. The three month period ended March 31, 2006 results reflects the impact of charges and costs associated with the acquisition, as well as the effect of fair value adjustments as required by purchase accounting. Management evaluates the results of its Mexico operations based on its operating performance during the current quarter and comparison to plan. Operating income for the three months ended March 31, 2006 was $32.0 million.

Mexico Revenues. Revenue for our Mexico segment constituted approximately 45.3% of KCS’s consolidated revenue for the quarter ended March 31, 2006. The following table summarizes consolidated Mexico revenues, including the revenues and carload statistics, for the three month periods ended March 31, 2006 and 2005. Although not consolidated in previous years, revenue recognition policies for our Mexico operations were consistent with those of U.S. operations in all material respects; therefore, commodity statistics for the quarter ended March 31, 2005 are presented for purposes of comparison.


	Revenues										Carloads and Intermodal Units

	(In millions)										(In thousands)
	Three Months Ended										Three Months Ended
	March 31,				Change						March 31,				Change

	2006		2005		In Dollars			Percentage			2006		2005		In Units			Percentage

General commodities:
Chemical and petroleum	$	32.1	$	32.1	$	—			0.0%			24.4		25.6		(1.2	)		(4.7%	)
Forest products and metals		52.5		44.7		7.8			17.4%			50.5		49.9		0.6			1.2%
Agricultural and mineral		48.9		50.3		(1.4	)		(2.8%	)		45.5		47.7		(2.2	)		(4.6%	)

Total general commodities		133.5		127.1		6.4			5.0%			120.4		123.2		(2.8	)		(2.3%	)
Intermodal and automotive		38.2		41.1		(2.9	)		(7.1%	)		73.7		76.6		(2.9	)		(3.8%	)

Carload revenues and carload and intermodal units		171.7		168.2		3.5			2.1%			194.1		199.8		(5.7	)		(2.9%	)

Other revenues		4.1		1.9		2.2			115.8%

Mexico revenues	$	175.8	$	170.1	$	5.7			3.4%

Revenues for the three months ended March 31, 2006 increased $5.7 million over the same period in the prior year. This increase was primarily attributable to the impact of fuel surcharges of $3.1 million and targeted rate increases.

Forest products and metals. Revenues increased during the three months ended March 31, 2006 as a result of change in the production process for a major customer. This change results in a longer haul of steel slab and steel coils, improving revenues.

Agriculture and mineral. Revenues from agriculture products decreased during the three months ended March 31, 2006 compared to the same periods in 2005. Increases resulting from fuel surcharges and price adjustments were partially offset by a reduction in import shipments of soybeans, sorghum and wheat products combined with shorter lengths of haul during the three months ended March 31, 2006.

Intermodal and Automotive. Revenue in this commodity group decreased primarily as a result of decreases in automotive volumes resulting from lower domestic traffic offset by targeted increases in rates.

Mexico Operating Expenses. As more fully described in our 2005 Annual Report on Form 10-K, KCS has made certain adjustments to the accounting policies of Grupo TFM to conform the accounting for certain expense items, such as depreciation, to our existing policies for US operations. As a result, we do not believe that Grupo TFM’s predecessor financial statements were prepared on a basis that is fully comparable to the period ended March 31, 2006.

Consolidated Interest Expense. Consolidated interest expense for the quarter ended March 31, 2006 increased $28.2 million compared to the quarter ended March 31, 2005. This increase was the result of the addition of interest expense of $23.0 million year to date March 31, 2006 due to the acquisition of Grupo TFM plus increased borrowings under the revolving credit facility and higher floating interest rates.

Consolidated Income Tax Provision (Benefit). For the quarter ended March 31, 2006, KCS’s income tax provision was $7.0 million as compared to a $5.6 million provision for the quarter ended March 31, 2005. The effective income tax rate was 35.2% and 40.9% for the quarters ended March 31, 2006 and 2005, respectively. The primary causes of the decrease in the consolidated effective rate are the lower 2006 Mexican statutory tax rate of 29% as compared to U.S. statutory rate of 35% and the impact of foreign exchange rate fluctuations.


	*LIQUIDITY AND CAPITAL RESOURCES*

KCS is a highly leveraged company. Our primary sources of liquidity are cash flows generated from operations, borrowings under our revolving credit facilities and access to debt and equity capital markets. Although we have had excellent access to capital markets, as a highly leveraged company the financial terms under which we obtain funding often contain certain restrictive covenants. Our covenants restrict or prohibit certain actions, including, but not limited to, our ability to incur debt, create or suffer to exist liens, make prepayments of particular debt, pay dividends, make investments, engage in transactions with stockholders and affiliates, issue capital stock, sell certain assets, and engage in mergers and consolidations or in sale-leaseback transactions. These covenants restrict our financial flexibility. As of March 31, 2006, our total available liquidity, defined as the cash balance plus revolving credit facility availability, was approximately $30 million.

Summary cash flow data for the Company is as follows (in millions):


			Three Months
			Ended March 31,

			2006			2005

Cash flows provided by (used for):
	Operating activities		$	69.3		$	27.0
	Investing activities			(58.7	)		(21.1	)
	Financing activities			(11.6	)		(3.2	)

	Cash and cash equivalents:
		Net increase (decrease)		(1.0	)		2.7
		At beginning of year		31.1			38.6

		At end of period	$	30.1		$	41.3

During the quarter ended March 31, 2006, KCS’s consolidated cash position decreased $1.0 million from December 31, 2005, as a result of increases in operating activity which were offset by outflows for investing and financing activities. Net operating cash inflows were $69.3 million and $27.0 million for the quarters ended March 31, 2006 and 2005, respectively. The $42.3 million increase in operating cash flows was primarily attributable to the consolidation of Grupo TFM and improved operating performance.

Net investing cash outflows were $58.7 million and $21.1 million for the year to date periods ended March 31, 2006 and 2005, respectively. Net cash outflows were impacted by a $48.1 million increase in capital expenditures.

Cash flows for operating, investing and financing activities include the cash flow activities of Grupo TFM in the 2006 quarter. Our consolidated ratio of debt to total capitalization was 54.9% and 56.6% at March 31, 2006 and December 31, 2005, respectively.

The following table summarizes the cash capital expenditures by type (in millions) :


	Three Months
	Ended March 31,

	2006		2005

Track infrastructure	$	57.2	$	12.8
Locomotives, freight cars and other equipment		6.0		1.0
Information technology		0.3		0.8
Facilities and improvements		—		0.3
Other		3.5		4.0

Total capital expenditures	$	67.0	$	18.9

Capital improvements for track structures have historically been funded with cash flows from operations and external debt. KCS has historically used equipment trust certificates, internally generated cash flows or leasing for acquisition of locomotives and rolling stock.

We believe that our cash and other liquid assets, operating cash flows, access to capital markets, and other available financing resources are sufficient to fund anticipated operating, capital and debt service requirements and other commitments through 2006. Our operating cash flows and financing alternatives, however, can be impacted by various factors, some of which are outside of our control. Additionally, we are subject to economic factors surrounding capital markets, and our ability to obtain financing under reasonable terms is subject to market conditions. Further, our cost of debt can be impacted by independent rating agencies, which assign debt ratings based on certain credit measurements, such as interest coverage and leverage ratios.

On April 10, 2006 Standard & Poor’s Ratings Services lowered its corporate credit rating on KCS and KCSM to ‘B’ from ‘BB-’ and also lowered its ratings on the companies’ senior secured debt to ‘BB-’ from ‘BB+’ and senior unsecured debt to ‘B-’ from ‘B+’. All ratings remain on CreditWatch with negative implications where they were placed on April 4, 2006.


Item 3.	*Quantitative and Qualitative Disclosures about Market Risk.*

None


Item 4.	*Controls and Procedures*

As of the end of the fiscal quarter for which this Quarterly Report on Form 10-Q is filed, the Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and

Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

KCS management considers the acquisition of Grupo TFM on April 1, 2005 to be material to the results of operations, financial position and cash flows from the date of acquisition through March 31, 2006 and considers the internal controls and procedures of Grupo TFM to have a material affect on the Company’s internal control over financial reporting. Management is currently executing post merger integration plans which include converting accounting information systems and ongoing internal control evaluation. To meet our quarterly certification requirements and in anticipation of incorporating Grupo TFM into our 2006 Sarbanes-Oxley compliance process, we will also be performing a detailed review of Grupo TFM’s internal control structure to ensure that its controls over financial reporting are consistent with KCS’s policies and procedures. Although this process is ongoing. We may identify control deficiencies during this process. KCS intends to extend its Sarbanes-Oxley Act Section 404 compliance program to include Grupo TFM with an effective date no later than December 31, 2006.


	•	KCS implemented the SAP Enterprise Resource Planning system on January 1, 2006 to operate a substantial portion of the Company’s accounting transactions. Management has implemented new or revised internal controls in connection with this deployment.

	•	Furthermore, the KCS tax department implemented the remediation plan, as described in Item 9A of the Company’s most recent Form 10-K, to address the material weakness in the Company’s internal controls over financial reporting at December 31, 2005.

Except as set forth above, there have not been any changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter for which this Quarterly Report on Form 10-Q is filed that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION


Item 1.	*Legal Proceedings*

Part I, Item 1. “Financial Statements”, Note 9 to the Consolidated Financial Statements of this Form 10-Q is hereby incorporated herein by reference.


Item 1A.	*Risk Factors*

None.


Item 2.	*Unregistered Sale of Equity Securities and Use of Proceeds*

None


Item 3.	*Defaults Upon Senior Securities*

None


Item 4.	*Submission of Matters to a Vote of Security Holders*

The Company held its 2006 Annual Meeting of Stockholders (“Annual Meeting”) on May 4, 2006. A total of 61,453,855 shares of the Common stock, $.01 per share par value, and Preferred stock, par value $25.00 per share, or 83% of the outstanding voting stock on the record date (74,023,974 shares), was represented at the Annual Meeting, thereby constituting a quorum. These shares voted together as a single class.

Proxies for the meeting were solicited pursuant to Regulation 14A; there was no solicitation in opposition to management’s nominees for directors as listed in such Proxy Statement and all such nominees were elected. The voting for the election of directors was as follows:


			Total Shares

Election of two Directors
(i) Michael R. Haverty
	For			65,724,474
	Against			—
	Withheld			6,094,397

		Total		71,818,871

(ii) Thomas A. McDonnell
	For			44,994,442
	Against			—
	Withheld			6,094,397

		Total		51,088,839

Listed below is the other matter voted on at the Company’s Annual Meeting. This matter is fully described in the Company’s Definitive Proxy Statement. The voting was as follows:


			Total Shares

Ratification of Audit Committee’s Selection of Independent Auditors
	For			61,188,571
	Against			180,780
	Withheld			84,504

		Total		61,453,855


Item 5.	*Other Information*

None


Item 6.	*Exhibits*


Exhibit No.

	3	.2	By laws of Kansas City Southern, as amended and restated to May 4, 2006, is attached hereto as exhibit 3.2.
	10	.1	Final Amended and Restated Credit Agreement dated as of April 28, 2006 among KCSR, KCS, the subsidiary guarantors, The Bank of Nova Scotia, as administrative and collateral agent, Morgan Stanley Senior Funding, Inc. and Harris N.A., as co-syndication agents, LaSalle Bank National Association and Bank of Tokyo-Mitsubishi UFJ Trust Company, as co-documentation agents, Scotia Capital as lead arranger and bookrunner, and the other lenders named in the Credit Agreement is attached hereto as exhibit 10.1.
	10	.2	Amendment No. 2 to the December 1, 2005 Transaction Agreement (filed as exhibit 10.46 to the KCS 2005 for 10-K) made and entered into as of May 1, 2006 by and among Kansas City Southern, a Delaware Corporation (“KCS”), The Kansas City Southern Railway Company, a Missouri Corporation (“KCSR”), Norfolk Southern Corporation, a Virginia corporation (“NS”), and The Alabama Great Southern Railroad Company, an Alabama corporation and Subsidiary of NS (“AGS”) is attached hereto as Exhibit 10.2.
	10	.3	Limited Liability Company Agreement of Meridian Speedway, LLC by and between The Alabama Great Southern Railroad Company and Kansas City Southern as of May 1, 2006 is attached hereto as Exhibit 10.3.
	31	.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit 31.1.
	31	.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit 31.2.
	32	.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit 32.1.
	32	.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit 32.2.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and in the capacities indicated on May 9, 2006.


	Kansas City Southern

	/s/ Ronald G. Russ

	Ronald G. Russ
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

	/s/ James S. Brook

	James S. Brook
	Vice President and Comptroller
	(Principal Accounting Officer)

EXHIBIT 3.2

BY-LAWS

KANSAS CITY SOUTHERN

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

As amended and restated to May 3, 2006

ARTICLE I

MEETINGS OF STOCKHOLDERS

Section 1. Place of Meetings. Meetings of stockholders for any purpose may be held at such time and place, within or without the State of Delaware, as shall be designated by the Board of Directors and stated in the notice of the meeting.

Section 2. Annual Meetings . The annual meeting of the stockholders, at which they shall elect directors and transact such other business as may properly be brought before the meeting, shall be held on the first Thursday of May in each year unless the Board of Directors shall designate some other date therefor in April through September.

To be properly brought before the meeting, business must be either (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before the meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, such a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 45 days nor more than 90 days prior to the meeting; provided , however , that in the event that the meeting is designated by the Board of Directors to be held at a date other than the first Thursday in May and less than 60 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, to be timely, the notice by the stockholder must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and address of the stockholder proposing such business, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder and the name and address of record under which such stock is held and (iv) any material interest of the stockholder in such business.

Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2 of Article I; provided , however , that nothing in this Section 2 of Article I shall be

deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting.

The Chairman of the annual meeting shall have the power to determine whether or not business was properly brought before the meeting in accordance with the provisions of this Section 2 of Article I, and, if the Chairman should determine that any such business was not properly brought before the meeting, the Chairman shall so declare to the meeting and any such business shall not be transacted.

Section 3. Notice of Annual Meetings . Written notice of each annual meeting of the stockholders stating the place, day and hour of the meeting, shall be given to each stockholder entitled to vote thereat, at least ten (10) days before the date of the meeting.

Section 4. Quorum . Except as otherwise required by statute, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding a majority in number of shares of the stock issued and outstanding and entitled to vote, shall constitute a quorum at all meetings of the stockholders. If, at any such meeting, such quorum shall not be present or represented, the stockholders present in person or by proxy shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present in person or by proxy, any business may be transacted which might have been transacted at the meeting as originally noticed.

Section 5. Voting . Each holder of shares of common stock and preferred stock shall be entitled to vote on the basis of one vote for each voting share held by him, except as provided in the Certificate of Incorporation and except that in elections for directors when the holders of the preferred stock do not have the right, voting as a class, to elect two directors, each holder of voting shares shall be entitled to as many votes as shall equal the number of shares which he is entitled to vote, multiplied by the number of directors to be elected and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or any two or more of them, as he may see fit.

Section 6. List of Stockholders Entitled to Vote . The Board of Directors shall cause the officer who has charge of the stock ledger of the corporation to prepare and make, at least ten (10) days before every election of directors, a complete list of the stockholders entitled to vote at said election, arranged in alphabetical order, showing the address of and the number of shares of common stock and preferred stock registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the election, either at a place within the city where the election is to be held, and which place be specified, at the place where said meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder who may be present.

Section 7. Inspectors . For each meeting of stockholders there may be appointed by the Board of Directors or by the Chairman of the meeting three (3) inspectors of election. If any inspector shall fail or be unable to serve as inspector or for any reason be unable to complete his duties, an alternate inspector shall be appointed by the Board of Directors or the Chairman of the meeting. The inspectors of election shall examine and canvass the proxies

and ballots, and make and submit a signed report of the votes cast at the meeting, which shall be entered at large upon the records.

Section 8. Inspectors’ Oath . An inspector, before he enters on the duties of his office, shall take and subscribe an oath substantially in the following form before any officer authorized by law to administer oaths:

“I do solemnly swear that I will execute the duties of an inspector of the election now to be held with strict impartiality and according to the best of my ability.”

Section 9. Special Meeting . Special meetings of the stockholders for any purpose or purposes may be called at any time by the Chairman of the Board of Directors, the Chief Executive Officer or the President, or at the request in writing of a majority of the Board of Directors, by giving ten (10) days written notice thereof to the stockholders. Business transacted at any special meeting of the stockholders shall be limited to the purpose stated in the notice.

Section 10. Organization . The Chairman of the Board of Directors, and in his absence the Chief Executive Officer, the President or one of the Vice Presidents, shall call meetings of the stockholders to order and act as Chairman of such meeting. In the absence of all these officers, the Board of Directors may appoint a Chairman of the meeting. The Secretary of the Corporation shall act as secretary at all meetings of the shareholders; but the Board of Directors may designate an Assistant Secretary for that purpose before the meeting and, if no such designation shall have been made, then such designation may be made by the Chairman of the meeting. The conduct of any meeting of the stockholders shall be governed by such rules, regulations and procedures as the Chairman of the meeting, in his sole and exclusive discretion shall determine.

Section 11. Stockholder Nomination of Directors .

(a) Any stockholder who meets the requirements of this section may submit a director candidate nomination for consideration by the Nominating and Corporate Governance Committee by complying with the requirements of this section, including: (i) the nomination must be made for an election to be held at a meeting of stockholders at which directors are otherwise to be elected; (ii) the stockholder must be a record owner on the record date for that meeting, and at the meeting, of securities representing at least two percent (2%) of the securities entitled to be voted at the meeting for election of directors; (iii) the stockholder must deliver a timely written nomination notice to the office of the Corporate Secretary, providing the information required by this section; and (iv) the nominee must meet the minimum qualifications for Directors established by the Board.

(b) To be timely for an annual meeting, a stockholder’s nomination notice must be received by the Corporate Secretary’s office not later than the 90 ^th day, nor earlier than the 150 ^th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is to be more than 30 days before, or more than 60 days after, such anniversary date, notice by the stockholder to be timely must be delivered not earlier than the 150 ^th day prior to such annual meeting and not later than the

15 ^th day following the day on which public announcement of the date of such annual meeting was first made by the Corporation.

(c) To be timely for a special stockholders’ meeting at which directors will be elected, a stockholder’s nomination notice must be received by the Corporate Secretary’s office not later than the close of business on the 15 ^th day following the day on which the Corporation shall first publicly announce the date of the special meeting.

(d) For purposes of these Bylaws, “public announcement” shall mean disclosure (i) in any press release distributed by the Corporation, (ii) published by the Corporation on its website or (iii) included in a document publicly filed by the Corporation with the Securities and Exchange Commission.

(e) The stockholder’s nomination notice shall include as to each person whom the stockholder proposes to nominate (i) all information relating to such person as shall be required to be disclosed in solicitations of proxies for election of directors, or as otherwise required, pursuant to applicable rules of the Securities and Exchange Commission or the New York Stock Exchange; (ii) the nominee’s written consent to be named in the proxy statement, to serve as a director and to comply with the Corporation’s rules, guidelines and policies applicable to Directors; (iii) the name and address of the stockholder and the telephone number(s) at which the Corporation will be able to reach the stockholder and the nominee during normal business hours; (iv) the class and number of shares of the Corporation which are owned beneficially and of record by the stockholder; (v) a fully completed Director’s Questionnaire on the form supplied by the Corporation, executed by the nominee; and (vi) such other information as the Nominating and Corporate Governance Committee shall reasonably deem relevant, to be provided within such time limits as shall reasonably be imposed by the Nominating and Corporate Governance Committee.

(f) Notwithstanding the foregoing, or anything else in these Bylaws to the contrary no nominee from a stockholder will be considered who was previously submitted for election to the Board of Directors and failed to receive at least 25% of the votes cast at such election, until a period of three years has passed from the date of such election.

ARTICLE II

BOARD OF DIRECTORS

Section 1. General Powers . The general management of the business and affairs and all the corporate powers of the Corporation shall be vested in and exercised by its Board of Directors which shall exercise all of the powers of the Corporation except such as are by statute, or by the Certificate of Incorporation or by these By-Laws, conferred upon or reserved to the stockholders. The directors shall act only as a Board and the individual directors shall have no power as such.

Section 2. Number, Term and Qualifications . The number of directors shall not be less than three nor more than eighteen, the exact number of directors to be determined from time to time by resolution adopted by a majority of the whole Board, and such exact number

shall be eighteen until otherwise determined by resolution adopted by a majority of the whole Board. Directors need not be stockholders.

The Board of Directors shall be divided into three classes as nearly equal in number as possible. At each annual meeting of stockholders, successors to directors of the class whose terms then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting of stockholders. When the number of directors is changed, any newly created directorships or any decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as possible. Notwithstanding the foregoing, whenever the holders of the preferred stock shall have the right, voting as a class, to elect two directors at the next annual meeting of stockholders, the terms of all directors shall expire at the next annual meeting of stockholders, and then and thereafter all directors shall be elected for a term of one year expiring at the succeeding annual meeting.

From and after January 19, 1990, no person who has attained the age of 72 shall be eligible to be nominated or to serve as a member of the Board of Directors, but any person who shall attain the age of 72 during the term of directorship to which he was elected shall be eligible to serve the remainder of such term; provided, however, that any person, regardless of age, who, on January 19, 1990, is an incumbent director, shall be eligible to be nominated for election and to serve one (1) additional term.

Section 3. Election of Directors . Directors shall be elected at the annual meetings of stockholders by ballot in the manner provided in these By-Laws and the Certificate of Incorporation.

Section 4. Newly Created Directorships and Vacancies . Newly created directorships and vacancies which shall occur in the Board of Directors because of death, resignation, disqualification or any other cause, may be filled by a majority of the directors then in office, though less than a quorum, pursuant to Section 223 of the General Corporation Law of Delaware. Such directors may, by resolution, eliminate any vacant directorship thereby reducing the size of the whole Board of Directors but in no event shall the size of the Board of Directors be reduced to less than three directors. No decrease in the Board of Directors shall shorten the term of any incumbent directors.

Section 5. Resignations . Any director of the Corporation may resign at any time by giving written notice to the President or to the Secretary of the Corporation. Such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein. Unless otherwise provided therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 6. Organization . The Board of Directors shall hold its organizational meeting as soon as practicable after the Annual Meeting of Stockholders. The Chairman of the Board of Directors, or in his absence the President, shall preside at all meetings of the Board of Directors.

Section 7. Place of Meetings . The Board of Directors may hold its meetings, both regular and special, at such place or places, within or without the State of Delaware as determined by the Board of Directors.

Section 8. Regular Meetings . Regular meetings of the Board of Directors may be held without notice at such times and at such places as shall from time to time be determined by the Board of Directors.

Section 9. Special Meetings . Special meetings of the Board of Directors may be called at the request of the Chairman of the Board of Directors, the Executive Committee, or of the President, or of any three members of the Board of Directors. Notice of the time and place of such meeting shall be given either by mail to each director at least three (3) days before such meeting or personally, by telephone, or by telegram to each director at least twelve (12) hours before such meeting.

Section 10. Quorum . A majority of the Board of Directors at a meeting duly assembled shall be necessary to constitute a quorum for the transaction of business except as otherwise provided by statute, by the Certificate of Incorporation or by these By-Laws. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present may adjourn the meeting from time to time until a quorum be present, without notice other than by announcement at the meeting.

Section 11. Report to Stockholders . The President and Board of Directors shall make a report or statement of the affairs of the Corporation at each regular annual meeting of the stockholders subsequent to the first annual meeting.

Section 12 . Compensation . The directors may receive reasonable fees to be determined from time to time by the Board of Directors for services actually performed in attending meetings and for other services actually performed and the expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of Directors. A director who is, at the same time, an officer or employee of the Corporation or of any subsidiary or affiliate, shall not be entitled to receive any compensation or fee for service as a director or as a member of any committee of the Board of Directors.

Section 13. Consent of Directors in Lieu of Meeting . Unless otherwise restricted by the Certificate of Incorporation or By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or Directors or Committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board of Directors or Committee.

ARTICLE III

COMMITTEES

Section 1. Executive Committee: Organization and Powers . There shall be an Executive Committee to consist of the Chairman of the Board of Directors, the Chief Executive

Officer and two (2) or more non-officer directors, the number of which being fixed from time to time by resolution adopted by a majority vote of the whole Board of Directors. The Board of Directors shall elect the members of the Executive Committee by vote of a majority of the whole Board of Directors and one member of the Executive Committee shall be elected as Chairman by the vote of a majority of the whole Board of Directors. The members of the Executive Committee shall be elected annually at the Board’s organizational meeting or as soon as thereafter as possible.

When the Board of Directors is not in session, the Executive Committee shall have and may exercise all the powers of the Board of Directors in the management of the business and affairs of the Corporation in all cases in which specific directions shall not have been given by the Board of Directors including, but not limited to, the power to declare dividends on the common and preferred stock of the Corporation, and to authorize the seal of the Corporation to be affixed to all papers which may require it. The members of the Executive Committee shall act only as a committee and individual members shall have no power as such.

Section 2. Compensation and Organization Committee: Organization and Powers . There shall be a Compensation and Organization Committee to consist of three (3) or more non-employee directors, the number of which being fixed from time to time by resolution adopted by a majority vote of the whole Board of Directors, a majority of whom shall be a “disinterested person” within the meaning ascribed thereto under Rule 16b-3 promulgated under the Securities Exchange Act of 1934 as amended from time to time and interpreted by the Securities and Exchange Commission. The Board of Directors shall elect the members of the Compensation and Organization Committee by vote of a majority of the whole Board of Directors, and one member of the Compensation and Organization Committee shall be elected its Chairman by the vote of a majority of the whole Board of Directors. The members of the Compensation and Organization committee shall be elected annually at the Board’s organizational meeting or as soon thereafter as possible.

The Compensation and Organization Committee shall have the power: to authorize and determine all salaries for the officers and supervisory employees of the Corporation and subsidiary companies as may be prescribed from time to time by resolution adopted by the Board of Directors; to administer the incentive compensation plans of the Corporation, The Kansas City Southern Railway Company and the other subsidiaries of the Corporation in accordance with the powers and authority granted in such plans; and to determine any incentive allowances to be made to officers and staff of the Corporation and its subsidiaries. The Compensation and Organization Committee shall have the power to administer the Employee Stock Purchase Plan of the Corporation under which eligible employees of the Corporation and its subsidiaries and affiliates are permitted to subscribe to and to purchase shares of the Corporation common stock through payroll deductions.

The Compensation and Organization Committee shall have full power: to act as the Stock Option Plan Committee to construe and interpret any stock option plan or similar plan of the Corporation and all options, stock appreciation rights and limited rights granted under this plan or any other plan; to determine the terms and provisions of the respective option agreements, including such terms and provisions as, in the judgement of the Committee, are necessary or desirable to qualify any of the options as “incentive stock options”; to establish and amend rules for its administration; to grant options, stock appreciation rights and limited rights under any stock option plan of the Corporation; to determine and designate the recipients of options, stock appreciation rights and limited rights; to determine and designate

the dates that options, stock appreciation rights and limited rights are granted; to determine and designate the number of shares subject to options, stock appreciation rights and limited rights; to determine and designate the option prices and option periods; and to correct any defect or supply any omission or reconcile any inconsistency in any stock option plan of the Corporation or in any option, stock appreciation right or limited right to the extent the Committee deems desirable to carry any stock option plan or any option, stock appreciation right or limited right into effect.

The Compensation and Organization Committee shall also have the power: to review the consolidated earnings of the Corporation and to make recommendations to the Board of Directors with respect to the allocation of funds to the Corporation’s Profit Sharing Plan; and to review the results of the investment program of the Profit Sharing Plan and make reports thereof to the Board of Directors.

The Compensation and Organization Committee shall also have the power and duty to initiate, review and approve succession plans and major organizational plans and changes within the Corporation and its subsidiaries.

Section 3. Audit Committee: Organization and Powers. There shall be an Audit Committee to consist of three (3) or more non-officer directors, the number of which being fixed from time to time by resolution adopted by a majority vote of the whole Board of Directors. The Board of Directors shall elect the members of the Audit Committee by vote of a majority of the whole Board of Directors and one member of the Audit Committee shall be elected as Chairman by a vote of a majority of the whole Board of Directors. The members of the Audit Committee shall be appointed by the Board of Directors to serve staggered three-year terms.

The Audit Committee shall have the power and the duty to meet with and consider suggestions from members of management and of the Corporation’s internal audit staff, as well as with the Corporation’s independent accountants, concerning the financial operations of the Corporation. The Audit Committee shall additionally have the power to review audited financial statements of the Corporation and consider and recommend the employment of, and approve the fee arrangement with, independent accountants for both audit functions and for advisory and other consulting services.

Section 4. Nominating and Corporate Governance Committee: Organization and Powers. There shall be a Nominating and Corporate Governance Committee consisting of three (3) or more directors, the number of which being fixed from time to time by resolution adopted by a majority vote of the whole Board of Directors. Each member of this Committee shall be affirmatively determined by a majority vote of the whole Board of Directors to qualify as independent under the New York Stock Exchange listing standards then in effect. The members of the Nominating and Corporate Governance Committee shall be elected and vacancies filled by the vote of a majority of the whole Board of Directors, and one member of the Nominating and Corporate Governance Committee shall be elected its Chairman by the vote of a majority of the whole Board of Directors. The members of the Nominating and Corporate Governance Committee shall be elected by the Board of Directors to serve staggered three-year terms.

The primary purposes of this Committee shall be to (i) identify and recommend to the Board of Directors qualified nominees for election to the Board of Directors (whether for election by the stockholders or by the Board of Directors) and (ii) to advise the Board of

Directors with respect to the establishment, implementation and evaluation of corporate governance guidelines applicable to the Company. The Committee shall prepare and present to the Board of Directors for approval a written charter setting forth in more detail the duties and responsibilities of the Committee.

Section 5. Finance Committee: Organization and Powers . There shall be a Finance Committee consisting of three (3) or more directors, the number of which shall be fixed from time to time by resolution adopted by a majority vote of the whole Board of Directors, and a majority of the Committee shall be non-officer directors. The Board of Directors shall elect the members of the Finance Committee by vote of a majority of the whole Board of Directors and one member of the Finance Committee shall be elected as Chairman by the vote of a majority of the whole Board of Directors. The members of the Finance Committee shall be elected annually at the Board’s organizational meeting or as soon thereafter as possible.

The Finance Committee shall have the power and duty to review and oversee the capital structure of the Corporation and its subsidiaries and to make recommendations relating thereto to the Board of Directors.

Section 6. Rules, Records and Reports . The Committees may make and adopt such rules and regulations governing their proceedings as they may deem proper and which are consistent with the statutes of the State of Delaware, the Certificate of Incorporation and By-Laws. The committees shall keep a full and accurate record of all their acts and proceedings and report the same from time to time to the Board of Directors.

Section 7. Meetings . Regular meetings of the committees shall be held at such times and at such places as from time to time may be fixed by the committees. Special meetings of the committees may be held at such other times as may in the judgement of the Chairman or, he being absent, in the judgement of a member, be necessary. Notice of regular meetings need not be given. Notice of special meetings shall be given to each member by mail not less than three (3) days before the meeting or personally, by telephone or telegram to each member not less than twelve (12) hours before the meeting, unless the Chairman of the committee, or a member acting in that capacity in his absence, shall deem a shorter notice expedient.

Section 8. Quorum . A majority of members of a committee shall constitute a quorum for the transaction of business and the act of a majority of those present shall be the act of the committee (except with respect to the Compensation and Organization Committee, in which any act of the Compensation and Organization Committee when acting as the Stock Option Plan Committee under any stock option plan, must be authorized and approved by at least (3) members).

Section 9. Subcommittees . A committee may appoint such subcommittees as it shall deem necessary.

Section 10. Vacancies . Any vacancy in a committee shall be filled by a majority of the whole Board of Directors.

Section 11. Substitute Members . Whenever at any time a member of any committee shall be absent from a meeting of that committee and it shall be necessary in order to constitute a quorum or, for other reason, it may be deemed expedient or desirable, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously designate a director (subject to the eligibility requirements set forth in Sections 2, 3, and 4 above) to serve and act in his stead; and in the event that the absence of a committee member shall be prolonged, such substitute member may, subject to the approval of the committee, continue to act for the term of its duration. A director so designated shall rank as a duly qualified member of the committee during incumbency, and shall be entitled to participate in its deliberations with the same force and effect as if elected in the manner herein elsewhere provided.

Section 12. Compensation . Subject to the provisions of Section 12 of Article II of these By-Laws, each member of any committee may receive a reasonable fee to be fixed by the Board of Directors for services actually performed in attending meetings, and for other services actually performed, and shall receive expenses of attendance, if any actually incurred by him for attendance at any meeting of the committee.

ARTICLE IV

OFFICERS, AGENTS AND EMPLOYEES

Section 1. Election of Officers . The Board of Directors at its annual organizational meeting, shall elect a Chairman of the Board of Directors and President of the Corporation, who shall be a member of the Board of Directors. The Board of Directors may elect a Chief Executive Officer and a Chief Operating Officer, and the Chief Executive Officer shall be a member of the Board of Directors.

Section 2. Vice Presidents . The Board of Directors may, in its discretion, appoint an Executive Vice President and one or more additional Vice Presidents.

Section 3. Other Officers . The Board of Directors shall appoint a Secretary, a Treasurer, a General Counsel and Comptroller. The Board of Directors may also appoint one or more Assistant Secretaries, and one or more Assistant Treasurers.

Section 4. Powers, Duties and Responsibilities . The powers, duties and responsibilities of the officers and employees of the Corporation, which are not prescribed by statute, by the Certificate of Incorporation or by these By-Laws, shall be defined in rules or regulations which may be adopted and from time to time modified or changed by the Board of Directors.

Section 5. Vacancies . The Board of Directors shall, as soon as practicable, fill any vacancy in the office of Chairman of the Board of Directors or President. Any vacancy in any other office may be filled temporarily by the Chairman of the Board of Directors or the President. In case of temporary incapacity or absence of any of the officers, the Chairman of the Board of Directors, or the President, may make an appointment pro tem and confer on such appointee full power and authority to act in place of any of said officers or appointees so temporarily incapacitated or absent; but such appointment shall be subject to change by the Board of Directors or by the Executive Committee at any regular or special meeting.

Section 6. Absence from Duty . No officer or employee of the Corporation shall be absent from duty without the consent of the President or the head of the department in which he is employed.

Section 7. Resignations . Any officer may resign at any time giving written notice to the President or to the Secretary of the Corporation. Such resignation shall take effect at the date of the receipt of such notice, or at any later time specified therein and, unless otherwise provided therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 8. Removals . All officers and agents of the Corporation shall be subject to removal at any time by the affirmative vote of a majority of the members of the Board of Directors present at any meeting. All officers and employees not appointed by the Board of Directors shall hold their offices at the discretion of the Executive Committee or of the officer appointing them.

Section 9. Term of Office . The officers of the Corporation shall hold office for one year and until their successors shall have been duly elected or appointed and qualified, or until they shall die, resign or be removed.

Section 10. Salaries . The salaries of officers elected or appointed by the Board of Directors or by the Executive Committee, shall be fixed by the Compensation and Organization Committee. The salaries of all other officers and employees shall be fixed by the President, or by the heads of departments subject to the approval of the President; and the compensation of all officers and employees shall be subject to the control of the Board of Directors or of the Compensation and Organization Committee.

No special compensation shall be paid to any officer or employee unless authorized by the Board of Directors, the Executive Committee or the Compensation and Organization Committee.

CHAIRMAN OF THE BOARD OF DIRECTORS

Section 11. Duties . The Chairman of the Board of Directors shall preside at all meetings of the Stockholders and the Board of Directors at which he is present and perform such other duties as the Board of Directors may prescribe. In his absence, the President shall discharge the duties of the Chairman of the Board of Directors.

CHAIRMAN OF THE EXECUTIVE COMMITTEE

Section 12. Duties . The Chairman of the Executive Committee shall preside at all meetings of the Executive Committee. In the absence of the Chairman of the Executive Committee, his duties shall be discharged by the President.

PRESIDENT

Section 13. General Powers and Duties . The President shall have the general care, supervision and control of the Corporation’s business and operation in all departments under control of the Board of Directors. The President shall have such other powers and perform such other duties as the Board of Directors may from time to time prescribe and shall perform such other duties as are incidental to the office of President. In the absence or incapacity of the Chairman of the Board of Directors, he shall preside at all meetings of the Board of Directors and stockholders.

Section 14. Appointments . Except as otherwise provided by statute, the Certificate of Incorporation, or these By-Laws, the President may appoint such additional officers and may employ such persons as he shall deem necessary for the proper management of the business and property of the Corporation.

VICE PRESIDENTS

Section 15. Powers and Duties . The Vice Presidents shall have such powers and perform such duties as shall from time to time be conferred and prescribed by the Board of Directors or by the Executive Committee. The Executive Vice President shall, however, be the ranking officer in the affairs of the Corporation next below the President.

SECRETARY

Section 16. Duties . The Secretary, or, in his absence, an Assistant Secretary, shall attend all meetings of the stockholders, of the Board of Directors and of the Executive Committee, and shall record their proceedings. He shall report to the Board of Directors and the Executive Committee and through the respective Chairman.

Section 17. Notice of Meetings . The Secretary shall give due notice of all meetings of the stockholders and of the Board of Directors and of the Executive Committee, where such notice is required by law, by the Certificate of Incorporation, by these By-Laws, by the Board of Directors or by the Executive Committee.

Section 18. Custody of Seal, Etc . The Secretary shall be custodian of the seal of the Corporation and of its records, and of such papers and documents as may be committed to his care by the Board of Directors or of the Executive Committee. He shall have power to affix the seal of the Corporation to instruments to which the same is authorized to be affixed by the Board of Directors or by the Executive Committee, and shall have power to attest the same. He shall perform such other duties as may be assigned to him by the Chairman of the Board of Directors, the President, the Board of Directors or the Executive Committee, or as may be prescribed in the rules or regulations to be adopted by the Board of Directors.

Section 19. Duties of Assistant Secretaries . The Assistant Secretary or Secretaries shall perform such duties as may be assigned to him or them by the Board of Directors or by the Executive Committee or the President, or as may be prescribed in the rules or regulations, if any, to be adopted by the Board of Directors or the Executive Committee; and, when authorized by the Board of Directors or by the Executive Committee, he or they shall have the power to affix the corporate seal to instruments and to attest the same, and to sign the certificates of stock of the Corporation.

TREASURER

Section 20. Duties . The Treasurer, either in person or through competent and faithful assistants, shall receive, keep and disburse all moneys, belonging or coming to the Corporation; he shall keep regular, true and full accounts of all receipts and disbursements, and make detailed reports of the same to the President, to the Board of Directors or to the Executive Committee, through the Chairman of said Board of Directors or Committee, as and when required.

Section 21. Other Duties . The Treasurer shall perform such other duties in connection with the administration of the financial affairs of the Corporation as the Board of Directors or the Executive Committee shall assign to him or as may be prescribed in the rules or regulations to be adopted by the Board of Directors or the Executive Committee. The Treasurer shall give bond in such amount as shall be required by the Board of Directors or by the Executive Committee. Any Assistant Treasurer appointed pursuant to the provisions of these By-Laws shall also give bond in such amount as shall be required by the Board of Directors or by the Executive Committee.

GENERAL COUNSEL

Section 22. Duties . The General Counsel shall render such legal services and perform such duties as the Board of Directors, Executive Committee, Chairman of the Board of Directors, President or other elected or appointed officer may request from time to time.

COMPTROLLER

Section 23. Duties . The Comptroller shall have charge of the Accounting Department. He shall have the supervision and management of all accounts of the Corporation, and shall prescribe, enforce and maintain the system of bookkeeping, and the books, blanks, etc., for keeping the accounts of the Corporation. He shall have the cooperation of all departments. He shall keep regular sets of books, showing a complete record of the general business transactions of the Corporation, and for that purpose shall receive from the Treasurer, Assistant Treasurers and agents of the Corporation such daily or other reports of receipts and disbursements as he may require.

Section 24. Custody of Contracts . The Comptroller shall have the custody of all written contracts and other similar written instruments to which the Corporation is a party.

Section 25. Statements by Comptroller . The Comptroller shall render such statements of the affairs of the Corporation, shown by his books and records, as may be required for the information of the Board of Directors or of the Executive Committee, and shall by proper distribution and classification of the accounts under his charge, be prepared to furnish such reports as may be required by the Chairman of the Board of Directors, the President, the Board of Directors, and the Executive Committee, or any state or federal official.

ARTICLE V

CERTIFICATE OF STOCK

Section 1. Provision for Issue, Transfer and Registration . The Board of Directors shall provide for the issue, transfer and registration of the capital stock of the Corporation in the City of New York or elsewhere, and for that purpose may appoint the necessary officers, transfer agents and registrars of transfers.

Section 2. Certificates of Stock . Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned.

Section 3. Facsimile Signatures of Certificates . The signature of any officer, transfer agent, or registrar on a certificate for shares of the Corporation may be facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been used on, any such certificate or certificates shall cease to be such officer, transfer agent or registrar of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer, transfer agent or registrar of the Corporation. Record shall be kept by the Transfer Agent of the number of each certificate, the date thereof, the name of the person owning the shares represented thereby, and the number of shares. Every certificate surrendered to the Corporation for transfer or otherwise in exchange for a new certificate shall be canceled by perforation or otherwise with the date of cancellation indicated thereon.

Section 4. Transfer of Stock . Transfer of stock of the capital stock of the Corporation shall be made only on the books of the Corporation by the holder thereof, or by his attorney thereunto authorized by a power of attorney duly executed and filed with the Transfer Agent of the Corporation, and on surrender for cancellation of the certificate or certificates for such shares. A person in whose name shares of stock stand on the books of the Corporation and no one else shall be deemed the owner thereof as regards the Corporation.

Section 5. Registrar and Transfer Agent . The Corporation shall at all times maintain a registrar, which shall in every case be a bank or trust company, and a transfer agent, to be appointed by the Board of Directors, in accordance with the requirements of the New York Stock Exchange, and registration and transfer of the Corporation’s stock certificates shall be in accordance with the rules and regulations of said stock exchange. The Board of Directors may also make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation.

Section 6. Closing of Transfer Books; Record Date . The Board of Directors may close the stock transfer books of the Corporation for a period not more than sixty (60) days nor less than ten (10) days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect. In lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date, not more than sixty (60) days nor less than ten (10) days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any

change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock and, in such case, such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid.

ARTICLE VI

SEAL

Section 1 . The authorized seal shall have inscribed thereon the name of the Corporation, the year of incorporation and the name of the state of incorporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise applied.

ARTICLE VII

FISCAL YEAR

Section 1. The fiscal year of the Corporation shall commence on the first day of January of each year.

ARTICLE VIII

NOTICES

Section 1. Form of Notice . Where notice, other than by publication, is required to be given by Delaware law, the Certificate of Incorporation or By-Laws, notice to directors and stockholders shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such directors or stockholders at such address as appears on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given personally, by telephone, by telegram or in such other manner as may be provided in these By-Laws.

Section 2. Waiver of Notice . Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated herein, shall be deemed equivalent thereto.

ARTICLE IX

INDEMNIFICATION, AMENDMENTS AND MISCELLANEOUS

Section 1. Indemnification . Each person who, at any time is, or shall have been, a director, officer, employee or agent of the Corporation, and is threatened to be or is made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is, or was, a director, officer, employee or agent of the Corporation, or served at the request of the Corporation as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified against expense (including attorneys’ fees), judgment, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any such action, suit or proceeding to the full extent provided under Section 145 of the General Corporation Law of the State of Delaware. The foregoing right of indemnification shall in no way be exclusive of any other rights of indemnification to which any such director, officer, employee or agent may be entitled, under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise.

Section 2. Amendments . These By-Laws may be altered, amended or repealed by a vote of a majority of the whole Board of Directors at any meeting of the Board of Directors. The Board of Directors in its discretion may, but need not, submit any proposed alteration, amendment or repeal of the By-Laws to the stockholders at any regular or special meeting of the stockholders for their adoption or rejection; provided notice of the proposed alteration, amendment or repeal be contained in the notice of such stockholders’ meeting.

Section 3. Proxies . Unless otherwise provided by resolution of the Board of Directors, the President or, in his absence or disability, a Vice President, from time to time in the name and on behalf of the Corporation: may appoint an attorney or attorneys, agent or agents of the Corporation (who may be or include himself), in the name and on behalf of the Corporation to cast the votes which the Corporation may be entitled to cast as a stockholder or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporations or to consent in writing to any action by such other corporation; may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent; and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal all such written proxies or other instruments as may be necessary or proper to evidence the appointment of such attorneys and agents.

EXHIBIT 10.1

Execution Copy

$371,134,375 million

AMENDED AND RESTATED CREDIT AGREEMENT

Dated as of April 28, 2006

Among

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

as Borrower

THE GUARANTORS NAMED HEREIN

as Guarantors

and

THE INITIAL LENDERS, INITIAL ISSUING BANK AND SWING LINE BANK NAMED HEREIN

as Initial Lenders , Initial Issuing Bank and Swing Line Bank

and

THE BANK OF NOVA SCOTIA

as Collateral Agent

and

THE BANK OF NOVA SCOTIA

as Administrative Agent

and

MORGAN STANLEY SENIOR FUNDING, INC AND HARRIS BANK, N.A.,

as Co-Syndication Agents

LASALLE BANK NATIONAL ASSOCIATION AND BANK OF TOKYO-MITSUBISHI UFJ TRUST COMPANY

as Co-Documentation Agents

and

SCOTIA CAPITAL

as Lead Arranger and Bookrunner


TABLE OF CONTENTS

Section	Page
ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01. Certain Defined Terms		1
SECTION 1.02. Computation of Time Periods; Other Definitional Provisions		27
SECTION 1.03. Accounting Terms		27
SECTION 1.04. Currency Equivalents Generally		27

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT

SECTION 2.01. The Advances and the Letters of Credit		27
SECTION 2.02. Making the Advances		29
SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit		31
SECTION 2.04. Repayment of Advances		33
SECTION 2.05. Termination or Reduction of the Commitments		34
SECTION 2.06. Prepayments		34
SECTION 2.07. Interest		36
SECTION 2.08. Fees		36
SECTION 2.09. Conversion of Advances		37
SECTION 2.10. Increased Costs, Etc.		38
SECTION 2.11. Payments and Computations		39
SECTION 2.12. Taxes		41
SECTION 2.13. Sharing of Payments, Etc.		42
SECTION 2.14. Use of Proceeds		43
SECTION 2.15. Defaulting Lenders		43
SECTION 2.16. Evidence of Debt		45
SECTION 2.17. Mitigation Obligations; Replacement of Lenders		46

ARTICLE III

CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT

SECTION 3.01. Conditions Precedent to Restatement		47
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance and Renewal		49
SECTION 3.03. Determinations Under Section 3.01		50


Section	Page
ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of Parent and the Borrower		50

ARTICLE V

COVENANTS OF THE BORROWER AND PARENT

SECTION 5.01. Affirmative Covenants		54
SECTION 5.02. Negative Covenants		59
SECTION 5.03. Reporting Requirements		66
SECTION 5.04. Financial Covenants		69

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.01. Events of Default		71
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default		73

ARTICLE VII

THE AGENTS

SECTION 7.01. Authorization and Action		73
SECTION 7.02. Agents’ Reliance, Etc.		74
SECTION 7.03. BNS and Affiliates		75
SECTION 7.04. Lender Party Credit Decision		75
SECTION 7.05. Indemnification		75
SECTION 7.06. Successor Agents		76
SECTION 7.07. Other Agents; Arranger and Managers		77

ARTICLE VIII

GUARANTY

SECTION 8.01. Guaranty; Limitation of Liability.		77
SECTION 8.02. Guaranty Absolute		78
SECTION 8.03. Waivers and Acknowledgments		79
SECTION 8.04. Subrogation		80
SECTION 8.05. Guaranty Supplements		80
SECTION 8.06. Subordination		80
SECTION 8.07. Continuing Guaranty; Assignments		81

iii


Section	Page
ARTICLE IX

MISCELLANEOUS

SECTION 9.01. Amendments, Etc.		82
SECTION 9.02. Notices, Etc.		82
SECTION 9.03. No Waiver; Remedies		83
SECTION 9.04. Costs and Expenses		83
SECTION 9.05. Right of Set-off		84
SECTION 9.06. Binding Effect		84
SECTION 9.07. Assignments and Participations		85
SECTION 9.08. Execution in Counterparts		88
SECTION 9.09. No Liability of the Issuing Bank		88
SECTION 9.10. Confidentiality		88
SECTION 9.11. Release of Collateral and Guarantees		88
SECTION 9.12. Non-Consenting Lenders		89
SECTION 9.13. Affirmation of Subsidiary Guarantors		89
SECTION 9.14. Patriot Act Notice		89
SECTION 9.15. Jurisdiction, Etc.		89
SECTION 9.16. Governing Law		90
SECTION 9.17. WAIVER OF JURY TRIAL		90


SCHEDULES

Schedule I	-	Commitments and Applicable Lending Offices
Schedule II	-	Subsidiary Guarantors
Schedule 4.01(b)	-	Subsidiaries
Schedule 4.01(d)	-	Authorizations, Approvals, Actions, Notices and Filings
Schedule 4.01(q)	-	Environmental Disclosure
Schedule 4.01(s)	-	Existing Debt
Schedule 4.01(t)	-	Surviving Debt
Schedule 4.01(u)	-	Liens
Schedule 4.01(v)	-	Owned Real Property
Schedule 4.01(w)(i)	-	Leased Real Property (Lessee)
Schedule 4.01(w)(ii)	-	Leased Real Property (Lessor)
Schedule 4.01(w)(iii)	-	Property with Title Insurance
Schedule 4.01(w)(iv)	-	Property with Surveys
Schedule 4.01(x)	-	Investments
Schedule 4.01(y)	-	Intellectual Property
Schedule 5.01(j)(iii)	-	Post Closing Actions


EXHIBITS

Exhibit A-1	-	Form of Revolving Credit Note
Exhibit A-2	-	Form of Term B Note
Exhibit B	-	Form of Notice of Borrowing
Exhibit C	-	Form of Assignment and Acceptance
Exhibit D	-	Form of Security Agreement
Exhibit E	-	Form of Mortgage
Exhibit F	-	Form of Solvency Certificate
Exhibit G	-	Form of Opinion of Counsel to the Loan Parties
Exhibit H	-	Form of Opinion of Local Counsel to the Loan Parties
Exhibit I	-	Form of Guaranty Supplement

AMENDED AND RESTATED CREDIT AGREEMENT

AMENDED AND RESTATED CREDIT AGREEMENT (this “ Agreement ”) dated as of April 28, 2006 among The Kansas City Southern Railway Company, a Missouri corporation (the “ Borrower ”), Kansas City Southern, a Delaware corporation (the “ Parent ”), the Subsidiary Guarantors (as hereinafter defined), the Lenders (as hereinafter defined), the Issuing Bank (as hereinafter defined), the Swing Line Bank (as hereinafter defined), The Bank of Nova Scotia (“ BNS ”), as collateral agent (together with any successor collateral agent appointed pursuant to Article VII, the “ Collateral Agent ”) for the Secured Parties (as hereinafter defined), Morgan Stanley Senior Funding, Inc, and Harris N.A., as co-syndication agents, LaSalle Bank National Association and Bank of Tokyo-Mitsubishi IFJ Trust Company, as co-documentation agents, and BNS, as administrative agent (together with any successor administrative agent appointed pursuant to Article VII, the “ Administrative Agent ” and, together with the Collateral Agent, the “ Agents ”) for the Lender Parties (as hereinafter defined), and Scotia Capital as lead arranger and bookrunner (the “ Arranger ”).

PRELIMINARY STATEMENTS:

1. The Borrower has requested that the Lenders amend and restate (such amendment and restatement being referred to herein as the “ Restatement ”) its existing $250 million credit agreement dated as of March 30, 2004 (as amended or otherwise modified prior to the date hereof, the “ Existing Credit Facility ”).

2. The Lender Parties have indicated their willingness to agree to the Restatement and extend credit to the Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01. Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“ 2000 Senior Notes ” means the unsecured 9-1/2% senior notes of the Borrower due October 1, 2008 in an aggregate principal amount of $200,000,000 issued pursuant to the 2000 Senior Notes Indenture.

“ 2000 Senior Notes Indenture ” means the Indenture dated as of September 27, 2000 between the Borrower and The Bank of New York as trustee, as amended to the extent permitted under the Loan Documents.

“ 2002 Senior Notes ” means the unsecured 7-1/2% senior notes of the Borrower due June 15, 2009 in an aggregate principal amount of $200,000,000 issued pursuant to the 2002 Senior Notes Indenture.

“ 2002 Senior Notes Indenture ” means the Indenture dated as of June 12, 2002 between the Borrower and US Bank National Association as trustee, as amended to the extent permitted under the Loan Documents.

“ Administrative Agent ” has the meaning specified in the recital of parties to this Agreement.

“ Administrative Agent’s Account ” means the account of the Administrative Agent specified by the Administrative Agent in writing to the Lender Parties from time to time.

“ Advance ” means a Term B Advance, a Revolving Credit Advance, a Swing Line Advance or a Letter of Credit Advance.

“ Affiliate ” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise.

“ Agents ” has the meaning specified in the recital of parties to this Agreement.

“ Applicable Commitment Fee Rate ” means, at any time, in respect of the Revolving Credit Facility, (a) until the first date after the Effective Date when the Borrower delivers the financial statements and related certificates and schedules required pursuant to Section 5.03(b) or (c), 0.50% per annum, and (b) thereafter, a percentage per annum as set forth below determined by reference to the Leverage Ratio as set forth in the most recent officer’s certificate received by the Administrative Agent pursuant to Section 5.03(b) or (c):


	Applicable
	Commitment
Leverage Ratio	Fee Rate
Level I less than or equal to 3.25: 1.00		0.375	%

Level II greater than 3.25: 1.00 but less than or equal to 4.25:1.00		0.500	%

Level III greater than 4.25: 1.00 but less than or equal to 5.25: 1.00		0.500	%

Level IV greater than 5.25: 1.00		0.500	%

Any increase or decrease in the Applicable Commitment Fee Rate resulting from a change in the Leverage Ratio shall become effective as of the first Business Day immediately following the date an officer’s certificate is delivered pursuant to Section 5.03(b) or (c); provided , however , that if such officer’s certificate is not delivered when due in accordance with such Section, then until

the first Business Day after the date on which such officer’s certificate is delivered, Level IV shall apply as of the first Business Day after the date on which such officer’s certificate was required to have been delivered.

“ Applicable Lending Office ” means, with respect to each Lender Party, such Lender Party’s Domestic Lending Office in the case of a Base Rate Advance and such Lender Party’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance.

“ Applicable Margin ” means (a) in respect of the Revolving Credit Facility and the Swing Line Facility, (i) until the first date after the Effective Date when the Borrower delivers the financial statements and related certificates and schedules required pursuant to Section 5.03(c) for the fiscal quarter ending June 30, 2006, 1.00% per annum for Base Rate Advances and 2.00% per annum for Eurodollar Rate Advances and (ii) thereafter, a percentage as set forth below per annum determined by reference to the Leverage Ratio, as set forth in the most recent officer’s certificate received by the Administrative Agent pursuant to Section 5.03(b) or (c):


	Applicable			Applicable
	Margin for			Margin for
	Base Rate			Eurodollar Rate
Leverage Ratio	Advances			Advances
Level I less than or equal to 3.25: 1.00		0.250	%		1.250	%

Level II greater than 3.25: 1.00 but less than or equal to 4.25:1.00		0.500	%		1.500	%

Level III greater than 4.25: 1.00 but less than or equal to 5.25: 1.00		0.750	%		1.750	%

Level IV greater than 5.25: 1.00		1.000	%		2.000	%

and (b) in respect of the Term B Facility, 0.75% per annum for Base Rate Advances and 1.75% per annum for Eurodollar Rate Advances.

In respect of the Revolving Credit Facility and the Swing Line Facility, after the first date after the Effective Date on which the Borrower delivers the financial statements and related certificates and schedules required pursuant to Section 5.03 (b) or (c), the Applicable Margin for each Base Rate Advance thereunder and the Applicable Margin for each Eurodollar Rate Advance thereunder shall be determined by reference to the Leverage Ratio, in effect on the first day of each Interest Period for such Advance as reflected on the most recent financial statements delivered pursuant to Sections 5.03(b) or (c), as the case may be; provided , however , that (A) no change in the Applicable Margin shall be effective until three Business Days after the date on which the Administrative Agent receives the financial statements required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and a certificate of the chief financial officer or treasurer of the Borrower demonstrating such Leverage Ratio; provided , further , that if such officer’s certificate is not delivered when due in accordance with such Section, then until the

first Business Day after the date on which such officer’s certificate is delivered, Level IV shall apply as of the first Business Day after the date on which such officer’s certificate was required to have been delivered.

“ Appropriate Lender ” means, at any time, with respect to (a) any of the Term B Facility or the Revolving Credit Facility, a Lender that has a Commitment with respect to such Facility or has made an Advance with respect to such Facility at such time, (b) the Letter of Credit Facility, (i) the Issuing Bank and (ii) if the other Revolving Credit Lenders have made Letter of Credit Advances pursuant to Section 2.03(c) that are outstanding at such time, each such other Revolving Credit Lender and (c) the Swing Line Facility, (i) the Swing Line Bank and (ii) if the other Revolving Credit Lenders have made Swing Line Advances pursuant to Section 2.02(b) that are outstanding at such time, each such other Revolving Credit Lender.

“ Approved Fund ” means any Fund that is administered or managed by (i) a Lender Party, (ii) an Affiliate of a Lender Party or (iii) an entity or an Affiliate of an entity that administers or manages a Lender Party.

“ Arranger ” has the meaning set forth in the recital of the parties hereto.

“ Assignment and Acceptance ” means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee (with the consent of any party whose consent is required by Section 9.07 or the definition of “ Eligible Assignee ”), and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit C hereto or any other form approved by the Administrative Agent.

“ Attributable Debt ” means, in connection with any Sale and Leaseback Transaction, the present value (discounted in accordance with GAAP at the discount rate implied in the lease) of the obligations of the lessee for rental payments during the term of the lease.

“ Available Amount ” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).

“ Bankruptcy Law ” means any proceeding of the type referred to in Section 6.01(f) or Title II, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.

“ Base Rate ” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of:

(a) the rate of interest announced publicly by the Administrative Agent in New York, New York, from time to time, as the Administrative Agent’s base or prime commercial lending rate; and

(b) ¹ / 2 of 1% per annum above the Federal Funds Rate.

“ Base Rate Advance ” means an Advance that bears interest as provided in Section 2.07(a)(i).

“ BNS ” has the meaning specified in the recital of parties to this Agreement.

“ Borrower ” has the meaning specified in the recital of parties to this Agreement.

“ Borrower’s Account ” means the account of the Borrower specified by the Borrower in writing to the Administrative Agent from time to time.

“ Borrowing ” means a Term B Borrowing, a Revolving Credit Borrowing or a Swing Line Borrowing.

“ Business Day ” means any day that is not a Saturday or Sunday or any other day on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, any day on which dealings are carried on in the London interbank market.

“ Capital Expenditures ” means, for any Person for any period, the sum of, without duplication, (a) all expenditures made by such Person during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have been or should be, in accordance with GAAP, reflected as additions to property, plant or equipment in a Consolidated statement of cash flows of such Person for such period plus (b) the aggregate amount of all Capitalized Lease Obligations assumed or incurred during such period.

“ Capitalized Lease Obligations ” means with respect to any Person the Obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which Obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person in accordance with GAAP and the amount of such Obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“ Cash Equivalents ” means any of the following, to the extent owned by the Borrower or any of its Subsidiaries free and clear of all Liens other than Liens created under the Collateral Documents: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) insured certificates of deposit of or time deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System, is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $500 million, in each case, having a maturity of not greater than 180 days from the date of acquisition thereof, (c) commercial paper maturing within 270 days from the date of acquisition thereof in an aggregate amount of no more than $20 million per issuer outstanding at any time, issued by any corporation organized under the laws of any State of the United States and rated, at the time of acquisition, at least “Prime-1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P, (d) Investments, classified in accordance with GAAP as Current Assets of the Parent or any of its Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions that have the highest commercial paper rating obtainable from either Moody’s or S&P, and the portfolios of which are limited solely to Investments of the character, quality and maturity described in clauses (a), (b) and (c) of this definition, (e) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (b) above, or (f) such other liquid investments as shall be approved by the Administrative Agent.

“ Caymex ” means Caymex Transportation, Inc., a Delaware corporation.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

“ CERCLIS ” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

“ Change of Control ” shall be deemed to have occurred if (i) at any time, less than 75% of the members of the board of directors of Parent shall be (A) individuals who are members of such board on the date hereof or (B) individuals whose election, or nomination for election by Parent’s stockholders, was approved by a vote of at least 75% of the members of the board then still in office who are members of the board on the date hereof (or whose election or nomination has been approved as provided in this clause (B)), (ii) at any time, any person, or any two or more persons acting as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding or disposing of Equity Interests of Parent, shall become, according to public announcement or filing, the “beneficial owner” (as defined in Rule 13d-3 issued under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of Parent representing 30% or more (calculated in accordance with such Rule 13d-3) of the combined voting power of Parent’s then outstanding voting securities, (iii) any Person other than Parent shall acquire ownership, directly or indirectly, beneficially or of record of any Equity Interests of the Borrower or (iv) a “Change of Control” (or similar event), as such term may be defined in any indenture or other agreement or instrument governing Material Debt, shall have occurred.

“ Collateral ” means all “Collateral” and “Mortgaged Property” referred to in the Collateral Documents and all other property that is or is intended to be subject to any Lien in favor of the Collateral Agent for the benefit of the Secured Parties.

“ Collateral Agent ” has the meaning specified in the recital of parties to this Agreement.

“ Collateral Agent’s Office ” means, with respect to the Collateral Agent or any successor Collateral Agent, the office of such Agent as such Agent may from time to time specify to the Borrower and the Administrative Agent.

“ Collateral Documents ” means the Security Agreement and the Mortgages, each of the collateral documents, instruments and agreements delivered pursuant to Sections 3.01(a)(ii) and 5.01(i), and each other agreement that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties.

“ Commitment ” means a Term B Commitment, a Revolving Credit Commitment, a Swing Line Commitment or a Letter of Credit Commitment.

“ Commitment Fee ” has the meaning specified in Section 2.08(a).

“ Confidential Information ” means information that any Loan Party furnishes to any Agent or any Lender Party in a writing designated as confidential, but does not include any such information that is or becomes generally available to the public other than as a result of a breach by such Agent or any Lender Party of its obligations hereunder or that is or becomes available to such Agent or such Lender Party from a source other than the Loan Parties that is not, to the best of such Agent’s or such Lender Party’s knowledge, acting in violation of a confidentiality agreement with a Loan Party.

“ Consolidated ” refers to the consolidation of accounts in accordance with GAAP.

“ Consolidated Interest Expense ” means, for any period, the sum, without duplication, of (a) the interest expense (including imputed interest expense in respect of Capitalized Lease Obligations, but excluding amortization of deferred financing costs) of the Parent and its Subsidiaries for such period, determined on a Consolidated basis in accordance with GAAP and (b) all cash dividends paid during such period by the Parent and the Borrower with respect to the Convertible Preferred Stock and Preferred Interests issued after the date hereof in respect of which cash dividends are payable.

“ Consolidated Net Income ” means, for any period, the net income or loss of the Parent and its Subsidiaries for such period determined on a Consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income of any Person that is not an Affiliate, other than income (i) earned after June 30, 2005 and (ii) actually paid by such Person to the Parent or any of its Subsidiaries during such period in the form of dividends or other distributions, and (b) the income or loss of any Person accrued prior to the date it becomes a Subsidiary of the Parent or is merged into or consolidated with the Parent or any Subsidiary of the Parent or the date that such Person’s assets are acquired by the Parent or any of its Subsidiaries.

“ Consolidated Net Worth ” shall mean, on any date, the stockholders’ equity of the Parent and its Subsidiaries on such date, determined on a Consolidated basis in accordance with GAAP.

“ Contingent Obligation ” means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment Obligations (“ primary obligations ”) of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making by such Person of the Obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, (iv) under Standby Letters of Credit or (v) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith.

“ Controlled Group ” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with Parent or any of its Subsidiaries, are treated as a single employer under Section 414(b) or 414(c) of the Internal Revenue Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Internal Revenue Code, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Internal Revenue Code.

“ Conversion ”, “ Convert ” and “ Converted ” each refer to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.09 or 2.10.

“ Convertible Preferred Stock ” means the 4.25% Redeemable Cumulative Convertible Perpetual Preferred Stock in an aggregate principal amount of $200 million issued by the Parent on May 5, 2003 and the 5.125% Cumulative Convertible Perpetual Preferred Stock in an aggregate principal amount of $210 million issued by the Parent on December 9, 2005.

“ Current Assets ” of any Person means, at any date of determination, all assets of such Person that would, in accordance with GAAP, be classified as current assets of a company conducting a business the same as or similar to that of such Person, after deducting adequate reserves in each case in which a reserve is proper in accordance with GAAP.

“ Debt ” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than current accounts payable incurred in the ordinary course of such Person’s business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person under any conditional sale or other title retention agreement with respect to property acquired by such Person, (e) all Capitalized Lease Obligations of such Person, (f) all Obligations of such Person in respect of bankers acceptances and as an account party in respect of letters of credit and letters of guaranty, (g) all Contingent Obligations and Obligations in respect of Securitization Transactions of such Person and (h) all indebtedness and other payment Obligations referred to in clauses (a) through (g) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment Obligations. The Debt of any Person shall include the Debt of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Debt provide that such Person is not liable therefor. Notwithstanding anything herein to the contrary, the definition of “Debt” shall exclude indebtedness that may be satisfied by the Parent or its subsidiaries with the issuance of stock or other Equity Interests of the Parent or its subsidiaries; provided that such indebtedness must be repaid with such stock or Equity Interests or cash proceeds from the issuance of stock or Equity Interests unless (i) after giving effect to any payment in cash that is not cash proceeds from the issuance of stock or Equity Interests, the Parent would have been in compliance with the financial covenants pursuant to Section 5.04 as determined on a pro forma basis as of the most recently ended fiscal quarter as if such indebtedness had constituted “Debt” or (ii) if the Revolving Credit Facility would remain undrawn after such repayment and have availability thereunder of not less than $25,000,000.

“ Debt for Borrowed Money ” means, at any date of determination, the sum of (i) the aggregate principal amount of all Debt that, in accordance with GAAP, would be classified as indebtedness on the balance sheet of the Parent and its Subsidiaries at such date plus the amount of any Debt owed by any Loan Party to Meridian Speedway, and (ii) the aggregate amount of all Securitization Transactions of the Borrower at such date.

“ Default ” means any Event of Default or any event that would constitute an Event of Default but for the passage of time or the requirement that notice be given or both.

“ Default Interest ” has the meaning set forth in Section 2.07(b).

“ Defaulted Advance ” means, with respect to any Lender Party at any time, the portion of any Advance required to be made by such Lender Party to the Borrower pursuant to Section 2.01 or 2.02 at or prior to such time that has not been made by such Lender Party or by the Administrative Agent for the account of such Lender Party pursuant to Section 2.02(e) as of such time. In the event that a portion of a Defaulted Advance shall be deemed made pursuant to Section 2.15(a), the remaining portion of such Defaulted Advance shall be considered a Defaulted Advance originally required to be made pursuant to Section 2.01 on the same date as the Defaulted Advance so deemed made in part.

“ Defaulted Amount ” means, with respect to any Lender Party at any time, any amount required to be paid by such Lender Party to any Agent or any other Lender Party hereunder or under any other Loan Document at or prior to such time that has not been so paid as of such time, including, without limitation, any amount required to be paid by such Lender Party to (a) the Swing Line Bank pursuant to Section 2.02(b) to purchase a portion of a Swing Line Advance made by the Swing Line Bank, (b) the Issuing Bank pursuant to Section 2.03(c) to purchase a portion of a Letter of Credit Advance made by the Issuing Bank, (c) the Administrative Agent pursuant to Section 2.02(e) to reimburse the Administrative Agent for the amount of any Advance made by the Administrative Agent for the account of such Lender Party, (d) any other Lender Party pursuant to Section 2.13 to purchase any participation in Advances owing to such other Lender Party and (e) any Agent or the Issuing Bank pursuant to Section 7.05 to reimburse such Agent or the Issuing Bank for such Lender Party’s ratable share of any amount required to be paid by the Lender Parties to such Agent or the Issuing Bank as provided therein. In the event that a portion of a Defaulted Amount shall be deemed paid pursuant to Section 2.15(b), the remaining portion of such Defaulted Amount shall be considered a Defaulted Amount originally required to be paid hereunder or under any other Loan Document on the same date as the Defaulted Amount so deemed paid in part.

“ Defaulting Lender ” means, at any time, any Lender Party that, at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take any action or be the subject of any action or proceeding of a type described in Section 6.01(f).

“ Domestic Lending Office ” means, with respect to any Lender Party, the office of such Lender Party specified as its “Domestic Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent.

“ EBITDA ” means, at any date of determination, the sum, determined on a Consolidated basis, of Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) Consolidated Interest Expense for such period, (ii) consolidated income tax expense for such period, (iii) all amounts attributable to depreciation and amortization for such period, including amortization of deferred financing costs, and (iv) all extraordinary losses for such period and minus (b) without duplication and to the extent included in determining such Consolidated Net Income, any extraordinary gains for such period determined in accordance with GAAP for the most recently completed Measurement Period; provided , however , that EBITDA shall exclude (i) non-cash charges not to exceed $5,000,000 in the aggregate per annum arising from claims adjustments and accounting changes and (ii) non-cash charges not to exceed $35,700,000 in the aggregate for the fiscal quarter ended September 30, 2005 with respect to an increase in claims reserves.

“ Effective Date ” has the meaning specified in Section 3.01.

“ Eligible Assignee ” means with respect to any Facility (other than the Letter of Credit Facility), (i) a Lender Party; (ii) an Affiliate of a Lender Party; (iii) an Approved Fund; and (iv) any other Person (other than an individual) approved by (x) the Administrative Agent, (y) in the case of an assignment of a Revolving Credit Commitment, the Issuing Bank and (z) unless a Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition.

“ Environmental Action ” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

“ Environmental Law ” means any Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.

“ Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of Parent, the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“ Environmental Permit ” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“ Equity Interests ” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“ ERISA Event ” means (a) any Reportable Event; (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Internal Revenue Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d)

of the Internal Revenue Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by Parent or any member of the Controlled Group of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Parent or any member of the Controlled Group from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or to appoint a trustee to administer any Plan; (f) the incurrence by Parent or any member of the Controlled Group of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by Parent or any member of the Controlled Group of any notice, or the receipt by any Multiemployer Plan from Parent or any member of the Controlled Group of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“ Escrow Bank ” has the meaning specified in Section 2.15(c).

“ Eurocurrency Liabilities ” has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“ Eurodollar Lending Office ” means, with respect to any Lender Party, the office of such Lender Party specified as its “Eurodollar Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent.

“ Eurodollar Rate ” means, for any Interest Period, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on the page of the Telerate screen (or any successor page) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period ( provided that, if for any reason such rate does not appear on such page or service or such page or service shall not be available, the term “Eurodollar Rate” shall mean the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period) by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period.

“ Eurodollar Rate Advance ” means an Advance that bears interest as provided in Section 2.07(a)(ii).

“ Eurodollar Rate Reserve Percentage ” for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference

to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period.

“ Events of Default ” has the meaning specified in Section 6.01.

“ Excess Cash Flow ” means, for any Fiscal Year,

(a) EBITDA for such Fiscal Year; minus

(b) cash tax payments made by Parent and its Subsidiaries during such Fiscal Year; minus

(d) (i) cash Capital Expenditures for such Fiscal Year (except to the extent attributable to the incurrence of Capitalized Lease Obligations or otherwise financed by incurring long-term Debt) and (ii) capital contributions, loans and guaranteed Debt and Sale and Leaseback Transactions made in cash during such Fiscal Year, in each case permitted by Section 5.02(f)(viii); minus

(e) the aggregate principal amount of long-term Debt repaid or prepaid by Parent and its Subsidiaries during such Fiscal Year, excluding (i) Debt in respect of Revolving Credit Advances and Letters of Credit, (ii) Term B Advances prepaid pursuant to Section 2.06(b)(ii) (other than any part of such prepayment attributable to gains on asset sales that are included in the calculation of Consolidated Net Income for such Fiscal Year), and (iii) repayments or prepayments of long-term Debt financed by incurring other long-term Debt or by issuing Equity Interests; minus

(f) the aggregate amount of Investments or other payments required to be made by the Parent or any of its Subsidiaries during such Fiscal Year pursuant to mandatory capital calls or similar agreements under joint venture, limited liability company or shareholder agreements and actually made in cash during such Fiscal Year.

“ Excluded Taxes ” means, with respect to the Administrative Agent or any Lender Party, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which the Administrative Agent or such Lender Party, as the case may be, is organized or in which the principal office of the Administrative Agent or such Lender Party, as applicable, is located or, in the case of any Lender Party, in which its Applicable Lending Office is located, (b) any branch profits tax imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above, and (c) in the case of a Foreign Lender Party, any withholding tax that (i) is in effect and would apply to amounts payable to such Foreign Lender Party at the time such Foreign Lender Party becomes a party to this Agreement (or designates a different Applicable Lending Office), except to the extent that such Foreign Lender Party (or a Lender Party assignor, if any) was entitled, at the time of designation of a different Applicable Lending Office (or the effective date of the Assignment and Acceptance pursuant to which such Foreign Lender Party becomes a party to this Agreement), to receive additional amounts from a Loan Party with respect to any withholding tax pursuant to Section 2.12(a), or (ii) is attributable to such Foreign Lender Party’s failure to comply with Section 2.12(e) (other than if such failure is due to a change in law, occurring after the date on which applicable documentation originally was required to be provided).

“ Existing Credit Facility ” has the meaning specified in the Preliminary Statements.

“ Existing Debt ” means Debt of each Loan Party and its Subsidiaries outstanding immediately before the occurrence of the Effective Date.

“ Extraordinary Receipt ” means any cash received by or paid to or for the account of any Person not in the ordinary course of business, consisting of proceeds of property insurance, condemnation awards (and payments in lieu thereof), indemnity payments and proceeds received in connection with any taking under the power of eminent domain or similar proceedings.

“ Facility ” means the Term B Facility, the Revolving Credit Facility, the Swing Line Facility or the Letter of Credit Facility.

“ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“ Fee Letter ” means the fee letter dated as of March 17, 2006 between the Borrower and BNS, as amended.

“ Fiscal Year ” means a fiscal year of the Parent and its Consolidated Subsidiaries ending on December 31 in any calendar year.

“ Foreign Lender Party ” means any Lender Party that is organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia.

“ Foreign Subsidiary ” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia.

“ Fund ” means any Person (other than an individual) that is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“ GAAP ” has the meaning specified in Section 1.03.

“ Governmental Authority ” means any nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board, bureau or similar body, whether federal, state, provincial, territorial, local or foreign.

“ Governmental Authorization ” means any authorization, approval, consent, franchise, license, covenant, order, ruling, permit, certification, exemption, notice, declaration or similar

right, undertaking or other action of, to or by, or any filing, qualification or registration with, any Governmental Authority.

“ Grupo Parent ” means a wholly owned direct or indirect domestic subsidiary of Parent that will at all times, individually or together with another direct or indirect wholly owned subsidiary of Parent, be the record and beneficial owner of all Equity Interests in Grupo TFM owned directly or indirectly by Parent (except that up to 25% of the Equity Interests in Grupo TFM may be owned by Kansas City Southern de México, S.A. de C.V., so long as Grupo TFM owns at least 80% of the issued and outstanding Equity Interests in Kansas City Southern de México, S.A. de C.V.).

“ Grupo TFM Acquisition ” means the acquisition by Parent, directly or indirectly, from Grupo TMM of all the Equity Interests owned, directly or indirectly, by Grupo TMM in Grupo TFM pursuant to a transaction or series of transactions that result in Grupo Parent or another wholly owned subsidiary of Parent owning directly or indirectly all such Equity Interests.

“ Grupo TFM ” means Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V., a Mexican corporation.

“ Grupo TFM Notes ” means the promissory notes issued in connection with the Grupo TFM Acquisition by the Parent, KARA Sub, Inc., a Delaware corporation, KCS Investment I, Ltd., a Delaware corporation, and Caymex in an aggregate principal amount not to exceed $87,000,000.

“ Grupo TMM ” means Grupo TMM, S.A., a Mexican corporation.

“ Guaranteed Obligations ” has the meaning specified in Section 8.01.

“ Guaranties ” means the Parent Guaranty and the Subsidiary Guaranty.

“ Guarantors ” means the Parent and the Subsidiary Guarantors.

“ Guaranty Supplement ” has the meaning specified in Section 8.05.

“ Hazardous Materials ” means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

“ Hedge Agreements ” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity price hedging agreements and arrangements and other hedging agreements.

“ Hedge Bank ” means any Lender Party or an Affiliate of a Lender Party in its capacity as a party to a Secured Hedge Agreement.

“ Indemnified Party ” has the meaning specified in Section 9.04(b).

“ Indemnified Taxes ” means Taxes other than Excluded Taxes.

“ Initial Extension of Credit ” means the earlier to occur of the initial Borrowing and the initial issuance of a Letter of Credit hereunder.

“ Initial Issuing Bank ” means the bank listed on the signature pages hereof as the Initial Issuing Bank.

“ Initial Lender Parties ” means the Initial Issuing Bank, the Initial Lenders and the Initial Swing Line Bank.

“ Initial Lenders ” means the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the Initial Lenders.

“ Initial Swing Line Bank ” means the bank listed on the signature pages hereof as the Initial Swing Line Bank.

“ Intercompany Loan Repayment ” has the meaning specified in Section 2.14.

“ Interest Coverage Ratio ” means, at any date of determination, the ratio of (a) EBITDA to (b) Consolidated Interest Expense, in each case, for the most recently completed Measurement Period.

“ Interest Period ” means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Administrative Agent not later than 1:00 P.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select (or such shorter periods as the Borrower may select and may be available and acceptable to the Lenders); provided , however , that:

(a) the Borrower may not select any Interest Period with respect to any Eurodollar Rate Advance under a Facility that ends after any principal repayment installment date for such Facility unless, after giving effect to such selection, the aggregate principal amount of Base Rate Advances and of Eurodollar Rate Advances having Interest Periods that end on or prior to such principal repayment installment date for such Facility shall be at least equal to the aggregate principal amount of Advances under such Facility due and payable on or prior to such date;

(b) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided , however , that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day;

(c) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month; and

(d) until the earlier to occur of (x) the 30th day following the Effective Date and (y) that date upon which the Arranger has determined (and notifies the Borrower) that the primary syndication of the Facilities (and the resultant addition of institutions as Lenders) has been completed no Eurodollar Rate Advances having an interest period greater than one month may be incurred.

“ Internal Revenue Code ” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“ Interstate Commerce Act ” means the Interstate Commerce Commission Termination Act of 1995, and the regulations promulgated thereunder.

“ Inventory ” means all Inventory referred to in Section 1(b) of the Security Agreement.

“ Investment ” in any Person means any loan or advance to such Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation (or similar transaction) and any arrangement pursuant to which the investor incurs any Contingent Obligation in respect of such person or Debt of the types referred to in clause (h) of the definition of “ Debt ” in respect of such Person.

“ Issuing Bank ” means the Initial Issuing Bank and any Eligible Assignee to which the Letter of Credit Commitment hereunder has been assigned pursuant to Section 9.07 so long as such Eligible Assignee expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Administrative Agent of its Applicable Lending Office and the amount of its Letter of Credit Commitment (which information shall be recorded by the Administrative Agent in the Register), for so long as such Initial Issuing Bank or Eligible Assignee, as the case may be, shall have a Letter of Credit Commitment.

“ L/C Collateral Account ” has the meaning specified in the Security Agreement.

“ L/C Disbursement ” shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit.

“ L/C Related Documents ” has the meaning specified in Section 2.04(d)(ii).

“ Lender Party ” means any Lender, the Issuing Bank or the Swing Line Bank.

“ Lenders ” means the Initial Lenders and each Person that shall become a Lender hereunder pursuant to Section 9.07 for so long as such Initial Lender or Person, as the case may be, shall be a party to this Agreement.

“ Lenders Presentation ” means the presentation to the Lenders dated April 2006 used by the Arranger in connection with the syndication of the Commitments.

“ Letter of Credit Advance ” means an advance made by the Issuing Bank or any Revolving Credit Lender pursuant to Section 2.03(c).

“ Letter of Credit Agreement ” has the meaning specified in Section 2.03(a).

“ Letter of Credit Commitment ” means, with respect to the Issuing Bank at any time, the amount set forth opposite the Issuing Bank’s name on Schedule I hereto under the caption “Letter of Credit Commitment” or, if the Issuing Bank has entered into an Assignment and Acceptance, set forth for the Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as the Issuing Bank’s “Letter of Credit Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

“ Letter of Credit Facility ” means, at any time, an amount equal to the amount of the Issuing Bank’s Letter of Credit Commitment at such time, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

“ Letters of Credit ” has the meaning specified in Section 2.01(d).

“ Leverage Ratio ” means, at any date of determination, the ratio of (a) the aggregate amount of Debt for Borrowed Money at such date to (b) EBITDA at such date determined in accordance with GAAP for the most recently completed Measurement Period.

“ Lien ” means any lien, security interest or other charge or encumbrance of any kind, including, without limitation, the lien or retained security title of a conditional vendor.

“ Loan Documents ” means (i) this Agreement, (ii) the Notes, (iii) the Guaranties, (iv) the Collateral Documents, (v) the Fee Letters, (vi) each Letter of Credit Agreement, and (vii ) each Secured Hedge Agreement, in each case as amended.

“ Loan Parties ” means the Parent, the Borrower and the Subsidiary Guarantors.

“ Margin Stock ” has the meaning specified in Regulation U.

“ Material Adverse Change ” means any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Parent and its Subsidiaries, taken as a whole.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of the Parent and its Subsidiaries, taken as a whole, (b) the rights and remedies of any Agent or any Lender Party under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party.

“ Material Debt ” means (i) Debt (other than the Obligations hereunder) of the Parent or its Subsidiaries in an aggregate principal amount exceeding $20,000,000 or (ii) obligations in respect of any Hedge Agreement of the Parent or its Subsidiaries in an aggregate principal amount exceeding $30,000,000. For purposes of determining Material Debt, the “principal amount” of the obligations of Parent or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Parent or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

“ Material Debt Document ” means any indenture or other agreement or instrument governing or evidencing Material Debt.

“ Measurement Period ” means, at any date of determination, the most recently completed four consecutive fiscal quarters of the Parent ending on or prior to such date.

“ Meridian Speedway ” means Meridian Speedway, LLC, a Delaware limited liability company, a joint venture with respect to which not less than 65% of the interest in the capital or profits of such joint venture is directly or indirectly owned or controlled by Parent.

“ Meridian Speedway Company Agreement ” means that certain Limited Liability Company Agreement of Meridian Speedway by and between the Parent and The Alabama Great Southern Railroad Company, entered into by the parties thereto pursuant to the terms of the Meridian Speedway Transaction Agreement, as modified, amended, amended and restated or supplemented from time to time.

“ Meridian Speedway Transaction Agreement ” means that certain Transaction Agreement dated as of December 1, 2005, by and among the Parent, the Borrower, Norfolk Southern Corporation and The Alabama Great Southern Railroad Company, as modified, amended, amended and restated or supplemented from time to time.

“ Mexrail ” means Mexrail, Inc., a Delaware corporation.

“ Mexrail Acquisition ” means the acquisition by the Parent, directly or indirectly, of all of the Equity Interests in Mexrail for consideration in an aggregate principal amount of approximately $80,000,000.

“ Moody’s ” means Moody’s Investors Service, Inc.

“ Mortgage Policies ” means fully paid American Land Title Association Lender’s title insurance policies in form and substance, with endorsements and in amounts reasonably acceptable to the Collateral Agent (it being understood that such amounts will equal the corresponding fair market values of the properties being mortgaged, or, if there shall result in no additional undue cost to the mortgagor, the Commitment under this Agreement), issued, coinsured and reinsured, if applicable, by Stewart Title Guaranty Company, insuring the Mortgages to be valid first and subsisting Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics’ and materialmen’s Liens) and encumbrances, excepting only Permitted Encumbrances, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents and for mechanics’ and materialmen’s Liens) and such coinsurance and direct access reinsurance as the Collateral Agent may deem necessary or desirable.

“ Mortgages ” means the deeds of trust, trust deeds, mortgages, leasehold mortgages and/or leasehold deeds of trust duly executed by the Loan Parties in connection with the Existing Credit Facility, as set forth on Schedule III, and each other mortgage delivered pursuant to Section 5.01(i) hereof, in each case, as amended, amended and restated or otherwise modified from time to time.

“ Multiemployer Plan ” shall mean a Plan that is a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA as to which Parent or any member of the Controlled Group may have any liability.

“ Net Cash Proceeds ” means (a) with respect to any sale, lease, transfer or other disposition (including pursuant to a Sale and Leaseback Transaction or Securitization

Transaction) of any assets of the Parent or any of its Subsidiaries (other than any sale, lease, transfer or other disposition of assets pursuant to clause (i), (iii) or (vi) of Section 5.02(e) and transfers of accounts receivable in Securitization Transactions to the extent the aggregate amount of all such transactions after the Effective Date hereof shall not exceed $25,000,000) and with respect to Extraordinary Receipts, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such sale, lease, transfer or other disposition or Extraordinary Receipt (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Debt (other than Debt under the Loan Documents) that is secured by such asset and that is required to be repaid in connection with such sale, lease, transfer or other disposition thereof or otherwise subject to mandatory prepayment as a result of such event, (B) the reasonable and customary out-of-pocket costs, fees, commissions, premiums and expenses incurred by the Parent or its Subsidiaries, (C) federal, state, provincial, foreign and local taxes reasonably estimated (on a Consolidated basis) to be actually payable within the current or the immediately succeeding tax year as a result of any gain recognized in connection therewith and (D) the amount of any reserves established by the Parent or any of its Subsidiaries to fund contingent liabilities reasonably estimated to be payable during the year in which such event occurred or the next succeeding year and that are directly attributable to such event; provided , however , that Net Cash Proceeds shall not include any such amounts to the extent such amounts are reinvested in the business of the Parent and its Subsidiaries within 360 days after the date of receipt thereof; provided further that Net Cash Proceeds under this clause (a) shall not include the first $20,000,000 of Net Cash Proceeds in any Fiscal Year;

(b) with respect to the incurrence or issuance of any Debt by the Parent or any of its Subsidiaries (other than (x) Debt permitted pursuant to Section 5.02(b)(i), (iii), (iv) and (v)), the excess of (i) the sum of the cash and Cash Equivalents received in connection with such incurrence or issuance over (ii) the underwriting discounts and commissions or other similar payments, and other out-of-pocket costs, fees, commissions, premiums and expenses incurred by the Parent or any of its Subsidiaries in connection with such incurrence or issuance to the extent such amounts were not deducted in determining the amount referred to in clause (i); and

(c) with respect to the incurrence or issuance of any Debt by the Parent or any of its Subsidiaries pursuant to Section 5.02(b)(v), if the Parent and Borrower do not meet the Debt incurrence test under Section 5.02(b)(i)(H), any amount of such cash and Cash Equivalents received not used to prepay the outstanding Revolving Credit Advances under the Revolving Credit Facility in accordance with Section 2.06(a).

“ Non-Consenting Lender ” means, in the event that the Required Lenders have agreed to any consent, waiver or amendment pursuant to Section 9.01 that requires the consent of one or more Lenders in addition to the Required Lenders, any Lender who is entitled to agree to such consent, waiver or amendment but who does not so agree.

“ Non-Core Business Subsidiary ” means any single domestic Subsidiary of the Borrower and any of such Subsidiary’s respective Subsidiaries conducting business of a nature distinct from that of the Loan Parties.

“ Note ” means a Term B Note or a Revolving Credit Note.

“ Notice of Borrowing ” has the meaning specified in Section 2.02(a).

“ Notice of Issuance ” has the meaning specified in Section 2.03(a).

“ Notice of Renewal ” has the meaning specified in Section 2.01(e).

“ Notice of Swing Line Borrowing ” has the meaning specified in Section 2.02(b).

“ Notice of Termination ” has the meaning specified in Section 2.01(e).

“ NPL ” means the National Priorities List under CERCLA.

“ Obligation ” means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of any Loan Party under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by such Loan Party under any Loan Document and (b) the obligation of such Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party.

“ OECD ” means the Organization for Economic Cooperation and Development.

“ Off Balance Sheet Obligation ” means, with respect to any Person, any Obligation of such Person under a synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing classified as an operating lease in accordance with GAAP, if such Obligations would give rise to a claim against such Person in a proceeding referred to in Section 6.01(f); provided that “Off Balance Sheet Obligations” shall not include Obligations incurred to finance property and equipment in the ordinary course of business.

“ Other Taxes ” means any and all present or future recording, stamp, documentary, excise, transfer, sales, property, or similar taxes, charges or levies arising from any payment made hereunder or under the Notes or under any other Loan Document or from the execution, delivery, registration or enforcement of, or otherwise with respect to, this Agreement, the Notes or any other Loan Document.

“ Parent ” has the meaning specified in the recital of parties to this Agreement.

“ Parent Guaranty ” means the guaranty of the Parent set forth in Article VIII.

“ Patriot Act ” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001.

“ PBGC ” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“ Permitted Encumbrances ” has the meaning specified in the Mortgages.

“ Permitted Liens ” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes,

assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b); (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that (i) are not overdue for a period of more than 90 days or which are being contested in good faith by appropriate proceedings and (ii) individually or together with all other Permitted Liens outstanding on any date of determination do not materially adversely affect the use of the property to which they relate; (c) pledges or deposits in the ordinary course of business to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (d) deposits to secure the performance of bids, trade contracts and leases (other than Debt), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) Liens securing judgments (or the payment of money not constituting a Default under Section 6.01(g)) or securing appeal or other surety bonds related to such judgments, and (f) Permitted Encumbrances.

“ Person ” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

“ Plan ” means any employee pension benefit plan that is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code as to which Parent or any member of the Controlled Group may have any liability.

“ Pledged Shares ” has the meaning specified in the Security Agreement.

“ Post Petition Interest ” has the meaning specified in Section 8.06.

“ Preferred Interests ” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s property and assets, whether by dividend or upon liquidation.

“ Prepayment Date ” means with respect to any cash receipts from a transaction described in clause (a) or (b) of the definition of “Net Cash Proceeds”, (x) other than in the case of the incurrence or issuance of Debt pursuant to Section 5.02(b)(v), the third Business Day, and (y) in the case of the incurrence or issuance of Debt pursuant to Section 5.02(b)(v), the 120 ^th day, in each case, following the date of the receipt of such Net Cash Proceeds by the Parent or any of its Subsidiaries or, if any cash receipts from a transaction described in clause (a) of the definition of “Net Cash Proceeds” are not deemed to be Net Cash Proceeds pursuant to the penultimate proviso of such clause and are not reinvested in the business of the Borrower and its Subsidiaries within 360 days after the date of receipt thereof, the date which is 360 days following the date of receipt of such cash receipts.

“ Prior Effective Date ” means the “Effective Date” as defined in the Existing Credit Facility.

“ Properties ” shall mean all Rights of Way (as defined in each of the Mortgages) and those real estate assets listed on Schedules 4.01(v) and 4.01(w)(ii).

“ Pro Rata Share ” of any amount means, with respect to any Revolving Credit Lender at any time, the product of such amount times a fraction the numerator of which is the amount of

such Lender’s Revolving Credit Commitment at such time (or, if the Revolving Credit Commitments shall have been terminated pursuant to Section 2.05 or 6.01, such Lender’s Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the Revolving Credit Facility at such time (or, if the Revolving Credit Commitments shall have been terminated pursuant to Section 2.05 or 6.01, the Revolving Credit Facility as in effect immediately prior to such termination).

“ Railway Labor Act ” means Railway Labor Act, as amended from time to time.

“ Register ” has the meaning specified in Section 9.07(d).

“ Regulation U ” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“ Reportable Event ” shall mean any reportable event as defined in Section 4043 of ERISA and the regulations issued under such Section with respect to a Plan (other than a Multiemployer Plan), excluding, however, such events as to which the PBGC by regulation or by technical update waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; provided that a failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code and of Section 302 of ERISA shall be a reportable event regardless of the issuance of any waiver in accordance with Section 412(d) of the Internal Revenue Code or Section 303(d) of ERISA.

“ Required Lenders ” means, at any time, Lenders owed or holding at least a majority in interest of the sum of (a) the aggregate principal amount of the Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, and (c) the aggregate Unused Revolving Credit Commitments at such time; provided , however , that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (A) the aggregate principal amount of the Advances owing to such Lender (in its capacity as a Lender) and outstanding at such time, (B) such Lender’s Pro Rata Share of the aggregate Available Amount of all Letters of Credit outstanding at such time, and (C) the Unused Revolving Credit Commitment of such Lender at such time. For purposes of this definition, the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to the Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to the Revolving Credit Lenders ratably in accordance with their respective Revolving Credit Commitments.

“ Restatement ” has the meaning specified in the Preliminary Statements.

“ Revolving Credit Advance ” has the meaning specified in Section 2.01(b).

“ Revolving Credit Borrowing ” means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by the Revolving Credit Lenders.

“ Revolving Credit Commitment ” means, collectively, (a) with respect to any Revolving Credit Lender at any time, the amount set forth opposite such Lender’s name on Schedule I hereto under the caption “Revolving Credit Commitment” and (b) if any such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d), in each case, as such Lender’s “Revolving Credit Commitment”, may be reduced at or prior to such time pursuant to Section 2.05.

“ Revolving Credit Facility ” means, at any time, the aggregate amount of the Revolving Credit Lenders’ Revolving Credit Commitments at such time.

“ Revolving Credit Lender ” means any Lender that has a Revolving Credit Commitment.

“ Revolving Credit Note ” means a promissory note of the Borrower payable to the order of any Revolving Credit Lender, in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances made by such Lender, as amended.

“ Sale and Leaseback Transaction ” means any arrangement, directly or indirectly, whereby any Person shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred.

“ Secured Hedge Agreement ” means any Hedge Agreement required or permitted under Article V that is entered into by and between any Loan Party and any Hedge Bank.

“ Secured Obligations ” has the meaning specified in Section 2 of the Security Agreement.

“ Secured Parties ” means the Agents, the Lender Parties and the Hedge Banks.

“ Securitization Transaction ” means any transfer by the Borrower or any Subsidiary of accounts receivable or interests therein (a) to a trust, partnership, corporation or other entity, which transfer is funded in whole or in part, directly or indirectly, by the incurrence or issuance by the transferee or any successor transferee of Debt or other securities that are to receive payments from, or that represent interests in, the cash flow derived from such accounts receivable or interests, or (b) directly to one or more investors or other purchasers. The amount of any Securitization Transaction shall be deemed at any time to be the aggregate principal or stated amount of the Debt or other securities referred to in the preceding sentence or, if there shall be no such principal or stated amount, the uncollected amount of the accounts receivable transferred pursuant to such Securitization Transaction net of any such accounts receivable that have been written off as uncollectible.

“ Security Agreement ” means the security agreement executed on the Prior Effective Date, as amended, restated, supplemented or otherwise modified, together with each other security agreement and security agreement supplement delivered pursuant to Section 5.01(i).

“ Senior Secured Debt ” means any Debt that is pari passu with the Debt under the Loan Documents and secured on a first priority basis; provided that all Debt incurred to purchase newly acquired equipment to the extent such newly acquired equipment is subject to a Sale and Leaseback Transaction shall not constitute “Debt” for the purposes of this definition if such transaction is consummated on or prior to the 120th day of the acquisition of such newly-acquired equipment subject to such Sale and Leaseback Transaction.

“ Significant Subsidiary ” means any Subsidiary which is not a Foreign Subsidiary the Consolidated revenues of which for the most recent Fiscal Year for which audited financial statements have been delivered pursuant to Section 5.03 were greater than 5% of Parent’s Consolidated revenues for such Fiscal Year or the Consolidated tangible assets of which as of the

end of such Fiscal Year were greater than 5% of Parent’s Consolidated tangible assets as of such date.

“ Solvent ” and “ Solvency ” mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“ Standby Letter of Credit ” means any Letter of Credit issued under the Letter of Credit Facility, other than a Trade Letter of Credit.

“ S&P ” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

“ STB ” shall mean the Surface Transportation Board, a board established within the Department of Transportation, or any successor Federal agency charged with similar regulation of common carriers.

“ Subordinated Debt ” means any Debt of any Loan Party that is subordinated to the Obligations of such Loan Party under the Loan Documents on, and that otherwise contains, terms and conditions satisfactory to the Required Lenders.

“ Subordinated Debt Documents ” means all agreements, indentures and instruments pursuant to which Subordinated Debt is issued, in each case as amended, to the extent permitted under the Loan Documents.

“ Subordinated Obligations ” has the meaning specified in Section 8.06.

“ Subsidiary ” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries. References in this Agreement or any Loan Document to any “Subsidiary” or “Subsidiaries” of the Borrower and/or the Parent shall not under any circumstances include Mexrail, Meridian Speedway (except that, for purposes of (x) Section 5.02(n) and (y) in the calculation of EBITDA (to the extent attributable to the Borrower based on the Borrower’s pro rata share of the outstanding Equity Interests of Meridian Speedway), Meridian Speedway shall be a Subsidiary), Caymex, any domestic wholly owned subsidiary of Parent which directly or indirectly owns the Equity Interests of Grupo TFM or Panama Canal Railway Company and any of their respective subsidiaries.

“ Subsidiary Guarantors ” means the Subsidiaries of the Borrower listed on Schedule II hereto and each other Subsidiary of the Borrower that shall be required to execute and deliver a guaranty pursuant to Section 5.01(i).

“ Subsidiary Guaranty ” means the guaranty of the Subsidiary Guarantors set forth in Article VIII together with each other guaranty and guaranty supplement delivered pursuant to Section 5.01(i), in each case as amended, amended and restated, modified or otherwise supplemented.

“ Supplemental Collateral Agent ” has the meaning specified in Section 7.01(c).

“ Surviving Debt ” means Debt of each Loan Party and its Subsidiaries outstanding immediately before and after giving effect to the Initial Extension of Credit.

“ Swing Line Advance ” means an advance made by (a) the Swing Line Bank pursuant to Section 2.01(c) or (b) any Revolving Credit Lender pursuant to Section 2.02(b).

“ Swing Line Bank ” means the Initial Swing Line Bank and any Eligible Assignee to which the Swing Line Commitment hereunder has been assigned pursuant to Section 9.07 so long as such Eligible Assignee expressly agrees to perform in accordance with their terms all obligations that by the terms of this Agreement are required to be performed by it as a Swing Line Bank and notifies the Administrative Agent of its Applicable Lending Office and the amount of its Swing Line Commitment (which information shall be recorded by the Administrative Agent in the Register), for so long as such Initial Swing Line Bank or Eligible Assignee, as the case may be, shall have a Swing Line Commitment.

“ Swing Line Borrowing ” means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank pursuant to Section 2.01(c) or the Revolving Credit Lenders pursuant to Section 2.02(b).

“ Swing Line Commitment ” means, with respect to the Swing Line Bank at any time, the amount set forth opposite the Swing Line Bank’s name on Schedule I hereto under the caption “Swing Line Commitment” or, if the Swing Line Bank has entered into an Assignment and Acceptances, set forth for the Swing Line Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as the Swing Line Bank’s “Swing Line Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

“ Swing Line Facility ” means, at any time, an amount equal to the amount of the Swing Line Bank’s Swing Line Commitments at such time, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

“ Taxes ” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings, and all liabilities with respect thereto, imposed by any Governmental Authority.

“ Term B Advance ” has the meaning specified in Section 2.01(a).

“ Term B Borrowing ” means a borrowing consisting of simultaneous Term B Advances of the same Type made by the Term B Lenders.

“ Term B Commitment ” means, with respect to any Term B Lender at any time, the amount set forth opposite such Lender’s name on Schedule I hereto under the caption “Term B Commitment” or, if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender’s “Term B Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

“ Term B Facility ” means, at any time, the aggregate amount of the Term B Lenders’ Term B Commitments at such time.

“ Term B Lender ” means any Lender that has a Term B Commitment or holds a Term B Advance.

“ Term B Note ” means a promissory note of the Borrower payable to the order of any Term B Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from the Term B Advance made by such Lender, as amended.

“ Termination Date ” means the earlier of (a) the date of termination in whole of the Revolving Credit Commitments, the Letter of Credit Commitment, the Swing Line Commitment, the Term B Commitments pursuant to Section 2.05 or 6.01 and (b) (i) for purposes of the Revolving Credit Facility, the Swing Line Facility and the Letter of Credit Facility, April 28, 2011, (ii) for purposes of the Term B Facility and for all other purposes, April 28, 2013; provided, however , that if, on any date the Facilities are not rated at least Ba3 by Moody’s and BB+ by S&P (in each case, with at least stable outlooks), the “Termination Date” for each of the Facilities shall be the date that is 90 days prior to the earliest final maturity date of any outstanding 2000 Senior Notes and 2002 Senior Notes unless (x) such 2000 Senior Notes and 2002 Senior Notes, as the case may be, have been refinanced in full on or prior to such date or (y) an amount sufficient to indefeasibly repay such 2000 Senior Notes and 2002 Senior Notes, as the case may be, has been deposited with the applicable bond trustee on or prior to such date and, after giving effect to such deposit, the Borrower is in pro forma compliance with all financial covenants set forth in Section 5.04 as determined on a pro forma basis as the most recently ended fiscal year.

“ Trade Letter of Credit ” means any Letter of Credit that is issued under the Letter of Credit Facility for the benefit of a supplier of Inventory to the Borrower or any of its Subsidiaries to effect payment for such Inventory or otherwise issued in the ordinary course of business, the conditions to drawing under which include the presentation to the Issuing Bank of negotiable bills of lading, invoices and related documents sufficient, in the judgment of the Issuing Bank, to create a valid and perfected lien on or security interest in such Inventory, bills of lading, invoices and related documents in favor of the Issuing Bank.

“ Transaction ” means the Restatement and the other transactions contemplated by the Loan Documents.

“ Type ” refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate.

“ Unused Revolving Credit Commitment ” means, with respect to any Revolving Credit Lender at any time, (a) such Lender’s Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances, Swing Line

Advances and Letter of Credit Advances made by such Lender (in its capacity as a Lender) and outstanding at such time plus (ii) such Lender’s Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Bank pursuant to Section 2.03(c) and outstanding at such time and (C) the aggregate principal amount of all Swing Line Advances made by the Swing Line Bank pursuant to Section 2.01(c) and outstanding at such time.

“ Voting Interests ” means shares of capital stock issued by a corporation, or equivalent Equity Interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

“ Welfare Plan ” means a welfare plan, as defined in Section 3(1) of ERISA, that is maintained for employees of any Loan Party or in respect of which any Loan Party could have liability.

“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Computation of Time Periods; Other Definitional Provisions . In this Agreement and the other Loan Documents in the computation of periods of time from a specified date to a later specified date, the word “ from ” means “from and including” and the words “ to ” and “ until ” each mean “to but excluding”. References in the Loan Documents to any agreement or contract “ as amended ” shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms.

SECTION 1.03. Accounting Terms . All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(g) (“ GAAP ”).

SECTION 1.04. Currency Equivalents Generally . Any amount specified in this Agreement (other than in Articles II, VII and IX) or any of the other Loan Documents to be in U.S. dollars shall also include the equivalent of such amount in any currency other than U.S. dollars, such equivalent amount to be determined at the rate of exchange quoted by BNS in New York, New York at the close of business on the Business Day immediately preceding any date of determination thereof, to prime banks in New York, New York for the spot purchase in the New York foreign exchange market of such amount in U.S. dollars with such other currency.

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT

SECTION 2.01. The Advances and the Letters of Credit . (a) The Term B Advances . Each Term B Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance (a “ Term B Advance ”) to the Borrower on the Effective Date in an amount not to exceed such Lender’s Term B Commitment. The Term B Borrowing shall consist of Term B Advances made simultaneously by the Term B Lenders ratably according to their Term B Commitments whereupon the Term B Commitments shall be reduced to zero in accordance with Section 2.05(b). Notwithstanding the

foregoing, each Term Lender that was a party to the Existing Credit Facility that executes a counterpart to this Agreement on the Effective Date (each, a “Converting Term Lender”) (x) severally agrees to convert (a “Term Loan Conversion”), on the Effective Date, all “Term Loans” (as defined in the Existing Credit Facility) of such Converting Term Lender outstanding on the Effective Date (immediately prior to giving effect thereto) into a term loan hereunder (each such term loan, a “Converted Term Loan” and, collectively, the “Converted Term Loans”), which Term Loan Conversion shall be deemed to constitute the making of a Term Loan for all purposes hereunder in an amount equal to the amount of such Converted Term Loans; provided, that to the extent that the Term Loan Commitment of any Converting Term Loan exceeds the aggregate amount of such Converting Term Lender’s Converted Term Loans, such Converting Term Lender shall be obligated to make a Term Loan to the Borrower in an amount equal to such excess in accordance with the first sentence of this Section 2.01. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed.

(b) The Revolving Credit Advances . Each Revolving Credit Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a “ Revolving Credit Advance ”) to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in respect of the Revolving Credit Facility in an amount for each such Advance not to exceed such Lender’s Unused Revolving Credit Commitment at such time. Each Revolving Credit Borrowing shall be in an aggregate amount of $2,000,000 or an integral multiple of $1,000,000 in excess thereof (other than a Borrowing the proceeds of which shall be used solely to repay or prepay in full outstanding Swing Line Advances or outstanding Letter of Credit Advances or a Borrowing which corresponds to an amortization payment) and shall consist of Revolving Credit Advances made simultaneously by the Revolving Credit Lenders ratably according to their Revolving Credit Commitments. Within the limits of each Revolving Credit Lender’s Unused Revolving Credit Commitment in effect from time to time, the Borrower may borrow under this Section 2.01(b), prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(b).

(c) The Swing Line Advances . The Swing Line Bank agrees on the terms and conditions hereinafter set forth, to make Swing Line Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in respect of the Revolving Credit Facility (i) in an aggregate amount not to exceed at any time outstanding the Swing Line Bank’s Swing Line Commitment at such time and (ii) in an amount for each such Swing Line Borrowing not to exceed the aggregate of the Unused Revolving Credit Commitments of the Revolving Credit Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $500,000 or an integral multiple of $100,000 in excess thereof and shall be made as a Base Rate Advance. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, the Borrower may borrow under this Section 2.01(c), repay pursuant to Section 2.04(c) or prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(c). Immediately upon the making of a Swing Line Advance, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Bank a risk participation in such Swing Line Advance in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Swing Line Advance.

(d) The Letters of Credit . The Issuing Bank agrees, on the terms and conditions hereinafter set forth, to issue (or cause its Affiliate that is a commercial bank to issue on its behalf) letters of credit (the “ Letters of Credit ”) in U.S. dollars for the account of the Borrower from time to time on any Business Day during the period from the Effective Date until 60 days before the Termination Date in respect of the Revolving Credit Facility in an aggregate Available Amount (i) for all Letters of Credit not to exceed at any time the lesser of (x) the Letter of Credit Facility at such time and (y) the Issuing Bank’s Letter of Credit Commitment at such time and (ii) for each such Letter of Credit not to exceed the Unused

Revolving Credit Commitments of the Revolving Credit Lenders at such time. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the earlier of 60 days before the Termination Date in respect of the Revolving Credit Facility and (A) in the case of a Standby Letter of Credit, one year after the date of issuance thereof, but may by its terms be renewable annually upon notice (a “ Notice of Renewal ”) given to the Issuing Bank and the Administrative Agent on or prior to any date for notice of renewal set forth in such Letter of Credit but in any event at least three Business Days prior to the date of the proposed renewal of such Standby Letter of Credit and upon fulfillment of the applicable conditions set forth in Article III unless the Issuing Bank has notified the Borrower (with a copy to the Administrative Agent) on or prior to the date for notice of termination set forth in such Letter of Credit but in any event at least 30 Business Days prior to the date of automatic renewal of its election not to renew such Standby Letter of Credit (a “ Notice of Termination ”) and (B) in the case of a Trade Letter of Credit, 60 days after the date of issuance thereof; provided that the terms of each Standby Letter of Credit that is automatically renewable annually shall (x) require the Issuing Bank that issued such Standby Letter of Credit to give the beneficiary named in such Standby Letter of Credit notice of any Notice of Termination, (y) permit such beneficiary, upon receipt of such notice, to draw under such Standby Letter of Credit prior to the date such Standby Letter of Credit otherwise would have been automatically renewed and (z) not permit the expiration date (after giving effect to any renewal) of such Standby Letter of Credit in any event to be extended to a date later than 60 days before the Termination Date in respect of the Revolving Credit Facility. If either a Notice of Renewal is not given by the Borrower or a Notice of Termination is given by the Issuing Bank pursuant to the immediately preceding sentence, such Standby Letter of Credit shall expire on the date on which it otherwise would have been automatically renewed. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit under this Section 2.01(d), repay any Letter of Credit Advances resulting from drawings thereunder pursuant to Section 2.04(d) and request the issuance of additional Letters of Credit under this Section 2.01(d).

SECTION 2.02. Making the Advances . (a) Except as otherwise provided in Section 2.02(b) or 2.03, each Borrowing shall be made on notice, given not later than 1:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances, or not later than 1:00 P.M. (New York City time) on the Business Day of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Appropriate Lender prompt notice thereof by telex, telecopier or other form of electronic communication. Each such notice of a Borrowing (a “ Notice of Borrowing ”) shall be by telephone, confirmed immediately in writing, or telex, telecopier or other form of electronic communication, in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Facility under which such Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such Borrowing and (v) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Appropriate Lender shall, before 12:00 P.M. (New York City time) on the date of any Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent’s Account, in same day funds, such Lender’s ratable portion of such Borrowing in accordance with the respective Commitments under the applicable Facility of such Lender and the other Appropriate Lenders. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower’s Account; provided , however , that, in the case of any Revolving Credit Borrowing, the Administrative Agent shall first apply such funds to prepay ratably the aggregate principal amount of any Swing Line Advances and Letter of Credit Advances outstanding at such time, together with interest accrued and unpaid thereon to and as of such date.

(b) (i) Each Swing Line Borrowing shall be made on notice, given not later than 1:00 P.M. (New York City time) on the date of the proposed Swing Line Borrowing, by the Borrower to

the Swing Line Bank and the Administrative Agent. Each such notice of a Swing Line Borrowing (a “ Notice of Swing Line Borrowing ”) shall be by telephone, confirmed immediately in writing, or telex, telecopier or other form of electronic communication, specifying therein the requested (i) date of such Borrowing, (ii) amount of such Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later than the tenth Business Day after the requested date of such Borrowing). The Swing Line Bank will make the amount of the requested Swing Line Advances available to the Administrative Agent at the Administrative Agent’s Account, in same day funds. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower’s Account.

(ii) The Swing Line Bank may, at any time in its sole and absolute discretion, request on behalf of the Borrower (and the Borrower hereby irrevocably authorizes the Swing Line Bank to so request on its behalf) that each Revolving Credit Lender make a Base Rate Advance in an amount equal to such Lender’s Pro Rata Share of the amount of Swing Line Advances then outstanding. Such request shall be deemed to be a Notice of Borrowing for purposes hereof and shall be made in accordance with the provisions of Sections 2.01(b) and 2.02(a) without regard solely to the minimum amounts specified therein but subject to the satisfaction of the conditions set forth in Section 3.02. The Swing Line Bank shall furnish the Borrower with a copy of the applicable Notice of Borrowing promptly after delivering such notice to the Administrative Agent. Each Revolving Credit Lender shall make an amount equal to its Pro Rata Share of the amount specified in such Notice of Borrowing available for the account of its Applicable Lending Office to the Administrative Agent for the account of the Swing Line Bank, by deposit to the Administrative Agent’s Account, in same date funds, not later than 11:00 A.M. on the day specified in such Notice of Borrowing.

(iii) If for any reason any Swing Line Advance cannot be refinanced by a Revolving Credit Borrowing as contemplated by Section 2.02(b)(ii), the request for Base Rate Advances submitted by the applicable Swing Line Bank as set forth in Section 2.02(b)(ii) shall be deemed to be a request by the Swing Line Bank that each of the Revolving Credit Lenders fund its risk participation in the relevant Swing Line Advance and each Revolving Credit Lender’s payment to the Administrative Agent for the account of the Swing Line Bank pursuant to Section 2.02(b)(ii) shall be deemed payment in respect of such participation.

(iv) If and to the extent that any Revolving Credit Lender shall not have made the amount of its Pro Rata Share of such Swing Line Advance available to the Administrative Agent in accordance with the provisions of Section 2.02(b)(ii), such Revolving Credit Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of the applicable Notice of Borrowing delivered by the Swing Line Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate.

(v) Each Revolving Credit Lender’s obligation to make Revolving Credit Advances or to purchase and fund risk participations in Swing Line Advances pursuant to this Section 2.02(b) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Bank, the Borrower or any other Person for any reason whatsoever, (B) the occurrence of continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided , however , that each Revolving Credit Lender’s obligation to make Revolving Credit Advances pursuant to this Section 2.02(b) is subject to satisfaction of the conditions set forth in Section 3.02. No funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Advances, together with interest as provided herein.

(c) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if the aggregate amount of such Borrowing is less than $1,000,000 (unless such Borrowing corresponds to an amortization payment) or if the obligation of the Appropriate Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.09 or 2.10 and (ii) the Term B Advances may not be outstanding as part of more than 10 separate Interest Periods and the Revolving Credit Advances may not be outstanding as part of more than 15 separate Interest Periods.

(d) Each Notice of Borrowing and each Notice of Swing Line Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Appropriate Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.

(e) Unless the Administrative Agent shall have received notice from an Appropriate Lender prior to the date of any Borrowing under a Facility under which such Lender has a Commitment that such Lender will not make available to the Administrative Agent such Lender’s ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay or pay to the Administrative Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid or paid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at such time under Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such corresponding amount, such amount so paid shall constitute such Lender’s Advance as part of such Borrowing for all purposes.

(f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing.

SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit . (a) Request for Issuance . Each Letter of Credit shall be issued upon notice, given not later than 11:00 A.M. (New York City time) on the third Business Day (or such fewer days as the Issuing Bank and the Borrower shall agree) prior to the date of the proposed issuance of such Letter of Credit, by the Borrower to the Issuing Bank, which shall give to the Administrative Agent and each Revolving Credit Lender prompt notice thereof by telecopier or electronic communication. Each such notice of issuance of a Letter of Credit (a “ Notice of Issuance ”) shall be by telephone, confirmed immediately in writing, telecopier, or other form of electronic communication, specifying therein the requested (A) date of such issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as the Issuing Bank may specify to the Borrower for use in connection with such requested

Letter of Credit (a “ Letter of Credit Agreement ”). If (x) the requested form of such Letter of Credit is acceptable to the Issuing Bank in its sole discretion and (y) it has not received notice of objection to such issuance from Lenders holding at least 51% of the Revolving Credit Commitments, the Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 9.02 or as otherwise agreed with the Borrower in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern.

(b) Letter of Credit Reports . The Issuing Bank shall furnish (A) to the Administrative Agent on the first Business Day of each week a written report summarizing issuance and expiration dates of Letters of Credit issued during the previous week and drawings during such week under all Letters of Credit, (B) to each Revolving Credit Lender on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued during the preceding month and drawings during such month under all Letters of Credit and (C) to the Administrative Agent and each Revolving Credit Lender on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit.

(c) Participations in Letters of Credit . Upon the issuance of a Letter of Credit by the Issuing Bank under Section 2.03(a), the Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each Revolving Credit Lender, and each such Revolving Credit Lender shall be deemed, without further action by any party hereto, to have purchased from the Issuing Bank, a participation in such Letter of Credit in an amount for each Revolving Credit Lender equal to such Lender’s Pro Rata Share of the Available Amount of such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay such Lender’s Pro Rata Share of each L/C Disbursement made by the Issuing Bank and not reimbursed by the Borrower forthwith on the date due as provided in Section 2.04(d) by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of the Issuing Bank by deposit to the Administrative Agent’s Account, in same day funds, an amount equal to such Lender’s Pro Rata Share of such L/C Disbursement. Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 2.03(c) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default or the termination of the Commitments, and that each such payment shall be made without any set-off, abatement, withholding or reduction whatsoever. If and to the extent that any Revolving Credit Lender shall not have so made the amount of such L/C Disbursement available to the Administrative Agent, such Revolving Credit Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date such L/C Disbursement is due pursuant to Section 2.04(d) until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of the Issuing Bank, as applicable. If such Lender shall pay to the Administrative Agent such amount for the account of the Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by the Issuing Bank shall be reduced by such amount on such Business Day.

(d) Drawing and Reimbursement . The payment by the Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by the Issuing Bank of a Letter of Credit Advance, which shall be a Base Rate Advance, in the amount of such draft.

(e) Failure to Make Letter of Credit Advances . The failure of any Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.03(c) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date.

SECTION 2.04. Repayment of Advances . (a) Term B Advances . The Borrower shall repay the Term B Advances to the Administrative Agent, for the ratable account of the Term B Lenders, in equal quarterly installments on the last Business Day of each March, June, September and December, commencing with the fiscal quarter ending September 30, 2006, in an amount equal to 0.25% of the initial aggregate principal amount of the Term B Advances; provided , however , that the final principal installment shall be repaid on the Termination Date in respect of the Term B Facility and in any event shall be in an amount equal to the aggregate principal amount of the Term B Advances outstanding on such date.

(b) Revolving Credit Advances . The Borrower shall repay to the Administrative Agent for the ratable account of the Revolving Credit Lenders on the Termination Date in respect of the Revolving Credit Facility the aggregate principal amount of the Revolving Credit Advances then outstanding.

(c) Swing Line Advances . The Borrower shall repay to the Administrative Agent for the account of the Swing Line Bank and each other Revolving Credit Lender that has made a Swing Line Advance the outstanding principal amount of each Swing Line Advance made by each of them on the earlier of the maturity date specified in the applicable Notice of Swing Line Borrowing (which maturity shall be no later than the tenth Business Day after the requested date of such Borrowing) and the Termination Date in respect of the Revolving Credit Facility.

(d) Letter of Credit Advances . (i) The Borrower shall repay to the Administrative Agent for the account of the Issuing Bank and each other Revolving Credit Lender that has made a Letter of Credit Advance on the earlier of demand and the Termination Date in respect of the Revolving Credit Facility the outstanding principal amount of each Letter of Credit Advance made by each of them.

(ii) The Obligations of the Borrower under this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances:

(A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the “ L/C Related Documents ”);

(B) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents;

(C) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), the Issuing Bank or any other

Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction;

(D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(E) payment by the Issuing Bank under a Letter of Credit against presentation of a draft, certificate or other document that does not strictly comply with the terms of such Letter of Credit;

(F) any exchange, release or non-perfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from the Guaranties or any other guarantee, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or

(G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.

SECTION 2.05. Termination or Reduction of the Commitments . (a) Optional . The Borrower may, upon at least three Business Days’ notice to the Administrative Agent, terminate in whole or reduce in part the unused portions of the Unused Revolving Credit Commitments; provided , however , that each partial reduction of the Revolving Credit Facility (i) shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) shall be made ratably among the Appropriate Lenders in accordance with their respective Pro Rata Shares with respect to such Facility.

(b) Mandatory . (i) Upon the funding of the Term B Advances on the Effective Date pursuant to Section 2.01(a), the aggregate Term B Commitments of the Term B Lenders shall be reduced to zero.

(ii) The Letter of Credit Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Letter of Credit Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility.

(iii) The Swing Line Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Swing Line Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility.

SECTION 2.06. Prepayments . (a) Optional . The Borrower may, upon at least one Business Day’s notice in the case of Base Rate Advances and three Business Days’ notice in the case of Eurodollar Rate Advances, in each case to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding aggregate principal amount of the Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the aggregate principal amount prepaid; provided , however , that (x) each partial prepayment shall be in an aggregate principal amount of $2,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) if any prepayment of a Eurodollar Rate Advance is made on a date other than the last day of an Interest Period for such Advance, the Borrower shall also pay any amounts owing pursuant to Section 9.04(c). Each such

prepayment of any Term B Advance shall be applied to the installments thereof on a pro rata basis ratably to the Appropriate Lenders in accordance with their respective outstanding Term B Advances.

(b) Mandatory . (i) The Borrower shall, on the 90 ^th day following the end of each Fiscal Year, if the Leverage Ratio as of the last day of such Fiscal Year is greater than 4.00:1.00, prepay an aggregate principal amount of the Term B Advances in an amount equal to 50% of the amount of Excess Cash Flow for such Fiscal Year. Each such prepayment shall be applied to the installments of the Term B Facility on a pro rata basis ratably to the Appropriate Lenders in accordance with their respective outstanding Term B Advances.

(ii) The Borrower shall, on each Prepayment Date, prepay an aggregate principal amount of the Term B Advances in an amount equal to the amount of such Net Cash Proceeds. Each such prepayment shall be applied to the installments of the Term B Facility on a pro rata basis ratably to the Appropriate Lenders in accordance with their respective outstanding Term B Advances.

(iii) The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Letter of Credit Advances and the Swing Line Advances and deposit an amount in the L/C Collateral Account in an amount equal to the amount by which (A) the sum of the aggregate principal amount of (x) the Revolving Credit Advances, (y) the Letter of Credit Advances and (z) the Swing Line Advances then outstanding plus the aggregate Available Amount of all Letters of Credit then outstanding exceeds (B) the Revolving Credit Facility on such Business Day.

(iv) The Borrower shall, on each Business Day, pay to the Administrative Agent for deposit in the L/C Collateral Account an amount sufficient to cause the aggregate amount on deposit in the L/C Collateral Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day.

(v) Prepayments of the Revolving Credit Facility made pursuant to clause (iii) above shall be first applied to prepay Letter of Credit Advances then outstanding until such Advances are paid in full, second applied to prepay Swing Line Advances then outstanding until such Advances are paid in full and third applied to prepay Revolving Credit Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full and fourth deposited in the L/C Collateral Account to cash collateralize 100% of the Available Amount of the Letters of Credit then outstanding; and the amount remaining (if any) after the prepayment in full of the Advances then outstanding and the 100% cash collateralization of the aggregate Available Amount of Letters of Credit then outstanding may be retained by the Borrower. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Collateral Account, such funds shall be applied to reimburse the Issuing Bank or Revolving Credit Lenders, as applicable.

(vi) Anything contained in this Section 2.06(b) to the contrary notwithstanding, if, following the occurrence of any “Asset Disposition” (as such term is defined in the 2002 Senior Notes Indenture) by any Loan Party or any of its Subsidiaries, the Parent would be required to apply or cause its Subsidiaries to apply an amount equal to any of the “Net Available Cash” (as defined in the 2002 Senior Notes Indenture) thereof by a particular date (an “ Application Date ”) in a particular manner, in order to excuse the Borrower from being required to make an “Offer” (as defined in the 2002 Senior Notes Indenture) in connection with such “Asset Disposition,” and the Borrower shall have failed to so apply an amount equal to such “Net Available Cash” at least 10 days before the applicable Application Date, or cause to be applied an amount equal to any such “Net Available Cash,” then the Borrower shall immediately pay or cause to be paid to the Administrative Agent an amount equal to such “Net Available

Cash” to be applied to the payment of the Term B Advances in the manner set forth in Section 2.06(b)(ii) in such amounts as shall excuse the Borrower from making any such “Offer”.

(vii) All prepayments under this subsection (b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid, together with any amounts owing pursuant to Section 9.04(c).

SECTION 2.07. Interest . (a) Scheduled Interest . The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:

(i) Base Rate Advances . During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) the Applicable Margin in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or paid in full.

(ii) Eurodollar Rate Advances . During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurodollar Rate for such Interest Period for such Advance plus (B) the Applicable Margin in effect on the first day of such Interest Period, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full.

(b) Default Interest . Upon the occurrence and during the continuance of a Default under Section 6.01(a), the Administrative Agent may, and upon the request of the Required Lenders shall, require that the Borrower pay interest (“ Default Interest ”) on (i) the unpaid overdue principal amount of each Advance owing to each Lender Party, payable in arrears on the dates referred to in clause (i) or (ii) of Section 2.07(a), as applicable, and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (i) or (ii) of Section 2.07(a), as applicable, and (ii) to the fullest extent permitted by applicable law, the amount of any interest, fee or other amount payable under this Agreement or any other Loan Document to any Agent or any Lender Party that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid, in the case of interest, on the Type of Advance on which such interest has accrued pursuant to clause (i) or (ii) of Section 2.07(a), as applicable, and, in all other cases, on Base Rate Advances pursuant to clause (i) of Section 2.07(a); provided , however , that following the acceleration of the Advances, or the giving of notice by the Agent to accelerate the Advances, pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not previously required by the Administrative Agent.

(c) Notice of Interest Period and Interest Rate . Promptly after receipt of a Notice of Borrowing pursuant to Section 2.02(a), a notice of Conversion pursuant to Section 2.09 or a notice of selection of an Interest Period pursuant to the terms of the definition of “Interest Period”, the Administrative Agent shall give notice to the Borrower and each Appropriate Lender of the applicable Interest Period and the applicable interest rate determined by the Administrative Agent for purposes of clause (a)(i) or (a)(ii) above.

SECTION 2.08. Fees . (a) Commitment Fee . The Borrower shall pay to the Administrative Agent for the account of the Revolving Credit Lenders a commitment fee (the

“ Commitment Fee ”), from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date, payable in arrears quarterly on the last day of each March, June, September and December, commencing June 30, 2006, and on the Termination Date, equal to the Applicable Commitment Fee Rate times the average daily Unused Revolving Credit Commitment of such Lender; provided , however , that any Commitment Fee accrued with respect to any of the Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such Commitment Fee shall otherwise have been due and payable by the Borrower prior to such time; and provided further that no Commitment Fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender.

(b) Letter of Credit Fees, Etc . (i) The Borrower shall pay to the Administrative Agent for the account of each Revolving Credit Lender a commission, payable in arrears quarterly on the last day of each March, June, September and December, commencing June 30, 2006, and on the earliest to occur of the full drawing, expiration, termination or cancellation of any Letter of Credit and on the Termination Date in respect of the Letter of Credit Facility, on such Lender’s Pro Rata Share of the average daily aggregate Available Amount during such quarter of (A) all Standby Letters of Credit outstanding from time to time at the Applicable Margin for Eurodollar Rate Advances under the Revolving Credit Facility and (B) all Trade Letters of Credit then outstanding at the rate of 0.20% per annum. Upon the occurrence and during the continuance of a Default under Section 6.01(a) or 6.01(f), the amount of commission payable by the Borrower under this clause (b)(i) shall be increased by 2% per annum on any overdue amounts.

(ii) The Borrower shall pay to the Issuing Bank, for its own account, (A) a commission, payable in arrears quarterly on the last day of each March, June, September and December, commencing June 30, 2006, and on the Termination Date in respect of the Letter of Credit Facility, on the average daily aggregate Available Amount during such quarter, from the Effective Date until the Termination Date in respect of the Letter of Credit Facility, at the rate of 1/4 of 1% per annum and (B) such other commissions, fronting fees, issuance fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and the Issuing Bank shall agree.

(c) Agents’ Fees . The Borrower shall pay to each Agent for its own account such fees as may from time to time be agreed between the Borrower and such Agent.

SECTION 2.09. Conversion of Advances . (a) Optional . The Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 1:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Section 2.10, Convert all or any portion of the Advances of one Type comprising the same Borrowing into Advances of the other Type; provided , however , that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(c), no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(c) and each Conversion of Advances comprising part of the same Borrowing under any Facility shall be made ratably among the Appropriate Lenders in accordance with their Commitments under such Facility. Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the Borrower.

(b) Mandatory . (i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $1,000,000, other than by reason of an amortization payment, such Advances shall automatically Convert into Base Rate Advances.

(ii) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Appropriate Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Eurodollar Rate Advance with an Interest Period of one month.

(iii) Upon the occurrence and during the continuance of any Default, (x) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended.

SECTION 2.10. Increased Costs, Etc . (a) If, due to either (i) the adoption of or any change in or in the interpretation of any law or regulation after the date of this Agreement or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) after the date of this Agreement, there shall be any increase in the cost to any Lender Party of agreeing to make or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or maintaining or participating in Letters of Credit or of agreeing to make or of making or maintaining Letter of Credit Advances (excluding, for purposes of this Section 2.10, any such increased costs resulting from (x) Taxes or Other Taxes (as to which Section 2.12 shall govern) and (y) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost; provided , however , that the Borrower shall not be responsible for costs under this Section 2.10(a) arising more than 180 days prior to receipt by the Borrower of the demand from the affected Lender Party pursuant to this Section 2.10(a). A certificate as to the amount of such increased cost, submitted to the Borrower by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error.

(b) If any Lender Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) which becomes effective after the date hereof affects or would affect the amount of capital required or expected to be maintained by such Lender Party or any corporation controlling such Lender Party and that the amount of such capital is increased by or based upon the existence of such Lender Party’s commitment to lend or to issue or participate in Letters of Credit hereunder and other commitments of such type or the issuance or maintenance of or participation in the Letters of Credit (or similar contingent obligations) (and a similar reserve requirement is not already reflected in the definition of “Eurodollar Rate”), then, upon demand by such Lender Party or such corporation (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party’s commitment to lend or to issue or participate in Letters of Credit hereunder or to the issuance or maintenance of or participation in any Letters of Credit; provided further that the Borrower shall not be

responsible for costs under this Section 2.10(b) arising more than 180 days prior to receipt by the Borrower of the demand from the affected Lender Party pursuant to this Section 2.10(b). A certificate as to such amounts submitted to the Borrower by such Lender Party shall be conclusive and binding for all purposes, absent manifest error.

(c) Notwithstanding any other provision of this Agreement, if the adoption of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) each Eurodollar Rate Advance under each Facility under which such Lender has a Commitment will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of the Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lender has determined that the circumstances causing such suspension no longer exist; provided , however , that, before making any such demand, such Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender.

SECTION 2.11. Payments and Computations . (a) The Borrower shall make each payment hereunder and under the Notes, irrespective of any right of counterclaim or set-off (except as otherwise provided in Section 2.15), not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at the Administrative Agent’s Account in same day funds, with payments being received by the Administrative Agent after such time being deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment by the Borrower is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder and under the Notes to more than one Lender Party, to such Lender Parties for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective Obligations then payable to such Lender Parties and (ii) if such payment by the Borrower is in respect of any Obligation then payable hereunder to one Lender Party, to such Lender Party for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender Party assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.

(b) The Borrower hereby authorizes each Lender Party and each of its Affiliates, if and to the extent payment owed to such Lender Party is not made when due hereunder or, in the case of a Lender, under the Note held by such Lender, to charge from time to time, to the fullest extent permitted by law, against any or all of the Borrower’s accounts with such Lender Party or such Affiliate any amount so due; provided that such Lender first confirms with the Administrative Agent that such payment has not been made to the Administrative Agent.

(c) All computations of interest based on the Base Rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations

of interest based on the Eurodollar Rate or the Federal Funds Rate and of fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error.

(d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment or letter of credit fee or commission, as the case may be; provided , however , that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.

(e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender Party hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender Party on such due date an amount equal to the amount then due such Lender Party. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender Party shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender Party together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date such Lender Party repays such amount to the Administrative Agent, at the Federal Funds Rate.

(f) Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Agents and the Lender Parties under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Agents and the Lender Parties in the following order of priority:

(i) first , to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Agents (solely in their respective capacities as Agents) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Agents on such date;

(ii) second , to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Issuing Bank and the Swing Line Bank (solely in their respective capacities as such) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Issuing Bank and the Swing Line Bank on such date;

(iii) third , to the payment of all of the indemnification payments, costs and expenses that are due and payable to the Lenders under Sections 9.04 hereof, Section 20 of the Security Agreement and any similar section of any of the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such indemnification payments, costs and expenses owing to the Lenders on such date;

(iv) fourth , to the payment of all of the amounts that are due and payable to the Administrative Agent and the Lender Parties under Sections 2.10 and 2.12 hereof on such date, ratably based upon the respective aggregate amounts thereof owing to the Administrative Agent and the Lender Parties on such date;

(v) fifth , to the payment of all of the fees that are due and payable to the Lenders under Section 2.08(a) on such date, ratably based upon the respective aggregate Commitments of the Lenders under the Facilities on such date;

(vi) sixth , to the payment of all of the accrued and unpaid interest on the Obligations of the Borrower under or in respect of the Loan Documents that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(b) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date;

(vii) seventh , to the payment of all of the accrued and unpaid interest on the Advances that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(a) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date;

(viii) eighth , to the payment of the principal amount of all of the outstanding Advances that is due and payable to the Administrative Agent and the Lender Parties on such date, ratably based upon the respective aggregate amounts of all such principal owing to the Administrative Agent and the Lender Parties on such date; and

(ix) ninth , to the payment of all other Obligations of the Loan Parties owing under or in respect of the Loan Documents that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date.

If the Administrative Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the Advances or the Facility to which, or the manner in which, such funds are to be applied, the Administrative Agent may, but shall not be obligated to, elect to distribute such funds to each of the Lender Parties in accordance with such Lender Party’s Pro Rata Share of the sum of (A) the aggregate principal amount of all Advances outstanding at such time and (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, in repayment or prepayment of such of the outstanding Advances or other Obligations then owing to such Lender Party, and, in the case of the Term B Facility, for application to such principal repayment installments thereof, as the Administrative Agent shall direct.

SECTION 2.12. Taxes . (a) Any and all payments by or on account of any obligation of any Loan Party hereunder or under the Notes or any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if any Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or any Lender Party (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) In addition, a Loan Party shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Each Loan Party shall indemnify the Administrative Agent and each Lender Party, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender Party, as the case may be, on or with respect to any payment by or on account of any obligation of such Loan Party hereunder or under the Notes or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to a Loan Party by a Lender Party or the Administrative Agent on its own behalf or on behalf of a Lender Party, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by any Loan Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e) Any Foreign Lender Party that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Loan Party is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to such Loan Party (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by such Loan Party as will permit such payments to be made without withholding or at a reduced rate; provided that such Foreign Lender has received written notice from such Loan Party advising it of the availability of such exemption or reduction and supplying all applicable documentation.

SECTION 2.13. Sharing of Payments, Etc . If any Lender Party shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise, other than as a result of an assignment pursuant to Section 9.07) (a) on account of Obligations due and payable to such Lender Party hereunder and under the Notes and the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender Party hereunder and under the Notes and the other Loan Documents at such time to (ii) the aggregate amount of the Obligations due and payable to all Lender Parties hereunder and under the Notes and the other Loan Documents at such time) of payments on account of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time obtained by all the Lender Parties at such time or (b) on account of Obligations owing (but not due and payable) to such Lender Party hereunder and under the Notes and the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender Party hereunder and under the Notes and the other Loan Documents at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes and the other Loan Documents at such time) of payments on account of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time obtained by all of the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such interests or participating interests in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided , however , that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each other Lender Party shall be

rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such Lender Party’s ratable share (according to the proportion of (i) the purchase price paid to such Lender Party to (ii) the aggregate purchase price paid to all Lender Parties) of such recovery together with an amount equal to such Lender Party’s ratable share (according to the proportion of (i) the amount of such other Lender Party’s required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered; provided further that, so long as the Obligations under the Loan Documents shall not have been accelerated, any excess payment received by any Appropriate Lender shall be shared on a pro rata basis only with other Appropriate Lenders. The Borrower agrees that any Lender Party so purchasing an interest or participating interest from another Lender Party pursuant to this Section 2.13 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such interest or participating interest, as the case may be, as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such interest or participating interest, as the case may be.

SECTION 2.14. Use of Proceeds . The proceeds of the Advances and issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds and Letters of Credit) to consummate the Restatement (including the repayment of the advances under the Existing Credit Facility), pay related transaction fees and expenses, and provide working capital for the Borrower and its Subsidiaries for general corporate purposes which shall include (x) the financing of the repayment of certain intercompany loans (the “ Intercompany Loan Repayment ”) and (y) the financing of the Mexrail Acquisition.

SECTION 2.15. Defaulting Lenders . (a) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower shall be required to make any payment hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then the Borrower may, so long as no Default shall occur or be continuing at such time and to the fullest extent permitted by applicable law, set off and otherwise apply the Obligation of the Borrower to make such payment to or for the account of such Defaulting Lender against the obligation of such Defaulting Lender to make such Defaulted Advance. In the event that, on any date, the Borrower shall so set off and otherwise apply its obligation to make any such payment against the obligation of such Defaulting Lender to make any such Defaulted Advance on or prior to such date, the amount so set off and otherwise applied by the Borrower shall constitute for all purposes of this Agreement and the other Loan Documents an Advance by such Defaulting Lender made on the date of such setoff under the Facility pursuant to which such Defaulted Advance was originally required to have been made pursuant to Section 2.01. Such Advance shall be considered, for all purposes of this Agreement, to comprise part of the Borrowing in connection with which such Defaulted Advance was originally required to have been made pursuant to Section 2.01, even if the other Advances comprising such Borrowing shall be Eurodollar Rate Advances on the date such Advance is deemed to be made pursuant to this subsection (a). The Borrower shall notify the Administrative Agent at any time the Borrower exercises its right of set-off pursuant to this subsection (a) and shall set forth in such notice (A) the name of the Defaulting Lender and the Defaulted Advance required to be made by such Defaulting Lender and (B) the amount set off and otherwise applied in respect of such Defaulted Advance pursuant to this subsection (a). Any portion of such payment otherwise required to be made by the Borrower to or for the account of such Defaulting Lender which is paid by the Borrower, after giving effect to the amount set off and otherwise applied by the Borrower pursuant to this subsection (a), shall be applied by the Administrative Agent as specified in subsection (b) or (c) of this Section 2.15.

(b) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to any Agent or any of the other

Lender Parties and (iii) the Borrower shall make any payment hereunder or under any other Loan Document to the Administrative Agent for the account of such Defaulting Lender, then the Administrative Agent may, on its behalf or on behalf of such other Agents or such other Lender Parties and to the fullest extent permitted by applicable law, apply at such time the amount so paid by the Borrower to or for the account of such Defaulting Lender to the payment of each such Defaulted Amount to the extent required to pay such Defaulted Amount. In the event that the Administrative Agent shall so apply any such amount to the payment of any such Defaulted Amount on any date, the amount so applied by the Administrative Agent shall constitute for all purposes of this Agreement and the other Loan Documents payment, to such extent, of such Defaulted Amount on such date. Any such amount so applied by the Administrative Agent shall be retained by the Administrative Agent or distributed by the Administrative Agent to such other Agents or such other Lender Parties, ratably in accordance with the respective portions of such Defaulted Amounts payable at such time to the Administrative Agent, such other Agents and such other Lender Parties and, if the amount of such payment made by the Borrower shall at such time be insufficient to pay all Defaulted Amounts owing at such time to the Administrative Agent, such other Agents and such other Lender Parties, in the following order of priority:

(i) first , to the Agents for any Defaulted Amounts then owing to them, in their capacities as such, ratably in accordance with such respective Defaulted Amounts then owing to the Agents;

(ii) second , to the Issuing Bank and the Swing Line Bank for any Defaulted Amounts then owing to them, in their capacities as such, ratably in accordance with such respective Defaulted Amounts then owing to the Issuing Bank and the Swing Line Bank; and

(iii) third , to any other Lender Parties for any Defaulted Amounts then owing to such other Lender Parties, ratably in accordance with such respective Defaulted Amounts then owing to such other Lender Parties.

Any portion of such amount paid by the Borrower for the account of such Defaulting Lender remaining, after giving effect to the amount applied by the Administrative Agent pursuant to this subsection (b), shall be applied by the Administrative Agent as specified in subsection (c) of this Section 2.15.

(c) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance or a Defaulted Amount and (iii) the Borrower, any Agent or any other Lender Party shall be required to pay or distribute any amount hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then the Borrower or such Agent or such other Lender Party shall pay such amount to the Administrative Agent to be held by the Administrative Agent, to the fullest extent permitted by applicable law, in escrow or the Administrative Agent shall, to the fullest extent permitted by applicable law, hold in escrow such amount otherwise held by it. Any funds held by the Administrative Agent in escrow under this subsection (c) shall be deposited by the Administrative Agent in an account with a bank (the “ Escrow Bank ”) selected by the Administrative Agent, in the name and under the control of the Administrative Agent, but subject to the provisions of this subsection (c). The terms applicable to such account, including the rate of interest payable with respect to the credit balance of such account from time to time, shall be the Escrow Bank’s standard terms applicable to escrow accounts maintained with it. Any interest credited to such account from time to time shall be held by the Administrative Agent in escrow under, and applied by the Administrative Agent from time to time in accordance with the provisions of, this subsection (c). The Administrative Agent shall, to the fullest extent permitted by applicable law, apply all funds so held in escrow from time to time to the extent necessary to make any Advances required to be made by such Defaulting Lender and to pay any amount payable by such Defaulting Lender hereunder and under the other Loan Documents to the Administrative Agent or any other Lender Party, as and when such

Advances or amounts are required to be made or paid and, if the amount so held in escrow shall at any time be insufficient to make and pay all such Advances and amounts required to be made or paid at such time, in the following order of priority:

(i) first , to the Agents for any amounts then due and payable by such Defaulting Lender to them hereunder, in their capacities as such, ratably in accordance with such respective amounts then due and payable to the Agents;

(ii) second , to the Issuing Bank and the Swing Line Bank for any amounts then due and payable to them hereunder, in their capacities as such, by such Defaulting Lender, ratably in accordance with such respective amounts then due and payable to the Issuing Bank and the Swing Line Bank;

(iii) third , to any other Lender Parties for any amount then due and payable by such Defaulting Lender to such other Lender Parties hereunder, ratably in accordance with such respective amounts then due and payable to such other Lender Parties; and

(iv) fourth , to the Borrower for any Advance then required to be made by such Defaulting Lender pursuant to a Commitment of such Defaulting Lender.

In the event that any Lender Party that is a Defaulting Lender shall, at any time, cease to be a Defaulting Lender, any funds held by the Administrative Agent in escrow at such time with respect to such Lender Party shall be distributed by the Administrative Agent to such Lender Party and applied by such Lender Party to the Obligations owing to such Lender Party at such time under this Agreement and the other Loan Documents ratably in accordance with the respective amounts of such Obligations outstanding at such time.

(d) The rights and remedies against a Defaulting Lender under this Section 2.15 are in addition to other rights and remedies that the Borrower may have against such Defaulting Lender with respect to any Defaulted Advance and that any Agent or any Lender Party may have against such Defaulting Lender with respect to any Defaulted Amount.

SECTION 2.16. Evidence of Debt . (a) Each Lender Party shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Advance owing to such Lender Party from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. The Borrower agrees that upon notice by any Lender Party to the Borrower (with a copy of such notice to the Administrative Agent) to the effect that a promissory note or other evidence of indebtedness is required or appropriate in order for such Lender Party to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender Party, the Borrower shall promptly execute and deliver to such Lender Party, with a copy to the Administrative Agent, a Revolving Credit Note and a Term B Note, as applicable, in substantially the form of Exhibits A-1 and A-2 hereto, respectively, payable to the order of such Lender Party in a principal amount equal to the Revolving Credit Commitment and the Term B Commitment, respectively, of such Lender Party. All references to Notes in the Loan Documents shall mean Notes, if any, to the extent issued hereunder.

(b) The Register maintained by the Administrative Agent pursuant to Section 9.07(d) shall include a control account, and a subsidiary account for each Lender Party, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any

principal or interest due and payable or to become due and payable from the Borrower to each Lender Party hereunder, and (iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each Lender Party’s share thereof.

(c) Entries made in good faith by the Administrative Agent in the Register pursuant to subsection (b) above, and by each Lender Party in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender Party and, in the case of such account or accounts, such Lender Party, under this Agreement, absent manifest error; provided , however , that the failure of the Administrative Agent or such Lender Party to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement.

SECTION 2.17. Mitigation Obligations; Replacement of Lenders . (a) If any Lender requests compensation under Section 2.10, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.12, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Advances hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.10 or 2.12, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) If any Lender requests compensation under Section 2.10, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.12, or if any Lender is a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.07), all of its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, the Issuing Bank and Swing Line Bank), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances and participations in LC Disbursements and Swing Line Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.10 or payments required to be made pursuant to Section 2.12, such assignment will result in a material reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

ARTICLE III

CONDITIONS OF LENDING AND
ISSUANCES OF LETTERS OF CREDIT

SECTION 3.01. Conditions Precedent to Restatement . The Restatement shall become effective on and as of the first date (the “ Effective Date ”) on which the following conditions precedent have been satisfied:

(a) The Administrative Agent shall have received on or before the Effective Date the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Administrative Agent (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender Party:

(i) The Notes payable to the order of the Lenders to the extent requested by the Lenders pursuant to the terms of Section 2.16.

(ii) Except as otherwise provided in Sections 5.01(l) and 5.01(j)(iii), all necessary modifications or confirmations to the Collateral Documents in effect on the Effective Date shall have been duly executed and delivered so as to ensure the continued effectiveness of the security interests created thereby, as reasonably determined by the Administrative Agent and its counsel, and the Administrative Agent shall have received evidence that all such other action as shall be necessary or desirable to record, perfect or protect the security interests of the Secured Parties shall have been taken.

(iii) Certified copies of the resolutions of the Board of Directors of each Loan Party approving the Transaction and each Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to the Transaction and each Loan Document to which it is or is to be a party.

(iv) A copy of a certificate of the Secretary of State of the jurisdiction of incorporation of each Loan Party, dated reasonably near the date of the Initial Extension of Credit, certifying (A) as to a true and correct copy of the charter of such Loan Party and each amendment thereto on file in such Secretary’s office and (B) that (1) such amendments are the only amendments to such Loan Party’s charter on file in such Secretary’s office, (2) such Loan Party has paid all franchise taxes to the date of such certificate (to the extent the Secretary of State in the applicable jurisdictions typically provides such a certification) and (3) such Loan Party is duly incorporated and in good standing or presently subsisting under the laws of the State of the jurisdiction of its incorporation.

(v) (i) A certificate of the Secretary or Assistant Secretary of each Loan Party, countersigned on behalf of such Loan Party by another officer of such Loan Party, dated the date of the Initial Extension of Credit (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the absence of any amendments to the charter of such Loan Party since the date of the Secretary of State’s certificate referred to in Section 3.01(a)(iv) and (B) a true and correct copy of the bylaws of such Loan Party as in effect on the date of the Initial Extension of Credit, and (ii) a certificate of the President or a Vice

President of the Borrower, dated the date of the Initial Extension of Credit (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the date of the Initial Extension of Credit and (B) the absence of any event occurring and continuing, or resulting from the Initial Extension of Credit, that constitutes a Default.

(vi) A certificate of the Secretary or an Assistant Secretary of each Loan Party certifying the names and true signatures of the officers of such Loan Party authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder.

(vii) A certificate, in substantially the form of Exhibit F hereto, attesting to the Solvency of the Loan Parties before and after giving effect to the Transaction, from the chief financial officer of the Parent.

(viii) A certificate of the Chief Financial Officer of the Borrower certifying that the assets being transferred to Meridian Joint Speedway pursuant to the Meridian Joint Speedway Transaction Agreement have a book value not in excess of $170,000,000.

(ix) Such financial, business and other information regarding each Loan Party and its Subsidiaries as the Lender Parties shall have requested, including, without limitation, information as to possible contingent liabilities, tax matters, environmental matters, obligations under Plans, Multiemployer Plans and Welfare Plans, collective bargaining agreements and other arrangements with employees, audited annual financial statements dated December 31, 2005, interim financial statements dated the end of the most recent fiscal quarter for which financial statements are available (or, in the event the Lender Parties’ due diligence review reveals material changes since such financial statements, as of a later date within 45 days of the day of the Initial Extension of Credit), pro forma financial statements as to the Parent and forecasts prepared by management of the Parent, in form and substance satisfactory to the Lender Parties, of balance sheets, income statements and cash flow statements on a quarterly basis for the first year following the day of the Initial Extension of Credit and on an annual basis for each year thereafter until the Termination Date.

(x) A Notice of Borrowing or Notice of Issuance, as applicable, relating to the Initial Extension of Credit.

(xi) A favorable opinion of Sonnenschein, Nath & Rosenthal LLP, counsel for the Loan Parties, in substantially the form of Exhibit G hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request.

(b) The Lender Parties shall be satisfied that all Existing Debt, other than Surviving Debt, has been prepaid, redeemed or defeased in full or otherwise satisfied and extinguished and all commitments relating thereto terminated and that all Surviving Debt shall be on terms and conditions satisfactory to the Lender Parties.

(c) All Governmental Authorizations and third party consents and approvals necessary in connection with the Transaction shall have been obtained (without the imposition of any conditions that are not acceptable to the Lender Parties) and shall remain in effect; all

applicable waiting periods in connection with the Transaction shall have expired without any action being taken by any competent authority, and no law or regulation shall be applicable in the judgment of the Lender Parties, in each case that restrains, prevents or imposes materially adverse conditions upon the Transaction or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

(d) The Lender Parties shall have been given such access to the management, records, books of account, contracts and properties of the Parent and its Subsidiaries as they shall have requested.

(e) The Borrower shall have paid all accrued fees of the Agents and the Lender Parties and all accrued expenses of the Agents (including the accrued fees and expenses of counsel to the Administrative Agent).

(f) The Lender Parties shall be satisfied with the nature of and amount of all existing and potential environmental concerns associated with the facilities of the Loan Parties, and shall be satisfied with the Borrower’s plans with respect thereto.

(g) The Borrower shall have, and shall have caused each other obligor under the Collateral Documents to, execute and deliver any and all further documents, financing statements, agreements and instruments, and take all such further actions that may be required to cause the collateral to have a perfected, first priority security interest in favor of the Secured Parties.

(h) The Facilities shall have received debt ratings from Moody’s and S&P.

SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance and Renewal . The obligation of each Appropriate Lender to make an Advance (other than a Letter of Credit Advance made by the Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and a Swing Line Advance made by a Revolving Credit Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing (including the initial Borrowing), and the obligation of the Issuing Bank to issue a Letter of Credit (including the initial issuance) or renew a Letter of Credit and the right of the Borrower to request a Swing Line Borrowing, shall be subject to the further conditions precedent that on the date of such Borrowing or issuance or renewal (a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Swing Line Borrowing, Notice of Issuance or Notice of Renewal and the acceptance by the Borrower of the proceeds of such Borrowing or of such Letter of Credit or the renewal of such Letter of Credit shall constitute a representation and warranty by the Borrower that both on the date of such notice and on the date of such Borrowing or issuance or renewal such statements are true):

(i) the representations and warranties contained in each Loan Document are correct on and as of such date, before and after giving effect to such Borrowing or issuance or renewal and to the application of the proceeds therefrom, as though made on and as of such date, other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing or issuance or renewal, in which case as of such specific date; and

(ii) no Default has occurred and is continuing, or would result from such Borrowing or issuance or renewal or from the application of the proceeds therefrom:

and (b) the Administrative Agent shall have received such other approvals, opinions or documents as any Appropriate Lender through the Administrative Agent may reasonably request.

SECTION 3.03. Determinations Under Section 3.01 . For purposes of determining compliance with the conditions specified in Section 3.01, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the Initial Extension of Credit specifying its objection thereto and, if the Initial Extension of Credit consists of a Borrowing, such Lender Party shall not have made available to the Administrative Agent such Lender Party’s ratable portion of such Borrowing.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of Parent and the Borrower . Each of Parent and the Borrower represent and warrants as follows:

(a) Each Loan Party and each of its Subsidiaries (i) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified and in good standing as a foreign entity in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite power and authority (including, without limitation, all Governmental Authorizations) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. All of the outstanding Equity Interests in the Borrower have been validly issued, are fully paid and non-assessable and are owned by the Parent free and clear of all Liens, except those created under the Collateral Documents.

(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Subsidiaries of each Loan Party, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation, the number of shares of each class of its Equity Interests authorized, and the number outstanding, on the date hereof and the percentage of each such class of its Equity Interests owned by such Loan Party at the date hereof. All of the outstanding Equity Interests in each Loan Party’s Subsidiaries that are subject to the Security Agreement have been validly issued, are fully paid and non-assessable and are owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens, except those created under the Collateral Documents.

(c) The execution, delivery and performance by each Loan Party of each Loan Document to which it is or is to be a party, and the consummation of the Transaction, are within such Loan Party’s powers, have been duly authorized by all necessary corporate or other action, and do not (i) contravene such Loan Party’s organizational documents, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System and any provision of the Interstate Commerce Act and the Railway Labor Act), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default or require any payment to be made under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No

Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which could be reasonably likely to have a Material Adverse Effect.

(d) No Governmental Authorization, and no notice to or filing with, any Governmental Authority or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of any Loan Document to which it is or is to be a party, or for the consummation of the Transaction, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by any Agent or any Lender Party of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for the authorizations, approvals, actions, notices and filings listed on Schedule 4.01(d) hereto, all of which have been duly obtained, taken, given or made and are in full force and effect. All applicable waiting periods in connection with the Transaction have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the Transaction or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

(e) This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms.

(f) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, pending or threatened before any Governmental Authority or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the Transaction.

(g) The Consolidated balance sheet of the Parent and its subsidiaries as at December 31, 2005, and the related Consolidated statement of income and Consolidated statement of cash flows of the Parent and its subsidiaries for the fiscal year then ended, accompanied by an unqualified opinion of KPMG LLP, independent public accountants, copies of which have been furnished to each Lender Party, fairly present the Consolidated financial condition of the Parent and its subsidiaries as at such dates and the Consolidated results of operations of the Parent and its subsidiaries for the periods ended on such dates, all in accordance with GAAP applied on a consistent basis, and since December 31, 2005, there has been no Material Adverse Change.

(h) The Consolidated pro forma balance sheet of Parent and its subsidiaries as at December 31, 2005, and the related Consolidated pro forma statements of income and cash flows of Parent and its subsidiaries for the twelve months then ended, certified by the chief financial officer of the Parent, copies of which have been furnished to each Lender Party, fairly present the Consolidated pro forma financial condition of the Parent and its subsidiaries as at such date and the Consolidated pro forma results of operations of the Parent and its subsidiaries for the period then ended on such date, in each case giving effect to the Transaction, all in accordance with GAAP.

(i) The Consolidated forecasted balance sheet, statement of income and statement of cash flows of Parent and its Subsidiaries delivered to the Lender Parties pursuant to Section 3.01(a)(ix) or 5.03 were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Parent’s best estimate of its future financial performance.

(j) Neither the Lenders Presentation nor any other information, exhibit or report furnished by or on behalf of any Loan Party to any Agent or any Lender Party in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading.

(k) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance or drawings under any Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock.

(l) Neither any Loan Party nor any of its Subsidiaries is an “investment company”, or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended. Neither any Loan Party nor any of its Subsidiaries is a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of any such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder.

(m) Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction that could be reasonably likely to have a Material Adverse Effect.

(n) Upon the filings of the Mortgages in accordance with the terms of the Loan Documents and the delivery of Account Control Agreements in accordance with the terms of the Loan Documents, all filings and other actions necessary or desirable to perfect and protect the security interest in the Collateral created under the Collateral Documents have been duly made or taken and are in full force and effect, and the Collateral Documents create in favor of the Collateral Agent for the benefit of the Secured Parties a valid and, together with such filings and other actions, perfected security interest in the Collateral, securing the payment of the Secured Obligations. The Loan Parties are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the liens and security interests created or permitted under the Loan Documents.

(o) Each Loan Party is, individually and together with its Subsidiaries, Solvent.

(p) No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes

of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $10,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $20,000,000 the fair market value of the assets of all such underfunded Plans.

(q) Except as otherwise set forth on Schedule 4.01(q) hereto or as disclosed in Parent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither Parent, the Borrower nor any other Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) to the best knowledge and belief of Parent and the Borrower, knows of any basis for any Environmental Liability.

(r) (i) As of the date hereof, neither any Loan Party nor any of its Subsidiaries is party to any tax sharing agreement relating to current or future Fiscal Years. (ii) Each of Parent and the Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) any Taxes that are being contested in good faith by appropriate proceedings and for which Parent or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

(s) Set forth on Schedule 4.01(s) hereto is a complete and accurate list as of the date hereof of all Existing Debt (other than Surviving Debt), showing the obligor and the principal amount outstanding thereunder.

(t) Set forth on Schedule 4.01(t) hereto is a complete and accurate list as of the date hereof of all Surviving Debt (other than Surviving Debt consisting of intercompany Debt between Loan Parties), showing the obligor and the principal amount outstanding thereunder, the maturity date thereof and the amortization schedule therefor.

(u) Set forth on Schedule 4.01(u) hereto is a complete and accurate list of all Liens on the property or assets of any Loan Party or any of its Subsidiaries as of the date hereof, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto.

(v) Set forth on Schedule 4.01(v) hereto as of the date hereof is a complete and accurate list of all major real property owned by any Loan Party or any of its Subsidiaries, showing as of the date hereof the common name, county or other relevant jurisdiction, state, record owner and a value (as reasonably determined by the Borrower and approved by the Administrative Agent) thereof. Each Loan Party or such Subsidiary has good, marketable and insurable fee simple title to such real property, free and clear of all Liens, other than Liens created or permitted by the Loan Documents.

(w) (i) Set forth on Schedule 4.01(w)(i) hereto as of the date hereof is a complete and accurate list of all major leases of real property under which any Loan Party or any of its Subsidiaries is the lessee, showing as of the date hereof the common name, county or other relevant jurisdiction, state, lessor and the lessee thereof.

(ii) Set forth on Schedule 4.01(w)(ii) hereto as of the date hereof is a complete and accurate list of all major leases of real property under which any Loan Party is the lessor, showing as of the date hereof the common name, county or other relevant jurisdiction, state, lessor, lessee and a value (as reasonably determined by the Borrower and approved by the Administrative Agent) thereof.

(x) Set forth on Schedule 4.01(x) hereto as of the date hereof is a complete and accurate list of all Investments in excess of $1,000,000 held by any Loan Party or any of its Subsidiaries on the date hereof (other than Investments in Subsidiaries and other than Investments in Cash Equivalents), showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof.

(y) Set forth on Schedule 4.01(y) hereto as of the date hereof is a complete and accurate list of all patents, trademarks, trade names, service marks and copyrights, and all applications therefor and licenses thereof which are registered and material to the business of any Loan Party or any of its Subsidiaries, showing as of the date hereof the jurisdiction in which registered, the registration number, the date of registration and the expiration date.

ARTICLE V

COVENANTS OF THE BORROWER AND PARENT

SECTION 5.01. Affirmative Covenants . From and after the Effective Date, so long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, each of Parent and the Borrower will:

(a) Compliance with Laws, Etc . Comply, and cause each of their Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA, Environmental Laws, the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970, the Interstate Commerce Act and the Railway Labor Act except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(b) Payment of Taxes, Etc . Pay and discharge, and cause each of their Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided , however , that neither the Parent, the Borrower nor any of their Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors.

(c) Maintenance of Insurance . Maintain, and cause each of their Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses

and owning similar properties in the same general areas in which the Parent, the Borrower or such Subsidiary operates.

(d) Preservation of Corporate Existence, Etc . Preserve and maintain, and cause each of their Subsidiaries to preserve and maintain, its existence, legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises; provided , however , that the Parent, the Borrower and their Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(d) and provided further that neither the Parent, the Borrower nor any of their Subsidiaries shall be required to preserve any right, permit, license, approval, privilege or franchise if the Board of Directors of the Parent, the Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Parent, the Borrower or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Parent, the Borrower, such Subsidiary or the Lender Parties.

(e) Visitation Rights . At any reasonable time and from time to time, upon reasonable notice, permit any of the Agents or any of the Lender Parties, or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Parent, the Borrower and any of their Subsidiaries, and to discuss the affairs, finances and accounts of the Parent, the Borrower and any of their Subsidiaries with any of their officers or directors provided that any such examinations shall be at the Lender’s sole expense and the Lenders shall coordinate the timing of their visits through the Administrative Agent.

(f) Keeping of Books . Keep, and cause each of their Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Parent, the Borrower and each such Subsidiary in accordance with GAAP in effect from time to time.

(g) Maintenance of Properties, Etc . Maintain and preserve, and cause each of their Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.

(h) Transactions with Affiliates . Conduct, and cause each of their Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are fair and reasonable and no less favorable to Parent, the Borrower or such Subsidiary than it would obtain in a comparable arm’s-length transaction with a Person not an Affiliate.

(i) Covenant to Guarantee Obligations and Give Security . Upon (x) the formation or acquisition of any Significant Subsidiary by any Loan Party or (y) the acquisition of any material property by any Loan Party, and such property, in the judgment of the Collateral Agent, shall not already be subject to a perfected first priority security interest in favor of the Collateral Agent for the benefit of the Secured Parties, then in each case at the Borrower’s expense:

(i) in connection with the formation or acquisition of a Significant Subsidiary, within 30 days after such formation or acquisition, cause each such Subsidiary, and cause each direct and indirect parent of such Subsidiary (if it has not already done so), to duly execute and deliver to the Collateral Agent a guaranty or guaranty supplement, in form and substance satisfactory to the Collateral Agent, guaranteeing the other Loan Parties’ obligations under the Loan Documents,

(ii) within 30 days after such formation or acquisition, furnish to the Collateral Agent a description of the real and personal properties of such Subsidiary or the real and personal properties so acquired, in each case in detail satisfactory to the Collateral Agent,

(iii) within 60 days after (A) such acquisition of any material property by any Loan Party, duly execute and deliver, and cause the applicable Loan Party to duly execute and deliver, to the Collateral Agent such additional mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and other security agreements as reasonably requested by, and in form and substance reasonably satisfactory to the Collateral Agent, securing payment of all the Obligations of such Loan Party under the Loan Documents and constituting Liens on all such properties and (B) formation or acquisition of any new Significant Subsidiary, cause such Significant Subsidiary to duly execute and deliver to the Collateral Agent mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and other security agreements as reasonably requested by, and in form and substance satisfactory to the Collateral Agent, securing payment of all of the obligations of such Subsidiary under the Loan Documents, and cause the applicable Loan Party and each such Significant Subsidiary to take, whatever action may be reasonably necessary or advisable in the opinion of the Collateral Agent to vest in the Collateral Agent (or in any representative of the Collateral Agent designated by it) valid and subsisting Liens on the properties purported to be subject to the mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements delivered pursuant to this Section 5.01(i), enforceable against all third parties in accordance with their terms,

(iv) within 60 days after such formation or acquisition, deliver to the Collateral Agent, upon the reasonable request of the Collateral Agent, a signed copy of a favorable opinion, addressed to the Collateral Agent and the other Secured Parties, of counsel for the Loan Parties acceptable to the Collateral Agent as to (1) the matters contained in clauses (i) and (iii) above, (2) such guaranties, guaranty supplements, mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements being legal, valid and binding obligations of each Loan Party party thereto enforceable in accordance with their terms, (3) any recordings, filings, notices, endorsements and other actions taken pursuant thereto being sufficient to create valid perfected Liens on such properties, as to matters of corporate formalities as Collateral Agent may request, and (4) such other matters as the Collateral Agent may reasonably request,

(v) as promptly as practicable after such request, formation or acquisition, deliver, upon the request of the Collateral Agent in its reasonable credit judgment, to the Collateral Agent with respect to each parcel of real property with a value in excess of $500,000 owned or held by the applicable Loan Party and each newly acquired or newly formed Significant Subsidiary title insurance, land surveys and engineering, soils and other reports, and environmental assessment reports, each in scope, form and substance reasonably satisfactory to the Collateral Agent, provided , however , that to the extent that any Loan Party or any of its Subsidiaries shall have otherwise received any of the foregoing items with respect to such real property, such items shall, promptly after the receipt thereof, be delivered to the Collateral Agent, and

(vi) at any time and from time to time, promptly execute and deliver, and cause to execute and deliver, each Loan Party and each newly acquired or newly formed Significant Subsidiary any and all further instruments and documents and take, and cause each Loan Party and each newly acquired or newly formed Significant Subsidiary to take, all such other action as the Collateral Agent may deem reasonably necessary or desirable to obtain the full benefits of, or in perfecting and preserving the Liens of, such guaranties, mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements; provided, however , that nothing in this clause (i) shall require the creation or perfection of pledges or security interests in particular assets of the Loan Parties if the Collateral Agent shall have determined that the cost of creation and perfection of such pledges or security interests is excessive in view of the benefit to be obtained by the Lenders.

(j) Further Assurances . (i) Promptly upon request by any Agent, or any Lender Party through the Administrative Agent, correct, and cause each of their Subsidiaries promptly to correct, any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and

(ii) Promptly upon request by any Agent, or any Lender Party through the Administrative Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as any Agent, or any Lender Party through the Administrative Agent, may reasonably require from time to time in order to (A) carry out more effectively the purposes of the Loan Documents, (B) to the fullest extent permitted by applicable law, subject any Loan Party’s or any of its Subsidiaries’ properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do so; and

(iii) Take or cause to be taken each action specified on Schedule 5.01(j)(iii) within the time period specified for such action to be taken on such schedule.

(k) Delivery of Environmental Reports . Promptly provide to the Administrative Agent or the Collateral Agent, at the expense of the Borrower, copies of any environmental site assessment report for the Parent, the Borrower or any of their Subsidiaries’ properties described in the Mortgages, indicating the presence or absence of Hazardous Materials in any material respect and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties.

(l) Mortgages . By the date that is 45 days after the Effective Date, as such time period may be extended in the Administrative Agent’s reasonable discretion, the Borrower shall deliver:

(A) Amendments in form and substance satisfactory to the Collateral Agent of the Mortgages, each duly executed and acknowledged by Borrower, together with a

mortgage modification endorsement to each Mortgage Policy delivered with respect to each such Mortgage under the Existing Credit Agreement in a form suitable for filing or recording and otherwise in form and substance satisfactory to the Collateral Agent,

(B) A fully paid “date down” endorsement to each Mortgage Policy for the properties listed on Schedule IV in form and substance acceptable to the Collateral Agent, dated the date of this Agreement, and issued by Stewart Title Guaranty Company, which states, among other things, that since the effective date of applicable mortgage policy, there have been no changes in the state of title, including no new Liens that do not constitute Permitted Encumbrances,

(C) Such other consents, agreements and confirmations of lessors and third parties as the Collateral Agent may deem necessary or desirable and evidence that all other actions that the Collateral Agent may deem necessary or desirable in order to continue valid first and subsisting Liens on the property described in the Mortgages has been taken.

(D) In addition to items listed immediately above, the Collateral Agent shall be satisfied with the advice from local counsel acceptable to the Collateral Agent in each state in which a Mortgage is recorded which imposes a mortgage recording (or similar) tax in connection with such Mortgage relating to the effects of the transactions contemplated herein on the Lien priority of each such Mortgage, the mortgage recording (or similar) taxes payable in connection with each such Mortgage, and related matters.

(m) Maintenance of Separate Existence . Cause Meridian Speedway to (i) maintain its funds in accounts which are separate and distinct from any account maintained by any Loan Party or any of its Subsidiaries, (ii) maintain its own business and financial records, (iii) act pursuant to corporate resolutions or similar authority granted in accordance with the Meridian Speedway Company Agreement, laws applicable to governance of Meridian Speedway and with procedures required by any other organizational document of Meridian Speedway, (iv) document and record in its financial records each transaction between Meridian Speedway, on the one hand, and any Loan Party or any of its Subsidiaries, on the other hand, in accordance with business practices commonly employed by enterprises similar to Meridian Speedway with respect to transactions with non-Affiliates, (v) conduct its business with third parties in the name of Meridian Speedway and not in the name of any Loan Party or any of its Subsidiaries and (vi) have at the time Meridian Speedway commences the business of Meridian Speedway capitalization adequate (in the reasonable determination of the Parent) to meet its reasonably anticipated business needs.

(n) Certain Indebtedness . Indebtedness that is excluded pursuant to the last sentence of the definition of “Debt” shall be repaid with the issuance of stock or other Equity Interests of the Parent or its subsidiaries or cash proceeds from the issuance of stock or Equity Interests unless (i) after giving effect to any payment in cash that is not cash proceeds from the issuance of stock or Equity Interests, the Parent would have been in compliance with the financial covenants pursuant to Section 5.04 as determined on a pro forma basis as of the most recently ended fiscal quarter as if such indebtedness had constituted “Debt” or (ii) if the Revolving Credit Facility would remain undrawn after such repayment and have availability thereunder of not less than $25,000,000.

(o) Meridian Speedway . The terms of all agreements entered into in connection with formation and funding of Meridian Speedway shall not vary in any material respect from the

terms of the agreements and the term sheet delivered to the Collateral Agent prior to the Effective Date.

SECTION 5.02. Negative Covenants . From and after the Effective Date, so long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, each of the Parent and the Borrower will not, at any time:

(a) Liens, Etc . Create, incur, assume or suffer to exist, or permit any of their Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, or permit any of its Subsidiaries to sign or file or suffer to exist, under the Uniform Commercial Code of any jurisdiction or with the STB, a financing statement or other filing that names the Parent, the Borrower or any of their Subsidiaries as debtor (other than any filing made by a lessor of property solely for protective purposes), or sign or suffer to exist, or permit any of their Subsidiaries to sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement or other filing, or assign, or permit any of their Subsidiaries to assign, any accounts or other right to receive income, except:

(i) Liens created under the Loan Documents;

(ii) Permitted Liens;

(iii) Liens existing on the date hereof and described on Schedule 4.01(u) hereto;

(iv) purchase money Liens upon or in real property or equipment acquired or held by the Borrower or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition, construction or improvement of any such property or equipment to be subject to such Liens, or Liens existing on any such property or equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided , however , that no such Lien shall extend to or cover any property other than the property or equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the Debt secured by Liens permitted by this clause (iv) shall be permitted under Section 5.02(b)(i)(H);

(v) Liens arising in connection with Capitalized Lease Obligations permitted under Section 5.02(b)(i)(H); provided that no such Lien shall extend to or cover any Collateral or assets other than the assets subject to such Capitalized Lease Obligations;

(vi) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Parent, the Borrower or any of their Subsidiaries or becomes a Subsidiary of the Parent or Borrower; provided that such Liens were not created in contemplation of such merger, consolidation or investment and do not extend to any

assets other than those of the Person merged into or consolidated with the Parent, the Borrower or such Subsidiary or acquired by the Parent, the Borrower or such Subsidiary;

(vii) to the extent any Securitization Transaction is not structured as a true sale of accounts receivable, Liens existing or deemed to exist in connection with such Securitization Transactions; provided, that any outstanding Term B Advances shall be prepaid to the extent required under Section 2.06; and

(viii) Liens not expressly permitted by clauses (i) through (vi); provided that the sum of (A) the aggregate principal amount of the outstanding Debt of Parent and its Subsidiaries secured by Liens permitted by this clause and (B) the Attributable Debt in connection with all Sale and Leaseback Transactions of Parent and its Subsidiaries permitted by Section 5.02(h)(iii) does not at any time exceed 10% of Consolidated Net Worth.

Notwithstanding anything to the contrary, neither the Loan Parties nor any of their Subsidiaries shall create, incur, assume or suffer to exist any Lien on the Equity Interests of the Loan Parties in Meridian Speedway without the prior written consent of the Administrative Agent, except for any Lien on the Equity Interests of the Loan Parties in Meridian Speedway created, incurred, assumed or suffered to exist with respect to any Debt permitted pursuant to Section 5.02(b)(v); provided that the aggregate Equity Interests held by the Loan Parties in Meridian Speedway subject to any such Lien, taken together with the aggregate Equity Interests held by Persons that are not Loan Parties in Meridian Speedway, shall at all times be less than 50% of the aggregate outstanding Voting Interests in Meridian Speedway.

(b) Debt . Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt and Off Balance Sheet Obligations, except:

(i) in the case of the Parent, the Borrower and any of their respective Subsidiaries,

(A) Debt under the Loan Documents;

(B) the Surviving Debt, and any Debt extending the maturity of, or refunding or refinancing, in whole or in part, any Surviving Debt (“Refinancing Debt”), provided that the principal amount of such Refinancing Debt shall not exceed the sum of (i) the principal amount of the Surviving Debt outstanding immediately prior to such extension, refunding or refinancing, (ii) the aggregate amount of any prepayment fees or premiums, consent fees and/or other costs and expenses directly related to the extension, refunding or refinancing of such Surviving Debt and (iii) the reasonable fees, expenses and costs directly related to issuing the Refinancing Debt, and the direct and contingent obligors therefore shall not be changed, as a result of or in connection with such extension, refunding or refinancing, provided further that the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of such Refinancing Debt, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lender Parties than the terms of any agreement or instrument governing the Surviving Debt being extended, refunded or refinanced;

(C) Debt of Parent or the Borrower as an account party in respect of letters of credit (which do not constitute Letters of Credit hereunder) in an aggregate stated amount at any time outstanding not in excess of $10,000,000;

(D) Debt of (i) any Loan Party that is owed to any other Loan Party, (ii) any Subsidiary of the Parent that is not a Loan Party owed to any Subsidiary of the Parent that is not a Loan Party, (iii) Debt of any Loan Party owed to any Subsidiary of the Parent that is not a Loan Party which, to the extent that the aggregate amount for all such Debt exceeds $10,000,000, shall include subordination terms acceptable to the Administrative Agent and (iv) Debt of any Subsidiary of the Parent that is not a Loan Party owed to any Loan Party to the extent constituting an Investment permitted by Section 5.02(f);

(E) Debt of any Person that becomes a Subsidiary of the Borrower or the Parent after the date hereof in accordance with the terms of Section 5.02(f) which Debt is existing at the time such Person becomes a Subsidiary of the Borrower or the Parent (other than Debt incurred solely in contemplation of such Person becoming a Subsidiary of the Borrower or the Parent);

(F) Securitization Transactions;

(G) Debt under the Grupo TFM Notes;

(H) Any other Debt, provided that before and after giving effect to the incurrence of such Debt (i) the ratio of Senior Secured Debt to EBITDA is less than 2.75:1.00 and (ii) the Loan Parties are otherwise in compliance with the financial covenants set forth in Section 5.04 and provided further that, if such Debt is unsecured, (a) in no event shall the terms of such Debt require any scheduled payment of principal in cash of such Debt prior to the Termination Date, (b) a Subsidiary shall not guarantee such Debt unless (i) such Subsidiary is also a Subsidiary Guarantor under this Agreement, and (ii) such guarantee of such Debt provides for the release and termination thereof, without action by any party, upon any release and termination of such Subsidiary Guaranty by the applicable Subsidiary (other than by reason of repayment and satisfaction of all of the Obligations);

(I) Debt incurred to finance newly-acquired equipment in contemplation of a Sale and Leaseback Transaction within 120 days following the incurrence thereof pursuant to Section 5.02(h)(iii), to the extent the conditions set forth therein are satisfied;

(J) Debt consisting of guaranties described in 5.02(b)(i)(H).

(ii) [Intentionally Omitted]

(iii) Neither Parent nor the Borrower will, nor will they permit any Subsidiary to, issue any preferred stock or other Preferred Interests other than Preferred Interests of Parent that are not by their terms or by the terms of any agreement or instrument subject to any redemption, repurchase or similar requirement for the payment of cash, whether absolute, at the option of any holder thereof or upon the occurrence of any event or

contingency (other than an event which results in an Event of Default hereunder) which could occur prior to the final maturity of all the Advances;

(iv) Parent will not permit Caymex or any other domestic wholly owned subsidiary of the Parent that directly or indirectly owns the Equity Interests of Grupo TFM to create, incur or assume any Debt other than Debt the proceeds of which are used to finance or refinance its foreign operations in Mexico and Panama or to make distributions to the Parent; and

(v) Debt owed by the Parent, the Borrower, or any Subsidiary of the Parent to Meridian Speedway which Debt shall not exceed an aggregate amount equal to $170,000,000 and be on terms and conditions reasonably acceptable to the Administrative Agent, including, without limitation, (A) subordination terms and (B) compliance with Section 5.02(n) hereof.

(c) Change in Nature of Business . Make, or permit any of their Subsidiaries (other than, with respect to the Borrower, a Non-Core Business Subsidiary) to make, any material change in the nature of its business as carried on at the date hereof.

(d) Mergers, Etc . Merge into or consolidate with any Person or permit any Person to merge into Parent or the Borrower, or permit any of their Subsidiaries to do so, except that:

(i) any Subsidiary of Parent or the Borrower may merge into or consolidate with the Parent, any other Subsidiary of Parent or the Borrower, provided that, in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be an Affiliate of the Parent or the Borrower which is also a Loan Party, provided further that, in the case of any such merger or consolidation to which a Subsidiary Guarantor is a party, the Person formed by such merger or consolidation shall be a Subsidiary Guarantor;

(ii) in connection with any acquisition permitted under Section 5.02(f), any Subsidiary of the Parent or the Borrower may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided that the Person surviving such merger shall be an Affiliate of the Parent or the Borrower which is also a Loan Party; and

(iii) in connection with any sale or other disposition permitted under Section 5.02(e) (other than clause (ii) thereof), any Subsidiary of the Parent may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it;

provided , however , that in each case, immediately before and after giving effect thereto, no Default shall have occurred and be continuing.

(e) Sales, Etc., of Assets . Sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets, except:

(i) sales of Inventory, used or surplus equipment, non-operating assets and non-income producing assets and Cash Equivalents in the ordinary course of its business

and the granting of any option or other right to purchase, lease or otherwise acquire Inventory in the ordinary course of its business;

(ii) in a transaction authorized by Section 5.02(d);

(iii) sales, transfers or other dispositions of assets among Loan Parties;

(iv) other sales, transfers or other dispositions of assets; provided that (i) the Net Cash Proceeds from any such sale, transfer or other disposition are paid to the Lenders to the extent required by Section 2.06(b) and (ii) such assets are sold, transferred or otherwise disposed of for fair market value;

(v) sales, transfers and other dispositions of accounts receivable pursuant to one or more Securitization Transactions; provided that the Net Cash Proceeds from such sale are used to prepay the Term B Advances pursuant to and in the amount required in, Section 2.06(b)(ii); and

(vi) sales, transfers, options for sales or transfers, or other dispositions of track assets in an amount not to exceed a book value thereof equal to $170,000,000 to Meridian Speedway pursuant to the terms and conditions set forth in the Meridian Speedway Transaction Agreement.

(f) Investments in Other Persons . Make or hold, or permit any of their Subsidiaries to make or hold, any Investment in any Person, except:

(i) Investments by the Parent, the Borrower and their Subsidiaries in Loan Parties; provided that, with respect to the Borrower, all such Investments in a Non-Core Business Subsidiary shall not exceed an aggregate principal amount equal to $15,000,000 at any time outstanding, including, with respect to any assets comprising such Investment, the fair market value thereof;

(ii) loans and advances to employees in the ordinary course of the business of the Parent and its Subsidiaries as presently conducted in an aggregate principal amount not to exceed $2,000,000 at any time outstanding;

(iii) Investments by the Parent and its Subsidiaries in Cash Equivalents;

(iv) Investments existing on the date hereof and described on Schedule 4.01(x) hereto;

(v) Investments by the Borrower in Hedge Agreements;

(vi) Investments consisting of intercompany Debt permitted under Section 5.02(b), including, without limitation, loans and advances to Parent;

(vii) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

(viii) Guarantees for the benefit of, or capital contributions or loans to, or sale and leaseback transactions with, Texas Mexican Railway Company or any other domestic

railway company that owns railways that are contiguous with those owned by the Borrower; provided that, since the Prior Effective Date, the aggregate amount of such capital contributions, loans and guaranteed Debt and sale and leaseback transactions shall not exceed $30,000,000;

(ix) Guarantees for the benefit of, or capital contributions or loans to, or sale and leaseback transactions with, any company that is engaged in the same line of business as the Borrower or a related line of business; provided that, since the Prior Effective Date, the aggregate amount of such capital contributions, loans and guaranteed Debt and sale and leaseback transactions shall not exceed $25,000,000;

(x) Investments made with the net proceeds of issuances of Equity Interests by Parent or any of its Subsidiaries;

(xi) the Mexrail Acquisition;

(xii) Investments by the Parent or Borrower of track assets in an amount not to exceed a book value thereof equal to $170,000,000 in the Meridian Speedway pursuant to the terms and conditions set forth in the Meridian Speedway Transaction Agreement and the Meridian Speedway Company Agreement;

(xiii) The Investments in Meridian Speedway Joint Venture permitted pursuant to Section 5.02(e)(vi) and Investments by the Parent or the Borrower not exceeding $10,000,000 per annum in Meridian Speedway; provided that up to $5,000,000 in additional Investments by the Borrower in Meridian Speedway may be made in the immediately following fiscal year if such Investments were not made in the current fiscal year;

(xiv) Investments not expressly permitted by clauses (i) through (xiii); provided that the aggregate amount of all such Investments shall not at any time exceed $10,000,000.

(g) Restricted Payments . Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, partners or members (or the equivalent Persons thereof) as such, or permit any of their Subsidiaries to do any of the foregoing, or permit any of their Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in Parent or the Borrower or to issue or sell any Equity Interests therein of any entity whose Equity Interests have been pledged as Collateral under the Security Agreement, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

(i) Parent may (A) declare and pay dividends and distributions payable only in common stock of Parent, (B) make payments restricted by this section pursuant to and in accordance with stock option plans or other benefit plans for management or employees of Parent and its Subsidiaries, and (C) purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests made by exchange for, or out of the proceeds of the substantially contemporaneous sale of, Equity Interests, and (D) pay cash

dividends with respect to shares of its Preferred Interests in respect of which cash dividends are payable or which require redemptions or repurchases in cash, and

(ii) any Subsidiary of the Parent may (A) declare and pay dividends ratably with respect to their capital stock and (B) declare and pay dividends in cash or property to any other Loan Party of which it is a Subsidiary.

(h) Sale and Leaseback Transactions . Parent will not, and will not permit any of its Subsidiaries to, enter into any Sale and Leaseback Transaction other than:

(i) Sale and Leaseback Transactions involving locomotives, rolling stock or other equipment with Southern Capital Corporation, LLC;

(ii) Sale and Leaseback Transactions permitted by clauses (viii) and (ix) of Section 5.02(f); and

(iii) any other Sale and Leaseback Transaction if (i) at the time of such Sale and Leaseback Transaction no Default shall have occurred and be continuing, (ii) the proceeds from the sale of the subject property shall be at least equal to its fair market value on the date of such sale, and (iii) the sum of (A) the aggregate principal amount of the outstanding Debt of Parent and its Subsidiaries secured by Liens permitted by clause (viii) of Section 5.02(a) and (B) the Attributable Debt in connection with all Sale and Leaseback Transactions of Parent and its Subsidiaries permitted by this Section 5.02(h)(iii) does not at any time exceed 10% of Consolidated Net Worth; provided that any Sale and Leaseback Transaction permitted pursuant to this Section 5.02(h)(iii) shall be deemed not to include any Attributable Debt for the purposes hereof to the extent that such Sale and Leaseback Transaction is consummated with respect to such newly-acquired equipment.

(i) Prepayments, Etc., of Debt . Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Debt, except (i) the prepayment of the Advances in accordance with the terms of this Agreement, (ii) regularly scheduled or required repayments or redemptions of Debt (other than payments in respect of Subordinated Debt which are in contravention of the subordination provisions thereof), (iii) any prepayments or redemptions of Debt in connection with a refunding or refinancing of such Debt permitted by Section 5.02(b)(i)(B), (iv) payments of secured Debt that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Debt and (v) payments in respect of Debt owed to Parent or any Subsidiary, or amend, modify or change in any manner any term or condition of any Material Debt or Subordinated Debt, or take any other action in connection with any Material Debt that would impair the value of the interest or rights of any Loan Party thereunder or that would impair the rights or interests of any Agent or any Lender Party, or permit any of its Subsidiaries to do any of the foregoing other than to prepay any Debt payable to the Borrower or the Parent.

(j) Negative Pledge . Enter into or suffer to exist, or permit any of their Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets (including, without limitation, any Equity Interests in Meridian Speedway (except as otherwise permitted pursuant to Section 5.02(a), as provided in the agreements entered into in connection with formation and funding of Meridian Speedway and in accordance with the terms of Loan Documents, or with the express prior written consent of the Administrative Agent) except (i) in favor of the Secured Parties or (ii)

in connection with (A) any Surviving Debt, (B) any purchase money Debt permitted by Section 5.02(b)(i)(H) solely to the extent that the agreement or instrument governing such Debt permits the Liens of the Secured Parties under the Loan Documents, and any Liens in connection with the refinancing thereof, (C) any Capitalized Lease Obligation permitted by Section 5.02(b)(i)(H) solely to the extent that such Capitalized Lease Obligation permits the Liens of the Secured Parties under the Loan Documents and any Liens in connection with the refinancing thereof, or (D) any Debt outstanding on the date any Subsidiary of Parent becomes such a Subsidiary (so long as such agreement was not entered into solely in contemplation of such Subsidiary becoming a Subsidiary of Parent).

(k) Partnerships, Etc . Become a general partner in any general or limited partnership or joint venture, or permit any of its Subsidiaries to do so.

(l) Speculative Transactions . Engage, or permit any of its Subsidiaries to engage, in any transaction involving speculative transactions other than Hedge Agreements entered into in the ordinary course of business to hedge or mitigate risks to which Parent, the Borrower or any of their Subsidiaries shall be exposed in the conduct of their business and not for speculative purposes.

(m) Formation of Subsidiaries . Organize or invest, or permit any of their Subsidiaries to organize or invest, in any new Subsidiary except as permitted under Section 5.02(f)(i) or (x).

(n) Payment Restrictions Affecting Subsidiaries . Directly or indirectly, enter into or suffer to exist, or permit any of their Subsidiaries to enter into or suffer to exist, any agreement or arrangement limiting the ability of any of their Subsidiaries to declare or pay dividends or other distributions in respect of its Equity Interests or repay or prepay any Debt owed to, make loans or advances to, or otherwise transfer assets to or invest in, Parent or any Subsidiary of Parent (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise), except (i) the Loan Documents, (ii) any agreement or instrument evidencing Surviving Debt, (iii) any agreement in effect at the time such Subsidiary becomes a Subsidiary of the Borrower or the Parent, so long as such agreement was not entered into solely in contemplation of such Person becoming a Subsidiary of the Borrower or the Parent, and (iv) the agreements entered into in connection with formation and funding of Meridian Speedway and in accordance with terms of the Loan Documents.

SECTION 5.03. Reporting Requirements . So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, Parent or the Borrower will furnish to the Agents and the Lender Parties:

(a) Default Notice, Etc . As soon as possible and in any event within five days after the occurrence of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, including, without limitation, notice of all actions, suits, investigations, litigation and proceedings before any Governmental Authority affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f), a statement of the chief financial officer of the Borrower setting forth details of such Default or such litigation or other proceeding and the action that the Borrower has taken and proposes to take with respect thereto.

(b) Annual Financials . As soon as available and in any event within 90 days after the end of each Fiscal Year (A), a copy of audited financial statements for such year for Parent

and its subsidiaries, including therein a Consolidated balance sheet of Parent and its subsidiaries as of the end of such Fiscal Year and a Consolidated statement of income and a Consolidated statement of cash flows of Parent and its subsidiaries for such Fiscal Year, in each case accompanied by (i) an opinion (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) of KPMG LLP or other independent public accountants of recognized standing acceptable to the Required Lenders, together with a certificate of such accounting firm to the Lender Parties stating that in the course of the regular audit of the business of the Parent and its subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred and is continuing during the course of its audit (which certificate may be limited to the extent required by accounting rules or guidelines), or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, and (ii) a certificate of the chief financial officer of the Parent stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent has taken and proposes to take with respect thereto together with a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04 provided that in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Parent shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP, (B) for Parent and its Consolidated subsidiaries other than Mexrail, Caymex, any domestic wholly owned subsidiary of Parent which holds the Investment in Grupo TFM or the Panama Canal Railway Company, and their respective subsidiaries, its unaudited consolidated balance sheet and related statement of income as of the end of and for such year, all certified by its chief financial officer as presenting fairly in all material respects the financial condition and results of operations of Parent and its Consolidated subsidiaries other than Mexrail, Caymex, any domestic wholly owned subsidiary of Parent which holds the Investment in Grupo TFM or the Panama Canal Railway Company, and their respective subsidiaries, on a consolidated basis consistently applied and (C) for the Loan Parties on a non-consolidated basis, unaudited summary financial statements for such Fiscal Year certified by its chief financial officer.

(c) Quarterly Financials . As soon as available and in any event within 50 days after the end of each of the first three quarters of each Fiscal Year, (A) a Consolidated balance sheet of Parent and its subsidiaries as of the end of such quarter and a Consolidated statement of income and a Consolidated statement of cash flows of Parent and its subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and a Consolidated statement of income and a Consolidated statement of cash flows of Parent and its subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by the chief financial officer of the Parent as having been prepared in accordance with GAAP, together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent has taken and proposes to take with respect thereto and (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower in determining compliance with the covenants contained in Section 5.04, provided that in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP, (B) for Parent and its

Consolidated subsidiaries other than Mexrail, Caymex, any domestic wholly owned subsidiary of Parent which holds the Investment in Group TFM or the Panama Canal Railway Company, and their respective subsidiaries, its unaudited consolidated balance sheet and related statement of income as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, all certified by its chief financial officer as presenting fairly in all material respects the financial condition and results of operations of Parent and its Consolidated subsidiaries other than Mexrail, Caymex, any domestic wholly owned subsidiary of Parent which holds the Investment in Group TFM or the Panama Railway Company, and their respective subsidiaries, on a consolidated basis consistently applied, subject to normal year-end audit adjustments and the absence of footnotes and (C) for the Loan Parties on a non-consolidated basis, unaudited summary financial statements for such fiscal quarter certified by its chief financial officer.

(d) Annual Forecasts . As soon as available and in any event no later than 30 days after the end of each Fiscal Year, forecasts prepared by management of Parent and the Borrower, in form satisfactory to the Administrative Agent, of balance sheets, income statements and cash flow statements on a monthly basis for the Fiscal Year following such Fiscal Year and on an annual basis for each Fiscal Year thereafter until the Termination Date.

(e) Securities Reports . Promptly after the same shall be publicly available, copies of all proxy statements, financial statements, regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange.

(f) Agreement Notices . Promptly upon receipt thereof, copies of all notices, requests and other documents received by any Loan Party or any of its Subsidiaries under or pursuant to any Material Debt Document or instrument, indenture, loan or credit or similar agreement regarding or related to any breach or default by any party thereto or any other event that could materially impair the value of the interests or the rights of any Loan Party or otherwise have a Material Adverse Effect and copies of any amendment, modification or waiver of any material provision of any Material Debt Document and, from time to time upon request by the Administrative Agent, such information and reports regarding the Material Debt Documents as the Administrative Agent may reasonably request.

(i) ERISA . Prompt written notice of (i) the occurrence of any Reportable Event with respect to any Plan, (ii) the incurrence of Withdrawal Liability with respect to any Multiemployer Plan, (iii) the receipt by Parent or any member of the Controlled Group of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization within the meaning of Title IV of ERISA or (iv) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

(g) Environmental Conditions . Promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit that could (i) reasonably be expected to have a Material Adverse Effect or (ii) cause any property described in the Mortgages to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law.

(h) Insurance . The Borrower will furnish to the Lenders, upon request of the Administrative Agent, information in reasonable detail as to the insurance coverage it maintains.

(i) Other Information . Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as any Agent, or any Lender Party through the Administrative Agent, may from time to time reasonably request.

SECTION 5.04. Financial Covenants . So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Parent and its Subsidiaries will:

(a) Leverage Ratio . Maintain at the end of each fiscal quarter of the Parent a Leverage Ratio of not more than the amount set forth below for each period set forth below:


Quarter Ending		Ratio
March 31, 2006		5.75:1.00
June 30, 2006		5.50:1.00
September 30, 2006		5.25:1.00
December 31, 2006		5.25:1.00
March 31, 2007		5.00:1.00
June 30, 2007		5.00:1.00
September 30, 2007		5.00:1.00
December 31, 2007		5.00:1.00
March 31, 2008		4.75:1.00
June 30, 2008		4.75:1.00
September 30, 2008		4.75:1.00
December 31, 2008		4.75:1.00
March 31, 2009		4.50:1.00
June 30, 2009		4.50:1.00
September 30, 2009		4.50:1.00
December 31, 2009		4.50:1.00
March 31, 2010		4.50:1.00
June 30, 2010		4.50:1.00
September 30, 2010		4.50:1.00
December 31, 2010		4.50:1.00
March 31, 2011		4.50:1.00
June 30, 2011		4.50:1.00
September 30, 2011		4.50:1.00
December 31, 2011		4.50:1.00
March 31, 2012		4.50:1.00
June 30, 2012		4.50:1.00
September 30, 2012		4.50:1.00
December 31, 2012		4.50:1.00
March 31, 2013		4.50:1.00
June 30, 2013		4.50:1.00

(b) Interest Coverage Ratio . Maintain at the end of each fiscal quarter of the Parent an Interest Coverage Ratio of not less than the amount set forth below for each period set forth below:


Quarter Ending		Ratio
March 31, 2006		1.75:1.00
June 30, 2006		1.75:1.00
September 30, 2006		1.75:1.00
December 31, 2006		1.75:1.00
March 31, 2007		2.00:1.00
June 30, 2007		2.00:1.00
September 30, 2007		2.00:1.00
December 31, 2007		2.00:1.00
March 31, 2008		2.00:1.00
June 30, 2008		2.00:1.00
September 30, 2008		2.25:1.00
December 31, 2008		2.25:1.00
March 31, 2009		2.25:1.00
June 30, 2009		2.25:1.00
September 30, 2009		2.50:1.00
December 31, 2009		2.50:1.00
March 31, 2010		2.50:1.00
June 30, 2010		2.50:1.00
September 30, 2010		2.50:1.00
December 31, 2010		2.50:1.00
March 31, 2011		2.50:1.00
June 30, 2011		2.50:1.00
September 30, 2011		2.50:1.00
December 31, 2011		2.50:1.00
March 31, 2012		2.50:1.00
June 30, 2012		2.50:1.00
September 30, 2012		2.50:1.00
December 31, 2012		2.50:1.00
March 31, 2013		2.50:1.00
June 30, 2013		2.50:1.00

provided that, with respect to clause (a) and (b) of this Section 5.04, for purposes of the calculation of the Leverage Ratio and the Interest Coverage Ratio, respectively, all Debt incurred to purchase newly-acquired equipment to the extent such newly-acquired equipment is subject to a Sale and Leaseback Transaction shall not constitute “Debt” for the purposes of this Section 5.04 if such transaction is consummated on or prior to the 105th day of the acquisition of such newly-acquired equipment subject to such Sale and Leaseback Transaction.

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.01. Events of Default . If any of the following events (“ Events of Default ”) shall occur and be continuing:

(a) (i) the Borrower shall fail to pay any principal of any Advance when the same shall become due and payable or (ii) the Borrower shall fail to pay any interest on any Advance, or any Loan Party shall fail to make any other payment under any Loan Document, in each case under this clause (ii) within five Business Days after the same shall become due and payable; or

(b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or

(c) Parent or the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.14, 5.01(d), (e), 5.02, 5.03 or 5.04; or

(d) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 15 days after written notice thereof shall have been given to the Borrower by any Agent or any Lender Party; or

(e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Material Debt of such Loan Party or such Subsidiary (as the case may be) that is outstanding (but excluding Debt outstanding hereunder), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder thereof to cause, such Debt to mature; or any such Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or

(f) any Loan Party or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar

official for, it or any substantial part of its property) shall occur; or any Loan Party or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or

(g) any judgments or orders, either individually or in the aggregate, for the payment of money in excess of $10,000,000 shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(h) any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that is reasonably likely to have a Material Adverse Effect, and there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(i) any provision of any Loan Document after delivery thereof pursuant to Section 3.01 or 5.01(i) shall for any reason cease to be valid and binding on or enforceable against any Loan Party party to it, or any such Loan Party shall so state in writing; or

(j) any Collateral Document or financing statement after delivery thereof pursuant to Section 3.01 or 5.01(i) shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority lien on and security interest in a material portion of the Collateral purported to be covered thereby; or

(k) a Change of Control shall occur;

(l) any ERISA Event shall have occurred which, in the opinion of the Required Lenders, could reasonably be expected to have a Material Adverse Effect;

(m) an event of Default (as defined in any Mortgage) shall have occurred and be continuing; or

(n) an event of default or purchase termination event or other comparable event shall occur in respect of any Securitization Transaction in an aggregate amount greater than $20,000,000, in any case that could reasonably be expected to have a material and adverse effect on the liquidity of the Borrower or any of its Subsidiaries or otherwise result in a Material Adverse Effect;

then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by the Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and Swing Line Advances by a Revolving Credit Lender pursuant to Section 2.02(b)) and of the Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, (A) by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower, (B) by notice to each party required under the terms of any agreement in support of which a Standby Letter of Credit is issued, request that all Obligations under such

agreement be declared to be due and payable; provided , however , that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (x) the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by the Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and Swing Line Advances by a Revolving Credit Lender pursuant to Section 2.02(b)) and of the Issuing Bank to issue Letters of Credit shall automatically be terminated and (y) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

SECTION 6.02. Actions in Respect of the Letters of Credit upon Default . If any Event of Default shall have occurred and be continuing, the Administrative Agent may, or shall at the request of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Collateral Agent on behalf of the Lender Parties in same day funds at the Collateral Agent’s Office, for deposit in the L/C Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding; provided , however , that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Law, the Borrower will pay to the Collateral Agent on behalf of the Lender Parties in same day funds at the Collateral Agent’s Office, for deposit in the L/C Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. If at any time the Administrative Agent or the Collateral Agent determines that any funds held in the L/C Collateral Account are subject to any right or claim of any Person other than the Agents and the Lender Parties or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Administrative Agent or the Collateral Agent, pay to the Collateral Agent, as additional funds to be deposited and held in the L/C Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Collateral Account that the Administrative Agent or the Collateral Agent, as the case may be, determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Collateral Account, such funds shall be applied to reimburse the Issuing Bank or Revolving Credit Lenders, as applicable, to the extent permitted by applicable law.

ARTICLE VII

THE AGENTS

SECTION 7.01. Authorization and Action . (a) Each Lender Party (in its capacities as a Lender, the Swing Line Bank (if applicable), the Issuing Bank (if applicable) and on behalf of itself and its Affiliates as potential Hedge Banks) hereby appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), no Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lender Parties and all holders of Notes; provided , however , that no Agent shall be required to take any action that exposes such Agent to personal liability or that is contrary to this Agreement or applicable law. Each Agent agrees to give to each Lender Party prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement.

(b) In furtherance of the foregoing, each Lender Party (in its capacities as a Lender, the Swing Line Bank (if applicable), the Issuing Bank (if applicable) and on behalf of itself and its Affiliates as potential Hedge Banks) hereby appoints and authorizes the Collateral Agent to act as the agent of such Lender Party for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Secured Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent (and any Supplemental Collateral Agents appointed by the Collateral Agent pursuant to Section 7.01(c) for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights or remedies thereunder at the direction of the Collateral Agent), shall be entitled to the benefits of this Article VII (including, without limitation, Section 7.05 as though such Supplemental Collateral Agents were an “Agent” under the Loan Documents) as if set forth in full herein with respect thereto.

(c) Any Agent may execute any of its duties under this Agreement or any other Loan Document (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents or of exercising any rights and remedies thereunder at the direction of the Collateral Agent) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Collateral Agent may also from time to time, when the Collateral Agent deems it to be necessary or desirable, appoint one or more trustees, co-trustees, collateral co-agents, collateral subagents or attorneys-in-fact (each, a “ Supplemental Collateral Agent ”) with respect to all or any part of the Collateral; provided , however , that no such Supplemental Collateral Agent shall be authorized to take any action with respect to any Collateral unless and except to the extent expressly authorized in writing by the Collateral Agent. Should any instrument in writing from the Borrower or any other Loan Party be required by any Supplemental Collateral Agent so appointed by the Collateral Agent to more fully or certainly vest in and confirm to such Supplemental Collateral Agent such rights, powers, privileges and duties, the Borrower shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by the Collateral Agent. If any Supplemental Collateral Agent, or successor thereto, shall die, become incapable of acting, resign or be removed, all rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent permitted by law, shall automatically vest in and be exercised by the Collateral Agent until the appointment of a new Supplemental Collateral Agent. No Agent shall be responsible for the negligence or misconduct of any agent, attorney-in-fact or Supplemental Collateral Agent that it selects in accordance with the foregoing provisions of this Section 7.01(c) in the absence of such Agent’s gross negligence or willful misconduct.

SECTION 7.02. Agents’ Reliance, Etc . Neither any Agent nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (a) may treat the payee of any Note as the holder thereof until, in the case of the Administrative Agent, the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any other Agent, such Agent has received notice from the Administrative Agent that it has received and accepted such Assignment and Acceptance, in each case as provided in Section 9.07; (b) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance, observance or satisfaction of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or the existence at any time of any

Default under the Loan Documents or to inspect the property (including the books and records) of any Loan Party; (e) shall not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (f) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or telex) believed by it to be genuine and signed or sent by the proper party or parties.

SECTION 7.03. BNS and Affiliates . With respect to its Commitments, the Advances made by it and the Notes issued to it, BNS shall have the same rights and powers under the Loan Documents as any other Lender Party and may exercise the same as though it were not an Agent; and the term “Lender Party” or “Lender Parties” shall, unless otherwise expressly indicated, include BNS in its individual capacity. BNS and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of its Subsidiaries and any Person that may do business with or own securities of any Loan Party or any such Subsidiary, all as if BNS were not an Agent and without any duty to account therefor to the Lender Parties. No Agent shall have any duty to disclose any information obtained or received by it or any of its Affiliates relating to any Loan Party or any of its Subsidiaries to the extent such information was obtained or received in any capacity other than as such Agent.

SECTION 7.04. Lender Party Credit Decision . Each Lender Party acknowledges that it has, independently and without reliance upon any Agent or any other Lender Party and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon any Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.

SECTION 7.05. Indemnification . (a) Each Lender Party severally agrees to indemnify each Agent (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party’s ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent under the Loan Documents (collectively, the “ Indemnified Costs ”); provided , however , that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse each Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that such Agent is not promptly reimbursed for such costs and expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by any Lender Party or any other Person.

(b) Each Lender Party severally agrees to indemnify the Issuing Bank (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party’s ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Issuing Bank in any way relating to or arising out of the Loan

Documents or any action taken or omitted by the Issuing Bank under the Loan Documents; provided , however , that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Issuing Bank’s gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse the Issuing Bank promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that the Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrower.

(c) For purposes of this Section 7.05, the Lender Parties’ respective ratable shares of any amount shall be determined, at any time, according to the sum of (i) the aggregate principal amount of the Advances outstanding at such time and owing to the respective Lender Parties, (ii) their respective Pro Rata Shares of the aggregate Available Amount of all Letters of Credit outstanding at such time, (iii) the aggregate unused portions of their respective Term B Commitments at such time and (iv) their respective Unused Revolving Credit Commitment at such time; provided that the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to the Issuing Bank shall be considered to be owed to the Revolving Credit Lenders ratably in accordance with their respective Revolving Credit Commitments. The failure of any Lender Party to reimburse any Agent or the Issuing Bank, as the case may be, promptly upon demand for its ratable share of any amount required to be paid by the Lender Parties to such Agent or the Issuing Bank, as the case may be, as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse such Agent or the Issuing Bank, as the case may be, for its ratable share of such amount, but no Lender Party shall be responsible for the failure of any other Lender Party to reimburse such Agent or the Issuing Bank, as the case may be, for such other Lender Party’s ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender Party hereunder, the agreement and obligations of each Lender Party contained in this Section 7.05 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents.

SECTION 7.06. Successor Agents . Any Agent may resign as to any or all of the Facilities at any time by giving written notice thereof to the Lender Parties and the Borrower and may be removed as to all of the Facilities at any time with or without cause by the Required Lenders; provided , however , that any removal of the Administrative Agent will not be effective until it has also been replaced as Collateral Agent, Swing Line Bank and Letter of Credit Issuing Bank and released from all of its obligations in respect thereof. Upon any such resignation or removal, the Required Lenders shall have the right with the approval of the Borrower (such approval not to be unreasonably withheld) to appoint a successor Agent as to such of the Facilities as to which such Agent has resigned or been removed. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent’s giving of notice of resignation or the Required Lenders’ removal of the retiring Agent, then the retiring Agent may, on behalf of the Lender Parties, with the approval of the Borrower (such approval not to be unreasonably withheld) appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent as to all of the Facilities and, in the case of a successor Collateral Agent, upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. Upon the acceptance of any appointment as Agent hereunder by a successor Agent as to less than all of the Facilities and, in the case of a successor Collateral Agent, upon the

execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent as to such Facilities, other than with respect to funds transfers and other similar aspects of the administration of Borrowings under such Facilities, issuances of Letters of Credit (notwithstanding any resignation as Agent with respect to the Letter of Credit Facility) and payments by the Borrower in respect of such Facilities, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement as to such Facilities, other than as aforesaid. If within 45 days after written notice is given of the retiring Agent’s resignation or removal under this Section 7.06 no successor Agent shall have been appointed and shall have accepted such appointment, then on such 45 ^th day (a) the retiring Agent’s resignation or removal shall become effective, (b) the retiring Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (c) the Required Lenders shall thereafter perform all duties of the retiring Agent under the Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent as provided above. After any retiring Agent’s resignation or removal hereunder as Agent as to any of the Facilities shall have become effective, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent as to such Facilities under this Agreement.

SECTION 7.07. Other Agents; Arranger and Managers . None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “bookrunner,” or “lead arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than to the extent expressly set forth herein and, in the case of such Lender Parties, those applicable to all Lender Parties as such. Without limiting the foregoing, none of the Lender Parties or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender Party. Each Lender Party acknowledges that it has not relied, and will not rely, on any of the Lender Parties or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

ARTICLE VIII

GUARANTY

SECTION 8.01. Guaranty; Limitation of Liability . (a) Each Guarantor, jointly and severally, hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of each other Loan Party now or hereafter existing under or in respect of the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest (including, without limitation, Post Petition Interest), premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise (such Obligations being the “ Guaranteed Obligations ”), and agrees to pay any and all expenses (including, without limitation, fees and expenses of counsel) incurred by the Administrative Agent or any other Secured Party in enforcing any rights under this Guaranty or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Secured Party under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party.

(b) Each Guarantor, and by its acceptance of this Guaranty, the Administrative Agent and each other Secured Party, hereby confirms that it is the intention of all such Persons that this Guaranty and the Obligations of each Subsidiary Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Obligations of each Subsidiary Guarantor hereunder. To effectuate the foregoing intention, the Administrative Agent, the other Secured Parties and the Guarantors hereby irrevocably agree that the Obligations of each Subsidiary Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance.

(c) Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to any Secured Party under this Guaranty or any other guaranty, such Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Secured Parties under or in respect of the Loan Documents.

SECTION 8.02. Guaranty Absolute . Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Secured Party with respect thereto. The Obligations of each Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of the Loan Documents, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Loan Party or whether the Borrower or any other Loan Party is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise;

(c) any taking, exchange, release or non-perfection of any Collateral or any other collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents or any other assets of any Loan Party or any of its Subsidiaries;

(e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries;

(f) any failure of any Secured Party to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party now or hereafter known to such Secured Party (each Guarantor waiving any duty on the part of the Secured Parties to disclose such information);

(g) the failure of any other Person to execute or deliver this Guaranty, any Guaranty Supplement or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or

(h) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by any Secured Party that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Secured Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise, all as though such payment had not been made.

SECTION 8.03. Waivers and Acknowledgments . (a) Each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Secured Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person or any Collateral.

(b) Each Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

(c) Each Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by any Secured Party that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Loan Parties, any other guarantor or any other Person or any Collateral and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Obligations of such Guarantor hereunder.

(d) Each Guarantor acknowledges that the Collateral Agent may, without notice to or demand upon such Guarantor and without affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage by nonjudicial sale, and each Guarantor hereby waives any defense to the recovery by the Collateral Agent and the other Secured Parties against such Guarantor of any deficiency after such nonjudicial sale and any defense or benefits that may be afforded by applicable law.

(e) Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of any Secured Party to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party or any of its Subsidiaries now or hereafter known by such Secured Party.

(f) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 8.02 and this Section 8.03 are knowingly made in contemplation of such benefits.

SECTION 8.04. Subrogation . Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower, any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor’s Obligations under or in respect of this Guaranty or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Secured Party against the Borrower, any other Loan Party or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, all Letters of Credit and all Secured Hedge Agreements shall have expired or been terminated and the Commitments shall have expired or been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (b) the Termination Date and (c) the latest date of expiration or termination of all Letters of Credit and all Secured Hedge Agreements, such amount shall be received and held in trust for the benefit of the Secured Parties, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) any Guarantor shall make payment to any Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, (iii) the Termination Date shall have occurred and (iv) all Letters of Credit and all Secured Hedge Agreements shall have expired or been terminated, the Secured Parties will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty.

SECTION 8.05. Guaranty Supplements . Upon the execution and delivery by any Person of a guaranty supplement in substantially the form of Exhibit I hereto (each, a “ Guaranty Supplement ”), (a) such Person shall be referred to as an “ Additional Guarantor ” and shall become and be a Guarantor hereunder, and each reference in this Guaranty to a “ Guarantor ” shall also mean and be a reference to such Additional Guarantor, and each reference in any other Loan Document to a “ Subsidiary Guarantor ” shall also mean and be a reference to such Additional Guarantor, and (b) each reference herein to “ this Guaranty ”, “ hereunder ”, “ hereof ” or words of like import referring to this Guaranty, and each reference in any other Loan Document to the “ Guaranty ”, “ thereunder ”, “ thereof ” or words of like import referring to this Guaranty, shall mean and be a reference to this Guaranty as supplemented by such Guaranty Supplement.

SECTION 8.06. Subordination . Each Guarantor hereby subordinates any and all debts, liabilities and other Obligations owed to such Guarantor by each other Loan Party (the “ Subordinated Obligations ”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 8.06:

(a) Prohibited Payments, Etc . Except during the continuance of a Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor may receive regularly scheduled payments from any other Loan Party on account of the Subordinated Obligations. After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), however, unless the Required Lenders otherwise agree, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

(b) Prior Payment of Guaranteed Obligations . In any proceeding under any Bankruptcy Law relating to any other Loan Party, each Guarantor agrees that the Secured Parties shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“ Post Petition Interest ”)) before such Guarantor receives payment of any Subordinated Obligations.

(c) Turn-Over . After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Secured Parties and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty.

(d) Administrative Agent Authorization . After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).

SECTION 8.07. Continuing Guaranty; Assignments . This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (ii) the Termination Date and (iii) the latest date of expiration or termination of all Letters of Credit and all Secured Hedge Agreements, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Secured Parties and their successors, transferees and assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, any Secured Party may assign or otherwise transfer all or any portion of its rights and obligations under this Agreement (including, without limitation, all or any portion of its Commitments, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party herein or otherwise, in each case as and to the extent provided in Section 9.07. No Guarantor shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Secured Parties.

ARTICLE IX

MISCELLANEOUS

SECTION 9.01. Amendments, Etc . No amendment or waiver of any provision of this Agreement or the Notes or any other Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed (or, in the case of the Collateral Documents, consented to) by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided , however , that (a) no amendment, waiver or consent shall, unless in writing and signed by all of the Lender Parties (other than any Lender Party that is, at such time, a Defaulting Lender), do any of the following at any time: (i) waive any of the conditions specified in Section 3.01 or, in the case of the Restatement, Section 3.02, (ii) change the number of Lenders or the percentage of (x) the Commitments, (y) the aggregate unpaid principal amount of the Advances or (z) the aggregate Available Amount of outstanding Letters of Credit that, in each case, shall be required for the Lenders or any of them to take any action hereunder, (iii) reduce or limit the obligations of any Guarantor under Section 7.01 or release such Guarantor or otherwise limit such Guarantor’s liability with respect to the Obligations owing to the Agents and the Lender Parties except in connection with transactions otherwise permitted hereunder, (iv) release all or substantially all of the Collateral in any transaction or series of related transactions, (v) amend Section 2.13 or this Section 9.01, (vi) increase the Commitments of the Lenders, (vii) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (viii) postpone any date scheduled for any payment of principal of, or interest on, the Notes pursuant to Section 2.04 or 2.07 or any date fixed for payment of fees or other amounts payable hereunder, or (ix) limit the liability of any Loan Party under any of the Loan Documents and (b) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender (other than any Lender that is, at such time, a Defaulting Lender) that has a Commitment under, or is owed any amounts under or in respect of, the Term B Facility or the Revolving Credit Facility if such Lender is directly and adversely affected by such amendment, waiver or consent: (i) increase the Commitments of such Lender; (ii) reduce the principal of, or stated rate of interest on, the Notes held by such Lender or any fees or other amounts stated to be payable hereunder to such Lender; or (iii) postpone any date scheduled for any payment of principal of, or interest on, the Notes pursuant to Section 2.04 or 2.07 or any date fixed for any payment of fees hereunder or any Guaranteed Obligations payable under the Subsidiary Guaranty; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Bank or the Issuing Bank, as the case may be, in addition to the Lenders required above to take such action, affect the rights or obligations of the Swing Line Bank or of the Issuing Bank, as the case may be, under this Agreement; and provided further that no amendment, waiver or consent shall, unless in writing and signed by an Agent in addition to the Lenders required above to take such action, affect the rights or duties of such Agent under this Agreement or the other Loan Documents.

SECTION 9.02. Notices, Etc . All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy, facsimile, or e-mail communication) and mailed, telegraphed, telecopied, telexed, faxed or delivered, if to Parent or the Borrower, at its address at P.O. Box 219335, Kansas City, Missouri 64121-9335, Attention: Senior Vice President-Finance and Treasurer (Facsimile No. (816) 983-1198), with a copy to the Executive Vice President and Chief Financial Officer (Facsimile No. (816) 983-1297), if to any Initial Lender Party, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender Party, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender Party; if to the Collateral Agent, at its address at 600 Peach Street, N.E., Suite 2700, Atlanta, GA 30308, Attention: [Eudia Smith], E-mail Address: eudia_smith@scotiacapital.com; if to the Administrative Agent, at its address at 600 Peach Street, N.E., Suite 2700, Atlanta, GA 30308, Attention: [Eudia Smith], E-mail Address: eudia_smith@scotiacapital.com; or, as to any party, at such other address as shall be

designated by such party in a written notice to the other parties. All such notices and other communications shall, when mailed, telegraphed, telecopied, telexed, faxed or E-mailed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or facsimile or confirmed by telex answerback, respectively, except that notices and communications to any Agent pursuant to Article II, III or VII shall not be effective until received by such Agent. Delivery by facsimile or other form of electronic communication of an executed counterpart of a signature page to any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.

SECTION 9.03. No Waiver; Remedies . No failure on the part of any Lender Party or any Agent to exercise, and no delay in exercising, any right hereunder or under any Note or any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 9.04. Costs and Expenses . (a) The Borrower agrees to pay on demand (i) all reasonable costs and expenses of each Agent in connection with the preparation, execution, delivery, administration, modification and amendment of, or any consent or waiver under, the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses and (B) the reasonable fees and expenses of counsel for each Agent with respect thereto, with respect to advising such Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors’ rights generally and any proceeding ancillary thereto) and (ii) all costs and expenses of each Agent and each Lender Party in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors’ rights generally (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent and each Lender Party with respect thereto).

(b) The Borrower agrees to indemnify, defend and save and hold harmless each Agent, each Lender Party and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “ Indemnified Party ”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Transaction Documents or any of the transactions contemplated thereby or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto and whether or not the Transaction is consummated. The Borrower also agrees not to assert any claim against any Agent,

any Lender Party or any of their Affiliates, or any of their respective officers, directors, employees, agents and advisors, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Transaction Documents or any of the transactions contemplated by the Transaction Documents.

(c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or if the Borrower fails to make any payment or prepayment of an Advance for which a notice of prepayment has been given or that is otherwise required to be made, whether pursuant to Section 2.04, 2.06 or 6.01 or otherwise, the Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion or such failure to pay or prepay, as the case may be, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance.

(d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Administrative Agent or any Lender Party, in its sole discretion.

(e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents.

SECTION 9.05. Right of Set-off . Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Agent and each Lender Party and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such Lender Party or such Affiliate to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower then due under the Loan Documents. Each Agent and each Lender Party agrees promptly to notify the Borrower after any such set-off and application; provided , however , that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Agent and each Lender Party and their respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Lender Party and their respective Affiliates may have.

SECTION 9.06. Binding Effect . This Agreement shall become effective when it shall have been executed by the Borrower and each Agent and the Administrative Agent shall have been notified by each Initial Lender Party (or otherwise received evidence satisfactory to the Administrative Agent) that such Initial Lender Party has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, each Agent and each Lender Party and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties.

SECTION 9.07. Assignments and Participations . (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); provided , however , that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations under and in respect of any or all Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender, an Affiliate of any Lender or an Approved Fund of any Lender or an assignment of all of a Lender’s rights and obligations under this Agreement, the aggregate amount of the Commitments being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than 1,000,000 (or such lesser amount as shall be approved by the Administrative Agent and, so long as no Default shall have occurred and be continuing at the time of effectiveness of such assignment, the Borrower) under each Facility for which a Commitment is being assigned, (iii) each such assignment shall be to an Eligible Assignee, (iv) no such assignments shall be permitted without the consent of the Administrative Agent until the Administrative Agent shall have notified the Lender Parties that syndication of the Commitments hereunder has been completed and (v) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $3,500; provided that , only one such fee shall be payable in respect of simultaneous assignments by any Lender to its Affiliates.

(b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the case may be, hereunder and (ii) the Lender or Issuing Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Sections 2.10, 2.12 and 9.04 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender’s or Issuing Bank’s rights and obligations under this Agreement, such Lender or Issuing Bank shall cease to be a party hereto).

(c) By executing and delivering an Assignment and Acceptance, each Lender Party assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Lender Party or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and

authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be.

(d) The Administrative Agent, acting for this purpose (but only for this purpose) as the agent of the Borrower, shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender Party from time to time (the “ Register ”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agents and the Lender Parties shall treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Agent or any Lender Party at any reasonable time and from time to time upon reasonable prior notice.

(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower and each other Agent. In the case of any assignment by a Lender, within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it under each Facility pursuant to such Assignment and Acceptance and, if any assigning Lender has retained a Commitment hereunder under such Facility, a new Note to the order of such assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1 or A-2 hereto, as the case may be.

(f) The Issuing Bank may assign to an Eligible Assignee all of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided , however , that each such assignment shall be to an Eligible Assignee and the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500; provided that , only one such fee shall be payable in respect of simultaneous assignments by any Lender to its Affiliates.

(g) Each Lender Party may sell participations to one or more Persons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes (if any) held by it); provided , however , that (i) such Lender Party’s obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agents and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party’s rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any

Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, release all or substantially all of the Collateral or reduce or limit the obligations of any Guarantor under Section 8.01 or release such Guarantor except in connection with transactions otherwise permitted hereunder.

(h) Any Lender Party may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender Party by or on behalf of the Borrower; provided , however , that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Lender Party.

(i) Notwithstanding any other provision set forth in this Agreement, any Lender Party may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it), including without limitation, in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

(j) Notwithstanding anything to the contrary contained herein, any Lender that is a fund that invests in bank loans may create a security interest in all or any portion of the Advances owing to it and the Note or Notes held by it to the trustee for holders of obligations owed, or securities issued, by such fund as security for such obligations or securities, provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 9.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

(k) Notwithstanding anything to the contrary contained herein, any Lender Party (a “ Granting Lender ”) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an “ SPC ”) the option to provide all or any part of any Advance that such Granting Lender would otherwise be obligated to make pursuant to this Agreement, provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Advance, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Advance, the Granting Lender shall be obligated to make such Advance pursuant to the terms hereof. The making of an Advance by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Advance were made by such Granting Lender. Each party hereto hereby agrees that (i) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender Party would be liable, (ii) no SPC shall be entitled to the benefits of Sections 2.10 and 2.12 (or any other increased costs protection provision) and (iii) the Granting Bank shall for all purposes, including, without limitation, the approval of any amendment or waiver of any provision of any Loan Document, remain the Lender Party of record hereunder. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior Debt of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any State thereof. Notwithstanding anything to the contrary contained in this Agreement, any SPC may (i) with notice to,

but without prior consent of, the Borrower and the Administrative Agent and with the payment of a processing fee of $500, assign all or any portion of its interest in any Advance to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Advances to any rating agency, commercial paper dealer or provider of any surety or guarantee or credit or liquidity enhancement to such SPC. This subsection (k) may not be amended without the prior written consent of each Granting Lender, all or any part of whose Advances are being funded by the SPC at the time of such amendment.

SECTION 9.08. Execution in Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery by telecopier or other form of electronic communication of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an original executed counterpart of this Agreement.

SECTION 9.09. No Liability of the Issuing Bank . The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank against presentation of documents that do not strictly comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) the Issuing Bank’s willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank’s willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

SECTION 9.10. Confidentiality . Neither any Agent nor any Lender Party shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) to such Agent’s or such Lender Party’s Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, Federal or foreign authority or examiner (including the National Association of Insurance Commissioners or any similar organization or quasi-regulatory authority) regulating such Lender Party, (d) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to the Loan Parties received by it from such Lender Party, (e) in connection with the exercise of any right or remedy under this Agreement or any other Loan Document or (f) to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty’s professional advisor (so long as such contractual counterparty or professional advisor agrees to be bound by the provisions of this Section 9.10).

SECTION 9.11. Release of Collateral and Guarantees . In the event that Parent or any Subsidiary sells, transfers or otherwise disposes of all or any portion of any of the Equity Interests, assets

or property owned by Parent or such Subsidiary in a transaction not prohibited by this Agreement, the Administrative Agent and the Collateral Agent shall promptly (and the Lenders hereby authorize and instruct the Administrative Agent and the Collateral Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower to release any Liens created by any Loan Document in respect of such Equity Interests, assets or property, including the release and satisfaction of record of any mortgage or deed of trust granted in connection herewith, and, in the case of a disposition of all or substantially all the Equity Interests or assets of any Subsidiary that is a Loan Party, to terminate such Subsidiary’s Obligations under the Guaranty and each other Loan Document. In addition, the Administrative Agent and the Collateral Agent will take such actions as are reasonably requested by the Borrower to terminate the Liens and security interests created by the Loan Documents when all the Obligations have been paid in full and all Letters of Credit and Commitments have been terminated. The Borrower agrees to pay all out-of-pocket expenses of the Administrative Agent and the Collateral Agent in connection with releases of Liens and Obligations under the Guaranty provided for in this Section.

SECTION 9.12. Non-Consenting Lenders . If, at any time, any Lender becomes a Non-Consenting Lender, then the Borrower may, at its sole cost and expense, on prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall be obligated to) assign pursuant to Section 9.07 all of its rights and obligations under this Agreement to one or more Eligible Assignees; provided that neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender or other such Person; provided further that such Non-Consenting Lender shall be entitled to receive the full outstanding principal amount of Advances so assigned, together with accrued interest and fees payable in respect of such Advances as of the date of such assignment.

SECTION 9.13. Affirmation of Subsidiary Guarantors. Each Subsidiary Guarantor hereby consents to the Restatement, and hereby confirms and agrees that the obligations of such Subsidiary Guarantor contained in Article VIII of the Restatement, or in any other Loan Documents to which it is a party are, and shall remain, in full force and effect and are hereby ratified and confirmed in all respects. Without limiting the generality of the foregoing, the Collateral Documents to which such Subsidiary Guarantor is a party and all of the Collateral described therein do, and shall continue to secure, payment of all of the Secured Obligations (in each case, as defined therein).

SECTION 9.14. Patriot Act Notice . Each Lender and each Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or such Agent, as applicable, to identify such Loan Party in accordance with the Patriot Act. The Borrower shall, and shall cause each of its Subsidiaries to, provide such information and take such actions as are reasonably requested by any Agent or any Lender in order to assist the Agents and the Lenders in maintaining compliance with the Patriot Act.

SECTION 9.15. Jurisdiction, Etc . (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the fullest extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect

any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction.

(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

SECTION 9.16. Governing Law . This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 9.17. WAIVER OF JURY TRIAL . EACH OF THE BORROWER, THE AGENTS AND THE LENDER PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES, THE LETTERS OF CREDIT OR THE ACTIONS OF ANY AGENT OR ANY LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

SCHEDULE I

COMMITMENTS AND APPLICABLE LENDING OFFICES

Revolving

Letter of

Domestic

Eurodollar

Term B

Credit

Swing Line

Lending

Name of Initial Lender

Commitment

Office

EXHIBIT 10.2

AMENDMENT NO. 2 TO
TRANSACTION AGREEMENT

THIS AMENDMENT NO. 2 TO TRANSACTION AGREEMENT (this “ Amendment ”), is made and entered into as of May 1, 2006, by and among KANSAS CITY SOUTHERN, a Delaware corporation (“ KCS ”), THE KANSAS CITY SOUTHERN RAILWAY COMPANY, a Missouri corporation (“ KCSR ”), NORFOLK SOUTHERN CORPORATION, a Virginia corporation (“ NS ”), and THE ALABAMA GREAT SOUTHERN RAILROAD COMPANY, an Alabama corporation and Subsidiary of NS (“ AGS ”), with reference to the following facts:

A. KCS, KCSR, NS and AGS are parties to that certain Transaction Agreement entered into as of December 1, 2005, as amended by Amendment No. 1 thereto, dated as of January 17, 2006 (the “ Transaction Agreement ”), pursuant to the terms of which the parties thereto have agreed to form a joint venture for purposes of owning and operating certain Assets.

B. Pursuant to Section 14.4 of the Transaction Agreement, the Transaction Agreement may be amended by a written agreement executed by all of the parties thereto.

C. The parties have determined that it is in the best interest of all parties that the Transaction Agreement and certain exhibits and annexes thereto be amended as set forth herein.

NOW, THEREFORE, with reference to the foregoing facts and in consideration of the mutual agreements and understanding set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Defined Terms .

Capitalized terms used herein but not otherwise defined herein shall have the meaning assigned to such terms in the Transaction Agreement.

2. Amendments .

2.1 Clause D of the Preamble to the Transaction Agreement is hereby amended and restated in its entirety as follows:

“In connection with the transactions contemplated by this Agreement and the Company Agreement, at the Closing, the parties will enter into, or will cause the Company or their respective Affiliates to enter into, as applicable: (i) an Operating Agreement substantially in the form attached hereto as Exhibit B (the “Operating Agreement”), (ii) an NSR Joint Use Agreement substantially in the form attached hereto as Exhibit C (the “NSR Joint Use Agreement”), (iii) a KCSR Joint Use Agreement substantially in the form attached hereto as Exhibit D (the “KCSR Joint Use Agreement”), (iv) a Western Haulage Agreement substantially in the form attached hereto as Exhibit E, (v) a KCSR Master Interchange Agreement substantially in the form attached hereto as Exhibit F, (vi) a Unified Assignment and Assumption Agreement substantially in the form attached

hereto as Exhibit G, (vii) the Vicksburg Assignment Agreement (as defined in Section 3.1(b)), (viii) the Jackson Assignment Agreement (as defined in Section 3.1(c)), (ix) one or more Notes (as defined in Section 4), (x) the Omnibus Bill of Sale attached hereto as Exhibit H, (xi) the Unified Liability Agreement attached hereto as Exhibit I, (xii) the Dallas Terminal Marketing Agreement attached hereto as Exhibit J, (xiii) NSR – KCSR Haulage Agreement (as defined in Section 3.1(c)), (xiv) the Access Agreement (as defined in Section 10.2(c)), (xv) the one or more Tower Licenses substantially in the form attached hereto as Exhibit U and (xvi) the Master Locomotive Agreements attached hereto as Exhibit V (collectively, the “Ancillary Agreements”).”

2.2 The definition of “KCSR Borrowing Capacity” contained in Section 1.1 of the Transaction Agreement is hereby amended by replacing the reference to “$300,000,000” contained therein with “$170,000,0000.”

2.3 The definition of “KCS Credit Agreement” contained in Section 1.1 of the Transaction Agreement is hereby amended by amending and restating such definition in its entirety to read as follows:

" KCS Credit Agreement ” shall mean the Amended and Restated Credit Agreement, dated as of April 28, 2006, among KCSR, KCS, the Subsidiary Guarantors (as defined therein), the Lenders (as defined therein), the Issuing Bank (as defined therein), the Swing Line Bank (as defined therein), and The Bank of Nova Scotia, as collateral and administrative agent, as may be amended, restated, replaced, supplemented, refinanced or otherwise modified from time to time.”

2.4 The definition of “Officer Certificate’s” contained in Section 1.1 of the Transaction Agreement is hereby amended by amending and restating such definition in its entirety to read as follows:

" Officer’s Certificate ” shall have the meaning given to that term in Section 2.1(a); provided , that when delivered pursuant to Section 2.1(b) it shall be as of the applicable Anniversary Date.”

2.5 The parties hereby acknowledge that, notwithstanding anything in Section 2.1(a) or Section 3.1(a) to the contrary, as of the Closing the NS Interest shall be 10% (subject to adjustment pursuant to Section 2.1(b)) and the KCS Interest shall be 90% (subject to adjustment pursuant to Section 2.1(b)).

2.6 Section 3.1(e) of the Transaction Agreement is hereby amended by amending and restating such section in its entirety to read as follows:

“The parties hereto acknowledge that some of the Owned Properties may include adjoining land, buildings, structures and other improvements that are not included in the Assets and that, to the extent that is the case, must be subdivided into separate lots. In such event, KCS shall promptly, and at KCS’ sole expense, take all steps necessary (including, without limitation, recording all required deeds, performing all required surveys and obtaining all necessary planning and zoning approvals) to subdivide and obtain a separate tax lot/parcel for the portion

of each such Owned Property that is included in the Assets, distinct from any adjoining land, buildings, structures or other improvements that are not included in the Assets.”

2.7 Section 4 of the Transaction Agreement is hereby amended by amending and restating such section in its entirety to read as follows:

“Promptly following the Closing, KCS and NS shall cause the Company to loan to KCS an amount not to exceed the Excess Proceeds and thereafter to KCS and NS from time to time upon such party’s request up to an amount equal to the Excess Capital less the aggregate amount of any outstanding loans made pursuant to this Section 4 (such loans, the “Partner Financing”) to be evidenced by one or more notes substantially in the form attached hereto as Exhibit N (collectively, the “Notes”); provided , however , that in no event shall (i) the aggregate amount of Partner Financing outstanding to KCS at any one time exceed $170,000,000 and (ii) the Company shall not provide any Partner Financing to KCS unless the Administrative Agent (as such term is defined in the KCS Credit Agreement) shall have approved in writing the terms of such loan as set forth in the Form of Note attached hereto as Exhibit N. All such Partner Financing shall first be made available to KCS and, if KCS elects not to borrow such amounts, subsequently to NS and shall in each case be structured so as to not violate, in the reasonable opinion of counsel to KCS, any provision of the Indentures or the KCS Credit Agreement.”

2.8 Section 8 of the Transaction Agreement is hereby amended by adding the following text to the end of such section:

“8.16 KCS Credit Agreement . As of the Closing Date, (i) the “Effective Date” under the KCS Credit Agreement has occurred, (ii) the Company is not a “Subsidiary” or a “Subsidiary Guarantor” for purposes thereof and (iii) the book value of the Assets is not more than $170,000,000.”

2.9 Section 10.5 of the Transaction Agreement is hereby amended by adding the following text to the end of such section:

“From and after the Closing, in the event it is discovered that any Lien (other than Permitted Liens or Liens arising after the Closing and resulting from the Company’s operation of its business) exists on any of the Assets, without prejudice to any rights or remedies which NS may have hereunder or under any of the Ancillary Agreements and without impact on any representation, warranty, covenant or obligation of KCS hereunder, KCS shall secure the release of such Lien and make the filings reasonably necessary to evidence such release as promptly as practicable. From and after the Closing, upon and after such time as (a) the Line or any portion thereof shall permanently cease to be subject to the Line Option, (b) the Line Option has expired, as to any portion of the Line, pursuant to the terms and conditions as set forth in Section 10.10 of the Transaction Agreement, or (c) the Terminal or any portion thereof shall permanently cease to be subject to the option set forth in the Dallas Terminal Marketing Agreement, in each case, in accordance with the terms thereof, NS shall, upon the written request of KCS and within thirty (30) days of its receipt of such notice, reasonably cooperate with KCS to make such filings, including but not limited to executing a satisfactory release in recordable form, as may be reasonably necessary to evidence such cessation or expiration.”

2.10 Section 11.2(g) of the Transaction Agreement is hereby deleted in its entirety.

2.11 The cover page to Annex A to the Transaction Agreement, the cover page to Appendix A to Exhibit B to the Transaction Agreement (Operating Agreement), the cover page to Appendix A to Exhibit F to the Transaction Agreement (Master Interchange Agreement) and the cover page to Exhibit A to Exhibit O to the Transaction Agreement (Temporary Access Agreement) are hereby amended by amending and restating such pages in their entirety to read as set forth on Exhibit A attached hereto.

2.12 Exhibit A to the Transaction Agreement (Form of Company Agreement) is hereby amended by amending and restating such Exhibit in its entirety to read as set forth on Exhibit B attached hereto.

2.13 The parties hereto acknowledge and agree that any payment by the Company for the reasons set forth in Section 2.4 of the Company Agreement shall not be taken into consideration in the calculation of the assumed operating ratio set forth in Section 7(a) of the Operating Agreement.

2.14 Pages 7, 8, 9, 10, 11A, 16, 17A and 20 of the “slic maps” attached as part of Annex A to the Transaction Agreement, as part of Appendix A to Exhibit B to the Transaction Agreement (Operating Agreement), as part of to Appendix A to Exhibit F to the Transaction Agreement (Master Interchange Agreement) and as part of Exhibit A to Exhibit O to the Transaction Agreement (Temporary Access Agreement) are hereby amended by amending and restating such pages 7, 8, 9, 10, 11A, 16, 17A and 20 in their entirety to read as set forth on Exhibit C attached hereto.

2.15 The Transaction Agreement is hereby amended by inserting the schedule of communications equipment included in the Assets attached hereto as Exhibit D as a new Annex D thereto.

2.16 Exhibit E to the Transaction Agreement (the Western Haulage Agreement) is hereby amended by amending and restating such Exhibit in its entirety to read as set forth on Exhibit E attached hereto.

2.17 Exhibit L to the Transaction Agreement (the Jackson Assignment Agreement) is hereby amended by amending and restating such Exhibit in its entirety to read as set forth on Exhibit F attached hereto.

2.18 Exhibit N to the Transaction Agreement (Form of Promissory Note) is hereby amended by amending and restating such Exhibit in its entirety to read as set forth on Exhibit G attached hereto.

2.19 Exhibit S to the Transaction Agreement (NS Legal Opinion) is hereby amended by amending and restating such Exhibit in its entirety to read as set forth on Exhibit H attached hereto.

2.20 The Transaction Agreement is hereby amended by inserting the form of Tower License attached as Exhibit I to this Amendment as a new Exhibit U thereto.

2.21 The Transaction Agreement is hereby amended by inserting the form of Master Locomotive Agreement attached as Exhibit J to this Amendment as a new Exhibit V thereto.

2.22 Schedule 3.1(d) to the Transaction Agreement and Exhibit A to the form of Unified Assignment and Assumption Agreement (attached as Exhibit G to the Transaction Agreement) are each hereby amended by adding the following additional agreements to the list of agreements to be assigned to the Company at Closing (except with respect the licenses referenced in clause (f) below which shall be assigned as soon as practicable after the Closing upon receipt of the consent of the applicable Governmental Authority or other regulatory body): (a) Right of Way Lease made and entered into March 23, 1989, by and between the Board of Trustees of the Vicksburg Warrant School District and The Kansas City Southern Railway Corporation (as successor in interest by merger with MidSouth Rail Corporation); (b) Railroad Industrial Lease Contract dated January 11, 1988, by and between Scott County Board of Education and The Kansas City Southern Railway Corporation (as successor in interest by merger with MidSouth Rail Corporation); (c) Commercial Lease Contract of Sixteenth Section Lands dated April 24, 1990, by and between Rankin County Board of Education and The Kansas City Southern Railway Corporation (as successor in interest by merger with MidSouth Rail Corporation); (d) the Corridor Agreement dated June 22, 2004 by and between The Kansas City Southern Railway Company and the Mississippi Transportation Commission solely with respect to those projects described on Exhibit A thereto along the Line; (e) the Corridor Agreement dated June 22, 2004 by and between The Kansas City Southern Railway Company and the Louisiana Department of Transportation solely with respect to those projects described on Exhibit A thereto along the Line; and (f) licenses for the frequencies used for train operations on the Line, including, but not limited to (i) dispatch of the Vicksburg sub district using AAR 86 and AAR 60 (161.400MHz and 161.010MHz), (ii) dispatch of the Meridian sub district using AAR 97 and AAR 29 (161.565MHz and 160.545MHz), (iii) EOT repeaters using AAR 404 and AAR 415 (452.9375MHz and 457.9375MHz) and (iv) data radio using ATCS channel pair # 5 (936.9375MHz and 897.9375MHz).

3. Limitation of Amendments .

The amendments set forth in Section 2 above are effective for the purposes set forth herein and will be limited precisely as written and will not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of the Transaction Agreement, (b) otherwise prejudice any right or remedy that any party to the Transaction Agreement may now have or may have in the future under or on in connection with the Transaction Agreement, or (c) be a consent to any future amendment, waiver or modification of any other term or condition of the Transaction Agreement.

4. Entire Agreement .

This Amendment, together with the Transaction Agreement, the Company Agreement, the Ancillary Agreements and the Confidentiality Agreement, in each case including any attached

exhibits and schedules, contain the sole and entire agreement and understanding of the parties with respect to the entire subject matter contained herein and therein, and any and all prior discussions, negotiations, commitments and understandings, whether oral or otherwise, related to the subject matter contained herein and therein are hereby merged herein and therein. Nothing in this amendment, express or implied, is intended to confer upon any Person other than the parties hereto any rights or remedies under or by way of this Amendment.

5. Assignment .

No party may assign its rights or obligations under this Amendment, and any attempted or purported assignment or any delegation of any party’s duties or obligations arising under this Amendment to any third party or entity shall be deemed to be null and void, and shall constitute a material breach by such party of its duties and obligations under this Amendment; provided that NS may assign its rights to any wholly-owned Subsidiary of NS.

6. Governing Law .

THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE VALIDITY OF THIS AMENDMENT, THE CONSTRUCTION OF ITS TERMS AND THE INTERPRETATION OF THE RIGHTS AND DUTIES ARISING HEREUNDER.

7. Severability .

Whenever possible each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Amendment shall be or become prohibited or invalid under applicable Law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Amendment.

8. Captions .

The various captions of this Amendment are for reference only and shall not be considered or referred to in resolving questions of interpretation of this Amendment.

9. Counterparts .

This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

10. Judicial Interpretation .

Should any provision of this Amendment require judicial interpretation, it is agreed that a court or other tribunal, as described in Section 14.13 of the Transaction Agreement, interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any Person by reason of the rule of construction that a document is to be construed more strictly against the Person who itself or through its agent prepared the same, it being agreed that all parties have participated in the preparation of this Amendment.

11. Dispute Resolution .

Each of the parties hereto stipulates and agrees that the dispute resolution procedures set forth in Section 14.13 of the Transaction Agreement shall apply to any dispute, controversy or claim arising out of or relating to this Amendment or the breach, termination or validity thereof.

[Signature Page Follows]

IN WITNESS WHEREOF , the parties have executed this Amendment No. 2 to Transaction Agreement as of the date first above written.


		KANSAS CITY SOUTHERN

		By:		/s/ Larry M. Lawrence

				Name: Larry M. Lawrence
				Title: Senior Vice President and Assistant to the Chairman

		THE KANSAS CITY SOUTHERN RAILWAY COMPANY

		By:		/s/ Robert B. Terry

				Name: Robert B. Terry
				Title: Senior Vice President and General Counsel

		NORFOLK SOUTHERN CORPORATION

		By:		/s/ Kathryn B. McQuade

				Name: Kathryn B. McQuade
				Title: Executive Vice President Planning and Chief Information Officer

		THE ALABAMA GREAT SOUTHERN RAILROAD COMPANY

		By:		/s/ Kathryn B. McQuade

				Name: Kathryn B. McQuade
				Title: Vice President

EXHIBIT A

COVER PAGE TO ANNEX A OF TRANSACTION AGREEMENT / COVER PAGE TO
ANNEX A TO EXHIBIT B TO THE TRANSACTION AGREEMENT (OPERATING
AGREEMENT)

General Guidelines — Asset Identification
KCSR / NSR Joint Venture

KCS will contribute the following assets to the Joint Venture subject to the following restrictions:

The single main line track highlighted in “green” on the attached SLIC charts, extending between Meridian, MS., at Milepost 0.0, and Shreveport, LA., at Milepost V — 169.85, and on the attached track charts the right of way extending from the center point of the track to the prevailing right of way line for that location on either side of the track, including locations highlighted in “blue” that are beyond the prevailing right of way line.

Sidings connected to and adjacent to the single main line track that are within the prevailing right of way line on either side of the track and whose primary use is to meet and pass trains will be included. Sidings can generally be identified on the Track Charts by the Control Point (CP) designation at each end of the siding. They may also be identified by their SLIC number, and are highlighted in “green” on the SLIC Charts)

All KCS owned tracks including but not limited to yard (see additional explanation below), branch line, industrial lead, intermodal or strip, interchange, mechanical, car repair or rip, and storage tracks; and all industry and privately owned tracks or leased branch lines that connect to the single main line are excluded. The Joint Venture will be responsible for maintaining to the clearance point any switches connecting such tracks to the single main line track. The attached SLIC charts and the MCS Track Identification Table below will be used to determine the status of each track along the route.

Where the single main line track runs through a yard only the single main line track will be included (Highlighted in “green” on the attached SLIC charts). Through yards the right of way line for the single main line track will be defined as the imaginary line running between the clearance points of switches connecting to the single main line track.


MCS Track Identification Table
1 – 199		Yard tracks
200 – 299		Intermodal / Strip tracks
300 – 399		Interchange tracks
400 – 499		Mechanical / Rip tracks
500 – 599		Main line / Main tracks
600 – 699		Sidings


700 – 799		Industry tracks
800 – 899		Storage tracks

The communications equipment included in the Assets to be contributed by KCS to the Company pursuant to the terms and conditions hereof is set forth in Annex D hereto.

EXHIBIT B

FORM OF COMPANY AGREEMENT

[See Attached]

EXHIBIT C

REVISED SLIC MAP PAGES 7, 8, 9, 10, 11A, 16, 17A AND 20

EXHIBIT D

ANNEX D TO TRANSACTION AGREEMENT

The following communications sites in their entirety, including property (whether or not on the right-of-way), tower, equipment shelter, dispatch radios, data radios, EOT repeaters, antenna systems, and appurtenances:

Arcadia, LA
Ruston, LA
Calhoun, LA
Bee Bayou, LA
Tallulah, LA
Mt. Alban, MS
Bolton, MS
Pelahatchie, MS
Forest, MS

Equipment at the following sites as designated below:


			KCS general office in Shreveport, LA:
				Dispatch radio base and antenna system necessary for dispatching and operation of traffic along the Line

			KCS communications site in Ringgold, LA:
				Dispatch radio base and antenna system necessary for dispatching and operation of traffic along the Line

			KCS yard in Minden, LA:
				Dispatch radio base and antenna system necessary for dispatching and operation of traffic along the Line
				Data radio Base Communications Package and antenna system necessary for dispatching and operation of traffic along the Line
				EOT repeater and antenna system necessary for dispatching and operation of traffic along the Line

			Ouachita River bridge in Monroe, LA:
				Local railroad radio and antenna necessary for dispatching and operation of traffic along the Line
				Marine radio and antenna necessary for dispatching and operation of traffic along the Line


			KCS yard in Monroe, LA:
			Dispatch radio base and antenna system necessary for dispatching and operation of traffic along the Line
				Data radio Base Communications Package and antenna system necessary for dispatching and operation of traffic along the Line
				EOT repeater and antenna system necessary for dispatching and operation of traffic along the Line

			KCS High Oak office in Jackson (Pearl), MS:
				Dispatch radio base and antenna system necessary for dispatching and operation of traffic along the Line
				Data radio Base Communications Package and antenna system necessary for dispatching and operation of traffic along the Line

			KCS yard in Newton, MS:
				Dispatch radio base and antenna system necessary for dispatching and operation of traffic along the Line
				Data radio Base Communications Package and antenna system necessary for dispatching and operation of traffic along the Line

			KCS TV Hill communications site in Meridian, MS:
				Dispatch radio base and antenna system necessary for dispatching and operation of traffic along the Line
				Data radio Base Communications Package and antenna system necessary for dispatching and operation of traffic along the Line

EXHIBIT E

FORM OF WESTERN HAULAGE AGREEMENT

[See attached]

EXHIBIT F

FORM OF JACKSON ASSIGNMENT AGREEMENT

[See attached]

EXHIBIT G

FORM OF PROMISSORY NOTE

[See attached]

EXHIBIT H

FORM OF NS LEGAL OPINION

[See attached]

EXHIBIT I

FORM OF TOWER LICENSE

[See attached]

EXHIBIT J

FORM OF MASTER LOCOMOTIVE AGREEMENT

[See attached]

Exhibit 10.3

LIMITED LIABILITY

COMPANY AGREEMENT

MERIDIAN SPEEDWAY, LLC

BY AND BETWEEN

THE ALABAMA GREAT SOUTHERN RAILROAD COMPANY

AND

KANSAS CITY SOUTHERN

AS OF

MAY 1, 2006

TABLE OF CONTENTS


		PAGE
SECTION 1 THE COMPANY			17

1.1	Formation and Continuation		17
1.2	Name		17
1.3	Purpose; Powers		17
1.4	Principal Place of Business, Chief Executive Office and Registered Office		18
1.5	Term		18
1.6	Filings; Agent for Service of Process		18
1.7	Title to Property		19
1.8	Payments of Individual Obligations		19

SECTION 2 MEMBERS’ CAPITAL CONTRIBUTIONS			19

2.1	Initial Capital Contributions		19
2.2	Initial Capital Accounts		19
2.3	Additional NS Member Contributions		20
2.4	Additional Member Contributions		20
2.5	Withdrawal and Return of Capital		20

SECTION 3 ALLOCATIONS			21

3.1	Profits		21
3.2	Losses		21
3.3	Special Allocations		21
3.4	Loss Limitation		23
3.5	Other Allocation Rules		24
3.6	Tax Allocations; Code Section 704(c)		24
3.7	Revaluation of Capital Accounts		25

SECTION 4 DISTRIBUTIONS			25

4.1	Distributions		25
4.2	Priority Distributions		25
4.3	Amounts Withheld		25
4.4	Limitations on Distributions		26
4.5	Distributions and Allocations in Respect of a Transferred Membership Interest		26
4.6	Special Distributions		26
4.7	Deemed Distributions		26

SECTION 5 MANAGEMENT			27

5.1	Manner of Operations		27
5.2	Management Committee		27


		PAGE
5.3	Committees of the Management Committee		28
5.4	Meetings of Management Committee		28
5.5	Action by Unanimous Written Consent		29
5.6	Major Decisions		30
5.7	Budget and Business Plan; Investment Policies		30
5.8	Officers		30
5.9	Exculpation and Indemnification		30
5.10	Fiduciary Duty; Exculpation		32
5.11	Interparty Matters		32
5.12	Capacity Improvement Projects		32
5.13	Construction of the Jackson Flyover		33

SECTION 6 ROLE OF MEMBERS			33

6.1	Rights or Powers		33
6.2	Voting Rights		33
6.3	Meetings of the Members		33
6.4	Required Member Consents		35
6.5	Member Compensation		35
6.6	Members’ Liability		35
6.7	Partition		35
6.8	Transactions Between a Member and the Company		36
6.9	Other Instruments		36
6.10	Advise of Changes		36

SECTION 7 ACCOUNTING BOOKS AND RECORDS			36

7.1	Accounting Books and Records		36
7.2	Reports		37
7.3	Tax Matters		38

SECTION 8 AMENDMENTS			40

8.1	Amendments		40

SECTION 9 TRANSFERS AND CALL RIGHT			40

9.1	Restrictions on Transfers		40
9.2	Permitted Transfers		40
9.3	Conditions to Permitted Transfers		41
9.4	Prohibited Transfers		41
9.5	Rights of Unadmitted Assignees		42
9.6	Admission of New and Substituted Members		42
9.7	Representations Regarding Transfers; Legend		43
9.8	Line Option Call Right		44


		PAGE
SECTION 10 EVENTS OF DEFAULT			44

10.1	Events of Default		44
10.2	Remedies Upon an Event of Default		45

SECTION 11 DISSOLUTION AND WINDING UP			46

11.1	Dissolution Events		46
11.2	Winding Up		46
11.3	Compliance With Certain Requirements of Regulations; Deficit Capital Accounts		47
11.4	Distributions in Kind		47
11.5	Rights of Members		48
11.6	Notice of Dissolution/Termination		48
11.7	Allocations During Period of Liquidation		48
11.8	Character of Liquidating Distributions		48
11.9	The Liquidator		48

SECTION 12 MISCELLANEOUS			49

12.1	Notices		49
12.2	Certificates		50
12.3	Binding Effect		51
12.4	Time		51
12.5	Headings		51
12.6	Prior Agreements		51
12.7	Severability		51
12.8	Incorporation by Reference		51
12.9	Variation of Terms		51
12.10	Counterpart Execution		51
12.11	Third Party Beneficiaries		51
12.12	GOVERNING LAW		52
12.13	Submission to Jurisdiction		52
12.14	Dispute Resolution		52
12.15	Confidentiality		54

iii

LIMITED LIABILITY COMPANY AGREEMENT
OF
MERIDIAN SPEEDWAY, LLC

This Limited Liability Company Agreement (this “Agreement”) of Meridian Speedway, 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 May 1, 2006, by and between The Alabama Great Southern Railroad Company, an Alabama corporation and a wholly-owned subsidiary of NSR (as defined herein) (such corporation or any Permitted Transferee thereof, the “NS Member”), and Kansas City Southern, a Delaware corporation (“KCS” and, together with any Permitted Transferee thereof, the “KCS Member”), as the Members pursuant to the provisions of the Act.

WHEREAS, KCS, The Kansas City Southern Railway Company, a Missouri corporation and a wholly-owned subsidiary of KCS (“KCSR”), the NS Member and Norfolk Southern Corporation, a Virginia corporation and the ultimate parent of the NS Member (the “NS Parent”) have entered into a Transaction Agreement, dated as of December 1, 2005, as amended to date (the “Transaction Agreement”), which provides, among other things, for the KCS Member to contribute the railroad line between Meridian, Mississippi and Shreveport, Louisiana (the “Line”) and certain other related assets (together with the Line, the “Assets”), in each case described in Schedule 1.1 to the Transaction Agreement, to the Company and for the NS Parent to cause the NS Member to make capital contributions to the Company as determined in accordance with Schedule 2.1(a) to 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) .

“Accumulated Preference” means, with respect to a Member with a Preferred Return, such Member’s Preferred Return Amount accrued in the aggregate.

“Act” shall have the meaning set forth in the preamble.

“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 Preamble.

“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 KPMG, until changed either (i) by mutual agreement of the parties or (ii) upon receipt by the Company of a written request of the NS Member for the replacement of the initial Auditors. Successor Auditors shall be appointed by the Management Committee in accordance with Section 5.6 .

“Bankruptcy” means, with respect to any Person, a Voluntary Bankruptcy or an Involuntary Bankruptcy (as each such term is defined herein).

“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 condition” of any Person means the financial condition, results of operations, business or properties of such Person.

“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) .

" Capacity Improvement Project ” means a construction project effectuated as described in Section 5.12 .

“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 Improvement Agreement” means any agreement entered into between the Company and the KCS Member whereby the KCS Member or its subsidiaries will effect the Capital Projects on behalf of the Company.

“Capital Project Process” shall have the meaning set forth in Section 5.3(b) .

“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 or Business Plan.

“ Capital Recovery Book Items ” means (i) Depreciation attributable to the Assets and attributable to the first $260,000,000 of Capital Projects to the extent such $260,000,000 is not allowed as a deductible expense for federal income-tax purposes, and (ii) expenses attributable to the first $260,000,000 of Capital Projects allowed as a deductible expense for federal income-tax purposes. Notwithstanding the foregoing, the $260,000,000 amount shall be adjusted downward for any Pre-Closing Capital Expenditures for which the KCS Member is reimbursed by the Company pursuant to Section 2.5(b) and for which the KCS Member, not the Company, is allowed to claim a deduction on its federal income tax return(s).

“ Capital Recovery Tax Deductions ” means expenses, depreciation, amortization, and other cost recovery deductions attributable solely to Capital Projects and Assets that are allowed as a deduction for federal income-tax purposes.

“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 Jackson Trackage Rights ” means the trackage rights granted with respect to the approximately four-tenths of a mile section of track in Jackson, Mississippi pursuant to the trackage rights agreement between Midsouth Rail Corporation and Illinois Central Gulf Railroad Company, dated March 26, 1986, as supplemented and amended through the date of the Transaction Agreement.

“Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

“Committee Representative” at any time means each of the individuals then appointed by the Members to and serving as a member of the Management Committee, or their alternates, as provided in Section 5 .

“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).

“Dallas Intermodal Terminal Traffic” means all domestic intermodal containers or trailers with an origin and destination in the United States, with a lift or drop at the KCS Member’s Dallas Intermodal Terminal, that moves over the Line and over KCSR’s tracks between Shreveport and the KCS Member’s Dallas Intermodal Terminal, and that originates or terminates at or east of Meridian, and that originates or terminates at or west of the Dallas / Ft. Worth, TX. Standard Metropolitan Statistical Area (SMSA) as published by the Office of Management and Budget (OMB).

“Dallas Terminal Marketing Agreement ” means the Marketing Agreement, dated the date hereof, by and among KCSR and NSR.

“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 12.13 .

“Deemed Distribution Amount” shall have the meaning set forth in Section 4.7 .

“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 12.14 .

“Dissolution Event” shall have the meaning set forth in Section 11.1 .

“Exchange Act” means the Securities Exchange Act of 1934.

“Excess Proceeds” shall have the meaning given to that term in the Transaction Agreement.

“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 KCSR, 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.

“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.

“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 .

“Indentures” means, collectively, the Indenture, dated as of September 27, 2000, among KCSR, KCS, certain subsidiaries of KCS and The Bank of New York, as trustee, governing the terms of KCS’ 9 ¹ / 2 % Senior Notes due 2008 and the Indenture, dated as of June 12, 2002, among KCSR, KCS, certain subsidiaries of KCS and U.S. Bank National Association, as trustee, governing the terms of KCS’ 7 ¹ / 2 % Senior Notes due 2009, as they may be amended from time to time.

“Investment Policies” shall have the meaning set forth in Section 5.7(b) .

“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.

“Issuance Items” shall have the meaning set forth in Section 3.3(j) .

“Items” shall have the meaning set forth in Section 3.4 .

“Jackson Assignment Agreement” means the Jackson Assignment Agreement, dated the date hereof, by and between KCSR and the Company.

“Jackson Flyover” shall have the meaning set forth in the Transaction Agreement.

“JV Transaction Agreements” means, collectively, (i) the Transaction Agreement, (ii) the Operating Agreement, (iii) the NSR Joint Use Agreement, (iv) the Western Haulage Agreement (v) the KCSR Joint Use Agreement, (vi) the KCSR Master Interchange Agreement, (vii) the Unified Assignment and Assumption Agreement, (viii) the Omnibus Bill of Sale, (ix) the Unified Liability Agreement, (x) the Dallas Terminal Marketing Agreement, (xi) one or more Notes, (xii) the Jackson Assignment Agreement, (xiii) the Vicksburg Assignment Agreement, (xiv) the Access Agreement, (xv) the NSR-KCSR Haulage Agreement, (xvi) one or more Tower Licenses and (xvii) the Master Locomotive Agreement.

“KCS” shall have the meaning set forth in the Preamble.

“KCS Member” shall have the meaning set forth in the Preamble.

“KCSR” shall have the meaning set forth in the Preamble.

“KCSR Joint Use Agreement” shall mean the The Kansas City Southern Railway Company — Meridian Speedway, LLC Joint Use Agreement, dated as of the date hereof, by and among NSR, KCSR and the Company.

“KCSR Master Interchange Agreement” means the Master Interchange Agreement, dated the date hereof, by and between KCSR and the Company.

“Line” shall have the meaning set forth in the Preamble.

“Line Option Call Agreement” shall have the meaning set forth in Section 9.8(b) .

“Line Option Call Closing” shall have the meaning set forth in Section 9.8(b) .

“Line Option Call Closing Date” shall have the meaning set forth in Section 9.8(b) .

“Line Option Call Right” shall have the meaning set forth in Section 9.8 .

“Liquidation Period” shall have the meaning set forth in Section 11.7 .

“Liquidator” shall have the meaning set forth in Section 11.9(a) .

“Local Train Starts” shall have the meaning set forth in Section 5.12(a) .

“Losses” shall have the meaning set forth in the definition of “Profits.”

“Major Decisions” means taking any of the following actions, notwithstanding any other provisions of the Transaction Agreement or this Agreement:

(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; provided, that, prior to the Maturity Date, the foregoing shall not apply to any Permitted Asset Transfer;

(iv) Entering into any transactions with any Member or any Affiliate of any Member (including any Capital Improvement Agreements), other than the distributions contemplated in Section 2.5(b) or Section 4 or pursuant to the JV Transaction Agreements; provided, that, prior to the Maturity Date, the foregoing shall not apply to any Permitted Asset Transfer or any Permitted Indebtedness;

(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, that no Committee Representative designated by the NS Member shall unreasonably withhold such Committee Representative’s approval of any changes in, amendments to or deviations from, the Budget (including any Rollover Budget) or the Business Plan proposed by the KCS Member in respect of any agreed Capital Project in light of then-current business conditions and traffic patterns relating to the Line and in the event the Management Committee cannot agree on (A) a Capital Project, the Management Committee shall accept the recommendation of the Capital Project Committee, made in accordance with the Capital Project Process, with respect to such Capital Project or (B) the Budget, 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) After the Maturity Date, 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 and (B) purchase money financing of assets used in the conduct of the business of the Company; provided, that, prior to the Maturity Date, the foregoing shall not apply to any Permitted Indebtedness;

(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 (other than to effect a Permitted Transfer);

(xiv) Approving any changes in the Percentage Interests of the Members other than to effect a Permitted Transfer, to approve the redemption of the Preferred Return or as contemplated by Section 2.3(a) ;

(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) 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);

(xvii) Approving the formation and composition of any committees of the Management Committee 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 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);

(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 (A) to move NS Traffic or Dallas Intermodal Terminal Traffic or (B) that allow a third party access over the Line, other than rights pursuant to agreements that meet the standards set forth in Exhibit A attached hereto;

(xxii) Accepting an active common carrier obligation or moving rail traffic in its own name and on its own behalf; or

(xxiii) 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.

“Management Committee” shall have the meaning set forth in Section 5.2(a) .

“Master Locomotive Agreement” shall mean the Master Locomotive Agreement, dated as of the date hereof, by and among NSR, KCSR and the Company.

“Maturity Date” means the earlier to occur of (i) the retirement of the KCS Member’s 9 ¹ / 2 % Senior Notes due 2009 and (ii) the date on which Section 4.05 (or any equivalent provision of the Indentures) of both of the Indentures is no longer applicable to the Company.

“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.

“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.

“New Overhead Train Starts” shall have the meaning set forth in Section 5.12(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.

“Non-Sponsoring Member” shall have the meaning set forth in Section 5.12(d) .

“Note” means any note evidencing indebtedness of the KCS Member or the NS Member to the Company entered into in accordance with Section 4 of the Transaction Agreement.

“Notice” shall have the meaning set forth in Section 12.14 .

“NS Member” shall have the meaning set forth in the Preamble.

“NS Parent” shall have the meaning set forth in the Preamble.

“NS Traffic” means all intermodal traffic moving on the Line that (a) originates or terminates in the United States at or east of Meridian, Mississippi and enters or exits the Line at Meridian, Mississippi, (b) originates or terminates in the United States west of Fort Worth, Texas (including intermodal traffic originating by steamship line at a port along the west coast of the United States) and enters or exits the Line at Shreveport, Louisiana and (c) does not consist of traffic originating or terminating at any station on the KCSR system (including any station where KCSR or the Texas Mexican Railway Company have trackage rights or access via reciprocal switch), as it exists on the date of the Transaction Agreement.

“NSR” means Norfolk Southern Railway Company, a Virginia corporation and an operating subsidiary of the NS Parent.

“NSR Joint Use Agreement” shall mean the Norfolk Southern Railway Company — Meridian Speedway, LLC Joint Use Agreement, dated as of the date hereof, by and between NSR, KCSR and the Company.

“NSR-KCSR Haulage Agreement” shall mean the Haulage Agreement, dated as of the date hereof, by and between NSR and KCSR.

“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.

“Operating Agreement” shall mean the Operating Agreement, dated as of the date hereof, by and between KCSR and the Company.

“Omnibus Bill of Sale ” means the Bill of Sale, dated the date hereof, by KCS and KCSR to the Company.

“Percentage Interest” means, with respect to any Member as of any date, the Percentage Interest opposite the name of each Member set forth on Exhibit C to this Agreement, which shall be maintained by the Company and updated from time to time as appropriate after the date hereof, including on the contribution by the NS Member of the amount described in Section 2.1(b) of the Transaction Agreement.

“Permitted Asset Transfer” means any non-cash transfer of the property or assets of the Company to the KCS Member or any Restricted Subsidiary (as such term is defined in the Indentures) thereof.

“Permitted Indebtedness” means any loans or advances by the Company to the KCS Member or any Restricted Subsidiary (as such term is defined in the Indentures) thereof.

“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.

“Pre-Closing Capital Expenditures” means those expenditures for Proposed Capital Projects listed in Exhibit D and made by the KCS Member prior to the Closing Date in accordance with Section 2.5(b).

“Preferred Return” means, with respect to the initial Capital Contribution made by the KCS Member, a preferential interest in the Company granted to such Member commencing on the date of this Agreement, having an initial agreed value equal to the amount of Excess Proceeds and entitling such member to certain rights as provided under the Agreement. The initial agreed value and commencement date of any other Preferred Return granted to a Member shall be as unanimously agreed by the Members at or prior to the time such Member shall make a Capital Contribution in exchange for such Preferred Return. A Member’s Preferred Return shall be considered outstanding so long as such Member’s Preferred Return Amount is greater than zero.

“Preferred Return Amount” means, with respect to the Preferred Return in connection with the Initial Capital Contribution made by the KCS Member, an amount computed at an interest rate equal to the sum of the 10-year U.S. Treasury Bond rate plus 50 basis points, compounded annually, and determined as of the date of the initial Capital Contribution made by the KCS Member (in all other cases determined as of the date the Company grants a Preferred Return to a Member) multiplied by the Preferred Return.

“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 four (4) year period commencing on the date hereof, as identified more specifically in Exhibit B.

“Regulations” means the Treasury Regulations, including temporary and proposed Regulations, promulgated under the Code, as such regulations are amended from time to time.

“Review Information” shall have the meaning set forth in Section 7.2(c)(i) .

“Review Period” shall have the meaning set forth in Section 7.2(c)(i) .

“Rollover Budget” shall have the meaning set forth in Section 5.7(a) .

“Rules” shall have the meaning set forth in Section 12.14 .

“Securities Act” means the Securities Act of 1933.

“Sponsoring Member” shall have the meaning set forth in Section 5.12(a) .

“Tax Matters Partner” shall have the meaning set forth in Section 7.3(d) .

“Tower License Agreement” shall mean a Tower License Agreement substantially in the form attached as Exhibit U to the Transaction Agreement.

“Transaction Agreement” shall have the meaning set forth in the preamble.

“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.

“Unified Assignment and Assumption Agreement” means the Assignment and Assumption Agreement, dated the date hereof, by and between KCS, KCSR and the Company.

“Unified Liability Agreement ” means the Unified Liability Agreement, dated the date hereof, by and among NSR, KCSR and the Company.

“Vicksburg Assignment Agreement” means the Vicksburg Assignment Agreement, dated the date hereof, by and between KCSR and the Company.

“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

“Voting Securities” shall mean any securities of any Person which vote generally in the election of directors.

“Western Haulage Agreement” means the Western Haulage Agreement, dated as of the date hereof, by and between NSR and KCSR.

“Wholly-Owned Affiliate” of any Person means an Affiliate of such Person:

(a) 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

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 Meridian Speedway, 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. § 1010(5) that performs transportation services over the Line as agent for and for the account of a Freight Rail Common Carrier.

(ii) Any rail transportation services shall at all times remain in the waybill, car hire and revenue accounts of a Freight Rail Common Carrier.

(iii) The Company shall not participate or appear in any rates, routes or divisions relating to any freight traffic whatsoever to, from and over the Line, and shall not be entitled to or responsible for any freight charges relating to such freight traffic. The Company shall not quote or establish any rate or service terms applicable to freight transportation services to, from or over the Line, enter into any transportation contracts with any persons, provide for freight transportation services to, from or over the Line, or undertake to perform any for-hire transportation services directly, in its own name or for its own account, for any person other than as provided for in the KCSR Joint Use Agreement and the NSR Joint Use Agreement.

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 427 West 12th Street, Kansas City, Missouri 64105 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, the NS Member has made the initial Capital Contribution of cash described in Section 2.1(a) of the Transaction Agreement.

(b) Pursuant to the Transaction Agreement and the Omnibus Bill of Sale, and simultaneously with the execution of this Agreement, the KCS Member has (i) made an initial Capital Contribution of the Assets as described in Section 3.1(a) of the Transaction Agreement and (ii) contributed or caused to be contributed to the Company, and the Company has assumed, the Assumed Liabilities (as such term is defined in 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 Capital Accounts of the Members as of the date hereof are as reflected in Exhibit 2.2.

2.3 Additional NS Member Contributions . The NS Member shall make the additional capital contributions to the Company described in Section 2.1 of the Transaction Agreement.

2.4 Additional Member Contributions

After the Closing Date, if any Person (other than any Member or any Affiliate of any Member) submits a challenge or appeal to either the STB or any court with jurisdiction regarding the STB’s review of the environmental impact of the formation and operation of the Company, or otherwise seeks additional environmental review and/or conditions on the formation or operation of the Company, notwithstanding any restrictions in any contract applicable to any Member (including the KCS Credit Agreement (as such term is defined in the Transaction Agreement)) to the contrary, each Member shall make an additional cash capital contribution to the Company to reimburse the Company for the costs incurred by it to (a) defend or settle such challenge or appeal and (b) implement all required remedial environmental measures. Each Member’s additional cash capital contribution shall be an amount equal to (y) the costs incurred by the Company with respect to items (a) and (b) in the foregoing sentence (including attorneys’ fees and expenses) multiplied by (z) such Member’s Percentage Interest at the time of such contribution.

2.5 Withdrawal and Return of Capital . (a) Except as otherwise provided in this Section 2.5 , Section 4 or Section 11 , 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 herein.

(b) On the Closing Date, the Company shall reimburse the KCS Member for (i) capital expenditures other than Pre-Closing Capital Expenditures, in an amount up to $40,000,000 in the aggregate, that the KCS Member made to the Assets within the two-year period ending on the Closing Date in accordance with Section 2.2 of the Transaction Agreement and (ii) Pre-Closing Capital Expenditures in respect of Proposed Capital Projects listed in Exhibit D hereto in an amount up to $20,000,000 in the aggregate made by the KCS Member prior to the Closing Date as set forth in this Agreement, the Budget for the first Fiscal Year, the Business Plan for the first Fiscal Year, and Section 2.2 of the Transaction Agreement.

(c) Within 30 days of the receipt of a written notice from a Member holding a Preferred Return that has been outstanding for at least 84 months but not more than 96 months (as of the date of such distribution), which notice expressly invokes the Member’s option pursuant to this Section 2.5(c) , the Company shall make a distribution to such Member in an amount equal to (i) such Member’s Preferred Return Amount as of the date of the distribution; plus (ii) the amount by which such Member’s Accumulated Preference as of the date of the distribution exceeds any amount distributed to such Member pursuant to Section 4.2(a) of this Agreement prior to the date of the distribution. At the Company’s discretion, such distribution may be in cash or property in kind. If made, such distribution shall be treated as a preferred return pursuant to Section 1.707-4 of the Regulations. Upon receipt of the full amount of the

distribution under this Section 2.5(c) , the Member shall have no further rights to receive any distribution under Section 4.2(a) .

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 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 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 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) Preferred Return Allocation . Gross income shall be allocated to any Member with a Preferred Return in an amount equal to (i) the cumulative amount of Net Cash Flow distributed to such Member under Section 4.2(a) ; plus (ii) any amounts distributed to such Member under Section 2.5(c) that are attributable to the amount by which such Member’s Accumulated Preference exceeded the amounts distributed under Section 4.2(a) ; minus (iii) the cumulative amount of gross income previously allocated to such Member under this Section 3.3(g) .

(h) Net Cash Flow Allocation . Gross income shall be allocated to each Member in an amount equal to (i) the cumulative amount of Net Cash Flow distributed to such Member under Section 4.2(b) ; minus (ii) the cumulative amount of gross income previously allocated to such Member under this Section 3.3(h) .

(i) 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.

(j) 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.

(k) 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.

(l) Capital Recovery Book Items . The Capital Recovery Book Items shall be specially allocated to the KCS Member and the NS Member in a manner that the resulting allocation of Capital Recovery Tax Deductions, to the extent possible, will be fifty (50) percent to the KCS Member and fifty (50) percent to the NS Member (taking into account the allocations to the Members under Section 3.6 ). Notwithstanding the prior sentence, if the KCS Member, not the Company, is allowed to claim a deduction on its federal income tax return(s) for any Pre-Closing Capital Expenditures, then the fifty (50) — fifty (50) allocation of Capital Recovery Book Items shall be adjusted in a manner that results in a fifty (50) — fifty (50) allocation between the KCS Member and the NS Member of the sum of the Capital Recovery Book Items and the deductions the KCS Member is allowed to claim relating to Pre-Closing Capital Expenditures with the NS Member receiving a priority allocation of Capital Recovery Book Items until it is allocated an amount of Capital Recovery Book Items equal to the amount of Pre-Closing Capital Expenditures for which the KCS Member, not the Company, is allowed to claim a deduction on its federal income tax return(s). Any book gain arising from the taxable sale or disposition of a property which generated Capital Recovery Book Items shall first be specifically allocated to the KCS Member and the NS Member in a manner that restores the allocation of Capital Recovery Book Items with respect to such property (taking into account the allocations to the Members under Section 3.6 ), and shall then be allocated in proportion to each Member’s Percentage Interest.

3.4 Loss Limitation . Losses allocated pursuant to Section 3.2 , together with Capital Recovery Book Items allocated pursuant to Section 3.3(l) (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 Section 3.3(l) , 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 unanimous agreement of the Members 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.

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).

In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (b) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss, deduction and credit with respect to such asset shall take account of any

variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder.

Any elections or other decisions relating to such allocations shall be made by the Management Committee in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 3.6 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provisions of this Agreement.

3.7 Revaluation of Capital Accounts . Capital Accounts shall not be revalued in connection with the Capital Contributions described in Sections 2.3 and 2.4 .

SECTION 4
DISTRIBUTIONS

4.1 Distributions . Except as otherwise provided in this Section 4 or Section 11 , and after distribution of the cumulative amounts contemplated by Section 4.2 of this Agreement, remaining Net Cash Flow, if any, shall be distributed upon the approval of the Management Committee. Any distribution of Net Cash Flow (or otherwise) by the Company not otherwise governed by Section 4.2 , Section 4.5 , Section 4.6 , Section 4.7 or Section 11.2(c) shall be distributed pro rata to the Members in accordance with each Member’s Percentage Interest.

4.2 Priority Distributions . 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 as follows:

(a) First, to any Member holding a Preferred Return in an amount equal to the Member’s Accumulated Preference, less any amount previously distributed to such Member pursuant to this Section 4.2(a) . Such distribution shall be treated as a preferred return pursuant to Section 1.707-4 of the Regulations.

(b) Second, any remaining Net Cash Flow shall be distributed pro rata to the Members in accordance with each Member’s 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 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 last day of such Fiscal Year.

4.6 Special Distributions.

(a) Notwithstanding anything to the contrary in this Agreement, the Company may make the payments to the KCS Member specified in Section 4(e)(ii) of the Operating Agreement.

(b) Immediately prior to the consummation of any transaction which results in the NS Member owning all of the Membership Interests in the Company, the Company will make a distribution to the KCS Member or its Permitted Transferees of all previously undistributed Net Cash Flow due to the KCS Member and such Permitted Transferees (based upon their respective Percentage Interests). Immediately prior to the consummation of any transaction which results in the KCS Member or its Permitted Transferees owning all of the Membership Interests in the Company, the Company will make a distribution to the NS Member or its Permitted Transferees of all previously undistributed Net Cash Flow due to the NS Member and such Permitted Transferees (based upon their respective Percentage Interests).

4.7 Deemed Distributions . In the event of a Permitted Asset Transfer in which the Company receives consideration with a value less than the Fair Value of the asset(s) subject to such Permitted Asset Transfer, the excess of the Fair Value of such asset(s) over the consideration received therefor (such excess, the “Deemed Distribution Amount”) shall be deemed to be a distribution to the KCS Member, and the NS Member shall be entitled to, in its

sole discretion: (a) an immediate cash payment from the KCS Member equal to the NS Member’s pro rata share of the Deemed Distribution Amount based on its Percentage Interest or (b) an immediate cash payment from the Company equal to the product of (i) such Deemed Distribution Amount and (ii) a fraction, the numerator of which is the NS Member’s Percentage Interest and the denominator of which is the KCS Member’s Percentage Interest.

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.

(b) Composition of Management Committee . The Management Committee shall consist of six committee representatives, four of whom shall be designated by the KCS Member and two of whom shall be designated by the NS Member, and any alternate selected by a Member, to serve in the absence or unavailability of one or more committee representatives (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 Article 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. The Chairman of the Management Committee shall be appointed by the KCS 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 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, the KCS Member and the NS Member shall each be entitled to representation on any such committee, such representation to be proportionate to their respective Percentage Interests in the Company.

(b) Capital Project Committee . The Members hereby agree that there shall be created a Capital Project Committee consisting of three Committee Representatives, two of whom shall be designated by the KCS Member and one of whom shall be designated by the NS 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 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) negotiating and entering into any Capital Improvement Agreements and overseeing the performance of the KCS Member thereunder, provided, however, that such Capital Improvement Agreements shall provide for construction of such Capital Projects at cost. 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. The initial capital expenditure protocols for capital expenditures other than the Proposed Capital Projects are attached hereto as Exhibit 5.3(b)(ii).

(c) Joint Operating Committee . The Members hereby agree that there shall be created a Joint Operating Committee (the “Joint Operating Committee”) consisting of the Chief Operations Officer, Chief Marketing Officer and Chief Engineering Officer, or their respective designees, of KCS and NS. The Joint Operating Committee shall make decisions by the unanimous vote of its members. The Joint Operating Committee shall have responsibility for (i) monitoring such matters as operations, performance and scheduling, (ii) managing maintenance and other operating matters arising upon the carrying out of the Operating Agreement and the KCSR Joint Use Agreement and the NSR Joint Use Agreement and (iii) seeking the resolution of disputes with respect to such matters. Meetings of the Joint Operating Committee may be convened by any member thereof. The Joint Operating Committee may meet by telephone or in any manner or place as shall be agreeable to its members. If the Joint Operating Committee is unable to reach a unanimous vote on any matter, it shall refer that matter to the Management Committee, provided, however, that any Member may require such matter to be referred to arbitration in accordance with Section 12.14 , if such matter involves a breach or an alleged breach of this Agreement or of any of the JV Transaction Agreements.

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), (xxii) and/or (xxiii) of the definition of Major Decision is sought. Notice of a meeting need not be given to any Committee Representative who signs a waiver of notice or a consent to holding the meeting (which waiver or consent need not specify the purpose of the meeting) or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior to its commencement, the lack of notice to such Committee Representative. All such waivers, consents and approvals shall be filed with the Company records or made a part of the minutes of the meeting. The Committee Representatives present may adjourn any meeting to another time and place. If any meeting of the Management Committee is adjourned, no less than four (4) Business Days’ notice (delivered personally or by telephone, e-mail or facsimile) shall be given to each Committee Representative who is not present at the time of such adjournment prior to such meeting being reconvened. 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) .

(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 other than approval of any action of the type set forth in clause (xx) of the definition of Major Decision 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 Major Decisions . Notwithstanding anything to the contrary contained in this Agreement, until such time as the NS Member no longer owns any Membership Interests, neither the Management Committee nor any committee thereof shall authorize or effect any action that constitutes a Major Decision unless such action has received the approval of at least one of the Committee Representatives appointed by NS.

5.7 Budget and Business Plan; Investment Policies.

(a) Attached as Exhibit 5.7(a) to this Agreement is the budget for the first Fiscal Year (the “Budget”) and the business plan for the first Fiscal Year (the “Business Plan”). 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, 2006, the Management Committee shall prepare a Budget and Business Plan for the following Fiscal Year. The Budget and Business Plan for the next succeeding Fiscal Year shall upon approval of the Management Committee in accordance with Section 5.6 become the Budget and Business Plan for such Fiscal Year. If the Management Committee does not approve a Budget or Business Plan for any Fiscal Year prior to the commencement of such year, then the Budget or Business Plan for that Fiscal Year shall be the Budget or Business Plan 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) and Business Plan for any Fiscal Year shall take into account the capital expenditures for such Fiscal Year set forth in Schedule 2.2 to the Transaction Agreement.

(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) and any additional cash Capital Contributions to the Company shall be invested by the Company.

5.8 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 .

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 .

5.10 Fiduciary Duty; Exculpation.

(a) Notwithstanding any other provisions of this Agreement, whether express or implied, or applicable law, the Members agree that, 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; provided further, however, that, with respect to the approval of any Permitted Asset Transfer or any Permitted Indebtedness, each Committee Representative shall owe the same duties to the Company and the Members as a director of a Delaware corporation would owe to such corporation and its shareholders with respect to such matters. 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.

(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 Company 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 Capacity Improvement Projects.

(a) Notwithstanding anything to the contrary herein, each Member (the “Sponsoring Member”) may require the Company to perform all acts necessary in order to effectuate the construction of a Capacity Improvement Project. In order to initiate such construction, the Sponsoring Member may require the Company to perform a capacity model to determine the expected addition to capacity that would result from the construction of the specified Capacity Improvement Project, such capacity to be measured in the number of potential additional new overhead train movements permitted by such specified Capacity Improvement Project (“New Overhead Train Starts”) and/or additional local train movements (“Local Train Starts”).

(b) If the Capacity Improvement Project will result in only additional capacity through Local Train Starts, only the KCS Member may cause the Company to construct

such Capacity Improvement Project, and such Capacity Improvement Project shall be constructed solely through a capital contribution of the KCS Member.

(c) If the Capacity Improvement Project will result in additional capacity through New Overhead Train Starts, then the Member that is not the Sponsoring Member (“Non-Sponsoring Member”) shall have the right to require the Company to allocate to such Non-Sponsoring Member up to its share of the New Overhead Train Starts (up to two-thirds to KCSR through the KCSR Joint Use Agreement, if KCSR is the Non-Sponsoring Member or up to one-third to NSR through the NSR Joint Use Agreement, if NSR is the Non-Sponsoring Member),provided, however, that the Sponsoring Member shall always be entitled to at least one New Overhead Train Start. If the Non-Sponsoring Member elects to receive an allocation of New Overhead Train Starts as provided herein, the Capacity Improvement Project shall be constructed through a capital contribution of both Members in proportion to the number of New Overhead Train Starts allocated to each Member. Otherwise, the Capacity Improvement Project shall be constructed solely through a capital contribution of the Sponsoring Member. If either Member declines all or part of its allocation from one or more Capacity Improvement Projects, it may make up the resulting deficit in New Overhead Train Starts in any subsequent Capacity Improvement Project or Projects.

5.13 Construction of the Jackson Flyover

(a) Notwithstanding anything (except Section 5.13(b) ) to the contrary, either Member may require the Company to perform all acts necessary (including requiring Capital Contributions in cash from each Member in proportion to its Percentage Interest) in order to effectuate the construction of the Jackson Flyover. The Company shall thereafter progress the engineering, permitting (to the extent required) and construction of the Jackson Flyover with all deliberate speed.

(b) Section 5.13(a) shall be disregarded if, within thirty (30) days of the formation of the Company, the Company receives assignment of the CN Jackson Trackage Rights.

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.

(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 Members holding a majority Percentage Interest. Except as otherwise required by law, the presence in person or by proxy of Members holding percentage interests of more than seventy-five percent (75%) 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, Members holding a majority of the Membership Interests held by Members represented thereat, in person or by proxy, shall have the power to adjourn the meeting from time to time until the requisite number of Members shall be present; provided , that, if any meeting of the Members is adjourned, no less than four (4) Business Days’ notice (delivered personally or by telephone, e-mail or facsimile) shall be given to each Member who is not present at the time of such adjournment prior to such meeting being reconvened After two adjournments for lack of quorum, if notice has been given to each Member in accordance with the preceding sentence, then the quorum requirement set forth in this Section 6.3(d) for any such adjourned meeting at which no Major Decision (or any other decision that requires the unanimous agreement of the Members, as provided herein) is proposed to be made shall be reduced from seventy-five percent to fifty-one percent. At any such adjourned meeting at which the requisite number of Members shall be represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

(e) At a meeting, any proposal shall be approved if it receives the affirmative vote of a majority of the Percentage Interests unless such a proposal would involve a Major Decision, in which event approval requires an affirmative vote of each of the Members.

(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 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, subject to the Management Committee’s approval in accordance with Section 5.6 , 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.

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 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,

(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,

(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.

7.2 Reports.

(a) In General . Pursuant to the Operating Agreement, KCSR (or, following the termination thereof, such other Person as may be engaged by the Management Committee in accordance with Section 5.6 ) 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 Controlled 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 45 days after the end of such Fiscal Year) the Company shall cause to be delivered to each Member, 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 of the first three Fiscal Quarters of each Fiscal Year (and in any event not later than 30 days after the end of each such Fiscal Quarter), the Company shall cause to be delivered to each Member, a balance sheet of the Company as of the end of such Fiscal Quarter and the related statements of operations and cash flows for 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 Fiscal Quarter and the interim period corresponding to the Fiscal Quarter and the interim period just completed.

The periodic statements described in clause (ii) above shall be accompanied by a written certification of the Chief Financial Officer of KCSR or such other individual performing a similar function (or any Person designated by the Management Committee in accordance with Section 5.6 ) 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 income tax returns and information returns for the Company and all other tax 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. 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 . Necessary tax information 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.

(d) Tax Audits .

(i) The KCS Member is hereby designated as the “tax matters partner,” as that term is defined in Section 6231(a)(7) of the Code (the “Tax Matters Partner”) of the Company, with all of the rights, duties and powers provided for in Sections 6221 through 6234 of the Code, inclusive. 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 Treasury 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 AND CALL RIGHT

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 Person that (i) is the surviving Person as a result of any merger or consolidation of either the NS Parent or KCS with or into any such Person or (ii) acquires all or substantially all of the assets of the NS Parent or KCS, (b) any other Member, (c) any Wholly-Owned Affiliate of either the NS Parent or KCS, (d) any administrator, trustee or other Person to whom such Membership Interest of any Member is transferred involuntarily by operation of law, or (e) subject to the prior written consent of all other Members, any Person (any such Transfer being referred to in this Agreement as a “Permitted Transfer”).

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 complies with the applicable provisions of Section 9.6 .

(e) The Transferee receives the prior written consent of each other Member if the transfer would 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.

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 Article 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 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 May 1, 2006. A copy of the above-referenced agreement is on file at the principal office of the Company.

9.8 Line Option Call Right . Upon NS’ delivery, in accordance with Section 10.10(g) of the Transaction Agreement, of a Line Option Exercise Notice (as such term is defined in the Transaction Agreement) stating its election to acquire the KCS Membership Interests (as such term is defined in the Transaction Agreement) pursuant to Section 10.10(a)(i) thereof, the NS Member shall have the right to acquire or cause the Company to acquire the KCS Member’s Membership Interests (the “Line Option Call Right”) as follows:

(a) Purchase Price . If the NS Member delivers such a Line Option Exercise Notice, then the NS Member agrees to buy (or cause one or more of its Subsidiar(ies) to buy) and the KCS Member agrees to sell the KCS Member’s Membership Interests, for the Membership Interest FMV (as such term is defined in the Transaction Agreement).

(b) Permitted Transfer; Closing . Promptly following the exercise of the Line Option Call Right, the Members shall take all actions reasonable and necessary to effect a Permitted Transfer of all of the Membership Interests of the KCS Member to the NS Member pursuant to this Section 9.8 , including entering into of a transaction agreement with respect to such Permitted Transfer (the “Line Option Call Agreement”) reflecting the key terms set forth in this Section 9.8 and otherwise containing representations, warranties, covenants and indemnities with respect to the Membership Interests of the KCS Member with terms at least as favorable to NS and its Subsidiaries as are set forth in the Transaction Agreement with respect to the Line and the Assets. Notwithstanding anything to the contrary contained herein, the completion of such sale pursuant to the Line Option Call Right and in accordance with the terms of the Line Option Call Agreement (the “Line Option Call Closing”) shall occur, and the NS Member shall pay the Membership Interest FMV to the KCS Member, on a date (the “Line Option Call Closing Date”) to be mutually agreed between the KCS Member and the NS Member, but in no event later than the later of (i) ninety (90) days after the delivery date of the Line Option Call Notice and (ii) five Business Days after the date on which the last of any required regulatory approvals in connection with such transaction is received. All payments of the Membership Interest FMV shall be made by wire transfer of immediately available funds to an account or accounts specified by the intended recipients. Upon the request of the NS Member, at the Line Option Call Closing, the KCS Member shall cause their respective representatives on the Management Committee to resign therefrom. The KCS Membership Interests shall be conveyed to the NS Member (or its designated Subsidiar(ies)) subject only to Permitted Liens (as defined in the Transaction Agreement) and the KCS Member shall be responsible for the payment of all transfer, filing and recording taxes in connection with the exercise of the Line Option with respect to the KCS Membership Interests and the conveyance of such interests.

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

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, or 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 inadequate 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 Interest held by such non-defaulting Member as compared to the total number of Membership Interest held by all non-defaulting Members) of the Membership Interest offered. The price of the Membership Interest offered by the defaulting Member shall be the Fair Value of such Membership Interest 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, 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 Interest which corresponds to the non-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, 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, its 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.

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) to the extent thereof and then to the Members pro rata in accordance with their Percentage Interests.

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, no Member shall have any 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 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:		Meridian Speedway, LLC 427 West 12 ^th Street Kansas City, Missouri 64105 Facsimile: (816) 983-1227

		With a copy to the NS Member and the KCS Member

		If to NS Member:		The Alabama Great Southern Railroad Company c/o Norfolk Southern Corporation Three Commercial Place Norfolk, Virginia 23510 Attention: James A. Squires, Esq. Facsimile: (757) 533-4872

		With a copy to:		Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York 10036-6522 Attention: Eric J. Friedman, Esq. Facsimile: (212) 735-2000

		If to the KCS Member:		Kansas City Southern 427 West 12 ^th Street Kansas City, Missouri 64105 Attention: Robert B. Terry, Esq. Facsimile: (816) 983-1227

		With a copy to:		Sonnenschein Nath & Rosenthal LLP


				4520 Main Street, Suite 1100 Kansas City, MO 64111 Attention: John F. Marvin, Esq. Facsimile: (816) 531-7545

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 KCS 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 a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next day which is not a Saturday, Sunday or legal holiday.

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 Submission to Jurisdiction . Subject to Section 12.14 herein, each of the parties 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 12.14 herein or for provisional relief to maintain the status quo or prevent irreparable harm pending the appointment of the arbitrators, 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.

12.14 Dispute Resolution . Except as provided in Section 10.2 , each of the parties hereto stipulates and agrees that any dispute, controversy or claim arising out of or relating to this Agreement or the breach, termination or validity thereof (“Dispute”) that is not resolved by negotiations between senior officers of the parties within sixty (60) days after receipt by a party of written notice (“Notice”) of such Dispute, will be submitted to mediation in accordance with the Commercial Mediation Procedures of the AAA. If such dispute is not resolved within twenty (20) days after appointment of a mediator, or within sixty (60) days of receipt of Notice (whichever comes sooner), each of the parties hereto agrees that, at the demand of any party, such Dispute will be submitted to mandatory and binding arbitration, in New York, New York by three arbitrators, 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:

(a) Selection of Arbitrator . A panel of three independent arbitrators 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.

(b) Conduct of Arbitration . The arbitration shall be held and the award shall be issued in New York, New York. In addition to Damages, the arbitral tribunal 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 arbitrators 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.

(c) Replacement of Arbitrator(s) . Should any of the arbitrator(s) refuse or be unable to proceed with arbitration proceedings, replacement arbitrator(s) will be selected using the same method of selection as the original arbitrator(s).

(d) Findings and Conclusions . The arbitrators 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.

(e) Time is of the Essence . The arbitrators are hereby instructed that time is of the essence in the arbitration proceeding, and that the arbitrators will have the right and authority to issue monetary sanctions against any party if, upon a showing that such party is unreasonably delaying the proceeding.

(f) 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 arbitral tribunal 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 Damages for the failure of any party to respect the arbitral tribunal’s orders to that effect.

(g) Consolidation . The Parties are committed to the prompt and efficient resolution of disputes. Accordingly, if one or more disputes arises 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 arbitral tribunal for the prior (or first filed) arbitration determines that (i) the new dispute or arbitration presents significant issues of law or fact common with those in the pending arbitration; (ii) no Party would be unduly prejudiced and (iii) consolidation under such circumstances would not result in undue delay for the prior arbitration. Any order of consolidation issued by such arbitral tribunal shall be final and binding upon the parties. Unless the parties otherwise agree, the arbitral tribunal appointed first in time shall serve as the arbitral tribunal 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.

(h) Discovery . Recognizing the express desire of the parties for an expeditious means of dispute resolution, the arbitrators will allow for limited discovery as may be reasonable under the circumstances.

(i) Costs and Attorneys’ Fees . Notwithstanding any rule of the AAA to the contrary, the arbitrators rendering judgment under this Section 12.14 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.

12.15 Confidentiality . Except as provided by law or by rule, order, or regulation of any court or regulatory agency with jurisdiction over the subject matter of this Agreement, or in connection with an audit by the Internal Revenue Service or other tax authority, or as may be necessary or appropriate for a Member hereto to enforce its rights under this Agreement, during the term of this Agreement (including any extensions thereof), and for a period of three (3) years after termination or expiration of this Agreement, the terms and provisions of this Agreement and all information to which access is provided or which is obtained hereunder will be kept confidential and will not be disclosed by either Member to any person other than members, officers, employees, independent auditors, and attorneys, without the prior written approval of the other Member.

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IN WITNESS WHEREOF, the parties have executed and entered into this Agreement as of the day first above set forth.



		THE ALABAMA GREAT SOUTHERN
		RAILROAD COMPANY,
		an Alabama corporation

		By:		/s/ Kathryn B. McQuade

				Name: Kathryn B. McQuade
				Title: Vice President

		KANSAS CITY SOUTHERN,
		a Delaware corporation

		By:		/s/ Larry M. Lawrence

				Name: Larry M. Lawrence
				Title: Senior Vice President and Assistant to the
				Chairman

Exhibit 31.1

CERTIFICATIONS

I, Michael R. Haverty, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kansas City Southern (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


	(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	/s/ Michael R. Haverty

	Michael R. Haverty
	Chairman, President and Chief Executive Officer

Date: May 9, 2006

Exhibit 31.2

CERTIFICATIONS

I, Ronald G. Russ, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kansas City Southern (the “registrant”);


	(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	/s/ Ronald G. Russ

	Ronald G. Russ
	Executive Vice President and Chief Financial Officer

Date: May 9, 2006

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kansas City Southern (the “Company”) on Form 10-Q for the period ending March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael R. Haverty, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:


	(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


	/s/ Michael R. Haverty

	Michael R. Haverty
	Chief Executive Officer

May 9, 2006

A signed original of this written statement required by Section 906 has been provided to Kansas City Southern and will be retained by Kansas City Southern and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kansas City Southern (the “Company”) on Form 10-Q for the period ending March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald G. Russ, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:


	(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


	/s/ Ronald G. Russ

	Ronald G. Russ
	Chief Financial Officer

May 9, 2006

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