45 U.S.C. S 231 45 U.S.C. §351
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BCD 1992-21.5 EMPLOYER STATUS DETERMINATION Richmond, Fredericksburg and Potomac Railway Company Richmond, Fredericksburg and Potomac Railroad Company RF&P Corporation RF&P Properties, Inc. Richmond Land Corporation RF&P Development Corporation This is the determination of the Railroad Retirement Board as to whether the above-listed companies are employers under the Railroad Retirement and Railroad Unemployment Insurance Acts.!/ Richmond, Fredericksburg and Potomac Railroad Company (RF&P Railroad) is currently an employer under those Acts (B.A. number 1403) by reason of its being a rail carrier. The employer status of the other companies has not previously been considered. On or about October 10, 1991, the Richmond, Fredericksburg and Potomac Railway Company (RF&P Railway), an indirectly wholly-owned subsidiary of CSX·Transportation, Inc. (CSXT)I1, directly acquired substantially all of the railroad assets and operations of RF&P Railroad. RF&P Railroad continues to exist and perform certain operations. RF&P Corporation is a holding company with two wholly-owned subsidiaries: (1) RF&P Railroad and (2) RF&P Properties, Inc. RF&P Properties, Inc., in turn, has 17 45 U.S.C. S 231 et seq. and 45 U.S.C. §351 et seq. respectively. 2/ CSXT is an employer covered under the Railroad Retirement and Railroad Unemployment Insurance Acts (B.A. number 1S24). -2- two wholly-owned subsidiaries: Richmond Land Corporation & RF&P Development Corporation. RF&P Properties, Inc., and its two subsidiaries are devoted to real estate acquisition and development. The background of the abovementioned October 1991 transaction is described as follows on page 15 of Schedule 14D-9 filed with the Securities and Exchange Commission by RF&P Corporation: In November, 1980, Chessie System, Inc. ("Chessie") and Seaboard Coast Line Industries, Inc. ("Seaboard") merged to form CSX. At the time of that merger, the principal asset of Chessie was an 11,000-mile railroad system located principally in the Mid-Atlantic and Midwest regions. The principal asset of Seaboard was a 16,000-mile railroad system located principally in the Mid-Atlantic, South and Midwest regions. In addition, Chessie and Seaboard each owned or controlled shares of [RF&P Railroad]. After consummation of the Chessie-Seaboard merger, CSX controlled, directly or indirectly, in excess of 60\ of the then outstanding voting [RF�P Railroad] shares and received approval of the Interstate Commerce Commission to control [RF&P Railroad]. Since 1983, CSX has sought to increase its ownership of the Company and to acquire either the Company's railroad operations or the entire Company. The 113-mile railroad system of [RF&P Railroad] connects the former Chessie System to the former Seaboard System. CSX has considered the existence of a separate operating railroad between the northern (former Chessie) and southern (former Seaboard) properties of CSXT an impediment to both operating and marketing efficiencies. CSXT is unable to control fully the costs of utilizing the connection between its two main systems and cannot respond to the needs of its customers in handling traffic in the most efficient manner. [RF&P Railroad], on the other hand, has limited access to markets and is largely dependent on CSXT for its business." -3- The transaction itself is described as follows on page 2 of the SEC filing. System Holdings, Inc., a wholly owned subsidiary of Virginia Retirement System (VRS) (a state agency), made a tender offer to purchase outstanding shares of RF&P Corporation; upon purchase of the shares, RF&P Corporation and RF&P Railroad would transfer to RF&P Railway the rail-related assets of RF&P Railroad. The transaction is also described as follows in ICC Notice of Exemption, Finance Docket No. 31954, October 31, 1991. CSX Corporation, a non-carrier holding company, owns 100 percent of the common stock of CSXT, a class I rail carrier. CSXT owns a controlling interest in Richmond-Washington Company, a non-carrier holding company that owned substantial interest in RF&P Corporation, a non-carrier holding company that owns 100 percent of the common stock of RF&P Railroad Company. Under the transaction, RF&P Railway, a newly created non-carrier affiliate of CSXT, would "directly acquire substantially all of the railroad assets and operations of RF&P Railroad Company." The transaction is further described in the application for a Notice of Exemption filed October 2, 1991, "in connection with the proposed acquisition by RF&P Railway of substantially all of the rail-related assets and operations of RF&P Railroad." -4- CSX [CSX Corporation] is a non-carrier holding company that, int>er alia, owns 100 percent of the common stock of CSXT, a cla"s'sl rail carrier. CSX today controls RF&P Railroad through indirect ownership of a majority of the outstanding voting stock of RF&P Corporation ("RF&P"), a non-carrier holding company that in turn owns 100 percent of the outstanding common stock of RF&P Railroad. The Commission authorized CSX's control of the RF&P Railroad in its 1980 decision approving the consolidation of the Chessie and Seaboard railroad systems under CSX's control. [Citation omitted.] Under the transaction proposed in this proceeding, RF&P Railway, a newly created non-carrier affiliate of CSXT, will directly acquire substantially all of RF&P Railroad's railroad assets and operations. Upon consummation of the acquisition, RF&P Railway will continue RF&P Railroad's railroad operations without significant change in rail service or operations. In fundamental respects, the proposed transaction effectuates merely an increase in the degree of CSX's controlling ownership interest in RF&P Railroad by transferring RF&P Railroad's railroad assets and operations from one entity (RF&P Railroad) that CSX controls through less than complete stock ownership to another entity (RF&P Railway) that CSX controls through 100 percent stock ownership. * * * * fl CSX is a non-carrier holding company that, inter alia, controls CSXT through 100 percent stock ownership. CSXT is a class I rail carrier that operates a rail system comprising approximately 19,000 miles of main-line trackage located in 20 states, the District of Columbia and the Province of Ontario, Canada. CSXT is the successor, through merger, of the former Chesapeake and Ohio Railway Company, The Baltimore and Ohio Railroad Company, Western Maryland Railway Company, Seaboard System Railroad, Inc., and affiliated carriers. RF&P Railway is a wholly owned, non-carrier subsidiary of [Northern Ventures Holding Corporation] which, in turn, is a wholly owned non-carrier subsidiary of CSXT. RF&P Railway was created for the express purpose of acquiring RF&P Railroad's rail-related assets -5- and operations. Upon consummation of the transaction proposed herein, RF&P Railway will conduct business as a rail carrier, operating the aquired assets of RF&P Railroad. RF&P Railroad is a Class Ill rail carrier that operates a 113-mile rail line between Richmond and Arlington County, Virginia. RF&P Railroad also operates the so-called Potomac Yard, a rail freight classification and interchange yard located in Arlington County and Alexandria, Virginia, as well as yard facilities located in Richmond and Henrico County, Virginia. RF&P Railroad is a wholly owned subsidiary of [RF&P Corporation), a non-carrier holding company. Among other things, [RF&P Corporation] also conducts real estate development operations through wholly owned subsidiaries. As noted, above, CSX has controlled RF&P Railroad pursuant to Commission authority since 1980. At present, CSX's control is in the form of stock ownership in the following manner. CSX owns 100 percent of the issued and outstanding common stock of CSXT, which in turn owns 80 percent of the outstanding voting stock of Richmond-Washington Company, a non-carrier holding company. (The remaining 20 percent of the outstanding voting stock of Richmond-Washington Company is owned by Norfolk Southern Corporation.) Richmond-Washington Company owns 62.7 percent of the outstanding voting stock of [RF&P Corporation), the non-carrier holding company that, in turn own 100 percent of the outstanding common stock of RF&P Railroad. (Of the remaing 37.3 percent of the outstanding voting stock of RF&P Corporation, 16.4 is owned by the Virginia Retirement System ("VRS") (the pension fund for state and local government employees in Virginia) and 20.9 percent is owned by the general public.) As result of this indirect stock ownership, CSX effectively controls 62.7 percent of the outstanding voting stock of RF&P Railroad. Description of Proposed Transactiqn. The proposed transaction is one of three interrelated transactions under which CSX and its affiliates would acquire direct and complete ownership of substantially all of RF&P's railroad assets and operations while [the Virginia Retirement System] would acquire indirect ownership of RF&P's non-rail assets and operations. The three proposed transactions, only the first of which is subject to Commission review, are as follows: -6- First, pursuant to an Asset Purchase Agreement dated as of August 28, 1991 among [RF&P Corporation], RF&P Railroad, [Northern Ventures Holding Corporation,] and RF&P Railway (the "APA"), RF&P Railway will purchase substantially all of the assets comprising the railroad operations of RF&P Railroad in exchange for certain [RF&P Corporation] non-voting dividend obligation stock (valued at $135 million) now held by [Northern Ventures Holding Corporation], and RF&P Railway's assumption of certain liabilties of RF&P Railroad as specified in the agreement. Following consummation of the acquisition, RF&P Railway will continue the railroad operations previously performed by RF&P Railroad, and RF&P Railroad will thereupon cease to be a rail common carrier. At closing, CSXT will enter into a related agreement guaranteeing various obligations of RF&P Railway under the APA.