exv10w46



 







Exhibit 10.46




EXECUTION COPY




TRANSACTION AGREEMENT



BY AND AMONG


KANSAS CITY SOUTHERN,


THE KANSAS CITY SOUTHERN RAILWAY COMPANY,


NORFOLK SOUTHERN CORPORATION,


AND


THE
ALABAMA GREAT SOUTHERN RAILROAD 

COMPANY


DATED AS OF


DECEMBER 1, 2005



 









 







TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	1.	 	Definitions	 	 	2	 
	 
	 	1.1	 	Certain Definitions	 	 	2	 
	 
	 	1.2	 	Construction of Certain Terms and Phrases	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	2.	 	Purchase and Sale of Membership Interest	 	 	12	 
	 
	 	2.1	 	Purchase and Sale of Membership Interest	 	 	12	 
	 
	 	2.2	 	Use of Proceeds	 	 	13	 
	 
	 	 	 	 	 	 	 	 
	3.	 	Contribution of Assets and Assumption of Liabilities	 	 	13	 
	 
	 	3.1	 	Contribution of Assets	 	 	13	 
	 
	 	3.2	 	Transfer of Liabilities	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	4.	 	Partner Financing	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	5.	 	Intentionally Omitted	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	6.	 	The Closing	 	 	16	 
	 
	 	6.1	 	The Closing	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	7.	 	Deliveries at the Closing	 	 	16	 
	 
	 	7.1	 	Deliveries at the Closing	 	 	16	 
	 
	 	7.2	 	Further Assurances	 	 	17	 
	 
	 	 	 	 	 	 	 	 
	8.	 	Representations and Warranties of KCS and KCSR	 	 	17	 
	 
	 	8.1	 	Organization, Standing and Power	 	 	17	 
	 
	 	8.2	 	Authority; Enforceability; Noncontravention	 	 	17	 
	 
	 	8.3	 	Assets	 	 	18	 
	 
	 	8.4	 	Material Contracts	 	 	18	 
	 
	 	8.5	 	Absence of Certain Changes and Events	 	 	20	 
	 
	 	8.6	 	Litigation and Proceedings	 	 	20	 
	 
	 	8.7	 	Environmental Matters	 	 	21	 
	 
	 	8.8	 	Compliance With Laws and Other Matters	 	 	21	 
	 
	 	8.9	 	Labor Relations	 	 	22	 
	 
	 	8.10	 	Taxes	 	 	23	 
	 
	 	8.11	 	Insurance	 	 	23	 
	 
	 	8.12	 	Books and Records	 	 	24	 
	 
	 	8.13	 	Transactions with Affiliates	 	 	24	 
	 
	 	8.14	 	Real Property	 	 	24	 
	 
	 	8.15	 	Brokers	 	 	26	 
	 
	 	 	 	 	 	 	 	 
	9.	 	Representations and Warranties of NS	 	 	26	 
	 
	 	9.1	 	Organization, Standing and Power	 	 	26	 






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	 	 	 	 	 	 	Page	 
	 
	 	9.2	 	Authority; Enforceability; Noncontravention	 	 	26	 
	 
	 	9.3	 	Brokers	 	 	27	 
	 
	 	9.4	 	Sufficient Funds	 	 	27	 
	 
	 	 	 	 	 	 	 	 
	10.	 	Covenants	 	 	27	 
	 
	 	10.1	 	Operation of the Line by KCS and KCSR	 	 	27	 
	 
	 	10.2	 	Inspection of Records; Environmental Audits	 	 	28	 
	 
	 	10.3	 	Alternative Proposals	 	 	29	 
	 
	 	10.4	 	Confer with NS	 	 	30	 
	 
	 	10.5	 	Commercially Reasonable Efforts	 	 	30	 
	 
	 	10.6	 	Real Estate Matters	 	 	31	 
	 
	 	10.7	 	Publicity	 	 	31	 
	 
	 	10.8	 	Standstill	 	 	31	 
	 
	 	10.9	 	Encumbrance and Transfer of Assets; Indentures	 	 	32	 
	 
	 	10.10	 	Option to Acquire the Line	 	 	32	 
	 
	 	10.11	 	Determination and Payment of Real Property Taxes	 	 	35	 
	 
	 	10.12	 	NS Automotive Traffic	 	 	36	 
	 
	 	10.13	 	Vicksburg Bridge Lease Dispute	 	 	36	 
	 
	 	 	 	 	 	 	 	 
	11.	 	Conditions to the Closing	 	 	36	 
	 
	 	11.1	 	Mutual Conditions	 	 	36	 
	 
	 	11.2	 	Additional Conditions of NS	 	 	36	 
	 
	 	11.3	 	Additional Conditions of KCS	 	 	37	 
	 
	 	 	 	 	 	 	 	 
	12.	 	Survival of Representations and Warranties; Indemnity	 	 	38	 
	 
	 	12.1	 	Survival of Representations and Warranties	 	 	38	 
	 
	 	12.2	 	Indemnification by KCS	 	 	39	 
	 
	 	12.3	 	Indemnification by NS	 	 	40	 
	 
	 	12.4	 	Notification of Claims	 	 	40	 
	 
	 	12.5	 	Matters Involving Third Parties	 	 	41	 
	 
	 	12.6	 	Taxes	 	 	42	 
	 
	 	12.7	 	Other Limits on Indemnification	 	 	42	 
	 
	 	 	 	 	 	 	 	 
	13.	 	Termination	 	 	43	 
	 
	 	13.1	 	Termination by Mutual Consent	 	 	43	 
	 
	 	13.2	 	Termination by Final Order	 	 	43	 
	 
	 	13.3	 	Termination by NS	 	 	43	 
	 
	 	13.4	 	Termination by KCS	 	 	44	 
	 
	 	13.5	 	Effect of Termination	 	 	45	 
	 
	 	 	 	 	 	 	 	 
	14.	 	Miscellaneous	 	 	45	 
	 
	 	14.1	 	Notices	 	 	45	 
	 
	 	14.2	 	Entire Agreement	 	 	46	 
	 
	 	14.3	 	Assignment	 	 	46	 
	 
	 	14.4	 	Extension, Waiver and Amendment	 	 	46	 
	 
	 	14.5	 	Governing Law; Submission to Jurisdiction	 	 	46	 
	 
	 	14.6	 	Specific Performance; Injunctive Relief	 	 	47	 






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	 	 	 	 	 	 	Page	 
	 
	 	14.7	 	Severability	 	 	47	 
	 
	 	14.8	 	Captions	 	 	47	 
	 
	 	14.9	 	Counterparts	 	 	47	 
	 
	 	14.10	 	Costs and Attorneys' Fees	 	 	47	 
	 
	 	14.11	 	Judicial Interpretation	 	 	47	 
	 
	 	14.12	 	No Third Party Beneficiaries	 	 	48	 
	 
	 	14.13	 	Dispute Resolution	 	 	48	 





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TRANSACTION AGREEMENT




            THIS TRANSACTION AGREEMENT (this “Agreement”) is made and entered into as of December 1, 2005,
by and among KANSAS CITY SOUTHERN, a Delaware corporation (“KCS”), THE KANSAS CITY SOUTHERN RAILWAY
COMPANY, a Missouri corporation and Subsidiary of KCS (“KCSR”), NORFOLK SOUTHERN CORPORATION, a
Virginia corporation (“NS”), and THE ALABAMA GREAT SOUTHERN RAILROAD COMPANY, an Alabama
corporation and Subsidiary of NS (“AGS”), with reference to the following facts:





	 	A.	 	KCS, through KCSR, currently owns or operates certain
properties, trackage rights, signals, equipment, and other rights, Permits,
claims, contracts and assets related thereto, in each case, as set forth on
Annex A hereto (collectively, the “Assets”), constituting the rail line
between Meridian, Mississippi and Shreveport, Louisiana identified on Annex B
(the “Line”).
	 
	 	B.	 	KCS and NS have determined that it is advisable to form a
joint venture which will own such Assets, and, at the Closing, KCS and NS,
through AGS, will form a limited liability company (the “Company”) for the
purpose of effecting the joint venture contemplated hereby and enter into a
Limited Liability Company Agreement substantially in the form attached hereto
as Exhibit A (the “Company Agreement”) setting forth their rights and
obligations as members of the Company.
	 
	 	C.	 	On the terms and subject to the conditions contained herein,
KCS desires to, and desires to cause KCSR to, contribute the Assets to the
Company in exchange for a 70% membership interest in the Company, (as
contemplated by the Company Agreement), and NS desires to cause AGS to
contribute the amounts contemplated by Schedule 2.1(a) to the Company in
exchange for a 30% membership interest in the Company.
	 
	 	D.	 	In connection with the transactions contemplated by this
Agreement and the Company Agreement, at the Closing, the parties will enter
into, or will cause the Company or their respective Affiliates to enter into,
as applicable: (i) an Operating Agreement substantially in the form attached
hereto as Exhibit B (the “Operating Agreement”), (ii) an NSR Joint Use
Agreement substantially in the form attached hereto as Exhibit C (the “NSR
Joint Use Agreement”), (iii) a KCSR Joint Use Agreement substantially in the
form attached hereto as Exhibit D (the “KCSR Joint Use Agreement”), (iv) a
Western Haulage Agreement substantially in the form attached hereto as Exhibit
E, (v) a KCSR Master Interchange Agreement substantially in the form attached
hereto as Exhibit F, (vi) a Unified Assignment and Assumption




 









 






	 	 	 	Agreement substantially in the form attached hereto as Exhibit G, (vii)
the Vicksburg Assignment Agreement (as defined in Section 3.1(b)), (viii)
the Jackson Assignment Agreement (as defined in Section 3.1(c)), (ix) one
or more Notes (as defined in Section 4), (x) the Omnibus Bill of Sale
attached hereto as Exhibit H, (xi) the Unified Liability Agreement
attached hereto as Exhibit I, (xii) the Dallas Terminal Marketing
Agreement attached hereto as Exhibit J, (xiii) the NSR – KCSR Haulage
Agreement (as defined in Section 3.1(c)) and (xiv) the Access Agreement
(as defined in Section 10.2(c)) (collectively, the “Ancillary
Agreements”).





          NOW, THEREFORE, with reference to the foregoing facts and in consideration of the mutual
agreements and understandings set forth herein, the parties hereto, intending to be legally bound,
hereby agree as follows:





	 	1.	 	Definitions.





          1.1 Certain Definitions. All terms defined in this Agreement shall have the defined
meanings when used in this Agreement or in any agreement, note, certificate, report or other
document made or delivered pursuant to this Agreement, unless otherwise defined or the context
otherwise requires. The following terms shall have the following meanings:




          “AAA” shall have the meaning given to that term in Section 14.13.




          “Access Agreement” shall have the meaning given to that term in Section 10.2(c).




          “Action” means any litigation, action, suit, proceeding, investigation, arbitration, claim or
other dispute by or before any court or other Governmental Authority, or any other alternative
dispute resolution proceedings, such as arbitration or mediation.




          “Affiliate” shall mean, with respect to any specified Person, (i) any other Person who,
directly or indirectly, controls, is under common control with, or is controlled by, such specified
Person, (ii) any other Person who is a director, officer, manager, member, partner or trustee of
the specified Person or a Person described in clause (i) of this definition or any spouse of the
specified Person or any such other Person or (iii) any Person of which the specified Person and/or
any one or more of the Persons specified in clause (i) or (ii) of this definition, individually or
in the aggregate, beneficially own 10% or more of any class of voting securities.




          “Aggregate NS Consideration” shall have the meaning given to that term in Schedule 2.1(a).




          “Agreement” shall have the meaning given to that term in the Recitals.




          “AGS” shall have the meaning given to that term in the Recitals.




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          “Alternative Proposal” shall have the meaning given to that term in Section 10.3.




          “Ancillary Agreements” shall have the meaning given to that term in the Recitals.




          “Anniversary Date” shall have the meaning given to that term in Section 2.1(b).




          “Appraiser” shall have the meaning given to that term in Section 10.10(d).




          “Appraisal Report” shall have the meaning given to that term in Section 10.10(e).




          “Assets” shall have the meaning given to that term in the Recitals.




          “Assumed Liabilities” shall have the meaning given to that term in Section 3.2(a).




          “Business Combination” shall have the meaning given to that term in Section 10.8.




          “Business Day” shall mean any day other than a Saturday or Sunday or any day banks in the
State of New York are authorized or required to be closed.




          “Canadian National” shall mean the Canadian National Railway Company.




          “Capital Contribution Amount” shall mean, on any given date, the total of the KCSR Borrowing
Capacity and the Company Capital Amount.




          “Capital Proceeds” shall have the meaning given to that term in Section 2.2.




          “Charter Documents” shall mean the certificate of incorporation or articles of incorporation
and the by-laws, with respect to a corporation; the partnership agreement, with respect to a
general partnership; or the certificate of formation and operating or company agreement, with
respect to a limited liability company.




          “Cleanup” shall mean all actions, including investigations, required by Law to: (1) cleanup,
remove, treat or remediate Hazardous Materials in the environment; (2) prevent the Release of
Hazardous Materials so that they do not migrate, endanger or threaten to endanger public health or
welfare or the environment; (3) perform pre-remedial studies and investigations and post-remedial
monitoring and care; or (4) respond to any government requests for information or documents in any
way relating to cleanup,
removal, treatment or remediation or potential cleanup, removal, treatment or remediation of
Hazardous Materials in the environment.




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          “Closing” shall mean the closing of the purchase and sale of the NS Interest on the Closing
Date as contemplated by Section 2.1(a) and the contribution of the Assets in exchange for the KCS
Interest.




          “Closing Date” shall have the meaning given to that term in Section 6.1.




          “Company” shall have the meaning given to that term in the Recitals.




          “Company Agreement” shall have the meaning given to that term in the Recitals.




          “Company Capital Amount” shall mean, as of any determination date, the total amount that the
Company will be able to expend for capital improvements on the Line within one-hundred eighty (180)
days of such date in accordance with Section 4.06(iii) of the Indentures which improvements were
not the subject of any prior calculation of the Company Capital Amount.




          “Company Indemnified Parties” shall have the meaning given to that term in Section 12.2(a).




          “Company Line Assets” shall have the meaning given to that term in Section 10.10(a)(ii).




          “Confidentiality Agreement” shall have the meaning given to that term in Section 10.2(a).




          “Contract” shall mean any note, bond, debenture, mortgage, license, agreement, commitment,
contract, obligation, promise or understanding.




          “Conveying Party” shall have the meaning given to that them in Section 3.1(c).




          “Damages” shall have the meaning given to that term in Section 12.2(a).




          “Delaware Courts” shall have the meaning given to that term in Section 14.5(b).




          “Dispute” shall have the meaning given to that term in Section 14.13.




          “Dispute Notice” shall have the meaning given to that term in Section 14.13.




          “Disclosure Schedule” shall have the meaning given to that term in Article 8.




          “Environmental Claim” means any fine, claim, action, lien, cause of action, investigation or
notice by any Person alleging potential liability (including potential liability for Cleanup costs,
governmental response costs, natural resources




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damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (a) the presence, Release or threatened
Release of any Hazardous Materials, or (b) circumstances forming the basis of any violation of any
Environmental Law.




          “Environmental Laws” means all Laws relating to pollution or protection of human health or the
environment, including all Laws relating to Releases or threatened Releases of Hazardous Materials
or otherwise relating to the manufacture, processing, distribution, use, treatment, storage,
Release, disposal, transport or handling of Hazardous Materials, all Laws relating to record
keeping, notification, disclosure and reporting requirements respecting Hazardous Materials and all
Laws relating to endangered or threatened species of fish, wildlife and plants and natural
resources.




          “Environmental Reports” shall have the meaning given to that term in Section 8.7(d).




          “Excess Capital” shall have the meaning given to that term in Section 2.2.




          “Excess Proceeds” shall have the meaning given to that term in Section 2.2.




          “Excluded Assets” shall have the meaning given to that term in Section 8.3.




          “Governmental Authority” shall mean any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government or any mediation body or arbitral tribunal,
including the STB.




          “Hazardous Materials” shall mean all substances defined as Hazardous Substances, Oils,
Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan,
40 C.F.R. § 300.5, or defined as such by, or regulated as such under, any Environmental Law.




          “Indebtedness” means, with respect to any Person, (i) any liability, contingent or otherwise,
(a) for borrowed money, capitalized lease obligations, purchase money obligations or other
obligations relating to the deferred purchase price of assets or property or (b) evidenced by a
note, bond, debenture, letter of credit or similar instrument given in connection with the
acquisition, other than in the ordinary course of business consistent with past practice, of any
property, assets, securities or otherwise, including indebtedness created or arising under
conditional sale or other title retention agreements (even though the rights and remedies of the
seller or lender under the agreements in the event of default are limited to repossession or sale
of the property), (ii) any liability of others described in the preceding clause (i) which such
Person has guaranteed or which otherwise is its legal liability, (iii) all indebtedness referred to
above secured by (or for
which the holder of the indebtedness has an existing right, contingent or otherwise, to be
secured by), any Lien upon the property of such Person, whether or not the obligations secured
thereby have been assumed, and (iv) any amendment, renewal, extension or




5









 







refunding of any liability
referred to in clauses (i), (ii) and (iii) above; provided, however, that
Indebtedness does not include any trade payables of any Person incurred in the ordinary course of
business consistent with past practice. The amount of Indebtedness of any Person at any date shall
be the outstanding balance at the date of all unconditional obligations as described above and the
maximum amount of any contingent obligations at the date.




          “Indemnified Party” shall have the meaning given to that term in Section 12.4.




          “Indemnifying Party” shall have the meaning given to that term in Section 12.4.




          “Indentures” shall mean, collectively, the Indenture, dated as of September 27, 2000, among
KCSR, KCS, certain Subsidiaries of KCS and The Bank of New York, as trustee, governing the terms of
KCS’ 91/2% Senior Notes due 2008 and the Indenture, dated as of June 12, 2002, among KCSR, KCS,
certain Subsidiaries of KCS and U.S. Bank National Association, as trustee, governing the terms of
KCS’ 71/2% Senior Notes due 2009, as they may be amended from time to time.




          “Issuance Date” shall have the meaning given to that term in Schedule 2.1(a).




          “Jackson Assignment Agreement” shall have the meaning given to that term in Section 3.1(c).




          “Jackson Flyover” shall mean a bridge to carry the Company’s tracks over the real property and
tracks of Canadian National Railway Company (or its Subsidiaries) located at Jackson, Mississippi
which establishes a continuous line of rail between Meridian, Mississippi and Shreveport,
Louisiana.




          “KCS” shall have the meaning given to that term in the Recitals.




          “KCSR Borrowing Capacity” shall mean, as of any determination date, the total amount of
previously unborrowed funds that KCSR (or any other Subsidiary of KCS which is on such date a party
to the Company Agreement) is permitted to borrow from the Company pursuant to a Note on such date
without violating in any respect the KCS Credit Agreement, the Indentures or any other Contract
evidencing more than $100,000 of Indebtedness to which it is a party on such date; it being
understood that, in no event shall the KCSR Borrowing Capacity, together with all funds previously
borrowed pursuant to any Note (including any Note evidencing the borrowing of the Excess Proceeds
contemplated by Section 4), exceed $300,000,000.




          “KCS Credit Agreement” shall mean the Credit Agreement dated as of March 30, 2004 among KCSR,
KCS, certain subsidiaries of KCS and Lenders (as defined therein), as amended through the date
hereof.





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          “KCS Credit Agreement Amendment No. 2” shall mean Amendment No. 2 to the Credit Agreement,
dated as of September 30, 2005, among KCSR, KCS, the subsidiary guarantors listed on the signature
page thereto, the Lender Parties (as defined therein) thereto and The Bank of Nova Scotia.




          “KCS Interest” shall have the meaning given to that term in Section 3.1.




          “KCSR Joint Use Agreement” shall have the meaning given to that term in the Recitals.




          “KCS Line Assets” shall have the meaning given to that term in Section 10.10(a).




          “KCS Membership Interests” shall have the meaning given to that term in Section 10.10(a)(i).




          “KCSR” shall have the meaning given to that term in the Recitals.




          “Knowledge” with respect to KCS shall mean the actual knowledge, after due inquiry into the
matter in question, of any of the Persons listed on Schedule 1.1(a) hereto.




          “Law” shall mean any U.S. federal, state or local or foreign statute, law, rule, regulation,
ordinance, order, code, policy or rule of common law, now or hereafter in effect and, in each case,
as amended, any binding judicial or administrative interpretation thereof by a Governmental
Authority or otherwise, including any judicial or administrative order, consent, decree or
judgment; provided that, each reference to “Law” in Sections 8 and 9 of this Agreement shall mean
only a Law in effect as of the date of this Agreement.




          “Lease” shall have the meaning given to that term in Section 8.4(b)(viii).




          “Leased Personal Property” shall mean all personal property leased by KCS and its Affiliates
which is included in the Assets.




          “Leased Property” shall have the meaning given to that term in Section 8.14(b).




          “Lien” shall mean any mortgage, deed of trust, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, purchase
option, right of first offer, right of first refusal, priority or other security agreement
(including any conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing,
and the filing of any financing statement under the Uniform Commercial Code or comparable Law
of any jurisdiction to evidence any of the foregoing).




          “Line” shall have the meaning given to that term in the Recitals.





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          “Line Assets” shall have the meaning given to that term in Section 10.10(a).




          “Line FMV” shall have the meaning given to that term in Section 10.10(d)(i).




          “Line Option” shall have the meaning given to that term in Section 10.10(a).




          “Line Option Exercise Notice” shall have the meaning given to that term in Section 10.10(g).




          “Line Option Notice” shall have the meaning given to that term in Section 10.10(a).




          “Line Option Valuation Notice” shall have the meaning given to that term in Section 10.10(d).




          “Material Adverse Effect” shall mean, with respect to any party, any change, circumstance,
event or effect which, individually or when considered in conjunction with other changes,
circumstances or effects, has had or would reasonably be likely to have a material adverse effect
on (a) with respect to a Material Adverse Effect on KCS and KCSR, the Assets, taken as a whole, or
the financial condition or results of operations of the business of the Company to be conducted
with the Assets after the Closing, taken as a whole, or (b) any party, the ability of such party to
consummate the transactions contemplated by this Agreement, the Ancillary Agreements or the Company
Agreement or to perform its obligations hereunder or thereunder; provided, that none of the
following shall be deemed to constitute, and none of the following shall be taken into account in
determining whether there has been, a Material Adverse Effect: (x) any adverse change, event,
development, or effect arising from or relating to (1) general business or economic conditions,
including conditions related to the prospective business of the party and including changes in
energy prices or availability, except to the extent that such conditions disproportionately affect
such party’s business relative to the effect of such factors on other Persons operating in such
party’s industry, (2) national or international political or social conditions, including the
engagement by the United States in hostilities, whether or not pursuant to the declaration of a
national emergency or war, or the occurrence of any military or terrorist attack upon the United
States, or any of its territories, possessions, or diplomatic or consular offices or upon any
military installation, equipment or personnel of the United States, except to the extent that such
conditions disproportionately affect such party’s business relative to the effect of such factors
on other Persons operating in such party’s industry, (3) financial, banking, or securities markets
(including any disruption thereof and any decline in the price of any security or any market
index), (4) changes in United States generally accepted accounting principles,
(5) changes in Law or (6) the taking of any action contemplated by this Agreement and the
other agreements contemplated hereby, (y) any of the events, occurrences, or circumstances set
forth in Schedule 1.1(b) and (z) any change, occurrence, event or effect, which shall have been
cured without a Material Adverse Effect (excluding this clause (z)),




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on the Assets, before the
earlier of the Closing Date or the date on which this Agreement is terminated pursuant to Section
13.




          “Material Contracts” shall have the meaning given to that term in Section 8.4(b).




          “Membership Interest FMV” shall have the meaning given to that term in Section 10.10(d)(ii).




          “MSR Jackson Trackage Rights” shall mean that certain trackage rights agreement, as
supplemented and amended from time to time, dated March 26, 1986, between Midsouth Rail Corporation
and Illinois Central Gulf Railroad Corporation, and the underlying right of movement, pursuant to
which KCSR (as successor to Midsouth Rail Corporation) operates over an approximately four-tenths
(0.4) of a mile section of track in Jackson, Mississippi that is controlled by Canadian National
(as successor to Illinois Central Gulf Railroad Corporation).




          “Notes” shall have the meaning given to that term in Section 4.




          “Notices” shall have the meaning given to that term in Section 14.1.




          “NS” shall have the meaning given to that term in the Recitals.




          “NS Closing Cash Purchase Price” shall mean the NS Consideration payable by NS on the Closing
Date as determined in accordance with Schedule 2.1(a).




          “NS Consideration” shall have the meaning given to that term in Schedule 2.1(a).




          “NS Indemnified Parties” shall have the meaning given to that term in Section 12.2(a).




          “NS Interest” shall have the meaning given to that term in Section 2.1(a).




          “NSR” shall mean Norfolk Southern Railway Company, a Virginia corporation and Subsidiary of
NS.




          “NSR Joint Use Agreement” shall have the meaning given to that term in the Recitals.




          “Officer’s Certificate” shall have the meaning given to that term in Section 2.1(b).




          “Operating Agreement” shall have the meaning given to that term in the Recitals.




          “Owned Property” shall have the meaning given to that term in Section 8.14(a).





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          “Partner Financing” shall have the meaning given to that term in Article 4.




          “Permitted Liens” shall mean collectively, (i) Liens for Taxes not yet due and payable or
which are being contested in good faith by appropriate proceedings and for which adequate reserves
have been made; (ii) such imperfections of title, easements and other similar encumbrances, if any,
as do not, individually or in the aggregate, interfere in any material respect with the use of any
Owned Property as such Owned Property is used on the date of this Agreement; (iii) mechanics’,
materialmen’s, workmen’s, repairmen’s, warehousemen’s, carrier’s and other similar Liens arising in
the ordinary course of business consistent with past practice, all of which shall be released at or
prior to the Closing; (iv) Liens arising under the Indentures; or (v) those Liens set forth on
Schedule 1.1(c) hereto.




          “Permits” shall have the meaning given to that term in Section 8.8(b).




          “Person” shall mean an individual or a partnership, corporation, trust, association, limited
liability company, Governmental Authority or other entity.




          “Preferred Return” shall have the meaning given to that term in the Company Agreement.




          “Preferred Return Amount” shall have the meaning given to that term in the Company Agreement.




          “Property” shall have the meaning given to that term in Section 8.14(c).




          “Release” means any release, spill, emission, discharge, leaking, pumping, injection, deposit,
disposal, or leaching into the environment (including ambient air, surface water, groundwater and
surface or subsurface strata) or into or out of any property, including the movement of Hazardous
Materials through or in the air, soil, surface water, groundwater or property.




          “Required Governmental Consents” shall have the meaning given to that term in Section 10.5.




          “Restricted Subsidiary” shall have the meaning given to that term in the Indentures.




          “Retained Interests” shall have the meaning given to that term in Section 3.1(d).




          “Rules” shall have the meaning given to that term in Section 14.13.




          “Standstill Period” shall have the meaning given to that term in Section 10.8.




10









 








          “STB” shall mean the Surface Transportation Board or any successor entity thereto.




          “Subsidiary” of any Person shall mean any entity of which such Person owns, directly or
indirectly, securities or other ownership interests having the power to elect a majority of the
board of directors or other persons performing similar functions, or otherwise having the power to
direct, manage or control the conduct of business of such entity.




          “Tax Return” shall mean 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 (foreign or domestic) or to be collected or maintained, including
information returns, any 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.




          “Taxes” shall mean 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).




          “Terminal” shall have the meaning given to that term in Section 8.14(a).




          “Third Party Claim” shall have the meaning given to that term in Section 12.5(a).




          “Third Party Leases” shall have the meaning given to that term in Section 8.4(b)(ix).




          “Title Company” shall have the meaning given to that term in Section 10.6(b).




          “Transfer” shall mean sell, assign, transfer, pledge, grant a security interest in, or
otherwise dispose of, with or without consideration, and “Transferred” shall have a correlative
meaning.




          “Vicksburg Assignment Agreement” shall have the meaning given to that term in Section 3.1(b).





11









 








          “Vicksburg Bridge Lease” shall mean that certain lease, as supplemented, amended and/or
replaced from time to time, dated February 11, 1928 between Vicksburg Bridge and Terminal Company
and The Yazoo and Mississippi Valley Railroad Company, pursuant to which KCSR leases that certain
railroad bridge over the Mississippi River at Vicksburg, MS.




          1.2 Construction of Certain Terms and Phrases. Unless the context otherwise requires, (a)
words of any gender include each other gender; (b) words using the singular or plural number also
include the plural or singular number, respectively; (c) the terms “hereof,” “herein,” “hereby” and
derivative or similar words refer to this entire Agreement; (d) the terms “Article” or “Section”
refers to the specified Article or Section of this Agreement; (e) the terms “and” and “or” include
the term “and/or” when the context is appropriate; (f) the terms “include” or “including” also
include the words “without limitation” when the context is appropriate; and (g) the phrases
“ordinary course of business” and “ordinary course of business consistent with past practice” refer
to the business and practice of the Person specified or, in the case of the operation of the Line,
the business and practice of KCS, KCSR and their respective Subsidiaries with respect to the
Assets. Whenever this Agreement refers to a number of days, such number shall refer to calendar
days unless Business Days are specified. All accounting terms used herein and not expressly
defined herein shall have the meanings given to them under generally accepted accounting
principles, as in effect in the United States of America. Whenever this Agreement refers to an
Exhibit or Schedule attached hereto, the Exhibit or Schedule shall be deemed to be incorporated by
reference.




     2. Purchase and Sale of Membership Interest.



          2.1 Purchase and Sale of Membership Interest. 




               (a) KCS shall prepare and deliver to NS at least ten (10) Business Days prior to the Closing
Date a certificate duly executed by the chief financial officer of KCS certifying as of such date
the Capital Contribution Amount (each such certificate, an “Officer’s Certificate”). Subject to
the terms and conditions of this Agreement, at the Closing, KCS and NS shall cause the Company to
issue and sell to AGS, and NS shall cause AGS to purchase from the Company, up to a 30% membership
interest in the Company (as adjusted pursuant to Section 2.1(b), the “NS Interest”) in exchange for
cash consideration, in each case, as determined in accordance with Schedule 2.1(a).



               (b) Within ten (10) Business Days prior to each six-month anniversary of the Closing Date
(each, an “Anniversary Date”) until the NS Interest represents a 30% membership interest in the
Company, KCS shall prepare and deliver to NS an Officer’s Certificate. Subject to the terms and
conditions of this Agreement, on each Anniversary Date, KCS and NS shall cause the Company to issue
and sell to AGS,
and NS shall cause AGS to purchase from the Company, in exchange for cash consideration
determined in accordance with Schedule 2.1(a), an additional membership interest in the Company
such that, upon the issuance thereof, AGS and KCS will hold the



12









 




respective percentage membership
interests in the Company, in each case, determined in accordance with Schedule 2.1(a).




          2.2 Use of Proceeds. KCS and NS shall cause the Company to use $260,000,000 of the proceeds
from the sale of the NS Interest plus any interest earned thereon from time to time (the “Capital
Proceeds”) for the capital expenditures anticipated to be made in accordance with the Company
Agreement and the Budgets (including any Rollover Budgets) and Business Plans (as each such term is
defined in the Company Agreement) for the Company contemplated thereby. KCS and NS shall cause at
Closing up to $40,000,000 of the proceeds from the sale of the NS Interest to be paid to reimburse
KCS for capital expenditures made by KCS on the Line within the two-year period ending on the
Closing Date (none of which shall have been made in anticipation of this Agreement) as presented on
a schedule delivered to NS prior to the Closing Date, which schedule shall be final and binding on
NS if it accurately sets forth expenditures made in accordance with the principles expressed in
this sentence (the difference between $40,000,000 and such reimbursement shall be the “Excess
Proceeds”), and (b) the Excess Proceeds and any portion of the Capital Proceeds not allocated at
such time for capital expenditures in accordance with the then current Budget or any Rollover
Budget, as the case may be, and Business Plan (in the aggregate, the “Excess Capital”) to be made
available by the Company to provide the Partner Financing pursuant to Article 4 below. KCS and NS
shall cause the Company to pay KCS a Preferred Return Amount on and, at KCS’ election, a Preferred
Return of, the Excess Proceeds, as contemplated in the Company Agreement.




     3. Contribution of Assets and Assumption of Liabilities.



          3.1 Contribution of Assets.




               (a) Subject to the terms and conditions of this Agreement, at the Closing, KCS and KCSR shall,
and shall cause their respective Subsidiaries, as applicable, to, transfer, convey, assign and
deliver to the Company, all of their respective right, title and interest in the Assets, free and
clear of all Liens other than Permitted Liens, and in exchange for the Assets, KCS and NS shall
cause the Company to issue to KCS a 71.4286% membership interest in the Company (as adjusted
pursuant to Section 2.1(b) and together with the Preferred Return, the “KCS Interest”). The
parties acknowledge that KCS’ initial capital account in the Company will be as set forth in
Exhibit 2.2 to the Company Agreement and that the Company shall be a Restricted Subsidiary prior to
the transfer of the Assets to the Company and shall remain a Restricted Subsidiary so long as the
Indentures remain in effect.



               (b) Prior to the Closing, KCSR shall use its commercially reasonable efforts to obtain the
consent of the Warren County Bridge Commission to an
assignment of the Vicksburg Bridge Lease to the Company. Should KCSR obtain said consent
prior to the Closing, at the Closing, KCSR shall assign the Vicksburg Bridge Lease to the Company
pursuant to an assignment agreement substantially in the form attached hereto as Exhibit K (the
“Vicksburg Assignment Agreement”). Should KCSR fail to obtain said consent prior to the Closing,
at the Closing, KCSR shall sublease, at the



13









 




same rate as paid by KCSR , the Vicksburg Bridge Lease
to the Company pursuant to a customary sublease agreement, and thereafter shall continue to use its
commercially reasonable efforts to obtain the consent of the Warren County Bridge Commission to an
assignment of the Vicksburg Bridge Lease to the Company and, upon receipt of such consent, shall
assign the Vicksburg Bridge Lease to the Company pursuant to an assignment agreement substantially
in the form of the Vicksburg Assignment Agreement. Notwithstanding anything herein to the
contrary, for purposes of this Agreement, the Vicksburg Assignment Agreement shall only be
considered an Ancillary Agreement if the consent of the Warren County Bridge Commission to an
assignment of the Vicksburg Bridge Lease to the Company is obtained by KCSR prior to Closing. Any
material amendment, and any termination or renewal, of the Vicksburg Bridge Lease prior to any
assignment pursuant to the Vicksburg Assignment Agreement shall be made only with the written
consent of NS, provided that the consent of NS shall not be required for KCS to resolve the current
dispute with the Warren County Bridge Commission regarding the Vicksburg Bridge Lease described in
Section 8.4(a)(i) of the Disclosure Schedule if such resolution does not prevent or materially
impair the assignment to the Company of such lease as contemplated by this Section 3.1(b) or
materially, adversely affect the access to or enjoyment of the Vicksburg Bridge as contemplated by
the NSR Joint Use Agreement.




               (c) Prior to the Closing, KCSR shall use its commercially reasonable efforts to obtain the
consent of Canadian National to an assignment of the MSR Jackson Trackage Rights to the Company.
KCS and NS shall seek an order of the STB permitting said assignment, should such consent be
obtained, or overriding any provision of said MSR Jackson Trackage Rights preventing such
assignment without the consent of Canadian National, should such consent not be obtained. Any
assignment by KCSR of the MSR Jackson Trackage Rights to the Company shall be pursuant to an
assignment agreement substantially in the form attached hereto as Exhibit L (the “Jackson
Assignment Agreement”). Following the Closing Date and until the earlier of assignment to the
Company of the MSR Jackson Trackage Rights or commencement of railroad operations over the Jackson
Flyover, as provided in Section 5.13 of the Company Agreement, KCSR shall provide the Company and
NSR with haulage rights over the portion of the Line subject to the MSR Jackson Trackage Rights
pursuant to an NSR – KCSR Haulage Agreement substantially in the form attached as Exhibit M hereto
(the “NSR – KCSR Haulage Agreement”).



               (d) Schedule 3.1(d) sets forth certain interests of KCS and its Subsidiaries (the “Retained
Interests”) in the Assets to be conveyed to the Company pursuant to Section 3.1(a) which interests
shall be retained following the Closing by the party conveying the relevant Assets to the Company
(the “Conveying Party”). The Retained Interests may be exercised only at the sole risk and expense
of the Conveying Party, in a manner that shall not unreasonably interfere with the operation of the
Assets as contemplated by the Operating Agreement, the NSR Joint Use Agreement and the KCSR
Joint Use Agreement, and shall be subject to execution of a reasonable access agreement
between the relevant Conveying Party and the Company. KCS shall cause any Conveying Party seeking
to exercise Retained Interests to provide reasonable advance notice to the Company before said
party may enter any relevant Assets consisting of Property for purposes of exercising a Retained
Interest, and said party’s actions on such



14









 




Property shall at all times be subject to the reasonable
direction and control of the operating officer in charge of the Property and to applicable
provisions of the Company’s safety and operating rules.




               (e) The parties hereto acknowledge that some of the Owned Properties include adjoining land,
buildings, structures and other improvements that are not included in the Assets and that,
accordingly, must be subdivided into separate lots. Accordingly, as to each such Owned Property,
KCS shall promptly, and at KCS’ sole expense, take all steps necessary (including, without
limitation, recording all required deeds, performing all required surveys and obtaining all
necessary planning and zoning approvals) to subdivide and obtain a separate tax lot/parcel for the
portion of each such Owned Property that is included in the Assets, distinct from any adjoining
land, buildings, structures or other improvements that are not included in the Assets.



          3.2 Transfer of Liabilities.




               (a) Subject to the terms and conditions of this Agreement, at the Closing, KCS and NS shall
cause the Company to assume the liabilities and obligations of KCS, KCSR and their respective
Affiliates relating to the operation of the Assets set forth on Schedule 3.2 hereto (the “Assumed
Liabilities”). Except as and to the extent otherwise expressly provided in this Agreement, the
Company has not agreed to pay, shall not be required to assume and shall not have any obligation in
respect of, any liability or obligation, direct or indirect, absolute or contingent, of KCS, KCSR,
NS or any other Person, the assumption of which by the Company is not expressly provided for in
this Agreement.



               (b) Notwithstanding anything in Section 3.2(a) to the contrary, any assignment agreement or
sublease entered into pursuant to Section 3.1(b) shall provide that all liabilities and obligations
under the Vicksburg Bridge Lease relating to or arising from events or omissions occurring prior to
the Closing shall be the liabilities and obligations of KCSR, and any liabilities and obligations
under the Vicksburg Bridge Lease relating to or arising from events or omissions occurring after
the Closing shall be the liabilities and obligations of the Company, except to the extent that any
such liabilities or obligations arise from the exercise by the Conveying Parties of the Retained
Interests.



     4. Partner Financing. Promptly following the Closing, KCS and NS shall cause the Company
to loan to KCS an amount not to exceed the Excess Proceeds and thereafter to KCS and NS from time
to time upon such party’s request up to an amount equal to the Excess Capital less the aggregate
amount of any outstanding loans made pursuant to this Section 4 (such loans, the “Partner Financing”) to be evidenced by one or more notes substantially in
the form attached hereto as Exhibit N (collectively, the “Notes”). All such Partner Financing
shall first be made available to KCS and, if KCS elects not to borrow such amounts, subsequently to
NS and shall in each case be structured so as to not violate, in the reasonable opinion of counsel
to KCS, any provision of the Indentures.



15









 





     5. Intentionally Omitted



     6. The Closing.



          6.1 The Closing. The Closing shall take place at the offices of Sonnenschein Nath &
Rosenthal LLP, 1221 Avenue of the Americas, 25th Floor, New York, New York 10020 at 10:00 A.M.,
local time on a date to be agreed to by NS and KCS, which date shall be no later than three
Business Days following the date on which all of the conditions set forth in Article 11 shall have
been satisfied or waived (other than those conditions that by their nature are to be satisfied at
the Closing, but subject to the fulfillment or waiver of those conditions), or at such other time
and place as KCS and NS mutually agree upon in writing. The date of the Closing is referred to in
this Agreement as the “Closing Date.”




     7. Deliveries at the Closing. 



          7.1 Deliveries at the Closing. At the Closing:




               (a) NS shall, or shall cause AGS and its other Subsidiaries to, deliver (i) the NS Closing
Cash Purchase Price by wire transfer of immediately available funds to the account(s) designated by
KCS and NS on behalf of the Company in writing at least one Business Day prior to the Closing Date;
(ii) duly executed counterpart originals of each Ancillary Agreement to which NS, AGS or any of
their respective Subsidiaries is a party to KCS or the Company, as applicable; (iii) a duly
executed counterpart original of the Company Agreement to KCS; (iv) the certificate required to be
delivered to KCS pursuant to Section 11.3(c) of this Agreement; (v) the opinions required pursuant
to Section 11.3(e) of the Agreement to KCS; and (vi) such documents and instruments as KCS may
reasonably request to evidence the satisfaction of all conditions precedent set forth in Article 11
of this Agreement or which are required to be delivered by NS at or prior to the Closing Date
pursuant to this Agreement.



               (b) KCS and KCSR shall, or shall cause their respective Subsidiaries to, deliver: (i) a duly
executed counterpart original of the Company Agreement to NS; (ii) duly executed counterpart
originals of each Ancillary Agreement to which KCS, KCSR or their respective Subsidiaries is a
party to NS or the Company, as applicable; (iii) the certificate required to be delivered to NS
pursuant to Section 11.2(c) of this Agreement; (iv) the consents required, if any, pursuant to
Section 11.2(d) of this Agreement to NS; (v) quitclaim deeds with respect to each of the Owned
Properties to the Company; (vi) the consent to assignment or sublease, as the case may be, provided
for in
Section 3.1(b) of this Agreement to the Company; (vii) all such other deeds, endorsements,
assignments and other instruments as are necessary to transfer to the Company KCS’ and its
Subsidiaries’ interest in the Assets in accordance with the terms hereof; (viii) the opinions
required pursuant to Section 11.2(f) of the Agreement to NS; and (ix) such documents and
instruments to NS as NS may reasonably request to evidence the satisfaction of all conditions
precedent set forth in Article 11 of this Agreement or which are required to be delivered by KCS at
or prior to the Closing Date pursuant to this Agreement.



16









 





               (c) KCS and NS shall cause the Company to deliver (i) duly executed counterpart originals of
each Ancillary Agreement to which the Company is a party to NS or KCS, as applicable and (ii)
certificates representing the NS Initial Interest and the KCS Interest to AGS and KCS,
respectively.



          7.2 Further Assurances. At and following the Closing, each party to this Agreement shall
deliver or cause to be delivered, as appropriate, such further certificates, consents and other
documents as may be necessary to carry out the terms of this Agreement.




     8. Representations and Warranties of KCS and KCSR. Except as set forth in the disclosure
schedule (the “Disclosure Schedule”) prepared by KCS and delivered to NS concurrently with the
execution of this Agreement (in each case making reference to the particular subsection of this
Agreement to which the relevant disclosure or exception is being made), KCS and KCSR jointly
represent and warrant to NS as of the date hereof and, to the extent provided in Section 11.2(a),
as of the Closing, as follows:



          8.1 Organization, Standing and Power. Each of KCS and KCSR is a corporation duly
organized, validly existing and in good standing under the Laws of the jurisdiction of its
incorporation and has all requisite power and authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted. Each of KCS and KCSR is duly
qualified or licensed as a foreign entity and is in good standing in each jurisdiction where the
nature of its properties owned or held under lease or the nature of the business conducted by it
make such qualification necessary, except for any failure to be so qualified, licensed and in good
standing as would not, individually or in the aggregate, have a Material Adverse Effect on KCS or
KCSR.




          8.2 Authority; Enforceability; Noncontravention.




               (a) Each of KCS, KCSR and their respective Subsidiaries, as the case may be, has full power
and authority to enter into, execute and deliver this Agreement, each of the Ancillary Agreements
and the Company Agreement to which it is
a party and perform its obligations hereunder and thereunder. This Agreement has been, and
each of the Ancillary Agreements and the Company Agreement will be, duly authorized by all
necessary action of each of KCS, KCSR and their respective Subsidiaries, as the case may be. This
Agreement has been, and each of the Ancillary Agreements and the Company Agreement will be, duly
executed and delivered by each of KCS, KCSR and their respective Subsidiaries, as the case may be,
and, assuming their due execution and delivery by the other party or parties hereto or thereto,
constitutes or will constitute a valid and legally binding obligation of each of KCS, KCSR and
their respective Subsidiaries, as the case may be, respectively, enforceable against them in
accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar Laws relating to or affecting creditors’ rights
generally, and to the availability of equitable remedies.



17









 





               (b) The execution and delivery of this Agreement, each of the Ancillary Agreements and the
Company Agreement by each of KCS, KCSR and their respective Subsidiaries, as the case may be, does
not and will not, and compliance by KCS and KCSR, as applicable, with the provisions of this
Agreement, each of the Ancillary Agreements and the Company Agreement will not, (i) conflict with
or result in a breach or default under the Charter Documents of KCS, KCSR or their respective
Subsidiaries; (ii) constitute or result in a material breach or violation of, or a material default
under, or the acceleration of (with or without the giving of notice, the lapse of time or both) any
obligation pursuant to, any provision of any Material Contract to which KCS, KCSR or their
respective Subsidiaries is a party or otherwise bound, or to which any property or asset of KCS,
KCSR or their respective Subsidiaries is subject; (iii) subject to the filings with Governmental
Authorities and other matters referred to in Section 8.2(c) below, violate any Law applicable to
KCS, KCSR or their respective Subsidiaries; (iv) result in the creation or imposition of any
material Lien on the Assets; or (v) constitute or result in any material change in the rights or
obligations of any party under any of the Material Contracts.



               (c) Except (i) for the applicable requirements of the STB and (ii) as set forth on Section
8.2(c) of the Disclosure Schedule, there are no approvals, authorizations, consents, orders or
other actions of, or filings with, any Person, including any Governmental Authority, that are
required to be obtained or made by KCS, KCSR, or their respective Subsidiaries or the Company in
connection with the execution of, and the consummation of the transactions contemplated under, this
Agreement, the Ancillary Agreements or the Company Agreement, except in each case as will not,
individually or in the aggregate, impair in any material respect the performance by KCS, KCSR or
their respective Subsidiaries of their respective obligations hereunder.



          8.3 Assets. The Assets constitute all properties, assets and rights (real, personal and
mixed, tangible and intangible) currently utilized in the operation of the Line, other than
operating equipment such as locomotives, rail cars and maintenance vehicles, and other than
maintenance of way machinery and tools (the “Excluded Assets”) and, except for the Excluded Assets,
the Assets are sufficient to operate the Line (i) in substantially the same
manner as operated by KCS and its Affiliates prior to the Closing and (ii) as contemplated by
the NSR Joint Use Agreement, the KCSR Joint Use Agreement, and the Operating Agreement. KCS or one
of its wholly owned Subsidiaries has, and upon consummation of the transactions contemplated hereby
the Company will acquire, good and marketable title to all of the non-real estate owned Assets free
and clear of all Liens except for Permitted Liens.




          8.4 Material Contracts.




               (a) (i) True and correct copies of each Material Contract, including all amendments and
modifications thereof and waivers thereunder, have been made available to NS and its counsel; (ii)
except as set forth in Section 8.4(a)(ii) of the Disclosure Schedule, each Material Contract is in
full force and effect, and is the valid and binding obligation of KCS, KCSR or their respective
Subsidiaries and, to the Knowledge of KCS, each other party to the Material Contract, and upon
consummation



18









 




of the transactions contemplated hereby each Material Contract will remain in full
force and effect, and will be the valid and binding obligation of the Company and, to the Knowledge
of KCS, each other party to the Material Contract; (iii) except as set forth in Section 8.4(a)(iii)
of the Disclosure Schedule, KCS, KCSR or their respective Subsidiaries has performed all of its
respective material obligations required to be performed by it to date under each Material
Contract, and is not in material breach of or material default under any Material Contract, and no
event has occurred or circumstance exists which, with notice or lapse of time or both, would
constitute a material breach of or material default by KCS, KCSR or their respective Subsidiaries
under any Material Contract; (iv) except as set forth in Section 8.4(a)(iv) of the Disclosure
Schedule, to the Knowledge of KCS, each party to each Material Contract other than KCS, KCSR or
their respective Subsidiaries has performed all of the material obligations required to be
performed by it to date under the Material Contract, and is not in material breach of or in
material default under the Material Contract, and no event has occurred or circumstance exists
which, with notice or lapse of time or both, would constitute a material breach of or material
default by such other party under any Material Contract; and (v) no Material Contract will be
affected adversely in any material way by the execution, delivery or performance of this Agreement,
the Ancillary Agreements or the Company Agreement, each in accordance with its terms, and no
Material Contract contains any change in control provision, restriction on assignment or other
terms that will become applicable or inapplicable as a result of the consummation of the
transactions contemplated by this Agreement, the Ancillary Agreements or the Company Agreement.




               (b) For purposes of this Agreement, “Material Contracts” shall mean the following Contracts of
KCS, KCSR or their respective Subsidiaries, each of which contracts is listed in Section 8.4(b) of
the Disclosure Schedule, (X) relating to or affecting in any material way the Assets or the Assumed
Liabilities or (Y) to be assigned to the Company pursuant to the terms hereof which are in effect
on the date hereof:



                    (i) Each Contract which is to be performed in whole or in part at or after the date of this
Agreement and which (1) cannot be canceled upon 60 days’ notice without payment or penalty and
involves aggregate annual payments of more
than $100,000; (2) involves material nonmonetary obligations to be performed later than one
year from the date hereof; (3) otherwise materially affects the Assets or the operation of the
Line; or (4) was not entered into in the ordinary course of business consistent with past practice;



                    (ii) Each Contract providing for the indemnification of any third party;



                    (iii) Each Contract providing for any future payments that are conditioned, in whole or in
part, on any Transfer or assignment of any of the Assets;



                    (iv) Each Contract for the Transfer of any of the Assets or for the grant of any preferential
right to purchase any of the Assets or which requires the consent of any third party to the
Transfer of any of the Assets;



19









 





                    (v) Each Contract evidencing more than $100,000 of Indebtedness of KCS or its Subsidiaries
(including the Indentures);



                    (vi) Each Contract involving aggregate consideration in excess of $100,000 (1) under which the
benefits cannot be retained or there will be a default as a result of the consummation of the
transactions contemplated by this Agreement without the written consent or approval of other
parties or (2) which would require the making of any material payment, other than payments as
contemplated by this Agreement, to any employee of KCS or to any other Person as a result of the
consummation of the transactions contemplated herein;



                    (vii) Each Contract pursuant to which any material Leased Personal Property is used or leased
in the operation of the Line;



                    (viii) Each lease, sublease or other occupancy agreement pursuant to which KCS or any of its
Subsidiaries leases, subleases or otherwise occupies any real property included or related to the
Line (such leases, subleases and other occupancy agreements, together with any amendments,
modifications and other supplements thereto, each a “Lease” and collectively, the “Leases”);



                    (ix) Each lease, sublease or other occupancy agreement pursuant to which KCS or any of its
Subsidiaries leases or subleases any Property to a third party or one of its Affiliates (each such
lease, sublease and other occupancy agreement, together with any amendments, modifications and
other supplements thereto, a “Third Party Lease” and collectively, the “Third Party Leases”);



                    (x) Each Contract involving a guarantee of any Indebtedness or imposing a Lien on any of the
Assets which serve as collateral for Indebtedness; and



                    (xi) Each Contract granting haulage, trackage or other access or operating rights with respect
to the Line.



          8.5 Absence of Certain Changes and Events. Except as set forth in Section 8.5 of the
Disclosure Schedule, since December 31, 2004 and prior to the date hereof, except for this
Agreement and changes contemplated by this Agreement, (i) neither KCS nor any of its Subsidiaries
has taken any action which would be in violation of Section 10.1 had such action been taken after
the date hereof and (ii) there has not been any change or development or combination of changes or
developments which, individually or in the aggregate, has resulted in, or is reasonably likely to
result in, a Material Adverse Effect on KCS or KCSR.




          8.6 Litigation and Proceedings. Except as set forth in Section 8.6 of the Disclosure
Schedule, there is no pending or, to the Knowledge of KCS, threatened Action to which KCS, KCSR or
any of their respective Subsidiaries is a party involving the Assets or the operation of the Line
in any material way, and neither KCS nor any of its Subsidiaries is subject to any material
judgment, order, writ, injunction, decree or regulatory directive or agreement with respect to the
Assets or the operation of the Line.




20









 







None of the Assets is subject to any judgment, order or
decree entered in any Action which would be reasonably likely to have a Material Adverse Effect on
KCS or KCSR.




          8.7 Environmental Matters. 




               (a) KCS, KCSR and their respective Subsidiaries, with respect to the Properties and the
operation of the Line, are in compliance in all material respects with all applicable Environmental
Laws (which compliance includes, but is not limited to, the possession by KCS, KCSR and their
respective Subsidiaries of all material permits and other governmental authorizations required
under applicable Environmental Laws, and compliance with the terms and conditions thereof). None
of KCS, KCSR or any of their respective Subsidiaries has received in writing any notice, action,
inquiry, investigation or claim alleging that KCS, KCSR or any of their respective Subsidiaries,
with respect to the Properties or the operation of the Line, are not in such compliance.



               (b) There is no Environmental Claim relating to the Properties or the operation of the Line
pending or, to the Knowledge of KCS, threatened against KCS, KCSR or any of their respective
Subsidiaries or, to the Knowledge of KCS, against any Person whose liability for any such
Environmental Claim KCS, KCSR or any of their respective Subsidiaries has retained or assumed
either contractually or by operation of Law which would, individually or in the aggregate, be
material.



               (c) To the Knowledge of KCS, no event has occurred and no condition exists including, without
limitation, the Release, threatened Release or presence of any Hazardous Material, which could
reasonably be expected to form the basis of any Environmental Claim relating to the Properties or
the operation of the Line which would, individually or in the aggregate, be material.



               (d) KCS has delivered or otherwise made available for inspection to NS true and correct copies
and results of any reports, studies, analyses, tests
or other monitoring reports or related substantive correspondence with any Governmental
Authority possessed or initiated by or on behalf of KCS, KCSR or any of their respective
Subsidiaries pertaining to Hazardous Materials in, on, beneath or adjacent to the Properties, or
regarding KCS’ and its Subsidiaries’ compliance with applicable Environmental Laws with respect to
the Properties and the operation of the Line (any of the foregoing, “Environmental Reports”).



          8.8 Compliance With Laws and Other Matters. KCS, KCSR and each of their respective
Subsidiaries:




               (a) is, and since January 1, 2003 has been, in compliance in all material respects, in the
operation of the Line, with all applicable Laws (it being understood that, solely for purposes of
this Section 8.8, the term “Laws” shall not include any Environmental Laws) and the regulations,
ordinances, rules, judgments, orders or decrees of any Governmental Authority applicable thereto or
to the employees involved in the operation of the Line;



21









 





               (b) has, and upon the consummation of the transactions contemplated hereby the Company will
have, all material permits, licenses, franchises, certificates of authority, orders, and approvals
of, and has made all material filings, applications, and registrations with, Governmental
Authorities that are required in order to permit it to operate the Line (the “Permits”); and since
January 1, 2003 has been, in compliance in all material respects with the terms of the Permits; and
all the Permits are, and will be, in full force and effect and a complete and accurate list of the
Permits is set forth in Section 8.8(b) of the Disclosure Schedule;



               (c) has, since January 1, 2003, received no notification or communication from any
Governmental Authority (i) asserting that it is not in compliance with any Laws (or indicating, in
the absence of any such assertion, a possible investigation or inquiry with respect to any of the
foregoing) with respect to the operation of the Line or (ii) threatening to suspend, materially
modify or revoke any Permit; and



               (d) is not a party to or subject to any material order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter, supervisory letter or similar
submission to, any Governmental Authority with respect to the Assets or the operation of the Line,
and none of KCS, KCSR or any of their respective Subsidiaries has been advised by any such
Governmental Authority that such Governmental Authority is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such material order, decree,
agreement, memorandum of understanding, commitment letter, supervisory letter or similar
submission.



          8.9 Labor Relations. Except as set forth in Section 8.9 of the Disclosure Schedule:




               (a) There is no strike, lockout, slowdown or stoppage pending or, to the Knowledge of KCS,
threatened against or directly affecting the operation of the Line.



               (b) Neither KCS nor any of its Subsidiaries is delinquent in payments in any material respect:
(i) to any of its employees involved in the operation of the Line for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by them, (ii) to any
of its employees involved in the operation of the Line for amounts required to be reimbursed to
such employees or (iii) to any benefit plans with respect to amounts owed on behalf of any of its
employees involved in the operation of the Line.



               (c) There is no unfair labor practice, charge or complaint against KCS, KCSR or their
respective Subsidiaries with respect to the operation of the Line, pending or, to the knowledge of
KCS, threatened, before any Governmental Authority; and there is no grievance that would be
reasonably likely to have a Material Adverse Effect on KCS or KCSR nor any arbitration proceeding
arising out of or under any collective bargaining agreement pending against KCS, KCSR or their
respective Subsidiaries with respect to the operation of the Line.



22









 





               (d) Each of KCS and any of its Subsidiaries who are or have been (i) required to comply with
Executive Order 11246 or any other requirements applicable to a “contractor” or “subcontractor” (as
defined by Executive Order 11246) or (ii) required to maintain an affirmative action plan have
complied with such requirements in all material respects.



          8.10 Taxes. (a) All Tax Returns required to be filed by KCS, KCSR or any of their
respective Subsidiaries with respect to the Assets and the operation of the Line have been filed on
a timely basis and all such returns are true, complete, and correct in all material respects, (b)
all Taxes (whether or not shown on any Tax Return) that are due or claimed to be due from KCS, KCSR
or any of their respective Subsidiaries with respect to the Assets and the operation of the Line
have been paid, (c) no notice has been received of any deficiencies for Taxes claimed, proposed or
assessed by any Government Authority with respect to the Assets or the operation of the Line for
which KCS, KCSR or any of their respective Subsidiaries may be liable, (d) there are no pending,
current or proposed audits, examinations, suits, proceedings, investigations, claims or
administrative proceedings for or relating to any liability in respect of any Taxes with respect to
the Assets or the operation of the Line for which KCS, KCSR or any of their respective Subsidiaries
may be liable, (e) each of KCS, KCSR and their respective Subsidiaries has withheld and paid to the
relevant Governmental Authority all Taxes required to have been withheld and paid in accordance
with applicable Law with respect to the Assets and the operation of the Line, including in
connection with any amounts paid or owing to any employee, independent contractor, creditor, equity
holder or other Person, (f) there is, to the Knowledge of KCS, no outstanding material claim by any
Governmental Authority in a jurisdiction where KCS, KCSR or any of their respective Subsidiaries
does not file Tax
Returns that KCS, KCSR or any of such Subsidiaries may be subject to Tax in such jurisdiction
with respect to the Assets or and the operation of the Line, (g) there are no Liens on any of the
Assets that arose in connection with any failure (or alleged failure) to pay any Tax, and (h) none
of KCS, KCSR or any of their respective Subsidiaries with respect to the Assets or the operation of
the Line will be required to include any item of income in, or exclude any item of deduction from,
income for any Tax period (or portion thereof) ending after the Closing Date as a result of any (1)
change in method of accounting for a Tax period ending on or prior to the Closing Date, (2)
agreement with a Governmental Authority executed on or prior to the Closing Date, (3) deferred
gains, (4) installment sale or open transaction disposition made on or prior to the Closing Date,
or (5) prepaid amount received on or prior to the Closing Date, in each case under this Section
8.10(h), to the extent that the Tax liability of the Company or any Member (as defined in the
Company Agreement) could be materially affected.




          8.11 Insurance. The Assets are insured with reputable insurers and Section 8.11 of the
Disclosure Schedule contains a true and correct list of such insurance policies maintained by KCS,
copies of which have been made available to NS. With respect to all insurance policies that are
individually or in the aggregate material to the Assets and the operation of the Line: (i) such
policies are in full force and effect on the date hereof and KCS, KCSR and their respective
Subsidiaries shall use their commercially reasonable efforts to continue such policies in full
force and effect through the Closing Date, (ii) all premiums currently payable or previously due
and payable with




23









 







respect to all periods up to and including the Closing Date have been paid to the
extent such premiums are due and payable on or prior to the date hereof and, with respect to
premiums not due or payable at or prior to the date hereof, all premiums due and payable prior to
the Closing Date, will have been paid prior to the Closing Date and (iii) no notice of cancellation
or termination has been received with respect to any such policy.




          8.12 Books and Records. The books and records of KCS, KCSR and their respective
Subsidiaries relating to the Assets and the operation of the Line have been fully, properly and
accurately maintained in all material respects.




          8.13 Transactions with Affiliates. With respect to the Assets and the operation of the
Line, there are no outstanding amounts payable to or receivable from, or advances by KCS, KCSR or
any of their respective Subsidiaries to, and none of KCS, KCSR or any of their respective
Subsidiaries is otherwise a creditor or debtor to, any member or stockholder, director, employee or
Affiliate of KCS, KCSR or any of their respective Subsidiaries. With respect to the Assets and the
operation of the Line, neither KCS, KCSR nor any Subsidiary of KCS nor KCSR is a party to any
transaction or agreement with any Affiliate, member or stockholder, director or executive officer
of KCS, KCSR or any of
their respective Subsidiaries or any material transaction or agreement with any employee other
than executive officers.




          8.14 Real Property. 




               (a) Section 8.14(a) of the Disclosure Schedule sets forth a true, correct and complete list of
each parcel of real property owned by KCS, KCSR or their respective Subsidiaries included in the
Assets (each such parcel and, for solely the purposes of this Section 8.14, the Dallas Intermodal
Terminal described on Annex C hereto (the “Terminal”), individually, an “Owned Property” and
collectively, the “Owned Properties”) showing the common address, or other means of identification,
and record title holder thereof and, to the Knowledge of KCS, all Liens thereon. Each of KCS, KCSR
and their respective Subsidiaries, as applicable, owns, and upon the consummation of the
transactions contemplated hereby will transfer to the Company all of their respective rights,
titles and interests in and to the Owned Properties and to all buildings, structures and other
improvements thereon, free and clear of all Liens, except for Permitted Liens, and subject to the
Retained Interests, sufficient for the operation of the Line in the ordinary course of business (i)
in substantially the same manner as operated by KCS and its Affiliates prior to the Closing and
(ii) as contemplated by the NSR Joint Use Agreement, the KCSR Joint Use Agreement, and the
Operating Agreement.



               (b) Section 8.14(b) of the Disclosure Schedule sets forth the common address of each parcel of
real property leased or subleased by KCS, KCSR or their applicable Subsidiary pursuant to each
Lease (each a “Leased Property” and collectively, the “Leased Properties”). True, correct and
complete copies of all work letters, side agreements, consents, subordination agreements,
guarantees and other similar arrangements or agreements with respect to each Lease and to which KCS
or any of its Subsidiaries is a party (or that are otherwise in the possession of KCS, KCSR or
their respective Subsidiaries) has heretofore been made available to NS and its counsel. KCS



24









 




(either directly or through KCSR or another Subsidiary) holds, and after the consummation of the
transactions contemplated hereby the Company will hold, a valid and existing leasehold or
subleasehold interest, as applicable, in each Leased Property pursuant to the applicable Lease,
free and clear of all Liens, other than Permitted Liens, and subject to the Retained Interests.
There are no oral agreements in effect as to any Lease to which KCS or any of its Subsidiaries is a
party. The terms of the Leases have not been modified in any respect, except to the extent that
such modifications are set forth in the documents previously delivered or made available to NS and
its counsel, and none of KCS, KCSR or any of their respective Subsidiaries is in negotiations with
any landlord to cancel or terminate any Lease prior to the stated maturity date of such Lease.
Except for Permitted Liens, none of KCS, KCSR or their applicable Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered its leasehold interest in any
Lease. Neither KCS nor any Subsidiary has received a notice of default or termination with respect
to any Lease. No material damage or destruction (i.e., damage or destruction that would permit
either party to the applicable Lease to terminate such Lease or cause the abatement of rent
thereunder) has occurred with respect to any of the Leased Properties which has not been repaired
prior to the date hereof.




               (c) The Owned Properties and the Leased Properties (each a “Property” and collectively, the
“Properties”) constitute all of the real estate, other than rail yards and similar facilities,
within which KCS and its Subsidiaries operate the Line. The Properties are in compliance with all
requirements of applicable Law in all material respects, and none of KCS, KCSR or any of their
respective Subsidiaries has received notice of, and KCS has no Knowledge of, any condemnation,
eminent domain, zoning, land use proceedings or other claims, causes of action, lawsuits or legal
proceedings pending, threatened or contemplated regarding the ownership, use or possession of the
Properties or any part thereof or of any sale or other disposition of the Owned Properties or any
part thereof in lieu of condemnation, except for those matters that are set forth in Section
8.14(c) of the Disclosure Schedule.



               (d) Section 8.14(d) of the Disclosure Schedule sets forth the common address of, or other
means of identifying, each parcel of real property leased or subleased by KCS, KCSR or their
applicable Subsidiary pursuant to each Third Party Lease and the property (or portion thereof)
subject to such Third Party Lease. True, correct and complete copies of all work letters, side
agreements, consents, subordination agreements, guarantees and other similar arrangements or
agreements with respect to the Third Party Leases and to which KCS, KCSR or any of their respective
Subsidiaries is a party (or that are otherwise in the possession of KCS, KCSR or any of their
respective Subsidiaries) has heretofore been made available to NS. There are no oral agreements in
effect as to any Third Party Lease to which KCS or any Subsidiary of KCS is a party. The terms of
the Third Party Leases have not been modified in any respect, except to the extent that such
modifications are set forth in the documents previously delivered or made available to NS and its
counsel, and neither KCS, KCSR or any of their respective Subsidiaries is in negotiations with any
tenant or subtenant to cancel or terminate any Third Party Lease prior to the stated maturity date
of such Third Party Lease.



25









 





          8.15 Brokers. Neither KCS nor any of its Affiliates has retained or otherwise engaged or
employed, or paid or agreed to pay any fee or commission, to any agent, broker, finder or other
Person, for or on account of acting as a finder or broker in connection with this Agreement, the
Ancillary Agreements or the Company Agreement or the transactions contemplated hereby and thereby.




     9. Representations and Warranties of NS. NS hereby represents and warrants as of the date
hereof and, to the extent provided in Section 11.3(a), as of the Closing, as follows:



          9.1 Organization, Standing and Power. NS is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its incorporation and has all
requisite power and authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted.




          9.2 Authority; Enforceability; Noncontravention.




               (a) Each of NS, AGS and their respective Subsidiaries, as the case may be, has full power and
authority to enter into, execute and deliver this Agreement, each of the Ancillary Agreements and
the Company Agreement to which it is a party and perform its obligations hereunder and thereunder.
This Agreement has been, and each of the Ancillary Agreements and the Company Agreement will be,
duly authorized by all necessary action of each of NS, AGS and their respective Subsidiaries, as
the case may be. This Agreement has been and each of the Ancillary Agreements and the Company
Agreement will be, duly executed and delivered by each of NS, NSR and AGS, as the case may be, and,
assuming it is duly executed and delivered by KCS and the Company, as applicable, constitutes or
will constitute a valid and legally binding obligation of each of NS, AGS and their respective
Subsidiaries, as the case may be, enforceable against them in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other
similar Laws relating to or affecting creditors’ rights generally, and to the availability of
equitable remedies.



               (b) The execution and delivery by each of NS, NSR and AGS, as the case may be, of this
Agreement, each of the Ancillary Agreements and the Company Agreement do not and will not, and
compliance by each of NS, NSR or AGS, as the case may be, with the provisions of this Agreement,
each of the Ancillary Agreements and the Company Agreement will not, (i) conflict with or result in
a breach or default under the Charter Documents of NS, NSR or AGS or any of the terms, conditions
or provisions of any Contract to which NS is a party or otherwise bound, or to which any property
or asset of NS, NSR or AGS is subject; (ii) subject to the filings with Governmental Authorities
and other matters referred to in Section 9.2(c) below, violate any Law applicable to NS, NSR or
AGS; or (iii) result in the creation or imposition of any Lien on any asset of NS, NSR or AGS,
except in each case as will not, individually or in the aggregate, impair in any material respect
NS’ performance of its obligations hereunder.



26









 





               (c) Except (i) for the applicable requirements of the STB and (ii) as set forth on Schedule
9.2(c), there are no approvals, authorizations, consents, orders or other actions of, or filings
with, any Person that are required to be obtained or made by NS, NSR, AGS or the Company in
connection with the execution of, and the consummation of the transactions contemplated under, this
Agreement, the Ancillary Agreements or the Company Agreement, except for any matters as will not,
individually or in the aggregate, impair in any material respect NS’ performance of its obligations
hereunder.



          9.3 Brokers. Neither NS nor any of its Affiliates has retained or otherwise engaged or
employed, or paid or agreed to pay any fee or commission, to any agent, broker, finder or other
Person, for or on account of acting as a finder or broker in connection with this
Agreement, the Ancillary Agreements or the Company Agreement or the transactions contemplated
hereby and thereby.




          9.4 Sufficient Funds. NS has, and will have as of the Closing, sufficient funds available
to pay the NS Closing Cash Purchase Price.




     10. Covenants.



          10.1 Operation of the Line by KCS and KCSR. Between the date of this Agreement and the
earlier of the Closing or termination pursuant to Section 13, except (a) as contemplated by this
Agreement, (b) as may be required by applicable Law, (c) as set forth in Schedule 10.1 or (d) with
the prior written consent of NS, KCS and KCSR will, and will cause their respective Subsidiaries to
(X) operate the Line according to the ordinary course of business consistent with past practice,
(Y) use all commercially reasonable efforts to preserve intact the Assets and maintain the rights,
franchises and existing relations with suppliers and employees relating thereto and (Z) without
limiting the generality of the clauses (X) and (Y) above:




                    (i) not transfer any of the Assets or any interest of KCS, KCSR or any of their respective
Subsidiaries therein other than in the ordinary course of business consistent with past practice or
to KCS or any Restricted Subsidiary;



                    (ii) not change the general nature of operation of the Assets or conduct any new line of
business with the rail operating Assets not consistent with past practice;



                    (iii) not mortgage, encumber or pledge any of the Assets or permit or allow any of the Assets
to be subjected to any Lien other than Permitted Liens;



                    (iv) not terminate prior to the scheduled expiration of, make any material modifications to,
transfer or materially amend any Material Contract;



                    (v) not dispose of any books, records and accounts relating to the Assets, and to maintain
such books records or accounts in the usual, regular and ordinary manner, on a basis consistent
with prior periods;



27









 





                    (vi) not enter into any lease for real property with respect to any portion of the Assets;



                    (vii) not enter into any Contract of any kind or nature with any Affiliate (other than KCS or
any Restricted Subsidiary), or make any payment or other asset Transfer to or for the benefit of
any Affiliate (other than KCS or any Restricted Subsidiary), in each case, relating to the Assets
or the operation of the Line;



                    (viii) not permit any waste of any of the Assets;



                    (ix) not pay, discharge or satisfy any material claim, liability or obligation (absolute,
accrued, contingent or otherwise) related to the Assets other than in the ordinary course of
business consistent with past practice;



                    (x) not cancel or compromise any material debt or material claim or waive or release any
material rights relating to the Assets or the operation of the Line;



                    (xi) not grant any haulage, trackage or other access or operating rights with respect to the
Line, except as required by Law;



                    (xii) not take any action that would cause a breach of any representation or warranty set
forth in Article 8 hereof; or



                    (xiii) not authorize or enter into any agreement to otherwise take any of the foregoing
actions.



          10.2 Inspection of Records; Environmental Audits. 




               (a) Between the date of this Agreement and the Closing, KCS and KCSR shall, and shall cause
their respective Subsidiaries to, allow, to the extent not prohibited by applicable Law, the
officers, attorneys, accountants and other duly authorized representatives of NS reasonable access
during regular business hours to the records and files, correspondence, audits, properties and
personnel, as well as to all information, in each case, relating to the Assets. Any information
regarding the Assets so obtained, and any information obtained by either party pursuant to the
provisions of this Agreement, the Company Agreement and the Ancillary Agreements, shall be subject
to the Agreement Regarding Confidentiality and Related Matters between KCS and NS, dated as of
April 11, 2005, as extended to date (the “Confidentiality Agreement”), and such information shall
be held by the recipient in accordance with the terms of the Confidentiality Agreement; it being
understood that, for purposes of this provision, the term of the Confidentiality Agreement shall be
deemed to have been extended for a period of one (1) year immediately following the Closing Date.
No investigation by NS or its representatives shall affect the representations and warranties of
KCS and KCSR set forth herein or preclude reliance thereon.



               (b) Between the date of this Agreement and the Closing, KCS shall continue to make available
for inspection by NS true, correct and complete copies



28









 




of the Environmental Reports, and shall
promptly deliver to NS true, correct and complete copies of any Environmental Reports that are
prepared after the date hereof or that have not been previously disclosed to NS.




               (c) If reasonably necessary (as determined solely by NS), NS and/or its appointed agents shall
be entitled to perform at the expense of NS Phase I and Phase II environmental audits of the
Properties in a manner which shall not unreasonably interfere with the operation of the Line in the
ordinary course of business consistent with
past practice. With respect to any Property for which NS determines a Phase I and/or Phase II
audit is warranted, KCS, KCSR and their respective Subsidiaries shall provide NS and its appointed
agents reasonable access to any such Property to conduct the Phase I and/or Phase II audit.
Additionally, KCS, KCSR and their respective Subsidiaries shall fully cooperate with all reasonable
requests made by NS and its appointed agents in connection with the Phase I and Phase II audits in
accordance with the terms of the access agreement set forth in Exhibit O (the “Access Agreement”)
and shall cooperate in good faith with reasonable requests made by NS and its appointed agents in
connection with the Phase I and Phase II audits.



          10.3 Alternative Proposals. During the period from the date of this Agreement and
extending through the earlier of the termination of this Agreement in accordance with its terms or
the Closing, KCS agrees that (a) it shall not, and shall use its commercially reasonable efforts to
direct and cause its officers, directors, employees, agents and representatives (including any
investment banker, attorney or accountant), as applicable, not to, directly or indirectly, (i)
initiate, solicit or encourage, directly or indirectly, or accept the submission of any proposal or
offer by any third party with respect to any joint venture, merger, acquisition, sale,
consolidation or similar transaction involving the Line or any haulage, trackage or marketing
arrangement involving the Line, in each case, other than the transactions contemplated by this
Agreement (any such proposal or offer being hereinafter referred to as an “Alternative Proposal”)
or initiate or participate in any negotiations or discussions concerning an Alternative Proposal,
(ii) enter into any agreement, agreement in principle, letter of intent or similar arrangement
(whether or not legally binding) with any third party relating to an Alternative Proposal or (iii)
provide any confidential information or data to any third party relating to an Alternative
Proposal, and (b) it shall notify NS promptly if any Alternative Proposal is received by it or any
negotiations or discussions relating to a potential Alternative Proposal are sought to be initiated
or continued with KCS, including the material terms of such Alternative Proposal and the identity
of the Person making such Alternative Proposal or seeking such negotiations or discussions;
provided, that nothing in this Section 10.3 shall prevent KCS from taking any action with
respect to any proposal or offer not initiated, solicited or encouraged in violation of this
Section 10.3 or participating in negotiations or discussions with respect to such a proposal or
offer if it is advised by outside legal counsel that it is required to take such action to satisfy
the fiduciary duties of the Board of Directors of KCS under Delaware law; provided,
however, that KCS shall not be permitted to terminate this Agreement other than as provided
in Article 13 hereof.




29









 








               10.4 Confer with NS. Prior to the Closing, to the extent practicable and not prohibited by
applicable Law, KCS shall confer with NS on all operational matters that might reasonably be
expected to materially affect the Assets or, after the Closing Date, the operation of the Line,
including, but not limited to material transactions and material expenditures.



               10.5 Commercially Reasonable Efforts. Between the date of this Agreement and the Closing,
each of the parties to this Agreement will use its commercially reasonable efforts to cause the
conditions to the obligations of the other parties set forth in Article 11 of this Agreement, as
the case may be, to be satisfied; provided, that, except as agreed in writing by the
parties hereto, in no event shall any of the parties hereto be obligated to accept, or cause the
Company to accept, in connection with obtaining any Required Governmental Consents required by
Section 11.1(c) or any consent, approval or agreement required by Section 11.2(d), any condition or
requirement that is not acceptable to such party in its reasonable judgment. In addition, the
parties hereto shall (i) cooperate and use their commercially reasonable efforts to obtain all
consents, approvals, authorizations and agreements (or exemptions therefrom) of all Governmental
Authorities necessary to authorize, approve or permit the consummation of the transactions
contemplated by this Agreement, the Company Agreement and the Ancillary Agreements (the “Required
Governmental Consents”) at the earliest possible time hereafter, (ii) as promptly as practicable
hereafter, file or submit, or cause to be filed or submitted, to all Governmental Authorities all
notices, applications, documents and other materials necessary in connection with obtaining the
Required Governmental Consents and (iii) use their respective commercially reasonable efforts to
respond as promptly as practicable to all inquiries received from all Governmental Authorities for
additional information or documentation in connection with obtaining such Required Governmental
Consents. Each of the parties hereto shall promptly advise each other party hereto upon receiving
any communication (written or oral) from any Governmental Authority whose consent, approval or
authorization is required, or to whom notice must be submitted, for consummation of the
transactions contemplated by this Agreement, the Company Agreement and the Ancillary Agreements
which constitutes a reasonable likelihood that any requisite regulatory consent, approval or
authorization will not be obtained or that receipt of any such consent, approval or authorization
will be materially delayed. Each of the parties hereto shall furnish to the other party hereto
such necessary information and reasonable assistance as the other may reasonably request in
connection with its preparation of any filings or submissions to any Governmental Authority
necessary to obtain any of the Required Governmental Consents. Each of the parties hereto shall
provide the other party hereto with draft copies and as-filed copies of all filings and submissions
with Governmental Authorities in respect of the Required Governmental Consents and shall provide
the other with a reasonable opportunity to comment upon all such draft copies. Each of the parties
hereto and its respective representatives shall promptly inform the other party hereto regarding
the substance of all communications and contacts received from any Governmental Authority with
respect to this Agreement, the Company Agreement, the Ancillary Agreements or the transactions
contemplated hereby and thereby, and neither of the parties hereto shall initiate any contact or
communications with any Governmental Authority regarding this Agreement, the Ancillary Agreements
or the transactions contemplated hereby and thereby without



30









 




giving reasonable prior notice to the
other party hereto and offering the other party hereto the opportunity to have a representative of
such party participate in the contact or communication. For the avoidance of doubt, either party
hereto shall be free to discuss regulatory matters with any Governmental Authority without the
participation of the other party hereto to the extent such discussions do not directly relate to
the
transaction contemplated by this Agreement, the Company Agreement and the Ancillary
Agreements.




          10.6 Real Estate Matters.




               (a) KCS and KCSR shall use their commercially reasonable efforts to obtain an estoppel
certificate from each landlord under the Leases certifying that each lease is in full force and
effect and that there are no defaults thereunder or any conditions that with the passage of time
would constitute a default thereunder, or an estoppel certificate in the form so provided for under
any such Lease or Third Party Lease. In the event that KCS is unable to deliver an estoppel
certificate for any of the Leases or Third Party Leases to NS at the Closing, KCS shall indemnify
NS against any loss, cost, liability or expense which NS may incur as a result of the failure of
KCS to deliver such estoppel certificate.



               (b) KCS and KCSR shall cause (i) title to the Owned Properties, at Closing, to be free and
clear of all Liens and without exceptions, disclaimers of liability or objections except for
Permitted Liens and any matters which the Title Company has committed to insure over or omit, and
(ii) the First American Title Insurance Company of New York or another reputable title insurance
company selected by NS (the “Title Company”) to insure the Owned Properties under the terms
described above.



               (c) Between the date of this Agreement and the Closing, KCS shall disclose to NS any newly
identified Liens on the Owned Properties that have not been previously disclosed to NS.



          10.7 Publicity. The initial public disclosure relating hereto, if any, will be a joint
press release and thereafter, except as otherwise required by Law, the applicable rules of the
stock exchanges on which KCS’ and NS’ shares are listed or any other self-regulatory organization,
the parties shall coordinate with each other, including the provision of drafts and the opportunity
to comment thereon, prior to issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby.




          10.8 Standstill. For a ten (10) year period commencing on the date hereof (such period,
the “Standstill Period”), neither KCS nor NS shall, jointly with any third Person, directly or
indirectly, (i) purchase or offer or agree to purchase any material assets or any voting securities
of the other party (other than purchases of up to 1% of the other party’s common stock) other than
in the ordinary course of business consistent with past practice or (ii) propose any merger or
other business combination involving the other party (any such purchase, offer to purchase or
proposal, a “Business Combination”), except, in each case, if specifically invited in writing to do
so by the other party. In




31









 







addition, during the Standstill Period, neither KCS nor NS nor any of
their respective Subsidiaries shall, jointly with any third Person, without the prior written
consent of the other party: (i)
make, or in any way participate, directly or indirectly, in any solicitation of proxies to
vote or seek to advise or influence any Person with respect to the voting of any voting securities
of the other party; (ii) form, join, or in any way participate in a “group” within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934 with respect to any voting securities of
the other party; or (iii) otherwise act, alone or in concert with others, to seek to control the
management, Board of Directors, or policies of the other party. Notwithstanding the foregoing, the
provisions of this Section 10.8 shall not apply to either party if during such Standstill Period
(i) the other party publicly proposes to enter into a Business Combination with another Person,
(ii) either NS or KCS (or their respective Affiliates) ceases to be a member of the Company or
(iii) this Agreement is terminated pursuant to Article 13 hereof.




          10.9 Encumbrance and Transfer of Assets; Indentures.




               (a) From and after the date hereof, KCS shall not, and shall cause its Subsidiaries not to,
without the prior written consent of NS: (i) enter into, amend or extend any Contract (including
the Indentures or the notes governed thereby) in any manner which would encumber any of the assets
or properties of the Company or prohibit, limit or defer in any way any of NS’ management rights
set forth in the Company Agreement (including any rights in respect of Major Decisions (as such
term is defined in the Company Agreement) that become or may become with the passage of time
effective and/or that are modified after the Closing Date); or (ii) with respect to any assets
transferred from the Company to KCS or its Restricted Subsidiaries as permitted by the Company
Agreement, except as contemplated by Section 10.10, enter into any Contract with respect to or
consummate any (x) acquisition, divestiture, spin-off, merger, consolidation, business combination
or similar transaction in which such assets would cease to be held by KCS or a Restricted
Subsidiary or their respective successors, (y) sale, transfer, lease, sublease, license or other
disposition of such assets (except by a Restricted Subsidiary to another Restricted Subsidiary or
KCS) or (z) formation of or other participation in, any joint venture or partnership with respect
to such assets.



               (b) From and after the date hereof, KCS shall, and from and after the Closing Date NS shall,
cause the Company to comply with the provisions of the Indentures and shall not, and shall cause
the Company not to, incur any additional Indebtedness other than as and to the extent permitted by
the Company Agreement and the Indentures and, in any event, subject to Section 10.9(a).



          10.10 Option to Acquire the Line. 




               (a) In the event of a Permitted Asset Transfer (as such term is defined in the Company
Agreement) to which NS has not previously consented in writing, KCS shall, at least twenty (20)
Business Days before such transfer, provide Notice thereof (each such Notice, a “Line Option
Notice”) to NS in accordance with the provisions of Section 14.1 and NS shall have the option (the
“Line Option”) to acquire, or cause one or more of its Subsidiaries to acquire, in accordance with
the procedures set



32









 




forth in this Section 10.10, (1) from the relevant transferee or transferees,
all right, title and interest in the Line, as it then exists, but subject to Permitted Liens, that
is owned by
such transferee(s) together with, at the option of NS in its sole discretion, all right, title
and interest of such transferee(s) or KCS and its Subsidiaries (other than the Company) in and to
the rail yards at or near Monroe, Louisiana, Bossier City, Louisiana and Pearson, Mississippi (the
Line and such rail yards collectively, the “Line Assets”) that are owned by such transferee or KCS
or any of its Subsidiaries (other than the Company) at the time of such Permitted Asset Transfer
(the “KCS Line Assets”) and (2) either:




                    (i) from KCS and its Subsidiaries, the Membership Interests of the KCS Member (as such terms
are defined in the Company Agreement) (the “KCS Membership Interests”); or



                    (ii) from the Company, the remaining Line Assets (if any) owned by the Company following such
Permitted Asset Transfer (the “Company Line Assets”).



               (b) Notwithstanding anything to the contrary herein, in the case of a Permitted Asset Transfer
involving one or more assets of the Company that are not material, individually or in the
aggregate, to the operation of the Line, the Line Option will not be available to NS if, within
twenty (20) days after such transfer, the asset(s) subject to such Permitted Asset Transfer are
transferred back to the Company on terms which have the same effect as if such Permitted Asset
Transfer had not occurred.



               (c) From and after the date of a Line Option Notice, KCS shall allow, to the extent not
prohibited by applicable Law, the officers, attorneys, accountants and other duly authorized
representatives of NS access during regular business hours to any books, records, files,
correspondence, audits, properties, personnel and other information of KCS or its Subsidiaries
relating to the Line Assets owned by KCS or its Subsidiaries (other than the Company) that is
reasonably requested by NS or its representatives.



               (d) At any time during the thirty (30) day period commencing on receipt of a Line Option
Notice, NS may give Notice to KCS in accordance with the provisions of Section 14.1 (each such
Notice, a “Line Option Valuation Notice”) of its desire to commence the valuation of the Line
Assets and the KCS Membership Interests in accordance with the procedures set forth in this Section
10.10(d). Upon the delivery of a Line Option Valuation Notice, NS and KCS shall each select and
engage a reputable, independent M.A.I. designated appraiser with at least ten (10) years of
experience in valuing real property and rail improvements for rail line and yard property or, at
their respective option, an independent investment banking firm of national reputation and such
appraisers or investment banking firms shall be instructed to meet within thirty (30) days
following their selection and at such meeting to mutually agree upon the selection of an appraiser,
appropriately qualified in their judgment (the “Appraiser”) to determine:



                    (i) the fair market value of the Line Assets on a stand-alone rail operation basis (the “Line
FMV”), as well as the portion of the Line FMV



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attributable to the KCS Line Assets, in the
aggregate, and the Company Line Assets, in the aggregate; and




                    (ii) the fair market value of the KCS Membership Interests (with the Line FMV
determined as
provided in Section 10.10(d)(i)) (the “Membership Interest FMV”).



          For purposes of this Section 10.10(d), “fair market value” shall mean, with respect to any
asset or property, the price that could be negotiated in an arm’s-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.




               (e) Within ninety (90) days of the date of its appointment, the Appraiser shall provide to
both NS and KCS a report (the “Appraisal Report”), which report shall include the Appraiser’s
determination of the Line FMV, as well as the portion of the Line FMV attributable to the KCS Line
Assets, in the aggregate, and the Company Line Assets, in the aggregate, and the Appraiser’s
determination of the Membership Interest FMV.



               (f) Each of NS and KCS shall, and shall cause the Company and their respective Subsidiaries
to, cooperate with the Appraiser and promptly provide all documents and other information and
access during regular business hours to the Line Assets reasonably requested by the Appraiser in
connection with its appraisal. The determination of the Line FMV and the Membership Interest FMV
set forth in the Appraisal Report shall be final and binding on NS and KCS for purposes of this
Section 10.10. KCS and NS shall bear equally all expenses of the Appraiser.



               (g) Within sixty (60) days after the determination of the Line FMV and the Membership Interest
FMV, either by mutual agreement of the parties (without any obligation to negotiate toward or reach
such agreement) or by the issuance of the Appraisal Report, NS shall give Notice to KCS of whether
it wishes to exercise the Line Option (the “Line Option Exercise Notice”) at the Line FMV or the
portion thereof attributable to the KCS Line Assets and Membership Interest FMV, as the case may
be, as finally determined pursuant to subsections (e) and (f) above, which Notice shall indicate
whether NS wishes to acquire the KCS Membership Interests pursuant to Section 10.10(a)(i) or the
Company Line Assets pursuant to Section 10.10(a)(ii). In the event that NS has elected to acquire
the KCS Membership Interests pursuant to the Line Option, the transfer of such interests shall be
governed by the procedure set forth in Article 10 of the Company Agreement. If NS delivers a Line
Option Exercise Notice to KCS, NS (or its designated Subsidiar(ies)), KCS and its Subsidiaries
shall effect the transfer of the KCS Line Assets, and (in the case that NS has elected to acquire
the Company Line Assets pursuant to the Line Option) cause the Company to effect the transfer of
the Company Line Assets, to NS (or its designated Subsidiar(ies)) pursuant to customary
documentation reasonably acceptable to the parties, including any agreements, documents and other
instruments necessary or reasonably requested by NS (or its designated Subsidiar(ies)) to effect
such transfer. Such documentation shall call for KCS and its Subsidiaries and, if NS elects to
acquire the Company Line Assets pursuant to



34









 




Section 10.10(a)(ii), the Company to provide
representations, warranties, covenants and indemnities with respect to the KCS Line Assets and
Company Line Assets, respectively, with terms at least as favorable to NS and its Subsidiaries as
are set forth in this
Agreement with respect to the Line and the Assets. Notwithstanding anything to the contrary
contained herein, the completion of the sale of the KCS Line Assets and/or Company Line Assets, as
the case may be, pursuant to the Line Option and in accordance with the terms of such documentation
shall each occur, and the NS Member shall pay the portion of the Line FMV attributable to the
assets so acquired to the transferring party, on a date to be mutually agreed by KCS and NS, but in
no event later than the later of (i) ninety (90) days after the delivery date of the Line Option
Exercise Notice and (ii) five Business Days after the date on which the last of any required
regulatory approvals in connection with such transaction is received. The KCS Line Assets and, if
applicable, Company Line Assets, shall be conveyed to NS (or its designated Subsidiar(ies)) subject
only to Permitted Liens and KCS shall be responsible for the payment of all transfer, filing and
recording taxes in connection with the exercise of the Line Option with respect to such assets and
the conveyance of the KCS Line Assets and, if applicable, Company Line Assets. All payments of the
Line FMV attributable to the assets acquired shall be made by wire transfer of immediately
available funds to an account or accounts specified by the intended recipients.




               (h) In the event that NS elects not to exercise the Line Option, it shall be entitled to
exercise the contingent trackage rights described in Section 3 of the NSR Joint Use Agreement. For
the avoidance of doubt, nothing in this Section 10.10 nor any decision of NS not to exercise the
Line Option shall in any way limit the rights of NS and its Affiliates under the NSR Joint Use
Agreement, the Western Haulage Agreement, the Contingent Haulage Agreement or any other Ancillary
Agreement.



               (i) Notwithstanding anything in this Section 10.10 to the contrary, the Line Option shall be
exercised, and title to the Line Assets shall vest, if at all, on or prior to the date on which the
last of the living descendents of Joseph P. Kennedy shall die, plus twenty one (21) years.



               (j) In the event that no Appraiser is appointed pursuant to and in compliance with Section
10.10(d) an Appraiser will be appointed by arbitration in accordance with Section 14.13.



          10.11 Determination and Payment of Real Property Taxes. KCSR is contributing the Assets to
the Company through one deed that excludes certain property. Because the Assets will be included
in KCSR’s Form R1 that is filed annually with the STB, Mississippi, Louisiana, and their local
governments will assess property tax against KCSR (not the Company) that includes the Assets.
Therefore, in connection with each annual property tax assessment, KCSR and NS will determine
jointly and in good faith a reasonable and fair allocation of KCSR’s property tax liability that is
attributable to the Assets and that should be paid by the Company, and KCSR and NS will certify in
writing that the determined amount is reasonable and fair. Thereafter, KCSR will bill the Company
for, and the Company shall promptly pay to KCSR, the jointly determined share of the property tax.




35









 








          10.12 NS Automotive Traffic. From and after the date hereof, NS and KCS shall negotiate in good faith the terms of an
agreement with respect to NS’ rights to move automotive traffic over the Line or to interchange
such traffic.




          10.13 Vicksburg Bridge Lease Dispute. KCS shall use its commercially reasonable efforts to
resolve the Vicksburg Bridge Lease dispute referred to in, and in the manner contemplated by,
Section 3.1(b).




     11. Conditions to the Closing. 



          11.1 Mutual Conditions. The respective obligations of the parties to complete the
purchase/sale of the NS Interest on the Closing Date as contemplated by Section 2.1(a), the
contribution of the Assets in exchange for the KCS Interest and to take the other actions required
to be taken by each of the parties at the Closing is subject to the satisfaction, at or prior to
the Closing, of each of the following conditions (any of which may be waived jointly by NS and KCS
in writing, in whole or in part):




               (a) Company Agreement. KCS and NS or their respective Affiliates shall have entered
into the Company Agreement.



               (b) Ancillary Agreements. KCS, KCSR, NS, the Company and their respective Affiliates,
as applicable, shall have entered into each of Ancillary Agreements.



               (c) Regulatory Approvals. All Required Governmental Consents (including from the STB)
shall have been obtained and shall be in full force and effect, and not subject to conditions that
any party deems unacceptable in its reasonable judgment, and shall not be subject to a pending
petition for review before a U.S. Court of Appeals.



               (d) No Order or Action. No Law shall have been enacted, entered, promulgated or
enforced by any Governmental Authority which prohibits, restricts or makes illegal the consummation
of the Closing or any of the material transactions contemplated thereby, or by the Company
Agreement or any of the Ancillary Agreements, and no Action shall be pending or threatened that
questions the validity of this Agreement, the Company Agreement or any of the Ancillary Agreements
or declares or proposes to declare the same unlawful or seeks to enjoin the consummation of any of
the material transactions contemplated hereby or thereby.



          11.2 Additional Conditions of NS. The obligation of NS to complete the purchase of the NS
Interest on the Closing Date as contemplated by Section 2.1(a), and to take the other actions
required to be taken by NS at the Closing is subject to the satisfaction, at or prior to the
Closing, of
each of the following additional conditions (any of which may be waived by NS in writing, in
whole or in part):




               (a) Representations and Warranties. The representations and warranties contained in
Article 8 hereof and in all certificates delivered by KCS and KCSR to NS pursuant hereto or in
connection with the transactions contemplated hereby




36









 






shall be true and accurate in all respects (in
the case of representations and warranties qualified by “materiality,” “in all material respects,”
“Material Adverse Effect” or similar terms or phrases, and in the case of the representations and
warranties set forth in Sections 8.1 and 8.2) or in all material respects (in the case of all other
representations and warranties) as of the date of this Agreement and as of the Closing as though
made at and as of the Closing (except for changes contemplated by this Agreement and except for
representations and warranties that by their terms speak specifically as of the date of this
Agreement or some other date, in which case as of such date).




               (b) Performance. KCS and KCSR shall have performed all obligations and complied with
in all material respects all covenants required by this Agreement to be performed or complied with
by KCS or KCSR on or prior to the Closing Date.



               (c) Certificate. KCS shall have delivered to NS a certificate, dated the Closing
Date, signed on behalf of KCS by an officer of KCS, certifying that the conditions specified in
Sections 11.2(a) and (b) of this Agreement have been satisfied.



               (d) Consents. At the Closing, KCS shall have delivered to NS all consents, approvals
and agreements of any third Persons required by the terms of any Material Contract in order that
the rights of KCS or any of its Subsidiaries or the prospective rights of the Company under such
Material Contract, in each case, as they relate to the Assets or the Assumed Liabilities, will not
be impaired by the consummation of the transactions contemplated by this Agreement, the Company
Agreement and the Ancillary Agreements, and such consents, approvals and agreements shall be in
full force and effect.



               (e) No Material Adverse Effect. There shall have been no Material Adverse Effect on
KCS or KCSR.



               (f) Opinions of Counsel. NS shall have received an opinion of Sonnenschein Nath &
Rosenthal LLP, dated as of the Closing Date, substantially in the form attached as Exhibit P
hereto, and an opinion of the Senior Vice President and General Counsel of KCS, dated as of the
Closing Date, substantially in the form attached as Exhibit Q hereto.



               (g) Bank Approval of Transaction Agreements. KCS shall have delivered to NS written
confirmation by the Required Lenders (as such term is defined in KCS Credit Agreement Amendment No.
2) that the form and substance of this Agreement and the Ancillary Agreements are satisfactory to
the Required Lenders as contemplated by Section 1(a)(xiv) of KCS Credit Agreement Amendment No. 2.



          11.3 Additional Conditions of KCS. The obligation of KCS and KCSR to complete the
contribution of the Assets in exchange for the KCS Interest, and to take the other actions required
to be taken by KCS and KCSR at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following additional conditions (any of which may be waived by KCS in
writing, in whole or in part):




37









 








               (a) Representations and Warranties. The representations and warranties contained in
Article 9 hereof and in all certificates delivered by NS to KCS pursuant hereto or in connection
with the transactions contemplated hereby shall be true and accurate in all respects (in the case
of representations and warranties qualified by “materiality,” “in all material respects,” “material
adverse effect” or similar terms or phrases, and in the case of the representations and warranties
set forth in Sections 9.1 and 9.2) or in all material respects (in the case of all other
representations and warranties) as of the date of this Agreement and as of the Closing as though
made at and as of the Closing (except for changes contemplated by this Agreement and except for
representations and warranties that by their terms speak specifically as of the date of this
Agreement or some other date, in which case as of such date).



               (b) Performance. NS shall have performed all obligations and complied with in all
material respects all covenants required by this Agreement to be performed or complied with by NS
on or prior to the Closing Date.



               (c) Certificate. NS shall have delivered to KCS a certificate, dated the Closing
Date, signed on behalf of KCS by an officer of NS, certifying that the conditions specified in
Sections 11.3(a) and (b) of this Agreement have been satisfied.



               (d) No Material Adverse Effect. There shall have been no Material Adverse Effect on
NS or AGS.



               (e) Opinions of Counsel. KCS shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, dated as of the Closing Date, substantially in the form attached as Exhibit R
hereto an opinion of the Vice President and Corporate Counsel of NS, dated as of the Closing Date,
substantially in the form of Exhibit S hereto and an opinion of Cabannis, Johnston, Gardner, Dumas
& O’Neal LLP, dated as of the Closing Date, substantially in the form of Exhibit T hereto.



     12. Survival of Representations and Warranties; Indemnity.



          12.1 Survival of Representations and Warranties. All representations and warranties made
in this Agreement or made in any document delivered pursuant to this Agreement by or on behalf of
any party shall survive the execution and delivery of this Agreement and the Closing, regardless of
notice of or any investigation or right of investigation made after the date of this Agreement by
or on behalf of any party, and shall terminate and expire one (1) year following the Closing Date,
except that the representations and warranties made in
Section 8.2(b)(ii) as they relate to the Indentures shall terminate and expire on the earlier
of the date that is four (4) years following the Closing Date and the Maturity Date (as such term
is defined in the Company Agreement) and the representations and warranties made in Sections 8.7,
8.10 and 8.14 shall terminate and expire sixty (60) days after the termination of the applicable
statute of limitations, in each case, after which date they shall be of no further force or effect
(except for bona fide claims of which a party has provided written notice in good faith to the
other parties prior to the relevant expiration date).




38









 








          12.2 Indemnification by KCS.




               (a) KCS and KCSR shall indemnify, save and hold harmless (i) NS and its Affiliates, and each
of their respective officers, directors, employees and agents, and each of their respective
successors and assigns (collectively, the “NS Indemnified Parties”), from and against any and all
costs, losses, claims, liabilities, damages, fines, penalties, expenses and Cleanup costs
(including any interest which may be imposed in connection therewith and court costs and reasonable
fees and disbursements of counsel) (“Damages,” which shall not include any claim of diminution of
value of a Member’s interest in the Company unless the Company shall have incurred actual loss)
incurred in connection with, arising out of, resulting from or incident to: (A) any breach of the
representations or warranties of KCS and KCSR in this Agreement, except for Section 8.7, (in each
case, solely for the purpose of calculating the amount of Damages, without regard to any
qualification or limitation with respect to “materiality,” whether by reference to “material,” “in
all material respects” or “Material Adverse Effect”), or (B) any breach or default in any covenants
or agreements made by KCS in this Agreement; and (ii) the Company and its Affiliates, and each of
their respective officers, directors, employees and agents (other than KCS or its Subsidiaries) and
each of their respective successors and assigns (collectively, the “Company Indemnified Parties”)
and any NS Indemnified Parties from and against any and all Damages incurred in connection with,
arising out of, resulting from or incident to any obligation or liability, other than the Assumed
Liabilities, incurred in connection with, arising out of, resulting from or incident to any act or
omission by KCS or KCSR, any of its Affiliates prior to the Closing relating to the Assets, whether
fixed or contingent, recorded or unrecorded, known or unknown.



               (b) KCS and KCSR shall defend, indemnify and hold harmless any NS Indemnified Parties and any
Company Indemnified Parties for, from, and against all Damages asserted against, resulting to,
imposed on, or incurred by NS or the Company in connection with: (i) any misrepresentation or
breach of any environmental representation or warranty set forth in Section 8.7 of this Agreement;
(ii) (A) the Release or threatened Release of any Hazardous Materials prior to the Closing Date on,
from or under the Properties or in connection with the operation of the Assets or (B) the Release
of any Hazardous Materials on, from or under any other property where, prior to the Closing Date,
Hazardous Materials are or were Released, discharged or disposed of which, on or prior to the
Closing date, have impacted the Property or the Assets or (C) the Release or threatened Release of
any Hazardous Materials on, from or under any other property where, prior to the Closing Date,
Hazardous Materials are or were
Released, threatened to be Released, discharged or disposed of in connection with disposal
activities related to the Properties or the Assets, whether or not, in any case covered by this
clause (ii), such Release, threatened Release, discharge or disposal was in compliance with
Environmental Law; (iii) the violation prior to the Closing of any Environmental Law in effect
prior to the Closing by KCS or KCSR, any of their Subsidiaries or any other Person in connection
with the Properties or the Assets; and (iv) any Environmental Claim relating to the Properties or
the Assets against any Person whose liability for such Environmental Claim KCS, KCSR or any of
their respective Subsidiaries has retained or assumed either contractually or by operation of Law.



39









 





               (c) KCS and KCSR shall have no obligation to indemnify the NS Indemnified Parties under
Section 12.2(a)(i)(A) until the NS Indemnified Parties have suffered Damages in excess of
$2,000,000 in the aggregate, and then KCS and KCSR will be obligated to indemnify the NS
Indemnified Parties for Damages only in excess of such amount, but KCS and KCSR shall not be liable
for indemnification under Section 12.2(a)(i)(A) for Damages in excess of $300,000,000 in the
aggregate; provided, that such $2,000,000 threshold shall not apply to any Damages arising
from any breach of any representation or warranty in Section 8.10. If KCS and KCSR are obligated
to indemnify the NS Indemnified Parties, then KCS and KCSR may, at their election, (i) pay such
indemnification directly to the NS Indemnified Parties or the Company Indemnified Parties, as the
case may be, (ii) pay any Damages arising from any liability or any Third Party Claim directly to
the applicable third party (to the extent that such Damages are owed to such third party), or (iii)
contribute amounts to the Company and cause the Company to pay any Damages arising from any
liability or any Third Party Claim directly to the applicable third party (to the extent that such
Damages are owed to such third party); provided, that the foregoing shall not limit in any way the
obligation of KCS and KCSR to satisfy all such indemnification obligations.



               (d) Except for fraud, injunctive and provisional relief and remedies that cannot be waived as
a matter of Law, if the Closing occurs, this Section 12.2 shall be the exclusive remedy for any
breach of any of KCS’ or KCSR’s representations and warranties or any breach of KCS’ or KCSR’s
covenants contained in this Agreement.



          12.3 Indemnification by NS.




               (a) NS shall indemnify, save and hold harmless KCS and its Affiliates, and each of their
respective officers, directors, employees and agents and each of their respective successors and
assigns, from and against any and all Damages incurred in connection with, arising out of,
resulting from or incident to: (i) any breach of or any inaccuracy in any of, the representations
or warranties of NS in this Agreement (in each case, solely for the purpose of calculating the
amount of Damages, without regard to any qualification or limitation with respect to “materiality,”
whether by reference to “material,” “in all material respects” or “Material Adverse Effect”); or
(ii) any breach or default in covenants or agreements made by NS in this Agreement.



               (b) Except for fraud, injunctive and provisional relief and remedies that cannot be waived as
a matter of Law, if the Closing occurs, this Section 12.3 shall be the exclusive remedy for any
breach of any of NS’ representations and warranties or any breach of NS’ covenants contained in
this Agreement.



          12.4 Notification of Claims. A party entitled to indemnification under Sections 12.2 or
12.3 (an “Indemnified Party”) shall notify the other party (the “Indemnifying Party”) within a
reasonable period of time after becoming aware of any Damages which the Indemnified Party shall
have determined has given or could give rise to a claim for indemnification under Sections 12.2 or
12.3 hereof. Such notice shall include an estimate of the Damages that the Indemnified Party has
determined may be




40









 







incurred to the extent then known or reasonably determinable. The failure to so
notify the Indemnifying Party will not relieve the Indemnifying Party of any liability that it may
have to any Indemnified Party, except to the extent of any prejudice to the Indemnifying Party
resulting from such delay. As soon as practicable after the date of such notice, the Indemnified
Party shall provide to the Indemnifying Party all information and documentation necessary to
support and verify the Damages so claimed and the Indemnifying Party and its agents shall be given
access to all books and records in the possession or control of the Indemnified Party which the
Indemnifying Party reasonably determines to be related to such claim.




          12.5 Matters Involving Third Parties.




               (a) If any third party shall commence an Action against any Indemnified Party with respect to
any matter (a “Third Party Claim”) which may give rise to a claim for indemnification under
Sections 12.2 or 12.3, or if an Indemnified Party otherwise becomes aware that a Third Party Claim
may be asserted against the Indemnified Party, the Indemnified Party shall notify the Indemnifying
Party in writing as soon as practicable. The failure to so notify the Indemnifying Party will not
relieve the Indemnifying Party of any liability that it may have to any Indemnified Party, except
to the extent of any prejudice to the Indemnifying Party resulting from such delay. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the claim, or fails to
notify the Indemnified Party within 30 days after delivery of such notice by the Indemnified Party
whether the Indemnifying Party disputes the claim, all Damages incurred in connection with, arising
out of, resulting from or incident to such Third Party Claim will be conclusively deemed a
liability of the Indemnifying Party and the Indemnifying Party shall pay the amount of such Damages
to the Indemnified Party promptly upon the final determination thereof.



               (b) If the Indemnifying Party does not respond to the notice or elects not to assume the
defense of such claim or demand, in each case within the period allowed after delivery of the
notice, the Indemnified Party shall have the right to defend such claim or demand by appropriate
proceedings or to settle or pay any such claim or demand for such an amount as the Indemnified
Party shall deem appropriate, in either case at the sole cost and expense of the Indemnifying
Party, provided that the Indemnified Party shall not settle any such claim without the prior
written consent of the
Indemnifying Party, which consent will not be unreasonably withheld, conditioned or delayed.
In the event that the Indemnifying Party does not assume the defense of such claim or demand, the
Indemnifying Party shall have the right to participate in such defense (including with counsel of
its choice), at its own expense, and the Indemnified Party shall reasonably cooperate with the
Indemnifying Party in connection with such participation.



               (c) If the Indemnifying Party notifies the Indemnified Party that it desires to defend against
such claim or demand, then the Indemnifying Party shall be entitled to participate in or, at the
Indemnifying Party’s option, assume at its own cost and expense the defense of any such claim or
demand with counsel of its own choosing (which shall be reasonably acceptable to the Indemnified
Party), provided, that, if the



41









 




Indemnifying Party assumes the defense of such claim or
demand it shall reimburse the Indemnified Party for out of pocket expenses incurred by the
Indemnified Party (such as travel costs, but not internal time charges) and the Indemnified Party
(i) shall reasonably cooperate with the Indemnifying Party; and (ii) may elect to participate in
any such defense at its sole cost and expense, but the control of such defense and its settlement
or resolution shall rest with the Indemnifying Party. In the event there is a significant conflict
of interest between the Indemnified Party and the Indemnifying Party in the conduct of the defense
of such claim or demand, the reasonable fees and disbursements of one counsel of the Indemnified
Party shall be at the expense of the Indemnifying Party. The Indemnifying Party shall not
compromise or settle any such claim or demand without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld, conditioned or delayed), unless such
settlement or compromise does not subject the Indemnified Party to any monetary liability, will not
impose on the Indemnified Party any obligation, admission, restriction or further Damages and
includes a complete, unconditional release of the Indemnified Party from all liability with respect
to such claim or demand.




               (d) In all cases the Indemnified Party and the Indemnifying Party shall keep each other
reasonably informed as to all matters concerning any Third Party Claim and shall promptly notify
the other party in writing of any and all significant developments relating thereto.



          12.6 Taxes. If any indemnity payment pursuant to this Article 12 is determined to be
taxable to any Indemnified Party by any Governmental Authority, the indemnity payment shall be
increased by such amount as is necessary so that, after taking into account the Tax liability
imposed upon such Indemnified Party upon receipt of such indemnity payment, the Indemnified Party
receives an amount equal to the amount it would have received had such indemnity payment not been
subject to Tax (after taking into account, in accordance with Section 12.7(a), any Tax benefits
and/or insurance coverage that may be available to the Indemnified Party).




          12.7 Other Limits on Indemnification.




               (a) The amount of any Damages sustained by a Indemnified Party shall be reduced (i) by any
amount received by such Indemnified Party with respect thereto under any insurance coverage
relating thereto (other than insurance coverage provided by an Affiliate (other than Company) of
such indemnitee) or from any other party alleged to be responsible therefor and (ii) by the amount
of any Tax benefit actually realized with respect to the Damages. An Indemnified Party shall use
its commercially reasonable efforts to collect any amounts available under such insurance coverage
and from such other party alleged to have responsibility and to realize any Tax benefit with
respect to the Damages. If an Indemnified Party realizes a Tax benefit or receives an amount under
insurance coverage or from such other party with respect to Damages sustained at any time
subsequent to any indemnification provided pursuant to this Article 12, then such Indemnified Party
shall promptly reimburse the applicable Indemnifying Party for any payment made by such
Indemnifying Party in connection with providing such indemnification up to such amount realized or
received by the Indemnified Party.



42









 




Nothing in this Section 12.7(a) shall limit in any way the
ability of KCS, NS or the Company to (i) take (or refrain from taking, as the case may be) any
reasonable position for Tax purposes that KCS, NS or the Company determines to take (or refrain
from taking) in its sole discretion or (ii) refrain from pursuing any third party insurance
recovery that KCS, NS or the Company, as the case may be, determines would be commercially
inadvisable to pursue.




               (b) Each Indemnified Party shall use its commercially reasonable efforts to mitigate any claim
or liability that an Indemnified Party asserts or may assert under this Article 12. In the event
that an Indemnified Party shall fail to make such commercially reasonable efforts to mitigate any
such claim or liability, then notwithstanding anything contained in this Agreement to the contrary,
the Indemnifying Party shall not be required to indemnify any Indemnified Party for that portion of
any Damages that would reasonably be expected to have been avoided if the Indemnified Party had
made such efforts.



     13. Termination.



          13.1 Termination by Mutual Consent. This Agreement may be terminated at any time prior to
the Closing by the mutual agreement, in writing, of each of KCS and NS.




          13.2 Termination by Final Order. This Agreement may be terminated by KCS or NS upon
written notice to the other party that any final, non-appealable Law shall have been enacted,
entered, promulgated or enforced by any Governmental Authority of competent jurisdiction which
prohibits, restricts or makes illegal the consummation of the Closing or any of the material
transactions contemplated thereby, or by the Company Agreement or any of the
Ancillary Agreements; provided, that the right to terminate this Agreement under this
Section 13.2 shall not be available to any party whose breach of any provision or whose failure to
perform any obligation under this Agreement (or the breach or failure of any Affiliate thereof) has
been the cause of such Law.




          13.3 Termination by NS. NS may (but shall not be obligated to) terminate this Agreement
prior to the Closing by giving written notice to KCS if:




               (a) there has been a material violation or breach by KCS or KCSR of any of their agreements or
covenants contained in this Agreement or there has been a material violation or breach by KCS or
KCSR of any of their representations or warranties contained in this Agreement such that it is
reasonably likely that either of the conditions set forth in Section 11.2(a) or 11.2(b) cannot be
satisfied, and such violation or breach shall not have been cured or corrected within twenty days
after receipt of notice thereof;



               (b) the Closing does not occur on or prior to September 1, 2006, or such later date as may be
agreed to in writing by the parties; provided, that, notwithstanding the satisfaction of
the other conditions set forth in Sections 11.1 and 11.2



43









 




(other than any conditions which, by their
terms, may only be satisfied on the Closing Date) if any of the Required Governmental Consents
required by Section 11.1(c) have not been obtained by such date, such date shall be extended in
additional one-month increments without any further action by the parties through February 1, 2007;
and, provided, further, that the non-occurrence of the Closing is not due to a
breach by NS of any condition or covenant hereunder;




               (c) there has been imposed by a Governmental Authority a condition to any Required
Governmental Consent, which condition is not acceptable to NS in NS’ reasonable judgment; or



               (d) there has been a Material Adverse Effect on KCS or KCSR which shall not have been cured or
corrected within twenty days after receipt of notice thereof; provided that such Material Adverse
Effect is not due to a breach by NS of any condition or covenant hereunder.



          13.4 Termination by KCS. KCS may (but shall not be obligated to) terminate this Agreement
prior to the Closing by giving written notice to NS if:




               (a) there has been a material violation or breach by NS of any of its respective agreements or
covenants contained in this Agreement or there has been a material violation or breach by NS of any
of its representations or warranties contained in this Agreement such that it is reasonably likely
that either of the conditions set forth in Section 11.3(a) and (b) cannot be satisfied, and such
violation or breach shall not have been cured or corrected within twenty days after receipt of
notice thereof;



               (b) the Closing does not occur on or prior to September 1, 2006, or such later date as may be
agreed to in writing by the parties; provided, that, notwithstanding the satisfaction of
the other conditions set forth in Sections 11.1 and 11.3 (other than any conditions which, by their
terms, may only be satisfied on the Closing Date) if any of the Required Governmental Consents
required by Section 11.1(c) have not been obtained by such date, such date shall be extended in
additional one-month increments without any further action by the parties through February 1, 2007;
and, provided, further, that the non-occurrence of the Closing is not due to a
breach by KCS or KCSR of any condition or covenant hereunder;



               (c) there has been imposed by a Governmental Authority a condition to any Required
Governmental Consent, which condition is not acceptable to KCS in KCS’ reasonable judgment; or



               (d) there has been a Material Adverse Effect on NS or AGS which shall not have been cured or
corrected within twenty days after receipt of notice thereof; provided that such Material Adverse
Effect is not due to a breach by KCS or KCSR of any condition or covenant hereunder.



44









 





          13.5 Effect of Termination. In the event of the termination of this Agreement as permitted
by this Article 13, no party shall have any obligation under, or liability to any other in respect
to, this Agreement, except with respect to, any willful breach of this Agreement that gives rise to
such termination and except for the provisions of the Confidentiality Agreement and the
confidentiality obligations contained in Section 10.2(a), this Section 13.5 and Article 14 hereof,
which shall survive the termination of this Agreement.




     14. Miscellaneous.



          14.1 Notices. All notices, requests, demands and other communications (collectively,
“Notices”) given pursuant to this Agreement shall be in writing, and shall be delivered by personal
service, courier, overnight delivery service, facsimile transmission (which must be confirmed) or
by United States registered or certified mail, postage prepaid, return receipt requested, to the
following addresses:



(i) if to NS, to:



Norfolk Southern Corporation

Three Commercial Place

Norfolk, Virginia 23510

Facsimile No.: (757) 533-4872

Attn: James A. Squires, Esq.



with a copy to:



Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, New York 10036-6522

Facsimile No.: (212) 735-2000

Attn: Eric J. Friedman, Esq.



(ii) if to KCS or KCSR, to:



Kansas City Southern

427 West 12th Street

Kansas City, Missouri 64105

Facsimile No.: (816) 983-1227

Attn: Robert B. Terry, Esq.



with a copy to:



Sonnenschein Nath & Rosenthal LLP

4520 Main Street, Suite 1100

Kansas City, MO 64111




45









 







Facsimile No.: (816) 531-7545

Attn: John F. Marvin, Esq.



Any Notice, other than a Notice sent by registered or certified mail, shall be effective when
received; a Notice sent by registered or certified mail, postage prepaid return receipt requested,
shall be effective on the earlier of when received or the third day following deposit in the United
States mails. Any party may from time to time change its address for further Notices hereunder by
giving notice to the other parties in the manner prescribed in this Section.




          14.2 Entire Agreement. This Agreement, the Company Agreement, the Ancillary Agreements and
the Confidentiality Agreement, in each case including any attached exhibits and schedules, contain
the sole and entire agreement and understanding of the parties with respect to the entire subject
matter of this Agreement, and any and all prior discussions, negotiations, commitments and
understandings, whether oral or otherwise, related to the subject matter of this Agreement are
hereby merged herein. Nothing in this Agreement, express or implied, is intended to confer upon
any Person other than the parties hereto any rights or remedies under or by way of this Agreement.




          14.3 Assignment. No party may assign its rights or obligations under this Agreement, and
any attempted or purported assignment or any delegation of any party’s duties or obligations
arising under this Agreement to any third party or entity shall be deemed to
be null and void, and shall constitute a material breach by such party of its duties and
obligations under this Agreement; provided that NS may assign its rights to any wholly-owned
Subsidiary of NS.




          14.4 Extension, Waiver and Amendment. At any time prior to the Closing, the parties hereto
may (a) extend the time for the performance of any of the obligations or other acts of any other
party hereto, (b) waive any inaccuracies in the representations and warranties of any other party
hereto contained herein or in any document delivered pursuant hereto, and (c) waive compliance by
any other party hereto with any of the agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid if set forth in writing
in an instrument signed by or on behalf of such party. The waiver by any party hereto of a breach
of this Agreement shall not operate or be construed as a waiver of any subsequent breach. This
Agreement may be amended only by a written agreement executed by all of the parties to this
Agreement.




          14.5 Governing Law; Submission to Jurisdiction. 




               (a) THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE VALIDITY OF THIS AGREEMENT, THE
CONSTRUCTION OF ITS TERMS AND THE INTERPRETATION OF THE RIGHTS AND DUTIES ARISING HEREUNDER.



46









 





               (b) Subject to Section 14.13, each of the parties hereto (i) consents to submit itself to the
exclusive jurisdiction of any Federal or state court located in the State of Delaware (the
“Delaware Courts”) in any action to enforce or in aid of the agreement to arbitrate in Section
14.13 herein or for provisional relief to maintain the status quo or prevent irreparable harm
pending the appointment of the arbitrators, and to the non-exclusive jurisdiction of the Delaware
Courts for enforcement of any award issued hereunder (ii) will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court, and (iii) waives
any objection based on forum non conveniens or any other objection to venue thereof.



          14.6 Specific Performance; Injunctive Relief. Each of the parties hereto acknowledges,
understands and agrees that any breach or threatened breach by such party or such party’s
Affiliates of the covenants contained herein will cause irreparable injury to the other party and
that money damages will not provide an adequate remedy therefor. Accordingly, in the event of any
such breach or threatened breach, a non-breaching party shall have the right and remedy (in
addition to any other rights or remedies available at Law or in equity, including, money damages),
subject to the provisions of Section 14.13, to have the provisions of this Agreement specifically
enforced by, and to seek injunctive relief and other equitable remedies in, any court having
competent jurisdiction. Each party further agrees to waive any requirement for the securing or
posting of any bond or other security in connection with seeking such remedies.




          14.7 Severability. Whenever possible each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable Law, but if any provision of this
Agreement shall be or become prohibited or invalid under applicable Law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement.




          14.8 Captions. The various captions of this Agreement are for reference only and shall not
be considered or referred to in resolving questions of interpretation of this Agreement.




          14.9 Counterparts. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall constitute one and the
same instrument.




          14.10 Costs and Attorneys’ Fees. Whether or not the transactions contemplated hereby are
consummated, each of the parties shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including fees and expenses of
its own financial or other consultants, investment bankers, accountants and counsel.




          14.11 Judicial Interpretation. Should any provision of this Agreement require judicial
interpretation, it is agreed that a court or other tribunal, as described in Section 14.13,
interpreting or construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against any Person by reason of the rule of




47









 







construction that a document is
to be construed more strictly against the Person who itself or through its agent prepared the same,
it being agreed that all parties have participated in the preparation of this Agreement.




          14.12 No Third Party Beneficiaries. Except as expressly provided in this Agreement, this
Agreement shall not benefit or create any right or cause of action in or on behalf of any Person
other than the parties hereto; provided, however, that this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and their respective
successors and permitted assigns.




          14.13 Dispute Resolution. Each of the parties hereto stipulates and agrees that any dispute
controversy or claim, arising out of or relating to this Agreement or the breach, termination or
validity thereof (“Dispute”) that is not resolved by negotiations between senior officers of the
parties within twenty (20) days after receipt by a party of written notice (“Dispute Notice”) of
such Dispute, will be submitted to mediation in accordance with the Commercial Mediation Procedures
of the American Arbitration Association (“AAA”). If such dispute is not resolved within twenty
(20) days after appointment of a mediator, or within sixty (60) days of receipt of Dispute Notice
(whichever comes sooner), each of the parties hereto agrees that, at the demand of any party, such
Dispute will be submitted to mandatory and binding arbitration before the AAA, in New York, New
York by three arbitrators, under the Commercial Arbitration Rules and the Large Complex Case
Procedures of the AAA then in effect (the “Rules”), under the following terms and conditions:




               (a) Selection of Arbitrators. A panel of three independent arbitrators shall be
appointed by the AAA using the listing, ranking and striking procedure in the Rules. Any
arbitrator appointed by the AAA shall be a retired judge or a practicing attorney with no less than
fifteen years of experience with large commercial cases and an experienced arbitrator.



               (b) Conduct of Arbitration. The arbitration shall be held and the award shall be
issued in New York, New York. In addition to Damages, the arbitral tribunal may award any remedy
provided for under applicable Law and the terms of this Agreement, including, without limitation,
specific performance or other forms of injunctive relief. The arbitrators shall apply the Law of
the State of Delaware to the substance of the Dispute and will have no power or authority, under
the rules of the AAA or otherwise, to amend or disregard any provision of this Agreement.



               (c) Replacement of Arbitrator(s). Should any of the arbitrator(s) refuse or be unable
to proceed with arbitration proceedings, replacement arbitrator(s) will be selected using the same
method of selection as the original arbitrator(s).



               (d) Findings and Conclusions. The arbitrators will, after reaching judgment and
award, prepare and distribute to the parties a written award including the findings of fact and
conclusions of Law relevant to such award and containing an opinion setting forth the reasons for
the giving or denial of any award.



48









 





               (e) Time is of the Essence. The arbitrators are hereby instructed that time is of the
essence in the arbitration proceeding, and that the arbitrators will have the right and authority
to issue monetary sanctions against any party if, upon a showing that such party is unreasonably
delaying the proceeding.



               (f) Temporary Equitable Relief. By agreeing to arbitration, the parties do not intend
to deprive any Delaware Court of its jurisdiction to issue a pre-
arbitral injunction, pre-arbitral attachment, or other order in aid of arbitration proceedings
and the enforcement of any award. Without prejudice to such provisional remedies as may be
available under the jurisdiction of a Delaware Court, the arbitral tribunal shall have full
authority to grant provisional remedies and to direct the parties to request that any court modify
or vacate any temporary or preliminary relief issued by such court, and to award Damages for the
failure of any party to respect the arbitral tribunal’s orders to that effect.



               (g) Consolidation. The parties hereto are committed to the prompt and efficient
resolution of disputes. Accordingly, if one or more disputes arises under this Agreement, the
Company Agreement or any of the Ancillary Agreements such disputes may be brought in a single
arbitration. If more than one arbitration is brought with respect to disputes under this
Agreement, the Company Agreement or any of the Ancillary Agreements, then any party hereto may
request that any arbitration or any new dispute arising under this Agreement, the Company Agreement
or any of the Ancillary Agreements be consolidated into any prior arbitration. The new dispute or
arbitration shall be so consolidated, provided that the arbitral tribunal for the prior (or first
filed) arbitration determines that (i) the new dispute or arbitration presents significant issues
of Law or fact common with those in the pending arbitration; (ii) no party would be unduly
prejudiced and (iii) consolidation under such circumstances would not result in undue delay for the
prior arbitration. Any order of consolidation issued by such arbitral tribunal shall be final and
binding upon the parties. Unless the parties otherwise agree, the arbitral tribunal appointed
first in time shall serve as the arbitral tribunal for the consolidated arbitration. The parties
waive any right they have to appeal or to seek interpretation, revision or annulment of such order
of consolidation under the Rules or in any court. The parties hereto agree that upon such an order
of consolidation, they will promptly dismiss any arbitration brought under this Agreement, the
subject of which has been consolidated into another arbitral proceeding.



               (h) Discovery. Recognizing the express desire of the parties for an expeditious means
of dispute resolution, the arbitrators will allow for limited discovery as may be reasonable under
the circumstances.



               (i) Costs and Attorneys’ Fees. Notwithstanding any rule of the AAA to the contrary,
the arbitrators rendering judgment under this Section 14.13 will have the power to award the costs
of the arbitration, including reasonable attorneys’ fees and expenses to the prevailing party or
parties in the arbitration. In any action to enforce this agreement to arbitrate or any arbitral
award rendered hereunder, the court may award costs and attorneys’ fees against the party resisting
enforcement.



49









 





[Signature Page Follows]




50









 








     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.



	 	 	 	 	 	 	 	 	 
	 	 	KANSAS CITY SOUTHERN	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Michael R. Haverty	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Michael R. Haverty	 	 
	 

	 	 	 	Title:
	 	Chairman, President and 

Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	THE KANSAS CITY SOUTHERN RAILWAY COMPANY	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Michael R. Haverty	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Michael R. Haverty	 	 
	 

	 	 	 	Title:
	 	Chairman of the Board	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	NORFOLK SOUTHERN CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ C.W. Moorman	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	C. W. Moorman	 	 
	 

	 	 	 	Title:
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	THE ALABAMA GREAT SOUTHERN RAILROAD COMPANY	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ James A. Squires	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	James A. Squires	 	 
	 

	 	 	 	Title:
	 	Vice President