CONFIDENTIAL TREATMENT REQUESTED AS TO THOSE PORTIONS MARKED WITH ASTERISKS
(***) AND THOSE PORTIONS HAVE BEEN SEPARATELY FILED WITH THE COMMISSION
BURLINGTON NORTHERN RAILROAD COMPANY
PORTLAND & WESTERN RAILROAD, INC.
Finance Docket Number: 32766
TABLE OF CONTENTS
- ------- ----
1 Definitions 5
2. Lease of Subject Line and Rail Facilities 6
3. Taxes 7
4. Non-Essential Properties 8
5. Property-Related Agreements 9
6. Locomotive and Rail Equipment Transportation 9
7. Possession and Use 9
8. Equipment 11
9. Maintenance of Rail Facilities 13
10. Rate and Allowance 15
11. Administration 19
12. Financial Statements 22
13. Term 22
14. Liability and Insurance 23
15. Labor 26
16. Governmental Approvals 26
TABLE OF CONTENTS (Cont.)
- ------- ----
17. Conditions Precedent to Transfer of Possession 27
18. Default 28
19. Catastrophic Event 29
20. Arbitration 30
21. Notices 31
22. Governing Law 32
23. Amendment 32
24. Assignment 32
25. Interpretation 33
A. Description of Rail Facilities
B. Non-Essential Properties.
C. Interchange Agreement
D. Power of Attorney for BN to Make Freight Rates
This Agreement is made on the 15 day of September, 1995, between BURLINGTON
NORTHERN RAILROAD COMPANY (BN), a Delaware corporation, duly qualified to do
business in the State of Oregon, and PORTLAND & WESTERN RAILROAD, INC. (PNWR), a
Delaware corporation, duly qualified to do business in the State of Oregon.
BN, an interstate common carrier by rail, is the operator of three railroad
lines in the State of Oregon. 1) One is known as the OE Subdivision broken down
into three parts; Milepost (MP) 16.87 near Bowers Junction to MP 18.83 near
Bendemeer; MP 25.52 near St. Marys Junction to MP 26.71 near St. Marys (also
known as Beaverton Spur) and MP 31.28 near Greton to MP 64.70 near Hopmere. 2)
Another line is known as the Banks Spur of the OE Subdivision; MP 17.07 near
Bowers Junction to MP 27.84 near Banks and the 3) third line is known as the
Forest Grove Branch from MP 4.68 near Hillsboro to MP 10.28 near Forest Grove.
All of these lines are collectively known as the Subject Line; and
BN desires to lease the Subject Line and Rail Facilities and PNWR desires to
operate the Subject Line and Rail Facilities for the purpose of offering Rail
Freight Service to shippers and industries located on the Subject Line. BN is
willing to lease the Subject Line together with the Rail Facilities upon the
terms and conditions of this Agreement:
THEREFORE, in consideration of the following mutual promises and covenants and
any funds paid by PNWR to BN this day and other consideration, the parties
Section 1. Definitions
Agreement. This Lease Agreement between Burlington Northern Railroad Company and
Portland & Western Railroad, Inc.
Agreement Year. The period commencing on the date of Transfer and ending on
December 3l of the same calendar year is the first Agreement Year. And each
subsequent calendar year, or portion, within the Term of the Agreement is also
an Agreement Year.
Base Per Car Allowance. Payment made by BN to PNWR as compensation to provide
Rail Freight Service on behalf of BN.
Event of Default. An event that has occurred under Section 18.
Lessee. Portland & Western Railroad, Inc.
Lessor. Burlington Northern Railroad Company.
Maintenance. The normal and regular work whether capitalized or expensed, to
keep the Rail Facilities in condition necessary for continued safe operation.
Non-Essential Properties. Assets not required for the operation of the Subject
Line as identified in Appendix B.
Rail Facilities. The track and related railbed structures but excluding
underlying real estate, leased to PNWR as described in Appendix A.
Rail Freight Service. The common carrier, contract or exempt rail service to be
provided by PNWR.
Standard of Maintenance. In the case of track it is the FRA classification and
for all other Rail Facilities it is the condition existing at Transfer as
defined in Section 9.
Subject Line. The following railroad lines in the State of Oregon between MP
16.87 near Bowers Junction and MP 18.83 near Bendemeer; between MP 25.52 near
St. Marys Junction and MP 26.71 near St. Marys (Beaverton Spur) and between MP
31.28 near Greton and MP 64.70 near Hopmere. These lines are part of the OE
Subdivision. The other two lines in the State of Oregon are the Banks Spur of
the OE Subdivision between MP 17.07 near Bowers Junction and MP 27.84 near Banks
and the Forest Grove Branch between MP 4.68 near Hillsboro and MP 10.28 near
Forest Grove. These lines are further described in Appendix A.
Transfer. The date of Transfer of possession of the Rail Facilities and Subject
Line as required by Section 17.
Term. The term of this Agreement as specified in Section 13.
Section 2. Lease of Subject Line and Rail Facilities
A. BN agrees to lease to PNWR, and PNWR agrees to lease from BN, for the price
established in Section 2C all of BN's right, title and interest in the Subject
Line and Rail Facilities as more particularly defined in Appendix A.
B. The parties will jointly Inspect the Subject Line and Rail Facilities within
sixty (60) days of the date of this Agreement to make an inventory of material
associated with BN's operation of the Subject Line lo determine which material
is not integral to the continued use of the Rail Facilities for railroad
purposes. BN has the right to remove all such non integral materials and
supplies prior to Transfer.
C. BN will lease the Subject Line to PNWR for *** annually and
other good and valuable consideration, receipt of which is acknowledged. BN will
pay the fee for trackage rights described in Appendix A.
D. Any leasehold improvement made to the Rail Facilities will become property of
BN at the termination of this Agreement. Subject to Section 3C it is understood
PNWR can depreciate any improvements it makes to the Rail Facilities
E. PNWR shall not have the right to admit any third party to use the Subject
Line and Rail Facilities without the prior written consent of BN.
Section 3. Taxes
A. Except as provided in Section 3B regarding property taxes, PNWR will be
responsible for all federal, state, and local taxes, levies, assessments,
withholdings and other governmental charges levied or assessed and payable
because of the leasing, use, repair, maintenance, substitution, and consumption
of the Subject Line and Rail Facilities by PNWR, including, but not limited to,
any taxes or other charges which are on, based on, measured by or with respect
to receipts, gross or net income, capital, franchises, excess profits or conduct
of business of PNWR ("Taxes"). These Taxes will be paid by PNWR, and all returns
and reports in connection with such Taxes wil1 be
made by PNWR, and further, PNWR will indemnify and hold harmless BN against all
such Taxes, and all expenses associated with the Taxes.
B. BN will pay all property taxes owed in the State of Oregon as assessed by
each county in which PNWR operates. BN's Property Tax Department will prepare
and file all returns and reports in connection with Ad Valorem taxes and BN's
Property Tax Department will also make payment of all property taxes for both BN
C. The parties intend that this Agreement will be treated as a lease and not a
sale for federal, state and local tax purposes. Each party agrees it will not
take any reporting position with any federal, state or local taxing authority or
agency on any tax return or other filling, or make any oral or written statement
before such authorities or agencies or before any quasi-judicial administrative
body or court which is inconsistent with this intent.
Section 4. Non-Essential Properties
A. BN and PNWR shall compile a list of Non-Essential Property within sixty (60)
days of Transfer which shall be attached as Appendix B. PNWR may, at any time,
identify to BN those Rail Facilities which are not required for the operation of
the Subject Line. Those Rail Facilities are considered Non-Essential Properties
and will be added to Appendix B.
B. PNWR is not required to maintain Non-Essential Properties. BN may remove
Non-Essential Properties at its own expense or PNWR may, with BN's written
consent, remove any Non-Essential Properties from their existing position and
redeploy them on the Rail Facilities subject to the requirements of Section 9.
All materials salvaged by operation of this Section will be the property of BN.
Section 5. Property-Related Agreements
A. BN will administer and remain responsible for all records, and is entitled to
all rent or other income relating to term leases, indefinite term leases,
permits, licenses, easements, track construction agreements, property
acquisition agreements, track leases, and other property-related agreements on
the Subject Line both existing at Transfer or entered into after Transfer. PNWR
shall not be entitled to enter into or receive rents for property related
agreements defined above.
B. PNWR will pay all utility bills on the Subject Line after Transfer.
Section 6. Locomotive and Rail Equipment Transportation
BN will move locomotives and other rail equipment to or from Albany or Brooklyn
Yard, OR under a separate transportation contract for on-going operations on the
Section 7. Possession and Use
A. During the Term, PNWR will have exclusive possession of the Rail Facilities
and Subject Line for the purpose of providing Rail Freight Service. PNWR
covenants that (1) it will not use, or allow others to use, the Rail Facilities
for the storage, manufacture, reprocessing or disposal of hazardous or toxic
substances as defined by state and federal law without BN's prior written
consent, except for materials stored or used by PNWR as necessary in the
ordinary course of its business and in compliance with law or materials or
commodities of others being handled by PNWR in the ordinary course of its rail
freight operations and in compliance with law and (2) will
not make the Rail Facilities or Subject Line available for use by third parties
for any purpose without the prior written consent of BN. BN retains the right to
inspect the Rail Facilities and the Subject Line on twenty-four (24) hours
notice at BN's expense to verify PNWR's compliance with this Agreement.
B. In connection with BN's inspection of the Subject Line and Rail Facilities,
BN will pay all loss, cost, damage, or injury which its own employees, agents or
property may suffer as a result of any willful misconduct or gross negligence by
BN's agents or employees. In connection with BN's inspection, PNWR will pay all
loss, cost, damage or injury which its own employees, agents or property may
suffer, except if such is the result of the sole gross negligence of BN's agents
or employees, or which any other person or property may suffer as a result of
any act or omission by PNWR's agents or employees.
C. During the Term, PNWR has the exclusive responsibility to provide Rail
Freight Service to and from points on the Rail Facilities and Subject Line. PNWR
will be capable of providing five (5) day per week service to industries on the
Subject Line. The parties will enter into the attached Interchange Agreement
which is incorporated by reference prior to Transfer which establishes the
rights and obligations of the parties with respect to the interchange of cars.
D. BN retains the right during the Term to operate unit coal trains over the
Rail Facilities and Subject Line with BN's own motive power and crews at no
expense to PNWR, provided (a) loss or damage caused by unit train operations
will be apportioned in the same manner specified in the Interchange Agreement
between BN and PNWR and (b) BN will observe all rules and timetable speeds of
E. Section 10 covers rates and allowances. That section will govern the payment
BN is obligated to make to PNWR for loaded cars interchanged with BN. That
section will also govern the rental PNWR must pay BN on traffic moving locally
F. Prior to Transfer, BN will identify and assign to PNWR all joint facility
agreements related to the Rail Facilities that are assignable by their terms.
Section 8. Equipment
A. Car Supply: During the Term, PNWR will be responsible for providing
locomotives, cars and other equipment with the exception that BN will provide
all freight cars for interline service with BN. BN will respond to PNWR's
request for freight cars when those requests are placed under established BN car
ordering procedures. However, BN has no higher obligation to provide PNWR with
equipment than it does any customer directly served by BN. BN will supply
equipment to PNWR only under terms specified in the Interstate Commerce Act, or
any other applicable legislation, and as ruled on by the Interstate Commerce
Commission, federal courts or any other entity having jurisdiction. BN will have
no obligation to supply equipment for any PNWR originated traffic that BN does
not participate in as a line haul carrier. PNWR may, but only with BN's prior
written consent, provide its own cars or grant OT-5 authority for equipment used
to transport traffic interchanged with BN.
B. Car Repairs:
1. Types of Repairs Permitted
PNWR may make minor running repairs and replacements of a safety appliance
nature to cars interchanged to PNWR by BN to comply with FRA/AAR standards to
permit their continued use in transportation service. Any other repairs must
have prior written approval by BN.
2. Repair Standards
All repairs and replacements to cars by PNWR will conform to standards of the
Association of American Railroads and regulations of the Federal Railroad
Administration for the type of repair performed.
3. Repair Rates and Charges
Repairs for BN's account will be billed at 50% of the applicable charge for
labor and 100% of the applicable charge for materials established by the
Association of American Railroads (AAR). All car repair bills must be submitted
in accordance with the format established in AAR Rule 83 in the Field Manual of
the AAR Interchange Rules.
PNWR will maintain an adequate record of all repairs and replacements to
substantiate the nature of the work performed and materials used along with the
charges billed BN. BN has the right to audit, at its own expense, the records of
PNWR regarding repairs made to freight cars.
C. Customer Related Detention Charges: PNWR will file its own demurrage,
detention and storage tariffs and collect the associated charges.
D. Car Hire: 1) PNWR shall pay car hire on all cars interchanged to PNWR by BN.
2) PNWR shall perform all car hire accounting required under applicable
Association of American Railroads ("AAR") Code of Car Hire Rules and Standards.
3) BN shall pay PNWR an amount equal to the actual car hire charges paid by PNWR
on both a mileage and per diem basis, but not to exceed a maximum of seventy two
(72) hours, computed on each car interchanged to PNWR by BN and received back
from PNWR. 4) To recover car hire PNWR must file a monthly bill with BN
providing sufficient information for BN to make payment. BN agrees to pay PNWR
within thirty (30) days from receipt of the bill. This bill should be sent to
Director Equipment Service Accounting
P.O. Box 64958
St. Paul, MN 55164-0958
5) If PNWR has negotiated deprescribed rates with any carrier other than BN,
PNWR shall bill BN at the default rate in the "CHARM" file.
Section 9. Maintenance of Rail Facilities
A. During the Term, PNWR will perform Maintenance on the Rail Facilities to
provide Rail Freight Service over the Subject Line. The Rail Facilities and
Subject Line must meet Standard of Maintenance applicable to that particular
type of rail facility or structure as set forth in Section 9B.
B. PNWR agrees the Standard of Maintenance for mainline track and structures
will be FRA Class III with the following exceptions: 1) FRA Class II from MP
51.5 to MP 57.4 between Greton and Hopmere; 2) FRA Class II between MP 16.87
near Bowers Junction and MP 18.83 near Bendemeer; 3) FRA Class II between MP
17.07 at Bowers Junction and MP 27.84 near Banks; 4) FRA Class I on the Forest
Grove Branch between MP 4.68 near Hillsboro and MP 10.28 near Forest Grove; and
5) FRA Class I on the Beaverton Spur between MP 25.52 near St Marys Junction and
MP 26.71 near St. Marys. The Standard of Maintenance for all other track and
structures will be the condition in which the track and structures was delivered
to PNWR at Transfer.
C. BN must approve, in writing, all capital outlays to maintain the right of way
and structures prior to such capital outlays.
D. The Standard of Maintenance for all bridges located on the Rail Facilities or
the Subject Line will be the bridge condition determined by a joint inspection
conducted prior to Transfer.
E. PNWR may identify to BN track or other structures which it wishes to maintain
at less than the designated Standard of Maintenance. Upon that notice, BN will
determine whether it is willing to permit PNWR to maintain the facility or
structure at less than the applicable Standard of Maintenance. Unless a written
waiver is granted by BN the Rail Facilities and Subject Line, other than
Non-Essential Properties, will be maintained to the Standard of Maintenance
designated in Section 9B and 9D.
F. The parties will make an annual joint inspection of the Rail Facilities and
Subject Line to determine whether all facilities were maintained according to
the Standard of Maintenance. If it is determined solely in the reasonable
judgment of BN that any facility, structure, or portion of the
Rail Facilities fails to meet the appropriate Standard of Maintenance, BN will
advise PNWR of the steps necessary to bring the facility into compliance.
Thereafter, PNWR will have sixty (60) days to take corrective action to bring
the non-complying facility up to the applicable Standard of Maintenance. If PNWR
does not take the required corrective action BN has the right, after a thirty
(30) day notice, to take the necessary corrective action at PNWR's expense. BN
is then authorized, without advance notice, to deduct those expenses from the
Base Per Car Allowance to PNWR.
G. PNWR agrees to keep adequate records for the Rail Facilities and Subject Line
during the Term to permit a determination of the existing maintenance level for
the Rail Facilities. By December 15 of each Agreement Year, PNWR will submit to
BN its proposed maintenance plan for the upcoming Agreement Year. BN will
communicate to PNWR by January 30 of the following year any concerns it may have
relative to the adequacy of the proposed maintenance plan.
H. PNWR will not remove any of the existing Rail Facilities without the consent
of BN. BN's consent to remove track material from the Rail Facillties in the
course of PNWR's performance of routine Maintenance is not required when
material removed from the Rail Facilities is replaced by material of equal or
superior quality, in which event, PNWR may retain for its own account the
material it removed
Section 10. Rate and Allowance
A. BN agrees to pay PNWR a Base Per Car Allowance of *** for each loaded car
it receives from PNWR in interchange at Brooklyn Yard, OR or forwards to PNWR in
interchange at Brooklyn Yard, OR or movement over the Subject Line.
BM will pay no Base Per Car Allowance on such non-revenue movements as the
return of pallets, empty bottles, etc. BN will pay a Base Per Car Allowance on
company material only when BN moves company material in revenue service.
B. PNWR will pay BN a fee of *** on every loaded
car interchanged with Southern Pacific, or successor company, that originate or
terminate on the Subject Line. For traffic moving locally on the Subject Line,
or between the Subject Line and originating or terminating points on WPRR, POTB,
WGR and WVRD, PNWR will pay BN a royalty of *** . The method of payment of
this royalty will be handled by a supplementary agreement.
C. The *** fee in Section 10B can be waived by BN on a case by case basis.
If PNWR Interchanges traffic with Southern Pacific, Burlington Northern is
authorized, with advance notice, to collect the fee through a reduction in the
monthly Base Per Car Allowance to PNWR until the full fee is paid. Section 12
requires PNWR to provide BN with information to assure PNWR compliance with this
D. The Base Per Car Allowance will increase or decrease annually at seventy
(70%) percent of the Western Railroad Cost Recovery Index published by the AAR
The change in the Base Per Car Allowance will take effect January 1 of each
Agreement Year based on the previous year's AAR Index.
E. PNWR agrees it will grant BN power of attorney to make, enter into, change,
or otherwise establish tariff charges and contracts relative to the
transportation of commodities to or from the Subject Line. PNWR may establish
its own tariffs or contracts for transportation of local and specified interline
traffic permitted in Section 10B. PNWR may establish its own demurrage tariff.
F. BN agrees it will issue all waybills on traffic originating on the Rail
Facilities and Subject Line operated by PNWR and interchanged to BN. BN also
agrees it will handle all freight billing and accounting on traffic BN
interlines with PNWR.
G. BN agrees to make the Base Per Car Allowance payments to PNWR as required
under this Rate and Allowance section twice monthly postmarked on the fifteenth
(15th) and last day of each month by written check to PNWR. The parties
understand and agree that the check for interchanged carloads postmarked on the
fifteenth (15th) of any given month represents the estimated payment for
carloads interchanged during the preceding month between the first (1st) and
fifteenth (15th) of the month. The parties understand and agree that the check
postmarked on the last day of each month to PNWR represents payment for carloads
interchanged during the preceding month between the sixteenth (16th) and last
day of the month, including any adjustments of payments made on the fifteenth
(15th) of the month. BN will not pay any bill tendered later than one year after
the last day of the period in which the allowance payment was incurred
PNWR will invoice BN twice monthly with the following information:
1. Car Initial and Number
2. Interchange Date
3. Whether car is delivered loaded to BN or received loaded from BN.
4. Amount Due for each carload
5. Commodity if available
PNWR will send this invoice to BN at the following address and also note the
contact at PNWR should BN have any questions:
Customer Revenue Support
Burlington Northern Railroad
Attn: Manager Handling Carriers
P. O. Box 64955
St. Paul, MN 55164
H. Burlington Northern will consult with PNWR on marketing programs for rail
transportation services provided by PNWR over the Subject Line, but all
marketing programs are the ultimate responsibility and at the sole discretion of
BN except for local and specified interline traffic permitted by Section 10B.
I. With respect to traffic subject to this Rate and Allowance Agreement, BN and
PNWR understand and agree that all claims for loss and damage to the lading of
any cars, other than those moving local and specified interline traffic
permitted in Section 10B, which occurred when those cars were on the Subject
Line, will be handled exclusively by BN and PNWR will be liable to BN for any
loss and damage not attributable to the sole negligence of BN.
Section 11. Administration
A. This section is applicable to traffic on the Subject Line handled in
interline service by BN.
B. BN will process all waybills for interline traffic with BN including freight
billing. Customers will pay freight bills to BN. PNWR will not be shown in the
C. At Transfer BN will prepare an inventory of all cars located on the Subject
Line by car number, so that revenue for shipments en route at Transfer can be
identified and properly distributed. This inventory will consist of three
categories: A. all cars on the Subject Line identified as being loaded or empty;
B. all cars on the Subject Line identified by station; and C. all cars on the
Subject Line identified by consignee and consignor. This inventory will be made
available to PNWR for audit.
D. For purposes of this section, revenue attributable to PNWR will be determined
by the Rate and Allowance Section. However, BN will pay PNWR one-half of the
Base Per Car Allowance on all cars either loaded or empty on the Subject Line at
11:59 p.m. of Transfer.
E. Miscellaneous bills relating to items such as storage, detention, weighing,
etc. will be prepared by BN for service provided up to Transfer.
F. All BN demurrage records for the month in which Transfer of the Subject Line
to PNWR occurs will be transferred to PNWR as of 11:59 p.m. Transfer. All
demurrage charges for the month in which Transfer occurs will be assessed and
collected by PNWR. All demurrage revenue for cars released prior to 11:59 p.m.
Transfer will be remitted to BN by PNWR within thirty (30) days after the close
of the month.
G. Revenue earned for switching service performed by BN up to Transfer for
another road or a shipper will be billed by BN and will constitute BN revenue.
Revenue earned for switching service performed by PNWR after Transfer will be
billed by PNWR and constitute PNWR revenue. Switching service performed either
by PNWR or BN will be at the expense of the party performing the switching
service without any attempt to associate the service with the line-haul move.
H. Charges for switching performed by another carrier up to Transfer will be
paid by BN. Charges for switching performed by another carrier after Transfer
will be paid by BN. No attempt will be made to allocate the switching charges to
the revenue movement.
I. Pursuant to Section 11C an inventory of both loaded and empty equipment on
the Subject Line at Transfer will be taken by BN. BN will paper interchange this
equipment to PNWR at 11:59 p.m., Transfer. Mileage payments will be calculated
on the basis of the actual interchange (i.e., location of the car at 11:59
p.m., Transfer) and not on the paper interchange. BN will be responsible for
car-hire payments up to and including 11:59 p.m. Transfer. PNWR will be
responsible for car hire payments after 11:59 p.m. Transfer.
J. All billing and collection on line-haul transportation service performed for
customers on the Subject Line and interchanged with BN will be made by BN. In
the event PNWR erroneously receives payment for BN billing, PNWR will pay the
amount of these payments to BN within thirty (30) days of receipt of the payment
from the customer.
K. Prior to Transfer BN will abolish all employee positions in connection with
its operation of the Subject Line effective 11:59 p.m., Transfer. Prior to
Transfer, BN will be exclusively responsible for all aspects of employment on
the Subject Line. After Transfer, BN will not be responsible for
any wages, fringe benefits or other elements of compensation attributable to
operation on the Subject Line. If PNWR is requested by the Railroad Retirement
Board, or determines that its own employment procedures require, PNWR may
request, in writing, specific information on former BN employees employed by
PNWR after Transfer, and BN will, subject to applicable legal restrictions,
provide that information.
L. Freight loss and damage claims will be identified specifically as to pre- or
post-Transfer based on the date of the incident. BN will be responsible for
claims which are specifically identified as having taken place on or prior to
Transfer and PNWR will be responsible for claims subsequent to Transfer, subject
to provisions of Section 10I.
M. Foreign cars damaged on the Subject Line on or prior to Transfer will be the
responsibility of BN and those damaged subsequent to Transfer will be the
responsibility of PNWR.
N. All interline settlement of freight revenue for traffic originating or
terminating on the Subject Line will be performed in accordance with the
Association of American Railroads' Mandatory Railway Accounting Rules except for
local and specified interline traffic permitted by Sections 10B and 10E.
O. In the case of a dispute or disagreement as to the proper application of
specific sections of this Agreement, both BN and PNWR have the right to audit,
on reasonable written notice during normal business hours, the pertinent records
of the other party at the expense of the party requesting the audit.
Section 12. Financial Statements
PNWR will provide, within one hundred twenty (120) days after the close of each
Agreement Year, an unaudited income statement, balance sheet and statement of
changes in financial status as of the end of the Agreement Year prepared by an
independent certified public accountant in accordance with Generally Accepted
Accounting Principles. In addition to the financial statements, PNWR will also
include a record of all traffic handled by PNWR on the Subject Line which is
intended to provide documentation to assure compliance with the traffic terms
specified in Section 10. BN has the right to audit these accounts.
Section 13. Term
A. This Agreement will be effective upon execution by both parties. The Term of
the Agreement will expire three years from the earlier of the date of last
execution, subject to earlier termination as provided in Section 18. Three
months prior to the third anniversary, or subsequent third year anniversary,
either party may request termination of this Agreement. If termination does
occur BN will resume the service it provided on the Subject Line prior to this
Agreement after receiving regulatory approval from the Interstate Commerce
Commission (ICC) or other governmental agency having jurisdiction. The expense
in seeking ICC approval will be paid by BN. This Agreement will remain in effect
until the actual date BN resumes service.
B. If this Agreement is not terminated after three (3) years then it will be
automatically extended in a series of additional three (3) year intervals.
Section 14. Liability and Insurance
A. During the Term, PNWR will indemnify, defend, protect and hold harmless BN,
its parent and subsidiaries, their officers, employees, agents, contractors,
successors, and assigns (1) from all suits, actions, or claims of any character
brought because of any injuries or damage received or sustained by any person,
or property, because of any act, omission, or misconduct of PNWR, its
representatives, officers, employees or agents, or (2) from any claims of PNWR's
agent's or contractor's employees or their successors arising or recovered under
any "Workers' Compensation Act," or any other law, ordinance, or (3) from liens,
fines, penalties, or claims for which PNWR might be or become liable, or to
which the PNWR's property or the Rail Facilities might be or become subject as a
result of some act or omission by PNWR, or (4) from all other liability of
whatever kind or nature arising out of PNWR's use or occupation of the Subject
Line except as may otberwise be specifically declared in this Agreement or any
Appendix to be the liability of BN or some other party.
B. PNWR shall, at its own expense, obtain and maintain in force during the term
of this Agreement the following insurance. Evidence of this insurance
(certificate of insurance or policy) must be provided prior to Transfer and BN
shall not be named insured under these policies with the exception of Section
(1) Commercial General Liability Insurance, including contractual liability and
products completed/operations, against claims arising out of bodily injury,
illness and death and from damage to or destruction of property of others,
including loss or use thereof, and including liability of BN, with minimum
limits for bodily injury and property damage of $5,000,000 for each occurrence.
This policy shall contain a "Waiver of Transfer Rights" endorsement to waive any
right of recovery that the insurance company may have against BN because of
payments made for bodily injuries and properly damage.
(2) Business Automobile Policy Insurance, including owned, non-owned and hired
vehicles with minimum limits for bodily injury and property damage of $1,000,000
per occurrence, on all vehicles that PNWR or any of its agents or employees may
use at any time in connection with the performance of this Agreement.
(3) Worker's Compensation Insurance or coverage as required under the Worker's
Compensation Act of the applicable state, if appropriate. The policy should
include occupational disease to required statutory limits, employer's liability
of $1,000,000 to include FELA, if appropriate, and an "all states" endorsement.
This policy shall contain a "Waiver of Transfer Rights" endorsement to waive any
right of recovery that the insurance company may have against BN because of
payments made for bodily injures and property damage.
(4) In the event of construction on the leased premises or work or services
within fifty (50) feet of the leased railroad tracks, PNWR shall provide advance
written notice to BN and either PNWR or their contractor or subcontractors
performing the construction work or service shall, prior to such construction
work or services procure insurance as set forth in Section 14.B.(1) through (3)
and, in addition, a Railroad Protective Liability Insurance policy issued in the
name of BN with limits of $2,000,000 for bodily injury and property damage per
occurrence, with an aggregate of $6,000,000. The requirement for Railroad
Protective Liability Insurance shall not apply to day-to-day operation and
routine maintenance of track.
C. The parties will review the insurance requirements of this Section prior to
each Agreement Year.
D. PNWR shall not create or permit any condition on the Subject Line and Rail
Facilities that could present a threat to human health or to the environment.
PNWR shall be responsible for and shall indemnify and hold harmless BN from any
suit or claim growing out of any damages alleged to have been caused, in whole
or in part, by an unhealthful, hazardous, or dangerous condition caused by
PNWR's presence on and use of the Subject Line and Rail Facilities or PNWR's
violation of any laws, ordinances, regulations, or requirements pertaining to
solid or other wastes, chemicals, oil and gas, toxic, corrosive, or hazardous
materials, air, water (surface or groundwater) or noise pollution, and the
storage, handling, use, or disposal of any such material. PNWR shall bear the
expense of all practices or work, preventive or remedial, which may be required
because of the condition or use of the Subject Line and Rail Facilities during
PNWR's occupancy, by PNWR or those claiming by, through or under PNWR, during
the Term. BN shall be responsible for, and shall indemnify and hold harmless
PNWR for any environmental conditions existing prior to Transfer. PNWR and BN
each expressly agree that the indemnification and hold harmless obligations it
hereby assumes shall survive cancellation of this Agreement. PNWR and BN each
agree that statutory limitation periods on actions to enforce these obligations
shall not be deemed to commence until the other party discovers any such health
or environmental impairment, and PNWR and BN each hereby knowingly and
voluntarily waives the benefits of any shorter limitation period.
E. BN may at its option prior to cancellation of this Agreement and before
Transfer from PNWR to BN, conduct an environmental audit of the Subject Line and
Rail Facilities, at BN's cost and expense, to determine if any environmental
damage to the Subject Line and Rail Facilities, has occurred during the Term.
PNWR shall pay all expenses for any remedial action that may be required as a
result of the audit to correct any environmental damage, and all necessary work
shall be performed by PNWR prior to termination or cancellation of this
F. PNWR may at its option prior to Transfer, or thereafter, conduct an
environmental audit of the Subject Line and Rail Facilities, at PNWR's expense,
to determine if any environmental damage to the Subject Line or Rail Facilities
Section 15. Labor
In addition to any other rights of termination provided by this Agreement,
either party will have the right to terminate this Agreement if unacceptable
labor protection is imposed on either party by the ICC as a result of obtaining
governmental approval or exemption from governmental approval for the lease of
the Subject Line and Rail Facilities by PNWR. Subject to the right of
termination set forth above, if any employee because of this agreement (1) has a
valid claim under employee protection arrangements under orders of the ICC or
(2) elects to make a claim against his/her employer pursuant to any other
employee protection arrangements, the employer will be solely responsible for
any costs of labor protection for its employee(s) and will not seek contribution
from the other party to this Agreement, except that PNWR will not be responsible
for any claim by an employee of PNWR previously employed by BN where the claim
is based upon employee protection imposed on or agreed to by BN.
Section 16. Governmental Approvals
A. After execution of this Agreement, PNWR will be responsible at its sole
expense for promptly preparing and filing with any regulatory agency having
jurisdiction over this transaction all applications, petitions, requests,
notices or other filings and PNWR will take all action necessary to obtain the
approval, authorization or exemption from approval to permit this transaction at
the earliest practicable date. BN will cooperate at its expense with PNWR in
approval. Securing regulatory approval, authorization or exemption from approval
of this transaction is a condition precedent to Transfer.
B. Prior to Transfer the parties will have received approval, other
authorization or exemption necessary to permit this transaction to be carried
out; except that any terms or conditions placed upon such approval,
authorization or exemption that materially affect the rights and obligations
established by the Agreement must be acceptable to the party on whom they are
imposed. PNWR may not terminate this Agreement because of conditions imposed on
it because it is under common control with another rail carrier
Section 17. Conditions Precedent to Transfer of Possession
A. The obligation of BN to transfer possession of the Rail Facilities and
Subject Line is subject to the following conditions:
(1) PNWR will have obtained a final order or exemption from the ICC under 49
C.F.R. 11343 authorizing it to lease and operate the Subject Line as required
under Section 16. However, the parties will operate under a trackage rights
agreement pending final ICC authorization for the Lease Agreement. This Lease
Agreement will serve as the trackage rights agreement until receipt of the final
order or exemption as provided in this paragraph. The final order must not
impose unacceptable labor protection on either party except as permitted under
(2) PNWR has obtained and placed into effect the insurance policy or policies
described in Section 14; and
B. Upon satisfaction of all of conditions set forth in this Section, PNWR will
take possession of theS Rail Facilities and commence operation of the Subject
Line pursuant to Sections 11 and 13.
Section 18. Default
A. Should PNWR substantially fail to perform its obligations under this
Agreement and continue such failure for sixty (60) days, BN may issue written
notice to PNWR of its intent to terminate this Agreement. If PNWR continues the
failure to perform for thirty (30) days after receiving notice of intent and has
not elected to submit the matter to binding mediation, an Event of Default will
have occurred. Upon default BN will have the right to terminate this Agreement
by issuing PNWR a written notice of termination. The exercise of such right will
be in addition to and not a waiver of any other rights of the terminating party.
B. A substantial failure to perform on the part of PNWR will include failure to
provide five (5) day per week rail service on the Subject Line if requested by
either customers or BN, failure to make payments under Section 10, PNWR being
bankrupt or insolvent, appointment of a receiver for any part of the property of
PNWR, making a general assignment by PNWR without the consent of BN as
required under Sections 2E and 7A, the filng of a petition under bankruptcy laws
or any law relating to the relief of debtors, the failure of PNWR to submit an
annual plan of maintenance that PNWR reasonably believes will sustain the
Standard of Maintenance for the Rail Facilities required under Section 9, and
the failure of PNWR to maintain the Rail Facilities to the required Standard of
Maintenance contemplated by Section 9, the unreasonable withholding of consent
a material matter requested in accordance with this Agreement.
C. If this Agreement is terminated for any reason, PNWR will expeditiously file
an application to discontinue and abandon its operation over the Rail Facilities
and Subject Line with the ICC under
49 U.S.C. ss.10903 if requested by Burlington Northern. BN agrees to support
the application. In the event of a termination of this Agreement, BN may
transfer the right to acquire and operate the Rail Facilities and Subject Line
to another party. PNWR will cooperate as necessary in the application of that
party for authority or exemption from authority from the ICC to permit the
substitution of another party to perform Rail Freight Service. If PNWR fails to
take the action outlined in this Section within the thirty (30) days specified
in Section 20A, BN, may at its option, cease, without advance notice, making the
monthly Base Per Car Allowance payment to PNWR.
D. On termination, BN and PNWR will settle all accounts as of the date of
transfer of possession to BN or BN's designate. The transfer will take place
immediately after PNWR has obtained authority, or exemption from authority for
PNWR to discontinue service on the Subject Line. The transfer will be generally
consistent with the terms of Section 11. PNWR will have thirty (30) days to
remove its property from the Subject Line.
Section 19. Catastrophic Event
A. This provision governs the rights and obligations of the parties under
circumstances in which PNWR's performance of Rail Freight Service is prevented
by an event beyond its control and is not the fault or negligence of PNWR or any
of its employees, including, but not limited to, acts of God, explosions, fires,
vandalism, flood or any other severe weather disturbance. If an event occurs
that substantially impairs PNWR's ability to provide Rail Freight Service, PNWR
will use reasonable diligence to perform its obligations. If PNWR fails to
perform any obligation due to a catastrophic event, the failure will not be an
Event of Default under Section 18 so long as the failure is caused by that event
and PNWR exercises reasonable diligence to perform. In the event of loss or
damage to Rail Facilities covered by property insurance, PNWR agrees to make the
necessary claims for insurance proceeds and use those proceeds to repair the
damaged Rail Facilities or defray expenses incurred as a result of making those
B. In the event of loss or damage to the Rail Facilities not covered by or in
excess of insurance coverage, PNWR may (i) seek additional funds from BN or
others, or (ii) terminate this Agreement and remit all insurance claims to BN.
Section 20. Arbitration
A. Any controversy or claim (whether such claim sounds in contract, tort or
otherwise) arising out of or relating to this Agreement, or the breach thereof,
or the commercial or economic relationship of the parties hereto, shall be
settled by binding arbitration in accordance with the Commercial Arbitration
Rules and the Guidelines for Expediting Larger Complex Commercial Arbitrations
of the American Arbitration Association. Judgment of the award by the
arbitrator(s) may be entered in any court having jurisdiction. The arbitration
shall be governed by the U.S. Arbitration Act, 9 U.S.C. Sections 1--16, to the
exclusion of any provisions of state law inconsistent therewith or which would
produce a different result. The arbitration shall also be governed by the
Federal Rules of Civil Procedure 26 - 307 and Federal Rules of Evidence 101 -
B. The arbitration shall be heard by three disinterested individuals unless the
parties can agree on a single arbitrator. The party desiring arbitration shall
name its appointed arbitrator in its notice of arbitration and the noticed party
shall appoint its arbitrator within twenty (20) days of receipt of the notice of
arbitration. The two appointed arbitrators shall meet within twenty (20) days
thereafter and appoint a neutral third arbitrator. Each party shall bear the
cost and expense of its appointed arbitrator and shall share equally the cost
and expense of the third arbitrator and any other costs and expenses necessary
for the arbitration.
Section 21. Notices
All notices will be in writing and are deemed given if delivered in person or by
certified mail to the person(s) specified to receive the notice. The date of the
notice will be the date of delivery.
Director Line Rationalization
2600 Lou Menk Drive
P.O. Box 961034
Fort Worth, TX 76161-0034
Portland & Western Railroad, Inc.
110 West 10th Avenue
Albany, OR 97321
Section 22. Governing Law
This Agreement will be construed and enforced in accordance with the laws of
Section 23. Amendment
No amendment to this Agreement is effective unless it is in writing and executed
by officers or agents of each party.
Section 24. Assignment
This Agreement is binding on and for the benefit of the successors and assigns
of each party. Assignment by PNWR requires the prior written consent of BN and
any purported assignment by PNWR without the prior written consent of BN is void
and is an Event of Default under Section 18.
Section 25. Interpretation
A. In the event any position of this Agreement is determined or adjudged
invalid, illegal, or otherwise unenforceable, that determination will not affect
the other positions of this Agreement, and it will remain in full force and
effect as if the portion determined or adjudged invalid, illegal, or otherwise
unenforceable was not originally a part of the Agreement unless the invalidity
of that portion has the effect of substantially impairing the benefits of this
transaction or frustrating the intent of this Agreement.
B. The headings and titles to provisions contained in this Agreement are for
convenience only, and do not modify or affect the rights and duties of the
C. This Agreement and its appendices represent the entire agreement between the
parties concerning this transaction and all previous communications,
understandings, or agreements between the parties are abrogated and withdrawn
except as provided in this Agreement.
BURLINGTON NORTHERN RAILROAD PORTLAND & WESTERN RAILROAD
By: /s/ William E. Glavin By: /s/ Anthony W. Mogytycht
Title: General Manager Title: President
Date: September 21, 1995 Date: September 20, 1995
STATE OF TEXAS )
COUNTY OF TARRANT )
Personally appeared before me the undersigned witness and made oath that she saw
William E. Glavin of BURLINGTON NORTHERN RAILROAD COMPANY, a Delaware
corporation, sign, seal and, as the act and deed of that corporation, deliver
the foregoing written instrument and that he with the other witness subscribed
above witnessed the execution.
Sworn to before me this 21st
day of Sept., 1995
/s/ A. Lisa Templeton A. Lisa Templeton
Notary Public for Terrant Co., TX [seal] Notary Public
My Commission expires 9-18-97 State of Texas
Comm. Exp. 09-18-97
STATE OF OREGON )
COUNTY OF LINN )
Personally appeared before me the undersigned witness and made oath that he/she
saw Anthony W. Magytych of PORTLAND & WESTERN RAILROAD, INC, a Delaware
corporation sign, seal and, as the act and deed of that corporation, deliver the
foregoing written instrument and that he with the other witness subscribed above
witnessed the execution.
Sworn to before me this 20th
day of September, 1995
[SEAL] OFFICIAL SEAL
MARY ALICE BARRON /s/ Mary Alice Barron
NOTARY PUBLIC -- OREGON ------------------------
COMMISSION NO. 027213 Witness
MY COMMISION EXPIRES AUGUST 22, 1997
DESCRIPTION OF RAIL FACILITIES AND SUBJECT LINE
A. BN will provide a copy of the condensed profile as its description of the
Rail Facilities and Subject Line to be leased to PNWR pursuant to Section 2.
Where necessary, right of way maps will also be provided to describe the
B. The Subject Line includes the following segments in the State of Oregon: (1)
Approximately 1.96 miles of BN owned line between Burlington Northern Milepost
(BN MP) 16.87 near Bowers Junction and BN MP 18.83 near Bendemeer; approximately
10.77 miles of BN owned line between BN MP 17.07 at Bowers Junction and BN MP
27.84 near Banks. PNWR access to this line is via trackage rights over the Port
of Tillamook Bay Railroad between Hillsboro located at old Southern Pacific
Milepost (SP MP) 765.5 and SP MP 774.7 near Banks.
(2) Approximately 5.60 miles of BN owned line between BN MP 4.68 near Hillsboro
and BN MP 10.28 near Forest Grove. PNWR access to this line is via its lease
from Southern Pacific between SP MP 756.9 near St. Marys and SP MP 765.5 near
(3) Approximately 1.19 miles of BN owned line between BN MP 25.52 near St. Marys
Junction and BN MP 26.71 near St. Marys. PNWR access to this line is via its
lease from Southern Pacific between BN MP 26.71 near St. Marys (SP MP 756.9) and
BN MP 31.28 near Greton (SP MP 751.9).
(4) Approximately 33.42 miles of BN owned track between BN MP 31.28 near Greton
and BN MP 64.70 near Hopmere.
C. PNWR access to this entire network will be via trackage rights over Southern
Pacific between Brooklyn Yard near Portland and Greton on the Southern Pacific
line via Lake Oswego, OR.
D. Burlington Northern will pay all trackage rights fees charged by Southern
Pacific or Port of Tillamook Bay Railroad operated on by PNWR under terms of
A list of Non-Essential Properties, if any, will be maintained and incorporated
into this Appendix pursuant to Section 4.
At Transfer there were no Non-Essential Properties.
POWER OF ATTORNEY FOR BN TO MAKE FREIGHT RATES
Page 1 of 9
INTERMEDIATE INTERCHANGE AGREEMENT
THIS AGREEMENT, made and entered into as of 21st day of Sept, 1995 by and
between Southern PACIFIC TRANSPORTATION COMPANY, a Delaware corporation,
hereinafter "SP," BURLINGTON NORTHEN RAILROAD COMPANY, a Delaware corporation,
hererinafter "BN," and PORTLAND & WESTERN RAILROAD, INC., a Delaware
corporation, hereinafter "PNWR"; BN and PNWR being sometimes referred to
collectively as "Users",
WHEREAS, SP and BN are parties to an interchange agreement dated
September 24, 1982, at Portland, Oregon, wherein each party delivers
to and pulls interchange rail cars from the other party for six (6) month
WHEREAS, SP and PNWR are parties to an interchange agreement dated
August 19, 1995, at SP's Brooklyn Yard, Portland, Oregon, wherein PNWR
delivers rail cars to SP and pulls rail cars from SP at Brooklyn Yard; and
WHEREAS, BN and PNWR desire to establish an arrangement whereby BN and
PNWR shall use SP's Brooklyn Yard as an intermediate interchange location
for the interchange of rail cars with each other; and
WHEREAS, SP is willing to provide such intermediate interchange trackage
at its Brooklyn Yard to BN and PNWR under the terms and conditions
hereinafter set forth.
NOW, THEREFORE, it is mutually agreed as follows:
a. Unless it shall be othewise agreed between the authorized
representatives of SP, BN, and PNWR to designate other trackage, the parties
agree to effect the intermediate interchange of Equipment of BN and PNWR (as
defined in Section 2(a) of this Agreement) at Brooklyn Yard, in the vicinity of
SP's Milepost 766.9, Portland, Oregon, on trackage owned by SP, hereinafter
termed "Interchange Trackage" as shown on Exhibit "A", dated ______________,
1995, attached hereto and made a part hereof BN and PNWR are permitted the right
to use, on a non-exclusive basis, all trackage
Page 2 of 9
owned and controlled by SP as necessary to effect such intermediate interchange;
provided, however, BN's and PNWR's use of the Interchange Trackage shall be
exclusively under the direction and control of the authorized representative of
SP who shall specify the exact location within the Interchange Trackage where
such intermediate in interchange shall occur.
b. Unless otherwise provided by separate written agreement or agreements
Users shall not use any track or tracks, or parts thereof of SP that Users are
not entitled to use by virtue of this Agreement.
a. The parties agree, during the term hereof, to use the Interchange
Trackage in or incident to the delivery of rail cars, locomotives, cabooses or
other equipment (hereinafter collectively called "Equipment") to be interchanged
between the Users. No Equipment of Users shall be so placed on the Interchange
Trackage in such manner as to unreasonably interfere in any way with the
operation of other Equipment on tracks adjacent to and or connecting with the
b. Unless it shall be otherwise agreed between the authorized
representatives of the parties hereto, if Equipment of BN or PNWR shall become
derailed, wrecked, bad ordered, shifted, stalled, or otherwise disabled while
upon the Interchange Trackage, it shall be rerailed, repaired or cleared by SP.
The reasonable costs and expenses of such rerailing, repairing or clearing,
including any Loss and/or Damage, as defined in Section 8 of this Agreement,
shall be at sole cost and expense of BN or PNWR, unless otherwise provided for
in the allocation of liability in Seceion 8 of this Agreement
Section 3. Services provided by SP shall include, but shall not be limited
to, performing any mechanical inspection and repair required by the American
Association of Railroads ("AAR") Interchange Rules ("Interchange Rules") and
shall be at the sole cost and expense of BN and/or PNWR. Billing for any repairs
performed by SP to the Equipment of Users, shall be in accordance with the Field
and Office Manuals of the Interchange Rules in effect at the date of performance
of the repairs. SP shall then prepare and submit billing directly to and collect
from the car owner for car-owner responsibility items as determined under said
Interchange Rules. SP shall also submit billing to and collect from BN or PNWR
any charges for repair to Equipment that is car-owner responsibility items, as
determined under said Interchange Rules, should said car owner refuse or
otherwise fail to make payment therefor
Section 4. Equipment of Users relative to this Agreement shall not be taken
into the car hire or mileage accounts of SP.
a. Users shall, with their own employees and at their sole cost and
expense, operate their Equipment incident to handling of interchange Equipment
over the Interchange Trackage, subject, however, to such reasonable rules,
regulations, and orders as SP may issue. All such rules,
Page 3 of 9
regulations and orders shall be reasonable and fair and shall not discriminate
against any party hereto in the use thereof. No employee of Users shall engage
in or be connected with the operation of Equipment hereunder until he or she
shall have been examined successfully on SP's Operating Rules and Regulations
applicable to said Interchange Trackage which shall be furnished from time to
time by SP to Users.
b. If any employee of BN or PNWR shall neglect, refuse, or fail to abide by
SP's rules, instructions, and restrictions governing the operation on or along
the Interchange Trackage, such employee shall, upon written request of SP, be
prohibited by BN or PNWR from operating on the Interchange Trackage. If SP shall
deem it necessary to hold a formal investigation to establish such neglect,
refusal, or failure on the part of any such employee, then upon such notice
presented in writing, SP and BN or PNWR shall promptly hold a joint
investigation in which all parties concerned shall participate and each party
shall bear the expense for its officers, counsel, witnesses, and employees.
Notice of such investigations to employees of BN or PNWR shall be given by BN's
or PNWR's officers, and such investigation shall be conducted in accordance with
the terms and conditions of labor agreements, if applicable, between BN or PNWR
and its employees. If, in the judgment of SP, the result of such investigation
warrants, such employee shall, upon written request of SP, be withdrawn by BN or
PNWR from service on the Interchange Trackage, and BN or PNWR shall release and
indemnify SP from and against any and all claims and expenses because of such
If the disciplinary action is appealed by such employee of BN or PNWR tO
the National Railroad Adjustment Board or other tribunal lawfully created to
adjudicate such cases, and if the decision of such board or tribunal sustains
the employee's position, such employee shall not thereafter be barred from
service on the Interchange Trackage by reason of such occurrence.
Section 6. Interchange of Equipment between the BN and PNWR shall be in
accordance with the Field and Office Manuals of the AAR Interchange Rules and
Code of Car Service Rules adopted by the Association of American Railroads
("Interchange Rules"). Equipment shall be considered interchanged between the BN
and PNWR when the Equipment is placed on the designated Interchange Trackage at
Brooklyn Yard by or for the account of one User and the locomotive or
locomotives of such delivering party have been uncoupled from such Equipment and
the delivering User has provided movement instructions to the receiving User.
Notwithstanding the foregoing, if PNWR is not a subscriber to the Interchange
Rules the following shall apply:
a. If Equipment has been interchanged to PNWR and it is lost or damaged,
responsibility for such loss or damage shall be the responsibility of PNWR and
not SP or BN; and
b. All Equipment repairs performed by PNWR, its employees, officers, agents
or outside contractors shall be done in compliance with Federal Railroad
Administration Railroad Freight Car Safety Standards, Safety Appliance and Power
Brake Laws and the Interchange Rules.
Section 7. BN and PNWR undertake and agree, in respect to the use hereunder
of the Interchange Trackage and the operation of Equipment thereon and
thereover, to comply with all
Page 4 of 9
applicable Federal and State laws or regulations, and all applicable rules,
regulations, and orders promulgated by any Municipality, Board or Commission
with respect thereto for the protection of employees or other persons or
parties, and if any failure on its part to comply therewith shall result in any
fine, penalty, cost or charge being assessed, imposed or charged against SP, BN
or PNWR shall promptly reimburse and indemnify SP for or on account of such
fine, penalty, cost or charge; and further agrees in the event of any such
action, upon notice thereof being given by SP, to defend such action free of
cost, charge or expense to SP.
Section 8. It is the express intention of the parties that the indemnity
provided for in this Agreement shall be as follows:
a. "Loss and/or Damage" shall mean all damage to any property and injury to
or death of any person and all liability therefor, and shall embrace all
payments made on account thereof, including, without limitation, expense of
rerailing the Equipment and clearing wrecks, amounts paid or payable for
environmental cleanup, fines or penalties, amounts paid or payable under all
applicable laws and shall also embrace all cost and expense incident to any such
injury, death, loss or damage arising in connection with operations under this
Agreement. Loss and/or Damage shall also include attorneys' fees and costs in
defending against all such claims or alleged claims.
b. i. It is understood and agreed that SP shall maintain the Interchange
Trackage in a state of reasonable repair which is reasonably suited for the
combined requirements of the parties hereof; provided, however, Users, in
operating their Equipment over and upon the Interchange Trackage, shall
accept such trackage as they shall find it and shall not, by reason of any
failure, deficiency or defect therein or failure or neglect in the
maintenance, have or make against SP any claim or demand for any loss,
damage, injury or death whatsoever arising from or incident to such
deficiency, defect, failure or neglect.
ii. It is understood and agreed that a number of vehicular and
pedestrian crossings ("Crossings) of the Interchange Trackage to be used
for operations hereunder presently exist or may in the future be
constructed. Users agree to accept all Crossings in whatever condition
they may be during the term of this Agreement and will not assert any
claim, demand, or cause of action against SP and each User shall hold SP
harmless from any claim, demand, or cause of action arising out of any
Crossing accident on the Interchange Trackage in which the Equipment of
such User only is involved.
c. Subject to the provisions of Section 8b of this Agreement, liability for
Loss and/or Damage shall be fixed between the parties as follows:
i. When caused by the acts, omissions or negligence of the employees
of only one party or the defective property of only one party (other than
Interchange Trackage), whether or not in conjunction with the acts,
omissions, negligence or defective property of a third party, such Loss
and/or Damage shall be borne solely by such party.
Page 5 of 9
ii. When caused by the acts, omissions or negligence of the employees
of one party or defective property (other than Interchange Trackage) of one
party in combination with the acts, omissions or negligence of the
employees of the other party or the defective property (other than
Interchange Trackage) of the other party, then, whether or not in
conjunction with the acts, omissions or negligence or defective property of
a third party, such Loss and/or Damage shall be borne solely by each such
party as to its own employees, contractors, agents, invitees, Interchange
Trackage and property other than real property owned by it, and property in
its possession, care, custody or control, and equally as to Loss and/or
Damage to real property underlying or surrounding the interchange Trackage,
third parties and their property.
iii. When caused by the acts, omissions or negligence of third
parties, without negligence or concurring fault on the part of the parties,
unknown causes, acts of God or any other cause, such Loss and/or Damage
shall be borne solely by each party as to its own employees, contractors,
agents, invitees, Interchange Trackage and property, including real
property owned by it, and property in its possession, care, custody or
control, and equally as to Loss and/or Damage suffered by third parties and
The foregoing notwithstanding, no party to this Agreement shall have any
claim against another party to this Agreement for its acts, omissions or
negligence giving rise to Loss and/or Damage caused by or resulting from
interruption of or delay to such other party's business or for special, indirect
or consequential damages, for loss of profit, savings, or revenue of any kind
whether or not another party has been advised of the possibility of such
Each party hereto covenants and agrees that it shall forever investigate,
release, defend, indemnify and save harmless the other parties, their successors
and assigns, from and against any and all liability or claims for damages, costs
and expenses herein assumed by it, during the time that this Agreement is in
effect; provided, however, that the party liable, in whole or in part, as to any
claim or suit filed against the other party, shall be given prompt written
notice thereof and an opportunity to join in or take over, as may be
appropriate, the defense and settlement of such claim or suit
Each party hereto may make settlement of any claim for Loss and/or Damage
for which it and another party hereto may be jointly liable hereunder, but no
payment in excess of Twenty-Five Thousand Dollars ($25,000) shall be voluntarily
made by any party in settlement of any such claim without first having obtained
in writing consent of the other parties, which consent shall not be unreasonably
withheld, delayed or communicated, and giving of such consent shall not be
deemed an admission that such claim involves joint liability. The party against
which a claim in excess of Twenty-Five Thousand Dollars ($25,000) is made for
which the another party hereto may be jointly liable hereunder shall give
written notice thereof to such other party(ies) and such party(ies) may join in
All releases taken pursuant to the settlement of claims or suits involving
joint liability shall include all parties hereto involved' and copies thereof
shall be furnished each of them.
Page 6 of 9
For the purpose of this Section 8, reference to SP or any term which
includes SP, shall include SP and any invitee, permittee or other party using
the Interchange Trackage pursuant to a written agreement with SP other than the
Section 9. Any party hereto shall be relieved from its performance of this
Agreement without penalty if at any time due to reason of any cause or causes
beyond that party's control, including, but not limited to, flood, earthquake,
hurricane, tornado or other severe heat or climatic conditions, acts of God,
acts of a public enemy, war, blockade, insurrection, vandalism, sabotage,
strike, lockout, or other labor disturbance, or governmental law, order, or
regulation, or other similar events, that party is unable to provide the other
party(ies) of any or all of the services provided for in this Agreement.
Section 10. PNWR shall, at its sole cost and expense, procure the following
kinds of insurance for the the term of this Agreement and promptly pay when due
all premiums for that insurance. Upon the failure of PNWR to maintain insurance
as provided herein. SP shall have the right, after giving PNWR ten (10) days
written notice, to obtain insurance and PNWR shall promptly reimburse PNWR for
that expense or, notwithstanding anything to the contrary in this Section 8, to
cancel this Agreement. The following minimum insurance coverage shall be kept in
force during the term of this Agreement:
Comprehensive General Liability insurance providing bodily injury,
including death, personal injury and property damage coverage with a combined
single limit of at least Twenty-Five Million Dollars ($25,000,000) for each
incident and a general aggregate limit of at least Twenty-Five Million Dollars
($25,000,000). This insurance shall contain Broad Form Liability covering the
indemnity provisions contained in this Agreement, including, without limitation,
contractual liability, severability of interests and name SP and BN as
additional insured with respect to liabilities arising out of PNWR's obligation
to SP and BN in this Agreement. If coverage is purchased on a "claims made"
basis it shall provide for at least a three (3) year extended reporting or
discovery period, which shall be invoked should insurance covering the time
period of this Agreement be canceled unless replaced with a policy containing
the same time period as the policy being replaced. Should the aggregate limit
be eroded by forty (40) percent or more, PNWR shall immediately restore the
aggregate limit to Twenty-Five Million Dollars ($25,000,000).
PNWR warrants that this Agreement has been reviewed with its insurance
agent(s)/broker(s) and the agent(s)/broker(s) has been instructed to procure the
insurance coverage required herein and name SP and BN additional insured with
respect to liabilities arising out of PNWR's obligation to SP and BN.
PNWR shall furnish to SP the certificate(s) of insurance evidencing the
required coverage and endorsement(s), and upon request of SP or BN, PNWR shall
provide certified duplicate of any of those policies. The insurance company(ies)
issuing such policy(ies) shall notify SP and BN in writing of any material
alteration including any change in the retroactive date in any "claims made"
policies or substantial reduction of aggregation limits, if such limits apply,
or cancellation thereof at least thirty (30) days prior thereto.
Page 7 of 9
The insurance coverage policy(ies) shall be written by a reputable
insurance company or companies reasonably acceptable to SP or with current
Best's Insurance Guide Rating of B and Class VII or better. Such insurance
company shall be authorized to transact business in the State of Oregon. If
requested, PNWR must furnish a certified copy of all insurance policy(ies) and
endorsement(s) to SP and BN within seven (7) days of such request.
Insurance coverage provided in the amounts set forth herein shall not be
construed to otherwise relieve PNWR from liability hereunder in excess of such
coverage, nor shall it preclude PNWR, SP or BN from taking such other action as
is available to it under any other provision of this Agreement or otherwise in
law or equity.
The insurance coverage limits required under this Section 8 shall be
adjusted every five (5) years during the term or any extended term hereof based
on any increases or decreases in the Consumer Price Index, or any successor
index if insurance at such adjusted level is available from any reputable
carrier. If the adjusted amount is not available, PNWR shall obtain the highest
amount of coverage available.
Section 11. In the event any party breaches any part of this Agreement, the
other parties shall be entitled to all their lawful remedies under this
Agreement or at law or equity.
Section 12. This Agreement supersedes all prior negotiations or agreements
between the parties, whether written or oral, relating to the subject matter
hereof, and is intended to be the entire and complete statement of the terms of
this Agreement between the parties and, except for the designation of track
provided in Section I of this Agreement, may be amended or modified only by a
written instrument executed by the Parties.
Section 13. This Agreement shall take effect as of the date first hereon
written and shall remain in effect thereafter until terminated by either party
upon giving not less than thirty (30) days' written notice to the other parties
to that effect. Termination of this Agreement for any reason shall not affect
any liability or obligations of the parties which accrued hereunder prior to
Section 14. This Agreement is exclusively for the benefit of the parties
hereto and not for the benefit of any third party. This Agreement shall inure to
the benefit of and shall be binding upon parties, their successors and assigns.
Any party hereto may waive any default at any time without affecting or
impairing any right arising from any other default.
Section 15. All notices, demands, requests, or other communications which
may be or are required to be given, served or sent by either party to the other
pursuant to this Agreement shall be in writing and shall be deemed to have been
properly given or sent
a. If intended for SP, send registered or certified mail, return receipt
requested, with postage prepaid, and address to SP as follows:
Page 8 of 9
Executive Vice President - Operations
Southern Pacific Transportation Company
1860 Lincoln Street, Suite 1400
Denver, CO 80295
With a copy to:
Managing Director Contracts and Joint Facilities
Southern Pacific Transportation Company
1860 Lincoln Street, Suite 1200-911
Denver CO 80295
b. If intended for BN. send registered or certified mail, return receipt
requested, with postage prepaid, ant address to BN as follows:
Vice President ~ Network Design
Burlington Northern Railroad Company
2600 Lou Menk Drive
Fort Worth, TX 76161-0034
With a copy to:
Director Contracts and Joint Facilities
Burlington Northern Railroad Company
2600 Lou Menk Drive
Fort Worth TX 76161-0034
c. If intended for PNWR, send registered or certified mail return receipt
requested with postage prepaid, and address to PNWR as follows;
Portland & Western Railroad, Inc.
110 W. 10th Avenue
Albany, OR 97321
or such other address as may be designated by either Party.
Page 9 of 9
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be duly executed in triplicate as of the date first above written.
SOUTHERN PACIFIC TRANSPORTATION COMPANY
By /s/ [ILLEGIBLE]
Contracts and Joint Facilities
BURLINGTON NORTHERN RAILROAD COMPANY
By /s/ William E. Glavin
PORTLAND & WESTERN RAILROAD, INC.
By /s/ Anthony W. Mogytycht