Norfolk Southern Corp 10-Q for FY2023 Q2
Norfolk Southern Corp (NSC)
10-Q
2023-07-27
For: 2023-06-30
View Original
Added on
April 12, 2026
About this 10-Q
Norfolk Southern Corp filed this 10-Q on July 27, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.98B
- down 8.3% from $3.25B a year earlier
- Net income
- $356M
- down 56.5% from net income of $819M a year earlier
- Diluted EPS
- $1.56
- down 54.8% from $3.45 a year earlier
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended June 30, 2023
For the transition period from ___________ to___________
Commission File Number: 1-8339
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
| (Registrant’s telephone number, including area code) | ||||||||
| No change | |||||||||||
| (Former name, former address and former fiscal year, if changed since last report) | |||||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
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 June 30, 2023 | ||||||||||
| Common Stock ($1.00 par value per share) | (excluding 20,320,777 shares held by the registrant’s | ||||||||||
| consolidated subsidiaries) | |||||||||||
TABLE OF CONTENTS
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
| Page | |||||||||||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
| Second Quarter | First Six Months | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| ($ in millions, except per share amounts) | |||||||||||||||||||||||
| Railway operating revenues | $ | $ | $ | $ | |||||||||||||||||||
| Railway operating expenses | |||||||||||||||||||||||
| Compensation and benefits | |||||||||||||||||||||||
| Purchased services and rents | |||||||||||||||||||||||
| Fuel | |||||||||||||||||||||||
| Depreciation | |||||||||||||||||||||||
| Materials and other | |||||||||||||||||||||||
| Eastern Ohio incident | |||||||||||||||||||||||
| Total railway operating expenses | |||||||||||||||||||||||
| Income from railway operations | |||||||||||||||||||||||
| Other income (expense) – net | ( | ( | |||||||||||||||||||||
| Interest expense on debt | |||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Income taxes | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
3
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
| Second Quarter | First Six Months | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss), before tax: | |||||||||||||||||||||||
| Pension and other postretirement benefit (expense) | ( | ( | |||||||||||||||||||||
| Other comprehensive income of equity investees | |||||||||||||||||||||||
| Other comprehensive income (loss), before tax | ( | ( | |||||||||||||||||||||
| Income tax benefit (expense) related to items of other | |||||||||||||||||||||||
| comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
| Total comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
4
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
| June 30, 2023 | December 31, 2022 | ||||||||||
| ($ in millions) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable – net | |||||||||||
| Materials and supplies | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Investments | |||||||||||
Properties less accumulated depreciation of $ | |||||||||||
and $ | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Short-term debt | |||||||||||
| Income and other taxes | |||||||||||
| Other current liabilities | |||||||||||
| Current maturities of long-term debt | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Other liabilities | |||||||||||
| Deferred income taxes | |||||||||||
| Total liabilities | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock $ | |||||||||||
authorized; outstanding | |||||||||||
| respectively, net of treasury shares | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained income | |||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
5
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
| First Six Months | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| ($ in millions) | ||||||||||||||
| Cash flows from operating activities | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Reconciliation of net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation | ||||||||||||||
| Deferred income taxes | ( | |||||||||||||
| Gains and losses on properties | ( | ( | ||||||||||||
| Changes in assets and liabilities affecting operations: | ||||||||||||||
| Accounts receivable | ( | |||||||||||||
| Materials and supplies | ( | ( | ||||||||||||
| Other current assets | ||||||||||||||
| Current liabilities other than debt | ||||||||||||||
| Other – net | ( | |||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Cash flows from investing activities | ||||||||||||||
| Property additions | ( | ( | ||||||||||||
| Property sales and other transactions | ||||||||||||||
| Investment purchases | ( | ( | ||||||||||||
| Investment sales and other transactions | ||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities | ||||||||||||||
| Dividends | ( | ( | ||||||||||||
| Common stock transactions | ( | ( | ||||||||||||
| Purchase and retirement of common stock | ( | ( | ||||||||||||
| Proceeds from borrowings | ||||||||||||||
| Debt repayments | ( | ( | ||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||
| Net increase in cash and cash equivalents | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| At beginning of year | ||||||||||||||
| At end of period | $ | $ | ||||||||||||
| Supplemental disclosures of cash flow information | ||||||||||||||
| Cash paid during the period for: | ||||||||||||||
| Interest (net of amounts capitalized) | $ | $ | ||||||||||||
| Income taxes (net of refunds) | ||||||||||||||
See accompanying notes to consolidated financial statements.
6
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| Common Stock | Additional Paid-in Capital | Accum. Other Comprehensive Loss | Retained Income | Total | ||||||||||||||||||||||||||||
| ($ in millions, except per share amounts) | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | ||||||||||||||||||||||||||||||
| Total comprehensive income | ||||||||||||||||||||||||||||||||
| Dividends on common stock, | ||||||||||||||||||||||||||||||||
$ | ( | ( | ||||||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Stock-based compensation | ( | |||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | ( | |||||||||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | ||||||||||||||||||||||||||||||
| Total comprehensive income | ||||||||||||||||||||||||||||||||
| Dividends on common stock, | ||||||||||||||||||||||||||||||||
$ | ( | ( | ||||||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
7
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| Common Stock | Additional Paid-in Capital | Accum. Other Comprehensive Loss | Retained Income | Total | |||||||||||||||||||||||||
| ($ in millions, except per share amounts) | |||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||||||||
| Dividends on common stock, | |||||||||||||||||||||||||||||
$ | ( | ( | |||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | ( | |||||||||||||||||||||||||
| Stock-based compensation | ( | ||||||||||||||||||||||||||||
| Balance at March 31, 2022 | ( | ||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||||||||
| Dividends on common stock, | |||||||||||||||||||||||||||||
$ | ( | ( | |||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | ( | |||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
8
Norfolk Southern Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly Norfolk Southern Corporation (Norfolk Southern) and subsidiaries’ (collectively, NS, we, us, and our) financial position at June 30, 2023 and December 31, 2022, our results of operations, comprehensive income and changes in stockholders’ equity for the second quarters and first six months of 2023 and 2022, and our cash flows for the first six months of 2023 and 2022 in conformity with U.S. Generally Accepted Accounting Principles (GAAP).
These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our latest Annual Report on Form 10-K.
1. Railway Operating Revenues
The following table disaggregates our revenues by major commodity group:
| Second Quarter | First Six Months | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Merchandise: | ||||||||||||||||||||||||||
| Agriculture, forest and consumer products | $ | $ | $ | $ | ||||||||||||||||||||||
| Chemicals | ||||||||||||||||||||||||||
| Metals and construction | ||||||||||||||||||||||||||
| Automotive | ||||||||||||||||||||||||||
| Merchandise | ||||||||||||||||||||||||||
| Intermodal | ||||||||||||||||||||||||||
| Coal | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
We recognize the amount of revenues to which we expect to be entitled for the transfer of promised goods or services to customers. A performance obligation is created when a customer under a transportation contract or public tariff submits a bill of lading to us for the transport of goods. These performance obligations are satisfied as the shipments move from origin to destination. As such, transportation revenues are recognized proportionally as a shipment moves, and related expenses are recognized as incurred. These performance obligations are generally short-term in nature with transit days averaging approximately one week or less for each commodity group. The customer has an unconditional obligation to pay for the service once the service has been completed. Estimated revenues associated with in-process shipments at period-end are recorded based on the estimated percentage of service completed. We had no material remaining performance obligations at June 30, 2023 and December 31, 2022.
We may provide customers ancillary services, such as switching, demurrage and other incidental activities, under their transportation contracts. The revenues associated with these distinct performance obligations are recognized when the services are performed or as contractual obligations are met. These revenues are included within each of the commodity groups and represent approximately 4 % and 6 % of total “Railway operating revenues” on the Consolidated Statements of Income for the second quarters of 2023 and 2022, respectively, and 5 % and 7 % for the first six months of 2023 and 2022, respectively.
9
Revenues related to interline transportation services that involve another railroad are reported on a net basis. Therefore, the portion of the amount that relates to another party is not reflected in revenues.
Under the typical terms of our freight contracts, payment for services is due within fifteen days of billing the customer, thus there are no significant financing components. “Accounts receivable – net” on the Consolidated Balance Sheets includes both customer and non-customer receivables as follows:
| June 30, 2023 | December 31, 2022 | |||||||||||||
| ($ in millions) | ||||||||||||||
| Customer | $ | $ | ||||||||||||
| Non-customer | ||||||||||||||
| Accounts receivable – net | $ | $ | ||||||||||||
Non-customer receivables include non-revenue-related amounts due from other railroads, governmental entities, and others. We do no
2. Stock-Based Compensation
| Second Quarter | First Six Months | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Stock-based compensation expense | $ | $ | $ | $ | ||||||||||||||||||||||
| Total tax benefit | ||||||||||||||||||||||||||
During 2023, we granted stock options, restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows:
| Second Quarter | First Six Months | |||||||||||||||||||||||||
| Granted | Weighted-Average Grant-Date Fair Value | Granted | Weighted-Average Grant-Date Fair Value | |||||||||||||||||||||||
| Stock options | $ | $ | ||||||||||||||||||||||||
| RSUs | ||||||||||||||||||||||||||
| PSUs | ||||||||||||||||||||||||||
10
Stock Options
| Second Quarter | First Six Months | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Options exercised | ||||||||||||||||||||||||||
| Cash received upon exercise | $ | $ | $ | $ | ||||||||||||||||||||||
| Related tax benefits realized | ||||||||||||||||||||||||||
Restricted Stock Units
RSUs granted primarily have a four-year ratable restriction period and will be settled through the issuance of shares of Norfolk Southern common stock (Common Stock). Certain RSU grants include cash dividend equivalent payments during the restriction period in an amount equal to the regular quarterly dividends paid on Common Stock.
| Second Quarter | First Six Months | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| RSUs vested | ||||||||||||||||||||||||||
| Common Stock issued net of tax withholding | ||||||||||||||||||||||||||
| Related tax benefits realized | $ | $ | $ | $ | ||||||||||||||||||||||
Performance Share Units
PSUs provide for awards based on the achievement of certain predetermined corporate performance goals at the end of a three-year cycle and are settled through the issuance of shares of Common Stock. All PSUs will earn out based on the achievement of performance conditions and some will also earn out based on a market condition. The market condition fair value was measured on the date of grant using a Monte Carlo simulation model. No
| First Six Months | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| ($ in millions) | ||||||||||||||
| PSUs earned | ||||||||||||||
| Common Stock issued net of tax withholding | ||||||||||||||
| Related tax benefits realized | $ | $ | ||||||||||||
11
3. Earnings Per Share
The following table sets forth the calculation of basic and diluted earnings per share:
| Basic | Diluted | ||||||||||||||||||||||
| Second Quarter | |||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| ($ in millions, except per share amounts, shares in millions) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Dividend equivalent payments | ( | ( | |||||||||||||||||||||
| Income available to common stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||||||||
| Dilutive effect of outstanding options and share-settled awards | |||||||||||||||||||||||
| Adjusted weighted-average shares outstanding | |||||||||||||||||||||||
| Earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Basic | Diluted | ||||||||||||||||||||||
| First Six Months | |||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| ($ in millions, except per share amounts, shares in millions) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Dividend equivalent payments | ( | ( | ( | ( | |||||||||||||||||||
| Income available to common stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||||||||
| Dilutive effect of outstanding options and share-settled awards | |||||||||||||||||||||||
| Adjusted weighted-average shares outstanding | |||||||||||||||||||||||
| Earnings per share | $ | $ | $ | $ | |||||||||||||||||||
During the second quarters and first six months of 2023 and 2022, dividend equivalent payments were made to certain holders of stock options and RSUs. For purposes of computing basic earnings per share, dividend equivalent payments made to holders of stock options and RSUs were deducted from net income to determine income available to common stockholders. For purposes of computing diluted earnings per share, we evaluate on a grant-by-grant basis those stock options and RSUs receiving dividend equivalent payments under the two-class and treasury stock methods to determine which method is more dilutive for each grant. For those grants for which the two-class method was more dilutive, net income was reduced by dividend equivalent payments to determine income available to common stockholders. The dilution calculations exclude options having exercise prices exceeding the average market price of Common Stock as follows: 0.1
12
4. Accumulated Other Comprehensive Loss
| Balance at Beginning of Year | Net Income | Reclassification Adjustments | Balance at End of Period | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Six months ended June 30, 2023 | |||||||||||||||||||||||
| Pensions and other postretirement liabilities | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive loss of equity investees | ( | ( | |||||||||||||||||||||
| Accumulated other comprehensive loss | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Six months ended June 30, 2022 | |||||||||||||||||||||||
| Pensions and other postretirement liabilities | $ | ( | $ | $ | $ | ( | |||||||||||||||||
| Other comprehensive income (loss) of equity investees | ( | ( | |||||||||||||||||||||
| Accumulated other comprehensive loss | $ | ( | $ | $ | $ | ( | |||||||||||||||||
5. Stock Repurchase Program
6. Investments
Investment in Conrail
Through a limited liability company, we and CSX Corporation (CSX) jointly own Conrail Inc. (Conrail), whose primary subsidiary is Consolidated Rail Corporation (CRC). We have a 58 % economic and 50 % voting interest in the jointly-owned entity, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.6
CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of Norfolk Southern Railway Company (NSR) and CSX Transportation, Inc. (CSXT). The costs of operating the Shared Assets Areas are borne by NSR and CSXT based on usage. In addition, NSR and CSXT pay CRC a fee for access to the Shared Assets Areas. “Purchased services and rents” and “Fuel” include expenses payable to CRC for operation of the Shared Assets Areas totaling $39 million and $36 million for the second quarters of 2023 and 2022, respectively, and $84 million and $74 million for the first six months of 2023 and 2022, respectively. Our equity in Conrail’s earnings, net of amortization, was $19 million and $11 million for the second quarters of 2023 and 2022, respectively, and $35 million and $25 million for the first six months of 2023 and 2022, respectively. These amounts partially offset the costs of operating the Shared Assets Areas and are included in “Purchased services and rents.”
“Other liabilities” includes $534 1.31
13
Investment in TTX
We and six other North American railroads collectively own TTX Company (TTX), a railcar pooling company that provides its owner-railroads with standardized fleets of intermodal, automotive, and general use railcars at stated rates. We have a 19.78 % ownership interest in TTX.
7. Debt
In May 2023, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $400 million. Amounts under our accounts receivable securitization program are borrowed and repaid from time to time in the ordinary course for general corporate and cash management purposes. The term of our accounts receivable securitization program was extended in the second quarter and now expires in May 2024. Amounts received under this facility are accounted for as borrowings. At June 30, 2023, we had $130 million (at an average variable interest rate of 5.81 %) outstanding which is included within “Short-term debt” and our available borrowing capacity was $270 million. At December 31, 2022, we had $100 million (at an average variable interest rate of 5.05 %) outstanding and our available borrowing capacity was $300 million. Our accounts receivable securitization program was supported by $840 million and $883 million in receivables at June 30, 2023 and December 31, 2022, respectively, which are included in “Accounts receivable – net”.
In February 2023, we issued $500 million of 4.45 % senior notes due 2033.
8. Pensions and Other Postretirement Benefits
We have both funded and unfunded defined benefit pension plans covering eligible employees. We also provide specified health care benefits to eligible retired employees; these plans can be amended or terminated at our option. Under our self-insured retiree health care plan, for those participants who are not Medicare-eligible, certain health care expenses are covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies. Eligible retired participants and their spouses who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are provided with an employer-funded health reimbursement account which can be used for reimbursement of health insurance premiums or eligible out-of-pocket medical expenses.
14
Pension and postretirement benefit cost components were as follows:
| Pension Benefits | Other Postretirement Benefits | ||||||||||||||||||||||
| Second Quarter | |||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of net losses | |||||||||||||||||||||||
| Amortization of prior service benefit | ( | ( | |||||||||||||||||||||
| Net benefit | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Pension Benefits | Other Postretirement Benefits | ||||||||||||||||||||||
| First Six Months | |||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of net losses | |||||||||||||||||||||||
| Amortization of prior service benefit | ( | ( | |||||||||||||||||||||
| Net benefit | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
9. Fair Values of Financial Instruments
The fair values of “Cash and cash equivalents,” “Accounts receivable – net,” “Accounts payable,” and “Short-term debt,” approximate carrying values because of the short maturity of these financial instruments. The carrying value of corporate-owned life insurance is recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities measured at fair value on a recurring basis at June 30, 2023 or December 31, 2022. The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consist of the following:
| June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Long-term debt, including current maturities | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
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10. Commitments and Contingencies
Eastern Ohio Incident
Summary
On February 3, 2023, a train we operated derailed in East Palestine, Ohio. The derailed equipment included 38 railcars, 11 of which were non-Company-owned tank cars containing hazardous materials. Fires associated with the derailment threatened certain of the tank cars. There was concern about the risk that the contents of five of the tank cars carrying vinyl chloride might polymerize, which would have posed the risk of a catastrophic explosion. As a consequence, on February 6, 2023, the local incident commander—in consultation with the incident command that included, among others, federal, state and local officials and Norfolk Southern—opted to conduct a controlled vent and burn of five derailed tank cars, all of which contained vinyl chloride. This procedure involved creating holes in the five tank cars to drain the vinyl chloride into adjacent trenches that had been dug into the ground where such vinyl chloride was then burned, with any material remaining after burning of the vinyl chloride being remediated. The February 3rd derailment, the associated fire, and the resulting vent and burn of the tank cars containing vinyl chloride on February 6th is hereinafter referred to as the “Incident.”
In response to the Incident, we have been working to clean the site safely and thoroughly, including those activities described in the Environmental Matters section below with respect to potentially impacted air, soil and water and to monitor for any impact on public health and the environment. We are working with federal, state, and local officials to mitigate impacts from the Incident, including, among other efforts, conducting environmental monitoring and clean-up activities (as more fully described below), and operating a family assistance center to provide financial support to affected members of the East Palestine and surrounding communities.
Financial Impact
Although we cannot predict the final outcome or estimate the reasonably possible range of loss with certainty, during the first six months of 2023, we have recognized $803 million of expense for costs directly attributable to the Incident ($416 million of which was recognized in the second quarter), which is presented in “Eastern Ohio incident” on the Consolidated Statements of Income. During the first six months of 2023, our cash expenditures attributable to the Incident were $287 million, which are presented in “Net cash provided by operating activities” on the Consolidated Statements of Cash Flows. The difference between the recognized expense and cash expenditures during the first six months of 2023, $516 million, is primarily comprised of our current estimates of probable and reasonably estimable liabilities principally associated with environmental matters and legal proceedings, which are discussed in further detail below.
While certain costs recorded during the first six months of 2023 may be recoverable from third parties or under our insurance policies in effect at the date of the Incident, no estimate of potential recoveries has yet been recorded. Any amounts recoverable from third parties or under our insurance policies will be reflected in future periods in which recovery is considered probable. For additional information about our insurance coverage, see “Insurance” below.
Environmental Matters – In response to the Incident, we have been working with federal, state, and local officials such as the U.S. Environmental Protection Agency (EPA), the Ohio EPA, and the Pennsylvania Department of Environmental Protection (DEP), to conduct environmental response and remediation activities, including but not limited to, air monitoring, indoor air quality screenings, municipal water and private water well testing, residential, commercial, and agricultural soil sampling, surface water and groundwater sampling, re-routing a local waterway around the affected site, capturing and shipping stormwater that enters the impacted derailment site to proper disposal facilities, and excavating and disposing of potentially affected soil at hazardous waste landfills or incinerators. The U.S. EPA issued a Unilateral Administrative Order (UAO) on February 21, 2023, containing various requirements, including the submission of numerous work plans to assess and remediate various environmental media and
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performance of certain removal actions at the affected site. On February 24, 2023, we submitted to the U.S. EPA our Notice of Intent to Comply with the UAO and are currently cooperating with U.S. EPA as well as the Ohio EPA and Pennsylvania DEP, pursuant to the UAO and the directives issued thereunder.
We are also subject to the following legal proceedings that principally relate to the environmental impact of the Incident:
•The U.S. Department of Justice (DOJ) and the U.S. EPA filed a civil complaint (the DOJ Complaint) in the Northern District of Ohio (Eastern Division) seeking injunctive relief, cost recovery and civil penalties for violations of the Clean Water Act and seeking cost recovery under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The Ohio Attorney General (AG) also filed a CERCLA lawsuit (the Ohio Complaint) in the Northern District of Ohio (Eastern Division) seeking statutory damages for a variety of tort and environmental claims under CERCLA and various state laws. The DOJ and Ohio AG cases have been consolidated for discovery purposes. We have filed an answer, and on June 30, 2023, we filed a third-party complaint bringing in numerous parties involved in the Incident.
In connection with the foregoing items, we recognized $581 million of expense during the first six months of 2023 ($264 million of which was recognized in the second quarter), of which $208 million was paid during the first six months of 2023, related to probable obligations that are reasonably estimable, in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 410-30, “Environmental Obligations.” Our current estimate includes ongoing and future environmental cleanup activities and remediation efforts, governmental oversight costs (including those incurred by the U.S. EPA and the Ohio EPA), and other related costs, including those in connection with the DOJ Complaint (including potential civil penalties related to violations of the Clean Water Act). Our current estimates of future environmental cleanup and remediation liabilities related to the Incident may change over time due to various factors, including but not limited to, when activities at the site transition from extensive soil and water disposal and air monitoring activities to additional assessment and investigative efforts, the nature and extent of required future cleanup activities (including those resulting from additional assessment and investigative activities that will be conducted at the site), the extent and duration of governmental oversight, and the success of current cleanup techniques, amongst other factors. As clean-up efforts progress and more information is available, including any federal and state requirements, we will review these estimates and revise as appropriate.
Legal Proceedings and Claims (Non-Environmental) – To date, numerous non-environmental legal actions have commenced with respect to the Incident, including those more specifically set forth below.
•There is a consolidated putative class action pending in the Northern District of Ohio (Eastern Division) alleging various claims, including negligence, gross negligence, strict liability, and nuisance, and seeking as relief compensatory and punitive damages, medical monitoring and business losses. The putative classes are defined by reference to a class area covering a 30-mile radius. The court in the putative class action has established a fact discovery deadline in January 2024. Additional lawsuits are also pending in the same court and others, such as lawsuits pending in the Western District of Pennsylvania brought by three local school districts and including claims such as negligence, nuisance, trespass, and future health monitoring. The putative class action and individual lawsuits are collectively referred to herein as the Incident Lawsuits. In accordance with ASC 450, “Contingencies,” we have recognized a $105 million loss during the first six months of 2023 with respect to the Incident Lawsuits ($77 million of which was recognized during the second quarter based on updated information and related discussions, including currently estimated liabilities related to tailored property value and drinking water protection programs being negotiated with relevant stakeholders, including the Ohio AG, to assist affected residents and businesses). We have made $25 million in payments during the first six months of 2023 with respect to these matters.
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•Securities litigation and demands, including a securities class action lawsuit under the Securities Exchange Act of 1934 filed in the Southern District of Ohio alleging multiple securities law violations, a securities class action lawsuit under the Securities Act of 1933 filed in the Southern District of New York alleging misstatements in association with our debt offerings, and multiple shareholder document and litigation demand letters that we have received (collectively, the Shareholder Matters). No responsive pleadings have been filed yet, although we are seeking to transfer the matter filed in the Southern District of Ohio to the Northern District of Georgia.
If and when we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it will be accrued through a charge to earnings and, if material, disclosed. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known. Because the final outcome of any of these legal proceedings cannot be predicted with certainty, unfavorable or unexpected developments or outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter. For legal proceedings where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established but the matter, if potentially material, is disclosed.
In addition to the costs associated with environmental matters and legal proceedings and claims, we incurred other expenses directly related to the Incident of $117 million during the first six months of 2023 ($75 million of which was recognized in the second quarter) pertaining to legal fees, community support, and other response-related activities. The reserves established by us during the first six months of 2023 do not include any estimate of loss for the following additional items, for which we believe a loss is either not probable or not reasonably estimable for the reasons noted: (i) the overall cost to us for the healthcare fund being developed in conjunction with relevant stakeholders, including the Ohio AG, for affected residents (given the preliminary nature of such discussions), which amount will impact our loss contingency analysis with respect to the Incident Lawsuits described above, or (ii) any fines or penalties (in excess of the reserves established for Clean Water Act-related civil penalties) that may be imposed as a result of the Incident Inquiries and Investigations, as more specifically set forth and defined below (the outcome of which are uncertain at this time). Additionally, as noted above, amounts recognized during the first six months of 2023 do not include potential recoveries from third parties, including but not limited to the impact of our insurance coverage, which may apply to various Incident-related expenses or liabilities, as more specifically set forth further below (given the preliminary nature of any related discussions with our insurers).
Inquiries and Investigations
As set forth above, we are subject to inquiries and investigations by numerous federal, state, and local government authorities and regulatory agencies regarding the Incident, including but not limited to, the DOJ and the U.S. EPA, the Ohio EPA, the National Transportation Safety Board (NTSB), the Federal Railroad Administration (FRA), the Occupational Safety and Health Administration, the Ohio AG, and the Pennsylvania AG. Further details regarding the NTSB and FRA investigations are set forth below. We are cooperating with all inquiries and investigations, including responding to civil and criminal subpoenas and other requests for information (the aforementioned inquiries and investigations, as well as the civil and criminal subpoenas are collectively referred to herein as the Incident Inquiries and Investigations). The outcome of any current or future Incident Inquiries and Investigations is uncertain at this time, including any related fines, penalties or settlements. Therefore, our expenses for the first six months of 2023 do not include estimates of the total amount that we may incur for any such fines, penalties or settlements.
Subsequent to the Incident, investigators from the NTSB examined railroad equipment and track conditions; reviewed data from the signal system, wayside defect detectors, local surveillance cameras, and the lead locomotive’s event recorder and forward-facing and inward-facing image recorders; and completed certain interviews (the NTSB Investigation). The NTSB issued a preliminary report indicating that one of the cars involved
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in the derailment appeared to have a wheel bearing in the final stage of overheat failure moments before the derailment. Their preliminary report also indicates that the rail crew was operating the train within our rules; the rail crew operated the train below the track speed limit, the wayside heat detectors were operating as designed; and once the rail crew was alerted by the wayside detector, they immediately began to stop the train. The NTSB conducted a subsequent investigative field hearing in East Palestine, Ohio on June 22 and 23, 2023. The NTSB’s investigation remains ongoing. We expect the NTSB to issue a final report, with a probable cause determination and safety recommendations, in 2024.
Concurrent with the NTSB Investigation, the FRA is also investigating the Incident. Similar in scope to the NTSB Investigation, the FRA is examining railroad equipment, track conditions, hazardous materials train placement and routing, and emergency response (the FRA Incident Investigation). The FRA Incident Investigation may result in the assessment of civil penalties. In addition to the FRA Incident Investigation, the FRA recently completed a 60-day supplemental safety assessment (the FRA Safety Assessment). The FRA Safety Assessment included a review of findings from a previously completed 2022 system audit and an assessment of operational elements including, but not limited to: track, signal, and rolling stock maintenance, inspection and repair practices; protection of employees; communications between transportation departments and mechanical and engineering staff; operation control center procedures and dispatcher training. The overall scope of the FRA Safety Assessment was to examine our safety culture. We expect the FRA to issue a public report in early August including its findings and recommended corrective actions. The FRA Incident Investigation remains ongoing.
Other Commitments and Contingencies
Lawsuits
We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to railroad operations. When we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it is accrued through a charge to earnings and, if material, disclosed below. While the ultimate amount of liability incurred in any of these lawsuits and claims is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payment of such liability and claims. However, the final outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known. For lawsuits and other claims where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established but the matter, if potentially material, is disclosed below. We routinely review relevant information with respect to our lawsuits and other claims and update our accruals, disclosures and estimates of reasonably possible loss based on such reviews.
In 2007, various antitrust class actions filed against us and other Class I railroads in various Federal district courts regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on Multidistrict Litigation. In 2012, the court certified the case as a class action. The defendant railroads appealed this certification, and the Court of Appeals for the District of Columbia vacated the District Court’s decision and remanded the case for further consideration. On October 10, 2017, the District Court denied class certification. The decision was upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in multiple jurisdictions and also consolidated in the District of Columbia. We believe the allegations in the complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these proceedings will have a material effect on our financial position, results of operations, or liquidity.
In 2018, a lawsuit was filed against one of our subsidiaries by the minority owner in a jointly-owned terminal railroad company in which our subsidiary has the majority ownership. The lawsuit alleged violations of various state laws and federal antitrust laws. On January 3, 2023, the court granted summary judgment to us on all of the compensatory claims but denied summary judgment for all equitable relief claims. On January 18, 2023, the court dismissed the federal equitable relief claims, leaving the state equitable relief claims as the sole remaining issue under consideration. On April 19, 2023, the court disposed of all remaining state equitable relief claims. A notice
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of appeal was filed on May 16, 2023. We will continue to vigorously defend the lawsuit and, although it is reasonably possible we could incur a loss in the case, we believe that we will prevail. However, given that litigation is inherently unpredictable and subject to uncertainties, there can be no assurances that the final outcome of the litigation (including the related appeal) will not be material. Until such appeal is final, we cannot reasonably estimate the potential loss or range of loss associated with this matter.
Casualty Claims
Casualty claims include employee personal injury and occupational claims as well as third-party claims, all exclusive of legal costs. To aid in valuing our personal injury liability and determining the amount to accrue with respect to such claims during the year, we utilize studies prepared by an independent consulting actuarial firm. Job-related personal injury and occupational claims are subject to the Federal Employer’s Liability Act (FELA), which is applicable only to railroads. The variability inherent in FELA’s fault-based tort system could result in actual costs being different from the liability recorded. While the ultimate amount of claims incurred is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payments of claims and is supported by the most recent actuarial study. In all cases, we record a liability when the expected loss for the claim is both probable and reasonably estimable.
Employee personal injury claims – Other than Incident-related matters noted above, the largest component of claims expense is employee personal injury costs. The independent actuarial firm we engage provides quarterly studies to aid in valuing our employee personal injury liability and estimating personal injury expense. The actuarial firm studies our historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside influences. The actuarial firm uses the results of these analyses to estimate the ultimate amount of liability. We adjust the liability quarterly based upon our assessment and the results of the study. The accuracy of our estimate of the liability is subject to inherent limitation given the difficulty of predicting future events such as jury decisions, court interpretations, or legislative changes. As a result, actual claim settlements may vary from the estimated liability recorded.
Occupational claims – Occupational claims include injuries and illnesses alleged to be caused by exposures which occur over time as opposed to injuries or illnesses caused by a specific accident or event. Types of occupational claims commonly seen allege exposure to asbestos and other claimed toxic substances resulting in respiratory diseases or cancer. Many such claims are being asserted by former or retired employees, some of whom have not been employed in the rail industry for decades. The independent actuarial firm provides an estimate of the occupational claims’ liability based upon our history of claim filings, severity, payments, and other pertinent facts. The liability is dependent upon judgments we make as to the specific case reserves as well as judgments of the actuarial firm in the quarterly studies. Our estimate of ultimate loss includes a provision for those claims that have been incurred but not reported. This provision is derived by analyzing industry data and projecting our experience. We adjust the liability quarterly based upon our assessment and the results of the study. However, it is possible that the recorded liability may not be adequate to cover the future payment of claims. Adjustments to the recorded liability are reflected in operating expenses in the periods in which such adjustments become known.
Third-party claims – We record a liability for third-party claims including those for highway crossing accidents, trespasser and other injuries, property damage, and lading damage. The actuarial firm assists us with the calculation of potential liability for third-party claims, except lading damage, based upon our experience including the number and timing of incidents, amount of payments, settlement rates, number of open claims, and legal defenses. We adjust the liability quarterly based upon our assessment and the results of the study. Given the inherent uncertainty in regard to the ultimate outcome of third-party claims, it is possible that the actual loss may differ from the estimated liability recorded.
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Environmental Matters
We are subject to various jurisdictions’ environmental laws and regulations. We record a liability where such liability or loss is probable and reasonably estimable. Environmental specialists regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to liability estimates.
In addition to environmental claims associated with the Incident, our Consolidated Balance Sheets 60 million at June 30, 2023 and $66 million at December 31, 2022, of which $15 82 known locations and projects compared with 85 locations and projects at December 31, 2022. At June 30, 2023, nineteen sites accounted for $49 million of the liability, and no individual site was considered to be material. We anticipate that most of this liability will be paid out over five years ; however, some costs will be paid out over a longer period.
At eight locations, one or more of our subsidiaries in conjunction with a number of other parties have been identified as potentially responsible parties under CERCLA or comparable state statutes that impose joint and several liability for cleanup costs. We calculate our estimated liability for these sites based on facts and legal defenses applicable to each site and not solely on the basis of the potential for joint liability.
As set forth above, with respect to known environmental sites (whether identified by us or by the U.S. EPA or comparable state authorities), estimates of our ultimate potential financial exposure for a given site or in the aggregate for all such sites can change over time because of the widely varying costs of currently available cleanup techniques, unpredictable contaminant recovery and reduction rates associated with available cleanup technologies, the likely development of new cleanup technologies, the difficulty of determining in advance the nature and full extent of contamination and each potential participant’s share of any estimated loss (and that participant’s ability to bear it), and evolving statutory and regulatory standards governing liability.
The risk of incurring environmental liability for acts and omissions, past, present, and future, is inherent in the railroad business. Some of the commodities we transport, particularly those classified as hazardous materials, pose special risks that we work diligently to reduce. In addition, several of our subsidiaries own, or have owned, land used as operating property, or which is leased and operated by others, or held for sale. Because environmental problems that are latent or undisclosed may exist on these properties, there can be no assurance that we will not incur environmental liabilities or costs with respect to one or more of them, the amount and materiality of which cannot be estimated reliably at this time. Moreover, lawsuits and claims involving these and potentially other unidentified environmental sites and matters are likely to arise from time to time. The resulting liabilities could have a significant effect on financial position, results of operations, or liquidity in a particular year or quarter.
Based on our assessment of the facts and circumstances now known, we believe we have recorded the probable and reasonably estimable costs for dealing with those environmental matters of which we are aware. Further, we believe that it is unlikely that any known matters, either individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, or liquidity.
Labor Agreements
Approximately 80 % of our railroad employees are covered by collective bargaining agreements with various labor unions. Pursuant to the Railway Labor Act, these agreements remain in effect until new agreements are reached, or until the bargaining procedures mandated by the Railway Labor Act are completed. Moratorium provisions in the labor agreements govern when the railroads and unions may propose changes to the agreements. We largely bargain nationally in concert with other major railroads, represented by the National Carriers’ Conference Committee.
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The latest round of national bargaining concluded in December 2022, when agreements were either ratified or enacted through legislative action for all twelve of our unions. With the conclusion of national bargaining, neither party can compel mandatory bargaining around any new proposals until November 1, 2024.
In addition, we understand the imperative to continue improving quality of life for our craft employees and remain actively engaged with our unions in voluntary local discussions (none of which carry the risk of a work stoppage) on this important issue.
Insurance
We purchase insurance covering legal liabilities for bodily injury and property damage to third parties. This insurance provides coverage above $75 million and below $800 million (or up to $1.1 billion for specified types of pollution releases) per occurrence and/or policy year. In addition, we purchase insurance covering damage to property owned by us or in our care, custody, or control. This insurance covers approximately 82 % of potential losses above $75 million and below $275 million per occurrence and/or policy year.
Our ability to recoup any of the foregoing amounts under our insurance coverage, including any amounts that may be recoverable with respect to the Incident, is subject to certain conditions, including but not limited to our insurers’ reservation of rights to further investigate and contest coverage, the express restrictions and sub-limits of coverage, and various policy exclusions, including those for some governmental fines or penalties, as well as potential coverage disputes over payments we make as part of our effort to mitigate the impact to the community and affected residents. We are working with our insurers to confirm applicable coverage with respect to the Incident, but no estimate for potential insurance recovery has been accrued at this time.
Asset Purchase and Sale Agreement
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Norfolk Southern Corporation and Subsidiaries
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes.
OVERVIEW
We are one of the nation’s premier transportation companies, moving goods and materials that help drive the U.S. economy. We connect customers to markets and communities to economic opportunity with safe, reliable, and cost-effective shipping solutions. Our Norfolk Southern Railway Company subsidiary operates in 22 states and the District of Columbia. We are a major transporter of industrial products, including agriculture, forest and consumer products, chemicals, and metals and construction materials. In addition, in the East we serve every major container port and operate the most extensive intermodal network. We are also a principal carrier of coal, automobiles, and automotive parts.
Our second-quarter results reflect declines in income from railway operations, net income and diluted earnings per share as we continued our response efforts to a February 2023 derailment of 38 railcars in Eastern Ohio. During the quarter, we recognized $416 million in additional expenses related to ongoing environmental cleanup and remediation efforts, legal proceedings resulting from the Incident, and other Incident-related costs. We continue to work with federal, state, and local officials to mitigate impacts from the Incident and to provide support to affected members of the community. Please see Note 10 in the Notes to Consolidated Financial Statements for a detailed discussion of the Incident.
Further impacting our second-quarter 2023 financial results was a decline in railway operating revenues. The reduction in revenue was due to a decline in volumes, as service challenges and a weaker demand environment restricted our ability to grow, and a lower average revenue per unit, driven by lower fuel surcharge revenue. In addition to the costs recognized from the Incident, our operating expenses were also slightly higher, driven by inflationary pressures, higher service-related costs and increased headcount, though mostly offset by the impact of lower fuel expense. As we continue to make progress in response to the derailment and support the impacted community, we remain committed to our strategy — a balanced approach of delivering safe, reliable and resilient service, smart and sustainable growth, and continuous productivity improvement.
SUMMARIZED RESULTS OF OPERATIONS
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | % change | 2023 | 2022 | % change | ||||||||||||||||||||||||||||||
| ($ in millions, except per share amounts) | |||||||||||||||||||||||||||||||||||
| Income from railway operations | $ | 576 | $ | 1,271 | (55%) | $ | 1,287 | $ | 2,356 | (45%) | |||||||||||||||||||||||||
| Net income | $ | 356 | $ | 819 | (57%) | $ | 822 | $ | 1,522 | (46%) | |||||||||||||||||||||||||
| Diluted earnings per share | $ | 1.56 | $ | 3.45 | (55%) | $ | 3.60 | $ | 6.37 | (43%) | |||||||||||||||||||||||||
| Railway operating ratio (percent) | 80.7 | 60.9 | 33% | 78.9 | 61.8 | 28% | |||||||||||||||||||||||||||||
Results for the second quarter and first six months of 2023 included $416 million and $803 million, respectively, of expenses included in income from railway operations arising from the Incident, which reduced net income by $317 million and $610 million, respectively, and diluted earnings per share by $1.39 and $2.67, respectively. For more information see Note 10 in the Notes to Consolidated Financial Statements. Second quarter and the first six months income from railway operations, net income, and diluted earnings per share were further impacted by the factors set forth further below.
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The following tables adjusts our 2023 GAAP financial results for the second quarter and the first six months to exclude the effects of the Incident. The income tax effects of this non-GAAP adjustment were calculated based on the applicable tax rates to which the non-GAAP adjustment related. We use these non-GAAP financial measures internally and believe this information provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding the 2023 costs arising from the Incident. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation from, or as a substitute for, the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.
| Non-GAAP Reconciliation for the Second Quarter | |||||||||||||||||
| Reported 2023 (GAAP) | Eastern Ohio Incident | Adjusted 2023 (non-GAAP) | |||||||||||||||
| ($ in millions, except per share amounts) | |||||||||||||||||
| Income from railway operations | $ | 576 | $ | 416 | $ | 992 | |||||||||||
| Net income | $ | 356 | $ | 317 | $ | 673 | |||||||||||
| Diluted earnings per share | $ | 1.56 | $ | 1.39 | $ | 2.95 | |||||||||||
| Railway operating ratio (percent) | 80.7 | (14.0) | 66.7 | ||||||||||||||
In the table below, references to the results for the second quarter of 2023 and related comparisons use the adjusted, non-GAAP results from the reconciliation in the table above.
| Second Quarter | |||||||||||||||||
| Adjusted 2023 (non-GAAP) | 2022 | Adjusted 2023 (non-GAAP) vs. 2022 | |||||||||||||||
| ($ in millions, except per share amounts) | % change | ||||||||||||||||
| Income from railway operations | $ | 992 | $ | 1,271 | (22%) | ||||||||||||
| Net income | $ | 673 | $ | 819 | (18%) | ||||||||||||
| Diluted earnings per share | $ | 2.95 | $ | 3.45 | (14%) | ||||||||||||
| Railway operating ratio (percent) | 66.7 | 60.9 | 10% | ||||||||||||||
| Non-GAAP Reconciliation for First Six Months | |||||||||||||||||
| Reported 2023 (GAAP) | Eastern Ohio Incident | Adjusted 2023 (non-GAAP) | |||||||||||||||
| ($ in millions, except per share amounts) | |||||||||||||||||
| Income from railway operations | $ | 1,287 | $ | 803 | $ | 2,090 | |||||||||||
| Net income | $ | 822 | $ | 610 | $ | 1,432 | |||||||||||
| Diluted earnings per share | $ | 3.60 | $ | 2.67 | $ | 6.27 | |||||||||||
| Railway operating ratio (percent) | 78.9 | (13.1) | 65.8 | ||||||||||||||
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In the table below, references to the results for the first six months of 2023 and related comparisons use the adjusted, non-GAAP results from the reconciliation in the table above.
| First Six Months | |||||||||||||||||||||||
| Adjusted 2023 (non-GAAP) | 2022 | Adjusted 2023 (non-GAAP) vs. 2022 | |||||||||||||||||||||
| ($ in millions, except per share amounts) | % change | ||||||||||||||||||||||
| Income from railway operations | $ | 2,090 | $ | 2,356 | (11%) | ||||||||||||||||||
| Net income | $ | 1,432 | $ | 1,522 | (6%) | ||||||||||||||||||
| Diluted earnings per share | $ | 6.27 | $ | 6.37 | (2%) | ||||||||||||||||||
| Railway operating ratio (percent) | 65.8 | 61.8 | 6% | ||||||||||||||||||||
On a non-GAAP basis excluding the impact of the Incident, income from railway operations decreased in both periods due to lower railway operating revenues and increased operating expenses. Railway operating revenues declined in both periods due to decreased volumes and lower intermodal storage revenues compared to the same period last year, while the second quarter also experienced a larger decline in fuel surcharge revenue. Increased railway operating expenses in both periods were primarily driven by inflationary pressures, higher service-related costs and increased headcounts which, during the second quarter, were mostly offset by lower fuel expense.
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DETAILED RESULTS OF OPERATIONS
Railway Operating Revenues
The following tables present a comparison of revenues ($ in millions), units (in thousands), and average revenue per unit ($ per unit) by commodity group.
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| Revenues | 2023 | 2022 | % change | 2023 | 2022 | % change | |||||||||||||||||||||||||||||
| Merchandise: | |||||||||||||||||||||||||||||||||||
| Agriculture, forest and consumer products | $ | 627 | $ | 624 | —% | $ | 1,280 | $ | 1,197 | 7% | |||||||||||||||||||||||||
| Chemicals | 503 | 552 | (9%) | 1,044 | 1,050 | (1%) | |||||||||||||||||||||||||||||
| Metals and construction | 415 | 420 | (1%) | 815 | 795 | 3% | |||||||||||||||||||||||||||||
| Automotive | 281 | 257 | 9% | 565 | 483 | 17% | |||||||||||||||||||||||||||||
| Merchandise | 1,826 | 1,853 | (1%) | 3,704 | 3,525 | 5% | |||||||||||||||||||||||||||||
| Intermodal | 745 | 972 | (23%) | 1,559 | 1,826 | (15%) | |||||||||||||||||||||||||||||
| Coal | 409 | 425 | (4%) | 849 | 814 | 4% | |||||||||||||||||||||||||||||
| Total | $ | 2,980 | $ | 3,250 | (8%) | $ | 6,112 | $ | 6,165 | (1%) | |||||||||||||||||||||||||
| Units | |||||||||||||||||||||||||||||||||||
| Merchandise: | |||||||||||||||||||||||||||||||||||
| Agriculture, forest and consumer products | 187.7 | 183.6 | 2% | 375.4 | 361.2 | 4% | |||||||||||||||||||||||||||||
| Chemicals | 126.7 | 140.0 | (10%) | 262.8 | 269.4 | (2%) | |||||||||||||||||||||||||||||
| Metals and construction | 161.7 | 163.9 | (1%) | 315.1 | 311.9 | 1% | |||||||||||||||||||||||||||||
| Automotive | 90.6 | 85.7 | 6% | 178.7 | 166.9 | 7% | |||||||||||||||||||||||||||||
| Merchandise | 566.7 | 573.2 | (1%) | 1,132.0 | 1,109.4 | 2% | |||||||||||||||||||||||||||||
| Intermodal | 925.4 | 1,016.5 | (9%) | 1,842.2 | 1,973.0 | (7%) | |||||||||||||||||||||||||||||
| Coal | 165.5 | 166.1 | —% | 339.3 | 331.7 | 2% | |||||||||||||||||||||||||||||
| Total | 1,657.6 | 1,755.8 | (6%) | 3,313.5 | 3,414.1 | (3%) | |||||||||||||||||||||||||||||
| Revenue per Unit | |||||||||||||||||||||||||||||||||||
| Merchandise: | |||||||||||||||||||||||||||||||||||
| Agriculture, forest and consumer products | $ | 3,342 | $ | 3,398 | (2%) | $ | 3,410 | $ | 3,314 | 3% | |||||||||||||||||||||||||
| Chemicals | 3,966 | 3,941 | 1% | 3,973 | 3,897 | 2% | |||||||||||||||||||||||||||||
| Metals and construction | 2,569 | 2,560 | —% | 2,587 | 2,548 | 2% | |||||||||||||||||||||||||||||
| Automotive | 3,102 | 3,007 | 3% | 3,164 | 2,894 | 9% | |||||||||||||||||||||||||||||
| Merchandise | 3,222 | 3,233 | —% | 3,273 | 3,177 | 3% | |||||||||||||||||||||||||||||
| Intermodal | 805 | 955 | (16%) | 846 | 925 | (9%) | |||||||||||||||||||||||||||||
| Coal | 2,470 | 2,562 | (4%) | 2,502 | 2,455 | 2% | |||||||||||||||||||||||||||||
| Total | 1,798 | 1,851 | (3%) | 1,845 | 1,806 | 2% | |||||||||||||||||||||||||||||
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Railway operating revenues decreased $270 million in the second quarter and $53 million for the first six months compared with the same periods last year. The table below reflects the components of the revenue change by major commodity group ($ in millions).
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| Merchandise | Intermodal | Coal | Merchandise | Intermodal | Coal | ||||||||||||||||||||||||||||||
| Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| Volume | $ | (21) | $ | (87) | $ | (2) | $ | 72 | $ | (121) | $ | 19 | |||||||||||||||||||||||
| Fuel surcharge revenue | (35) | (96) | (3) | 49 | (67) | 15 | |||||||||||||||||||||||||||||
| Rate, mix and other | 29 | (44) | (11) | 58 | (79) | 1 | |||||||||||||||||||||||||||||
| Total | $ | (27) | $ | (227) | $ | (16) | $ | 179 | $ | (267) | $ | 35 | |||||||||||||||||||||||
Approximately 95% of our revenue base is covered by contracts that include negotiated fuel surcharges. Revenues associated with these surcharges totaled $287 million and $421 million in the second quarters of 2023 and 2022, respectively, and $662 million and $665 million for the first six months of 2023 and 2022, respectively. The decrease in fuel surcharge revenues is driven by lower fuel commodity prices.
For the remainder of 2023, we expect that revenue will decline compared to 2022 driven by lower fuel prices, declining storage service charges, and softening coal pricing.
Merchandise
Merchandise revenues decreased during the second quarter but increased during the first six months. The decrease during the second quarter was due to lower volume and lower average revenue per unit, driven by lower fuel surcharge revenue partially offset by increased pricing. The increase during the first six months was primarily due to higher average revenue per unit, driven by increased pricing and higher fuel surcharge revenue, and higher volume.
Agriculture, forest and consumer products volume increased in both periods as increases in corn, fertilizers, food oils, ethanol and wheat more than offset the declines in pulpboard, graphic paper and woodchips. Volume gains in corn, fertilizers, food oils, ethanol and wheat were driven by increased market demand. The decline in pulpboard and graphic paper were due to higher inventories which lowered the demand for shipments, while the decline in woodchips was due to a customer mill closing.
Chemicals volume declined in both periods as reduced shipments of crude oil, plastics, natural gas liquids, and organic and inorganic chemicals, more than the offset increases in sand and solid waste. Volume declines for crude oil were driven by production outages and soft demand in the energy markets. Plastics, natural gas liquids and organic chemicals volume declined as a result of lower demand, while the decline in inorganic chemicals was driven by reduced production. Volume gains in sand were driven by current market demand, while the increase in solid waste was due to growth with existing customers.
Metals and construction volume decreased during the second quarter but increased during the first six months. The decline in the second quarter was due to lower volumes of kaolin and construction materials. The volume decline in kaolin was largely driven by higher inventories which lowered demand, while the decline in construction materials was due to extended cycle times and local service challenges. The increase during first six months was largely driven by increased demand for aggregates, scrap metal and cement, which more than offset declines in kaolin and construction materials.
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Automotive volume was higher in both periods due to higher finished vehicle inventory levels available for rail transportation.
Intermodal
Intermodal revenues decreased in both periods the result of lower average revenue per unit, driven by lower fuel surcharge revenue and storage service charges, and decreased volume.
Intermodal units (in thousands) by market were as follows:
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | % change | 2023 | 2022 | % change | ||||||||||||||||||||||||||||||
| Domestic | 577.0 | 670.4 | (14%) | 1,164.7 | 1,323.8 | (12 | %) | ||||||||||||||||||||||||||||
| International | 348.4 | 346.1 | 1% | 677.5 | 649.2 | 4 | % | ||||||||||||||||||||||||||||
| Total | 925.4 | 1,016.5 | (9%) | 1,842.2 | 1,973.0 | (7 | %) | ||||||||||||||||||||||||||||
Domestic volume declined in both periods due to a decrease in freight demand as a result of reduced consumer consumption combined with high inventories. International volume increased in both periods, driven by ocean carriers favoring inland point intermodal traffic, partially offset by a decrease in imports.
Coal
Coal revenues decreased for the second quarter but increased for the first six months. The second quarter decline was the result of lower average revenue per unit, driven by lower pricing and decreased fuel surcharge revenue, partially offset by favorable traffic mix. The increase in the first six months was due to increased volume and higher average revenue per unit, driven by traffic mix and higher fuel surcharge revenue partially offset by declining prices.
Coal tonnage (in thousands) by market was as follows:
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | % change | 2023 | 2022 | % change | ||||||||||||||||||||||||||||||
| Utility | 6,852 | 8,267 | (17%) | 15,062 | 17,228 | (13%) | |||||||||||||||||||||||||||||
| Export | 7,697 | 6,514 | 18% | 15,903 | 12,928 | 23% | |||||||||||||||||||||||||||||
| Domestic metallurgical | 3,059 | 2,782 | 10% | 5,390 | 5,212 | 3% | |||||||||||||||||||||||||||||
| Industrial | 882 | 1,083 | (19%) | 1,571 | 1,886 | (17%) | |||||||||||||||||||||||||||||
| Total | 18,490 | 18,646 | (1%) | 37,926 | 37,254 | 2% | |||||||||||||||||||||||||||||
Coal tonnage declined during the second quarter but rose for the first six months. Both periods saw increases in export and domestic metallurgical tonnage with declines in utility and industrial tonnage. Export and domestic metallurgical tonnage was higher due to increased demand and coal supply. Utility tonnage decreased as a result of low natural gas prices, high stockpiles, and mild winter weather. Industrial coal tonnage decreased due to reduced coal shipments related to sourcing changes.
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Railway Operating Expenses
Railway operating expenses summarized by major classifications follow ($ in millions):
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | % change | 2023 | 2022 | % change | ||||||||||||||||||||||||||||||
| Compensation and benefits | $ | 693 | $ | 614 | 13% | $ | 1,383 | $ | 1,233 | 12% | |||||||||||||||||||||||||
| Purchased services and rents | 506 | 481 | 5% | 1,002 | 918 | 9% | |||||||||||||||||||||||||||||
| Fuel | 263 | 408 | (36%) | 578 | 709 | (18%) | |||||||||||||||||||||||||||||
| Depreciation | 321 | 304 | 6% | 642 | 606 | 6% | |||||||||||||||||||||||||||||
| Materials and other | 205 | 172 | 19% | 417 | 343 | 22% | |||||||||||||||||||||||||||||
| Eastern Ohio incident | 416 | — | 803 | — | |||||||||||||||||||||||||||||||
| Total | $ | 2,404 | $ | 1,979 | 21% | $ | 4,825 | $ | 3,809 | 27% | |||||||||||||||||||||||||
Compensation and benefits expense increased in both periods as follows:
•increased pay rates (up $54 million for the quarter and $103 million for the first six months),
•employee activity levels (up $30 million for the quarter and $66 million for the first six months),
•incentive compensation (down $12 million for the quarter and $22 million for the first six months), and
•other (up $7 million for the quarter and $3 million for the first six months).
Average rail headcount for the quarter was up by 1,400 compared with the second quarter of 2022 primarily due to the hiring of additional train and engine craft employees.
Purchased services and rents increased in both periods as follows ($ in millions):
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | % change | 2023 | 2022 | % change | ||||||||||||||||||||||||||||||
| Purchased services | $ | 407 | $ | 387 | 5% | $ | 806 | $ | 736 | 10% | |||||||||||||||||||||||||
| Equipment rents | 99 | 94 | 5% | 196 | 182 | 8% | |||||||||||||||||||||||||||||
| Total | $ | 506 | $ | 481 | 5% | $ | 1,002 | $ | 918 | 9% | |||||||||||||||||||||||||
Purchased services rose in both periods due to increased operational and transportation expenses and higher technology-related expenses. In addition, the first six months were impacted by higher intermodal-related expenses. Equipment rents increased in both periods as lower network fluidity led to greater time-and-mileage expenses and increased intermodal equipment expenses. We also incurred higher freight car lease costs.
Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, decreased in both periods due to lower locomotive fuel prices (down 36% in the second quarter and 19% in the first six months) partially offset by slightly higher locomotive fuel consumption (up 1% in both the second quarter and first six months).
Depreciation expense increased in both periods due to our higher asset base and the impact of the results of our periodic roadway study.
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Materials and other expenses increased in both periods as follows ($ in millions):
| Second Quarter | First Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | % change | 2023 | 2022 | % change | ||||||||||||||||||||||||||||||
| Materials | $ | 88 | $ | 70 | 26% | $ | 179 | $ | 132 | 36% | |||||||||||||||||||||||||
| Claims | 60 | 64 | (6%) | 114 | 113 | 1% | |||||||||||||||||||||||||||||
| Other | 57 | 38 | 50% | 124 | 98 | 27% | |||||||||||||||||||||||||||||
| Total | $ | 205 | $ | 172 | 19% | $ | 417 | $ | 343 | 22% | |||||||||||||||||||||||||
Materials expense increased in both periods due to increased locomotive and freight car materials costs. Claims expense decreased in the second quarter, but slightly increased in the first six months of 2023. Both periods experienced lower costs associated with personal injury claims and environmental matters unrelated to the Incident. Claims expense for the first six months increased as a result of higher costs associated with derailments unrelated to the Incident. Other expense increased in both periods due to higher travel-related expenses and lower gains from operating property sales. Gains from operating property sales, included in Other, totaled $19 million and $28 million for the second quarter in 2023 and 2022, respectively, and $22 million and $34 million in the first six months of 2023 and 2022, respectively.
Eastern Ohio incident
During the second quarter and the first six months of 2023, we recorded $416 million and $803 million, respectively, for costs primarily associated with environmental matters and legal proceedings. The expense recorded in the first six months does not include any estimates for amounts that may be recovered from third parties or under our insurance policies. For further details regarding the Incident, see Note 10 in the Notes to Consolidated Financial Statements.
Other income (expense) – net
Other income increased $71 million in the second quarter and $132 million for the first six months, as both periods reflect higher returns on corporate-owned life insurance (COLI).
Income taxes
The effective tax rates for the second quarter and first six months of 2023 were 23.1% and 22.1%, compared with 24.7% and 23.9%, respectively, for the same periods last year. Both periods in 2023 reflect higher returns on COLI slightly offset by lower tax benefits on stock-based compensation, while the year-to-date rate also includes the benefit of certain business tax credits recognized in the first quarter.
FINANCIAL CONDITION AND LIQUIDITY
Cash provided by operating activities, our principal source of liquidity, was $1.8 billion for the first six months of 2023, compared with $2.0 billion for the same period of 2022. The decrease reflects lower operating results, offset in part by changes in working capital. We had negative working capital of $955 million and $642 million at June 30, 2023 and December 31, 2022, respectively. Cash and cash equivalents totaled $556 million at June 30, 2023.
Cash used in investing activities was $741 million for the first six months of 2023, compared with $714 million for the same period last year. The increase was primarily driven by higher property additions and lower proceeds from
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property sales, partially offset by COLI investment activity. For 2023, we expect property additions will be approximately $2.2 billion.
Cash used in financing activities was $1.0 billion for the first six months of 2023, compared with $877 million for the same period last year. The increase reflects lower proceeds from borrowing and higher debt repayments, partially offset by lower repurchases of Common Stock. We repurchased $303 million of Common Stock in the first six months of 2023 compared to $1.5 billion in the same period last year. The timing and volume of future share repurchases will be guided by our assessment of market conditions and other pertinent factors. Repurchases may be executed in the open market, through derivatives, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c) and Rule 10b-18 under the Securities and Exchange Act of 1934. Any near-term purchases under the program are expected to be made with internally-generated cash, cash on hand, or proceeds from borrowings.
In May 2023, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $400 million. Amounts under our accounts receivable securitization program are borrowed and repaid from time to time in the ordinary course for general corporate and cash management purposes. The term of our accounts receivable securitization program was extended in the second quarter and now expires in May 2024. We had $130 million outstanding under this program at June 30, 2023 and $100 million outstanding at December 31, 2022. Our available borrowing capacity was $270 million and $300 million at June 30, 2023 and December 31, 2022, respectively.
In February 2023, we issued $500 million of 4.45% senior notes due 2033.
Our debt-to-total capitalization ratio was 54.5% at June 30, 2023 and 54.4% at December 31, 2022. We have in place and available an $800 million credit agreement expiring in March 2025, which provides for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at June 30, 2023 or December 31, 2022.
In addition, we have investments in general purpose COLI policies and had the ability to borrow against these policies up to $530 million and $610 million at June 30, 2023 and December 31, 2022, respectively.
We expect cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing obligations. In addition, we believe our currently-available borrowing capacity, access to additional financing, and ability to decrease shareholder distributions, including share repurchases, provide additional flexibility to meet our ongoing obligations. There have been no material changes to the information on future contractual obligations, including those that may have material cash requirements, contained in our Form 10-K for the year ended December 31, 2022, with the exception of additional senior notes (see Note 7).
In June 2023, we amended and restated our asset purchase and sale agreement with the Board of Trustees of the Cincinnati Southern Railway to purchase approximately 337 miles of railway line that extends from Cincinnati, Ohio to Chattanooga, Tennessee which we currently operate under a lease agreement. Following this amendment, the total purchase price for the line and other associated real and personal property included in the transaction is expected to be between $1.6 billion and $1.7 billion. The agreement is conditioned upon the following, among other items: (i) Cincinnati Voter Approval, and (ii) the receipt of regulatory approval from the STB. If Cincinnati Voter Approval is obtained in November 2023, the transaction will close on the later of the date that is five days after all remaining conditions have been satisfied (including potential STB regulatory approval) or March 15, 2024.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates and assumptions may require judgment about matters that are inherently uncertain, and future events are
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likely to occur that may require us to make changes to these estimates and assumptions. Accordingly, we regularly review these estimates and assumptions based on historical experience, changes in the business environment, and other factors we believe to be reasonable under the circumstances. In addition to the critical accounting estimates below, the remainder of our critical accounting estimates are contained in our December 31, 2022 Form 10-K.
Contingencies
We are currently involved in certain environmental response and remediation activities and subject to numerous legal proceedings and regulatory inquiries and investigations resulting from the Incident. As required, we have accrued estimates of the probable and reasonably estimable costs for the resolution of these matters. Our environmental estimates are based upon types of remediation efforts currently anticipated, the volume of contaminants in the impacted areas, and governmental oversight and other costs, amongst other factors. Estimates associated with the legal proceedings to which we are subject are based on information that is currently available, including but not limited to an assessment of the proceedings and the potential and likely results of such proceedings.
Our current estimates of future environmental cleanup and remediation liabilities related to the Incident may change over time due to various factors, including but not limited to, when activities at the site transition from extensive soil and water disposal and air monitoring activities to additional assessment and investigative efforts, the nature and extent of required future cleanup activities (including those resulting from additional assessment and investigative activities that will be conducted at the site), the extent and duration of governmental oversight, and the success of current cleanup techniques, amongst other factors. Additionally, the final outcome of any of the legal proceedings and regulatory inquiries and investigations cannot be predicted with certainty, and unfavorable or unexpected developments or outcomes could result in new or additional accruals that could be material. Furthermore, certain of these costs may be recoverable from third parties or under our insurance policies in effect at the date of the Incident. Any amounts that are recoverable from third parties or under our insurance policies will be reflected in periods in which we determine that such amounts are probable of recovery.
See Note 10 in the Notes to Consolidated Financial Statements for more detailed information as it pertains to these contingencies.
OTHER MATTERS
Labor Agreements
Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor unions. Pursuant to the Railway Labor Act, these agreements remain in effect until new agreements are reached, or until the bargaining procedures mandated by the Railway Labor Act are completed. Moratorium provisions in the labor agreements govern when the railroads and unions may propose changes to the agreements. We largely bargain nationally in concert with other major railroads, represented by the National Carriers’ Conference Committee.
The latest round of national bargaining concluded in December 2022, when agreements were either ratified or enacted through legislative action for all twelve of our unions. With the conclusion of national bargaining, neither party can compel mandatory bargaining around any new proposals until November 1, 2024.
In addition, we understand the imperative to continue improving quality of life for our craft employees and remain actively engaged with our unions in voluntary local discussions (none of which carry the risk of a work stoppage) on this important issue.
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Inflation
In preparing financial statements, GAAP requires the use of historical cost that disregards the effects of inflation on the replacement cost of property. As a capital-intensive company, we have most of our capital invested in long-lived assets. The replacement cost of these assets, as well as the related depreciation expense, would be substantially greater than the amounts reported on the basis of historical cost.
FORWARD-LOOKING STATEMENTS
Certain statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or our achievements or those of our industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “project,” “consider,” “predict,” “potential,” “feel,” or other comparable terminology. We have based these forward-looking statements on our current expectations, assumptions, estimates, beliefs, and projections. While we believe these expectations, assumptions, estimates, beliefs, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which involve factors or circumstances that are beyond our control. These and other important factors, including those discussed under “Risk Factors” in our latest Form 10-K, as supplemented in Part II, Item 1A of this Form 10-Q, as well as our subsequent filings with the Securities and Exchange Commission, may cause actual results, performance, or achievements to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements herein are made only as of the date they were first issued, and unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Additional Information
Investors and others should note that we routinely use the Investor Relations, Performance Metrics, and Sustainability sections of our website (www.norfolksouthern.com/content/nscorp/en/investor-relations.html, http://www.nscorp.com/content/nscorp/en/investor-relations/performance-metrics.html & www.nscorp.com/content/nscorp/en/about-ns/sustainability.html) to post presentations to investors and other important information, including information that may be deemed material to investors. Information about us, including information that may be deemed material, may also be announced by posts on our social media channels, including Twitter (www.twitter.com/nscorp) and LinkedIn (www.linkedin.com/company/norfolk-southern). We may also use our website and social media channels for the purpose of complying with our disclosure obligations under Regulation FD. As a result, we encourage investors, the media, and others interested in Norfolk Southern to review the information posted on our website and social media channels. The information posted on our website and social media channels is not incorporated by reference in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is included in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Financial Condition and Liquidity.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
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under the Securities Exchange Act of 1934, as amended (Exchange Act)) at June 30, 2023. Based on such evaluation, our officers have concluded that, at June 30, 2023, our disclosure controls and procedures were effective in alerting them on a timely basis to material information required to be included in our periodic filings under the Exchange Act.
Changes in Internal Control Over Financial Reporting
During the second quarter of 2023, we have not identified any changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information on our legal proceedings, see Note 10 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.
Item 1A. Risk Factors
The risks set forth in “Risk Factors” included in our 2022 Form 10-K could have a material adverse effect on our financial position, results of operations, or liquidity in a particular year or quarter, and could cause those results to differ materially from those expressed or implied in our forward-looking statements. Those risks are updated to include the following risks.
INCIDENT RISKS
As defined and as further described in Note 10 in the Notes to Consolidated Financial Statements, there was an Incident that occurred in the first quarter that consisted of a February 3, 2023 train derailment in East Palestine, Ohio that included 11 non-Company-owned tank cars containing hazardous materials, fires associated with the derailment that threatened certain of the tank cars, and a controlled vent and burn procedure conducted on February 6, 2023 on five of the derailed tank cars, all of which contained vinyl chloride. As a result of the Incident, we have become subject to numerous legal, regulatory, legislative and other proceedings related thereto, including but not limited to, the NTSB Investigation, the FRA Incident Investigation, the FRA Safety Assessment, the DOJ Complaint, the Ohio Complaint, the Incident Lawsuits, the Shareholder Lawsuits, and the Incident Inquiries and Investigations, in addition to other proceedings, actions, or potential changes in response to the Incident, including but not limited to those related to, among other items, train size, train length, train composition, or crew size (collectively, the “Incident Proceedings”). Set forth below are additional risks pertaining to an investment in the Company that are related to the Incident and the Incident Proceedings.
New or additional governmental regulation and/or operational changes resulting from or related to the Incident or the Incident Proceedings may negatively impact us, our customers, the rail industry, or the markets we serve. The legislative, regulatory, operational or other actions taken, protocols adopted (including by us), or changes resulting from the Incident or any of the Incident Proceedings may, either individually or in the aggregate, negatively impact us, our customers, the rail industry, or the markets we serve. Our inability to comply with the requirements of any new or additional laws, regulations or operating protocols resulting from or related to the Incident or the Incident Proceedings may have a material adverse effect on our financial position, results of operations, liquidity, or operations.
The costs, liabilities, fines, penalties, and/or financial impact resulting from or related to the Incident or the Incident Proceedings may be significant, exceed expected or accrued amounts, or negatively affect our financial results. We have incurred and will continue to remain subject to incurring significant costs, liabilities, fines, and penalties related to the Incident and the Incident Proceedings, including amounts that may have a material adverse effect on our financial position, results of operations, or liquidity.
In addition, while we have provided estimates of probable and reasonably estimable liabilities with respect to the Incident and the Incident Proceedings, we cannot predict the final outcome or estimate the reasonably possible range of loss with certainty and such estimates may change over time due to a variety of factors, including but not limited to those set forth in Note 10 hereto or other unfavorable or unexpected developments or outcomes which could result in our current estimates being insufficient. These estimated amounts also do not include any estimate of loss for specific items for which we believe a loss is either not probable or not reasonably estimable for the reasons set forth in Note 10 hereto. As a result, our currently accrued amounts of estimated liabilities may be insufficient, and any additional, new or updated accruals may potentially have a material adverse effect on our results of operations or financial position.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be purchased under the Plans or Programs (1) | |||||||||||||||||||||||||
| April 1-30, 2023 | 14,773 | $ | 203.06 | 14,773 | $ | 7,324,271,033 | |||||||||||||||||||||||
| May 1-31, 2023 | 83,840 | 205.74 | 83,840 | 7,307,021,689 | |||||||||||||||||||||||||
| June 1-30, 2023 | 541,523 | 222.23 | 541,523 | 7,186,677,232 | |||||||||||||||||||||||||
| Total | 640,136 | 640,136 | |||||||||||||||||||||||||||
(1)On March 29, 2022, our Board of Directors authorized a new program for the repurchase of up to $10.0 billion of Common Stock beginning April 1, 2022. As of June 30, 2023, $7.2 billion remains authorized for repurchase.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Director and Officer Trading Arrangements
36
Item 6. Exhibits
10.1* | |||||
10.2* | |||||
10.3* | |||||
| 31-A* | |||||
| 31-B* | |||||
| 32* | |||||
| 101* | The following financial information from Norfolk Southern Corporation’s Quarterly Report on Form 10-Q for the second quarter of 2023, formatted in Inline Extensible Business Reporting Language (iXBRL) includes (i) the Consolidated Statements of Income for the second quarter and first six months of 2023 and 2022; (ii) the Consolidated Statements of Comprehensive Income for the second quarter and first six months of 2023 and 2022; (iii) the Consolidated Balance Sheets at June 30, 2023 and December 31, 2022; (iv) the Consolidated Statements of Cash Flows for the first six months of 2023 and 2022; (v) the Consolidated Statements of Changes in Stockholders’ Equity for the second quarter and first six months of 2023 and 2022; and (vi) the Notes to Consolidated Financial Statements. | ||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||||
| * Filed herewith. | |||||
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NORFOLK SOUTHERN CORPORATION Registrant | ||||||||
| Date: | July 27, 2023 | /s/ Claiborne L. Moore | ||||||
| Claiborne L. Moore Vice President and Controller (Principal Accounting Officer) (Signature) | ||||||||
| Date: | July 27, 2023 | /s/ Denise W. Hutson | ||||||
| Denise W. Hutson Corporate Secretary (Signature) | ||||||||
38
Exhibit 10.1
EXECUTION VERSION
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of May 4, 2023 (this “Amendment”), is entered into among NORFOLK SOUTHERN CORPORATION (the “Borrower”), the Lenders party hereto, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent (together with any successor Administrative Agent, in such capacity, the “Administrative Agent”).
RECITALS
WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to that certain Credit Agreement dated as of March 27, 2020, (as amended, restated, amended and restated, supplemented or otherwise modified and in effect prior to the date hereof, the “Existing Agreement”; the Existing Agreement as amended hereby, the “Credit Agreement”);
WHEREAS, certain loans or other extensions of credit under the Existing Agreement bear or are permitted to bear interest, or incur or are permitted to incur fees, commissions or other amounts, based on the London Interbank Offered Rate in accordance with the terms of the Existing Agreement; and
WHEREAS, the Borrower, the Lenders, and the Administrative Agent have agreed to amend the Existing Agreement to implement Adjusted Term SOFR (as defined in the attached Annex A) as a Benchmark Replacement for the London Interbank Offered Rate and to make certain other amendments to the Credit Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the following shall be effective:
ARTICLE I
AMENDMENT
1.1Notwithstanding anything to the contrary contained in the Existing Agreement, the Existing Agreement and the Schedules thereto are hereby amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the bold and double-underlined text (indicated textually in the same manner as the following example: double underlined text) as set forth on Annex A attached hereto on and as of the Effective Date.
1.2To the extent that the Existing Agreement requires the Administrative Agent to provide notice to the Borrower, any Lender or any other Person party to the Existing Agreement of (i) a Benchmark Transition Event (or other analogous or similar event) or an Early Opt-in Election (or other analogous or similar election) with respect to the London Interbank Offered Rate, (ii) a Benchmark Replacement Date (or other analogous or similar date), (iii) the implementation of Adjusted Term SOFR as a Benchmark Replacement (or other analogous or similar term) or (iv) any Benchmark Replacement Conforming Changes (or other similar conforming changes) in connection with the adoption and implementation of Adjusted Term SOFR or the use and administration thereof, this Amendment shall constitute such notice.
15968212v3 24740.00073 | ||
ARTICLE II
DEFINITIONS
1.1Capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Credit Agreement as set forth on Annex A attached hereto.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
1.1This Amendment shall become effective as of May 4, 2023 (the “Effective Date”) if, and only if, the following conditions precedent shall have been satisfied:
(a)Amendment. The Administrative Agent shall have received this Amendment executed and delivered by a duly authorized officer of the Borrower and Lenders comprising the Required Lenders.
(b)Representations and Warranties. The representations and warranties made pursuant to Article IV of this Amendment shall be true and complete on and as of such date with the same force and effect as if made on and as of such date.
(c)Expenses. The Borrower shall have paid all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent in connection with the negotiation, preparation, execution, and delivery of this Amendment and each other document contemplated hereby (including, without limitation, the reasonable fees and expenses of counsel).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
1.1In order to induce the Administrative Agent and the Lenders to enter into this Amendment, the Borrower hereby represents and warrants to the Administrative Agent and the Lenders on and as of the Effective Date that:
(a)Existence, Qualification and Power. The Borrower (i) is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) has all requisite corporate power and authority and all requisite governmental licenses, authorizations, consents and approvals to execute and deliver this Amendment and perform its obligations under this Amendment and the Credit Agreement as amended hereby (each an “Amended Document”) to which it is a party, and (iii) is duly qualified and is licensed and, as applicable, in good standing under the laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except, in the case referred to in clause (iii) to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
(b)Authorization; No Contravention. The execution and delivery by the Borrower of this Amendment and performance by the Borrower of this Amendment and each other Amended Document to which it is party have been duly authorized by all necessary corporate or other organizational action, and do not and will not (i) contravene the terms of its certificate or articles of incorporation or organization or other applicable constitutive documents, (ii) conflict with or result in any breach or contravention of, or the creation of any lien under, or require any payment to be made under (x) any agreement under which Debt may be incurred or any other material agreement or instrument binding upon the Borrower or any of its Consolidated Subsidiaries
2
(excluding any contravention or default of any material agreement or instrument as could not reasonably be expected to result in a Material Adverse Change) or (y) any order, injunction, writ or decree of any governmental authority or any arbitral award to which the Borrower or any subsidiary thereof or its property is subject or (iii) violate any law.
(c)Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any governmental authority or any other person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Borrower of this Amendment or any other Amended Document, except for such approvals, consents, exemptions, authorizations, actions or notices that have been duly obtained, taken or made and are in full force and effect, or such filings, which if not made, would not have any effect on the validity or enforceability of this Amendment or any other Amended Document to which the Borrower is a party or the obligations of the Borrower hereunder or thereunder.
(d)Execution and Delivery; Binding Effect. This Amendment has been, and each other Amended Document, when delivered, will have been, duly executed and delivered by the Borrower. This Amendment constitutes, and each other Amended Document when so delivered will constitute, a legal, valid and binding obligation of the Borrower party hereto or thereto, as applicable, enforceable against the Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other laws affecting creditors’ rights generally and by general principles of equity.
(e)Incorporation of Representations and Warranties. The representations and warranties of the Borrower set forth in the Existing Agreement are true and correct in all material respects (or, in the case of any such representation or warranty already qualified by materiality, in all respects) on and as of the Effective Date (or, in the case of any such representation or warranty expressly stated to have been made as of a specific date, as of such specific date).
(f)Representation by Independent Counsel. The Borrower (i) has been represented by independent legal counsel of its choice (or has had the opportunity to consult with independent legal counsel of its choice) in connection with this Amendment, (ii) has reviewed this Amendment and understands the agreements contained herein and their impact on the terms of the Existing Agreement and the Borrower’s rights and obligations thereunder and (iii) has knowingly and voluntarily agreed to execute and deliver this Amendment without duress.
ARTICLE V
EXPENSES
1.1The Borrower hereby agrees to pay all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the negotiation, preparation, execution, and delivery of this Amendment and each other document contemplated hereby (including, without limitation, the reasonable fees and expenses of counsel).
ARTICLE VI
MISCELLANEOUS
1.1Survival. Except as expressly provided in this Amendment, all of the terms, provisions, covenants, agreements, representations and warranties and conditions of the Existing Agreement shall be and remain in full force and effect as written, unmodified hereby and are hereby ratified by the Borrower. In the event of any conflict between the terms, provisions,
3
covenants, representations and warranties and conditions of this Amendment, on the one hand, and the Existing Agreement, on the other hand, this Amendment shall control.
1.2Further Assurances. The Borrower agrees to execute such other documents, instruments and agreements and take such further actions reasonably requested by the Administrative Agent to effectuate the provisions of this Amendment.
1.3Severability. Any term or provision of this Amendment that is invalid, illegal or unenforceable in any jurisdiction shall, solely as to that jurisdiction, be ineffective solely to the extent of such invalidity, illegality or unenforceability without rendering invalid, illegal or unenforceable the remaining terms and provisions of this Amendment or affecting the validity, legality or enforceability of any of the terms or provisions of this Amendment in any other jurisdiction. If any provision of this Amendment is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as would be enforceable.
1.4Governing Law. This Amendment and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Amendment and the transactions contemplated hereby shall be governed by, and construed in accordance with, the laws of the jurisdiction that governs the Existing Agreement in accordance with the terms thereof.
1.5Entire Agreement. This Amendment and the Existing Agreement (as amended hereby) constitute the entire agreement among the parties to the Existing Agreement with respect to the subject matter hereof and supersede all other prior agreements and understandings, both written and verbal, among such parties or any of them with respect to the subject matter hereof. Any exhibits or annexes attached hereto are hereby incorporated herein by reference and made a part hereof.
1.6Binding Effect, Beneficiaries. This Amendment shall be binding upon and inure to the benefit of the parties to the Existing Agreement and their respective heirs, executors, administrators, successors, legal representatives and assigns, and no other party shall derive any rights or benefits herefrom.
1.7Construction. This Amendment shall be construed without regard to any presumption or other rule requiring construction against the party drafting this Amendment.
1.8Notices. All notices relating to this Amendment shall be delivered in the manner and subject to the provisions set forth in the Existing Agreement.
1.9Counterparts; Effectiveness; Electronic Execution. This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single agreement. Except as provided in Article III, this Amendment shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or in electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Amendment. The words “execution,” “signed,” “signature,” and words of like import in this Amendment shall be deemed to include electronic signatures or electronic records, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State
4
Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
1.10Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.
1.11Reference to and Effect on the Existing Agreement. On and after the Effective Date, each reference in any loan document to the Existing Agreement, “thereunder”, “thereof” or words of like import referring to the Existing Agreement shall mean and be a reference to the Existing Agreement as amended by this Amendment. Except as specifically amended by this Amendment, the Existing Agreement shall remain in full force and effect (with the same priority, as applicable) and are hereby ratified and confirmed and this Amendment shall not be considered a novation. The execution, delivery and performance of this Amendment shall not constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender or any other party under, the Credit Agreement.
[Signature Pages to Follow]
5
IN WITNESS WHEREOF the parties hereto have caused this First Amendment to Credit Agreement to be duly executed as of the date first written above.
BORROWER:
NORFOLK SOUTHERN CORPORATION
By: /s/ Christopher R. Neikirk
Name: Christopher R. Neikirk
Title: Vice President & Treasurer
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
AGENT AND LENDERS: WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and as a Lender | |||||
By: /s/ Mylissa Merten Name: Mylissa Merten Title: Vice President | |||||
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
CITIBANK, N.A., as a Lender
By: /s/ Kevin Clark
Name: Kevin Clark
Title: Vice President
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
BANK OF AMERICA, N.A., as
Syndication Agent and as a Lender
By: /s/ Adrian Plummer
Name: Adrian Plummer
Title: Director
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
GOLDMAN SACHS BANK USA, as a Lender
By: /s/ Keshia Leday
Name: Keshia Leday
Title: Authorized Signatory
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
MORGAN STANLEY BANK, N.A., as a Lender
By: /s/ Daniel Lee
Name: Daniel Lee
Title: Vice President
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
U.S. BANK NATIONAL ASSOCIATION, as a Lender
By: /s/ Eric M. Herm
Name: Eric M. Herm
Title: Vice President
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
CAPITAL ONE, NATIONAL ASSOCIATION, as a Lender
By: /s/ William Panagis
Name: William Panagis
Title: Duly Authorized Signatory
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
FIFTH THIRD BANK, NATIONAL ASSOCIATION, as a Lender
By: /s/ Carson Korn
Name: Carson Korn
Title: Officer
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
MUFG BANK, LTD., as a Lender
By: /s/ Wolfgang Arbaczewski
Name: Wolfgang Arbaczewski
Title: Authorized Signatory
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
THE NORTHERN TRUST COMPANY, as a Lender
By: /s/ Kimberly A. Crotty
Name: Kimberly A. Crotty
Title: Vice President
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
PNC BANK, NATIONAL ASSOCIATION, as a Lender
By: /s/ Jennifer L. Shafer
Name: Jennifer L. Shafer
Title: Vice President
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
SUMITOMO MITSUI BANKING CORPORATION, as a Lender
By: /s/ Minxiao Tian
Name: Minxiao Tian
Title: Director
SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
ANNEX A
Credit Agreement and Schedules
See attached.
15968212v3 24740.00073 | ||
Execution Version
Conformed through First Amendment to Credit Agreement, dated May 4, 2023
Published CUSIP Number: 65584GAG6
Revolving Credit CUSIP Number: 65584GAH4
$800,000,000
CREDIT AGREEMENT
dated as of
March 27, 2020
among
Norfolk Southern Corporation,
The Lenders From Time to Time Parties Hereto,
Wells Fargo Bank, N.A.,
as Administrative Agent and
Swingline Lender
Swingline Lender
and
Citibank, N.A.
and
Bank of America, N.A.,
as Syndication Agents
and
Goldman Sachs Bank USA,
Morgan Stanley Senior Funding, Inc.,
and
U.S. Bank National Association,
as Documentation Agents
__________________________
Wells Fargo Securities, LLC,
Citigroup Global Markets Inc.,
and
BofA Securities, Inc.,
as Joint Lead Arrangers and Joint Bookrunners
as Joint Lead Arrangers and Joint Bookrunners
15966481v6 24740.00073 | ||
TABLE OF CONTENTS
Page
Article 1 DEFINITIONS 1
Section 1.1 Definitions 1
Section 1.2 Accounting Terms and Determinations 1719
Section 1.3 Types of Loans and Borrowings 1820
Section 1.4 Times of Day 1820
Section 1.5 Terms Generally 1820
Section 1.6 Rates 1820
Section 1.7 Divisions 21
Article 2 THE CREDIT 1921
Section 2.1 Commitments to Lend 1921
Section 2.2 Notice of Borrowings 1921
Section 2.3 [Reserved] 1922
Section 2.4 Notice to Lenders; Funding of Loans 1922
Section 2.5 Maturity of Loans 2022
Section 2.6 Interest Rates 2022
Section 2.7 Regulation D Compensation 21[Reserved] 24
Section 2.8 Facility Fees 2224
Section 2.9 Optional Termination, Reduction or Extension of Commitments 2224
Section 2.10 Method of Electing Interest Rates 2325
Section 2.11 Optional Prepayments 2526
Section 2.12 Scheduled Termination of Commitments 2527
Section 2.13 General Provisions as to Payments 2527
Section 2.14 Funding Losses 2627
Section 2.15 Computation of Interest and Fees 2628
Section 2.16 Registry 2628
Section 2.17 Increase in LoansCommitments 2728
Section 2.18 Swingline Loans 2830
Article 3 CONDITIONS 3032
Section 3.1 Closing Date 3032
Section 3.2 Borrowings 3133
Section 3.3 Waiver by Lenders 3234
Article 4 REPRESENTATIONS AND WARRANTIES 3234
Section 4.1 Corporate Existence and Power 3234
Section 4.2 Corporate and Governmental Authorization; No Contravention 3334
Section 4.3 Binding Effect 3334
Section 4.4 Financial Information 3335
Section 4.5 Litigation 3435
Section 4.6 Compliance with Laws 3435
Section 4.7 Environmental Matters 3436
Section 4.8 Taxes 3436
Section 4.9 Significant Subsidiaries 3536
Section 4.10 Not an Investment Company 3536
Section 4.11 Full Disclosure 3536
15966481v6 24740.00073 | ||
ii
Section 4.12 No Default 3537
Section 4.13 Anti-Corruption Laws and Sanctions 3537
Section 4.14 Not an Affected Financial Institution 35 or Covered Party 37
Article 5 COVENANTS 3637
Section 5.1 Information 3637
Section 5.2 Maintenance of Property; Insurance 3839
Section 5.3 Conduct of Business and Maintenance of
Existence 3840
Existence 3840
Section 5.4 Compliance with Laws 3940
Section 5.5 Payment of Obligations 3940
Section 5.6 Inspection of Property, Books and Records 3940
Section 5.7 Leverage Ratio 3941
Section 5.8 Negative Pledge 3941
Section 5.9 Consolidations, Mergers and Sales of Assets 4142
Section 5.10 Use of Proceeds 4244
Section 5.11 Limitation on Subsidiary Debt 4344
Section 5.12 Transactions with Affiliates 4445
Article 6 DEFAULT 4446
Section 6.1 Events of Default 4446
Section 6.2 Notice of Default 4648
Article 7 ADMINISTRATIVE AGENT 4648
Section 7.1 Appointment and Authorization 4648
Section 7.2 Agents and Affiliates 4648
Section 7.3 Exculpatory Provisions 4748
Section 7.4 Reliance by Administrative Agent 4849
Section 7.5 Delegation of Duties 4850
Section 7.6 Indemnification 4850
Section 7.7 Credit Decision 4950
Section 7.8 Successor Administrative Agent 4950
Section 7.9 Administrative Agent’s Fees 4951
Section 7.10 Syndication Agents, Arrangers and Documentation Agents 4951
Section 7.11 Certain ERISA Matters 4951
Section 7.12 Erroneous Payments 52
Article 8 CHANGE IN CIRCUMSTANCE 5054
Section 8.1 Changed Circumstances 5054
Section 8.2 Illegality 5257
Section 8.3 Increased Cost and Reduced Return 5357
Section 8.4 Taxes 5458
Section 8.5 Base Rate Loans Substituted for Affected Euro-Dollar 58SOFR Loans 62
Section 8.6 Substitution of Lenders 5863
Section 8.7 Defaulting Lenders 5963
15966481v6 24740.00073 | ||
iii
Article 9 MISCELLANEOUS 6165
Section 9.1 Notices 6165
Section 9.2 No Waivers 6267
Section 9.3 Expenses; Indemnification 6267
Section 9.4 Sharing of Payments by Lenders; Right of Set-Off 6368
Section 9.5 Amendments and Waivers 6469
Section 9.6 Successors and Assigns 6570
Section 9.7 Governing Law; Submission to Jurisdiction, WAIVER OF JURY TRIAL 6772
Section 9.8 Counterparts; Integration; Effectiveness 6872
Section 9.9 Confidentiality 6873
Section 9.10 Termination 6974
Section 9.11 Collateral 6974
Section 9.12 Representations of Lenders 6975
Section 9.13 USA PATRIOT Act 6975
Section 9.14 No Fiduciary Duty 7075
Section 9.15 Acknowledgement and Consent to Bail-In of Affected Financial Institutions 7075
Section 9.16 Severability of Provisions 7176
Section 9.17 Titles and Captions 7176
Section 9.18 Acknowledgement Regarding Any Supported QFCs 7176
Schedules
Schedule 1 – Commitment Schedule
Schedule 2 – Pricing Grid
Exhibits
Exhibit A-1 – Form of Revolving Note
Exhibit A-2 – Form of Swingline Note
Exhibit B – Assignment and Assumption Agreement
Exhibit C – Closing Certificate
Exhibit D – U.S. Tax Compliance Certificates
15966481v6 24740.00073 | ||
CREDIT AGREEMENT
CREDIT AGREEMENT (“Agreement”) dated as of March 27, 2020, among NORFOLK SOUTHERN CORPORATION, the LENDERS from time to time parties hereto, and WELLS FARGO BANK, N.A., as Administrative Agent and Swingline Lender.
The parties hereto agree as follows:
Article 1
DEFINITIONS
DEFINITIONS
Section 1.1Definitions. The following terms, as used herein, have the following meanings:
“Adjusted Term SOFR” means, for purposes of any calculation, the rate per annum equal to (a) Term SOFR for such calculation plus (b) the Term SOFR Adjustment; provided that if Adjusted Term SOFR as so determined shall ever be less than the Floor, then Adjusted Term SOFR shall be deemed to be the Floor.
“Administrative Agent” means Wells Fargo in its capacity as Administrative Agent for the Lenders hereunder, and its successors in such capacity.
“Administrative Questionnaire” means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Lender.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to any Person (i) each Person (a “Controlling Person”) (other than the Borrower or a Subsidiary) that directly, or indirectly through one or more intermediaries, controls such Person or (ii) each Person (other than the Borrower or a Subsidiary) which is controlled by or is under common control with a Controlling Person. As used herein, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.
“Agents” means the collective reference to the Administrative Agent, the Syndication Agents and the Documentation Agents.
“Amendment” has the meaning set forth in Section 9.5.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption, including, without limitation, the United States Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.
“Applicable Lending Office” means, with respect to any Lender, (i) in the case of its Base Rate Loans, its Base Rate Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.its office located at its address set forth in its Administrative Questionnaire or such other office as such Lender may hereafter designate as its Applicable Lending Office by notice to the Borrower and the Administrative Agent.
[Norfolk Southern Credit Agreement Signature Page]
15966481v6 24740.00073 | ||
2
“Applicable Margin” means, at any time, the applicable percentage rate per annum set forth in the Pricing Grid which is applicable at such time in accordance with the Pricing Grid.
“Arrangers” means Wells Fargo Securities, LLC, Citigroup Global Markets Inc. and BofA Securities, Inc., each in its capacity as joint lead arranger and joint bookrunner in respect of this Agreement.
“Assignee” has the meaning set forth in Section 9.6(c).
“Assuming Lender” has the meaning set forth in Section 2.17(a)2.17(a).
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (a) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement or (b) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 8.1(c)(iv).
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Bankruptcy Event” means, with respect to any Person, that such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent (or, in the case of the Lender serving as the Administrative Agent, in the good faith determination of the Required Lenders), has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment.
15966481v6 24740.00073 | ||
3
“Base Rate” means, for any day, a rate per annum equal to the highest of (i) the Prime Rate for such day, (ii) the Euro-Dollar Rate that would be calculated as of such day (or, if such day is not a Euro-Dollar Business Day, as of the next preceding Euro-Dollar Business Day) in respect of a proposed Euro-Dollar Loan withAdjusted Term SOFR for a one-month Interest Period in effect on such date plus 1%, (iii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day and (iv) 0%, provided that clause (ii) shall not be applicable during any period in which the Euro-Dollar RateAdjusted Term SOFR is unavailable or unascertainable. Any change in the Base Rate due to a change in the Prime Rate, the Federal Funds Rate or the Euro-Dollar RateAdjusted Term SOFR shall be effective as of the opening of business on the day of such change in the Prime Rate, the Federal Funds Rate or the Euro-Dollar RateAdjusted Term SOFR, respectively.
“Base Rate Lending Office” means, as to each Lender, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Base Rate Lending Office) or such other office as such Lender may hereafter designate as its Base Rate Lending Office by notice to the Borrower and the Administrative Agent.
“Base Rate Loan” means a Loan which bears interest at a rate per annum based upon the Base Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election or the provisions of Article 8.
“Benchmark” means, initially, the Term SOFR Reference Rate; provided that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 8.1(c)(i).
“Benchmark Replacement” means, with respect to any Benchmark Transition Event, the sum of: (a) the alternate benchmark rate (which may include Term SOFR) that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate of interest as a replacement to the London Interbank Offered Rate for U.S.then-current Benchmark for dollar-denominated syndicated credit facilities and (b) the related Benchmark Replacement Adjustment; provided that, if thesuch Benchmark Replacement as so determined would be less than zero, thesuch Benchmark Replacement will be deemed to be zero for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the London Interbank Offered Ratethen-current Benchmark with an Unadjusted Benchmark Replacement for eachany applicable Interest PeriodAvailable Tenor, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the London Interbank Offered Ratesuch Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the London Interbank Offered Ratesuch Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities at such time.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the
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definition of “Base Rate,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest and other administrative matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement).
“Benchmark Replacement Date” means the earlierearliest to occur of the following events with respect to the London Interbank Offered Ratethen-current Benchmark:
(a)(1) in the case of clause (1a) or (2b) of the definition of “Benchmark Transition Event,” the later of (ai) the date of the public statement or publication of information referenced therein and (bii) the date on which the administrator of the London Interbank Offered Ratesuch Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide the London Interbank Offered Rateall Available Tenors of such Benchmark (or such component thereof); or
(b)(2) in the case of clause (3c) of the definition of “Benchmark Transition Event,” the first date of the publicon which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness will be determined by reference to the most recent statement or publication of information referenced thereinin such clause (c) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the London Interbank Offered Ratethen-current Benchmark:
(a)(1) a public statement or publication of information by or on behalf of the administrator of the London Interbank Offered Ratesuch Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide the London Interbank Offered Rateall Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely,; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the London Interbank Offered Rateany Available Tenor of such Benchmark (or such component thereof);
(b)(2) a public statement or publication of information by the regulatory supervisor for the administrator of the London Interbank Offered Rate, the U.S.such Benchmark (or the published component used in the calculation thereof), the FRB, the Federal Reserve SystemBank of New York, an insolvency official with jurisdiction over the administrator for the London Interbank Offered Ratesuch Benchmark (or such component), a resolution authority with jurisdiction over the administrator for the London Interbank Offered Ratesuch Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for the London Interbank Offered Ratesuch Benchmark (or such component),
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which states that the administrator of the London Interbank Offered Ratesuch Benchmark (or such component) has ceased or will cease to provide the London Interbank Offered Rateall Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely,; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the London Interbank Offered Rateany Available Tenor of such Benchmark (or such component thereof); or
(c)(3) a public statement or publication of information by the regulatory supervisor for the administrator of the London Interbank Offered Rate announcing that the London Interbank Offered Rate is no longersuch Benchmark (or the published component used in the calculation thereof)announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means (a), in the case of a Benchmark Transition Event, the earlier of (ia) the applicable Benchmark Replacement Date and (iib) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by the Administrative Agent or the Required Lenders, as applicable, by notice to the Borrower, the Administrative Agent (in the case of such notice by the Required Lenders) and the Lenders..
“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the London Interbank Offered Rate and solely to the extent that the London Interbank Offered Rate has not been replaced with a Benchmark Replacement, the period (if any) (x) beginning at the time that sucha Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the London Interbank Offered Ratethen-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 8.1(b)Section 8.1(c)(i) and (y) ending at the time that a Benchmark Replacement has replaced the London Interbank Offered Ratethen-current Benchmark for all purposes hereunder pursuant to Section 8.1(b)and under any Loan Document in accordance with Section 8.1(c)(i).
“Beneficial Ownership Regulation” has the meaning set forth in Section 3.1(h).
“Beneficial Ownership Certification” has the meaning set forth in Section 3.1(h).
“Benefit Arrangement” means, at any time, an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by the Borrower.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
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“Borrower” means Norfolk Southern Corporation, a Virginia corporation, its successors, and any Person with which the Borrower merges or consolidates, or to which it sells substantially all of its assets, in accordance with Section 5.9.
“Borrower’s 2019 Form 10-K” means the Borrower’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended.
“Borrowing” has the meaning set forth in Section 1.3.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Closing Date” means the date on or after the Effective Date on which all of the conditions set forth in Section 3.1 shall have been satisfied.
“Commitment” means: (i) with respect to each Lender listed on the signature pages hereof, the amount set forth opposite the name of such Lender in the Commitment Schedule, or (ii) with respect to each Assignee which becomes a Lender pursuant to Section 9.6(c), the amount of the Commitment thereby assumed by it, in each case as such amount may be reduced from time to time pursuant to Section 2.9 or increased or reduced in accordance with Section 2.17 or Section 9.6(c).
“Commitment Increase” has the meaning set forth in Section 2.17(a)2.17(a).
“Commitment Increase Date” has the meaning set forth in Section 2.17(a)2.17(a).
“Commitment Schedule” means the schedule attached hereto as Schedule 1 and identified as such.
“Communications” has the meaning set forth in Section 9.1(f).
“Conduit Lender” means any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided, that such Lender has consulted the Borrower with respect to such designation; provided, further that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Sections 2.14, 8.3, 8.4, or 9.3 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment.
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“Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Domestic Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), the definition of “SOFR Market Index Rate,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 8.1 and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Consolidated Net Income” means, for any fiscal period, the net income of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis for such period.
“Consolidated Net Tangible Assets” means, as of any date of determination, the total assets of the Borrower and its Consolidated Subsidiaries (less applicable reserves and other properly deducted items) after deducting therefrom (a) all current liabilities (excluding any thereof that are by their terms extendible or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed) and (b) all goodwill, trade names, trademarks, patents, purchased technology, unamortized debt discount and other intangible assets of the Borrower or any of its Consolidated Subsidiaries, all as set forth on the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries most recently delivered under Section 5.1(a) or 5.1(b).
“Consolidated Net Worth” means, at any date, the consolidated stockholders’ equity of the Borrower and its Consolidated Subsidiaries as of such date.
“Consolidated Subsidiary” means, at any date, with respect to any Person, any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date. Unless otherwise specified, a “Consolidated Subsidiary” shall be a Consolidated Subsidiary of the Borrower.
“Consolidated Total Capital” means, at any date, the sum of (i) Consolidated Net Worth and (ii) Consolidated Total Debt, in each case at such date.
“Consolidated Total Debt” means, at any date, without duplication, the aggregate amount of Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis using generally accepted accounting principles of consolidation as of such date.
“Continuing Director” has the meaning set forth in Section 6.1(l).
“Covered Party” has the meaning set forth in Section 9.8(a).
“Debt” of any Person means, at any date, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person evidenced by bonds, debentures, notes, equipment trust certificates or other similar instruments, (iii) all obligations of such Person
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to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) any obligation (whether fixed or contingent) to reimburse any bank or other Person in respect of amounts paid or payable under a standby letter of credit, (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (vii) all Debt of others Guaranteed by such Person.
“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.
“Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
“Defaulting Lender” means any Lender that (a) has failed, within two Domestic Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans or (ii) pay over to any Lender any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or any Lender in writing, or has made a publicly available, written statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied), (c) has failed, within three Domestic Business Days after request by a Lender, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Lender’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent (or, in the case of the Lender serving as the Administrative Agent, such certification in form and substance satisfactory to it and the Required Lenders), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a Bankruptcy Event, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-in Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 8.7(b)) upon delivery of written notice of such determination to the Borrower and each Lender.
“Derivatives Obligations” of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity
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option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions.
“Disclosed Matters” means the Borrower’s most recent filing on Form 10-K for the year ended December 31, 2019, and any subsequent filing made on Form 10-Q or Form 8-K on or three (3) Domestic Business Days prior to the Closing Date, or any posting on the Borrower’s website at http://www.nscorp.com/content/nscorp/en/investor-relations/financial-reports/sec-filings.html, posted since December 31 2019, on or prior to the Closing Date.
“Documentation Agents” means the collective reference to Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc., and U.S. Bank National Association.
“Domestic Business Day” means any day exceptthat is not a Saturday, Sunday or other day on which commercial banks in the Federal Reserve Bank of New York City are authorized by law to closeis closed.
“Early Opt-in Election” means the occurrence of:
(1) (i) a determination by the Administrative Agent or (ii) a notification by the Required Lenders to the Administrative Agent (with a copy to the Borrower) that the Required Lenders have determined that U.S. dollar-denominated syndicated credit facilities being executed at such time, or that include language similar to that contained in Section 8.1(b) are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the London Interbank Offered Rate, and
(2) (i) the election by the Administrative Agent or (ii) the election by the Required Lenders to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Administrative Agent of written notice of such election to the Borrower and the Lenders or by the Required Lenders of written notice of such election to the Administrative Agent.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” means the date this Agreement becomes effective in accordance with Section 9.8(b).
“Electronic Record” has the meaning assigned to that term in, and shall be interpreted in accordance with, 15 U.S.C. 7006.
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“Electronic Signature” has the meaning assigned to that term in, and shall be interpreted in accordance with, 15 U.S.C. 7006.
“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, injunctions or binding agreements relating to the environment, preservation or reclamation of natural resources or the management or release of or exposure to any Hazardous Materials.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Consolidated 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.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.
“ERISA Group” means the Borrower, any Consolidated Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control, which, together with the Borrower or any Consolidated Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code.
“Erroneous Payment” has the meaning set forth in Section 7.12(a).
“Erroneous Payment Deficiency Assignment” has the meaning set forth in Section 7.12(d).
“Erroneous Payment Return Deficiency” has the meaning set forth in Section 7.12(d).
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“Euro-Dollar Business Day” means any Domestic Business Day on which banks are open for dealings in dollar deposits in the London interbank market.
“Euro-Dollar Lending Office” means, as to each Lender, its office, branch or Affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or Affiliate of such Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent.
“Euro-Dollar Loan” means a Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election.
“Euro-Dollar Market Index Rate” shall mean, with respect to any day, the floating rate per annum for euro-dollar deposits for a period equal to one month as published by the ICE Benchmark Administration Limited, a United Kingdom company, or a comparable or successor quoting service approved by the Administrative Agent as of 11:00 A.M. (London time) on such day.
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“Euro-Dollar Rate” means a rate of interest determined pursuant to Section 2.6(b) on the basis of a London Interbank Offered Rate.
“Euro-Dollar Reserve Percentage” has the meaning set forth in Section 2.7.
“Event of Default” has the meaning set forth in Section 6.1.
“Excluded Taxes” has the meaning set forth in Section 8.4(a)Section 8.4(a).
“Existing Credit Agreement” means the Credit Agreement dated as of May 26, 2016, among the Borrower, the banks parties thereto, and Wells Fargo Bank, N.A., as administrative agent for such banks.
“Extension Date” has the meaning set forth in Section 2.9(b).
“Extension Effective Date” has the meaning set forth in Section 2.9(b).
“Facility Fee Rate” means, at any time, the applicable percentage rate per annum set forth in the Pricing Grid which is applicable at such time in accordance with the Pricing Grid.
“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any intergovernmental agreement entered into with respect thereto and any agreement entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code.
“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federalfederal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeedingif such rate is not so published for any day which is a Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Wells Fargo onof the quotation for such day on such transactions as determinedreceived by the Administrative Agent from three federal funds brokers of recognized standing selected by the Administrative Agent. Notwithstanding the foregoing, if the Federal Funds Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.
“Floor” means a rate of interest equal to 0%.
“FRB” means the Board of Governors of the Federal Reserve System of the United States.
“Fronting Exposure” means, at any time there is a Defaulting Lender, such Defaulting Lender’s pro rata share of the outstanding Swingline Loans made by the Swingline Lender other than Swingline Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders.
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“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“Group of Loans” means, at any time, a group of Revolving Credit Loans consisting of (i) all Revolving Credit Loans which are Base Rate Loans at such time or (ii) all Revolving Credit Loans which are Euro-DollarSOFR Loans having the same Interest Period at such time, provided that, if a Revolving Credit Loan of any particular Lender is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made.
“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.
“Hazardous Materials” means all explosive or radioactive substances or wastes, all hazardous or toxic substances, wastes or other pollutants, including, without limitation, all petroleum or petroleum products, asbestos or asbestos-containing materials, polychlorinated biphenyls, and any other hazardous substances regulated pursuant to any Environmental Laws.
“Increasing Lender” has the meaning set forth in Section 2.17(a)2.17(a).
“Indemnified Taxes” has the meaning set forth in Section 8.4(a)Section 8.4(a).
“Indemnitee” has the meaning set forth in Section 9.3(b).
“Interest Period” means: , with respect to each Euro-DollarSOFR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months (or twelve months, or a period shorter than one month, in each case, if available to all Lenders) thereafter, as the Borrower may elect in the applicable notice; provided that:
(a) if any Interest Period which would otherwise endexpire on a day whichthat is not a Euro-DollarDomestic Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case, such Interest Period shall endexpire on the next preceding Euro-Dollar Business Day;succeeding Domestic Business Day; provided that if any Interest Period would otherwise expire on a day that is not a Domestic Business Day but is a day of the month after which no further Domestic Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Domestic Business Day;
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(b) any Interest Period which begins on the last Euro-DollarDomestic Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-DollarDomestic Business Day of athe relevant calendar month at the end of such Interest Period; and
(c) no Interest Period shall extend beyond the Termination Date.; and
(d) no tenor that has been removed from this definition pursuant to Section 8.1(c)(v) shall be available for specification in any Notice of Borrowing or Notice of Interest Rate Election.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.
“Investment” means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise.
“Lender” means each financial institution listed on the signature pages hereof, each Assignee that becomes a Lender pursuant to Section 9.6(c), and their respective successors; provided, that unless the context otherwise requires, each reference herein to a Lender shall be deemed to include any Conduit Lender. Unless the context requires otherwise, the term “Lender” includes the Swingline Lender.
“Lender Affiliate” means (a) any Affiliate of any Lender, and (b) any Person that is administered or managed by any Lender or any Affiliate of any Lender or an entity or an Affiliate of an entity that administers or manages a Lender and that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
“Leverage Ratio” means, at any date, the ratio (expressed as a percentage) of Consolidated Total Debt to Consolidated Total Capital, in each case at such date.
“Lien” means, with respect to any asset, any mortgage, deed of trust, lien, pledge, hypothecation, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.
“Loan” means a Revolving Credit Loan or a Swingline Loan; provided that Swingline Loans shall be subject to only those provisions of Article 2 which are specifically made applicable to Swingline Loans.
“Loan Documents” means this Agreement and any Notes delivered pursuant hereto.
“London Interbank Offered Rate” has the meaning set forth in Section 2.6(b).
“Margin Regulations” means Regulations T, U and X of the Board of Governors of the Federal Reserve System, as amended and in effect from time to time.
“Material Adverse Change” has the meaning specified in Section 4.4(b).
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“Material Debt” means Debt (other than under the Loan Documents) of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $200,000,000.
“Material Plan” means, at any time, any Plan, with respect to which the Unfunded Liabilities exceed $10,000,000.
“Multiemployer Plan” means, at any time, an employee pension benefit plan which meets the definition of “Multiemployer Plan” within the meaning of Section 4001(a)(3) of ERISA and either (i) to which any member of the ERISA Group is making or accruing an obligation to make contributions or (ii) has within the preceding five plan years been contributed to by any Person which at the time of such contribution was a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.
“Non-Approving Lender” has the meaning set forth in Section 2.9(b).
“Non-Consenting Lender” has the meaning set forth in Section 9.5.
“Non-U.S. Lender” has the meaning set forth in Section 8.4(f).
“Note” has the meaning set forth in Section 2.16(b).
“Notice of Borrowing” has the meaning set forth in Section 2.2.
“Notice of Interest Rate Election” has the meaning set forth in Section 2.10(a).
“NSRC” has the meaning set forth in Section 5.9(c).
“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.
“Other Connection Taxes” has the meaning set forth in Section 8.4(a)8.4(a).
“Other Taxes” has the meaning set forth in Section 8.4(a)Section 8.4(a).
“Overnight Rate” means, for any day, the greater of (a) the Federal Funds Rate and (b) an overnight rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
“Parent” means, with respect to any Lender, any Person controlling such Lender.
“Participant” has the meaning set forth in Section 9.6(b).
“Participant Register” has the meaning set forth in Section 9.6(b).
“Payment Recipient” has the meaning set forth in Section 7.12(a).
“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
“Permitted Additional Amount” means, with respect to any Debt the subject of an extension, renewal or refinancing, an amount equal to all unpaid accrued or capitalized interest therein, any make-whole payments or premium applicable thereto or paid in connection therewith, any swap breakage costs or other termination costs related to hedge agreements, plus upfront fees and original issue discount, of such extension, renewal or refinancing on such
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refinancing indebtedness, plus other customary fees and expenses in connection with such extension, renewal or refinancing.
“Person” means an individual, a corporation, a partnership, a limited liability company, an association, a business trust, a joint stock company, a trust, an unincorporated association, a joint venture or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
“Plan” means, at any time, an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.
“Platform” means IntraLinks, Syndtrak or a substantially similar electronic transmission system.
“Pricing Grid” means the grid attached hereto as Schedule 2 and identified as such.
“Prime Rate” means the rate of interest publicly announced by Wells Fargo from time to time as its Prime Rate.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Quarterly Date” means each of March 31, June 30, September 30 and December 31.
“Recipient” has the meaning set forth in Section 8.4(a)Section 8.4(a).
“Related Indemnified Person” has the meaning set forth in Section 9.3(b).
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“Released Person” has the meaning specified in Section 9.3(b).
“Relevant Governmental Body” means the Federal Reserve BoardFRB and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve BoardFRB and/or the Federal Reserve Bank of New York, or any successor thereto.
“Required Lenders” means, at any time, Lenders having more than 50% of the aggregate amount of the Commitments at such time (or, if the Commitments shall have terminated, Lenders having more than 50% of the aggregate principal amount of Revolving Credit Loans outstanding at such time).
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Revolving Credit Exposure” means, as to any Lender at any time, the aggregate principal amount at such time of its outstanding Revolving Credit Loans and such Lender’s participation in Swingline Loans at such time.
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“Revolving Credit Loan” means a loan made or to be made by a Lender to the Borrower pursuant to Section 2.1(a).
“Revolving Credit Period” means the period from and including the Closing Date to but not including the Termination Date.
“Sanctioned Country” means, at any time, a country, region or territory, which is the subject or target of any comprehensive Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed on any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the TreasuryOFAC, the U.S. Department of State, the United Nations Security Council, the European Union, HerHis Majesty’s Treasury, in each case to the extent relevant, (b) any Person located, organized or resident in a Sanctioned Country or (c) any Person owned 50% or more or controlled by any such Person or Persons described in the foregoing clauses (a) and (b).
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the TreasuryOFAC or the U.S. Department of State.
“SEC” means the Securities and Exchange Commission or any successor thereto.
“Significant Subsidiary” means, at any time, (i) NSRC and (ii) each other Subsidiary (x) whose assets (or, in the case of a Subsidiary which has subsidiaries, consolidated assets) as shown on the latest financial statements delivered by the Borrower pursuant to Section 5.1(a) or 5.1(b), as the case may be, are (A) at least 10% of the consolidated assets of the Borrower and its Consolidated Subsidiaries at such time and (B) at least $1,500,000,000 or (y) whose operating income (or, in the case of a Subsidiary which has subsidiaries, consolidated operating income) as shown on the latest financial statements delivered by the Borrower pursuant to Section 5.1(a) or 5.1(b), as the case may be, is (A) at least 10% of the consolidated operating income of the Borrower and its Consolidated Subsidiaries at such time and (B) at least $150,000,000.
“SOFR” with respect to any day meansmeans a rate equal to the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Websiteas administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Loan” means any Loan bearing interest at a rate based on Adjusted Term SOFR as provided in Section 2.6(b).
“SOFR Market Index Rate” shall mean a daily floating rate per annum equal to Adjusted Term SOFR for a one-month tenor on each day during the relevant period. Notwithstanding anything to the contrary, if the SOFR Market Index Rate shall be less than zero, then such rate shall be deemed to be zero for purposes of this Agreement.
“SOFR Market Index Rate Loan” means a Swingline Loan which, except as otherwise provided in Section 2.6(b), bears interest based on the SOFR Market Index Rate.
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“Subsidiary” means, with respect to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, a “Subsidiary” means a Subsidiary of the Borrower.
“Swingline Lender” means Wells Fargo in its capacity as lender of Swingline Loans hereunder or any successor thereto.
“Swingline Loan” means a loan made or to be made by the Swingline Lender to the Borrower pursuant to Section 2.18.
“Swingline Termination Date” means the 10th Domestic Business Day prior to the Termination Date.
“Syndication Agents” means the collective reference to Citibank, N.A. and Bank of America, N.A.
“Taxes” has the meaning specified in Section 8.4(a)8.4(a).
“Term SOFR” means,
(a)for any calculation with respect to a SOFR Loan, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (Eastern time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and
(b)for any calculation with respect to a Base Rate Loan on any day, the Term SOFR Reference Rate for a tenor of one month on the day (such day, the “Base Rate Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (Eastern time) on any Base Rate Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Base Rate SOFR Determination Day.
“Term SOFR Adjustment” means a percentage equal to 0.10% per annum.
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“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Termination Date” means March 27, 2025 (or, if such date is not a Euro-DollarDomestic Business Day, the next preceding Euro-DollarDomestic Business Day) or such date(s) as may become applicable pursuant to Section 2.9(b).
“Type” has the meaning set forth in Section 1.3.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Unfunded Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefit liabilities under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefit liabilities (excluding any accrued but unpaid contributions), but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.
“United States” means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities; provided, that for purposes of notice requirements in Section 2.2, Section 2.10(a) and Section 2.11(a), in each case, such day is also a Domestic Business Day.
“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association.
“Withholding Agent” means each of the Borrower and the Administrative Agent.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all
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or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
Section 1.2Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles in the United States (provided that all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (previously referred to as Statement of Financial Accounting Standards 159) (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Debt or other liabilities of the Borrower or any Subsidiary at “fair value”, as defined therein and (ii) without giving effect to any treatment of Debt in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Debt shall at all times be valued at the full stated principal amount thereof), as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower’s independent public accountants) with the then most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Lenders; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change in generally accepted accounting principles or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in generally accepted accounting principles or in the application thereof, then such provision shall be interpreted on the basis of generally accepted accounting principles as in effect and applied immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such provision is amended in a manner satisfactory to the Borrower and the Required Lenders. Notwithstanding anything herein to the contrary, and without limiting the foregoing, all leases of the Borrower and its subsidiaries shall be construed without giving effect to any change as a result of the adoption of any of the provisions set forth in the Accounting Standards Update 2016-02, Leases (Topic 842), issued by the Financial Accounting Standards Board in February 2016, or any other amendments to the Accounting Standards Codifications issued by the Financial Accounting Standards Board in connection therewith, in each case if such change would require the recognition of right-of-use assets and lease liabilities for leases or similar agreements that would not be classified as capital leases under GAAP as in effect prior to January 1, 2019.
Section 1.3Types of Loans and Borrowings. The term “Borrowing” denotes the aggregation of Loans of one or more Lenders to be made to the Borrower pursuant to Article 2 on the same date, all of which Loans are of the same Type (subject to Article 8) and, except in the case of Base Rate Loans or Swingline Loans, have the same initial Interest Period. The “Type” of a Revolving Credit Loan refers to the determination whether such Loan is a Euro-DollarSOFR Loan or a Base Rate Loan, each of which constitutes a “Type”. The “Type” of a Swingline Loan refers to the determination whether such Loan is made bearing interest at the Euro-DollarSOFR Market Index Rate or the BasedBase Rate, each of which constitutes a “Type”.
Section 1.4Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
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Section 1.5Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
Section 1.6Rates. The Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, (a) the continuation of, administration of, submission of, calculation of or any other matter related to the Term SOFR Reference Rate, Adjusted Term SOFR, SOFR Market Index Rate or Term SOFR, or any component definition thereof or rates referred to in the definition of “London Interbank Offered Rate”thereof, or with respect to any rate that is an alternative, successor or replacement for or successor to any such rate (including, without limitation, any Benchmark Replacement) or the effect of any of the foregoing, or of any “Benchmark Replacement Conforming Changes.”rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement), as it may or may not be adjusted pursuant to Section 8.1(c), will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, the Term SOFR Reference Rate, Adjusted Term SOFR, SOFR Market Index Rate, Term SOFR or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. The Administrative Agent and its Affiliates or other related entities may engage in transactions that affect the calculation of the Term SOFR Reference Rate, Adjusted Term SOFR, SOFR Market Index Rate, Term SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto and such transactions may be adverse to the Borrower. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain the Term SOFR Reference Rate, Adjusted Term SOFR, SOFR Market Index Rate or Term SOFR, or any other Benchmark, any component definition thereof or rates referred to in the definition thereof, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.
Section 1.7Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes
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into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its equity interests at such time.
Article 2
THE CREDIT
THE CREDIT
Section 2.1Commitments to Lend.
(a)Revolving Credit Loans. During the Revolving Credit Period, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Revolving Credit Loans in U.S. dollars to the Borrower from time to time in an aggregate amount at any time outstanding that will not result in such Lender’s Revolving Credit Exposure exceeding the amount of its Commitment. Within the limits specified in this Agreement, the Borrower may borrow under this Section 2.1, prepay Revolving Credit Loans to the extent permitted by Section 2.11 and reborrow at any time during the Revolving Credit Period pursuant to this Section 2.1. Each Borrowing under this Section 2.1 shall be in the aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount of the unused Commitments) and shall be made from the several Lenders ratably in proportion to their respective Commitments.
Section 2.2Notice of Borrowings. In the case of a Borrowing of Revolving Credit Loans, the Borrower shall give the Administrative Agent notice (a “Notice of Borrowing”) not later than 11:00 A.M. on (x) the date of each Base Rate Borrowing and (y) the third Euro-DollarU.S. Government Securities Business Day before each Euro-DollarSOFR Borrowing, specifying:
(a)the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing;
(b)the aggregate amount of such Borrowing;
(c)the initial Type of Loans comprising such Borrowing; and
(d)in the case of a Euro-DollarSOFR Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period.
Section 2.3[Reserved]
Section 2.4Notice to Lenders; Funding of Loans.
(a)Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Lender participating therein of the contents thereof and of such Lender’s share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b)Not later than 1:00 P.M. on the date of each Borrowing, each Lender participating therein shall make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.1. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Lenders available to the Borrower not later than 2:00 P.M. on the date of each Borrowing at the Administrative Agent’s aforesaid address.
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(c)Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.4 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 made such share available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.6 and (ii) in the case of such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensationOvernight Rate, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Loan included in such Borrowing for purposes of this Agreement.
Section 2.5Maturity of Loans. Each Revolving Credit Loan shall mature, and the principal amount thereof shall be payable in full together with accrued interest thereon, on the Termination Date.
Section 2.6Interest Rates.
(a)Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the day such Loan is made to, but excluding, the day it becomes due, at a rate per annum equal to the sum of the Applicable Margin for such day plus the Base Rate for such day. Such interest shall be payable at maturity, quarterly in arrears on each Quarterly Date prior to maturity and, with respect to the principal amount of any Base Rate Loan converted to a Euro-DollarSOFR Loan, on the date such Loan is so converted. Any overdue principal of or interest on any Base Rate Loan, or any overdue fees or other amounts payable by the Borrower hereunder, shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate then applicable to Base Rate Loans.
(b)Each Euro-DollarSOFR Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin for such day plus the London Interbank Offered RateAdjusted Term SOFR applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The “London Interbank Offered Rate” applicable to any Interest Period means the rate per annum determined on the basis of the rate for deposits in U.S. dollars for a period equal to such Interest Period commencing on the first day of such Interest Period as published by the ICE Benchmark Administration Limited, a United Kingdom company, or a comparable or successor quoting service approved by the Administrative Agent in consultation with the Borrower, as of 11:00 A.M. (London time) two Euro-Dollar Business Days; provided, that, (i) in the event of any repayment or prepayment of any SOFR Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (ii) in the event of any conversion of any SOFR Loan prior to the beginning of suchend of the Interest Period. Subject to Section 8.1, in the event that such rate is not so published, the London Interbank Offered Rate shall be determined by reference to the arithmetic average of the rates per annum at which deposits in Dollars would be offered by first class banks in the London interbank market to the Administrative Agent (rounded upward, if necessary, to the next higher 1/100 of 1%) at approximately 11:00 A.M. (London
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time) two Euro-Dollar Business Days before the first day of such Interest Period for a period of time comparable to such Interest Period. Notwithstanding the foregoing, if the London Interbank Offered Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.
(c) therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. Any overdue principal of or interest on any Euro-DollarSOFR Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Applicable Margin for such day plus the London Interbank Offered RateAdjusted Term SOFR applicable to such Loan on the day before such payment was due (or, if the circumstances described in clause (a) or of Section 8.1 shall exist, at a rate per annum equal to the sum of 2% plus the rate then applicable to Base Rate Loans).
(c)(d) In no contingency or event whatsoever shall the aggregate of all amounts deemed interest under this Agreement charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any applicable law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Lenders have charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by applicable law and the Lenders shall at the Administrative Agent’s option (i) promptly refund to the Borrower any interest received by the Lenders in excess of the maximum lawful rate or (ii) apply such excess to the principal balance of the obligations owed hereunder. It is the intent hereof that the Borrower not pay or contract to pay, and that neither the Administrative Agent nor any Lender receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrower under applicable law.
(d)(e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Lenders of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error.
(e)In connection with the use or administration of Term SOFR, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. The Administrative Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.
Section 1.8[Reserved].
Section 2.7 Regulation D Compensation. Each Lender may require the Borrower to pay, contemporaneously with each payment of interest on any Euro-Dollar Loan, additional interest on the related Euro-Dollar Loan of such Lender at a rate per annum determined by such Lender up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Lender wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Euro-Dollar Loans of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower at least five Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section.
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“Euro-Dollar Reserve Percentage” means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). The compensation payable pursuant to this Section 2.7 shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage.
Section 2.7Facility Fees. The Borrower shall pay to the Administrative Agent a facility fee calculated for each day at the Facility Fee Rate for such day (determined in accordance with the Pricing Grid). Such facility fee shall accrue for each day (i) from, and including the Effective Date to, but excluding, the date on which the Commitments terminate in their entirety, on the aggregate amount of the Commitments (whether used or unused) then in effect and (ii) from and including such date of termination to, but excluding, the date on which no Loans are outstanding, on the aggregate outstanding principal amount of the Loans on such day. Such facility fee shall be allocated among the Lenders ratably in proportion to their Commitments; provided that any facility fee accruing after the Commitments terminate in their entirety shall be allocated among the Lenders ratably in proportion to the unpaid principal amounts of their respective Loans. Accrued fees under this Section shall be payable quarterly in arrears on each Quarterly Date and on the Termination Date; provided that fees accruing after the Termination Date shall be payable on demand.
Section 2.8Optional Termination, Reduction or Extension of Commitments.
(a)The Borrower may, upon at least three Domestic Business Days’ notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time (after giving effect to any optional prepayments to be made at such time) or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or a larger multiple of $1,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding Revolving Credit Exposure.
(b)On any anniversary of the Closing Date (each, an “Extension Date”), but on no more than two occasions, the Borrower shall have the right, with the consent of the Required Lenders and subject to the terms and conditions of this Section 2.9(b), to extend the Termination Date then in effect (each, an “Extension Effective Date”) by one additional year (which date shall become the Termination Date for the consenting Lender(s)); provided, that (i) the representations and warranties of the Borrower set forth in this Agreement shall be true and correct in all material respects (or, if qualified as to materiality, in all respects) on such Extension Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be accurate in all material respects (or, if qualified as to materiality, in all respects) as of such earlier date) both before and immediately after giving effect to the proposed Termination Date extension, (ii) no Default shall have occurred and be continuing on such Extension Date both before and immediately after giving effect to the proposed Termination Date extension, and (iii) the Termination Date shall not be extended with respect to any Lender without the consent of such Lender (such consent to be given by the Lender acting in its sole and individual discretion). At least 30 days prior to the relevant Extension Date (or such shorter period as agreed to by the Administrative Agent and the Borrower), the Borrower shall provide written notice to the Administrative Agent of the proposed Termination Date extension. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender thereof. Any Lender that shall not have provided its written consent to the proposed Termination Date extension by the date that is 10 Domestic
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Business Days prior to the relevant Extension Date (or such shorter period agreed to by the Administrative Agent and the Borrower) shall be deemed to have elected not to approve of such extension. In the event any Lender does not (or is deemed to not) consent to an extension of the Termination Date then in effect with respect to such Lender (with respect to such extension, a “Non-Approving Lender”), such Lender’s Commitment shall expire on the Termination Date then in effect with respect to such Lender and for all purposes of this Agreement “Termination Date” in respect of such Lender, the Loans made by it and any other amounts owing to such Lender hereunder shall mean such Termination Date. As of a given Extension Effective Date, the Commitments of the Lenders shall be deemed modified as appropriate to reflect the expiration of the Commitment of any Non-Approving Lender with respect to such extension. The Borrower shall have the right, at its sole expense, upon notice to the Administrative Agent and any Non-Approving Lender in respect of any Termination Date extension, to require such Lender to assign and delegate, prior to the relevant Extension Effective Date, without recourse (in accordance with and subject to the restrictions contained in Section 9.6) all of its interests, rights and obligations under this Agreement and the other Loan Documents to which it is a party to an assignee that shall assume such obligations (which assignee may be another Lender that accepts such assignment), provided, such assignee concurrently with such assignment approves such extension; and provided, further, that (i) the Borrower (unless the assignee is a Lender or a Lender Affiliate) shall have received the prior written consent of the Administrative Agent (which consent shall not unreasonably be withheld, delayed or conditioned) and (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Credit Loans, 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).
Section 2.9Method of Electing Interest Rates.
(a)The Revolving Credit Loans included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8 and the last sentence of this subsection (a)), as follows:
(i)if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-DollarSOFR Loans as of any Euro-DollarU.S. Government Securities Business Day; and
(ii)if such Loans are Euro-DollarSOFR Loans, the Borrower may elect to convert such Loans to Base Rate Loans or elect to continue such Loans as Euro-DollarSOFR Loans for an additional Interest Period, in either case effective on the last day of the then current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a “Notice of Interest Rate Election”) to the Administrative Agent not later than 11:00 A.M. on the third Euro-DollarU.S. Government Securities Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, is each $10,000,000 or any larger multiple of $1,000,000. If no such notice is timely received prior to the end of an Interest Period, the Borrower shall be deemed to have elected that all Revolving Credit Loans having such Interest Period be automatically continued as Euro-DollarSOFR Loans having an Interest Period of one month; provided that if such Interest Period would end after the Termination Date, such Loans shall be converted to Base Rate Loans. Notwithstanding the
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foregoing, the Borrower may not elect to convert any Loan to, or continue any Loan as, a Euro-DollarSOFR Loan pursuant to any Notice of Interest Rate Election if at the time such notice is delivered an Event of Default shall have occurred and be continuing.
(b)Each Notice of Interest Rate Election shall specify:
(i)the Group of Loans (or portion thereof) to which such notice applies;
(ii)the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above;
(iii)if the Loans comprising such Group are to be converted, the new Type of Loans and, if the Loans being converted are to be Euro-DollarSOFR Loans, the duration of the next succeeding Interest Period applicable thereto; and
(iv)if such Loans are to be continued as Euro-DollarSOFR Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period.
(c)Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Administrative Agent shall promptly notify each Lender of the contents thereof and such notice shall not thereafter be revocable by the Borrower.
(d)An election by the Borrower to change or continue the rate of interest applicable to any Group of Loans pursuant to this Section shall not constitute a Borrowing subject to the provisions of Section 3.2.
Section 2.10Optional Prepayments.
(a)The Borrower may, (i) upon same Domestic Business Day’s notice to the Administrative Agent (received not later than 11:00 A.M.), prepay the Group of Base Rate Loans or (ii) upon at least, in the case of Euro-DollarSOFR Loans, three Euro-DollarU.S. Government Securities Business Days’ notice to the Administrative Agent, and subject to Section 2.14, prepay any Group of Euro-DollarSOFR Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment of a Group of Loans shall be applied to prepay ratably the Loans of the Lenders included in such Group.
(b)[Reserved]
(c)Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender’s ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower; provided that a notice of prepayment may state that such notice is conditioned upon the effectiveness of other credit facilities or any other transaction, in which case such notice may be revoked by the Borrower if such condition is not satisfied.
Section 2.11Scheduled Termination of Commitments. The Commitments shall terminate on the Termination Date.
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Section 2.12General Provisions as to Payments.
(a)The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, without setoff or counterclaim and not later than 12:00 Noon on the date when due, in Federal or other funds immediately available to the Administrative Agent at its address referred to in Section 9.1. The Administrative Agent will promptly distribute to each Lender, for the account of its Applicable Lending Office, its ratable share (or other applicable share as provided herein) of each such payment received by the Administrative Agent for the account of the respective Lenders to which such payment is owed. Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-DollarSOFR Loans shall be due on a day that is not a Euro-DollarU.S. Government Securities Business Day, the date for payment thereof shall be extended to the next succeeding Euro-DollarU.S. Government Securities Business Day unless such Euro-DollarU.S. Government Securities Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-DollarU.S. Government Securities Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time.
(b)Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders 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 Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have so made such payment, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensationOvernight Rate, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing.
Section 2.13Funding Losses. If the Borrower makes any payment of principal with respect to any Euro-DollarSOFR Loan or any Euro-DollarSOFR Loan is converted (pursuant to Article 6 or 8 or otherwise) on any day other than the last day of the Interest Period applicable thereto, or if the Borrower fails to borrow, prepay, convert or continue any Euro-DollarSOFR Loans after notice has been given to any Lender in accordance with Section 2.4(a), 2.10(c) or 2.11(c), the Borrower shall reimburse each Lender within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, provided that such Lender shall have delivered to the Borrower a certificate as to the amount of such loss or expense indicating in reasonable detail the computation thereof, which certificate shall be conclusive in the absence of manifest error.
Section 2.14Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).
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Section 2.15Registry.
(a)The Administrative Agent shall, acting solely for such purpose as a non-fiduciary agent of the Borrower, maintain at one of its filing offices in the United States a register (the “Register”) on which it will record the Commitment of each Lender, each Loan made by such Lender and each repayment of any Loan made by such Lender. Any such recordation by the Administrative Agent on the Register shall be conclusive, absent manifest error. With respect to any Lender, the assignment or other transfer of the Commitment of such Lender and the rights to the principal of, and interest on, any Loan made and Note issued pursuant to this Agreement shall not be effective until such assignment or other transfer is recorded on the Register and otherwise complies with Section 9.6(c). The registration of assignment or other transfer of all or part of the Commitment, Loans and Notes for a Lender shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement referred to in Section 9.6(c). The Register shall be available at the offices where kept by the Administrative Agent for inspection by the Borrower and any Lender at any reasonable time upon reasonable prior notice to the Administrative Agent. The Borrower may not replace any Lender pursuant to Section 8.6 unless, with respect to any Notes held by such Lender, the requirements of this subsection have been satisfied. Each Lender shall record on its internal records (including computerized systems) the foregoing information as to its own Commitment and Loans. Failure to make any such recordation, or any error in such recordation, shall not affect the obligations of the Borrower or any Lender under the Loan Documents.
(b)The Borrower hereby agrees that, upon the request of any Lender at any time, such Lender’s Loans shall be evidenced by a promissory note or notes of the Borrower (each a “Note”), substantially in the form of Exhibits A-1 or A-2 hereto, payable to the order of such Lender and representing the obligation of the Borrower to pay the unpaid principal amount of the Loans made by such Lender, with interest as provided herein on the unpaid principal amount from time to time outstanding.
Section 2.16Increase in LoansCommitments. (a) The Borrower may, at any time by notice to the Administrative Agent, propose an increase in the total Commitments hereunder (each such proposed increase being a “Commitment Increase”) either by (x) having a Lender increase its Commitment then in effect (each an “Increasing Lender”) (provided that, for the avoidance of doubt, any Lender may elect or decline, in its sole discretion, to be an Increasing Lender) or (y) adding as a Lender with a new Commitment hereunder a Person that is not then a Lender (each an “Assuming Lender”) (with, solely in the case of (y), if such Person is not a Lender or a Lender Affiliate, the approval of the Administrative Agent and the Swingline Lender (such notice not to be unreasonably withheld, delayed or conditioned)), which notice shall specify the name of each Increasing Lender and/or Assuming Lender, as applicable, the amount of the Commitment Increase and the portion thereof being assumed by each such Increasing Lender or Assuming Lender, and the date on which such Commitment Increase is to be effective (the “Commitment Increase Date”) (which shall be a Domestic Business Day at least three Domestic Business Days after delivery of such notice and 30 days prior to the Termination Date); provided that:
(i)the minimum amount of the increase of the Commitment of any Increasing Lender, and the minimum amount of the Commitment of any Assuming Lender, as part of any Commitment Increase shall be $10,000,000 or a larger multiple of $1,000,000;
(ii)immediately after giving effect to any Commitment Increase, the aggregate amount of Commitment Increases effected pursuant to this Section 2.17 shall not exceed $250,000,000;
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(iii)no Default shall have occurred and be continuing on the relevant Commitment Increase Date or shall result from any Commitment Increase; and
(iv)the representations and warranties of the Borrower contained in this Agreement shall be true in all material respects (or, if qualified as to materiality, in all respects) on and as of the date of the relevant Commitment Increase Date (except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall be true in all material respects(or, if qualified as to materiality, in all respects) as of such earlier date).
(a)Each Commitment Increase (and the increase of the Commitment of each Increasing Lender and/or the new Commitment of each Assuming Lender, as applicable, resulting therefrom) shall become effective as of the relevant Commitment Increase Date upon receipt by the Administrative Agent, on or prior to 11:00 A.M. on such Commitment Increase Date, of (A) a certificate of a duly authorized officer of the Borrower stating that the conditions with respect to such Commitment Increase under this Section 2.17 have been satisfied and (B) an agreement, in form and substance reasonably satisfactory to the Borrower and the Administrative Agent, pursuant to which, effective as of such Commitment Increase Date, the Commitment of each such Increasing Lender shall be increased and/or each such Assuming Lender shall undertake a Commitment, duly executed by such Increasing Lender or Assuming Lender, as the case may be, and the Borrower and acknowledged by the Administrative Agent. Upon the Administrative Agent’s receipt of a fully executed agreement from each Increasing Lender and/or Assuming Lender referred to in clause (B) above, together with the certificate referred to in clause (A) above, the Administrative Agent shall record the information contained in each such agreement in the Register and give prompt notice of the relevant Commitment Increase to the Borrower and the Lenders (including, if applicable, each Assuming Lender). On each Commitment Increase Date, (x) in the event Revolving Credit Loans are then outstanding, (i) each relevant Increasing Lender and Assuming Lender shall make available to the Administrative Agent such amounts in immediately available funds as the Administrative Agent shall determine, for the benefit of the other relevant Lenders, as being required in order to cause, after giving effect to such increase and the application of such amounts to make payments to such other relevant Lenders, the Revolving Credit Loans to be held ratably by all Lenders in accordance with their respective Commitments, (ii) the Borrower shall be deemed to have prepaid and reborrowed all outstanding Revolving Credit Loans as of such Commitment Increase Date (with such borrowing to consist of the Type of Loans, with related Interest Periods if applicable, specified in a notice delivered by the Borrower in accordance with the requirements of Section 2.2) and (iii) the Borrower shall pay to the Lenders the amounts, if any, payable under Section 2.14 as a result of such prepayment, and (y) if there are Swingline Loans then outstanding, the participations of the Lenders in such Swingline Loans will be automatically adjusted to be held ratably after giving effect to the applicable Commitment Increase.
Section 2.17Swingline Loans.
(a)Agreement to Lend. From time to time prior to the Swingline Termination Date, subject to the terms and conditions hereof and in reliance on the agreements of the Lenders set forth in this Section, the Swingline Lender agrees to make Swingline Loans to the Borrower pursuant to this Section; provided that, immediately after each Swingline Loan is made, the aggregate outstanding principal amount of all Swingline Loans will not (i) result in the Revolving Credit Exposure of any Lender exceeding its Commitment, (ii) result in the sum of the total Revolving Credit Exposures exceeding the aggregate amount of the Commitments or (iii) exceed the lesser of (A) $100,000,000 and (B) the aggregate amount of the Commitments. Each Swingline Loan shall be in a principal amount of $1,000,000 or any larger multiple thereof. No Swingline Loan may be used to refinance an outstanding Swingline Loan. Within the foregoing
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limits, the Borrower may borrow under this Section 2.18, prepay Swingline Loans and reborrow at any time prior to the Swingline Termination Date under this Section 2.18.
(b)Swingline Borrowing Procedure. The Borrower shall give the Swingline Lender notice not later than 3:00 P.M. on the date of each Swingline Loan, specifying the amount of such Loan, whether the Swingline Loan shall bear interest atbased on the Euro-DollarSOFR Market Index Rate or the Base Rate, and the date of such borrowing, which shall be a Domestic Business Day. Not later than 4:00 P.M. on the date of each Swingline Loan, the Swingline Lender shall, unless it determines that any applicable condition specified in Article 3 has not been satisfied, make available the amount of such Swingline Loan, in Federal or other immediately available funds, to the Borrower at the Swingline Lender’s address specified in or pursuant to Section 9.1.
(c)Interest. Each Swingline Loan shall bear interest on the outstanding principal amount thereof, for each day from the day such Loan is made to but excluding the day it becomes due, at a rate per annum equal to (i) the sum of the Euro-DollarSOFR Market Index Rate plus the Applicable Margin for Euro-DollarSOFR Loans or (ii) the sum of the Base Rate plus the Applicable Margin for Base Rate Loans. Such interest shall be payable at maturity and quarterly in arrears on each Quarterly Date prior to maturity. Any overdue principal of or interest on any Swingline Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate then applicable to Swingline Loans plus the Applicable Margin.
(d)Maturity; Mandatory Prepayment. Each Swingline Loan shall mature, and the principal amount thereof shall be due and payable, on the earlier of the date falling 10 Domestic Business Days after such Loan is made and the Swingline Termination Date. In addition, on the date of each Borrowing of Revolving Credit Loans pursuant to Section 2.1, the Administrative Agent shall apply the proceeds thereof to prepay all Swingline Loans then outstanding.
(e)Optional Prepayment. The Borrower may prepay any Swingline Loan in whole at any time, or from time to time in part in a principal amount of $1,000,000 or any larger multiple thereof, by giving notice of such prepayment to the Swingline Lender not later than 1:00 P.M. on the date of prepayment.
(f)Payments. All payments to the Swingline Lender under this Section 2.18 shall be made to it at its address specified in or pursuant to Section 9.1 in Federal or other immediately available funds, not later than 3:00 P.M. on the date of payment.
(g)Participations by Lenders in Swingline Loans.
(i)Immediately upon the making of a Swingline Loan by the Swingline Lender, and without any further action on the part of such Swingline Lender or the Lenders, such Swingline Lender hereby grants to each Lender, and each Lender hereby acquires from such Swingline Lender, a participation in such Swingline Loan equal to such Lender’s pro rata share, based upon its Commitment in proportion to the aggregate Commitments of the amount of such Swingline Loan. The Swingline Lender may, by written notice given to the Administrative Agent not later than 10:00 A.M. on any Domestic Business Day, require the Lenders to fund participations on such Domestic Business Day in all or a portion of its Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Lenders will fund such participations. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Lender, specifying in such notice such Lender’s pro rata share of such Swingline Loan or Loans. Each Lender hereby absolutely, unconditionally and irrevocably agrees, upon receipt of notice as provided above in this paragraph, to pay to
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the Administrative Agent, for account of the Swingline Lender, such Lender’s pro rata share of such Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation to acquire and fund participations in Swingline Loans pursuant to this paragraph is absolute, unconditional and irrevocable and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.4 with respect to Revolving Credit Loans made by such Lender (and Section 2.4 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Lenders.
(ii)The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan funded pursuant to the preceding paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the applicable Swingline Lender. Any amounts received by a Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan made by such Swingline Lender after receipt by such Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent. Any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to the preceding paragraph and to such Swingline Lender, as their interests may appear, provided that any such payment so remitted shall be repaid to such Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.
Article 3
CONDITIONS
CONDITIONS
Section 3.1Closing Date. The Closing Date hereunder shall occur on the first date on which each of the following conditions shall have been satisfied:
(a)receipt by the Administrative Agent of counterparts of this Agreement duly executed by the Borrower and each of the Lenders;
(b)receipt by the Administrative Agent, to the extent requested by any Lender not less than five Domestic Business Days prior to the Closing Date, of any Notes so requested duly executed by the Borrower;
(c)receipt by the Administrative Agent of evidence that all fees and expenses payable on or before the Closing Date by the Borrower, and for which invoices have been presented at least two Domestic Business Days prior to the Closing Date, for the account of the Lenders and the Lender Affiliates in connection with this Agreement shall have been paid in full on or before such date;
(d)receipt by the Administrative Agent of opinions of (i) Hinckley, Allen & Snyder LLP, special counsel for the Borrower and (ii) Vanessa Allen Sutherland, Senior Vice President Government Relations and Chief Legal Officer of the Borrower (or another counsel for the Borrower reasonably satisfactory to the Administrative Agent) in substance reasonably satisfactory to the Administrative Agent;
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(e)evidence that as of the Closing Date (i) the principal of and interest on, and all other fees owing under the Existing Credit Agreement shall have been (or shall be contemporaneously) paid in full and (ii) the commitments of the banks under the Existing Credit Agreement shall have been (or shall be contemporaneously) terminated (and in each case, each Lender which is a party to the Existing Credit Agreement hereby waives compliance with the time requirement that a notice of termination or prepayment be given in advance of the Closing Date);
(f)receipt by the Administrative Agent of all documents it may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of the Loan Documents and any other matters relevant thereto, all in form and substance reasonably satisfactory to the Administrative Agent;
(g)receipt by the Administrative Agent of a certificate, dated as of the Closing Date and signed by duly authorized officers of the Borrower, substantially in the form of Exhibit C hereto; and
(h)the Borrower shall have provided to the Administrative Agent and the Lenders, at least 5 Domestic Business Days prior to the Closing Date, (x) all documentation and other information requested by the Administrative Agent or any Lender in order to comply with requirements of the PATRIOT Act, applicable “know your customer” and anti-money laundering rules and regulations and (y) to the extent the Borrower qualifies as a “legal entity customer” under 31 C.F.R. § 1010.230 (the “Beneficial Ownership Regulation”), a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation (a “Beneficial Ownership Certification”).
Without limiting the generality of the provisions of Section 7.3(c), for purposes of determining compliance with the conditions specified in this Section 3.1, the Administrative Agent and each Lender that has signed this Agreement 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 a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.
Section 3.2Borrowings. The obligation of any Lender to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions:
(a)receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.2 or receipt by the Swingline Lender of notice as required by Section 2.18(b), as the case may be;
(b)immediately after such Borrowing and application of the proceeds thereof, (i) in the case of a Borrowing of a Revolving Credit Loan, the aggregate outstanding principal amount of the Revolving Credit Loans shall not exceed the aggregate amount of the Commitments and (ii) in the case of a Borrowing of a Swingline Loan, the aggregate outstanding principal amount of all Swingline Loans shall not exceed the lesser of (A) $100,000,000 and (B) the aggregate amount of the Commitment;
(c)immediately before and after such Borrowing, no Default shall have occurred and be continuing;
(d)the representations and warranties of the Borrower contained in this Agreement (other than the representations and warranties set forth in Sections 4.4(b) and 4.5) shall be true in all material respects (or in all respects in the case of any representation or warranty already
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qualified by materiality) on and as of the date of such Borrowing (except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall be true in all material respects (or in all respects in the case of any representation or warranty already qualified by materiality) as of such earlier date); and
(e)the Closing Date shall have occurred on or prior to May 15, 2020.
Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section.
Section 3.3Waiver by Lenders. In order to facilitate the satisfaction of the condition set forth in Section 3.1(e) above, each of the parties hereto that is a party to the Existing Credit Agreement waives (i) the requirement in Section 2.9(a) thereof that a notice terminating the commitments of the banks thereunder must be given at least three Domestic Business Days prior to such termination and (ii) to the extent necessary, the requirement in Section 2.11(a) thereof that a notice of prepayment of any Base Rate Borrowing (as defined in the Existing Credit Agreement) must be given at least one Domestic Business Day prior to such prepayment. The waivers granted under this Section are subject to the obligations of the Borrower to pay to each bank party to the Existing Credit Agreement all amounts payable by the Borrower to such bank pursuant to Section 2.14 of the Existing Credit Agreement as a result of any prepayment.
Article 4
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants on the date hereof that:
Section 4.1Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Virginia (or, if another corporation has become the Borrower as permitted by Section 5.9, the laws of its jurisdiction of incorporation). The Borrower has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have such licenses, authorizations, consents and approvals could not be reasonably expected to result in a Material Adverse Change.
Section 4.2Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of the Loan Documents are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (except for filings with governmental agencies (x) which filings are necessary or desirable in order for the Borrower to comply with disclosure obligations under applicable laws and (y) which filings, if not made, would not have any effect on the validity or enforceability of the Loan Documents and the obligations of the Borrower thereunder) and do not contravene, or constitute a default under, any provision of law or regulation applicable to the Borrower (including without limitation the Margin Regulations) or of the articles of incorporation or by-laws of the Borrower, or of any agreement under which Debt may be incurred or any other material agreement or instrument binding upon the Borrower or any of its Consolidated Subsidiaries (excluding any contravention or default of any material agreement or instrument as could not reasonably be expected to result in a Material Adverse Change) or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Consolidated Subsidiaries.
Section 4.3Binding Effect. This Agreement constitutes, and when executed and delivered in accordance with this Agreement, each Note will constitute, a valid and binding
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obligation of the Borrower, enforceable against it in accordance with its terms, subject to (i) applicable Debtor Relief Laws and (ii) equitable principles of general applicability (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 4.4Financial Information.
(a)The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2019 and the related consolidated statements of income, comprehensive income, cash flows and changes in stockholders’ equity for the fiscal year then ended, reported on by KPMG LLP and set forth in the Borrower’s 2019 Form 10-K, a copy of which has been delivered to each of the Lenders or otherwise made available to the Lenders as contemplated by Section 5.1, fairly present, in conformity with generally accepted accounting principles in the United States, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations, cash flows and changes in stockholders’ equity for such fiscal year.
(b)Since December 31, 2019, there has been no material adverse change in the consolidated financial condition, operations or assets of the Borrower and its Consolidated Subsidiaries, taken as a whole (a “Material Adverse Change”).
(c)The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate.
Section 4.5Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower, threatened against or affecting, the Borrower or any of its Consolidated Subsidiaries before any court or arbitrator or any governmental body, agency or official, which, if determined adversely, could reasonably be expected to result in a Material Adverse Change or which in any manner impairs the validity or enforceability of the Loan Documents in any material respect.
Section 4.6Compliance with Laws.
(a)The Borrower and its Consolidated Subsidiaries are in compliance in all material respects with all applicable provisions of the United States Interstate Commerce Commission Termination Act of 1995, as amended, and all regulations, orders, rulings and official interpretations thereunder, except where the failure to so comply could not reasonably be expected to result in a Material Adverse Change.
(b)Except as would not reasonably be expected to result in a Material Adverse Change, each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. Except as would not reasonably be expected to result in a Material Adverse Change, no member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any material contribution or payment due under any Multiemployer Plan in which more than 100 employees of members of the ERISA Group participate or under any Plan, or made any amendment to any Plan or Benefit Arrangement, any of which has resulted in the imposition of a Lien under Section 430(k) of the Internal Revenue Code or Section 303(k) of ERISA or which could reasonably be expected to subject any Plan to the increased funding rules under Section 430 of the Internal Revenue Code or Section 303 of ERISA, (iii) incurred any material liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA, or (iv) received any written notification that any Multiemployer Plan is
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in “endangered” or “critical” status (within the meaning of Section 432 of the Internal Revenue Code or Section 305 of ERISA) or is insolvent or has been terminated (within the meaning of Title IV of ERISA).
Section 4.7Environmental Matters. Except for the Disclosed Matters 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 Change, neither the Borrower nor any Consolidated 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) knows of any basis for any Environmental Liability.
Section 4.8Taxes. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary or are contesting such assessment in good faith by appropriate proceedings, except where the failure to so pay or file could not be reasonably expected to result in a Material Adverse Change. The statute of limitations on Internal Revenue Service examinations has expired for all years prior to 2015.
Section 4.9Significant Subsidiaries. Each of the Borrower’s Significant Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, franchises, consents and approvals required to carry on its business as now conducted, except where the failure to have such licenses, authorizations, franchises, consents and approvals could not be reasonably expected to result in a Material Adverse Change.
Section 4.10Not an Investment Company. The Borrower is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
Section 4.11Full Disclosure. All written information (it being understood that such information will be deemed to include the Borrower’s most recent filings on Form 10-K and Form 10-Q and any filing on Form 8-K, or posting on the Borrower’s website at http://www.nscorp.com/content/nscorp/en/investor-relations/financial-reports/sec-filings.html, filed or posted not less than three (3) Domestic Business Days prior to the date hereof), taken as a whole, heretofore furnished by the Borrower to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Administrative Agent or any Lender will be (in the case of any such information furnished after the date hereof, after giving effect to any supplements thereto), complete and correct in all material respects on the date as of which such information is stated or certified.
Section 4.12No Default. No Default has occurred and is continuing and neither the Borrower nor any of its Subsidiaries is in default under or with respect to any material contract, agreement, lease or other instrument to which it is a party or by which its property is bound or affected where such default could reasonably be expected to result in a Material Adverse Change.
Section 4.13Anti-Corruption Laws and Sanctions. The Borrower, its Subsidiaries and their respective directors, officers, employees, and, to the knowledge of the Borrower, its agents are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of the Borrower, any Subsidiary or, to the knowledge of the Borrower, any of their
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respective directors, officers or employees has taken any action, directly or indirectly, that would result in a violation by such Persons of any Sanctions or Anti-Corruption Laws.
Section 4.14Not an Affected Financial Institution or Covered Party. The Borrower is not an Affected Financial Institution as defined in Section 1.1or Covered Party.
Article 5
COVENANTS
COVENANTS
The Borrower agrees that, so long as any Lender has any Commitment hereunder or any principal of or interest on any Loan remains unpaid:
Section 5.1Information. The Borrower will deliver to the Administrative Agent for circulation to each of the Lenders:
(a)promptly after they are publicly available, and in any event within 15 days after they are required to be filed with the SEC after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, cash flows and changes in stockholders’ equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in accordance with regulations of the SEC by KPMG LLP or other independent public accountants of nationally recognized standing;
(b)promptly after they are publicly available, and in any event within 15 days after they are required to be filed with the SEC after the end of each of the first three quarters of each fiscal year of the Borrower, (x) a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter, setting forth in comparative form the figures at the end of the Borrower’s previous fiscal year, (y) the related consolidated statement of income for such quarter and for the portion of the Borrower’s fiscal year ended at the end of such quarter, setting forth in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower’s previous fiscal year, and (z) the related consolidated statement of cash flows for the portion of the Borrower’s fiscal year ended at the end of such quarter, setting forth in comparative form the figures for the corresponding portion of the Borrower’s previous fiscal year, certified by the chief financial officer or the chief accounting officer of the Borrower (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency as of the dates and for the periods indicated (except for changes in generally accepted accounting principles concurred in by the Borrower’s independent public accountants);
(c)simultaneously with the delivery of the financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer, the chief accounting officer, treasurer or any assistant treasurer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Section 5.7 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;
(d)within 10 days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;
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(e)promptly after the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent), proxy statements or any other documents distributed by the Borrower to its shareholders generally which contain equivalent information to that contained in Forms 10-K, 10-Q and 8-K (or their equivalents) or proxy statements, and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the SEC; provided however that such proxy statements or other documents distributed by the Borrower to its shareholders need not be furnished so long as the Borrower is a reporting company under the Securities Exchange Act of 1934, as amended;
(f)except as would not reasonably be expected to cause a Material Adverse Change: if and within 10 Domestic Business Days after the date any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with respect to any Plan which could reasonably be expected to constitute grounds for a termination of such Plan under Title IV of ERISA or knows that the plan administrator of any Plan has given or is required to give notice of any reportable event with respect to any Plan which could reasonably be expected to constitute grounds for a termination of such Plan under Title IV of ERISA, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of the imposition of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan in which more than 100 employees of members of the ERISA Group participate is insolvent or has been terminated (within the meaning of Title IV of ERISA), or is in “endangered” or “critical” status (within the meaning of Section 305 of ERISA), a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution due under any Multiemployer Plan in which more than 100 employees of members of the ERISA Group participate or under any Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement, any of which has resulted in the imposition of a Lien under Section 430(k) of the Internal Revenue Code or Section 303(k) of ERISA or could reasonably be expected to result in such Plan becoming subject to the increased funding requirements under Section 430 of the Internal Revenue Code or Section 303 of ERISA, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take;
(g)as soon as reasonably practicable after any officer of the Borrower obtains knowledge of the commencement of, or of a threat of the commencement of, any actions, suits or proceedings against the Borrower or any of its Subsidiaries before any court or arbitrator or any Governmental Authority which, if determined adversely, could reasonably be expected to result in a Material Adverse Change or which in any manner questions the validity or enforceability of the Loan Documents in any material respect, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the nature of such pending or threatened action, suit or proceeding and such additional information with respect thereto as may be reasonably requested by any Lender;
(h)from time to time such additional publicly available information regarding the financial position or business of the Borrower and its Consolidated Subsidiaries as any Lender through the Administrative Agent may reasonably request; and
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(i)promptly following any request therefor, deliver information and documentation reasonably requested by the Administrative Agent or any Lender for purposes of compliance with applicable “know your customer” and anti-money laundering rules and regulations, including the PATRIOT Act and the Beneficial Ownership Regulation (to the extent applicable).
Information required to be delivered pursuant to this Section 5.1 shall be deemed to have been delivered to the Administrative Agent on the date that such information has been posted on the Borrower’s website on the Internet at http://www.nscorp.com/content/nscorp/en/investor-relations/financial-reports/sec-filings.html or is available on the website of the SEC at http://www.sec.gov (to the extent such information has been posted or is available as described in such notice). Information required to be delivered pursuant to this Section 5.1 may also be delivered via the Platform or other electronic communication (in .pdf form) pursuant to procedures approved by the Administrative Agent pursuant to Section 9.1 hereto. Upon the release of any such information, the Borrower shall provide a hard copy of such document as any Lender may reasonably request from time to time.
Section 5.2Maintenance of Property; Insurance.
(a)The Borrower will keep, and will cause each Significant Subsidiary to keep, all property deemed by the Borrower to be necessary to its business in such order and condition as the Borrower shall consider prudent, ordinary wear and tear excepted.
(b)The Borrower will maintain insurance (or self-insurance) in such amounts as it reasonably deems necessary to carry on its business on terms the Borrower reasonably deems appropriate.
Section 5.3Conduct of Business and Maintenance of Existence. The Borrower will preserve, renew and keep in full force and effect its corporate existence, except as permitted by Section 5.9, and its rights, privileges and franchises reasonably deemed by the Borrower to be necessary in the normal conduct of business, except where the failure to maintain such rights, privileges and franchises could not be reasonably expected to result in a Material Adverse Change. The Borrower will cause each of its Significant Subsidiaries to continue to engage in business of the same general type as now conducted by it, and will cause each of them to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises reasonably deemed by the Borrower to be necessary in the normal conduct of business, except where the failure to maintain such rights, privileges and franchises could not be reasonably expected to result in a Material Adverse Change. Nothing in this Section 5.3 shall prohibit a merger, consolidation or share exchange pursuant to which any two corporations shall be combined into a single corporation or the acquisition by any corporation of substantially all of the assets of another corporation.
Section 5.4Compliance with Laws. The Borrower will comply, and cause each Subsidiary to comply, in all material respects, with all applicable laws, ordinances, rules, regulations, and requirements of Governmental Authorities (including, without limitation, the Interstate Commerce Commission Termination Act of 1995, Environmental Laws, ERISA, Anti-Corruption Laws and applicable Sanctions, and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where such failure could not be reasonably expected to result in a Material Adverse Change.
Section 5.5Payment of Obligations. The Borrower will pay and discharge, and will cause each Significant Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities (including, without limitation, tax liabilities and claims of materialmen, warehousemen and the like which if unpaid would by law give rise to a Lien not
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permitted by this Agreement), except, where the same may be contested in good faith by appropriate proceedings or, where the failure to pay such obligation or liability could not be reasonably expected to result in a Material Adverse Change, and will maintain, and will cause each Significant Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same.
Section 5.6Inspection of Property, Books and Records. The Borrower will keep, and will cause each Significant Subsidiary to keep, proper books of record and account in accordance with generally accepted accounting principles; and will permit, and will cause each Subsidiary to permit, representatives designated in writing by any Lender at such Lender’s expense (coordinated through the Administrative Agent), and subject to such limitations as the Borrower may reasonably impose to insure safety or compliance with any applicable legal or contractual restrictions, to visit and inspect any of their respective properties, to examine and make abstracts from any of their corporate books and financial records and to discuss their respective affairs, finances and accounts with their respective principal officers, all at such reasonable times during normal business hours, after reasonable prior notice; provided that, unless a Default of Event of Default shall have occurred and be continuing, there shall be no more than two such inspections by the Administrative Agent and the Lenders taken as a whole during any fiscal year.
Section 5.7Leverage Ratio. The Leverage Ratio will not exceed, at any time on or after the Effective Date, 65%.
Section 5.8Negative Pledge. Neither the Borrower nor any Subsidiary will create, assume or suffer to exist any Lien on any other asset now owned or hereafter acquired by it except:
(a)Liens existing on the date of this Agreement that have attached (or that hereafter attach, pursuant to agreements in effect on the date hereof, to assets not owned by Persons subject to such agreements on the date hereof);
(b)any Lien existing on any asset of any Person at the time such Person becomes a Subsidiary and not created in contemplation of such event;
(c)any Lien (created pursuant to an equipment trust agreement, conditional sale agreement, chattel mortgage or lease or otherwise) on any asset or pool of assets securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring, constructing or rebuilding such asset or pool of assets;
(d)any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower or a Subsidiary and not created in contemplation of such event;
(e)any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary and not created in contemplation of such acquisition;
(f)Liens created, assumed or existing on assets associated with real estate development projects or development joint ventures;
(g)any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased (other than by the Permitted Additional Amount) and is not secured by any additional assets (other than any replacement assets);
(h)inchoate tax Liens;
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(i)Liens arising in the ordinary course of its business, which (i) do not secure Debt or Derivatives Obligations and (ii) do not, in the aggregate, materially detract from the value of its material assets or materially impair the use thereof in the operation of its business;
(j)Liens on “margin stock” (as defined in the Margin Regulations), if and to the extent that the value of such margin stock exceeds 25% of the total assets of the Borrower and its Subsidiaries subject to this Section;
(k)Liens on cash and cash equivalents securing Derivatives Obligations, provided that the aggregate amount of cash and cash equivalents subject to such Liens may at no time exceed $100,000,000;
(l)Liens upon real and/or personal property, which property was acquired after the Closing Date (by purchase, construction or otherwise) by the Borrower or any of its Subsidiaries, provided that each of such Liens exists only on such property and any proceeds or replacements thereof;
(m)Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not in excess of 12.5% of Consolidated Net Tangible Assets; and
(n)Liens on assets of a Subsidiary to secure obligations owed by such Subsidiary to the Borrower.
Notwithstanding the foregoing, neither the Borrower nor any Subsidiary will create, assume, incur or suffer to exist any Lien otherwise permitted by this Section 5.8 on any equity interest or Debt of Norfolk Southern Railway Company now directly owned or hereafter acquired to secure any Debt for money borrowed or Debt evidenced by a bond, note, debenture or other evidence of indebtedness, without in any such case making effective provision whereby all of the obligations owing hereunder shall be secured equally and ratably with such Debt.
Section 5.9Consolidations, Mergers and Sales of Assets.
(a)The Borrower will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets to any other Person; provided that the Borrower may merge or consolidate with another Person or sell all or substantially all of its assets to another Person if:
(A)the Person surviving such merger or consolidation, or the Person that acquires substantially all of the Borrower’s assets, is a business corporation incorporated under the laws of a State of the United States of America;
(B)the Person surviving such merger or consolidation, if not the Borrower, or the Person that acquires substantially all of the Borrower’s assets, (i) executes and delivers to the Administrative Agent and each of the Lenders an instrument in form reasonably satisfactory to the Administrative Agent pursuant to which such Person assumes all of the Borrower’s obligations under the Loan Documents as theretofore amended or modified, including the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Loan made to the Borrower pursuant to this Agreement, the full and punctual payment of all other amounts payable hereunder and the performance of all of the other covenants and agreements contained
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herein, (ii) provides to the Administrative Agent and the Lenders, at least 5 Domestic Business Days prior to the closing of such merger, consolidation or sale of assets, (x) all documentation and other information requested by the Administrative Agent or any Lender in order to comply with requirements of the PATRIOT Act, applicable “know your customer” and anti-money laundering rules and regulations and (y) to the extent such Person qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation and (iii) if requested by the Required Lenders, delivers an opinion of counsel reasonably satisfactory to the Required Lenders (it being understood that an opinion delivered substantially in the form provided on the Closing Date shall be reasonably satisfactory), in each case after giving effect to such merger, consolidation or sale of assets, as the case may be; and
(C)immediately after giving effect to such merger, consolidation or sale of assets, no Default shall have occurred and be continuing and the representations and warranties of the Borrower contained in this Agreement shall be true in all material respects (or, if qualified as to materiality, in all respects) as if made immediately after such merger, consolidation or sale of assets (except to the extent such representations and warranties specifically relate to an earlier date, in which case, such representations and warranties shall be true in all material respects (or, if qualified as to materiality, in all respects) as of such earlier date).
It is understood that: (i) the reference in Section 4.4(b) to changes in respect of the Borrower and its Consolidated Subsidiaries refers to changes from the business and consolidated financial position of Norfolk Southern Corporation and its Consolidated Subsidiaries at such date, including changes that occur as a result of another Person becoming the Borrower pursuant to such a merger, consolidation or sale of assets and (ii) the references in Section 6.1(l) to individuals who were directors of the Borrower at any time before such a merger, consolidation or sale of assets refers only to individuals who were directors of the Person who was the Borrower at that time. No Person who was the Borrower shall be released from any of its obligations hereunder upon the assumption of such obligations by another Person. For purposes of this Section, the term “consolidate with” means a transaction in which the Borrower and another corporation consolidate to form a new corporation pursuant to the laws of their jurisdictions of incorporation and in which the Borrower and such other corporation cease to exist as separate corporate entities.
(b)Subject to subsection (a) above and subsection (c) below, the Borrower and its Subsidiaries will not sell, lease or otherwise transfer, directly or indirectly, all or any substantial part of the assets of the Borrower and its Subsidiaries, taken as a whole, to any other Person.
(c)The Borrower will at all times own, directly or indirectly all of the shares of capital stock or other ownership interests of Norfolk Southern Railway Company, or the successor thereto by merger, consolidation or share exchange or the Person, if any, who has acquired substantially all of such corporation’s assets (“NSRC”), except directors’ qualifying shares. The Borrower will cause NSRC to continue to own and operate the railroads and any material related assets owned and operated by it on the date hereof; provided that nothing in this Section shall prohibit dispositions (by sale, merger or otherwise) by NSRC of (A) assets in the ordinary course of business or (B) obsolete or unproductive assets.
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Section 5.10Use of Proceeds. The proceeds of the Loans will be used by the Borrower for general corporate purposes of the Borrower and its Subsidiaries. The Borrower will not request any Borrowing, and the Borrower shall not use the proceeds of any Borrowing (i) to purchase or carry “margin stock” (as defined in the Margin Regulations) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose, in each case in violation of Margin Regulations, or (ii) directly or knowingly indirectly (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, or (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, in each case, in any manner that would result in the violation of any Sanctions applicable to any party hereto.
Section 5.11Limitation on Subsidiary Debt. The Borrower will not permit any of its Subsidiaries to incur or at any time be liable with respect to any Debt except:
(a)Debt owing to the Borrower or a Subsidiary all of the outstanding common stock of which (other than directors’ qualifying shares) is owned directly or indirectly by the Borrower;
(b)Debt of Subsidiaries not otherwise permitted by this Section in an aggregate principal amount at any time outstanding not exceeding $1,250,000,000;
(c)Guarantees by any Subsidiary of Debt of its own Subsidiaries, provided that the Debt guaranteed is permitted under this Section;
(d)Debt of any Person at the time such Person becomes a Subsidiary and not incurred in contemplation of such event;
(e)Debt of a Subsidiary in existence on the Effective Date and extensions, renewals and refinancings thereof, provided that the principal amount of such Debt is not increased except by an amount no greater than the Permitted Additional Amount;
(f)Debt of a Subsidiary incurred in connection with the financing of any asset, but solely to the extent that under the terms of such Debt the obligations of such Subsidiary with respect to such Debt may be satisfied by recourse only to such asset and the proceeds and replacements thereof;
(g)obligations (contingent or otherwise) of any Subsidiary arising under any swap contract or hedge agreement; provided that such obligations are (or were) entered into in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets or property held or reasonably anticipated by such Person, and not for purposes of speculation;
(h)Debt arising from the endorsement of instruments in the ordinary course of business;
(i)Debt arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; and
(j)Debt of Subsidiaries incurred or assumed (in connection with an equipment trust agreement, conditional sale agreement, chattel mortgage or lease or otherwise) for the purpose of directly or indirectly financing all or any part of the cost of acquiring, constructing or rebuilding
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any asset and any renewal, extension or refinancing thereof; provided that the aggregate principal amount of such Debt (other than extensions, renewals and refinancings that do not increase the principal amount thereof except by an amount no greater than the Permitted Additional Amount) incurred or assumed in any fiscal year of the Borrower pursuant to this clause (j) shall not exceed $800,000,000.
Section 5.12Transactions with Affiliates. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, pay any funds to or for the account of, make any Investment in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect, any transaction with, any Affiliate except on an arm’s-length basis on terms no less favorable in any material respect to the Borrower or such Subsidiary than could have been obtained from a third party who was not an Affiliate; provided that the foregoing provisions of this Section shall not prohibit (i) the declaration or payment of any lawful dividend or other payment ratably in respect of all of its capital stock of the relevant class, (ii) transactions entered into in the ordinary course of business with joint ventures in which the Borrower has a direct or indirect interest to the extent the Borrower has determined in its reasonable judgment that the business purpose achieved by such transactions renders the terms thereof reasonable or (iii) any payment under any tax sharing agreement entered into among the Borrower and any of its Subsidiaries.
Article 6
DEFAULT
DEFAULT
Section 6.1Events of Default. If one or more of the following events (“Events of Default”) shall have occurred and be continuing:
(a)the Borrower shall default in the payment when due of any principal of any Loan, or shall default in the payment, within 10 days of the due date thereof, of any interest, fees or other amount payable hereunder;
(b)the Borrower shall fail to observe or perform any covenant contained in Sections 5.7 to 5.12, inclusive;
(c)the Borrower shall fail to observe or perform any covenant or agreement contained in any Loan Document (other than those covered by clause (a) or (b) above) for 30 days after written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Lender;
(d)any representation, warranty or certification made (or deemed made) by the Borrower in any Loan Document or in any certificate, financial statement or other document delivered pursuant to any Loan Document shall prove to have been incorrect in any material respect when made (or deemed made);
(e)the Borrower or any of its Subsidiaries shall fail to make any payment in respect of any Material Debt when due or within any applicable grace period;
(f)any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables the holder of such Debt or any Person acting on such holder’s behalf to accelerate the maturity thereof;
(g)the Borrower or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any Debtor Relief Law now or hereafter in effect or seeking the appointment of a
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trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of, or taking possession by, any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;
(h)an involuntary case or other proceeding shall be commenced against the Borrower or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any Debtor Relief Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect;
(i)any member of the ERISA Group shall fail to pay when due an amount or amounts which it shall have become liable to pay under Title IV of ERISA that when aggregated could reasonably be expected to cause a Material Adverse Change; or (i) notice of intent to terminate a Material Plan, or notice that a Material Plan is in “at risk” status (within the meaning of Section 303 of ERISA) or notice that a Multiemployer Plan is in “endangered” or “critical” status (within the meaning of Section 305 of ERISA), shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or (ii) the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or (iii) a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default (within the meaning of Section 4219(c)(5) of ERISA) with respect to, one or more Multiemployer Plans; and in each case in clauses (i) through (iii) above, such event or condition together with all other such events or conditions, if any, could reasonably be expected to cause a Material Adverse Change;
(j)a judgment or order for the payment of money (not paid or covered by insurance (except for deductibles) as to which the relevant insurance company has acknowledged coverage) in excess of $175,000,000 shall be rendered against the Borrower or any Significant Subsidiary and such judgment or order shall continue unsatisfied, unreversed, unvacated, undischarged and unstayed for a period of 30 days;
(k)any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 30% or more of the outstanding shares of common stock of the Borrower;
(l)at any time Continuing Directors shall not constitute a majority of the board of directors of the Borrower (“Continuing Director” means at any time each (i) individual who was a director of the Borrower 24 months before such time, (ii) individual whose election or nomination as a director of Borrower was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of the board of directors of the Borrower and (iii) individual whose election or nomination to the board of directors of the Borrower was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of the board of directors of the Borrower); or
(m)any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or
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satisfaction in full of all obligations hereunder, ceases to be in full force and effect; or the Borrower or any other Person contests in writing the validity or enforceability of any provision of any Loan Document; or the Borrower denies in writing that it has any or further liability or obligation under any Loan Document, or purports in writing to revoke, terminate or rescind any Loan Document;
then, and in every such event, the Administrative Agent shall if requested by the Required Lenders by notice to the Borrower (i) terminate the Commitments and they shall thereupon terminate, and (ii) if requested by the Required Lenders, by notice to the Borrower declare the Loans (together with accrued interest thereon) to be, and the Loans (together with accrued interest thereon) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Lenders, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower.
Section 6.2Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 6.1(c) promptly upon being requested to do so by any Lender and shall thereupon notify all the Lenders thereof.
Article 7
ADMINISTRATIVE AGENT
ADMINISTRATIVE AGENT
Section 7.1Appointment and Authorization. Each Lender irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms thereof, together with all such powers as are reasonably incidental thereto. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
Section 7.2Agents and Affiliates. The Administrative Agent shall have the same rights and powers under the Loan Documents as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and the Administrative Agent and its Affiliates may engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not an Agent hereunder.
Section 7.3Exculpatory Provisions.
(a)The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:
(i)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
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(ii)shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and
(iii)shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of the Borrower’s affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of such Person’s affiliates in any capacity.
(b)The Administrative Agent shall not be liable for any action taken or not taken by it pursuant to this Agreement (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 6.1 and 9.5), or (ii) in the absence of its own gross negligence, willful misconduct or material breach of its obligations under the Loan Documents as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent in writing by the Borrower or a Lender.
(c)The Administrative Agent shall not be responsible for, or have any duty to ascertain or inquire into, (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article 3 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
Section 7.4Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet- or intranet-website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.
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Section 7.5Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub agents appointed by the Administrative Agent. The Administrative Agent and any such sub agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub agent and to the Related Parties of the Administrative Agent and any such sub agent, and shall apply to their respective activities in connection with the syndication of the Facilities as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub agents.
Section 7.6Indemnification. For so long as the Administrative Agent and the Swingline Lender shall serve in that respective capacity, each Lender shall, ratably in accordance with its Commitment (or, if the Commitments shall have terminated, the aggregate outstanding principal amount of its Loans), indemnify such Administrative Agent, the Swingline Lender and each of their respective Related Parties (to the extent not reimbursed by the Borrower) against any reasonable out-of-pocket cost, expense (which in the case of counsel, shall be limited to the reasonable and documented out-of-pocket fees and disbursements of one counsel to the Administrative Agent or Swingline Lender, as applicable, and, if necessary, special counsel acting in applicable multiple jurisdictions and a local counsel in each relevant jurisdiction), claim, demand, action, loss or liability (except such as result from such Indemnitee’s or any Related Indemnified Person’s gross negligence or willful misconduct or material breach of its or any Related Indemnified Person’s obligations under the Loan Documents) that such Indemnitee may suffer or incur in connection with this Agreement or any action taken or omitted by such Indemnitee hereunder.
Section 7.7Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Section 7.8Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent reasonably acceptable to the Borrower. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank with an office in New York, organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent.
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Section 7.9Administrative Agent’s Fees. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent.
Section 7.10Syndication Agents, Arrangers and Documentation Agents. Neither the Syndication Agents, the Arrangers, nor the Documentation Agents shall have any duties or responsibilities hereunder in their respective capacities as such.
Section 7.11Certain ERISA Matters.
(a)Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower, that at least one of the following is and will be true:
(i)such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or more Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments or this Agreement,
(ii)the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement,
(iii)(A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84- 14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement, or
(iv)such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.
(a)In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower, that the Administrative Agent is not a fiduciary with respect to the assets of such Lender involved in such Lender’s
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entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).
Section 1.9Erroneous Payments.
(a)Each Lender and any other party hereto hereby severally agrees that if (i) the Administrative Agent notifies (which such notice shall be conclusive absent manifest error) such Lender or any other Person that has received funds from the Administrative Agent or any of its Affiliates, either for its own account or on behalf of a Lender (each such recipient, a “Payment Recipient”) that the Administrative Agent has determined in its sole discretion that any funds received by such Payment Recipient were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Payment Recipient) or (ii) any Payment Recipient receives any payment from the Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, as applicable, (y) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, as applicable, or (z) that such Payment Recipient otherwise becomes aware was transmitted or received in error or by mistake (in whole or in part) then, in each case, an error in payment shall be presumed to have been made (any such amounts specified in clauses (i) or (ii) of this Section 7.12(a), whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise; individually and collectively, an “Erroneous Payment”), then, in each case, such Payment Recipient is deemed to have knowledge of such error at the time of its receipt of such Erroneous Payment; provided that nothing in this Section shall require the Administrative Agent to provide any of the notices specified in clauses (i) or (ii) above. Each Payment Recipient agrees that it shall not assert any right or claim to any Erroneous Payment, and hereby waives any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payments, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine.
(b)Without limiting the immediately preceding clause (a), each Payment Recipient agrees that, in the case of clause (a)(ii) above, it shall promptly notify the Administrative Agent in writing of such occurrence.
(c)In the case of either clause (a)(i) or (a)(ii) above, such Erroneous Payment shall at all times remain the property of the Administrative Agent and shall be segregated by the Payment Recipient and held in trust for the benefit of the Administrative Agent, and upon demand from the Administrative Agent such Payment Recipient shall (or, shall cause any Person who received any portion of an Erroneous Payment on its behalf to), promptly, but in all events no later than one Domestic Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made in same day funds and in the currency so received, together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Administrative Agent at the Overnight Rate.
(d)In the event that an Erroneous Payment (or portion thereof) is not recovered by the Administrative Agent for any reason, after demand therefor by the Administrative Agent in accordance with immediately preceding clause (c), from any Lender that is a Payment Recipient or an Affiliate of a Payment Recipient (such unrecovered amount as to such Lender, an
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“Erroneous Payment Return Deficiency”), then at the sole discretion of the Administrative Agent and upon the Administrative Agent’s written notice to such Lender (i) such Lender shall be deemed to have made a cashless assignment of the full face amount of the portion of its Loans (but not its Commitments) to the Administrative Agent or, at the option of the Administrative Agent, the Administrative Agent’s applicable lending affiliate in an amount that is equal to the Erroneous Payment Return Deficiency (or such lesser amount as the Administrative Agent may specify) (such assignment of the Loans (but not Commitments), the “Erroneous Payment Deficiency Assignment”) plus any accrued and unpaid interest on such assigned amount, without further consent or approval of any party hereto and without any payment by the Administrative Agent or its applicable lending affiliate as the assignee of such Erroneous Payment Deficiency Assignment. The parties hereto acknowledge and agree that (1) any assignment contemplated in this clause (d) shall be made without any requirement for any payment or other consideration paid by the applicable assignee or received by the assignor, (2) the provisions of this clause (d) shall govern in the event of any conflict with the terms and conditions of Section 9.6 and (3) the Administrative Agent may reflect such assignments in the Register without further consent or action by any other Person.
(e)Each party hereto hereby agrees that (x) in the event an Erroneous Payment (or portion thereof) is not recovered from any Payment Recipient that has received such Erroneous Payment (or portion thereof) for any reason, the Administrative Agent (1) shall be subrogated to all the rights of such Payment Recipient with respect to such amount and (2) is authorized to set off, net and apply any and all amounts at any time owing to such Payment Recipient under any Loan Document, or otherwise payable or distributable by the Administrative Agent to such Payment Recipient from any source, against any amount due to the Administrative Agent under this Section 7.12 or under the indemnification provisions of this Agreement, (y) the receipt of an Erroneous Payment by a Payment Recipient shall not for the purpose of this Agreement be treated as a payment, prepayment, repayment, discharge or other satisfaction of any obligations owed by the Borrower, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Administrative Agent from the Borrower for the purpose of making a payment on the obligations and (z) to the extent that an Erroneous Payment was in any way or at any time credited as payment or satisfaction of any of the obligations, the obligations or any part thereof that were so credited, and all rights of the Payment Recipient, as the case may be, shall be reinstated and continue in full force and effect as if such payment or satisfaction had never been received.
(f)Each party’s obligations under this Section 7.12 shall survive the resignation or replacement of the Administrative Agent or any transfer of right or obligations by, or the replacement of, a Lender, the termination of the Commitments or the repayment, satisfaction or discharge of all obligations (or any portion thereof) under any Loan Document.
(g)Nothing in this Section 7.12 will constitute a waiver or release of any claim of the Administrative Agent hereunder arising from any Payment Recipient’s receipt of an Erroneous Payment.
Article 8
CHANGE IN CIRCUMSTANCE
CHANGE IN CIRCUMSTANCE
Section 8.1Changed Circumstances.
(a)Circumstances Affecting Benchmark Availability. Subject to clause (c) below, in connection with any request for a SOFR Loan (or a SOFR Market Index Rate Loan) or a conversion to or continuation thereof or otherwise, if for any reason (i) the Administrative Agent
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shall determine (which determination shall be conclusive and binding absent manifest error) that reasonable and adequate means do not exist for ascertaining Adjusted Term SOFR for the applicable Interest Period with respect to a proposed SOFR Loan on or prior to the first day of such Interest Period (or a SOFR Market Interest Rate Loan) or (ii) the Required Lenders (or the Swingline Lender, in the case of a SOFR Market Index Rate Loan) shall determine (which determination shall be conclusive and binding absent manifest error) that Adjusted Term SOFR does not adequately and fairly reflect the cost to such Lenders of making or maintaining such Loans during such Interest Period and, in the case of clause (ii), the Required Lenders have provided notice of such determination to the Administrative Agent, then, in each case, the Administrative Agent shall promptly give notice thereof to the Borrower. Upon notice thereof by the Administrative Agent to the Borrower, any obligation of the Lenders to make SOFR Loans (or of the Swingline Lender to make SOFR Market Index Rate Loans), and any right of the Borrower to convert any Loan to or continue any Loan as a SOFR Loan, shall be suspended (to the extent of the affected SOFR Loans or the affected Interest Periods) until the Administrative Agent (with respect to clause (ii), at the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, (A) the Borrower may revoke any pending request for a borrowing of, conversion to or continuation of SOFR Loans (to the extent of the affected SOFR Loans or the affected Interest Periods) or SOFR Market Index Rate Loans or, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Base Rate Loans in the amount specified therein and (B) any outstanding affected SOFR Loans will be deemed to have been converted into Base Rate Loans at the end of the applicable Interest Period (or immediately, in the case of SOFR Market Index Rate Loans). Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 2.14.
(b)Laws Affecting SOFR Availability. If, after the date hereof, the introduction of, or any change in, any applicable law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Applicable Lending Offices) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, shall make it unlawful or impossible for any of the Lenders (or any of their respective Applicable Lending Offices) to honor its obligations hereunder to make or maintain any SOFR Loan, or to determine or charge interest based upon SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR, SOFR Market Index Rate or Term SOFR, such Lender shall promptly give notice thereof to the Administrative Agent and the Administrative Agent shall promptly give notice to the Borrower and the other Lenders (an “Illegality Notice”). Thereafter, until each affected Lender notifies the Administrative Agent and the Administrative Agent notifies the Borrower that the circumstances giving rise to such determination no longer exist, (i) any obligation of the Lenders to make SOFR Loans or SOFR Market Index Rate Loans, and any right of the Borrower to convert any Loan to a SOFR Loan or continue any Loan as a SOFR Loan, shall be suspended and (ii) if necessary to avoid such illegality, the Administrative Agent shall compute the Base Rate without reference to clause (c) of the definition of “Base Rate”. Upon receipt of an Illegality Notice, the Borrower shall, if necessary to avoid such illegality, upon demand from any Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all SOFR Loans and/or SOFR Market Index Rate Loans to Base Rate Loans (in each case, if necessary to avoid such illegality, the Administrative Agent shall compute the Base Rate without reference to clause (c) of the definition of “Base Rate”), on the last day of the Interest Period therefor (or immediately, in the case of SOFR Market Index Rate Loans), if all affected Lenders may lawfully continue to maintain such SOFR Loans and/or SOFR Market Index Rate Loans to such day, or immediately, if any Lender may not lawfully continue to maintain such SOFR Loans and/or SOFR Market Index Rate Loans to such day. Upon any such prepayment or conversion, the
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Borrower shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 2.14.
(a) Basis for Determining Interest Rate Inadequate or Unfair. Subject to clause (b) below, if on or prior to the first day of any Interest Period for any Euro-Dollar Loan:
(i) the Administrative Agent shall determine that deposits in dollars (in the applicable amounts) are not being offered to banks in the relevant market for such Interest Period,
(ii) the Administrative Agent shall determine that reasonable and adequate means do not exist for ascertaining the London Interbank Offered Rate for such Interest Period with respect to a proposed Euro-Dollar Loan, or
(iii) the Required Lenders advise the Administrative Agent that the London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Lenders of funding their Euro-Dollar Loans for such Interest Period,
then, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist (which notice the Administrative Agent shall deliver immediately upon its becoming aware thereof), (i) any Notice of Borrowing requesting a Euro-Dollar Loan shall be made as a Base Rate Loan and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing.
(c)(b) Effect of Benchmark Transition EventReplacement Setting.
(i)Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, the Administrative Agent and the Borrower may amend this Agreement to replace the London Interbank Offered Ratethen-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 P.M. on the fifth (5th) Domestic Business Day after the Administrative Agent has posted such proposed amendment to all affected Lenders and the Borrower so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders. Any such amendment with respect to an Early Opt-in Election will become effective on the date that Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders accept such amendment. No replacement of the London Interbank Offered Ratea Benchmark with a Benchmark Replacement pursuant to this Section 8.1(b) Section 8.1(c)(i)(A) will occur prior to the applicable Benchmark Transition Start Date.
(ii)Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent in consultation with the Borrower will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective
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without any further action or consent of any other party to this Agreement or any other Loan Document.
(iii)Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date and Benchmark Transition Start Date, (iiA) the implementation of any Benchmark Replacement, and (iiiB) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Periodin connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Administrative Agent will promptly notify the Borrower of the removal or reinstatement of any tenor of a Benchmark pursuant to Section 8.1(c)(v). Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 8.1(b)Section 8.1(c), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party heretoto this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 8.1(b)Section 8.1(c).
(iv)Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (A) if the then-current Benchmark is a term rate (including the Term SOFR Reference Rate) and either (1) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (2) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative, then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (B) if a tenor that was removed pursuant to clause (A) above either (1) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (2) is not, or is no longer, subject to an announcement that it is not or will not be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.
(v)(iv) Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, (iA) the Borrower may revoke any pending request for a Euro-Dollar Loanborrowing of, conversion to or continuation of Euro-DollarSOFR Loans or SOFR Market Index Rate Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowingborrowing of or conversion to Base Rate Loans, (ii) the obligation of the Lenders to make or maintain Euro-Dollar Loans shall be suspended, (iii) the Euro-Dollar Rate component shall no longer be utilized in determining the Base Rate and (iv) any request by the Borrower to borrow Swingline Loans at the Euro-Dollar Market Index Rate shall be ineffective. and (B) any outstanding affected SOFR Loans and/or SOFR Market Index Rate Loans will be deemed to have been converted to Base Rate Loans at the end of the applicable Interest Period (or immediately, in the case of SOFR Market
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Index Rate Loans). During any Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of the Base Rate based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of the Base Rate.
Section 8.2Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by any Lender (or its Euro-DollarApplicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Lender (or its Euro-DollarApplicable Lending Office) to make, maintain or fund its Euro-DollarSOFR Loans and such Lender shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Borrower, whereupon until such Lender notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist (which notice such Lender shall give immediately upon its becoming aware thereof), the obligation of such Lender to make Euro-DollarSOFR Loans, or to convert outstanding Loans into Euro-DollarSOFR Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Lender shall designate a different Euro-DollarApplicable Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. If such notice is given, each Euro-DollarSOFR Loan of such Lender then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-DollarSOFR Loan if such Lender may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Lender shall determine that it may not lawfully continue to maintain and fund such Loan to such day.
Section 8.3Increased Cost and Reduced Return.
(a)If any Change in Law shall impose, modify or deem applicable any reserve (including pursuant to regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, special, supplemental or other marginal reserve requirement) with respect to eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D of the FRB, as amended and in effect from time to time)), special deposit, compulsory loan, insurance assessment or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding, with respect to any Euro-Dollar Loan, any such requirement with respect to which such Lender is entitled to compensation during the relevant Interest Period under Section 2.7) against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Applicable Lending Office) or shall impose on any Lender (or its Applicable Lending Office) or the London interbank market any other condition, cost or expense affecting this Agreement or Loans made by such Lender (except, in each case, for any Tax, which shall be addressed solely in Section 8.4Section 8.4), and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement with respect thereto, by an amount deemed by such Lender to be material, then, within 60 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost incurred or reduction suffered.
(b)If any Lender shall have determined that any Change in Law affecting such Lender (or its Applicable Lending Office) or such Lender’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on
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capital of such Lender (or on the capital of such Lender’s holding company) as a consequence of such Lender’s obligations hereunder to a level below that which such Lender (or such Lender’s holding company) could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 60 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender (or such Lender’s holding company) for such reduction.
(c)Each Lender will promptly notify the Borrower and the Administrative Agent of any event, past or prospective, of which it has knowledge that will entitle such Lender to compensation pursuant to this Section 8.3, or which such Lender believes is reasonably likely to entitle such Lender to compensation pursuant to this Section 8.3, and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation under this Section 8.3 (for itself or for a Participant) and setting forth the additional amount or amounts to be paid to it hereunder and indicating in reasonable detail the computation thereof shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods.
(d)The Borrower shall not be liable pursuant to this Section 8.3 to any Lender to compensate it for any cost or reduction incurred or suffered more than 45 days before receipt by the Borrower of a notice from such Lender referring to the event that gave rise to such cost or reduction.
(e)This Section 8.3 shall not require the Borrower to reimburse any Lender for any Taxes that are otherwise covered by the payment of additional amounts or the indemnity set forth in Sections 8.4(b) or (d), respectively or for any Excluded Taxes.
Section 8.4Taxes. (a) For the purposes of this Section 8.4 the following terms have the following meanings:
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (i) Taxes imposed on or measured by net income (however denominated), and franchise, branch profits or similar taxes in each case (A) imposed, by a jurisdiction under the laws of which such Recipient is organized or located or in which its principal executive office is located or, in the case of each Lender, in which its Applicable Lending Office is located, or (B) that are Other Connection Taxes (ii) in the case of each Lender, any withholding tax imposed on such payments pursuant to a law in effect on the date on which such Lender first becomes a party to this Agreement or designates a new Applicable Lending Office (except in each case to the extent that amounts with respect to Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Applicable Lending Office), (iii) Taxes attributable to such Recipient’s failure to comply with Section 8.4(f), and (iv) Taxes imposed pursuant to FATCA.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered,
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become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any transaction pursuant to or enforced any Loan document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means any present or future stamp, court or documentary intangible, recording, filing or similar Taxes that arise from any payment made under, or from the execution, delivery, performance, enforcement or registration of, this Agreement or any Note, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 8.6).
“Recipient” means the Administrative Agent or any Lender, as applicable.
“Taxes” means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings (including backup withholding) imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
(f)Except as required by applicable law, any and all payments by or on behalf of the Borrower to or for the account of any Lender or the Administrative Agent hereunder or under any Note shall be made without withholding or deduction for any Taxes; provided that, if any Withholding Agent determines, in its sole discretion exercised in good faith, that it is required by law to deduct or withhold any Indemnified Taxes from any such payments, (i) the sum payable by the Borrower shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) such Withholding Agent shall make such deductions or withholding, (iii) such Withholding Agent shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.1, the original or a certified copy of a receipt evidencing payment thereof or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(g)The Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.
(h)The Borrower agrees to indemnify each Lender and the Administrative Agent for the full amount of Indemnified Taxes (including, without limitation, any Indemnified Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) that are payable or paid by such Lender or the Administrative Agent (as the case may be) and any reasonable and invoiced out-of-pocket expenses arising therefrom or with respect thereto, provided, however, that the Borrower shall not be required to indemnify any Lender or the Administrative Agent under this Section 8.4 for any liability arising as a result of such Lender’s or the Administrative Agent’s willful misconduct or gross negligence (including failure to timely withhold and report) as determined in a final, non-appealable judgment of a court of competent jurisdiction. This indemnification shall be paid within 30 days after such Lender or the Administrative Agent (as the case may be) makes written demand therefor (which demand shall identify the nature and the amount of Indemnified Taxes and Other Taxes for which indemnification is being sought).
(i)Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Indemnified Taxes attributable to such Lender’s failure to comply with the provisions of Section
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9.6(b) relating to the maintenance of a Participant Register and (iii) any “Excluded Taxes” that are attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such 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 any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (e).
(j)Each Lender that is a “United States Person” as defined in Section 7701(a)(30) of the Internal Revenue Code shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement two properly completed and duly signed copies of U.S. Internal Revenue Service Form W-9 (or any successor form) certifying that such Lender is exempt from U.S. Federal withholding Tax. Each Lender that is not a “United States Person” as defined in Section 7701(a)(30) of the Internal Revenue Code (a “Non-U.S. Lender”) on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Administrative Agent (but only so long as such Non-U.S. Lender remains lawfully able to do so), shall provide the Borrower and the Administrative Agent with (i) two copies of a properly completed Internal Revenue Service Form W-8BEN-E (or W-8BEN, as applicable), Form W-8ECI or Form W-8IMY (or successor forms) (together with any applicable underlying Internal Revenue Service forms), (ii) in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding Tax under Sections 871(h) or 881(c) of the Internal Revenue Code with respect to payments of “portfolio interest”, the applicable Internal Revenue Service Form W-8, or any successor form prescribed by the Internal Revenue Service, and a statement substantially in the relevant form of Exhibit D, each properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S. Federal withholding Tax on payments under this Agreement or any Note, or (iii) any other form prescribed by applicable requirements of U.S. Federal income Tax law as a basis for claiming exemption from or a reduction in U.S. Federal withholding Tax duly completed together with such supplementary documentation as may be prescribed by applicable requirements of law to permit the Borrower and the Administrative Agent to determine the withholding or deduction required to be made. Each Lender further agrees (but only so long as such Lender is lawfully able to do so) to deliver to the Borrower and the Administrative Agent duly completed copies of the above-mentioned Internal Revenue Service forms on or before the earlier of (i) the date that is 30 days before the date that any such form expires or becomes obsolete or otherwise is required to be resubmitted as a condition to obtaining an exemption from withholding of U.S. Federal income Tax and (ii) 30 days after the occurrence of any event which would require a change in the most recent form previously delivered to the Borrower and the Administrative Agent.
(k)Notwithstanding anything to the contrary in this Agreement, for any period with respect to which a Lender has failed to provide the Borrower or the Administrative Agent with the appropriate form or certificate pursuant to Section 8.4(f), or with respect to which any representation or certification on any such form or certificate is, or proves to be, materially incorrect, false or misleading when so made such Lender shall not be entitled to receive additional amounts or indemnification under Sections 8.4(b) or (d), respectively, with respect to Indemnified Taxes, to the extent that such Indemnified Taxes would not have been imposed but for such Lender’s failure to provide such form or certificate or such Lender’s materially incorrect, false or misleading representation or certification, and such Lender shall indemnify and reimburse the Borrower for any Indemnified Taxes that were required to be withheld but
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which were not withheld as a result of such Lender’s materially incorrect, false or misleading representations or certifications; provided that if a Lender that is otherwise exempt from or subject to a reduced rate of withholding Tax, becomes subject to Indemnified Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps (at such Lender’s sole cost and expense) as such Lender shall reasonably request to assist such Lender to recover such Indemnified Taxes.
(l)If a payment made to a Lender hereunder or under any Note would be subject to U.S. Federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Internal Revenue Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.
(m)If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section, then, (i) such Lender will (at the request of the Borrower) use reasonable efforts to change the jurisdiction of its Applicable Lending Office if, in the judgment of such Lender, such change (x) will eliminate or reduce any such additional payment which may thereafter accrue and (y) is not otherwise disadvantageous to such Lender or (ii) if such Lender does not change the jurisdiction of its Applicable Lending Office, the Borrower shall have the right to designate a substitute lender or lenders pursuant to Section 8.6 hereof.
(n)Upon the reasonable request of the Borrower, and at the Borrower’s expense, each Lender shall use reasonable efforts to cooperate with the Borrower with a view to obtain a refund of any Taxes for which the Borrower has indemnified such Lender under this Section 8.4 if obtaining such refund would not, in the sole judgment of such Lender, exercised in good faith, be disadvantageous to such Lender. If a Lender shall receive a refund from a taxing authority of any Taxes paid by the Borrower pursuant to subsections (b), (c) or (d) above, such Lender shall promptly pay to the Borrower the amount so received without interest (other than interest received from the taxing authority with respect to such refund) and net of out-of-pocket expenses incurred in obtaining such refund; provided that such Lender shall only be required to pay to the Borrower such amounts as such Lender in its sole discretion, exercised in good faith, determines are attributable to Taxes paid by the Borrower. In the event such Lender or the Administrative Agent is required to repay the amount of such refund (including interest, if any), the Borrower, upon the request of such Lender or the Administrative Agent (as the case may be), agrees to promptly return to such Lender or the Administrative Agent the amount of such refund and interest, if any (plus penalties, interest and other charges imposed in connection with the repayment of such amounts by such Lender or the Administrative Agent).
(o)Notwithstanding the foregoing, nothing in this Section 8.4 shall be construed to (i) entitle the Borrower or any other Persons (A) to any information determined by any Lender or the Administrative Agent, in its sole discretion, exercised in good faith, to be confidential or proprietary information of such Lender or the Administrative Agent unrelated to matters specifically related to this Section 8.4, (B) to any tax or financial information of any Lender or the Administrative Agent unrelated to matters specifically related to this Section 8.4 or (C) to inspect or review any books and records of any Lender or the Administrative Agent unrelated to matters specifically related to this Section 8.4, or (ii) interfere with the rights of any Lender or the Administrative Agent to conduct its fiscal or tax affairs in such manner as it deems fit.
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Section 8.5Base Rate Loans Substituted for Affected Euro-DollarSOFR Loans. If (i) the obligation of any Lender to make, or convert outstanding Loans to, Euro-DollarSOFR Loans has been suspended pursuant to Section 8.2 or (ii) any Lender has demanded compensation under Sections 8.3(a) or 8.4, or the Borrower is required to make any additional payments under Section 8.4 in respect of any payments to any Lender, in either case with respect to its Euro-DollarSOFR Loans, and the Borrower shall, by at least five Euro-DollarU.S. Government Securities Business Days’ prior notice to such Lender through the Administrative Agent, have elected that the provisions of this Section shall apply to such Lender, then, unless and until such Lender notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply:
(a)all Loans which would otherwise be made by such Lender as (or continued as or converted into) Euro-DollarSOFR Loans shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-DollarSOFR Loans of the other Lenders), and
(b)after each of its Euro-DollarSOFR Loans has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Euro-DollarSOFR Loans shall be applied to repay its Base Rate Loans instead.
If such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Base Rate Loan shall be converted into a Euro-DollarSOFR Loan on the first day of the next succeeding Interest Period applicable to the related Euro-DollarSOFR Loans of the other Lenders.
Section 8.6Substitution of Lenders. If (a) any Lender has demanded compensation under Sections 8.3 or 8.4, (b) the Borrower is required to make any additional payments under Section 8.4 in respect of any payment to any Lender, (c) any Lender becomes a Defaulting Lender or (d) any Lender does not consent to any proposed amendment, supplement, modification, consent or waiver of any provision of this Agreement or any other Loan Document that requires the consent of each of the Lenders or each of the Lenders affected thereby (so long as the consent of the Required Lenders has been obtained), the Borrower shall have the right to designate a substitute lender or lenders reasonably acceptable to the Administrative Agent (which may be one or more of the Lenders) to purchase the Loans and assume the Commitments of such Lender, and each Lender agrees in such event that, if the Borrower so designates a substitute or substitutes, it will sell its Loans and assign its rights under this Agreement to such substitute or substitutes as soon as reasonably possible (and in any event within 30 days) after such designation, on substantially the terms set forth in Exhibit B, for a payment equal to the principal amount of its Loans plus all interest on such Loans and all facility fees accrued but unpaid up to but excluding the date of such payment plus any loss or expense incurred by such Lender (other than a Defaulting Lender) (or by an existing Participant in the related Loan of such Lender (other than a Defaulting Lender)), in connection with such payment, including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties as contemplated under Section 2.14, but excluding loss of margin for the period after any such payment, as reasonably determined by it; provided that in connection with any substitution pursuant to clause (d) above, (i) such substitution does not conflict with any applicable law, rule or regulation and (ii) no Event of Default pursuant to Section 6.1(a), Section 6.1(g) or Section 6.1(h) shall have occurred and be continuing at the time of such substitution; provided further that, in connection with any substitution pursuant to this Section, the substitute or substitutes shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of substitution.
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Section 8.7Defaulting Lenders. (a) Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(i)fees shall cease to accrue on the Commitment of such Defaulting Lender pursuant to Section 2.8;
(ii)any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article 6 or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 9.4(b) shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Swingline Lender hereunder; third, as the Borrower may request (so long as no Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fourth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement; fifth, to the payment of any amounts owing to any Lenders or the Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by such Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; sixth, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and seventh, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made at a time when the conditions set forth in Section 3.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of such Defaulting Lender until such time as all Loans and funded and unfunded participations in Swingline Loans are held by the Lenders pro rata in accordance with the Commitments hereunder. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender pursuant to this Section shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto;
(iii)all or any part of such Defaulting Lender’s participation in Swingline Loans shall be reallocated among the non-Defaulting Lenders pro rata in accordance with their respective Commitments (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that such reallocation does not cause the aggregate Revolving Credit Exposure of any non-Defaulting Lender to exceed such non-Defaulting Lender’s Commitment. If the reallocation described in this clause (iii) cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, prepay Swingline Loans in an amount equal to the Swingline Lender’s Fronting Exposure. Subject to Section 9.15, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a non-Defaulting Lender as a result of such non-Defaulting Lender’s increased exposure following such reallocation; and
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(iv)the Commitment (or, if applicable, the Loans) of such Defaulting Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 9.5); provided, that this clause (iv) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of all Lenders or each Lender affected thereby.
(c)If the Borrower and the Administrative Agent agree in writing that a Lender that is a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein, such Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans to be held pro rata by the Lenders in accordance with the Commitments, whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no cancellation or termination of such Lender’s status as a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.
(d)So long as any Lender is a Defaulting Lender, the Swingline Lender shall not be required to fund any Swingline Loans unless it is satisfied that it will have no Fronting Exposure after giving effect to such Swingline Loan.
Article 9
MISCELLANEOUS
MISCELLANEOUS
Section 9.1Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, facsimile transmission, electronic mail or similar writing) and shall be given to such party:
(a)in the case of the Borrower, to Norfolk Southern Corporation, 1200 Peachtree Street, NE, Suite 12141, Atlanta, GA 30309, Attention of: Clyde H. Allison, Jr., Vice President and Treasurer (Facsimile No.: (404) 529-1086) (Email: jake.allison@nscorp.com);
(b)in the case of the Administrative Agent, to Wells Fargo Bank, National Association, MAC D1109-019, 1525 West W.T. Harris Blvd. 1B1, Charlotte, NC 28262, Attention of: Syndication Agency Services (Facsimile No.: (704) 715-0092) (Email: Agencyservices.requests@wellsfargo.com, with a copy to Dylan.Wrightkurtis.mathieu@wellsfargo.com; kevin.valentamylissa.merten@wellsfargo.com; ben.wright@wellsfargo.com; Peter.R.Martinets@wellsfargo.com);
(c)in the case of the Swingline Lender, to Wells Fargo Bank, National Association, MAC D1109-019, 1525 West W.T. Harris Blvd. 1B1, Charlotte, NC 28262, Attention of: Syndication Agency Services (Facsimile No.: (704) 715-0092) (Email: Agencyservices.requests@wellsfargo.com, with a copy to Dylan.Wrightkurtis.mathieu@wellsfargo.com; kevin.valentamylissa.merten@wellsfargo.com; ben.wright@wellsfargo.com; Peter.R.Martinets@wellsfargo.com);
(d)in the case of any Lender, at its address set forth in its Administrative Questionnaire; or
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(e)in the case of any party, such other address as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower.
Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mail with first class postage prepaid, addressed as aforesaid or (ii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 8 shall not be effective until received.
Notices and other communications to the Lenders hereunder may be delivered or furnished via the Platform or other electronic communications (in .pdf form) pursuant to procedures approved by the Administrative Agent (upon any such procedures’ approval, the Administrative Agent shall provide notice thereof to the applicable Lender); provided that the foregoing shall not apply to notices pursuant to Article 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications (in .pdf form) pursuant to procedures approved by it prior to such communication (upon any such procedures’ approval, the Administrative Agent shall provide notice thereof to the Lenders); provided that approval of such procedures may be limited to particular notices or communications.
(f)THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS AFFILIATES NOR ANY OF THE RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES OF THE FOREGOING WARRANTS THE ADEQUACY OF THE PLATFORM, AND SUCH PARTIES EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSION FROM THE COMMUNICATIONS (AS DEFINED BELOW). NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD-PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY SUCH PARTY IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. In no event shall the Administrative Agent or any of Related Parties have any liability to the Borrower, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s transmission of communications through the Platform. “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of the Borrower pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Administrative Agent or any Lender by means of electronic communications pursuant to this Section, including through the Platform.
Section 9.2No Waivers. Except as otherwise set forth in this Agreement, no failure or delay by any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in the Loan Documents shall be cumulative to, and not exclusive of, any rights or remedies provided by law.
Section 9.3Expenses; Indemnification. (a) The Borrower shall pay within 10 Domestic Business Days of the demand therefor (i) all reasonably incurred and invoiced out-of-pocket expenses of the Administrative Agent and the Arrangers, including, without limitation, charges related to the Platform and out-of-pocket fees and disbursements of a single counsel for the Administrative Agent and the Arrangers taken as a whole, in connection with the preparation
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and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable and invoiced out-of-pocket expenses incurred by the Administrative Agent and each Lender, which, in the case of counsel shall be limited to the reasonable and invoiced out-of-pocket fees and disbursements of a single counsel to the Administrative Agent and the Lenders, taken as a whole, (and, if necessary, (A) one special counsel (without duplication) acting in applicable multiple jurisdictions and (B) a single local counsel in each relevant jurisdiction for the Administrative Agent and the Lenders and, to the extent that an actual or reasonably perceived conflict of interest exists, counsel to each affected group of Indemnitees subject to such conflict), in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
(g)The Borrower agrees to indemnify each Agent and each Lender, and each Related Party of any of the foregoing (each an “Indemnitee”) and hold each Indemnitee harmless from and against any and all liabilities, losses, actions, judgments, suits, damages, and out-of-pocket costs and expenses of any kind, including, without limitation the reasonable and invoiced fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto and regardless of whether such claim, litigation, investigation or proceeding is brought by the Borrower or any other Person) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder (all the foregoing, collectively, the “indemnified liabilities”) and to reimburse each Indemnitee within 10 Domestic Business Days of the demand for any reasonable and invoiced out-of-pocket legal and other expenses incurred in connection with investigating or defending any of the foregoing; provided that no Indemnitee shall have the right to be indemnified hereunder for indemnified liabilities (i) found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from such Indemnitee’s or any Related Indemnified Person’s gross negligence or willful misconduct, (ii) that arise from a material breach of the obligations of such Indemnitee or any Related Indemnified Person under this Agreement as determined by a final, non-appealable judgment of a court of competent jurisdiction or (iii) that result from any dispute solely among Indemnitees that do not involve a material act or omission of the Borrower or any of its Subsidiaries, other than claims against the Administrative Agent or any Arranger in fulfilling its role as Administrative Agent or Arranger, provided further, that in the case of fees and disbursements of counsel, reimbursement by the Borrower shall be limited to the reasonable and invoiced out-of-pocket fees and disbursements of a single counsel to the Indemnitees, taken as a whole (and, if necessary, (A) one special counsel (without duplication) acting in applicable multiple jurisdictions and (B) a single local counsel in each relevant jurisdiction for the Indemnitees and, to the extent that an actual or reasonably perceived conflict of interest exists, counsel for each affected group of Indemnitees subject to such conflict). For purposes hereof, a “Related Indemnified Person” of an Indemnitee means (1) any Affiliate of such Indemnitee, (2) the respective partners, directors, officers, or employees, agents, trustees, administrators, managers, advisors and representatives of such Indemnitee or any of its Affiliates and (3) the respective agents of such Indemnitee or any of its Affiliates, in the case of this clause (3), acting at the instructions of such Indemnitee; provided that each reference to an Affiliate in this sentence pertains to an Affiliate involved in the negotiation, syndication or administration of this Agreement.
(h)To the fullest extent permitted by applicable law, the Borrower shall not assert and the Borrower hereby waives, any claim against the Administrative Agent (or any sub-agent thereof), the Arrangers, each Lender, or any Related Party of any of the foregoing persons (each such person being called an “Released Person”), on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Advance or the use of the proceeds
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thereof. No Released Person shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems (including IntraLinks, SyndTrak or similar systems) in connection with this Agreement or the transactions contemplated hereby, except as a result of such Released Person’s gross negligence, willful misconduct or breach in bad faith of its obligations hereunder, in each case, as determined by a court of competent jurisdiction by final and nonappealable judgment.
(i)To the fullest extent permitted by applicable law, each of the Administrative Agent (or any sub-agent thereof), the Arrangers, and Lenders, hereby waives any claim against the Borrower or any Related Party of the Borrower, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Advance or the use of the proceeds thereof; provided that nothing contained in this Section 9.3(d) shall limit Borrower’s indemnification obligations for indemnified liabilities in respect of special, indirect, consequential or punitive damages demanded, asserted or claimed against any Indemnitee and for which an Indemnitee is entitled to indemnification hereunder.
Section 9.4Sharing of Payments by Lenders; Right of Set-Off.
(a)Each Lender agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Loan payable to it that is greater than the proportion received by any other Lender in respect of the aggregate amount of principal and interest due with respect to any Loan payable to such other Lender, the Lender receiving such proportionately greater payment shall purchase such participations in the Loans payable to the other Lenders, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Loans shall be shared by the Lenders pro rata; provided that nothing in this Section 9.4 shall impair the right of any Lender to exercise any right of set-off or counterclaim it may have against the Borrower and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Loan Documents.
(b)Upon the occurrence of an Event of Default and the commencement of remedies described in Section 6.1, each Lender and each of its Lender Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Lender Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured; provided that if any Defaulting Lender shall exercise any such right of set off, (i) all amounts set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of this Agreement and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders and (ii) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the obligations owing to such Defaulting Lender as to which it exercised such right of set off. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such application made by such Lender, provided that the failure to give such notice shall not affect the validity of such application. The rights of each Lender under this Section 9.4 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have.
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Section 9.5Amendments and Waivers. Any provision of this Agreement or any other Loan Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that no such amendment or waiver shall, (a) unless signed by each Lender directly affected thereby, (i) extend or increase any Commitment of such Lender or subject such Lender to any additional obligation, (ii) reduce the principal of, or rate of interest on, any Loan or any fees hereunder due to such Lender or (iii) postpone the date fixed for any payment of principal of, or interest on, any Loan or any fees hereunder due to such Lender or (b) unless signed by all the Lenders, (i) change any provision of this Section or the definition of “Required Lenders” or change the percentage of the Lenders which shall be required for the Lenders to take any action under this Section or any other provision of the Loan Documents or (ii) change Section 9.4(a) in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender; provided, further, that no such amendment, waiver or consent shall amend, modify or otherwise affect the rights or duties hereunder or under any other Loan Document of (A) the Administrative Agent, unless in writing executed by the Administrative Agent, and (B) the Swingline Lender, unless in writing executed by such Swingline Lender, in each case in addition to the Borrower and the Lenders required above.
Notwithstanding anything herein to the contrary, in connection with an amendment of this Agreement that requires the consent of all the Lenders affected thereby pursuant to the immediately preceding sentence (any such amendment, including any amendment and restatement of this Agreement in its entirety, an “Amendment”) with respect to which the Required Lenders have granted their consent but one or more other Lenders have not consented (each such non-consenting Lender, a “Non-Consenting Lender”), this Agreement may be amended in its entirety by an agreement in writing entered into by the Borrower, all the Lenders (other than any Non-Consenting Lenders) and the Administrative Agent; provided that (A) the Commitment of each Non-Consenting Lender shall terminate upon the effectiveness of such Amendment by the terms thereof and (B) at the time of such effectiveness, each Non-Consenting Lender shall receive, subject to Section 8.6 and Section 8.7, payment in full of the principal of, and interest accrued on, each Loan made by it and all fees owing to it or accrued for its account under this Agreement, including any amounts due pursuant to Section 2.14.
Notwithstanding anything herein to the contrary, the Administrative Agent may amend or modify this Agreement without the consent of any Lender or the Required Lenders (but with the consent of the Borrower) to correct an obvious error or any error or omission of a technical nature.
Section 9.6Successors and Assigns.
(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that the Borrower may not assign or otherwise transfer any of its rights under this Agreement (and any attempted assignment or transfer shall be null and void) except as contemplated by Section 5.9 or with the prior written consent of all Lenders.
(b)Any Lender other than any Conduit Lender may at any time grant to one or more banks or other entities (other than a natural Person, or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person, or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each a “Participant”) participating interests in any or all of its Commitments or Loans. In the event of any such grant by a Lender of a participating interest to a Participant, whether or not upon notice to the Borrower and the Administrative Agent, such Lender shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal
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solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement pursuant to which any Lender may grant such a participating interest shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Lender will not agree to any modification, amendment or waiver of this Agreement described in clauses (a)(i), (ii) or (iii) of Section 9.5 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Section 2.7 and, subject to the provisions of this Section 9.6, Article 8 with respect to its participating interest to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 9.6(c). Each Lender that sells a participation, acting solely for such purpose as a non-fiduciary agent of the Borrower, shall maintain a register on which it enters the name and address of each Participant and the principal amount (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans, or its other obligations under any Loan Document) except to the extent that such disclosure is necessary to establish that such Commitment, Loan, or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender, the Borrower and the Administrative Agent shall treat each Person whose name is recorded in the Participant Register pursuant to the terms hereof as the owner of such participation for all purposes of this Agreement, notwithstanding notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(c)Any Lender other than any Conduit Lender may at any time assign to any Lender or Lender Affiliate or any bank or other entity (other than a natural Person, or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person, or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each an “Assignee”) all or a portion of its rights and obligations under this Agreement, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit B hereto executed by such Assignee and such transferor Lender; provided that after giving effect to such assignment to an Assignee (other than any Lender or any Lender Affiliate), (x) the Commitment (or, if the Commitments shall have terminated, the aggregate principal amount of the Loans) of the assignor Lender (together with its Lender Affiliates) shall be either zero or $10,000,000 or more, unless otherwise agreed by the Borrower and the Administrative Agent and (y) the Commitment (or, if the Commitments shall have terminated, the aggregate principal amount of the Loans) of the Assignee (together with its Affiliates) shall be $10,000,000 or more, unless otherwise agreed by the Borrower and the Administrative Agent. For purposes of the proviso contained in the preceding sentence, the amount described therein shall be aggregated in respect of each Lender and its Lender Affiliates, if any. Each such assignment shall be made with (and subject to) the subscribed consent of the Borrower, the Administrative Agent and the Swingline Lender (which shall not, in any case, be unreasonably withheld, delayed or conditioned); provided that if an Assignee is a Lender Affiliate or is a Lender immediately prior to such assignment, no such consent shall be required, or if at the time an Event of Default under Section 6.1(a), Section 6.1(g) or Section 6.1(h) shall have occurred and be continuing, no such consent of the Borrower shall be required; provided further that the Borrower shall be deemed to have consented to any such assignment unless the Borrower shall object thereto by written notice to the Administrative Agent within 10 Domestic Business Days after having received notice thereof. Upon execution and delivery of such instrument, recording of such instrument as provided in Section 2.16(a), obtainment of the foregoing required consents (if any) and payment by such Assignee to such transferor Lender of
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an amount equal to the purchase price agreed between such transferor Lender and such Assignee, such Assignee shall be a Lender party to this Agreement and shall have all the rights and obligations of a Lender with a Commitment (or, if the Commitments shall have terminated, Loans in an aggregate principal amount) as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. In connection with any such assignment, the transferor Lender shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States Federal income Taxes in accordance with Section 8.4. Notwithstanding the foregoing, any Conduit Lender may assign at any time to its designating Lender hereunder without the consent of the Borrower or the Administrative Agent any or all of the Loans it may have funded hereunder and pursuant to its designation agreement and without regard to the limitations set forth in the first sentence of this Section 9.6(c).
(d)Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement, including any pledge or assignment to secure obligations to a Federal Reserve Bank. No such assignment shall release the transferor Lender from its obligations hereunder.
(e)No Participant shall be entitled to receive any greater payment under Sections 8.3 or 8.4, (and the Borrower shall not incur any greater liability for Taxes pursuant to Section 8.4), with respect to any Participation than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Participant agrees to be subject to the provisions of Section 8.2 as if it were an Assignee. No Participant shall be entitled to the benefits of Section 8.4 unless such Participant complies with Section 8.4(f) as if it were a Lender (it being understood that the documentation required under Section 8.4(f) shall be delivered to the Participating Lender).
(f)Each of the Borrower, each Lender and the Administrative Agent hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.
Section 9.7Governing Law; Submission to Jurisdiction, WAIVER OF JURY TRIAL. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, including General Obligations Laws 5-1401 and 5-1402. Each of the parties hereto hereby submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York County for purposes of all legal proceedings arising out of, or relating to, this Agreement or the transactions contemplated hereby. Each of the parties hereto irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING
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OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. To the fullest extent permitted by applicable law, each party hereto shall not assert, and hereby waives, any claim against any other party hereto, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof; provided that the foregoing shall not limit the indemnification provisions set forth in Section 9.3.
Section 9.8Counterparts; Integration; Effectiveness.
(a)This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signature thereto and hereto were upon the same instrument. The Loan Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
(b)This Agreement shall become effective on the date that the Administrative Agent shall have received counterparts hereof signed by each of the parties hereto. Delivery of an executed signature page of this Agreement by electronic communication (in .pdf form) or facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. The effectiveness of this Agreement and any such signatures shall, subject to applicable law, have the same force and effect as the manually executed originals and shall be binding on each of the parties hereto.
(c)The words “execute,” “execution,” “signed,” “signature,” “delivery” and words of like import in any Assignment and Assumption Agreementor related to this Agreement, any other Loan Document or any document, amendment, approval, consent, waiver, modification, information, notice, certificate, report, statement, disclosure, or authorization to be signed or delivered in connection with this Agreement or any other Loan Document or the transactions contemplated hereby shall be deemed to include Electronic Signatures or execution in the form of an Electronic Record, and contract formations on electronic signatures platforms approved by the Administrative Agent, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Lawapplicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act. Each party hereto agrees that any Electronic Signature or execution in the form of an Electronic Record shall be valid and binding on itself and each of the other parties hereto to the same extent as a manual, original signature. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the parties of a manually signed paper which has been converted into electronic form (such as scanned into PDF format), or an electronically signed paper converted into another format, for transmission, delivery and/or retention. Notwithstanding anything contained herein to the contrary, the Administrative Agent is under no obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it; provided that without limiting the foregoing, (i) to the extent the Administrative Agent has agreed to accept such Electronic Signature from any party hereto, the Administrative Agent and the other parties hereto shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of the executing party without further verification and (ii) upon the request of the Administrative Agent or any Lender, any Electronic Signature shall be promptly followed by an original manually executed counterpart thereof. Without limiting the generality of the foregoing, each party hereto hereby (A) agrees that, for all purposes, including without limitation, in connection with any
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workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among the Administrative Agent, the Lenders and any of the Credit Parties, electronic images of this Agreement or any other Loan Document (in each case, including with respect to any signature pages thereto) shall have the same legal effect, validity and enforceability as any paper original, and (B) waives any argument, defense or right to contest the validity or enforceability of the Loan Documents based solely on the lack of paper original copies of any Loan Documents, including with respect to any signature pages thereto.
Section 9.9Confidentiality. The Administrative Agent and each Lender agrees to keep any information delivered or made available by the Borrower pursuant to the Loan Documents confidential from anyone other than Persons employed or retained by such Lender and its Lender Affiliates who are engaged in evaluating, approving, structuring or administering the credit facility contemplated hereby and are informed of the confidential nature of such information and instructed to keep such information confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing such information (a) to any other Lender or to the Administrative Agent, (b) to any Related Party involved in the negotiation, syndication or administration of this Agreement, including accountants, legal counsel and other advisors, of the Administrative Agent or such Lender (it being understood that Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (c) upon the order of any court or administrative agency (in which case the Administrative Agent or such Lender agrees, as applicable, to the extent practicable and not prohibited by applicable law, to inform the Borrower promptly thereof prior to disclosure), (d) to the extent required or requested by, or required to be disclosed to, any regulatory or similar authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), in which case the Administrative Agent or such Lender agrees, as applicable, to use its commercially reasonable efforts to the extent practicable and not prohibited by applicable law, to inform the Borrower promptly thereof, (e) on a confidential basis to any rating agency in connection with rating the Borrower or its Subsidiaries or the credit facility contemplated hereby, (f) relating to deal terms customarily reported to Thomson Reuters, other bank market data collectors and similar service providers to the lending industry and service providers to the Administrative Agent and the Lenders in connection with the administration of the Loan Documents, subject to prior notice and any disclosure restrictions reasonably requested by the Borrower, (g) which had been publicly disclosed other than as a result of a disclosure by the Administrative Agent or any Lender or any of their respective Related Parties prohibited by this Agreement, (h) for purposes of establishing a “due diligence” defense, (i) to the extent necessary in connection with the exercise of any remedy hereunder, (j) subject to the provisions of this Section 9.9 or provisions substantially similar to those contained in this Section 9.9, to any actual or proposed Participant or Assignee, any direct or indirect contractual counterparties (or the professional advisors thereto) to any swap or derivative transaction relating to the Borrower and its obligations or to any credit insurance provider relating to the Borrower and its obligations, in each case, so long as each such Person is informed of the confidential nature of such information and instructed to keep such information confidential and (k) with the consent of the Borrower.
Section 9.10Termination. This Agreement shall terminate upon the termination of all Commitments and repayment in full of the aggregate outstanding principal amount of the Loans, accrued interest thereon, and all fees and expenses and other amounts due and payable at such time; provided that the provisions of Sections 7.6, 8.3, 8.4 and 9.3 shall survive such termination.
Section 9.11Collateral. Each of the Lenders represents to the Administrative Agent and each of the other Lenders that it, in good faith, is not relying upon any “margin stock” (as defined in the Margin Regulations) as collateral in the extension or maintenance of the credit provided for in this Agreement.
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Section 9.12Representations of Lenders.
(a)Each of the Lenders represents and warrants to the Borrower that it is a corporation or association duly incorporated or organized and validly existing under the laws of its jurisdiction of incorporation or organization, as the case may be.
(b)Each of the Lenders represents and warrants to the Borrower that this Agreement constitutes a valid and binding agreement of it enforceable against it in accordance with the terms hereof subject to (i) applicable receivership, insolvency, reorganization, moratorium and other laws affecting the rights of creditors of banks or other institutions generally from time to time in effect and (ii) equitable principles of general applicability.
Section 9.13USA PATRIOT Act. Each Lender that is subject to Section 326 of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), hereby notifies the Borrower that, pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name, address and tax identification number of the Borrower and other information regarding the Borrower reasonably necessary to allow such Lender to identify the Borrower in accordance with the Act.
Section 9.14No Fiduciary Duty. Each Agent, each Arranger, each Lender and their respective Affiliates (collectively, solely for purposes of this paragraph, the “Lender Parties”), may have economic interests that conflict with those of the Borrower, its stockholders or its Affiliates. The Borrower agrees that nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Lender Party, on the one hand, and the Borrower, its stockholders or its Affiliates, on the other. The Borrower acknowledges and agrees that (i) the transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between the Lender Parties, on the one hand, and the Borrower, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Lender Party has assumed an advisory or fiduciary responsibility in favor of the Borrower, its stockholders or its Affiliates with respect to the transactions contemplated hereby (or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lender Party has advised, is currently advising or will advise the Borrower, its stockholders or its Affiliates on other matters) or any other obligation to the Borrower except the obligations expressly set forth in the Loan Documents and (y) each Lender Party is acting solely as principal and not as the agent or fiduciary of the Borrower, its management, stockholders, creditors or any other Person. The Borrower acknowledges and agrees that it has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. The Borrower agrees that it will not claim that any Lender Party has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Borrower, in connection with such transaction or the process leading thereto.
Section 9.15Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
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(a)the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b)the effects of any Bail-in Action on any such liability, including, if applicable:
(i)a reduction in full or in part or cancellation of any such liability;
(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of the applicable Resolution Authority.
Section 9.16Severability of Provisions. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 9.17Titles and Captions. Titles and captions of Articles, Sections and subsections in, and the table of contents of, this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement.
Section 9.18Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and, each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the FDIC under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
(a)In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that
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rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
(b)As used in this Section 9.18, the following terms have the following meanings:
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Covered Entity” means any of the following:
(i)a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
(ii)a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii)a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
[Signature pages intentionally omitted]
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Schedule 1
COMMITMENT SCHEDULE
| LENDERS | COMMITMENTS | ||||
| Wells Fargo Bank, N.A. | $105,000,000.00 | ||||
| Citibank, N.A. | $105,000,000.00 | ||||
| Bank of America, N.A. | $105,000,000.00 | ||||
| Goldman Sachs Bank USA | $71,666,666.67 | ||||
| Morgan Stanley Bank, N.A. | $71,666,666.67 | ||||
| U.S. Bank National Association | $71,666,666.66 | ||||
| Capital One, National Association | $45,000,000.00 | ||||
| Fifth Third Bank, National Association | $45,000,000.00 | ||||
| MUFG Bank, Ltd. | $45,000,000.00 | ||||
| The Northern Trust Company | $45,000,000.00 | ||||
| PNC Bank, National Association | $45,000,000.00 | ||||
| Sumitomo Mitsui Banking Corporation | $45,000,000.00 | ||||
| TOTAL | $800,000,000.00 | ||||
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Schedule 2
PRICING GRID
| Status | Level I | Level II | Level III | Level IV | Level V | Level VI | ||||||||||||||
| Facility Fee | 0.070 % | 0.090 % | 0.10 % | 0.125 % | 0.15 % | 0.225 % | ||||||||||||||
Applicable Margin for Euro-DollarSOFR Loans | 0.805 % | 0.91 % | 1.025 % | 1.125 % | 1.225 % | 1.40 % | ||||||||||||||
| Applicable Margin for Base Rate Loans | 0 % | 0 % | 0.025 % | 0.125 % | 0.225 % | 0.40 % | ||||||||||||||
For purposes of this Grid, the following terms have the following meanings, subject to the final paragraph of this Grid:
“Level I Status” exists at any date if, at such date, the Borrower’s senior unsecured long-term debt is rated A/A2 or higher.
“Level II Status” exists at any date if, at such date, the Borrower’s senior unsecured long-term debt is rated A-/A3.
“Level III Status” exists at any date if, at such date, the Borrower’s senior unsecured long-term debt is rated BBB+/Baa1.
“Level IV Status” exists at any date if, at such date, the Borrower’s senior unsecured long-term debt is rated BBB/Baa2.
“Level V Status” exists at any date if, at such date, the Borrower’s senior unsecured long-term debt is rated BBB-/Baa3.
“Level VI Status” exists at any date if, at such date, no other Status exists.
“Moody’s” means Moody’s Investors Service, Inc.
“S&P” means Standard & Poor’s Rating Service, a division of S&P Global Inc.
“Status” refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date.
The credit ratings to be utilized for purposes of this Grid are those assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating assigned to any other debt security of the Borrower shall be disregarded. In the event of split ratings from Moody’s and S&P, (i) if the ratings are one full rating category apart, Status shall be determined by the higher of the two ratings (unless the lower of such two ratings is BB+(Ba1) or lower, in which case Status shall be determined by the lower of such two ratings) and (ii) if the ratings are more than one full rating category apart, Status shall be determined based on the rating at the midpoint between the two ratings; provided that if there is no rating at the midpoint between the two ratings, the higher of the two intermediate ratings (unless the lower of such two ratings is BB+(Ba1) or lower, in which case Status shall be determined by the lower
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of such two ratings) shall apply (e.g., BBB+/Baa2 results in Level III Status, BBB+/Baa3 and BBB/Baa3 both result in Level IV Status and BBB+/Ba1 results in Level V Status)
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Exhibit 10.2
Commitment Termination Date Extension Request
THOROUGHBRED FUNDING, INC. (the “SPV”), pursuant to Section 11.2(e) of the Amended and Restated Transfer and Administration Agreement, dated as of May 28, 2021 (as amended, modified, or supplemented from time to time, the “Agreement”), among the SPV, NORFOLK SOUTHERN RAILWAY COMPANY, individually (the “Originator”) and as initial Servicer, NORFOLK SOUTHERN CORPORATION (“NSC”), the “Conduit Investors” from time to time party thereto, the “Committed Investors” from time to time party thereto, the “Managing Agents” from time to time party thereto and SMBC NIKKO SECURITIES AMERICA, INC. (“SMBC”), as the Administrative Agent for the Investors and as a Managing Agent, hereby requests that the Committed Investor(s) consent to an extension of the Commitment Termination Date and the amendment to the Fee Letter as set forth below on the terms and conditions set forth herein.
1.Commitment Termination Date: May 24, 2024.
2.Upfront Fee. On May 26, 2023, the SPV shall pay to (w) SMBC, as Managing Agent for the account of the Investors in the SMBC Investor Group, an upfront fee equal to $33,333.33 (representing the product of (i) 0.025% and (ii) the sum of the Commitments of the Committed Investors in the SMBC Investor Group as of the date hereof), (x) U.S. Bank National Association, as Managing Agent for the account of the Investors in the U.S Bank National Association, an upfront fee equal to $33,333.33 (representing the product of (i) 0.025% and (ii) the sum of the Commitments of the Committed Investors in the U.S Bank National Association as of the date hereof) and (y) Capital One, National Association, as Managing Agent for the account of the Investors in the Capital One Investor Group, an upfront fee equal to $33,333.33 (representing the product of (i) 0.025% and (ii) the sum of the Commitments of the Committed Investors in the Capital One Investor Group as of the date hereof).
3.Each of the SPV, the Originator and the Servicer hereby represents and warrants that:
a.This Commitment Termination Date Extension Request, the Agreement, as amended hereby, the Fee Letter, as amended hereby, and the First Tier Agreement constitute legal, valid and binding obligations of such parties and are enforceable against such parties in accordance with their respective terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.
b.As of the date hereof, and upon the effectiveness of this Commitment Termination Date Extension Request and after giving effect hereto, the covenants, representations and warranties of each such party, respectively, set forth in Articles IV and VI of the Agreement, as applicable, are true, complete and correct, in the case of such representations and warranties qualified by materiality, in all respects, and otherwise in all material respects on and as of the date hereof as though made on and as of the date hereof (except to the extent that such representations and warranties relate to an earlier date in which case such representations and warranties that expressly relate to an earlier date are true, correct and complete, in the case of such representations and warranties qualified by materiality, in all respects, and otherwise in all material respects, as of such earlier date).
4.The SPV hereby represents and warrants that, as of the date hereof, and upon the effectiveness of this Commitment Termination Date Extension Request, no event or circumstance has occurred and is continuing which constitutes a Termination Event or a Potential Termination Event.
Except as expressly provided herein, the execution, delivery and effectiveness of this Commitment Termination Date Extension Request shall not operate as a waiver of any right, power or remedy of the Conduit Investors, the Committed Investors, the Managing Agents or the Administrative Agent, nor constitute a waiver of any provision of the Agreement, any other Transaction Document or any other documents, instruments and agreements executed and/or delivered in connection therewith.
Upon the effectiveness of this Commitment Termination Date Extension Request, on and after the effective date specified in the last paragraph hereof, each reference in the Agreement and the Fee Letter to
Exhibit 10.2
“this Agreement,” “this Fee Letter,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Agreement and Fee Letter, respectively, and its amendments, as supplemented hereby.
The Agreement and Fee Letter, each as supplemented hereby, and all other amendments, documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed.
This Commitment Termination Date Extension Request shall become effective as of May 26, 2023, upon (i) the receipt by (w) SMBC, as Managing Agent for the account of the Investors in the SMBC Investor Group, (x) U.S. Bank National Association, as Managing Agent for the account of the Investors in the U.S. Bank National Association, and (y) Capital One, National Association, as Managing Agent for the account of the Investors in the Capital One Investor Group, and (ii) the receipt by the Administrative Agent of counterparts of this Commitment Termination Date Extension Request executed by the SPV, the Originator, the Servicer, each Committed Investor, each Managing Agent and the Administrative Agent. Capitalized terms used herein and not otherwise defined herein have the meaning assigned to them in the Agreement.
Dated: March 10, 2023
Signature pages follow
Exhibit 10.2
THOROUGHBRED FUNDING, INC.,
as SPV
By: /s/ Christopher R. Neikirk Name: Christopher R. Neikirk
Title: Chairman and President
NORFOLK SOUTHERN RAILWAY COMPANY,
as Originator and as Servicer
By: /s/ Christopher R. Keikirk Name: Christopher R. Neikirk
Title: Vice President and Treasurer
SMBC NIKKO SECURITIES AMERICA, INC.
as Administrative Agent and a Managing Agent
By: /s/ Yukimi Konno Name: Yukimi Konno Title: Managing Director
SUMITOMO MITSUI BANKING CORPORATION
As a Committed Investor
By: /s/ Minxiao Tian Name: Minxiao Tian Title: Director
CAPITAL ONE, NATIONAL ASSOCIATION
as a Managing Agent and a Committed Investor
By: /s/ Julianne Low Name: Julianne Low Title: Title
U.S. BANK NATIONAL ASSOCIATION,
as a Managing Agent and a Committed Investor
By: /s/ Judd Dudgeon Name: Judd Dudgeon Title: Vice President
Exhibit 10.3
______________________________________________________________________________
FIRST AMENDED AND RESTATED
ASSET PURCHASE AND SALE AGREEMENT
dated as of June 28, 2023
between
Board of Trustees of the Cincinnati Southern Railway,
Norfolk Southern Railway Company and
The Cincinnati, New Orleans and Texas Pacific Railway Company
_____________________________________________________________________________
TABLE OF CONTENTS
Page
(i)
(ii)
(iii)
(iv)
FIRST AMENDED AND RESTATED
ASSET PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDED AND RESTATED ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the 28th day of June, 2023, by and among Norfolk Southern Railway Company, a Virginia corporation ("Buyer"), The Cincinnati, New Orleans and Texas Pacific Railway Company, an Ohio corporation ("CNOTP"), and the Board of Trustees of the Cincinnati Southern Railway, a board of trustees organized under the State of Ohio ("Seller").
RECITALS:
A.Seller owns the railroad starting at approximately Milepost 0.0 in Cincinnati, Ohio, extending approximately 338.2 track miles through Kentucky and a portion of Tennessee, and ending in Chattanooga, Tennessee, at the connection to the rail line of The Alabama Great Southern Railroad Company, as further described at Exhibit A and depicted at Exhibit A-1, each attached hereto and made a part hereof (the "Line").
B.Seller currently leases and has leased the Line for operation by CNOTP pursuant to the Existing Lease (as defined herein) since October 11, 1881, with CNOTP being an Affiliate of Buyer.
C.Seller has agreed to sell, and Buyer has agreed to purchase, in accordance with the terms of this Agreement, all right, title and interest of Seller in all real property held by Seller in conjunction with Seller's oversight and management of the Cincinnati Southern Railway, including (1) the Line; (2) certain real property associated with the Line; (3) real property interests acquired by Seller in conjunction with its ownership of the Line; (4) real property underlying the Line; (5) real property adjacent to or detached from the Line; and (6) all associated rights, interests, privileges, fixtures, improvements, and appurtenances otherwise
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associated therewith (the "Real Property"), together with all of Seller's right, title and interest in all personal property used in the operation of the Line, including all of Seller's rights in and to the fund maintained by CNOTP pursuant to Section 3(f) of the 1987 Supplementary Agreement and personal property consisting of or associated with facilities, equipment, roadbed, track (including, without limitation, all main track, side tracks, spur tracks, connecting tracks, yard tracks, industry tracks, and team tracks), connections, ties, bridges, ballasts, signage, stations, track fastening, culverts, ditches, structures, communications and signal facilities, parking and storage areas, depots, yards, shops, buildings, and all other improvements, fixtures, appurtenances, and interest (whether tangible or intangible) owned, used, held for use, or otherwise possessed by Seller located on, in, under, above, or adjacent to the Line (the "Personal Property") (the Line, Real Property, Personal Property, and all other associated rights, interests, privileges, licenses, agreements, and appurtenances otherwise associated therewith (but excluding the Excluded Assets), and as further described in Section 2.01(a), collectively, the "Acquired Assets").
D.On November 21, 2022, Seller, Buyer and CNOTP entered into an Asset Purchase and Sale Agreement (the "Original Agreement") with respect to the transactions to be consummated hereby. As a result of the State Law Change being enacted, Seller, Buyer and CNOTP wish to supersede the Original Agreement as set forth in this Agreement.
E.Norfolk Southern Corporation, a Virginia corporation and as the ultimate parent corporation of Buyer and CNOTP, agreed to fully and unconditionally guarantee the obligations of Buyer and CNOTP under the Original Agreement by a guaranty dated November 21, 2022 (the "Original Guaranty'). The Original Guaranty is being superseded in connection with this
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Agreement pursuant to an amended and restated guaranty agreement (the "Guaranty") dated the date hereof.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, and with the foregoing recitals incorporated as more fully set forth herein, the Parties hereby agree as follows:
I.DEFINITIONS
1.01.Defined Terms. As used herein, the following terms shall have the meanings specified in this Section 1.01 as follows:
"1987 Supplementary Agreement" – The Supplementary Agreement entered into as of January 1, 1987 between Seller and CNOTP.
"2023 Voter Approval Month" – As defined in Section 2.04(b).
"2024 Voter Approval Month" – As defined in Section 2.04(c).
"Accelerated Transaction Fee" - $5,000,000.
"Acquired Assets" – As defined in the Recitals.
"Adverse Buyer Governmental Action" – As defined in Section 10.06.
"Adverse Seller Governmental Action" – As defined in Section 11.06.
"Affiliates" – As defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, and, solely as it pertains to Seller, the Public Parties.
"Agreement" – As defined in the Preamble.
"Assignment and Assumption Agreement" – The assignment and assumption agreement in the form set forth in Exhibit E attached hereto and made a part hereof.
"Assumed Obligations" – As defined in Section 2.04(d).
"Bill of Sale" – The bill of sale in the form set forth in Exhibit D attached hereto and made a part hereof.
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"Business Day" – Any day except Saturday, Sunday or any other day on which commercial banks located in Cincinnati, Ohio are authorized or required by law to be closed for business.
"Buyer" – As defined in the Preamble.
"Cincinnati Voter Approval" – Voter approval of the sale of the Line by the voters of the City of Cincinnati as required by the laws of the State of Ohio.
"Cincinnati Voter Rejection" – Rejection of the sale of the Line by the voters of the City of Cincinnati.
"Claims" – Any and all demands, claims, actions or causes of action, suits, proceedings, investigations, assessments, losses, damages, liabilities, costs and expenses, including interest, penalties and attorneys' fees and disbursements, Third Party Claims, and other costs and expenses.
"Closing" – As defined in Section 3.01.
"Closing Date" – As defined in Section 3.01.
"CNOTP" -- As defined in the Preamble.
"Code" – The Internal Revenue Code of 1986, as amended.
"Contracts" – Contracts, agreements, easements, franchises, rights-of-way, licenses, leases, commitments, arrangements and understandings to which Seller is a party that relate to the Line or its operations, including Pipe and Wire Crossing Agreements, Property Services Agreements, limited distribution tariff agreements, clearance agreements and the like and which are not Excluded Assets.
"Credit Pool" – As defined in Section 2.04(b).
"Credit Pool Additive" – As defined in Section 2.04(c).
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"Deeds" – Quit-claim deeds in the form set forth in Exhibit C attached hereto and made a part hereof.
"Deferred Transaction Fee" – Subject to Section 2.04(b) and Section 2.04(c), $20,000,000.
"Drop Dead Date" – The date that is the later of: (i) June 30, 2025, and (ii) the calendar day immediately following the Primary Date.
"East Peavine Line" -- The real property and other assets comprised of approximately twenty (20) miles of the CT segment located West/Northwest of Vera Junction as further described on Exhibit G attached hereto and made a part hereof.
"East Peavine Line Transaction Documents" – The prospective agreement, documents and instruments to be negotiated between Buyer and the State of Ohio pursuant to which Buyer shall, subject to obtaining any required STB approval or exemption, donate the East Peavine Line to the State of Ohio, as interim trail manager, including a quitclaim deed of donation.
"Encumbrances" – Any mortgage, pledge, option, lien, claim, security interest, agreement, easement, equitable interest, restriction, license, lease, right of reverter, right of entry, right of first refusal, encumbrance or charge (whether arising by contract or operation of law) related to the Acquired Assets or any part thereof, including (i) any general real estate Taxes or special assessments not yet due and payable; (ii) existing laws, orders and regulations, including applicable zoning laws and regulations; (iii) all tenancies, encumbrances, easements, rights, trackage rights, conditions, reservations, leases, licenses, permits, privileges, agreements, third-party agreements, covenants, restrictions, rights of re-entry, possibilities of reverter, and defects in title, whether or not of record or as would be disclosed by a complete and accurate survey and physical inspection of the Acquired Assets and inspection of the title thereto that affect the Real
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Property as of the Closing Date; (iv) whatever rights the public may have to the use of any roads, alleys, bridges or streets on or crossing the Real Property or streams, rivers, creeks and waterways passing under, across or through the Real Property; and (v) Pipe and Wire Crossing Agreements and any pipes, wires, poles, cables, culverts, drainage courses or systems, or other facilities on or crossing the Real Property together with the rights, if any, of Persons entitled to maintain, repair, renew, replace, use or remove the same.
"Environmental Law" – Any federal, state, local or common law, rule, regulation, ordinance, code, order, decree, judgment, permit requirement, or other requirement of any Governmental Authority, in effect as of the date of this Agreement or at any time thereafter, relating to (i) the pollution or protection of the environment (including air, land, soil, soil vapor, surface waters, ground waters, stream and river sediments, and biota); or (ii) the use, generation, storage, treatment, disposal, processing, transportation (except for transportation as a common carrier), handling, release, emission or remediation of, or exposure to, Hazardous Substances, including the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., the Resource Conservation and Recovery Act ("Solid Waste Disposal Act" or "RCRA"), 42 U.S.C. §§ 6901 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., the Safe Drinking Water Act, 42 U.S.C. §§ 330f et seq., the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §§ 5101 et seq., and the Toxic Substances Control Act ("TSCA"), 15 U.S.C. §§ 2601 et seq.
"Environmental Liabilities" – Claims, judgments, damages (including consequential and punitive damages), losses, penalties, fines, obligations, commitments, liabilities, Encumbrances, violations, costs and expenses (including attorneys', consultants' and engineering fees) arising under any Environmental Laws (whether at law or in equity) or in any way relating to (i) the
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environment (including air, land, soil, soil vapor, surface waters, ground waters, stream and river sediments, and biota); (ii) the presence, use, generation, storage, treatment, disposal, processing, transportation (except for transportation as a common carrier), handling, release, emission or remediation of, or exposure to, Hazardous Substances; or (iii) impacts on human health and safety resulting from the foregoing, including, without limitation, investigation, remediation, clean-up, corrective action, monitoring, or defense of any matter arising under any Environmental Laws, of whatever kind or nature, whether known or unknown, asserted or unasserted, fixed, absolute or contingent, matured or unmatured, accrued or unaccrued, liquidated or unliquidated or due or to become due, whether or not resulting from the actual or alleged violation of or noncompliance with any Environmental Laws.
"Excluded Assets" – All assets of Seller not expressly included in the definition and description of the Acquired Assets as set forth on Exhibit B attached hereto and made a part hereof.
"Excluded Liabilities" – As defined in Section 2.03.
"Existing Lease" – That certain Lease between Seller and CNOTP, dated as of October 11, 1881, as amended and supplemented, including without limitation by the 1987 Supplementary Agreement.
"Formal Announcement" – The passage of a resolution by Seller formally announcing the proposed sale of the Acquired Assets as required by Ohio law, thereby setting the date of the election for the Cincinnati Voter Approval.
"Governmental Authority" – Any governmental body, whether federal, state or local, including any agency, board, bureau, court, commission, department, instrumentality, regulatory
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authority, or administration of any governmental body, with jurisdiction over the applicable subject matter.
"Governmental Order" – Any order, writ, judgment, injunction, decree, stipulation, decision, authority, notice, determination or award entered by or with any Governmental Authority, including by the STB.
"Guaranty" - As defined in the Recitals.
"Hazardous Substances" – All hazardous or toxic materials or substances, wastes, pollutants, contaminants, or terms of similar meaning, and all other materials or substances that are subject to regulation, defined, or may give rise to any responsibilities or liabilities under any Environmental Law.
"IPD-GNP" – The implicit price deflator through gross national product as published by the Bureau of Economic Analysis.
"IPD Increase" - As defined in Section 2.04(b).
"Labor Protection" – (i) Any and all costs, expenses, legal fees and payments incurred by Seller, including benefits, bonuses, allowances, and arbitration, administrative and litigation expenses, arising out of any agreement with, or claims or grievances made or lawsuits brought by or on behalf of, employees of Seller or their collective bargaining representatives, in each case pursuant to statute, employee protective conditions imposed by a Governmental Authority, a collective bargaining agreement or any agreement entered into with such employees or their collective bargaining representatives in connection with the transactions contemplated by this Agreement; and (ii) any and all costs and expenses incurred by Seller in connection with any preemptive legal actions undertaken by Seller, including costs and expenses associated with defending any related counterclaims of employees of Seller or their collective bargaining
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representatives, that are related to matters contemplated by clause (i) above or otherwise related to implementation of the transactions contemplated by this Agreement from the standpoint of collective bargaining.
"Line" – As defined in the Recitals.
"Line Agreements" – As defined in Section 2.01(ii).
"Material Adverse Effect" – Any event, change, development, circumstance or effect that is materially adverse to (x) the ability of Buyer to use and operate the Acquired Assets in substantially the same manner as the Acquired Assets were used and operated by Buyer prior to the date hereof, or (y) the ability of Buyer or CNOTP or Seller to consummate the transactions contemplated by this Agreement; provided, however, that "Material Adverse Effect" shall not include any event, occurrence, fact, condition, or change directly or indirectly arising out of or attributable to: (i) the consummation of any action required by this Agreement, (ii) any failure to meet projections and forecasts; provided that this clause (ii) shall not prevent a determination that any event, change, development, circumstance or effect (whether short-term or long-term), not otherwise excluded from this definition of Material Adverse Effect, that results in such failure to meet projections or forecasts has resulted in a Material Adverse Effect, (iii) changes, events or occurrences arising from general business conditions or affecting the rail industry generally (including COVID-19 and variants thereof); provided, that, in the case of clause (iii) if such fact, circumstance, change, event, occurrence or effect disproportionately affects the Acquired Assets, taken as a whole, compared to other companies in the industry in which the Buyer operates, then, such impact or impacts shall be taken into account in determining whether there has been a Material Adverse Effect, (iv) any change, effect or circumstance resulting from
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the announcement of this Agreement, or (v) conditions caused by acts of terrorism or war (whether or not declared) or any man-made disaster or acts of God.
"Operative Documents" – Assignment and Assumption Agreement, Bill of Sale, Deeds, Guaranty, Termination of Existing Lease, all required affidavits and state transfer forms delivered at Closing pursuant to this Agreement, and the certificates in the forms set forth in Exhibits H, I and J, each attached hereto and made a part hereof.
"Original Agreement" – As defined in the Recitals.
"Original Guaranty" – As defined in the Recitals.
"Parties" – Collectively, CNOTP, Buyer and Seller.
"Party" – Each of CNOTP, Buyer and Seller.
"Person" – Any natural person, proprietorship, partnership (limited or general), corporation, limited liability company, organization, firm, business, joint venture, association, trust or other entity, but excluding the Parties and their respective Affiliates where the context requires.
"Personal Property" – As defined in the Recitals.
"Pipe and Wire Crossing Agreements" – Easements, license agreements, and/or rights of entry agreements, pertaining to above- and below-ground pipes, conduits, wires, cables, casings, inner ducts and other appurtenant materials, equipment and facilities installed, maintained and operated on and through the rights-of-way and the roadbed of the Real Property, and other crossings related to water, gas, sanitary sewer, storm sewer, pipelines, drains, ditches, irrigation, and conveyor facilities.
"Primary Date" – The date on which polls are open for the primary election with respect to elected offices for the City of Cincinnati to be held in calendar year 2025.
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"Proceeding" – Any claim, charge, audit, investigation, hearing, litigation, suit, action (including regulatory action) or proceeding, whether judicial, civil, criminal or administrative (including arbitration and any other alternative dispute resolution procedure).
"Property Services Agreements" – Easements, license agreements and/or rights of entry agreements pertaining to: cell towers, antennas, radio equipment, radar, fiber optics, power transmission facilities (but not power distribution facilities), rail sidings, spur track or industrial track, road crossings, laser transmission systems, wirelines and pipelines running generally parallel to the right-of-way, signboards, timber management and farm management, on or under the Real Property.
"Public Parties" – Collectively, Seller and the City of Cincinnati.
"Purchase Price" – Subject to Section 2.04(b) and Section 2.04(c), $1,600,000,000.
"Real Property" – As defined in the Recitals.
"Real Property Interests" – Leases, licenses, easements, permits or other interests in or right to enter upon the Real Property.
"Required Consent Contract" – As defined in Section 2.08(a).
"Seller" – As defined in the Preamble.
"Seller Released Parties" – As defined in Section 5.05(c).
"Settlement Agent" – Such third party as Buyer may retain, at Buyer's sole cost and expense, to administer the Closing and otherwise assist in facilitating the transactions contemplated by this Agreement.
"State Law Change" – Sections 746.01 to 746.07 of Sub H.B. No. 23.
"STB" – United States Surface Transportation Board.
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"STB Order" – The order, decision or notice of exemption entered by the STB that (i) approves or exempts the transactions contemplated by this Agreement and (ii) subject to Section 12.05(a) of this Agreement, does not impose any condition granting trackage, haulage or other operating or access rights or terms (e.g., rates or terms of service or interchange) to one or more railroads that, in the reasonable judgment of Buyer, is likely to materially impact Buyer's anticipated benefits to be obtained hereunder; provided, however, that if more than one order is issued by the STB in connection with such contemplated transactions, all such orders shall for purposes of this Agreement, unless otherwise indicated, be referred to collectively as the STB Order.
"Tax" or "Taxes" – All federal, state, local, foreign and other taxes, customs, duties, fees, levies, assessments or charges of any kind whatsoever, including all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, estimated, severance, stamp, occupation, real or personal property, business, documentary, registration, filing, recordation, unemployment, worker's compensation, commercial rent, premium, windfall profits, deemed profits, lease, capital, production, corporation, value added, bulk sale or other taxes, customs, duties, fees, levies, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any Governmental Authority (domestic or foreign) regardless of whether disputed or whether related to the filing of a Tax Return (or the failure to file a Tax Return).
"Tax Return" – Any report, return, document, declaration or other information or filing (including any amendment thereto) with respect to Taxes required by law to be supplied to any Governmental Authority or to be collected or maintained, including information returns, any
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documents accompanying payments of estimated Taxes, or requests for the extension of time in which to file any such report, return, document, declaration or other information or filing.
"Termination Fee" – An amount equal to the Deferred Transaction Fee that would be payable upon Closing if Closing occurred on the date of termination of this Agreement under Section 12.06.
"Termination of Existing Lease" – The document terminating the Existing Lease and related documents in the form set forth in Exhibit F attached hereto and made a part hereof.
"Third Party Claims" – As defined in Section 13.03.
"Transaction Extension Fee" – For each Transaction Extension Fee Payment Date, an amount equal to 1/12th of $1,620,000,000 multiplied by the Transaction Extension Fee Rate.
"Transaction Extension Fee Payment Date" -- The first Business Day of each of December 2023, January 2024, February 2024, and March 2024.
"Transaction Extension Fee Rate" -- The greater of (i) the then-prevailing coupon equivalent rate for 13-week U.S. Treasury bills as published by the U.S. Department of Treasury or other determination reasonably acceptable to Buyer and Seller or (ii) four percent (4%), in each case determined as of the 15th day of the month immediately preceding each applicable Transaction Extension Fee Payment Date.
"WARN Act" – Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101 et seq.
Other Definitional Provisions. Unless otherwise stated, terms, phrases and expressions used in this Agreement (whether or not capitalized) which pertain to railroad operations and service shall have the meaning commonly given such terms under common usage and practice of the railroad industry in 2023. All personal pronouns used in this Agreement shall include the
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other genders whether used in the masculine or feminine or neuter gender, and the singular shall include the plural, and vice versa, unless the context otherwise requires. Terms such as "herein", "hereof", "hereby", "hereunder" and "hereinafter" refer to this Agreement as a whole and not to the particular sentence, paragraph or Section where they appear, unless the context otherwise requires. The term "including" shall mean, and shall be interpreted as though such term were, the phrase "including, without limitation," in each place where such term appears. Whenever reference is made to a Section of this Agreement, such reference is to the Section as a whole, including all of the subsections and paragraphs of such Section, unless the reference is expressly made to a particular subsection or paragraph of such Section. All references in this Agreement to "$" or "dollars" shall refer to the currency of the United States of America.
II.SALE AND PURCHASE OF ACQUIRED ASSETS; TRANSFER OF LINE AGREEMENTS.
1.01.Sale and Purchase of Acquired Assets. Subject to the terms and conditions hereof, Seller agrees to sell, transfer, assign, and convey to Buyer, and Buyer agrees to purchase from Seller for the Purchase Price, all of Seller's right, title and interest in or to the Acquired Assets, subject in each case to all and any Encumbrances. Subject to Section 2.02, the Acquired Assets, without duplication, consist of all of Seller's right, title and interest in and to:
(i)the Line;
(ii)subject to Section 2.08, all rights under Contracts related to or associated with the Line ("Line Agreements"), including the Line Agreements listed in Schedule 2.01(ii) attached hereto and made a part hereof;
(iii)all Real Property and Real Property Interests; and
(iv)all Personal Property.
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1.02.Excluded Assets. It is expressly understood and agreed that, notwithstanding the provisions of Section 2.01, the Acquired Assets shall not include the Excluded Assets.
1.03.Excluded Liabilities. Buyer shall not assume or be obligated to pay, perform or otherwise discharge any of the following liabilities of Seller (all of such liabilities not so assumed by Buyer being referred to herein as the "Excluded Liabilities"):
(a)any liabilities arising out of or related to the Excluded Assets;
(b)liabilities arising out of or related to indebtedness for borrowed money;
(c)any liability of Seller in respect of any breach of or default under, or any non-compliance with respect to, any Line Agreements by Seller to the extent arising out of, relating to or resulting from any act, error or omission of Seller occurring at or prior to Closing;
(d)any payment obligation of Seller for any goods or services provided to Seller under any Line Agreement prior to Closing; and
(e)to the extent such obligations exist, any liability of Seller to indemnify any Person by reason of the fact that such Person was a partner, manager, trustee, director, officer, employee or agent of Seller or any of its Affiliates or was serving at the request of any such Person as a partner, manager, trustee, director, officer, employee or agent of another Person.
1.04.Purchase Price.
(a)Payment of Purchase Price. Subject to the terms and conditions of this Agreement, the Purchase Price for the Acquired Assets shall be payable pursuant to the terms and conditions of this Agreement in cash from Buyer (through a Settlement Agent if Buyer shall so elect) to Seller (without defense, setoff, counterclaim or withholding, but subject to any applicable deductions for Seller expenses or costs that Seller has agree to assume herein and have been paid by Buyer) as follows, in each case by wire transfer of immediately available funds to a
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bank account to be designated in writing by Seller to Buyer (or Settlement Agent, if applicable) not less than five (5) Business Days prior to the applicable payment:
(i)The Parties hereby acknowledge that $4,500,000 of the Accelerated Transaction Fee was paid by Buyer to Seller upon execution of the Original Agreement, and the remaining $500,000 of the Accelerated Transaction Fee will be paid on the date hereof. The Accelerated Transaction Fee is non-refundable and shall not be returned to Buyer if the Closing does not occur.
(ii)The Purchase Price and the Deferred Transaction Fee are due and payable upon Closing.
(iii)If Cincinnati Voter Approval is a ballot item for the election in November 2023 and Cincinnati Voter Approval has been obtained, then the Transaction Extension Fee shall be due and payable on each Transaction Extension Fee Payment Date. By way of example, if the Transaction Extension Fee were determined as of June 1, 2023, the then-prevailing coupon equivalent rate for 13-week U.S. Treasury bills as published by the U.S. Department of Treasury on May 15, 2023 was 5.21%, which is greater than 4%. Accordingly, the Transaction Extension Fee that would have been payable on June 1, 2023 would have equaled $7,033,500 calculated as follows: $1,620,000,000 x 1/12 x .0521.
(iv)The Accelerated Transaction Fee, the Transaction Extension Fee, and the Deferred Transaction Fee are being paid to offset the expenses of Seller in connection with the transactions contemplated by this Agreement, the Original Agreement, and matters associated with addressing the extension contemplated in the Lease. The Transaction Extension Fee is also being paid to accommodate Buyer's request to delay the Closing Date in certain circumstances.
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(b)IPD-GNP Escalation - 2024. If the Closing has not occurred on or before December 31, 2023, the Purchase Price and the Deferred Transaction Fee shall be increased on January 1, 2024 by the lesser of the year-over-year percentage increase in IPD-GNP (an "IPD Increase") or one and one-half percent (1.5%) except that:
(i)if there is no IPD Increase as of January 1, 2024 then there shall be no adjustment made on January 1, 2024;
(ii)if the IPD Increase applicable as of January 1, 2024 exceeds 1.5% (e.g., 2% as of January 1, 2024), then the Purchase Price and Deferred Transaction Fee as of January 1, 2024 shall be increased by 1.5% and the amount in excess of 1.5% (e.g., 0.5% based on the preceding example) shall be applied to a credit pool (the "Credit Pool");
(iii)notwithstanding subsection (ii) above, there will be no adjustment to the Purchase Price or the Deferred Transaction Fee on January 1, 2024 if (1) Seller shall have received the Accelerated Transaction Fee prior to January 1, 2024 and both of the following conditions have been satisfied: (A) the condition precedent in Section 11.03 (Cincinnati Voter Approval) has been satisfied by November 15, 2023 (the calendar month in which such satisfaction occurs the "2023 Voter Approval Month"), and (B) the condition precedent identified in Section 10.01 and Section 11.01 shall have been satisfied by the end of the eighth (8th) calendar month following the end of the 2023 Voter Approval Month, or (2) an Adverse Buyer Governmental Action or an Adverse Seller Governmental Action, or both, shall have occurred and been the proximate cause of Cincinnati Voter Approval not being a ballot measure for the November 2023 election; and
(iv)any Credit Pool balance that remains as of the Closing Date shall expire unused.
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(c)IPD-GNP Escalation - 2025. If the Closing has not occurred on or before December 31, 2024, the Purchase Price and the Deferred Transaction Fee, as they may have been increased pursuant to Section 2.04(b), shall be increased on January 1, 2025 by the lesser of the associated IPD Increase or one and one-half percent (1.5%) except that:
(i)if there is no IPD Increase and no Credit Pool balance as of January 1, 2025, then there shall be no adjustment made on January 1, 2025;
(ii)if Cincinnati Voter Approval is obtained on or before November 15, 2023, then there shall be no adjustment made on January 1, 2025;
(iii)subject to subsection (ii) above, if the IPD Increase applicable as of January 1, 2025 exceeds 1.5% (e.g., 2% as of January 1, 2025), then the Purchase Price and Deferred Transaction Fee, as they may have been increased pursuant to Section 2.04(b), shall be increased by 1.5%, and the amount in excess of 1.5% (e.g., 0.5% based on the preceding example) shall be applied to the Credit Pool;
(iv)subject to subsection (ii) above, if the IPD Increase applicable as of January 1, 2025 is less than 1.5% (e.g., 1.25% as of January 1, 2025) and the amount in the Credit Pool immediately prior to January 1, 2025 is greater than zero (e.g., 0.5% based on the example in Section 2.04(b)), then an amount shall be deducted from the Credit Pool (a "Credit Pool Additive") and added to the IPD Increase to either increase the IPD Increase to a maximum of 1.5% (e.g., 1.25% + .25% = 1.5%, with the resulting Credit Pool balance of .25% based on the preceding examples in this Section 2.04(c) and in Section 2.04(b)) or, if the Credit Pool balance immediately prior to January 1, 2025 is insufficient to reach 1.5%, exhaust the Credit Pool, and the Purchase Price and Deferred Transaction Fee, as they may have been increased pursuant to Section 2.04(b), shall be increased by the sum of the IPD Increase and the Credit Pool Additive;
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(v)notwithstanding subsections (iii) and (iv) above, there will be no adjustment to the Purchase Price or the Deferred Transaction Fee (beyond any adjustment that may have been made on January 1, 2024) on January 1, 2025 if (1) Seller shall have received the Accelerated Transaction Fee prior to January 1, 2024 and both of the following conditions have been satisfied: (A) the condition precedent in Section 11.03 (Cincinnati Voter Approval) has been satisfied by November 15, 2024 (the calendar month in which such satisfaction occurs the "2024 Voter Approval Month"), and (B) the condition precedent identified in Section 10.01 and Section 11.01 shall have been satisfied by the end of the eighth (8th) calendar month following the end of the 2024 Voter Approval Month or (2) solely due to the conditions precedent in Section 10.06 or Section 11.06 not being satisfied, Closing does not occur on or before December 31, 2024; and
(vi)any Credit Pool balance that remains as of the Closing Date shall expire unused.
(d)Assumed Obligations. As additional consideration for the Acquired Assets, Buyer shall assume the following obligations and liabilities of Seller (the "Assumed Obligations"):
(i)obligations and liabilities of Seller (if any) arising before (except to the extent such obligations are imposed on Seller under the Existing Lease) or after the Closing Date under Real Property Interests and Contracts assigned to Buyer pursuant to the provisions hereof or under Line Agreements, as provided in Section 2.08(b);
(ii)except for any income tax liability Seller may incur from Seller selling the Acquired Assets to Buyer, all obligations, commitments and liabilities of the Public Parties, of whatever nature, whether known or unknown, asserted or unasserted, fixed, absolute
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or contingent, matured or unmatured, accrued or unaccrued, liquidated or unliquidated or due or to become due, which relate to the condition of the Real Property and the other Acquired Assets arising before or after the Closing Date, or which relate exclusively to the ownership, condition or operation of the Acquired Assets arising before or after the Closing Date, including those arising under statutes, rules, regulations and effective or pending orders of Governmental Authorities;
(iii)all Environmental Liabilities of the Public Parties arising before or after the Closing Date which arise out of or are related in any way to the condition, ownership or use of the Real Property or the Line Agreements or any other Acquired Assets, including without limitation (A) any environmental contamination or other condition, or the presence of Hazardous Substances, on the Real Property or other Acquired Assets, whether such contamination or Hazardous Substances are located on or under the Real Property or other Acquired Assets or have migrated or will migrate from or to the Real Property or other Acquired Assets, and (B) the handling, use, treatment, removal, storage, decontamination, cleanup, transport (except for transportation as a common carrier) or disposal of, or exposure to, Hazardous Substances, whether such conditions and/or Environmental Liabilities are known or unknown, suspected or unsuspected, contemplated or uncontemplated, and whether or not such conditions were caused by Seller or predecessors or Affiliates of Seller.
1.05.Real Estate Taxes. No pro-rations shall be made for real estate taxes, and, in addition to the Purchase Price, CNOTP shall pay all Taxes assessed against the Acquired Assets that are due and payable as of the Closing Date, and Buyer shall pay all Taxes assessed against the Acquired Assets that become due and payable after the Closing Date.
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1.06.Buyer Title/Survey. Buyer, or CNOTP, as applicable, may undertake examination of title to, and may perform surveying of, any aspect of the Acquired Assets prior to Closing as Buyer, or CNOTP, deems necessary, at Buyer's sole cost and expense. Buyer, or CNOTP, may elect to procure title insurance commitments for any portion of, or all, of the Acquired Assets prior to Closing as Buyer or CNOTP deems necessary, at Buyer's sole cost and expense. While Seller agrees to execute documentation reasonably necessary for Buyer to obtain such coverage, (a) Seller shall not be under any obligation to cure any defects or Encumbrances revealed by such examination that may affect any aspect of the Acquired Assets, and (b) Seller shall not be required to execute an Affidavit of Title or any other similar documents pertaining to title, it being acknowledged by Buyer that Seller is selling the Acquired Assets "as is." Neither any finding disclosed by the examination described above nor Buyer's, or CNOTP's, failure to obtain title insurance at rates, and without exceptions, acceptable to Buyer or CNOTP, as the case may be, shall affect Buyer's obligations to proceed to Closing as otherwise set forth herein. Seller agrees to reasonably cooperate with Buyer's efforts to obtain any subdivision, or other similar effort, to give full effect to the transfer of the Acquired Assets as contemplated by this Agreement. Buyer shall reimburse Seller for any out-of-pocket costs or expenses Seller incurs in connection with such cooperation.
1.07.[Reserved]
1.08.Required Consent Contracts.
(a)Anything in this Agreement to the contrary notwithstanding, Seller shall be under no obligation to assign or otherwise sell, convey or transfer any Line Agreement (or any claim, right or benefit arising thereunder or resulting therefrom) prior to receiving any required consent or approval of a third party for such assignment, conveyance or transfer, or to enter into
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any other agreement or arrangement with respect thereto, if an attempted assignment, sale, conveyance or transfer thereof, or entering into any such agreement or arrangement, without the consent or approval of a third party, would constitute a breach thereof, or other contravention thereunder, be ineffective with respect to any party thereto, or in any way adversely affect the rights of Seller or Buyer thereunder; provided, however, that, if any such Line Agreement may be so assigned, sold, conveyed or transferred to Buyer without having any of the foregoing consequences, such contract shall be so assigned, sold, conveyed and transferred. With respect to any Line Agreement as to which the consent or approval of a third party is required (each a "Required Consent Contract"), promptly after the date hereof, and for a period of 12 months from and after the Closing, Seller and Buyer will use commercially reasonable efforts to obtain the written consent or approval of such third party(ies) to such Required Consent Contract for the sale, transfer, assignment and novation thereof to Buyer, or written confirmation from such parties reasonably satisfactory in form and substance to Seller and Buyer confirming that such consent is not required; provided, however, that Seller shall not be required to pay or incur any costs or expenses (including any requested consent fees) in connection with any effort to obtain any consent or approval under a Required Consent Contract, such costs and expenses to be borne solely by Buyer.
(b)Until such consent or approval is obtained with respect to any Required Consent Contract, to the extent permitted by applicable law and the terms of any Required Consent Contract not assigned pursuant to Section 2.01, from and after the Closing, (i) Buyer will obtain the claims, rights and benefits of Seller arising under such Required Consent Contract, (ii) Buyer will perform, fulfill and discharge all of Seller's obligations and liabilities thereunder in a timely manner and in accordance with all applicable laws and the terms of such
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Required Consent Contract for the benefit of Seller and the other party or parties thereto, (iii) Buyer will indemnify, defend, and hold harmless Seller and its Affiliates from any losses asserted against, incurred or suffered by any of them that relate to, result from or arise out of the failure of Buyer to comply with this Section 2.08(b) with respect to any Required Consent Contract, including as a result of performance, non-performance or deficient performance under such Required Consent Contract and (iv) Seller agrees to enforce, at the reasonable request of Buyer and at the expense and for the account of Buyer, any rights of Seller under or arising from the Required Consent Contracts against any third party, including the right to elect to terminate any such Required Consent Contracts (or rights thereunder) in accordance with the terms of such Required Consent Contracts upon the written direction of Buyer; provided that Buyer shall be responsible for any termination fees resulting from or arising out of the termination of any Required Consent Contracts at the direction of Buyer.
(c)With respect to any Required Consent Contract not assigned or transferred pursuant to Section 2.01 for which Buyer must undertake performance pursuant to Section 2.08(b), Seller will pay over to Buyer any monies received by Seller from any third party for services rendered by Buyer after the Closing, less any actual out-of-pocket costs or expenses incurred by Seller as a result of receiving and processing payment of such monies.
III.CLOSING
1.01.Closing Date and Place.
(a)The closing of the purchase of the Acquired Assets (the "Closing") shall take place at the offices of the Settlement Agent or remotely via electronic exchange of documents and signatures (except for the Deeds, for which Seller shall deliver to Buyer original wet-ink, signed and notarized copies for each county in which the Real Property is located) within five (5) Business Days after all conditions (other than the conditions to be satisfied at the
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Closing, but subject to their satisfaction or waiver at the Closing ) to each Party's obligations under Articles X and XI have been satisfied or waived as provided therein (in the case where this Section 3.01(a) is applicable, the "Closing Date").
(b)Notwithstanding Section 3.01(a), if Cincinnati Voter Approval is a ballot item for the election in November 2023 and Cincinnati Voter Approval has been obtained, then the Closing of the purchase of the Acquired Assets shall take place at the offices of the Settlement Agent or remotely via electronic exchange of documents and signatures (except for the Deeds, for which Seller shall deliver to Buyer original wet-ink, signed and notarized copies for each county in which the Real Property is located) on the later of: (i) the date that is within five (5) Business Days after all conditions (other than the conditions to be satisfied at the Closing, but subject to their satisfaction or waiver at the Closing) to each Party's obligations under Articles X and XI have been satisfied or waived as provided therein, or (ii) March 15, 2024 (in the case where this Section 3.01(b) is applicable, the "Closing Date").
(c)Buyer and Seller shall cooperate to facilitate recordation of Deeds by use of the Settlement Agent or another title company to promptly record the Deeds as part of the Closing. The provisions of this Agreement shall survive the Seller's execution and delivery of the Deeds and shall not be deemed to have been merged therein.
1.02.Deliveries by Seller. At or prior to the Closing, Seller shall deliver to Buyer or the Settlement Agent the following, with all instruments being duly executed:
(i)Original counterpart of the Assignment and Assumption Agreement.
(ii)Original counterpart of the Bill of Sale.
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(iii)Original Deeds for all of the Real Property in recordable form for each locality and/or county in which the Real Property is located.
(iv)Original counterpart of the Termination of Existing Lease.
(v)Seller Officers' Certificate in the form set forth in Exhibit H attached hereto and made a part hereof.
(vi)Original counterpart of the settlement statement in mutually agreeable form to Buyer, Seller, and the Settlement Agent.
(vii)All required state transfer forms and affidavits of value, if any, as well as, other documentation, in mutually agreeable form, as may be reasonably required by Buyer's title company or the Settlement Agent to evidence Seller's authority to enter into this Agreement and consummate the transactions contemplated herein, or facilitate recording of the Deeds.
1.03.Deliveries by Buyer. At the Closing, Buyer and its relevant Affiliates shall deliver to Seller the following, with all instruments being duly executed:
(i)The Purchase Price and the Deferred Transaction Fee.
(ii)Original counterpart of the Bill of Sale.
(iii)Original counterpart of the Assignment and Assumption Agreement.
(iv)Original counterpart of the Termination of Existing Lease.
(v)Buyer Officers' Certificate in the form set forth in Exhibit I attached hereto and made a part hereof.
(vi)Certificate of Incumbency authorizing the transactions contemplated herein in the form set forth in Exhibit J attached hereto and made a part hereof.
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(vii)All required state transfer forms and affidavits of value, if any.
(viii)Other documentation, in mutually agreeable form, as may be reasonably required by Buyer's title company or the Settlement Agent to evidence Buyer's authority to enter into this Agreement and consummate the transactions contemplated herein, or facilitate recording of the Deeds.
1.04.Third-Party Agreements. To the extent any third party requires a particular assignment document that has representations and warranties or indemnification provisions that are different from the terms of this Agreement, as between Buyer and Seller this Agreement shall control.
1.05.Closing Costs. Seller shall only be responsible for Seller's attorneys' fees, and any other costs or expenses as expressly set forth in this Agreement. Buyer shall be responsible for all other Closing costs, Buyer's attorney's fees, title insurance premiums, fees for any examination, and other costs and expenses as set forth in this Agreement.
IV.CONFIDENTIALITY OF INFORMATION
1.01.Confidentiality of Information. Each Party may disclose this Agreement to the Internal Revenue Service, any government tax authority, or external auditor and disclosure may also occur if this Agreement is a public record. In the event this Agreement is terminated or expires, any confidentiality obligations between the parties hereto shall survive for two (2) years after such termination or expiration.
V.ADDITIONAL UNDERTAKINGS AND AGREEMENTS
1.01.Buyer's Support of Cincinnati Voter Approval. Buyer shall, at its expense, undertake all efforts it deems reasonable to support the Cincinnati Voter Approval. Buyer shall pay all costs related to its supporting efforts for obtaining the Cincinnati Voter Approval and shall make payments directly to such third parties as may be identified by Buyer to assist in
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obtaining such approval. The Parties acknowledge that, in accordance with applicable law, Seller will not and is not permitted to fund or disburse any third-party funds for any activity related to obtaining Cincinnati Voter Approval.
1.02.Existing Lease.
(a)From the date hereof through the earlier of termination of this Agreement or the Drop Dead Date, neither Seller nor CNOTP or any of their Affiliates shall provide a notice of intent to pursue arbitration under Sections 2 and 8(b) of the 1987 Supplementary Agreement to determine the fair market rental terms for an extension of the term of the Existing Lease (such notice being the "Lease Extension Arbitration Notice"). This Agreement shall not be construed to limit the rights of Seller or CNOTP to pursue arbitration under Section 8 of the 1987 Supplementary Agreement of any dispute other than a dispute over the fair market rental terms for an extension of the term of the Existing Lease.
(b)Until the Closing occurs, CNOTP shall fully comply with all of the terms of the Existing Lease, and the failure of CNOTP to do so shall constitute a breach of this Agreement by Buyer and CNOTP.
(c)In the event this Agreement is terminated or the Closing does not occur prior to December 31, 2024, Seller and CNOTP shall negotiate in good faith to reach a letter agreement with respect to modifying Section 2 of the 1987 Supplementary Agreement in a manner that, based on then-current circumstances, allows for sufficient time to execute the existing provisions of Section 2 of the 1987 Supplementary Agreement, including the possibility of streamlining the procedures therefor. In the event this Agreement is terminated, Seller and CNOTP agree that neither party may deliver a Lease Extension Arbitration Notice until 60 days after the effective date of the termination of this Agreement.
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1.03.Tax Credits. Seller shall continue to properly and timely assign to CNOTP Seller's track miles that Seller is allowed to assign under Section 45G of the Code and under Kentucky Revised Statutes §141.385, and CNOTP shall continue to pay Seller an amount equal to 50% of the tax credits it claims and permanently sustains under Section 45G of the Code and under Kentucky Revised Statutes §141.385. For the avoidance of doubt, Seller and CNOTP acknowledge and agree there are tax credits under Section 45G of the Code and under Kentucky Revised Statutes §141.385 which are payable to Seller following Closing pursuant to agreements executed by Seller and CNOTP prior to the date of Closing.
1.04.Seller's Expenses under Existing Lease; Rent. CNOTP shall continue to pay the expenses of Seller in accordance with the Existing Lease through the date of Closing, together with payments to the expense reserve fund. CNOTP shall continue to pay all rent under the Existing Lease that becomes due prior to the Closing.
1.05.Condition of Property.
(a)Buyer acknowledges and agrees, through CNOTP's operation of the Line under the Existing Lease and otherwise, that it has had an adequate opportunity to inspect the Real Property and other Acquired Assets and Seller's records to evaluate the condition of the Real Property and other Acquired Assets and, if the Closing occurs, Buyer shall conclusively be deemed to have accepted the Real Property and other Acquired Assets in their present condition (including condition of title and environmental condition), and such property shall be conveyed at Closing to Buyer "AS IS, WHERE IS, WITH ALL FAULTS", as more fully set forth in Article VI. The Public Parties do not make any representation or warranty, express or implied, with respect to the condition of the Real Property or other Acquired Assets, including with respect to surface and subsurface environmental conditions, whether latent or patent, the
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nonexistence of any Hazardous Substances, compliance by the Real Property or Seller with any Environmental Law, the existence of any Environmental Liabilities, or habitability or tenantability of the Real Property. Buyer recognizes that certain of the materials contained in certain assets comprising the Acquired Assets may be or contain Hazardous Substances, including batteries, creosote in railroad ties, asbestos in building materials, lubricating stations, and lead in paint used on bridges and other assets.
(b)Buyer's acceptance of title to the Real Property and other Acquired Assets shall represent Buyer's acknowledgment and agreement that: (i) the Public Parties have not made nor has Buyer relied on any written or oral representation or warranty made by the Public Parties, their agents or employees with respect to the condition or value of the Real Property or other Acquired Assets; (ii) Buyer has had an adequate opportunity to inspect the condition of the Real Property and other Acquired Assets, through CNOTP's operation of the Line under the Existing Lease and otherwise, including environmental conditions, and to inspect documents applicable thereto, and Buyer is relying on such inspection; (iii) the Real Property has been developed and operated as a railroad and for other industrial uses for many years, and the Real Property may be contaminated with Hazardous Substances as a result; (iv) some products and materials that were used in operating facilities on the Line will be left on the Real Property at Closing and, if intended to be discarded and not used, may need to be managed and disposed of in accordance with applicable Environmental Laws; (v) the Real Property may include underground storage tanks (and certain underground storage tanks which may have been removed without investigation), piping (above ground and underground piping), drainage mechanisms, and the like; and (vi) Buyer has read and understands Seller's disclaimer in Article VI and such disclaimer is in full force and effect and legally binding on Buyer.
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(c)Effective upon the Closing, and without further act, deed or instrument, Buyer, on behalf of itself and its Affiliates, successors, successors-in-interest, and assigns , hereby releases the Public Parties, and their successors and assigns and their respective trustees, officials, officers, directors, shareholders, employees, agents and representatives ("Seller Released Parties"), from any and all obligations and liabilities with respect to any existing or future Claims at any time (including any liability Buyer may incur as a result of Third Party Claims) arising out of or in any way relating to (i) the condition of the Real Property and other Acquired Assets, (ii) non-compliance with Environmental Law related to the Real Property and other Acquired Assets, (iii) Environmental Liabilities related to the Real Property and other Acquired Assets, including any environmental contamination, or presence of Hazardous Substances on the Real Property or other Acquired Assets, whether such contamination or Hazardous Substances are located on or under the Real Property or other Acquired Assets or have migrated or will migrate from or to the Real Property or other Acquired Assets, and the handling, use, treatment, removal, storage, decontamination, cleanup, transport, or disposal of, or exposure to, Hazardous Substances from the Real Property or other Acquired Assets, and (iv) the East Peavine Line, and Buyer hereby waives any cause of action (including any right of contribution) Buyer and its Affiliates had, has or may in the future have against Seller Released Parties with respect to the foregoing, whether arising under common law, or federal, state or local statute, rule or regulation (all such obligations and liabilities being hereby assumed by Buyer and constituting Assumed Obligations). The foregoing shall apply to any condition or noncompliance with Environmental Law, including any environmental condition, known or unknown, suspected or unsuspected, contemplated or uncontemplated or any liability Buyer may incur as a result of Third Party Claims. The Deeds shall provide substantially in effect as a
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covenant running with the land that (i) Successor Railroads (as defined in Exhibit B to the Deed) shall acknowledge and affirm of record such Successor Railroad's release and waiver of claims against Seller Released Parties and Seller's disclaimers of liability, and the Successor Railroad's assumption of Buyer's obligations (which shall be joint and several with Buyer) to release, indemnify and defend the Seller Released Parties and (ii) other transferees shall acknowledge and affirm of record such transferee's release and waiver of claims against Seller Released Parties and Seller's disclaimers of liability (in the case of this clause (ii), with reasonable limitations for limitations imposed by state law and principles of sovereign immunity).
1.06.Labor and Labor Protection. For the avoidance of doubt, upon Closing, Buyer may operate or elect to allow CNOTP to continue to operate the Line with CNOTP's existing employees and pursuant to existing collective bargaining agreements. Buyer shall pay all costs, expenses, legal fees and payments incurred by Seller related to Labor Protection and other matters referred to in the definition of Labor Protection.
1.07.WARN Act. Buyer shall comply and cause compliance with the provisions of the WARN Act and any other federal, state or local laws regarding "plant closings," "mass layoffs" or similar triggering events, or change of control, with respect to Buyer's employment loss (as defined in the WARN Act) to Buyer's employees employed in operating the Line.
1.08.East Peavine Line. Buyer shall engage in good faith negotiations with the State of Ohio to come to an agreement on interim trail use, under which Buyer would donate the East Peavine Line to the State of Ohio, as interim trail manager, pursuant to 16 U.S.C. §§ 1241-51, on terms customary for Class I railroads to states pursuant to the East Peavine Line Transaction Documents.
1.09.Consents and Filings.
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(a)Subject to Section 2.08 and Section 5.01, Buyer shall be responsible for obtaining all necessary consents, other than the Cincinnati Voter Approval, for the transfer of any Acquired Asset and shall complete all required regulatory filings, including making filings with the STB to obtain the STB Order. Subject to Section 5.01 and to the extent permitted by law, Seller shall undertake all reasonable efforts to facilitate the Cincinnati Voter Approval, provided that the Parties acknowledge that the conduct of elections and the content of ballots associated with Cincinnati Voter Approval is solely within the authority of the Hamilton County Board of Elections and is dictated by the State Law Change. At the expense and upon the written request of Buyer, Seller shall use its reasonable best efforts to assist Buyer to obtain as soon as practicable after execution hereof, and prior to Closing, all licenses, permits, consents, waivers, approvals, authorizations, qualifications and orders of Governmental Authorities relating to the Acquired Assets as may be required in order to enable Buyer, CNOTP and Seller to perform their respective obligations under this Agreement, and each of the agreements and instruments called for hereunder, including required or desired approvals, exemptions or actions, if any, by the STB with respect to Seller's sale and Buyer's purchase of the Acquired Assets, including (i) assisting Buyer in the preparation and filing of all applications, forms, registrations and notices required to be filed to consummate the transactions contemplated by this Agreement, (ii) cooperating with Buyer in its efforts to obtain any consent or approval of any third party, including any Governmental Authority, required to be obtained or made by Buyer or Seller in connection with the transactions contemplated by this Agreement and (iii) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement and to fully carry out the purposes of this Agreement. Except as mutually agreed by the Parties, Buyer shall make all required filings and notices no later than thirty (30) days after
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the date of the State Law Change. The Parties acknowledge the initial filing was made with the STB on May 1, 2023. Buyer and Seller shall cooperate and use their reasonable best efforts to respond as promptly as practicable to all inquiries received from the STB or other Governmental Authorities for initial or additional information or documentation. The Parties will provide one another with an opportunity to review and comment upon one another's proposed filings, and all such filings shall be subject to the approval of both Parties (such approval not to be unreasonably withheld, conditioned or delayed).
(b)Without limiting the generality of subsection (a) above, (i) Buyer shall use commercially reasonable efforts to eliminate any objections or concerns asserted with respect to the transactions contemplated hereby by any Governmental Authority with jurisdiction over the enforcement of any laws applicable to Buyer's acquisition of the Acquired Assets so as to enable the Parties to consummate the transactions contemplated hereby as soon as reasonably practicable and prior to the time at which a Party may terminate this Agreement pursuant to Section 12.05(a), Section 12,05(b), Section 12.05(d) and Section 12.05(e), including but not limited to: entering into negotiations, providing information, making proposals, entering into and performing agreements or submitting to or challenging judicial or administrative orders; (ii) Buyer shall take promptly take all other actions and do all other things reasonably necessary and proper to avoid or eliminate each and every impediment under any law that may be asserted by any Governmental Authority or any other party to the consummation of the transactions contemplated at the Closing in accordance with the terms of this Agreement; (iii) Seller shall provide reasonable assistance to and cooperate with Buyer in the efforts contemplated by this Section 5.09(b); and (iv) Buyer shall reimburse Seller for any out-of-pocket costs and expenses Seller incurs in connection with those efforts.
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(c)If a Cincinnati Voter Rejection occurs and this Agreement is not terminated pursuant to Section 12.05(f), Buyer, Seller and CNOTP shall cooperate to obtain further enabling legislation from the State of Ohio and approval by the voters of the City of Cincinnati as required by law for the transactions contemplated hereby on terms originally envisioned for obtaining the State Law Change and Cincinnati Voter Approval contemplated by this Agreement and the Original Agreement.
VI.SELLER'S REPRESENTATION AND WARRANTIES; DISCLAIMER.
1.01.Representations and Warranties. Neither Seller nor any other Person acting on behalf of Seller has made, makes or shall be deemed to have made any express or implied representation or warranty, either written or oral, with respect to Seller or the transaction contemplated hereby except as set forth in this Article VI. Seller represents and warrants to Buyer as of the date hereof as follows:
(a)Seller is a board of trustees duly organized and validly existing and in good standing under laws of the State of Ohio.
(b)Seller has the power and authority to own and lease the Acquired Assets and to carry on its business as now conducted.
(c)Subject to receipt of the Cincinnati Voter Approval and the outcome the existing litigation previously disclosed by Seller to Buyer and CNOTP, (A) the execution, delivery and performance by Seller of this Agreement and of all other agreements and instruments called for hereunder, and the consummation by Seller of the transactions contemplated by this Agreement, and all such other agreements and instruments called for hereunder, have been (or will be as of the deliverable date) duly and validly authorized by all necessary action of Seller under applicable law and (B) this Agreement constitutes, and each other agreement and instrument called for hereunder will constitute, upon execution and delivery
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by each other party hereto and thereto the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).
(d)Litigation. Except for the pending litigation previously disclosed by Seller to Buyer and CNOTP, there is no Proceeding pending, or to the actual knowledge of Seller, threatened against or involving Seller at law or in equity before or by any court, arbitrator or other Governmental Authority (a) which would restrict or limit the ability of Seller to perform its obligations under this Agreement or any other agreement or instrument called for hereunder to which Seller is a party or (b) which seeks to prevent the consummation of the transactions contemplated hereby or thereby.
1.02.Disclaimer.
EXCEPT AS SET FORTH IN THIS ARTICLE VI, THE SALE AND PURCHASE AND THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY SELLER; SELLER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE ACQUIRED ASSETS; BUYER AND SELLER AGREE THAT THE REAL PROPERTY AND THE ACQUIRED ASSETS ARE BEING CONVEYED "AS IS, WHERE IS, WITH ALL FAULTS"; SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO WHETHER, UPON
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CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREUNDER, THE ACQUIRED ASSETS WILL BE SUFFICIENT FOR BUYER'S PURPOSES; AND SELLER DOES NOT MAKE, AND EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY REGARDING CONDITION OF TITLE, THE ENVIRONMENTAL CONDITION OF THE REAL PROPERTY, THE PHYSICAL CONDITION OR MAINTENANCE HISTORY OF THE LINE, THE REAL PROPERTY, AND THE ACQUIRED ASSETS.
VII.BUYER'S REPRESENTATIONS AND WARRANTIES
Neither Buyer nor any other Person acting on behalf of Buyer has made, makes or shall be deemed to have made any express or implied representation or warranty, either written or oral, with respect to Buyer or the transaction contemplated hereby except as set forth in this Article VII. Buyer represents and warrants to Seller as of the date hereof as follows:
1.01.Organization and Authority.
(a)Buyer is a corporation duly organized and validly existing and in good standing under the laws of the Commonwealth of Virginia. Buyer is duly qualified to do business in, and is in good standing under the laws of, each other state in which the ownership or lease of its property or the nature or conduct of its business or both makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect.
(b)Buyer has the corporate power and authority to own, lease and operate the Acquired Assets and to carry on its business as now conducted.
(c)The execution, delivery and performance by Buyer of this Agreement and of all other agreements and instruments called for hereunder, and the consummation by Buyer of the transactions contemplated by this Agreement, and all such other agreements and instruments called for hereunder, have been (or will be as of the deliverable date) duly and validly authorized
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by all necessary corporate or shareholder action of Buyer under applicable law, the articles of incorporation and bylaws of Buyer and otherwise (none of which actions have been modified or rescinded, and all of which actions are in full force and effect). This Agreement constitutes, and each other agreement and instrument called for hereunder will constitute, upon execution and delivery by each other party hereto and thereto, the legal, valid and binding obligation of Buyer , enforceable against Buyer in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a Proceeding at law or in equity).
1.02.No Conflicts; Consents of Third Parties. The execution, delivery and performance of this Agreement by Buyer will not (a) conflict with the articles of incorporation or bylaws of Buyer; (b) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any Party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any lease, agreement, commitment, financing arrangement (including financial covenants) or other instrument to which Buyer is a party; (c) violate any order, judgment, or decree, to which Buyer or any of its Affiliates are bound; or (d) constitute a violation by Buyer of any law or regulation applicable to it, except in the case of clauses (b), (c) or (d) where the failure would not result in a Material Adverse Effect. Except for the STB Order, no authorization, consent, waiver of right of first refusal, or approval of, or designation, declaration or filing with, any Governmental Authority is required on the part of Buyer in connection with the execution, delivery, and performance of this Agreement.
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1.03.Litigation. There is no Proceeding pending, or to the actual knowledge of Buyer, threatened against or involving Buyer at law or in equity before or by any court, arbitrator or other Governmental Authority (a) which would restrict or limit the ability of Buyer to perform its obligations under this Agreement or any other agreement or instrument called for hereunder to which Buyer is a party or (b) which seeks to prevent the consummation of the transactions contemplated hereby or thereby.
1.04.Information Provided. Buyer represents and warrants that it is taking full responsibility for making its own evaluation of the physical condition of the Acquired Assets, the Real Property, title to the Real Property and Encumbrances thereon, and the Acquired Assets, including the environmental condition of the property. Buyer also represents and warrants that it is making its own evaluation of projected revenues and operating results from the Acquired Assets and that Seller has not provided any estimates, projections, forecasts, plans, budgets or pro-forma information.
1.05.Financial Resources. Buyer will have at Closing the financial resources necessary to pay the Purchase Price and the Deferred Transaction Fee and to consummate the transactions contemplated hereby.
1.06.Continued Operation. Buyer is purchasing the Line for continued railway operation, including provision of rail service to customers on the Line.
VIII.CNOTP'S REPRESENTATIONS AND WARRANTIES
Neither CNOTP nor any other Person acting on behalf of CNOTP has made, makes or shall be deemed to have made any express or implied representation or warranty, either written or oral, with respect to CNOTP or the transaction contemplated hereby except as set forth in this Article VIII. CNOTP represents and warrants to Seller as of the date hereof as follows:
1.01.Organization and Authority.
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(a)CNOTP is a corporation duly organized and validly existing and in good standing under laws of the State of Ohio. CNOTP is duly qualified to do business in, and is in good standing under the laws of, each other state in which the ownership or lease of its property or the nature or conduct of its business or both makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect.
(b)CNOTP has the corporate power and authority to own, lease and operate its assets and to carry on its business as now conducted.
(c)The execution, delivery and performance by CNOTP of this Agreement and of all other agreements and instruments called for hereunder, and the consummation by CNOTP of the transactions contemplated by this Agreement, and all such other agreements and instruments called for hereunder, have been duly and validly authorized by all necessary corporate or shareholder action of CNOTP under applicable law, the articles of incorporation and bylaws of CNOTP. This Agreement constitutes, and each other agreement and instrument called for hereunder will constitute, upon execution and delivery by each other party hereto and thereto the legal, valid and binding obligation of CNOTP, enforceable against CNOTP in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).
1.02.No Conflicts; Consents of Third Parties. The execution, delivery and performance of this Agreement by CNOTP will not (a) conflict with the articles of incorporation or bylaws of CNOTP; (b) conflict with, result in a breach of, constitute (with or without due
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notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any Person the right to terminate, modify or cancel, or require any notice, consent or waiver under, any lease, agreement, commitment, financing arrangement (including financial covenants) or other instrument to which CNOTP is a party; (c) violate any order, judgment, or decree, to which CNOTP is bound; or (d) constitute a violation by CNOTP of any law or regulation applicable to it, except in the case of clauses (b), (c) or (d) where the failure would not result in a Material Adverse Effect. Except for the STB Order, no authorization, consent, waiver of right of first refusal, or approval of, or designation, declaration or filing with, any Governmental Authority is required on the part of CNOTP in connection with the execution, delivery, and performance of this Agreement.
1.03.Litigation. There is no Proceeding pending, or to the actual knowledge of CNOTP, threatened against or involving CNOTP at law or in equity before or by any court, arbitrator or other Governmental Authority (a) which would restrict or limit the ability of CNOTP to fully perform its obligations under this Agreement or any other agreement and instrument called for hereunder to which CNOTP is a party or (b) which seeks to prevent the consummation of the transactions contemplated hereby or thereby.
IX.COVENANTS
1.01.Conduct of Business. Without the prior written approval of Buyer, from the date of this Agreement until the Closing, Seller shall not, and shall not permit any of its Affiliates to:
(a)sell, assign, lease, mortgage, pledge, grant any right or interest in, or otherwise transfer or dispose of, all or any part of its real or personal property rights which comprise, or operating rights that relate to, any part of the Acquired Assets;
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(b)terminate or amend any Line Agreements, provided that Seller may renew or extend (on substantially similar terms as, or terms more favorable to Seller than, the existing Line Agreement) any Line Agreement that otherwise would terminate by its terms;
(c)seek to abandon any part of the rail lines included in the Line;
(d)grant to any third party trackage rights, haulage rights or any rights to use or occupy any portion of the Line or the Real Property; or
(e)authorize any of, or commit or agree to take, whether in writing or otherwise, or do any of, the foregoing actions.
1.02.Further Action. After the Closing, at the request of a Party, the other Party shall cooperate and use commercially reasonable efforts to carry out the intent of this Agreement, and each Party will execute and deliver such other documents and instruments of conveyance, assignment, transfer, assumption and delivery and take such other actions as the other Party reasonably may request in order to consummate, complete and carry out the transactions contemplated hereby. Except where the responsibility for the expense is expressly allocated by this Agreement, the expense of complying with any such request shall be borne by the requesting Party.
X.CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer to purchase the Line and the Acquired Assets and to proceed with the Closing are subject, at the option of Buyer, to the satisfaction or waiver at or prior to the Closing of each of the following conditions:
1.01.STB Order. The STB Order shall have been obtained and become final and effective and otherwise be in full force and effect.
1.02.[Reserved.]
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1.03.Cincinnati Voter Approval. The Formal Announcement shall have occurred and Cincinnati Voter Approval shall have been obtained and become effective.
1.04.Representations and Warranties. The representations and warranties of Seller made herein or in any agreement, instrument or document executed pursuant to this Agreement shall have been true and correct as of the date of this Agreement or as of the date of such other agreement, instrument or document, as the case may be (except for such representations and warranties that speak as of an earlier date, which representations and warranties shall have been true and correct as of such earlier date), and shall be true and correct in all respects (where such representations or warranties contain materiality qualifiers) or in all material respects (where such representations or warranties do not contain materiality qualifiers), as the case may be, on the Closing Date as though such representations and warranties were made on and as of the Closing Date (except for such representations and warranties that speak as of an earlier date, which representations and warranties shall be true and correct in all respects or in all material respects, as the case may be, as of such earlier date); and Seller shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by Seller on or prior to the Closing.
1.05.Documents at Closing. Seller shall have delivered to Buyer or the Settlement Agent all agreements, instruments and documents required to be delivered by Seller to Buyer pursuant to Section 3.02.
1.06.No Governmental Action or Legal Proceedings. As of the Closing Date, no statute, rule, regulation, order, decree, directive, writ or judgment shall have been enacted, adopted, issued, promulgated or rendered by any government or by any Governmental Authority (and not subsequently dismissed, settled, withdrawn or terminated) which would (a) prevent the
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consummation at Closing of or restrain or invalidate the transactions contemplated by this Agreement, and by each of the other material agreements and instruments called for hereunder, (b) materially interfere with or prohibit the continued effectiveness of such agreements and instruments or (c) prevent, limit, restrict or impair in any material respect the ownership, use or operation of the Acquired Assets by Buyer in a manner which would have a Material Adverse Effect, which Material Adverse Effect arose after the date of this Agreement (each an "Adverse Buyer Governmental Action").
XI.CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
The obligations of Seller to sell, transfer, convey and deliver the Acquired Assets and to proceed with the Closing are subject, at the option of Seller, to the satisfaction or waiver at or prior to the Closing of each of the following conditions:
1.01.STB Order. The STB Order shall have been obtained and become final and effective and otherwise be in full force and effect.
1.02.[Reserved.]
1.03.Cincinnati Voter Approval. The Formal Announcement shall have occurred and Cincinnati Voter Approval shall have been obtained and become effective. Subject to applicable law, including the State Law Change, Seller shall implement the Formal Announcement in a timely manner that would allow the Cincinnati Voter Approval to be a ballot item for an election determined by Seller after consultation with Buyer.
1.04.Representations and Warranties. The representations and warranties of Buyer and CNOTP made herein or in any agreement, instrument or document called for hereunder shall have been true and correct as of the date of this Agreement or as of the date of such other agreement, instrument or document, as the case may be (except for such representations and warranties that speak as of an earlier date, which representations and warranties shall have been
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true and correct as of such earlier date), and shall be true and correct in all respects (where such representations or warranties contain materiality qualifiers) or in all material respects (where such representations or warranties do not contain materiality qualifiers), as the case may be, on the Closing Date as though such representations and warranties were made on and as of the Closing Date (except for such representations and warranties that speak as of an earlier date, which representations and warranties shall be true and correct in all respects or in all material respects, as the case may be, as of such earlier date); and Buyer and CNOTP shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by Buyer and CNOTP on or prior to the Closing.
1.05.Documents at Closing. Buyer and its Affiliates shall have delivered to Seller on or before the Closing Date all agreements, instruments and documents required to be delivered by Buyer to Seller pursuant to Section 3.03.
1.06.No Governmental Action or Legal Proceedings. As of the Closing Date, no statute, rule, regulation, order, decree, directive, writ or judgment shall have been enacted, adopted, issued, promulgated or rendered by any government or by any Governmental Authority (and not subsequently dismissed, settled, withdrawn or terminated) which would as of the Closing Date (a) prevent the consummation at Closing of or restrain or invalidate the transactions contemplated by this Agreement, and by each of the other agreements and instruments called for hereunder, or (b) materially interfere with or prohibit the continued effectiveness of such agreements and instruments (each an "Adverse Seller Governmental Action").
XII.RISK OF LOSS; TERMINATION
1.01.Risk of Loss. Subject to the limitations hereinafter stated, the risk of loss or damage by fire or other casualty or cause to the Acquired Assets or any eminent domain
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proceeding until the Closing shall be upon Buyer. In the event of such loss or damage prior to the Closing, Buyer shall consummate the Closing and pay the Purchase Price and Deferred Transaction Fee regardless of any casualty event or act of God or any eminent domain proceeding.
1.02.Termination By Agreement. This Agreement may be terminated at any time prior to the Closing by the mutual written consent of Seller, Buyer, and CNOTP; and at any time after December 31, 2024, by the mutual written consent of Seller and Buyer.
1.03.Termination By Buyer. This Agreement may be terminated at any time prior to the Closing by Buyer by written notice to Seller if neither Buyer nor CNOTP is then in material breach of any provision of this Agreement and there has been a material breach or failure to perform any covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Articles X or XI and such breach, inaccuracy or failure cannot be cured by Seller by the Drop Dead Date.
1.04.Termination by Seller. This Agreement may be terminated at any time prior to the Closing by Seller by written notice to Buyer if Seller is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer or CNOTP pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Articles X or XI and such breach, inaccuracy or failure cannot be cured by Buyer or CNOTP, as the case may be, by the Drop Dead Date.
1.05.Other Termination Provisions. In addition to the provisions of Section 12.03 and Section 12.04, this Agreement may be terminated at any time prior to the Closing by written notice to the other Party as follows:
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(a)by Buyer if the STB issues an order, decision or notice of exemption that would be the STB Order but for failure to satisfy clause (ii) of that definition, except that, if Buyer does not exercise its rights under this subsection (a) within thirty (30) days of the issue date of such order, decision or notice of exemption, such order, decision or notice of exemption shall be deemed to be the STB Order;
(b)by either Party if Cincinnati Voter Approval is not obtained on or before the Drop Dead Date;
(c)by Seller if Cincinnati Voter Approval is obtained on or before the Drop Dead Date but the other conditions to Closing (other than the conditions to be satisfied at the Closing, but subject to their satisfaction or waiver at Closing) to each Party's obligations under Articles X and XI are not satisfied by July 31, 2026;
(d)by either Party if any law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited;
(e)by either Party if any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable; or
(f)by either party if a Cincinnati Voter Rejection occurs, provided that the party terminating the agreement provides notice of termination to the other party within 30 days after the Cincinnati Voter Rejection is certified pursuant to law.
1.06.Termination Fee.
(a)If this Agreement is terminated (i) by Buyer pursuant to Section 12.05(a) and at the time of termination there shall not have been a Cincinnati Voter Rejection or (ii) by Seller pursuant to Section 12.05(c) and, at the time of such termination, all of the conditions set
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forth in Article X and Article XI have been satisfied other than Section 10.01 and Section 11.01 and conditions that by their nature are to be satisfied at the Closing, but that are capable of being satisfied if the Closing were to occur on the date of such termination, then in each such case Buyer shall pay to Seller, by wire transfer in immediately available funds to an account specified by Seller, an amount equal to the Termination Fee. The Termination Fee due under this Section 12.06 shall be paid on the second Business Day immediately following the date of termination of this Agreement as contemplated by this Section 12.06.
(b)The parties each acknowledge that the agreements contained in this Section 12.06 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Seller would not have entered into this Agreement, and that any amounts payable pursuant to Section 12.06 do not constitute a penalty but constitute payment of liquidated damages and that such liquidated damages are reasonable in light of the substantial but indeterminate harm anticipated to be caused by Buyer's failure to obtain the STB Order, the difficulty of proof of loss of damages, the inconvenience and non-feasibility of otherwise obtaining an adequate remedy, and the value of the transactions to be consummated thereunder. If Buyer does not pay any amount payable pursuant to this Section 12.06, and Seller commences a suit to obtain such payment, then (i) if such suit results in a judgment against Buyer for the Termination Fee set forth in this Section 12.06 or any portion of such fee, Buyer shall pay to Seller Seller's costs and expenses (including reasonable attorneys' fees and expenses) in connection with such suit, or (ii) if such suit results in a judgment in favor of Buyer, Seller shall pay to Buyer Buyer's costs and expenses (including reasonable attorneys' fees and expenses) in connection with such suit.
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1.07.Effect of Termination.In the event of the termination of this Agreement as provided in this Article XII, this Agreement shall forthwith become null and void and of no further force or effect, except for provisions that are specifically identified as intended to survive such termination (including Sections 2.03(a)(i) and 4.01, Section 12.06 (as contemplated therein) and this Section 12.07). Notwithstanding the foregoing, nothing herein shall relieve any Party hereto from liability for any fraud or any intentional and material breach of any provision hereof.
XIII.SURVIVAL; INDEMNIFICATION
1.01.Survival of Warranties and Covenants; Limitations; Exclusive Remedy.
(a)All representations and warranties made the Parties in this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall remain operative and in full force and effect for a period of eighteen (18) months following the Closing Date, except the representations and warranties in Section 6.01, Section 7.01 and Section 8.01 shall survive for 10 years, provided that the foregoing time limits shall not limit any Claim based on fraud.
(b)All covenants made by the Parties in this Agreement or pursuant hereto which by their terms are specifically intended to be performed (i) at or prior to Closing are terminated at Closing except that liability for any pre-Closing breach of Sections 5.02, 5.03, 5.04, 5.08 and 5.09 shall survive the Closing and (ii) from and after the Closing shall survive the Closing until fully performed; provided, however, that the foregoing time limits shall not limit any Claim based on fraud.
1.02.Indemnification by Buyer. Subject to the limitations, conditions and provisions of this Article XIII and the Operative Documents, Buyer and CNOTP shall jointly and severally indemnify, defend and hold harmless Seller, its Affiliates and their respective officials, directors, officers, employees and agents from, against and with respect to all Claims asserted against,
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imposed upon or incurred directly or indirectly by Seller, by reason of, or resulting from, or in connection with (a) any breach of any representation or warranty of Buyer or CNOTP contained in this Agreement or the Operative Documents; (b) any noncompliance by Buyer or CNOTP with any covenants, agreements or undertakings of Buyer or CNOTP contained in this Agreement; (c) the ownership, use and operation of the Acquired Assets by Buyer after Closing; (d) use of the East Peavine Line for purposes other than railroad purposes; (e) the donation of the Peavine Line to, or use of the Peavine Line by, the State of Ohio; and (f) the Assumed Obligations.
1.03.Conditions of Indemnification. The obligations and liabilities of Buyer with respect to its indemnities pursuant to this Article XIII, resulting from any claim or other assertion of liability by third parties (hereinafter called collectively, "Third Party Claims"), shall be subject to the following terms and conditions:
(a)Seller must give Buyer written notice of any such Claim within ninety (90) days after Seller receives notice thereof, but failure to give notice in such period shall only relieve Buyer of its indemnity obligations if and to the extent the delay materially prejudices the defense of such Claim.
(b)Buyer shall have the right to promptly undertake, without conditions or reservation of rights, by counsel or other representatives of its own choosing and reasonably acceptable to Seller, the defense of such Claim at Buyer's cost and risk.
(c)In the event that Buyer shall elect not to undertake such defense, or within a reasonable time after notice of any such Claim from Seller shall fail to defend, Seller (upon further written notice to Buyer) shall have the right on behalf of and for the account and risk of Buyer to undertake the defense, compromise or settlement of such Claim by counsel or other
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representatives of Seller's own choosing. In such event, Buyer shall pay to Seller, in addition to any other sums required to be paid hereunder, the costs and expenses incurred by Seller in connection with such defense, compromise or settlement as and when such costs and expenses are so incurred.
(d)Anything in this Section 13.03 to the contrary notwithstanding, (i) if there is a reasonable probability that a Claim may materially and adversely affect Seller, Seller shall have the right, at its own cost and expense, to participate in the defense, compromise or settlement of the Claim, (ii) Buyer shall not, without Seller's written consent (such consent not to be unreasonably withheld, conditioned or delayed), settle or compromise any Claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to Seller a release from all liability in respect of such Claim in a form reasonably satisfactory to Seller, (iii) in the event that Buyer undertakes defense of any Claim, Seller, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with Buyer and its counsel or other representatives concerning such Claim, and Buyer and Seller and their respective counsel or other representatives shall reasonably cooperate with respect to such Claim, and (iv) in the event that Buyer undertakes defense of any Claim, Buyer shall have an obligation to keep Seller informed of the status of the defense of such Claim and furnish Seller with all documents, instruments and information that Seller shall reasonably request in connection therewith. Notwithstanding the foregoing, in the event Buyer undertakes the defense of any Claim, Seller shall have the right to employ its own counsel at Buyer's expense if Seller shall have reasonably concluded and specifically notified Buyer that there may be one or more specific defenses available to it which are different from or
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additional to those available to Buyer or there otherwise exists a conflict of interest between Seller and Buyer.
1.04.Other Indemnity Matters. The indemnities contained in Section 13.02 shall be continuing (except that as to representations and warranties, the indemnity shall expire on the date the relevant representation and warranty ceases to survive pursuant to Section 13.01(a)); provided, however, that with respect to any claim for indemnification for which notice has been given to Buyer within the period that the relevant representation and warranty survives, the indemnification period shall be extended until the final resolution of such claim.
XIV.MISCELLANEOUS
1.01.Brokers. Each Party represents and warrants to the other Party that it has not incurred any liability to any broker, finder or agent for any brokerage fees or commissions or finders' fees or commissions with respect to the transactions contemplated by this Agreement that would be a direct or indirect obligation of the other Party.
1.02.Expenses.
(a)Buyer shall pay all costs associated with regulatory approvals, closing costs, including recording costs, deed taxes, sales taxes, title company costs and transfer taxes, together with fees incidental to the transfer of the Acquired Assets.
(b)Except as otherwise expressly provided herein, each Party shall pay its own expenses incident to this Agreement and the transactions contemplated hereunder, including all legal and accounting fees and disbursements, regulatory filing fees and costs of obtaining necessary consents.
1.03.Waiver. No delay or failure on the part of any Party in exercising any right, power or privilege under this Agreement, or under any other agreements or instruments given in
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connection with or pursuant to this Agreement shall impair any such right, power or privilege or be construed as a waiver of default or any acquiescence therein.
1.04.Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the respective successors and permitted assigns of the Parties.
1.05.Assignment. None of the Parties shall assign this Agreement, in whole or in part, whether by operation of law or otherwise, without the prior written consent of each Party, except that Buyer may assign this Agreement (but not its obligations), without Seller's consent but with written notice to Seller, solely to a qualified intermediary, as defined by Treasury Regulation Section 1.1031(k)-1(g)(4), to facilitate a tax-deferred exchange pursuant to Section 1031 of the Code; provided that in any such case Buyer takes title to all of the Acquired Assets at Closing. Seller agrees to reasonably cooperate with Buyer or CNOTP in performing such a tax-deferred exchange at the cost and expense of Buyer.
1.06.Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any Party or CNOTP to any other Party or CNOTP pursuant to this Agreement shall be in writing and shall be mailed by a recognized overnight courier service, by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by hand delivery or electronic communication addressed as follows:
(i)If to Seller:
Board of Trustees of the Cincinnati Southern Railway
c/o City of Cincinnati Law Department
801 Plum Street, Suite 214
Cincinnati, OH 45202
Attention: City Solicitor
Email: Emily.Woerner@cincinnati-oh.gov
c/o City of Cincinnati Law Department
801 Plum Street, Suite 214
Cincinnati, OH 45202
Attention: City Solicitor
Email: Emily.Woerner@cincinnati-oh.gov
with a copy to:
City of Cincinnati Law Department
801 Plum Street, Suite 214
Cincinnati, OH 45202
801 Plum Street, Suite 214
Cincinnati, OH 45202
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Attention: Kaitlyn Geiger
Email: Kaitlyn.Geiger@cincinnati-oh.gov
Stinson LLP
50 South Sixth Street, Suite 2600
Minneapolis, MN 55402
Attention: James Bertrand
Email: James.Bertrand@stinson.com
50 South Sixth Street, Suite 2600
Minneapolis, MN 55402
Attention: James Bertrand
Email: James.Bertrand@stinson.com
(ii)If to Buyer or CNOTP:
c/o Norfolk Southern Corporation
650 West Peachtree Street NW
Atlanta, GA 30308
Attention: Senior Vice President & Chief Strategy Officer
Email: Michael.McClellan@nscorp.com
650 West Peachtree Street NW
Atlanta, GA 30308
Attention: Senior Vice President & Chief Strategy Officer
Email: Michael.McClellan@nscorp.com
Buyer, Seller or CNOTP may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request or communication shall be deemed sufficiently given, served, sent and received for all purposes (a) at such time as it is delivered to the addressee (with the return receipt, the delivery receipt or the affidavit of messenger being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation, or (b) on the day transmitted by electronic mail (with written confirmation of transmission), if sent before 5:00 p.m. Eastern Time on a Business Day, otherwise on the next Business Day following transmission.
1.07.Press Releases. Buyer and Seller shall consult with one another with regard to all press releases issued or publicity at or prior to Closing concerning the transactions contemplated by this Agreement except as necessary as a result of public disclosure requirements under applicable laws or the applicable rules and regulations of any Governmental Authority or stock exchange. None of Buyer, CNOTP, or Seller or any of their respective Affiliates shall issue prior to Closing any such press releases or publicity without the prior written consent of the other Parties.
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1.08.Entire Agreement. The Operative Documents and this Agreement, including the Exhibits hereto and other instruments and documents referred to herein or delivered pursuant hereto or in connection herewith represent the entire understanding of the Parties, supersede all prior oral or written memoranda and agreements and understandings between the Parties with respect to the subjects herein, and may not be supplemented or amended, except by a written instrument executed by and delivered to each of the Parties designating specifically the terms and provisions so supplemented and amended. Upon execution of this Agreement, this Agreement shall concurrently and immediately supersede the Original Agreement without any further writing or agreement or lapse of time.
1.09.Headings. Article, section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.
1.10.Conflicting Terms. In the event that any of the terms or provisions of this Agreement violate, conflict with or are inconsistent with any of the terms or provisions of any of the other agreements, documents and instruments referred to herein or delivered pursuant hereto or in connection therewith, the terms and provisions of this Agreement shall govern and control for all purposes thereunder and hereunder.
1.11.Limitation on Benefits. Nothing herein is intended to be for the benefit of any Person other than the Parties and, where expressly set forth herein, the other Public Party. It is the explicit intention of the Parties that no Person other than the Parties is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the Parties, and the assumptions, indemnities, covenants, undertakings and agreements set forth in this Agreement,
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and all other documents or instruments called for hereunder shall be solely for the benefit of, and shall be enforceable only by, the Parties or their respective successors, legal representatives and assigns as permitted hereunder.
1.12.Severability. If any clause or provision of this Agreement, or the performance of any action related to this Agreement or the Original Agreement, shall be deemed by a court of competent jurisdiction to be unlawful or otherwise invalid or unenforceable, or to exceed the limit of validity prescribed by law, then the obligation to be fulfilled or performed shall be reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate prospectively to invalidate any agreement, in whole or in part, then such clause or provision only shall be held ineffective, as though not herein or therein contained, and the remainder of this Agreement shall remain operative and in full force and effect.
1.13.Execution. To facilitate execution, this Agreement may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each Party, or the signatures of all Persons required to bind any Party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each Party, or the signatures of the Persons required to bind any Party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for any particular number of counterparts; but rather any number of counterparts shall be sufficient so long as those counterparts contain the respective signatures of, or on behalf of, all of the Parties. This Agreement and any signed agreement or instrument entered into in connection with this Agreement, and any amendments hereto or thereto (in each case other than each Deed or any other documents that must be in recordable form), to the extent delivered by means of a facsimile, email or electronic .pdf
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transmission shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.
1.14.Governing Law; Jurisdiction.
(a)This Agreement, and all claims or causes of action (whether in contract, tort or statute) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), shall be governed by, and enforced in accordance with, the internal laws of the State of Ohio, including its statutes of limitations, without regard to any borrowing statute that would result in the application of the statute of limitations of any other jurisdiction. ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED IN A STATE OR FEDERAL COURT IN THE STATE OF OHIO, AND THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING.
(b)Each of the Parties hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated hereby. Each of the Parties (i) certifies that no representative, agent or attorney of any other Party has represented, expressly or otherwise, that such other Party would not, in the
56
event of litigation, seek to enforce that foregoing waiver and (ii) acknowledges that it and the other Party have been induced to enter into this Agreement and the transactions contemplated hereby, as applicable, by, among other things, the mutual waivers and certifications in this Section 14.14.
1.15.Specific Performance. The Parties agree that irreparable damage would occur in the event that any provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to enforce specifically the performance of this Agreement in accordance with its terms. The foregoing is in addition to, and not in lieu of, any other rights a Party may have in respect of a breach of this Agreement, whether at law or in equity.
[Signatures on next pages.]
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IN WITNESS WHEREOF, each of the Parties has executed this Agreement or has caused this Agreement to be duly executed on its behalf, as of the day and year first above written.
BOARD OF TRUSTEES OF THE CINCINNATI SOUTHERN RAILWAY
By: /s/ Paul V. Muething
Paul V. Muething, President
[Signature Page to First Amended and Restated Asset Purchase and Sale Agreement]
NORFOLK SOUTHERN RAILWAY COMPANY
By: /s/ Mark R. George
Mark R. George
Vice President and Chief Financial Officer
Vice President and Chief Financial Officer
THE CINCINNATI, NEW ORLEANS AND TEXAS PACIFIC RAILWAY COMPANY
By: /s/ Mark R. George
Mark R. George
Vice President
[Signature Page to First Amended and Restated Asset Purchase and Sale Agreement]
Schedule 2.01(ii)
Line Agreements
None.
| Document | Exhibit Reference | ||||
| Real Property Description | A | ||||
| Map | A-1 | ||||
| Excluded Assets | B | ||||
| Deeds | C | ||||
| Form of Deed – Ohio | C-1 | ||||
| Form of Deed - Kentucky | C-2 | ||||
| Form of Deed - Tennessee | C-3 | ||||
| Form of Bill of Sale | D | ||||
| Form of Assignment and Assumption Agreement | E | ||||
| Form of Termination of Existing Lease | F | ||||
| East Peavine Line | G | ||||
| Seller Officer's Certificate | H | ||||
| Buyer Officer's Certificate | I | ||||
| Certificate of Incumbency | J | ||||
Exhibit 31-A
CERTIFICATIONS
I, Alan H. Shaw, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Norfolk Southern Corporation;
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.
Dated: July 27, 2023
| /s/ Alan H. Shaw | |||||
| Alan H. Shaw | |||||
| President and Chief Executive Officer | |||||
Exhibit 31-B
CERTIFICATIONS
I, Mark R. George, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Norfolk Southern Corporation;
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.
Dated: July 27, 2023
| /s/ Mark R. George | |||||
| Mark R. George | |||||
| Executive Vice President and Chief Financial Officer | |||||
Exhibit 32
CERTIFICATIONS OF CEO AND CFO REQUIRED BY RULE 13a-14(b) OR RULE
15d-14(b) AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE U.S. CODE
I certify, to the best of my knowledge, that the Quarterly Report on Form 10-Q for the period ended June 30, 2023, of Norfolk Southern Corporation fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Norfolk Southern Corporation.
| Signed: | /s/ Alan H. Shaw | ||||
| Alan H. Shaw | |||||
| President and Chief Executive Officer | |||||
| Norfolk Southern Corporation | |||||
Dated: July 27, 2023
I certify, to the best of my knowledge, that the Quarterly Report on Form 10-Q for the period ended June 30, 2023, of Norfolk Southern Corporation fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Norfolk Southern Corporation.
| Signed: | /s/ Mark R. George | ||||
| Mark R. George | |||||
| Executive Vice President and Chief Financial Officer | |||||
| Norfolk Southern Corporation | |||||
Dated: July 27, 2023