ACQUISITION AGREEMENT
by and among
KANSAS CITY SOUTHERN,
a Delaware corporation,
KARA Sub, Inc.,
a Delaware corporation,
GRUPO TMM, S.A.,
a sociedad anonima organized under
the laws of the United Mexican States,
TMM HOLDINGS, S.A. de C.V.,
a sociedad anonima de capital variable
organized under the laws of the United Mexican States,
and
TMM MULTIMODAL, S.A. de C.V.,
a sociedad anonima de capital variable
organized under the laws of the United Mexican States
DATED AS OF APRIL 20, 2003
Table of Contents
ARTICLE 1 STOCK PURCHASE.....................................................1
Section 1.1 Stock Purchase.................................................1
Section 1.2 Stock Purchase Price...........................................1
ARTICLE 2 SUBSIDIARY INVESTMENT..............................................2
Section 2.1 Subsidiary Investment..........................................2
ARTICLE 3 THE MERGER.........................................................2
Section 3.1 The Merger.....................................................2
Section 3.2 Name Change, Certificate of Incorporation and Bylaws...........2
Section 3.3 Board and Officers.............................................2
Section 3.4 Merger Integration Committee...................................3
ARTICLE 4 CLOSING............................................................3
Section 4.1 Closing........................................................3
Section 4.2 Actions at Closing.............................................3
Section 4.3 Conversion of Securities.......................................4
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLERS..........................5
Section 5.1 Organization and Related Matters...............................5
Section 5.2 Authorized Capitalization......................................6
Section 5.3 GTFM and GTFM Subsidiaries.....................................7
Section 5.4 Authority; No Violation........................................7
Section 5.5 Consents and Approvals.........................................8
Section 5.6 Financial Statements; Undisclosed Liabilities..................9
Section 5.7 Contracts......................................................9
Section 5.8 Intellectual Property Rights..................................10
Section 5.9 Employee Benefit Matters......................................10
Section 5.10 Labor and Other Employment Matters...........................11
Section 5.11 Tax Matters..................................................13
Section 5.12 Legal Proceedings............................................14
Section 5.13 Permits and Compliance.......................................14
Section 5.14 Environmental Matters........................................15
Section 5.15 Properties...................................................15
Section 5.16 Insurance....................................................16
Section 5.17 No Other Broker..............................................16
Section 5.18 No GTFM Material Adverse Effect..............................16
Section 5.19 Sufficiency of and Title to Assets...........................16
Section 5.20 Information in Filed Documents...............................16
Section 5.21 Transactions with Affiliates.................................17
Section 5.22 No Loss of Significant Customers.............................17
Section 5.23 Trading in and Ownership of KCS Common Stock.................17
Section 5.24 Solvency.....................................................17
Section 5.25 Termination of Option Agreement..............................17
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF KCS.............................18
Section 6.1 Organization and Related Matters..............................18
Section 6.2 Authority; No Violation.......................................18
Section 6.3 Consents and Approvals........................................20
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Section 6.4 Authorized Capitalization.....................................20
Section 6.5 SEC Filings...................................................21
Section 6.6 Financial Statements; Undisclosed Liabilities.................21
Section 6.7 No Other Broker...............................................21
Section 6.8 Information in Filed Documents................................22
Section 6.9 No KCS Material Adverse Effect................................22
Section 6.10 KARA Sub.....................................................22
Section 6.11 Legal Proceedings............................................22
Section 6.12 KCS Capital Resources........................................22
Section 6.13 Employee Benefit Matters.....................................23
Section 6.14 Labor and Other Employment Matters...........................23
Section 6.15 Tax..........................................................23
Section 6.16 Permits and Compliance.......................................23
Section 6.17 Environmental Matters........................................24
Section 6.18 Properties...................................................24
ARTICLE 7 COVENANTS AND ADDITIONAL AGREEMENTS...............................25
Section 7.1 Conduct of Business by the GTFM Group.........................25
Section 7.2 Conduct of Business by KCS and its Subsidiaries...............27
Section 7.3 Access to Information; Confidentiality........................28
Section 7.4 Regulatory Matters; Governing Documents; Third-Party Consents.28
Section 7.5 Stockholder and Debtholder Approvals..........................29
Section 7.6 Tax Matters...................................................30
Section 7.7 Insurance.....................................................30
Section 7.8 Notification of Certain Matters...............................30
Section 7.9 Further Assurances............................................31
Section 7.10 Third-Party Matters..........................................31
Section 7.11 Efforts of Parties to Close..................................32
Section 7.12 Expenses.....................................................33
Section 7.13 VAT Contingency Payment......................................33
Section 7.14 Financing for the Acquisition................................33
Section 7.15 Release......................................................33
ARTICLE 8 CONDITIONS........................................................34
Section 8.1 Mutual Conditions.............................................34
Section 8.2 Conditions to the Obligations of KCS..........................34
Section 8.3 Conditions to the Obligations of Sellers......................35
ARTICLE 9 TERMINATION.......................................................37
Section 9.1 Termination...................................................37
Section 9.2 Survival after Termination....................................37
ARTICLE 10 INDEMNIFICATION..................................................38
Section 10.1 Survival of Representations, Warranties and Covenants;
Exclusive Monetary Remedies...............................................38
Section 10.2 Indemnification by Sellers...................................38
Section 10.3 Indemnification by KCS.......................................39
Section 10.4 Procedures for Third-Party Claims............................40
Section 10.5 Tax Indemnification..........................................41
ARTICLE 11 DEFINITIONS......................................................41
Section 11.1 Certain Defined Terms........................................41
ARTICLE 12 MISCELLANEOUS....................................................47
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Section 12.1 Amendments; Waiver...........................................47
Section 12.2 Entire Agreement.............................................47
Section 12.3 Interpretation...............................................48
Section 12.4 Severability.................................................48
Section 12.5 Notices......................................................49
Section 12.6 Headings.....................................................50
Section 12.7 Binding Effect; Persons Benefiting; No Assignment............50
Section 12.8 No Third Party Beneficiaries.................................50
Section 12.9 Counterparts.................................................50
Section 12.10 Specific Enforcement........................................50
Section 12.11 Governing Law; Dispute Resolution...........................50
Section 12.12 Announcements...............................................53
Section 12.13 Termination Fee.............................................53
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TABLE OF DEFINED TERMS
Term.. Page Section
2003 Notes.........................9.....................5.5
2006 Notes.........................9.....................5.5
Acquisition........................1................Preamble
Affiliate.........................40....................11.1
Agreement..........................1................Preamble
Ancillary Agreements...............1................Preamble
Applicable Law....................40....................11.1
Arbitration Costs.................51...........12.11(d)(iii)
Arbitration Demand................50................12.11(d)
Arbitrators.......................50.............12.11(d)(i)
Benefit Plan......................10..................5.9(a)
Board of Directors.................2.....................3.3
Business Day......................40....................11.1
Buyer Parties.....................31.................7.10(c)
Certificate of Merger..............2.....................3.1
Change of Control.................40....................11.1
Closing............................3.....................4.1
Closing Date.......................3.....................4.1
Code..............................22....................6.13
Concession........................41....................11.1
Confidentiality Agreement.........41....................11.1
Consulting Agreement..............41....................11.1
Contracts.........................41....................11.1
Control...........................41....................11.1
Del. G.C.L.........................2.....................3.1
Disputes..........................49................12.11(a)
Dispute Notice....................50................12.11(c)
Dispute Parties...................49................12.11(a)
Dispute Party.....................49................12.11(a)
Effective Time.....................2.....................3.1
Encumbrance.......................41....................11.1
Environmental Laws................41....................11.1
Environmental Permit..............42....................11.1
ERISA.............................22....................6.13
ERISA Affiliate...................42....................11.1
Exchange Act......................42....................11.1
Expiration Date...................37.................10.1(a)
Final Resolution of the VAT Claim.42....................11.1
GAAP..............................42....................11.1
Governmental Authority............42....................11.1
GTFM...............................1................Preamble
GTFM Assets.......................16....................5.19
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GTFM Benefit Plan.................10..................5.9(a)
GTFM Business.....................42....................11.1
GTFM Financial Statements..........9.....................5.6
GTFM Form 20-F....................43....................11.1
GTFM Group........................43....................11.1
GTFM Insurance Policies...........16....................5.16
GTFM Material Adverse Effect......43....................11.1
GTFM Shares........................1.....................1.1
GTFM Subsidiaries..................7..................5.3(a)
GTFM Trademarks...................43....................11.1
GTFM Voting Debt...................6.....................5.2
Hazardous Materials...............43....................11.1
HSR Act...........................43....................11.1
Income Taxes......................43....................11.1
Indemnified Party.................39.................10.4(a)
Intellectual Property.............43....................11.1
Investment Advisers Act...........44....................11.1
Investment Company Act............44....................11.1
KARA Sub...........................1................Preamble
KARA Sub Common Stock..............2.....................2.1
KCS................................1................Preamble
KCS Acquisition Proposal..........31.................7.10(c)
KCS Assets........................44....................11.1
KCS Business......................44....................11.1
KCS Disclosure Schedule...........17..Article 6 Introduction
KCS Financial Statements..........20.....................6.6
KCS Indemnitees...................37....................10.2
KCS Material Adverse Effect.......44....................11.1
KCS SEC Documents.................21.....................6.5
KCS Stock Option Plan.............44....................11.1
KCS Voting Debt...................20.....................6.4
Knowledge.........................44....................11.1
Law...............................44....................11.1
Losses............................38....................10.2
Merger.............................1................Preamble
Merger Integration Committee.......3.....................3.4
MM.................................1................Preamble
MM Subsidiaries...................44....................11.1
NAFTA Rail.........................2.....................3.2
NYSE..............................44....................11.1
Parties............................1................Preamble
Permits...........................14.................5.13(a)
Permitted Encumbrance.............45....................11.1
Person............................45....................11.1
Proceedings.......................14....................5.12
Process Agent.....................52................12.11(f)
Put Agreement.....................45....................11.1
Put Purchase Price................45....................11.1
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Reconciliation.....................9.....................5.6
Scheduled Contracts................9.....................5.7
SEC...............................45....................11.1
Securities........................45....................11.1
Securities Act....................45....................11.1
Securities Laws...................45....................11.1
Seller Disclosure Schedule.........5..Article 5 Introduction
Seller Indemnitees................38....................10.3
Seller Material Adverse Effect....45....................11.1
Seller Parties....................30.................7.10(a)
Sellers............................5..Article 5 Introduction
Strategic Investor................45....................11.1
Stock Purchase.....................1................Preamble
Stock Purchase Price...............1.....................1.1
Straddle Period...................29..................7.6(b)
Subsidiary........................46....................11.1
Subsidiary Investment..............1................Preamble
Surviving Company..................2.....................3.1
Tax...............................45....................11.1
Tax Return........................46....................11.1
Taxing Authority..................46....................11.1
Termination Date..................36..............9.1(a)(vi)
TFM...............................46....................11.1
Third-Party Claim.................39.................10.4(a)
TMM................................1................Preamble
TMM Account........................1.....................1.2
TMM Acquisition Proposal..........30.................7.10(a)
TMMH...............................1................Preamble
UMS................................1................Preamble
U.S...............................46....................11.1
VAT...............................46....................11.1
VAT Claim.........................46....................11.1
VAT Contingency Payment...........32....................7.13
VAT Payment.......................46....................11.1
Exhibit 1 KARA Sub Note
Exhibit A Amended and Restated Certificate of Incorporation of the
Surviving Company
Exhibit B Bylaws of the Surviving Company
Exhibit C Agreement of Assignment and Assumption of Put Obligations
Exhibit D Boards of Directors, Committees and Officers of Surviving
Company, GTFM and GTFM Subsidiaries and Merger Integration
Committee
Exhibit E Seller Disclosure Schedule
Exhibit F KCS Disclosure Schedule
Exhibit G-1. Form of Opinion Letter of Milbank, Tweed, Xxxxxx & XxXxxx LLP
Exhibit G-2 Form of Opinion Letter of Xxxxxx & Xxxxx, X.X.
Exhibit H-1 Form of Opinion Letter of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
Exhibit H-2 Form of Opinion Letter of Xxx Xxxxxxx, Esq.
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ACQUISITION AGREEMENT, dated as of April 20, 2003 (this "Agreement"), by
and among KANSAS CITY SOUTHERN, a Delaware corporation ("KCS"), KARA Sub, Inc.,
a Delaware corporation ("KARA Sub"), GRUPO TMM, S.A., a sociedad anonima
organized under the laws of the United Mexican States ("UMS") ("TMM"), TMM
HOLDINGS, S.A. de C.V., a sociedad anonima de capital variable organized under
the laws of the UMS and a subsidiary of TMM ("TMMH") and TMM MULTIMODAL, S.A. de
C.V., a sociedad anonima de capital variable organized under the laws of the UMS
("MM") and a subsidiary of TMMH (collectively, the "Parties").
WHEREAS, each of the Boards of Directors of KCS, TMM, TMMH and MM has
approved and declared advisable the acquisition by KCS of all of MM's interest
in GRUPO TRANSPORTACION FERROVIARIA MEXICANA, S.A. de C.V., a sociedad anonima
de capital variable organized under the laws of the UMS ("GTFM") through (i) the
purchase by KARA Sub from MM of all of the capital stock of GTFM held by MM (the
"Stock Purchase"), (ii) the investment by MM in KARA Sub (the "Subsidiary
Investment") and (iii) the merger of KARA Sub with and into KCS (the "Merger")
upon the terms and subject to the conditions of this Agreement (collectively,
the Stock Purchase, Subsidiary Investment and the Merger comprise the
"Acquisition"); and
WHEREAS, certain of the Parties and other parties are entering into
ancillary agreements (the "Ancillary Agreements," identified hereinafter) to
carry out certain of the objectives of this Agreement and of the Acquisition.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the Parties agree as
follows:
ARTICLE 1
STOCK PURCHASE
Section 1.1 Stock Purchase. Upon the terms and subject to satisfaction or
waiver of the conditions set forth in Article 8, at the Closing, KARA Sub shall
purchase, acquire and receive from MM, and MM shall sell, assign, transfer,
convey and deliver to KARA Sub, all GTFM Shares held by MM, consisting of 25,500
shares of Series "A" fixed capital stock of GTFM and 3,842,901 shares of Series
"A" variable capital stock of GTFM (collectively the "GTFM Shares"), for the
consideration described in Section 1.2 (the "Stock Purchase Price").
Section 1.2 Stock Purchase Price. The Stock Purchase Price to be paid by
KARA Sub to MM at the Closing for the purchase of the GTFM Shares shall be paid
by the delivery of: (i) $200 million, in immediately available funds, by wire
transfer to the account designated by TMM to KCS at least three business days
prior to the Closing Date (the "TMM Account"), provided, that KCS may, at its
option, elect to pay up to $80 million of such amount by delivering to MM a
number of shares of KCS Common Stock, or of KCS Class A Common Stock determined
by dividing the amount that KCS so elects to pay other than in cash by $12.50
(such election to be made by written notice to the Sellers not less than 30 days
prior to the
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Closing specifying the amount which KCS elects to pay through the delivery of
Common Stock or Class A Common Stock and the class of such stock, which notice
shall be irrevocable once given); and (ii) a subordinated promissory note
evidencing an indebtedness of KARA Sub in the principal amount of $25,000,000,
having the terms and conditions set forth in the form of note attached hereto as
Exhibit 1 (the "KARA Sub Note"). KCS covenants and agrees to provide KARA Sub
with sufficient funds to make all payments required to be made by it under this
Agreement.
ARTICLE 2
SUBSIDIARY INVESTMENT
Section 2.1 Subsidiary Investment. At the Closing, immediately following
the Stock Purchase, MM shall subscribe for and purchase from KARA Sub 100 shares
of KARA Sub common stock, $.01 par value ("KARA Sub Common Stock"), representing
10% of the issued and outstanding shares of KARA Sub Common Stock, and KARA Sub
shall issue, sell and transfer to MM the KARA Sub Common Stock in consideration
for delivery by MM to KARA Sub of the KARA Sub Note.
ARTICLE 3
THE MERGER
Section 3.1 The Merger. Immediately following the Subsidiary Investment,
KARA Sub shall be merged with and into KCS in accordance with the General
Corporation Law of the State of Delaware ("Del. G.C.L."). KCS and KARA Sub shall
cause the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
in such form as required by, and executed in accordance with the relevant
provisions of, the Del. G.C.L. (the date and time of the filing of the
Certificate of Merger being the "Effective Time"). At the Effective Time, the
effects of the Merger shall be as provided in the Certificate of Merger and the
applicable provisions of the Del. G.C.L. As a result of the Merger, the separate
corporate existence of KARA Sub shall cease and KCS shall continue as the
surviving corporation of the Merger (the "Surviving Company").
Section 3.2 Name Change, Certificate of Incorporation and Bylaws. At the
Effective Time, KCS shall change its name to "NAFTA Rail Corporation" or such
other name as shall be determined by KCS and its Restated Certificate of
Incorporation and Bylaws shall be amended in their entirety to contain the
provisions set forth, respectively, in Exhibits A and B to this Agreement, which
shall become, respectively, the Amended and Restated Certificate of
Incorporation and Bylaws of the Surviving Company. At the Effective Time, the
Charter and Bylaws, or other organizational documents of GTFM and each GTFM
Subsidiary shall be amended as determined by KCS.
Section 3.3 Board and Officers. At the Effective Time, the Board of
Directors of the Surviving Company (the "Board of Directors") shall be comprised
of eleven members (provided, that KCS may add a representative of a Strategic
Investor in KCS as a twelfth director) divided into three classes, each class to
be as equal in number as practicable, to serve staggered three-year terms. At or
promptly following the Effective Time, the Board of Directors shall establish,
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and appoint the members of, such committees as the Board of Directors deems
appropriate, which shall include the committees set forth in Exhibit D to this
Agreement. Included in Exhibit D are the names of the members of the respective
initial Board of Directors (including those persons designated to be members of
the committees of the Board of Directors), and the initial executive officers,
of the Surviving Company, and of GTFM and the GTFM Subsidiaries, each to hold
office at the Effective Time. Each person identified in Exhibit D to this
Agreement shall hold office in accordance with the applicable charter documents
and Ancillary Agreements and until the earlier of their resignations or removal
as permitted under such charter documents and Ancillary Agreements, or until
their respective successors are duly elected and qualified, as the case may be.
Section 3.4 Merger Integration Committee. The Board of Directors shall
appoint, effective as of the Effective Time, a merger integration committee
("Merger Integration Committee"), comprised initially of the persons identified
as such in Exhibit D. The Merger Integration Committee shall assist the Board of
Directors for a period of one year in managing the transition of ownership and
operation of GTFM contemplated by this Agreement and shall have such other
duties and responsibilities as may be assigned by the Board of Directors,
consistent with the Ancillary Agreements.
ARTICLE 4
CLOSING
Section 4.1 Closing. Unless this Agreement shall have been earlier
terminated in accordance with the terms hereof, the consummation of the
transactions contemplated by this Agreement (the "Closing") shall, subject to
the satisfaction or waiver of the conditions set forth in Article 8, take place
at the offices of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, 1221 Avenue of the America,
24th Floor, New York, New York, on the second (2nd) Business Day after all of
the conditions set forth in Article 8 have been satisfied or waived (other than
the conditions that relate to actions to be taken at the Closing) or at such
other date, time and place as KCS and MM shall mutually agree in writing (the
date on which the Closing takes place, the "Closing Date"). The closing of the
Acquisition is dependent upon the closing of each of the Stock Purchase, the
Subsidiary Investment and the Merger and if any one of the Stock Purchase, the
Subsidiary Investment or the Merger shall not close, then the Acquisition shall
not close and all consideration theretofore paid or exchanged shall be promptly
returned.
Section 4.2 Actions at Closing. At the Closing:
(a) KCS shall cause KARA Sub to deliver to MM the Stock Purchase Price,
including the KARA Sub Note, duly executed and in proper form to evidence the
indebtedness of KCS Sub represented thereby and MM shall, and TMM shall cause MM
to, deliver to KARA Sub the stock certificates for the GTFM Shares duly endorsed
in favor of KARA Sub in proper form to transfer ownership to KARA Sub of such
shares free and clear of any and all Encumbrances.
(b) MM shall, and TMM shall cause MM to, deliver to KARA Sub the KARA Sub
Note, duly endorsed for transfer to KARA Sub free and clear of any and all
Encumbrances, other than Encumbrances arising solely by operation of law, and
KCS shall cause KARA Sub to issue and deliver to MM the KARA Sub Common Stock.
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(c) KCS and KARA Sub shall file the Certificate of Merger with the
Secretary of State of Delaware to effect the Merger.
(d) The Parties shall deliver and receive, respectively, the opinions of
counsel referred to in Section 8.2(f) and 8.3(e) and the officers' certificates
referred to in Section 8.2(c) and 8.3(c).
(e) KCS and Consultant shall execute and deliver the Consulting Agreement,
which shall become effective on the first business day following the Closing
Date.
(f) KCS and TMM shall execute and deliver the Marketing and Services
Agreement. KCS, TMM and the other parties thereto shall execute and deliver the
Stockholders' Agreement and the Registration Rights Agreement.
(g) TMM and KCS shall execute and deliver an agreement by which TMM assigns
its rights, and KCS assumes TMM's obligations, to purchase TFM stock pursuant to
the Put Agreement and indemnifying TMM from KCS's non-performance of such
obligations, such agreement to be substantially in the form of Exhibit C hereto.
(h) To the extent in the possession of TMM or MM, TMM and MM shall, and TMM
shall cause MM to, deliver to GTFM all files and books of account, including
business, financial and tax records, of GTFM, including, without limitation,
minute books, stock record books, the Concession Agreement and supporting
exhibits and records relating thereto and work papers. In addition, TMM and MM
shall, and TMM shall cause MM to, deliver to GTFM or KCS such other documents,
resolutions, appointments, powers of attorney and instruments of transfer
necessary or appropriate to implement this Agreement and effect the transactions
contemplated hereby and by the Ancillary Agreements, in each case as KCS may
reasonably request and in form and substance reasonably acceptable to KCS.
(i) MM shall cause the Secretary of GTFM to make the corresponding notation
in the Stock Registry Book of GTFM evidencing KARA Sub as the record, legal and
beneficial owner of the GTFM Shares as of the Closing Date.
(j) The written resignations of all directors and officers (or, as to
officers, evidence reasonably acceptable to KCS of corporate action sufficient
to effect their removal and replacement) of GTFM and GTFM Subsidiaries effective
as of the Closing Date, except for those persons identified on Exhibit D as to
continue in office, shall be delivered to KCS, accompanied by evidence
reasonably satisfactory to KCS that prior to such resignation, the election of
the successors to directors resigning was approved by at least two-thirds of the
entire Board of Directors of such corporations.
(k) All actions taken at the Closing pursuant to this Agreement shall be
deemed to have been taken simultaneously and no actions or transactions will be
deemed to have taken place, or documents delivered, or payments made, unless all
actions and transactions have been completed and all documents have been
executed and delivered.
Section 4.3 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any other action on the part of any Party:
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(a) each share of KARA Sub Common Stock issued and outstanding immediately
prior to the Effective Time and held of record and beneficially by MM shall be
converted into and exchanged for 180,000 shares of Class A Common Stock of the
Surviving Company, representing in the aggregate 18,000,000 shares of Class A
Common Stock of the Surviving Company and having the par value and the rights
and limitations described in Article Fourth of Exhibit A to this Agreement;
(b) each share of KARA Sub Common Stock issued and outstanding immediately
prior to the Effective Time and held of record and beneficially by KCS shall be
cancelled;
(c) each share of KCS Common Stock, and each share of KCS Preferred Stock,
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding as one share of Common Stock, and one share of Preferred
Stock, respectively, of the Surviving Company, having the par value and the
rights and limitations described in Article Fourth of Exhibit A to this
Agreement;
(d) each share of KCS Common Stock and each share of KCS Preferred Stock
that is owned by KCS immediately prior to the Effective Time as treasury stock
shall remain as one share of treasury stock of the Surviving Company having the
par value and the rights and limitations described in Article Fourth of Exhibit
A to this Agreement; and
(e) each option to acquire KCS Common Stock issued and outstanding
immediately prior to the Effective Time shall be adjusted as necessary to
provide that, at the Effective Time, such option shall be deemed an option to
acquire, on the same terms and conditions as were applicable under such option,
the number of shares of Common Stock of the Surviving Company equal to the
number of shares of KCS Common Stock subject to such option.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the disclosure schedule attached as Exhibit E to
this Agreement (the "Seller Disclosure Schedule"), TMM, TMMH and MM ("Sellers"),
jointly and severally, represent and warrant to KCS as follows:
Section 5.1 Organization and Related Matters.
(a) TMM is a sociedad anonima, duly formed, validly existing and in good
standing under the laws of the UMS. TMM has the corporate power and authority
necessary to carry on its business in the manner as it is now being conducted
and to own, lease and operate all of its properties and assets. The copy of
TMM's Corporate Charter and Bylaws previously provided to KCS is a complete and
correct copy of such instrument as in effect on the date hereof. Sellers have
provided KCS with an English translation of such documents.
(b) TMMH is a S.A. de C.V., duly formed, validly existing and in good
standing under the laws of the UMS. TMMH has the corporate power and authority
necessary to carry on its business in the manner it is now being conducted and
to own, lease and operate all of its properties and assets. TMMH is a subsidiary
of TMM, which owns all of the issued and
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outstanding capital stock of TMMH, except as set forth in Section 5.1 of the
Seller Disclosure Schedule.
(c) MM is a S.A. de C.V., duly formed, validly existing and in good
standing under the laws of the UMS. MM has the corporate power and authority
necessary to carry on its respective business in the manner it is now being
conducted and to own, lease and operate all of its properties and assets. MM is
a subsidiary of TMMH, which owns all of the issued and outstanding capital stock
of MM, except as set forth in Section 5.1 of the Seller Disclosure Schedule.
(d) GTFM is a S.A. de C.V., duly formed, validly existing and in good
standing under the laws of the UMS, and each of the GTFM Subsidiaries is a S.A.
de C.V. or other business entity duly formed, validly existing and in good
standing under the laws of the UMS. GTFM has the corporate power and authority
necessary to carry on its business in the manner it is now being conducted and
to own, lease and operate all of its properties and assets.
(e) Each of TMM, TMMH, MM, GTFM and the Subsidiaries of GTFM is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned, leased or operated by it makes such qualification or licensing
necessary, except in jurisdictions where the failure of such license or
qualification would not individually or in the aggregate have a GTFM Material
Adverse Effect.
(f) The copies of the Corporate Charter and Bylaws of each of TMMH, MM,
GTFM, and of each of the GTFM Subsidiaries, delivered to KCS by TMM prior to the
execution of this Agreement are complete and correct copies of such instruments
as in effect on the date hereof and Sellers have provided KCS with English
translations of such documents.
Section 5.2 Authorized Capitalization. The authorized capital stock of
GTFM consists of (i) 25,500 shares of Series "A" fixed capital, of which 25,500
shares are held by MM, (ii) 3,842,901 shares of Series "A" variable capital, of
which 3,842,901 shares are held by MM, (iii) 24,500 shares of Series "B" fixed
capital, of which 24,500 shares are held by NAFTA Rail, S.A. de C.V., (iv)
3,692,199 shares of Series "B" variable capital, of which 3,692,199 shares are
held by NAFTA Rail, S.A. de C.V., and (v) 2,478,470 shares of Series "LII"
variable capital, of which 2,478,470 are held by TFM. Except as set forth in
Section 5.2 of the Seller Disclosure Schedule, there are no other shares of
capital stock of GTFM or other ownership interests in GTFM issued, reserved for
issuance or outstanding. All of the shares of capital stock of GTFM outstanding
are duly authorized, validly issued, fully paid and nonassessable and free of
any preemptive rights and are not subject to any voting trust agreement (or
similar agreement), or other Contract restricting or otherwise relating to the
voting, dividend rights or disposition of such shares to which GTFM or any of
the Sellers is a party or by which GTFM or any of the Sellers is bound. Except
as set forth in this Section 5.2, there is no outstanding option, warrant,
convertible or exchangeable security, right, subscription, call, right of first
refusal, legally binding commitment, preemptive right or other agreement or
right of any kind to which GTFM or the Sellers are a party or are otherwise
bound entitling any Person to purchase or otherwise acquire (including by
exchange or conversion) from GTFM or any GTFM Subsidiary any shares of capital
stock of GTFM. Except as set forth in the Put Agreement, there are no
outstanding obligations of GTFM or any of its Subsidiaries to redeem, repurchase
or otherwise acquire any of
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the shares of capital stock of GTFM or any shares of capital stock (or other
ownership interests) of any of its Subsidiaries. Neither GTFM nor any GTFM
Subsidiary has outstanding any bonds, debentures, notes or other indebtedness
generally having the right to vote (or convertible into, or exchangeable for,
Securities having the right to vote) on any matters on which holders of shares
of capital stock of GTFM may consent or vote ("GTFM Voting Debt"). There are no
options, warrants, rights, convertible or exchangeable Securities, "phantom"
interests or other ownership interest appreciation rights, commitments,
Contracts, arrangements or undertakings of any kind to which GTFM or any of its
Subsidiaries is a party or by which any of them is bound (i) obligating GTFM or
any of its Subsidiaries or any other Person to issue, deliver or sell, or cause
to be issued, delivered or sold, existing or additional shares of capital stock
of GTFM or capital stock (or other ownership interests) of any GTFM Subsidiary,
or any security convertible into or exercisable or exchangeable for any of the
foregoing or for GTFM Voting Debt, (ii) obligating GTFM or any GTFM Subsidiary
or any other Person to issue, grant, extend or enter into any such option,
warrant, call, right, security commitment, Contract, arrangement or undertaking,
(iii) that give any Person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights accruing to holders
of the shares of capital stock of GTFM or capital stock (or other ownership
interests) of any GTFM Subsidiary or (iv) that give rise to a right to receive
any payment from GTFM or any GTFM Subsidiary upon the execution of this
Agreement or the consummation of the Merger or any of the other transactions
contemplated hereby, except as set forth in this Section 5.2. Notwithstanding
the disclosures set forth in Section 5.2 of the Seller Disclosure Schedule or
otherwise, the shares of GTFM to be purchased by KARA Sub from MM pursuant to
this Agreement shall be acquired by KARA Sub free and clear of any and all
Encumbrances, except for any Encumbrances created by KARA Sub or its Affiliates
or by operation of law.
Section 5.3 GTFM and GTFM Subsidiaries.
(a) Section 5.3 of the Seller Disclosure Schedule lists each Subsidiary of
GTFM (the "GTFM Subsidiaries") and their respective jurisdictions of
incorporation or organization and the outstanding shares of capital stock and
other ownership interests, if any, of the GTFM Subsidiaries, and the record
owner thereof. All of the outstanding shares of capital stock of, or other
equity interests in, each of the GTFM Subsidiaries have been validly issued and
are fully paid and nonassessable and such shares or interests owned directly or
indirectly by GTFM free and clear of all Encumbrances and free of any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests, except as set forth in Section 5.3 of the
Seller Disclosure Schedule. Except for the capital stock or other ownership
interests of the GTFM Subsidiaries as set forth on Section 5.3 of the Seller
Disclosure Schedule, GTFM does not beneficially own directly or indirectly any
capital stock, membership interest, partnership interest, joint venture interest
or other equity interest in any Person.
(b) Neither GTFM nor any of the GTFM Subsidiaries engage in or conduct any
business other than as set forth in the GTFM Form 20-F, or as set forth in
Section 5.3 of the Seller Disclosure Schedule. Neither GTFM nor any of the GTFM
Subsidiaries has taken any action or commenced or threatened any legal
proceeding for the administration, winding-up or provisional winding-up or
dissolution of GTFM or any of the GTFM Subsidiaries or seeking to enter into any
arrangement or composition for the benefit of creditors, or for the appointment
of a receiver, administrator, administrative receiver, trustee or similar
officer of any of the properties,
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revenues, undertakings or assets of GTFM or any of the GTFM Subsidiaries, nor
have any orders been made for any of the foregoing.
Section 5.4 Authority; No Violation.
(a) TMM, TMMH and MM each has full corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all requisite action on their respective parts, and no
other corporate action on the part of TMM, TMMH or MM is necessary to approve
this Agreement or the Ancillary Agreements to which it is a party or to
authorize or consummate the transactions contemplated hereby or thereby, other
than approvals from the shareholders of TMM and MM. TMM has received the opinion
of XX Xxxxxx Securities, Inc. that the consideration to be received in the
Acquisition is fair from a financial point of view to TMM. This Agreement and
the Ancillary Agreements to which it is a party have been duly and validly
executed and delivered by TMM, TMMH and MM (except for those Ancillary
Agreements that are not dated the date hereof, which Ancillary Agreements shall
be duly and validly executed and delivered prior to the Closing) and (assuming
the due authorization, execution and delivery of this Agreement and the
Ancillary Agreements by the other Parties hereto and thereto) constitute valid
and binding obligations of TMM, TMMH and MM (except for those Ancillary
Agreements that are not dated the date hereof, which Ancillary Agreements shall
constitute valid and binding obligations of TMM, TMMH and MM at the Closing),
enforceable against TMM, TMMH and MM in accordance with their terms, except as
(i) the enforceability thereof may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the rights of creditors generally and the availability of equitable relief
(whether in proceedings at law or in equity) and (ii) rights to indemnification
may be limited by the Securities Laws and the policies underlying such laws.
(b) Neither the execution and delivery of this Agreement or the Ancillary
Agreements to which it is a party by TMM, TMMH or MM nor the consummation by
TMM, TMMH or MM of any of the transactions contemplated hereby or thereby to be
performed by them, nor compliance by TMM, TMMH or MM with any of the terms or
provisions hereof or thereof, will (i) violate any provision of the Charter or
Bylaws of TMM, TMMH or MM or the charter or bylaws or comparable organizational
documents of GTFM or any GTFM Subsidiary or (ii) assuming that the consents and
approvals referred to in Section 5.5 are duly obtained, (x) violate, conflict
with or require any notice, filing, consent, waiver or approval under any
Applicable Law to which TMM, TMMH, MM, GTFM or the GTFM Subsidiaries or any of
their respective properties, Contracts or assets are subject, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with or without notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate or result in a
right of acceleration of the performance required by, result in the creation of
any liability under, result in the creation of any Encumbrance other than any
Permitted Encumbrance upon the properties, Contracts or assets of TMM, TMMH, MM,
GTFM or the GTFM Subsidiaries under, or require any notice, approval, waiver or
consent under, any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which TMM, TMMH, MM, GTFM
or any of the
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GTFM Subsidiaries is a party, or by which TMM, TMMH, MM, GTFM or any of the GTFM
Subsidiaries or any of their properties or assets may be bound or affected,
except, in the case of this clause (ii), as set forth in Section 5.4 of the
Seller Disclosure Schedule or as would not have or be reasonably expected to
have, individually or in the aggregate, a GTFM Material Adverse Effect or result
in an Encumbrance on the GTFM Shares.
Section 5.5 Consents and Approvals. Except (i) as set forth in Section 5.5
of the Seller Disclosure Schedule and in the Ancillary Agreements, (ii) the
prior approval of the Mexican Foreign Investments Commission, (iii) clearance by
the Mexican Antitrust Commission, (iv) notice to the Mexican Ministry of
Communications and Transportation, (v) compliance with and filings under the
Securities Laws as may be required in connection with this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby, (vi)
any required filings with the NYSE, (vii) the filing of the Certificate of
Merger, (viii) consents from the holders of TMM's outstanding 9 1/2% Notes due
2003 (the "2003 Notes") and 10 1/4% Notes due 2006 (the "2006 Notes"), and (ix)
the expiration or earlier termination of the waiting period under the HSR Act,
no consents or approvals of, or filings, declarations or registrations with any
Governmental Authority, any third party or any other Person are necessary on the
part of the Sellers in connection with the execution and delivery by each Seller
of this Agreement or the Ancillary Agreements to which it is a party and the
consummation by the Sellers of the Acquisition and the other transactions
contemplated by this Agreement and the Ancillary Agreements other than such
consents, approvals, filings, declarations or registrations which if not
obtained would not reasonably be expected to have a GTFM Material Adverse
Effect. To the best of Sellers' Knowledge, no control share, anti-takeover or
similar statute under the laws of the UMS is applicable to the transactions
contemplated hereby or by the Ancillary Agreements.
Section 5.6 Financial Statements; Undisclosed Liabilities. The audited
consolidated financial statements of GTFM and its consolidated Subsidiaries for
the period ended December 31, 2002, as approved by the shareholders of GTFM,
previously provided to KCS (the "GTFM Financial Statements") present fairly, in
all material respects, in conformity with IAS applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of GTFM and its consolidated Subsidiaries as of the dates thereof and
their consolidated results of operations and cash flows for the periods then
ended (subject, in the case of the unaudited interim financial statements, to
normal year-end adjustments). The reconciliation ("Reconciliation") to U.S. GAAP
from IAS of the GTFM Financial Statements, provided by GTFM to KCS, fairly
presents in all material respects all adjustments necessary to reflect the
presentation of such financial statements on a U.S. GAAP basis. Except as set
forth in the GTFM Financial Statements, neither GTFM nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by IAS, or the Reconciliation, to be set forth
on a consolidated balance sheet of GTFM and the consolidated GTFM Subsidiaries
or in the notes thereto or which, individually or in the aggregate, could
reasonably be expected to have a GTFM Material Adverse Effect.
Section 5.7 Contracts. Section 5.7 of the Seller Disclosure Schedule sets
forth a complete and accurate list or description, as of the date of this
Agreement, of all Contracts: (i) that are between GTFM or any of the GTFM
Subsidiaries, on the one hand, and Sellers or any Affiliate of Seller (other
than GTFM and its Subsidiaries) on the other hand, (ii) which constitute
nondisclosure agreements or confidentiality agreements which could reasonably be
expected to have a significant effect on the conduct of the GTFM Business or the
business of the Surviving
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Company; (iii) pursuant to which GTFM or any of its Subsidiaries is either
obligated to pay or entitled to receive in excess of $10 million in any year
(that is not otherwise required to be disclosed pursuant to this Section 5.7);
(iv) that are employment, management, consulting or severance agreements with
any officer or director of GTFM or any of its Subsidiaries; (v) that include any
noncompetition or nonsolicitation covenant or any exclusive dealing or similar
arrangement that limits the ability of GTFM or any of its Subsidiaries to
compete (geographically or otherwise) in any line of business or which would so
limit the Surviving Company or any of its Subsidiaries after the Effective Time
or (vi) trackage rights agreements, interline or interchange agreements with
other railroads (collectively, the "Scheduled Contracts"). As of the date
hereof, each of the Contracts is a legal, valid and binding obligation of GTFM
or its Subsidiaries (assuming the due authorization, execution and delivery by
the other Parties thereto) and is in full force and effect and enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors generally and by the availability of equitable remedies
(whether in proceedings at law or in equity). As of the date of this Agreement,
neither GTFM nor any of its Subsidiaries has received notice of cancellation of
or default under or intent to cancel or call a default under any of the
Scheduled Contracts. Assuming receipt of the consents and approvals set forth in
Section 5.5, to the best of the Sellers' Knowledge, nothing has occurred which
with or without notice or lapse of time or both would constitute a material
breach of or a material default under any of the Scheduled Contracts.
Section 5.8 Intellectual Property Rights.
(a) With respect to all Intellectual Property used in the conduct of the
GTFM Business, GTFM or a Subsidiary of GTFM either has all right, title and
interest in or valid and binding rights under Contract to use such Intellectual
Property, except where the failure to have such rights would not reasonably be
expected to have a GTFM Material Adverse Effect. Except as disclosed in Section
5.8 of the Seller Disclosure Schedule or as would not reasonably be expected to
have a GTFM Material Adverse Effect, (i) all registrations with and applications
to Governmental Authorities in respect of Intellectual Property owned by GTFM or
a Subsidiary of GTFM are valid and in full force and effect, (ii) there are no
material restrictions on the direct or indirect transfer of any Contract, or any
interest therein, held by GTFM or any Subsidiary in respect of such Intellectual
Property, (iii) to the Knowledge of the Sellers neither GTFM nor any Subsidiary
of GTFM is in default (or with the giving of notice or lapse of time or both,
would be in default) in any material respect under any Contract to use such
Intellectual Property and (iv) to the Knowledge of the Sellers, such
Intellectual Property is not being infringed by any other Person. Neither GTFM
nor any Subsidiary of GTFM has received notice that GTFM or any Subsidiary of
GTFM is infringing in any material respect any Intellectual Property of any
other Person, to the Knowledge of Sellers, no claim is pending or has been made
to such effect that has not been resolved and, to the Knowledge of the Sellers,
neither GTFM nor any Subsidiary of GTFM is infringing any Intellectual Property
of any other Person the effect of which, individually or in the aggregate, could
reasonably be expected to have a GTFM Material Adverse Effect. TMM shall
transfer to GTFM or KCS, effective upon the closing, all right, title and
interest in and to that certain trademark of mixed type, owned by TMM,
registered with the Mexican Institute of Industrial Property under number 53951,
class 37, in connection with the name "TFM" and its design, and shall execute
and deliver all documents reasonably required by KCS to effect such transfer to
the transferee and its successors and assigns.
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Section 5.9 Employee Benefit Matters.
(a) Section 5.9 of the Seller Disclosure Schedule sets forth a true and
complete list of each material pension plan, deferred compensation plan,
retirement income plan, stock option or stock purchase plan, profit sharing
plan, bonus plan or policy, employee group insurance plan, hospitalization plan,
disability plan or other employee benefit plan, program, policy or practice,
formal or informal, funded or unfunded, to any current or former director,
officer or employee (or to any dependent or beneficiary thereof) of GTFM or any
Subsidiary of GTFM under which GTFM or any Subsidiary of GTFM has any present or
future material obligation or liability, whether actual or contingent. Each such
plan, agreement, program, policy and arrangement shall be referred to as a
"Benefit Plan." Each Benefit Plan is further designated in Section 5.9 of the
Seller Disclosure Schedule as either currently or formerly maintained, sponsored
or contributed to by GTFM (a "GTFM Benefit Plan") or by any other entity (in
which case such entity is identified). Neither GTFM nor any GTFM Subsidiary, nor
to the Knowledge of Sellers, any other Person, has any express or implied
commitment, whether legally enforceable or not, to modify, change or terminate
any GTFM Benefit Plan, other than with respect to a modification, change or
termination required by Applicable Law.
(b) With respect to each Benefit Plan, GTFM has delivered or made available
to KCS true, current, correct and complete copies of (i) each Benefit Plan (or,
if not written, a written summary of its material terms), including without
limitation all plan documents, adoption agreements, trust agreements, insurance
Contracts or other funding vehicles and all amendments thereto, (ii) any
summaries and summary plan descriptions, including any summary of material
modifications, distributed to Benefit Plan participants, (iii) the most recent
actuarial report or other financial statement relating to such Benefit Plan, as
applicable, and (iv) all filings made with any Governmental Authorities with
respect to any Benefit Plan.
(c) Each Benefit Plan has been administered in material compliance with its
terms and all Applicable Laws and material contributions required to be made
under the terms of any of the Benefit Plans as of the date of this Agreement
have been timely made or, if not yet due, have been properly reflected in the
GTFM Financial Statements. With respect to the Benefit Plans, no event has
occurred and there exists no condition or set of circumstances in connection
with which GTFM could be subject to any material liability (other than for
liabilities to pay benefits) under the terms of, or with respect to, such
Benefit Plans, or any Applicable Law.
(d) Except as disclosed in Section 5.9 of the Seller Disclosure Schedule:
(i) there has been no prohibited transaction (within the meaning of Applicable
Law) with respect to any Benefit Plan that could result in material liability to
GTFM or the Surviving Company, (ii) each Benefit Plan can be amended, terminated
or otherwise discontinued after the Effective Time in accordance with its terms,
without material liability (other than liability for ordinary administrative
expenses typically incurred in a termination event), (iii) no suit,
administrative proceeding, action or other litigation has been brought or, to
the Knowledge of Sellers, is threatened, against or with respect to any such
Benefit Plan, including any audit or inquiry by any Governmental Authority, (iv)
all tax, annual reporting and other governmental filings required have been
timely filed with the appropriate Governmental Authority and all notices and
disclosures have been timely provided to participants and (v) each Benefit Plan
meets the requirement for deductibility under the law and regulations of the
UMS.
-11-
(e) No Benefit Plan exists, and no other payment shall be made that, as a
result of the execution of this Agreement or the transactions contemplated by
this Agreement (whether alone or in connection with a subsequent event), could
result in the payment to any employee of the GTFM Group of any money or other
property or could result in the increase, acceleration or provision of any
payments, other rights or benefits to any such employee.
Section 5.10 Labor and Other Employment Matters.
(a) Sellers have made available to KCS a complete and accurate list (giving
name, job title and current payroll compensation of each current employee of
each company in the GTFM Group. None of the members of the GTFM Group has any
responsibility or liability to any of its employees for any delinquent payments
of wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it or amounts required to be reimbursed to such employee
or paid to such employee for mandatory profit sharing, housing, mandatory
retirement benefits, vacation benefits or social security benefits required
under Mexican law in an amount that would have a GTFM Material Adverse Effect.
(b) Except as would not reasonably be expected to have a GTFM Material
Adverse Effect, each of the members of the GTFM Group (i) are in compliance in
all material respects with all Applicable Law respecting labor, employment,
immigration, fair employment practices, terms and conditions of employment,
workers' compensation, occupational safety, plant closings, wages and hours and
any other Law applicable to any of their employees, and (ii) has withheld all
amounts required by Applicable Law or by agreement to be withheld from the
wages, salaries, and other payments to employees, and (iii) is not liable for
any arrears of wages or any Taxes or any penalty for failure to comply with any
of the foregoing.
(c) No current officer of any member of the GTFM Group has given notice of
termination of employment to the GTFM Group, nor do Sellers otherwise have any
Knowledge, that any such officer intends to terminate his or her employment with
the GTFM Group.
(d) The Mexican Railway Workers Union (El Sindicato deTrabajadores
Ferrocarrileros de la Republica Mexicana) is the only trade union or labor union
representing any employees of GTFM or any of its Subsidiaries. Sellers have
provided to KCS a true and complete copy of the collective bargaining agreement
and any amendments thereof. Neither GTFM nor any of its Subsidiaries is a party,
or is otherwise subject, to any other collective bargaining agreement or other
labor union contract applicable to its employees. There are no material
activities or proceedings by a labor union or representative thereof to organize
any employees of GTFM or any of its Subsidiaries. There are no pending
negotiations between GTFM or any of its Subsidiaries and any labor union or
representative thereof regarding any proposed material changes to any existing
collective bargaining agreement and no such collective bargaining agreement is
subject to expiration or renewal within one year after the date hereof or the
extension or renewal of such an agreement or the entering of any such agreement.
There are no pending, and none of GTFM or any of its Subsidiaries has
experienced since December 31, 2001 any, material labor disputes, lockouts,
strikes, slowdowns, work stoppages, or threats thereof nor, to the knowledge of
the Sellers, has any event occurred or does any circumstance exist that would
provide a reasonable basis for any such dispute, lockout, strike, slowdown, work
stoppage or threat thereof. GTFM and its Subsidiaries are not in default and
have not breached in any material respect the terms of any applicable collective
bargaining or other labor union contract,
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and there are no material claims or grievances outstanding against GTFM, any of
its Subsidiaries, or any of their respective employees under any such agreement
or contract.
(e) Except as specified in Section 5.10 of the Seller Disclosure Schedule,
(i) there are no claims, disputes or actions pending, or to the Knowledge of
Sellers threatened, between GTFM or any of its Subsidiaries, on the one hand,
and any of their employees, on the other hand, and (ii) to the Knowledge of
Sellers, there are no facts or circumstances involving any employee that would
form the basis of, or give rise to, any cause of action, including, without
limitation, unlawful termination based on discrimination of any kind, except in
case of such clause (i) or (ii) as would not reasonably be expected to have,
individually or in the aggregate, a GTFM Material Adverse Effect.
Section 5.11 Tax Matters.
(a) Except as set forth in Section 5.11 of the Seller Disclosure Schedule
or as would not have a GTFM Material Adverse Effect, all Tax Returns and reports
of GTFM and the GTFM Subsidiaries required to be filed on or before the Closing
Date have been duly and timely filed (taking into account all proper extensions)
with the appropriate Taxing Authorities and all such Tax Returns were complete,
correct and accurate. All Taxes shown on such Tax Returns as owed by GTFM or the
GTFM Subsidiaries have been paid.
(b) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
neither GTFM nor any of the GTFM Subsidiaries has received any written notice of
deficiency or assessment from any Taxing Authority with respect to material
liabilities for Taxes of GTFM or any of the GTFM Subsidiaries which have not
been paid or finally settled. No claim has ever been made in writing by an
authority in a jurisdiction where GTFM or any of the GTFM Subsidiaries do not
file Tax Returns that such entity is or may be subject to taxation by that
jurisdiction. Except as set forth in Section 5.11 of the Seller Disclosure
Schedule, no audit of any Tax Return concerning GTFM or any of the GTFM
Subsidiaries is pending, being conducted, or to the Knowledge of Sellers,
threatened to be instituted by a Taxing Authority. Except as set forth in
Section 5.11 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM
Subsidiaries has in effect a waiver of any statute of limitation in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency that will be in effect as of the Closing Date.
(c) There are no liens for Taxes on any assets of GTFM or any of the GTFM
Subsidiaries other than liens for current Taxes (i) not yet due and payable or
(ii) that would not have a GTFM Material Adverse Effect.
(d) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
neither GTFM nor any of the GTFM Subsidiaries has any liability for the Taxes of
any other Person as a transferee or successor, by Contract or otherwise.
(e) There are no Tax sharing or Tax indemnity agreements or similar
arrangements with respect to or involving GTFM or any of the GTFM Subsidiaries,
other than agreements among GTFM and Subsidiaries in which GTFM owns directly or
indirectly all equity interest.
(f) Each of GTFM and the GTFM Subsidiaries has complied in all material
respects with all applicable governmental rules relating to the payment,
collection and withholding of Taxes.
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(g) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
there is no Tax Litigation pending or to the Knowledge of Sellers threatened
against GTFM and/or the GTFM Subsidiaries.
(h) To the Knowledge of the Sellers neither GTFM nor any of its
Subsidiaries will suffer any adverse tax consequences in the UMS from ceasing,
as a result of the Acquisition, to be members of the TMM consolidated group.
(i) During the period from the date of the GTFM Financial Statements until
the date of this Agreement, GTFM and each of the GTFM Subsidiaries (i) have made
no change in any accounting method used for Tax purposes or in depreciation or
amortization policies, and have made no election for Tax purposes which is not
consistent with the method, policies and elections made prior to the date of the
GTFM Financial Statements; and (ii) have not settled any pending Tax audits or
settled any Tax liability.
Section 5.12 Legal Proceedings. Except as set forth in Section 5.12 of the
Seller Disclosure Schedule, there are no legal, administrative, arbitral or
other proceedings (including disciplinary proceedings), claims, suits, actions
or governmental or regulatory investigations of any nature whether in the UMS or
elsewhere (collectively, "Proceedings") that are pending or, to the Knowledge of
Sellers, threatened against GTFM or any of the GTFM Subsidiaries or any of their
respective directors or officers (in their capacity as such) or the GTFM Assets
or the GTFM Business, which if determined adversely would have a GTFM Material
Adverse Effect, or that challenge the validity or propriety of the transactions
contemplated by this Agreement or by any of the Ancillary Agreements. There is
no injunction, order, judgment or decree imposed upon GTFM or any of the GTFM
Subsidiaries, any material portion of the GTFM Assets or the GTFM Business.
Section 5.13 Permits and Compliance.
(a) Section 5.13 of the Seller Disclosure Schedule sets forth a true and
complete list of all licenses, franchises, concessions, decrees, permits and
authorizations required under Applicable Law (collectively, "Permits") currently
held by GTFM and each of its Subsidiaries and which are required to operate the
GTFM Business as currently conducted where the failure to hold such Permits
would reasonably be expected to have a GTFM Material Adverse Effect. Each of
GTFM and its Subsidiaries (i) holds, and at all times has held, and at Closing
will hold, all Permits for the lawful ownership, operation and use of the GTFM
Assets and the conduct of the GTFM Business, (ii) has been and is in compliance
with each such Permit, and (iii) has not received notice asserting any violation
of any such Permit, in each case, where the failure to hold or comply or such
violation would reasonably be expected to have a GTFM Material Adverse Effect.
(b) Except for normal examinations conducted by any Governmental Authority
in the regular course of the business of GTFM and its Subsidiaries or as would
not reasonably be expected to have a GTFM Material Adverse Effect, since
December 31, 2001, no Governmental Authority has provided written notice to GTFM
or any of its Subsidiaries of any threatened proceeding or investigation into
the business or operations of GTFM or any of its Subsidiaries or any of their
members, officers, directors or employees in their capacity as such with GTFM or
any of its Subsidiaries and, to the Knowledge of the Sellers, no such
proceedings or
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investigations are contemplated. There is no unresolved deficiency, violation or
exception claimed or asserted by any Governmental Authority with respect to any
examination of any of GTFM or any of its Subsidiaries.
(c) Neither GTFM nor any of its Subsidiaries is in violation of any
Applicable Laws or orders of any Governmental Authority except as would not
reasonably be expected to have a GTFM Material Adverse Effect. No event has
occurred or exists that would (with or without notice or lapse of time) give
rise to any obligation on the part of GTFM or any of its Subsidiaries to
undertake or to bear all or any portion of the cost of any remedial action of
any nature which would reasonably be expected to have a GTFM Material Adverse
Effect.
(d) Without limiting the generality of the foregoing, to the Knowledge of
Sellers no basis exist for revocation, material modification or termination
prior to the expiration, of the concession held by TFM to operate rail freight
transportation services in Mexico.
Section 5.14 Environmental Matters. GTFM and each of its Subsidiaries (i)
are in compliance with, and are not subject to any liability under, in each case
with respect to all, applicable Environmental Laws; (ii) hold all Environmental
Permits necessary to conduct their current operations and (iii) are in
compliance with their respective Environmental Permits, except where the failure
to hold or be in compliance with such Environmental Permits would not be
expected to have a GTFM Material Adverse Effect. Except as would not reasonably
be expected to have a GTFM Material Adverse Effect, neither GTFM nor any of its
Subsidiaries has received any written notice, demand, letter, claim or request
for information alleging that GTFM or any of its Subsidiaries may be in
violation of, or liable under, any Environmental Law. Neither GTFM nor any of
its Subsidiaries (x) has entered into or agreed to any consent decree or order
or is subject to any judgment, decree or judicial order relating to compliance
with Environmental Laws, Environmental Permits or the investigation, sampling,
monitoring, treatment, remediation, removal or cleanup of Hazardous Materials
and no investigation, litigation or other proceeding is pending or, to the
Knowledge of the Sellers, threatened, with respect thereto or (y) is an
indemnitor or has assumed liability in connection with any pending demand,
notice, claim, or other allegation, or to the Knowledge of the Sellers, any
claim threatened, by or against any third-party relating to any liability under
any Environmental Law or relating to any Hazardous Materials. None of the real
property owned or leased or operated by GTFM or any of its Subsidiaries is
listed or, to the Knowledge of the Sellers, proposed for listing on any list of
sites maintained by Governmental Authority requiring investigation or cleanup.
Section 5.15 Properties. Section 5.15 of the Seller Disclosure Schedule
sets forth a true and complete list of all real property and interests in real
property owned or leased by GTFM or any of the GTFM Subsidiaries and a summary
of the lease agreements with respect thereto (true and correct copies of which
leases have been provided to KCS) and a true and complete list of all personal
property, equipment and fixtures (other than items having a book value of less
than $1 million individually) owned by GTFM or any of the GTFM Subsidiaries, all
of which personal property, equipment and fixtures are
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in good condition and repair, normal wear and tear excepted. Each of GTFM and
the GTFM Subsidiaries has good and marketable title to, or valid and enforceable
leasehold or concession interests in, all of its properties and tangible assets
necessary to conduct the GTFM Business as currently conducted except where the
failure to have such title or interest would not reasonably be expected to have
a GTFM Material Adverse Effect. All of such property and assets which constitute
personal property, equipment, and fixtures, are in good condition and repair,
normal wear and tear excepted. Except as set forth in Section 5.15 of the Seller
Disclosure, all of such assets and properties, other than assets and properties
in which GTFM or any of the GTFM Subsidiaries has a leasehold interest, are free
and clear of all Encumbrances other than Permitted Encumbrances and Encumbrances
which would not individually or in the aggregate reasonably be expected to have
a GTFM Material Adverse Effect. Each of GTFM and the GTFM Subsidiaries has
complied in all material respects with the terms of all leases and concessions
(including the Concession) to which it is a party and under which it is in
occupancy, and all such leases and concessions (including the Concession) are in
full force and effect.
Section 5.16 Insurance. Section 5.16 of the Seller Disclosure Schedule
includes a list of all policies of fire, liability, product liability, workers'
compensation, health and other forms of insurance presently in effect with
respect to the GTFM Business (the "GTFM Insurance Policies"), including the
named insured(s) and all beneficiaries thereunder, and true and complete copies
of the GTFM Insurance Policies have been delivered to KCS. Neither GTFM, nor any
of the GTFM Subsidiaries has been refused any insurance with respect to any
aspect of the operations of its business, nor has its coverage been rescinded by
any insurance carrier to which it has applied for insurance or with which it has
carried insurance. No notice of cancellation or termination has been received
with respect to any such policy. The activities and operations of GTFM and each
of the GTFM Subsidiaries have been conducted in a manner so as to conform in all
material respects to all material provisions of the GTFM Insurance Policies.
Section 5.17 No Other Broker. Other than X.X. Xxxxxx Xxxxx, the fees and
expenses of which have been or will be paid by TMM, no broker, finder or similar
intermediary is entitled to any broker's, finder's or similar fee or other
remuneration from or as a result of engagement by, Sellers or any of their
respective Affiliates in connection with this Agreement, the Ancillary
Agreements or the transactions contemplated hereby or thereby.
Section 5.18 No GTFM Material Adverse Effect. Since December 31, 2002, (i)
GTFM and the GTFM Subsidiaries have conducted their respective businesses only
in the ordinary course, consistent with past practice, and (ii) there has not
been (x) any GTFM Material Adverse Effect or any event or development that
could, individually or in the aggregate, reasonably be expected to have a GTFM
Material Adverse Effect or (y) to the Knowledge of Sellers any event or
development that would, individually or in the aggregate, reasonably be expected
to materially delay or prevent the consummation of, or the performance by
Sellers or any of their respective Affiliates, of any of their obligations
under, this Agreement or any of the Ancillary Agreements, to which any Seller is
a party.
Section 5.19 Sufficiency of and Title to Assets. GTFM and each of the GTFM
Subsidiaries owns or licenses, and upon the consummation of the Merger, the
Surviving Company and its Subsidiaries will own or license, all right, title and
interest in and to all of the properties, assets, Contracts and rights of any
kind, whether tangible or intangible, real or personal (including, without
limitation, the Concession), necessary to enable GTFM (prior to the Closing) and
the Surviving Company (after the Closing) to conduct the GTFM Business as
presently conducted (the "GTFM Assets"), free and clear of any Encumbrances
other than Permitted Encumbrances, except as set forth in Section 5.19 of the
Seller Disclosure Schedule.
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Section 5.20 Information in Filed Documents. None of the information
regarding any of TMM, TMMH, MM, GTFM or any of the GTFM Subsidiaries supplied or
to be supplied by Sellers prior to the Closing expressly for inclusion or
incorporation by reference in any documents to be filed with any Governmental
Authority prior to the Closing in connection with the transactions contemplated
hereby, including, without limitation, the proxy materials to be filed with the
SEC by KCS in connection with the Merger, will, at the respective times such
information is supplied, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 5.21 Transactions with Affiliates. Except for this Agreement, the
Ancillary Agreements and the other agreements contemplated herein to be entered
into in connection with the transactions contemplated hereby and thereby, no
Contract, understanding or arrangement between GTFM or any of the GTFM
Subsidiaries, on the one hand, and TMM or any of its Affiliates (other than GTFM
and its Subsidiaries), on the other hand, will continue in effect subsequent to
the Closing Date, except as described in Section 5.21 of the Seller Disclosure
Schedule. Except as set forth in Section 5.21 of the Seller Disclosure Schedule,
none of TMM or any of its Subsidiaries or Affiliates (other than GTFM and its
Subsidiaries) provides any material services to GTFM or any of the GTFM
Subsidiaries, except pursuant to the Management Services Agreement, originally
dated as of May 9, 1997, between TMM and TFM, which agreement shall be
terminated and of no further force and effect as of the Effective Time other
than with respect to amounts due or indemnification or other obligations
relating to periods prior to Closing, none of which may reasonably be expected
to be material individually or in the aggregate. At the Closing Date, the
Parties shall settle the net intercompany receivables as follows: (A) the
parties shall calculate the amount, if any, of open accounts receivables due
over 30 days (i) from TMM Logistics, S.A. de C.V. or any other Subsidiary of TMM
(other than GTFM, any of the GTFM Subsidiaries, Mexrail or any subsidiary of
Mexrail), on the one hand, to GTFM or any of the GTFM Subsidiaries or Mexrail or
any Subsidiary of Mexrail, on the other hand, and (ii) from GTFM or any of the
GTFM Subsidiaries or Mexrail or any Subsidiary of Mexrail, on the one hand, to
TMM Logistics, S.A. de C.V. or any other Subsidiary of TMM (other than GTFM, any
of the GTFM Subsidiaries, Mexrail or any subsidiary of Mexrail), on the other
hand; (B) the Parties shall calculate the absolute value of the difference
between the amount in clause (i), above, and the amount in clause (ii), above
(the "Net Receivable Amount"); (C) if the amount in clause (i), above is greater
than clause (ii), then TMM shall, or shall cause one or more of its Subsidiaries
to, pay to KCS the Net Receivable Amount; and (D) if the amount of clause (ii)
is greater than clause (i), then KCS shall, or shall cause one or more its
Subsidiaries to, pay to TMM the Net Receivable Amount. All calculations required
by this Section 5.21 shall be provided not later than five business days prior
to the Closing.
Section 5.22 No Loss of Significant Customers. From January 1, 2002 through
the Business Day immediately preceding the date of this Agreement, neither GTFM
or any of the GTFM Subsidiaries has had any customer which has canceled,
terminated or failed to renew any Contract with such entity which accounted for
more than $10 million in revenues to such entity in either of the last two
fiscal years.
Section 5.23 Trading in and Ownership of KCS Common Stock. None of Sellers
or any of their respective Affiliates has, during the sixty (60) Business Days
prior to the date hereof, either directly or indirectly, bought or sold, or
otherwise effected any trade in any shares of KCS
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Common Stock, or any Security derivative of KCS Common Stock and none of Sellers
or any of their respective Affiliates, own as of the or date of this Agreement
any shares of KCS Common Stock or any security derivative of KCS Common Stock.
Section 5.24 Solvency. No insolvency or bankruptcy proceedings against TMM
or any of its Subsidiaries are pending as of the last business day preceding the
date of this Agreement.
Section 5.25 Termination of Option Agreement. Prior to the Closing Date,
the Amended and Restated Option Agreement between MM and The Bank of New York,
as Trustee, dated October 25, 2002, as amended by Amendment Number One to the
Amended and Restated Option Agreement, dated December 10, 2002 (the "Option
Agreement"), entered into in connection with the Logistics Trust 2000-A (the
"Trust") formed pursuant to the Second Amended and Restated Master Trust
Agreement, dated as of December 10, 2002 (the "Master Trust Agreement"), between
TMM and The Bank of New York, as Trustee, will have been terminated or amended,
and the Master Trust Agreement and the Transaction Documents (as defined in the
Master Trust Agreement) shall have been terminated or amended so that as of the
Closing Date (i) there shall be no outstanding option, warrant, right,
subscription, call, legally binding commitment or other agreement or right of
any kind entitling any Person (including The Bank of New York, as Trustee of the
Trust) to acquire, or any other Encumbrance arising under such agreements on,
any shares of capital stock of GTFM and (ii) the provision in Section 6.4 of the
Option Agreement requiring a written agreement to be bound by the terms of the
Option Agreement and related agreements shall not apply to the purchase of the
GTFM Shares under this Agreement and the purchase of the GTFM Shares by KARA Sub
will be effective without KARA Sub or KCS entering into any agreement to be
bound by the terms of the Option Agreement and related agreements. Seller shall
have provided to KARA Sub evidence reasonably satisfactory to KARA Sub of such
amendment or termination. Prior to the Closing Date, MM will cause each legend
affixed to any stock certificates evidencing GTFM Shares pursuant to the Option
Agreement to be cancelled or removed, and MM will cause any annotation that was
required by the Option Agreement to be placed in the Stockholders Registry Book
of GTFM to be cancelled or removed. Prior to the Closing Date, the Amended and
Restated Put Option Agreement between MM and The Bank of New York, as Trustee,
dated October 25, 2002, as amended by Amendment Number One to the Amended and
Restated Option Agreement, dated December 10, 2002, entered into in connection
with the Trust shall have been terminated or amended, and the Master Trust
Agreement and the Transaction Documents (as defined in the Master Trust
Agreement) shall have been terminated or amended so that as of the Closing Date
there shall be no obligation of KCS, KARA Sub or any of their Affiliates to
purchase or otherwise acquire any certificate or other interest in or related to
the Trust and Seller shall have provided to KARA Sub evidence reasonably
satisfactory to KARA Sub of such amendment or termination. Unless the Option
Agreement is terminated or amended to make such requirement inapplicable MM
shall have provided notice at or prior to the Closing date to the Trustee of the
sale of the GTFM Shares as required by Section 6.4 of the Option Agreement.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF KCS
Except as set forth in the disclosure schedule attached as Exhibit F to
this Agreement (the "KCS Disclosure Schedule"), KCS hereby represents and
warrants to each of the Sellers as follows:
Section 6.1 Organization and Related Matters.
(a) KCS is a corporation, duly formed, validly existing and in good
standing under the laws of the State of Delaware, and each of its Subsidiaries
is a corporation or other business entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization. KCS has the
corporate power and authority and each of its Subsidiaries has the corporate or
other applicable power and authority necessary to carry on their respective
businesses in the manner as they are now being conducted and to own, lease and
operate all of their respective properties and assets.
(b) KCS and each of its respective Subsidiaries is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned, leased or operated by it makes such qualification or licensing
necessary except in jurisdictions where the failure of such license or
qualification would not individually or in the aggregate have a KCS Material
Adverse Effect.
Section 6.2 Authority; No Violation.
(a) Each of KCS and KARA Sub has full corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all requisite corporate action on the part of KCS and
KARA Sub and no other corporate action on the part of KCS and KARA Sub is
necessary to approve this Agreement or the Ancillary Agreements to which it is a
party or authorize or consummate the transactions contemplated hereby and
thereby, except for obtaining the approval of its stockholders as described in
Section 6.3. KCS has received the opinion of Deutsche Bank that the Acquisition
is fair from a financial point of view to KCS. This Agreement and the Ancillary
Agreements to which it is a party have been duly and validly executed and
delivered by KCS and KARA Sub (except for those Ancillary Agreements that are
not dated the date hereof, which Ancillary Agreements shall be duly and validly
executed and delivered prior to the Closing) and (assuming the due
authorization, execution and delivery of this Agreement and the Ancillary
Agreements by the other Parties hereto and thereto) constitute valid and binding
obligations of KCS and KARA Sub (except for those Ancillary Agreements that are
not dated the date hereof, which Ancillary Agreements shall constitute valid and
binding obligations of KCS and KARA Sub at the Closing), enforceable against KCS
and KARA Sub in accordance with their terms, except as (i) the enforceability
thereof may be subject to or limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting the rights of creditors
generally and the availability of equitable relief (whether in proceedings at
law
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or in equity) and (ii) rights to indemnification may be limited by the
Securities Laws and the policies underlying such laws.
(b) Neither the execution and delivery of this Agreement or the Ancillary
Agreements to which it is a party by KCS and KARA Sub nor the consummation by
KCS and KARA Sub of the transactions contemplated hereby or thereby to be
performed by KCS and KARA Sub, nor compliance by KCS and KARA Sub with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of KCS or KARA Sub, (ii) assuming that
the consents and approvals referred to in Section 6.3 are duly obtained, (x)
violate, conflict with or require any notice, filing, consent or approval under
any Applicable Law to which KCS or any of its Subsidiaries or any of its
properties, Contracts or assets are subject, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with or without notice or lapse of
time, or both, would constitute a default) under, result in the termination of
or a right of termination or cancellation under, accelerate or result in a right
of acceleration of the performance required by, result in the creation of any
liability under, result in the creation of any Encumbrance upon the properties,
Contracts or assets of KCS or KARA Sub under, or require any notice, approval or
consent under, any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which KCS or any of its
Subsidiaries is a party, or by which KCS or any of its Subsidiaries, or any of
its properties or assets, may be bound or affected except in the case of this
clause (ii) in each case as would not have or reasonably be expected to have a
KCS Material Adverse Effect.
(c) The shares of Class A Common Stock to be issued in the Merger, and, if
KCS elects, in payment of a portion of the purchase price pursuant to Section
1.2, have been duly authorized and, when issued as contemplated by this
Agreement and the Merger Agreement as the case may be, will be duly and validly
issued, fully paid and non-assessable and free of any pre-emptive rights and
entitled to the benefits and rights set forth in the Certificate of
Incorporation of KCS, as in effect at the Effective Time. All shares of KCS
Common Stock issuable upon conversion of the Class A Common Stock issued in the
Merger and, if KCS elects, in payment of a portion of the purchase price
pursuant to Section 1.2, will be, upon any such conversion in accordance with
the terms of the Certificate of Incorporation as in effect at the Effective
Time, validly issued, fully paid, and non-assessable and free of any pre-emptive
rights.
Section 6.3 Consents and Approvals.
(a) The affirmative vote of the holders of (i) a majority of the votes cast
by all outstanding shares of KCS Common Stock and KCS Preferred Stock, voting
together as a single class, to approve (x) Amendment to KCS's Certificate of
Incorporation in accordance with the Del. G.C.L. and (y) the issuance of the
Class A Common Stock in accordance with the Del. G.C.L. and the rules of the
NYSE, is the only vote of the holders of any Security of KCS necessary to
approve this Agreement and the other transactions contemplated by this Agreement
and the Ancillary Agreements.
(b) Except for (i) the prior approval of the Mexican Foreign Investments
Commission, clearance by the Mexican Competition Commission and notice to the
Mexican Ministry of Communications and Transportation, (ii) compliance with and
filings under the Securities Laws as may be required in connection with this
Agreement and the Ancillary Agreements and the
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transactions contemplated hereby and thereby, (iii) any required filings with
the NYSE, (iv) the filing of the Certificate of Merger and (v) Bank consents
under Amended and Restated Credit Agreement dated June 12, 2002; no consents or
approvals of, or filings, declarations or registrations with any Governmental
Authority, any third party or any other Person are necessary in connection with
the execution and delivery by KCS of this Agreement and the Ancillary Agreements
to which it is a party and the consummation by KCS of the Acquisition or the
other transactions contemplated by this Agreement and the Ancillary Agreements.
(c) KCS has taken or shall take prior to Closing all corporate action
necessary to assure that the transactions contemplated hereby and by the
Ancillary Agreements will (i) not be prohibited by Section 203 of the Delaware
General Corporation Law and (ii) not constitute a "trigger event" under the KCS
Shareholder Rights Plan. To the best of KCS's Knowledge, no other control share,
anti-takeover or similar statute under the laws of any state is applicable to
the transactions contemplated hereby or by the Ancillary Agreements.
Section 6.4 Authorized Capitalization. The authorized capital stock of KCS
consists of 400,000,000 shares of Common Stock, $.01 par value per share,
840,000 shares of Preferred Stock, $25 par value per share and 2,000,000 shares
of New Series Preferred Stock, $1.00 par value per share. As of March 31, 2003,
there were (i) 61,631,987 shares of KCS Common Stock and 242,170 shares of KCS
Preferred Stock, issued and outstanding, (ii) 5,048,669 shares of KCS Common
Stock reserved for issuance pursuant to options granted pursuant to the KCS
Stock Option Plan and (iii) no shares of New Series Preferred Stock outstanding.
All of the shares of KCS Common Stock and KCS Preferred Stock outstanding at the
date of this Agreement are listed for trading on the NYSE. All of the shares of
capital stock of KCS outstanding are duly authorized, validly issued, fully
paid, nonassessable and free of any preemptive rights and are not subject to any
voting trust agreement (or similar agreement) or other Contract restricting or
otherwise relating to the voting, dividend rights or disposition of such shares
to which KCS is a party, except for restricted share agreements between KCS and
certain of its officers and limited stock appreciation rights. Except as set
forth in this Section 6.4, there is no outstanding option, warrant, convertible
or exchangeable security, right, subscription, call, right of first refusal,
legally binding commitment, preemptive right or other agreement or right of any
kind to purchase or otherwise acquire (including by exchange or conversion) from
KCS or any KCS Subsidiary any shares of capital stock of KCS. There are no
outstanding obligations of KCS or any of its Subsidiaries to redeem, repurchase
or otherwise acquire any of the shares of capital stock of KCS or any shares of
capital stock (or other ownership interests) of any of its Subsidiaries. Neither
KCS nor any KCS Subsidiary has outstanding any bonds, debentures, notes or other
indebtedness generally having the right to vote (or convertible into, or
exchangeable for, Securities having the right to vote) on any matters on which
holders of shares of capital stock of KCS may consent or vote ("KCS Voting
Debt"). There are no options, warrants, rights, convertible or exchangeable
Securities, "phantom" interests or other ownership interest appreciation rights,
commitments, Contracts, arrangements or undertakings of any kind to which KCS or
any of its Subsidiaries is a party or by which any of them is bound (i)
obligating KCS or any of its Subsidiaries or any other Person to issue, deliver
or sell, or cause to be issued, delivered or sold, existing or additional shares
of capital stock of KCS or capital stock (or other ownership interests) of its
Subsidiaries, or any security convertible into or exercisable or exchangeable
for any of the foregoing or for KCS Voting Debt, (ii) obligating KCS or any of
its Subsidiaries or any other Person to issue, grant, extend or enter into any
such option, warrant, call, right, security commitment, Contract, arrangement or
undertaking,
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(iii) that give any Person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights accruing to holders
of the shares of capital stock of KCS or capital stock (or other ownership
interests) of its Subsidiaries or (iv) that give rise to a right to receive any
payment upon the execution of this Agreement or the consummation of the Merger
or any of the other transactions contemplated hereby, except as set forth in
this Section 6.4.
Section 6.5 SEC Filings. Since December 31, 1999, KCS has filed with the
SEC all documents required to be filed by it under the Exchange Act or the
Securities Act and as of their requisite dates (or the dates of any amendments
thereto) such documents (the "KCS SEC Documents") did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading and complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act and the applicable rules
of the SEC thereunder.
Section 6.6 Financial Statements; Undisclosed Liabilities. The audited
consolidated financial statements and unaudited interim financial statements of
KCS and its consolidated Subsidiaries included in the KCS SEC Documents (the
"KCS Financial Statements") present fairly, in all material respects, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of KCS and its
consolidated Subsidiaries as of the dates thereof and their consolidated results
of operations and cash flows for the periods then ended (subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments).
Except as set forth in the KCS Financial Statements or the KCS SEC Documents
filed prior to the date of this Agreement, neither KCS nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a
consolidated balance sheet of KCS and the consolidated KCS Subsidiaries or in
the notes thereto or which, individually or in the aggregate, could reasonably
be expected to have a KCS Material Adverse Effect.
Section 6.7 No Other Broker. Other than Deutsche Bank, whose fees and
expenses will be paid by KCS, no broker, finder or similar intermediary is
entitled to any broker's, finder's or similar fee or other commission from or as
a result of engagement by KCS or any of its Subsidiaries in connection with this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby.
Section 6.8 Information in Filed Documents. None of the information
regarding KCS or any of its Subsidiaries supplied or to be supplied by KCS for
inclusion in any documents to be filed with any Governmental Authority prior to
Closing in connection with the transactions contemplated hereby will, at the
respective times such information is supplied by KCS, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 6.9 No KCS Material Adverse Effect. Since September 30, 2002, (i)
KCS and its Subsidiaries have conducted their respective businesses only in the
ordinary course, consistent with past practice, (ii) there has not been any KCS
Material Adverse Effect or any event or development that could, individually or
in the aggregate, reasonably be expected to have a KCS Material Adverse Effect,
and (iii) to the Knowledge of KCS, there has not occurred any event or
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development that would, individually or in the aggregate, reasonably be expected
to prevent the consummation of the Acquisition or the performance by KCS of its
obligations under this Agreement or any of the Ancillary Agreements to which it
is a party.
Section 6.10 KARA Sub. The authorized capital stock of KARA Sub consists of
1,000 shares of common stock, $.01 par value per share. There are 900 shares
issued and outstanding, all of which are owned by KCS, free and clear of all
Encumbrances. All of the shares of capital stock of KARA Sub outstanding are
duly authorized, validly issued, fully paid, nonassessable and free of any
preemptive rights and are not subject to any voting trust agreement (or similar
agreement) or other Contract restricting or otherwise relating to the voting,
dividend rights of disposition of such shares. KARA Sub is not a party to any
Contract other than this Agreement. KARA Sub has not conducted any business
other than in connection with the transactions contemplated by this Agreement
and the Ancillary Agreements and has incurred no material indebtedness and has
no material assets.
Section 6.11 Legal Proceedings. There are no Proceedings that are pending
or, to the Knowledge of KCS, threatened against KCS or any of its Subsidiaries
or any of their respective directors or officers (in their capacity as such) or
the KCS Assets or the KCS Business which (i) if adversely determined, would have
a KCS Material Adverse Effect or (ii) challenge the validity or propriety of the
transactions contemplated by this Agreement or by any of the Ancillary
Agreements.
Section 6.12 KCS Capital Resources. The information set forth in the KCS
Report on Form 10-K for the year ended December 31, 2002 filed with the SEC
accurately sets forth anticipated material capital expenditures required to
maintain in good repair and working order the KCS Assets and to provide for
material additions to KCS property, plant and equipment necessary to conduct the
business of KCS as described in such SEC Report. KCS has access to capital
resources sufficient to fund such capital expenditures in the amount and at the
time required.
Section 6.13 Employee Benefit Matters. Each employee benefit plan, within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, ("ERISA") that is maintained, administered or contributed to
by KCS or any of its Subsidiaries for employees or former employees of KCS and
its Subsidiaries has been maintained in compliance with its terms and the
requirements of any applicable statutes, orders, rules and regulations,
including, but not limited to, ERISA and the Internal Revenue Code of 1986, as
amended, ("Code"). No prohibited transaction, within the meaning of Section 406
of ERISA or Section 4975 of the Code, has occurred with respect to any such
plan, excluding transactions effected pursuant to a statutory or administrative
exemption. For each such plan which is subject to the funding rules of Section
412 of the Code or Section 302 of ERISA, no "accumulated funding deficiency," as
defined in Section 412 of the Code, has been incurred, whether or not waived,
and the fair market value of the assets of each such plan (excluding, for these
purposes, accrued but unpaid contributions) exceeds the present value of all
benefits accrued under such plan as determined using reasonable actuarial
assumptions.
Section 6.14 Labor and Other Employment Matters. There are no existing or,
to the Knowledge of KCS and its Subsidiaries, threatened, labor disputes with
employees of KCS and its Subsidiaries which would be reasonably expected to have
a KCS Material Adverse Effect.
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Section 6.15 Tax. KCS and its Subsidiaries have filed all federal, state,
local and foreign tax returns which have been required to be filed and have paid
all taxes shown thereon and all assessments received by them or any of them to
the extent that such taxes have become due and are not being contested in good
faith, except as would not, individually or in the aggregate, have a KCS
Material Adverse Effect; and, except as disclosed in Section 6.15 of the KCS
Disclosure Schedule, there is no tax deficiency which has been or might
reasonably be expected to be asserted or threatened against KCS or any of its
Subsidiaries, except as would not, individually or in the aggregate, have a KCS
Material Adverse Effect.
Section 6.16 Permits and Compliance.
(a) Except as would not, individually or in the aggregate, have a KCS
Material Adverse Effect, (i) each of KCS and its Subsidiaries owns, possesses or
has obtained all licenses, permits, certificates, consents, orders, approvals
and other authorizations from, and has made all declarations and filings with,
all federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals necessary to
own or lease, as the case may be, and to operate its properties and to carry on
its business as conducted as of the date hereof and (ii) neither KCS nor any of
its Subsidiaries has received notice of any proceeding relating to revocation or
modification of any such license, permit, certificate, consent, order, approval
or other authorization, except as described in Section 6.15 of the KCS
Disclosure Schedule.
(b) Except for normal examinations conducted by any Governmental Authority
in the regular course of the business of KCS and its Subsidiaries or as would
not reasonably be expected to have a KCS Material Adverse Effect, since December
31, 2001, no Governmental Authority has provided written notice to KCS or any of
its Subsidiaries of any threatened proceeding or investigation into the business
or operations of KCS or any of its Subsidiaries or any of their members,
officers, directors or employees in their capacity as such with KCS or any of
its Subsidiaries.
(c) Neither KCS nor any of its Subsidiaries is in violation of any
Applicable Laws or orders of any Governmental Authority, except as would not
reasonably be expected to have a KCS Material Adverse Effect. No event has
occurred or exists that would (with or without notice or lapse of time) give
rise to any obligation on the part of KCS or any of its Subsidiaries to
undertake or to bear all or any portion of the cost of any remedial action of
any nature which would reasonably be expected to have a KCS Material Adverse
Effect.
Section 6.17 Environmental Matters. KCS and each of its Subsidiaries (i)
are in compliance with, and are not subject to any liability under, in each
case, all applicable Environmental Laws; (ii) hold all Environmental Permits
necessary to conduct their current operations and (iii) are in compliance with
their respective Environmental Permits, except where the failure to hold or be
in compliance with such Environmental Permits would not reasonably be expected
to have a KCS Material Adverse Effect. Neither KCS nor any of its Subsidiaries
has received any written notice, demand, letter, claim or request for
information alleging that KCS or any of its Subsidiaries may be in violation of,
or liable under, any Environmental Law, except where the preceding would not
reasonably be expected to have a KCS Material Adverse Effect. Neither KCS nor
any of its Subsidiaries (x) has entered into or agreed to any consent decree or
order or is subject to any judgment, decree or judicial order relating to
compliance with
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Environmental Laws, Environmental Permits or the investigation, sampling,
monitoring, treatment, remediation, removal or cleanup of Hazardous Materials
and no investigation, litigation or other proceeding is pending or, to the
Knowledge of KCS and its Subsidiaries, threatened with respect thereto, except
as would not reasonably be expected to have a KCS Material Adverse Effect or (y)
is an indemnitor or has assumed liability in connection with any pending demand,
notice, claim, or other allegation, or to the Knowledge of KCS and its
Subsidiaries, any claim threatened by or against any third-party relating to any
liability under any Environmental Law or relating to any Hazardous Materials,
except as would not reasonably be expected to have a KCS Material Adverse
Effect. None of the real property owned or leased or operated by KCS or any of
its Subsidiaries is listed or, to the Knowledge of KCS and its Subsidiaries,
proposed for listing on any list of sites maintained by any Governmental
Authority requiring investigation or cleanup, except as would not reasonably be
expected to have a KCS Material Adverse Effect.
Section 6.18 Properties. Each of KCS and its Subsidiaries has good and
marketable title to, or valid and enforceable leasehold, easement or concession
interests in, all of its properties and tangible assets necessary to conduct the
KCS Business as currently conducted, except where the failure to have such title
or interest would not reasonably be expected to have a KCS Material Adverse
Effect. All of such property and assets which constitute personal property,
equipment, and fixtures, are in good condition and repair, normal wear and tear
excepted. Each of KCS and its Subsidiaries has complied in all material respects
with the terms of all leases and concessions to which it is a party and under
which it is in occupancy, and all such leases and concessions are in full force
and effect, except in each case as would not reasonably be expected to have a
KCS Material Adverse Effect.
ARTICLE 7
COVENANTS AND ADDITIONAL AGREEMENTS
Section 7.1 Conduct of Business by the GTFM Group. During the period from
the date of this Agreement and continuing through the Closing Date, except as
expressly permitted or required by this Agreement or with the prior written
consent of KCS, Sellers shall use commercially reasonable efforts to cause GTFM
and each of its Subsidiaries to (i) carry on its business in the ordinary course
consistent with past practice and (ii) use commercially reasonable efforts to
preserve their present business organizations and relationships (including
keeping available the present services of their employees and preserving their
rights, franchises, goodwill and relations with their customers and others with
whom they conduct business). Without limiting the generality of the foregoing,
except as expressly permitted or required by this Agreement or consented to in
writing by KCS, Sellers shall use commercially reasonable efforts to cause GTFM,
and each of the GTFM Subsidiaries not to, directly or indirectly:
(a) amend or agree to amend their charters or bylaws (or comparable
organizational documents), or merge with or into or consolidate with, or agree
to merge with or into or consolidate with, any other Person, subdivide or in any
way reclassify any of their membership interests, shares or any other ownership
interests, or change or agree to change in any manner the rights of their
membership interests, shares or any other ownership interests or liquidate or
dissolve;
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(b) (i) issue, sell, redeem or acquire any share or any other ownership
interest or any debt security in GTFM or any of the GTFM Subsidiaries; (ii)
issue, sell or grant any option, warrant, convertible or exchangeable Security,
right, "phantom" or other ownership interest, subscription, call, unsatisfied
preemptive right or other agreement or right of any kind to purchase or
otherwise acquire (including by exchange or conversion) any shares or any other
ownership interests in GTFM or any of the GTFM Subsidiaries; or (iii) enter into
any Contracts, agreements or arrangements to issue, redeem, acquire or sell any
shares or any other ownership interests in GTFM or any of the GTFM Subsidiaries;
(c) incur any indebtedness for borrowed money in excess of $30 million for
the facility at Toluca, or $10 million in the aggregate (outstanding at any one
time) for other purposes, or guarantee any liability, obligation or indebtedness
(whether or not currently due or payable) of any other Person or incur any GTFM
Voting Debt;
(d) except as required by law or IAS, make any change in their accounting
methods or practices for Tax or accounting purposes or make any change in
depreciation or amortization policies or rates adopted by them for Tax or
accounting purposes or make any material, or change any existing, Tax election,
settle any pending audits or make voluntary disclosure agreements or settle or
compromise any Tax liability, except in the case of any such liability to the
extent reserved for on the GTFM Financial Statements or except to the extent
such change would not have a GTFM Material Adverse Effect;
(e) make any loan or advance or capital contribution to any of their
Affiliates who are not members of the GTFM Group, or any of their officers,
directors, employees, consultants, agents or other representatives (other than
reasonable and customary travel advances made in the ordinary course of business
consistent with past practice);
(f) sell, transfer, lease, license, offer to sell, abandon or make any
other disposition of any of their assets or rights or grant or suffer, or agree
to grant or suffer, any Encumbrance other than Permitted Encumbrances on any of
their assets or rights, other than in the ordinary course of business consistent
with past practice and not exceeding $5 million in the aggregate;
(g) except as expressly permitted pursuant to subsection (o) below, settle
any claim, action or proceeding involving any liability for money damages or any
restrictions upon any of their operations, any of the GTFM Assets or the GTFM
Business, except to the extent such settlement would not have a GTFM Material
Adverse Effect;
(h) create, renew, amend, terminate or cancel, any Contract other than in
the ordinary course of business consistent with past practice and providing for
consideration payable by or to GTFM or any GTFM Subsidiaries equal to or less
than $1 million individually;
(i) enter into, amend, or agree to enter into or amend any Contract,
agreement or arrangement or any financial transaction with any of their
officers, directors, consultants, agents representatives, (in the case of agents
and representatives, other than in the ordinary course of business consistent
with past practice), or Affiliates who are not members of the GTFM Group;
provided, however, that this clause (i) shall not prohibit the performance of
Contracts executed prior to the date of this Agreement, the terms of which have
been disclosed to KCS in the Seller Disclosure Schedule;
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(j) declare or make any dividends or declare or make any other
distributions of any kind payable to MM or any Affiliate of MM (other than any
other member of the GTFM Group);
(k) acquire or agree to acquire in any manner any equity interests in, or
any business of, any Person or other business organization or division thereof,
including by way of merger, consolidation, or purchase of an equity interest or
assets;
(l) enter into, amend, modify or renew any Benefit Plan or other written
employment, consulting, severance or similar employment agreements or
arrangements, or grant any salary or wage increase or increase in severance or
termination pay or increase any employee benefit or hire any new employee for a
management position, except as may be required by Applicable Law; and except in
the ordinary course of business consistent with past practice.
(m) take any action to accelerate any material rights or benefits, or make
any material determinations not in the ordinary course of business consistent
with past practice, under any collective bargaining agreement, Benefit Plan or
employment, indemnification, severance or termination agreement;
(n) make or incur any capital expenditures in excess of those set forth in
the GTFM 2003 Capital Budget, a copy of which has been provided to KCS, or cease
to make capital expenditures in the ordinary course of business consistent with
past practice;
(o) cancel any indebtedness or waive any claims or rights in amounts, in
each case, in excess of $500,000 in the aggregate;
(p) accrue or pay any bonuses to any employee of the GTFM Group other than
in the ordinary course of business consistent with past practices , except as
set forth in Section 7.1 of the Seller Disclosure Schedule; or
(q) authorize or agree (by Contract or otherwise) to do any of the
foregoing.
Section 7.2 Conduct of Business by KCS and its Subsidiaries.
(a) During the period from the date of this Agreement and continuing
through the Closing Date, except as expressly permitted or required by this
Agreement or with the prior written consent of TMM, KCS and its Subsidiaries
shall (i) carry on their business in the ordinary course consistent with past
practice, (ii) use commercially reasonable efforts to preserve their present
business organizations and relationships (including keeping available the
present services of their employees and preserving their rights, franchises,
goodwill and relations with their customers and others with whom they conduct
business), (iii) take no action that would reasonably be expected to prevent
completion of, or materially delay, the Acquisition, or change materially the
terms of the Acquisition to the detriment of Sellers, and (iv) take none of the
following actions that would materially change the economic benefits of the
Acquisition to the detriment of the Sellers:
(u) amend their charters or bylaws (or comparable organizational
documents), or merge or consolidate with, any other Person, subdivide or
reclassify their common stock or other ownership interests, or change the
rights of their common stock or other ownership interests or liquidate or
dissolve;
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(v) issue, sell or acquire any common stock or other ownership
interest of any of the KCS Subsidiaries;
(w) make any loan or advance or capital contribution to any of their
Affiliates (other than any KCS Subsidiary), or any of their officers,
directors, employees, consultants, agents or other representatives (other
in the ordinary course of business consistent with past practice;
(x) declare or make any dividends or declare or make any other
distributions of any kind on or payable to the holders of its capital
stock (other than regularly scheduled dividends payable on KCS preferred
stock);
(y) acquire any equity interests in, or assets of any business of,
any Person; or
(z) authorize or agree to do any of the foregoing.
(b) In connection with obtaining the funds necessary for the Purchase
Price, KCS shall keep apprised on a current basis regarding any negotiations,
and consult on a non-binding basis with, Xxxxxx Xxxxxxx Xxxxxxx concerning any
KCS asset disposition and with Xxxxxxx Xxxxxx Xxxxxx concerning any Acquisition
financing arrangements.
Section 7.3 Access to Information; Confidentiality.
(a) Between the date of this Agreement and the Closing Date, subject to
Applicable Laws relating to the exchange and disclosure of information and to
the Confidentiality Agreements, the Parties and their respective Affiliates
shall afford to each other and to their respective authorized agents and
representatives access, upon reasonable notice and during normal business hours,
to all properties of, and all Contracts, documents and information of or
relating to the assets, liabilities, business, customers, employees, operations,
personnel and other aspects of their respective businesses; provided, however,
that such access shall be conducted in a manner which does not unreasonably
interfere with a Party's normal operations.
(b) The Parties agree to continue to be bound by and comply with the
provisions set forth in the Confidentiality Agreements, and all amendments
thereto, the provisions of which are hereby incorporated herein by reference, to
the extent such provisions are not in conflict with the terms of this Agreement.
Section 7.4 Regulatory Matters; Governing Documents; Third-Party Consents.
(a) The Parties shall cooperate with each other and use their commercially
reasonable efforts promptly to prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals, waivers and
authorizations of all Governmental Authorities, third parties and other Persons
which are necessary or advisable to consummate the transactions contemplated by
this Agreement and the Ancillary Agreements, and requests for required consents
under the Contracts, including, without limitation, those referred to in
Sections 5.5 and 6.3. KCS and Sellers agree to take all reasonable steps
necessary to satisfy any conditions or requirements
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imposed by any Governmental Authority in connection with the consummation of the
transactions contemplated by this Agreement, other than those conditions or
requirements, in the aggregate, the satisfaction of which are reasonably likely
to result in either a GTFM Material Adverse Effect, a KCS Material Adverse
Effect or a Seller Material Adverse Effect. The Parties agree that they will
consult with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all Governmental Authorities, third parties and
other Persons necessary or advisable to consummate the Merger and the other
transactions contemplated by this Agreement and the Ancillary Agreements and
each Party will keep the other Parties apprised of the status of matters
relating to completion of the transactions contemplated herein and therein.
(b) The Parties shall promptly advise each other party hereto upon
receiving any communication from any Governmental Authority whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements.
(c) Each Party will (i) take promptly all actions necessary to make the
filings required of such Party or its Affiliates under the HSR Act (which
filings shall include a request for the early termination of the waiting period
under the HSR Act), (ii) comply at the earliest practicable date with any
request for additional information received by such Party or its Affiliates from
the Federal Trade Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and (iii) cooperate with each other Party in
connection with such other Party's filing under the HSR Act and in connection
with resolving any investigation or other inquiry concerning the transactions
contemplated by this Agreement commenced by either the Federal Trade Commission
or the Antitrust Division of the Department of Justice or state attorneys
general.
(d) KCS shall promptly after the date of this Agreement (i) file before the
Mexican Antitrust Commission (Comision Federal de Competencia) the notification
required pursuant to Articles 20 and 21 of the Mexican Antitrust Law (Ley
Federal de Competencia Economica), using commercially reasonable efforts to
assure that the notification is accurate and complete and contains all of the
information required pursuant to the regulations of the Mexican Antitrust Law
(Reglamento de xx Xxx Federal de Competencia Economica) and other official forms
therefor, and (ii) that any request for any additional information that may be
required or otherwise solicited by the Mexican Antitrust Commission from KCS or
any of its Affiliates in connection with such notification is complied with on a
timely basis. Sellers shall promptly provide KCS with all information regarding
Sellers, GTFM and GTFM Subsidiaries that may be necessary for KCS to satisfy its
obligations under this Section 7.4(d). The Parties shall cooperate with each
other in connection with such Mexican antitrust notification and in connection
with resolving any investigation or other inquiry concerning the transactions
contemplated by this Agreement, commenced by either the Antitrust Commission
directly or as a result of any person filing any claim before such Antitrust
Commission in connection therewith.
(e) TMM shall cause to be taken all action necessary and appropriate to
amend the Bylaws of GTFM and the GTFM Subsidiaries to contain the provisions set
forth in Exhibit C.
(f) TMM shall use its commercially reasonable efforts to obtain the
consents of the Lessor and the Lenders required under the Sublease of
Locomotives identified in Section 5.5 of Sellers' Disclosure Schedule, to the
change of control resulting from the Acquisition.
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Section 7.5 Stockholder and Debtholder Approvals.
(a) As soon as practicable following the date of this Agreement, KCS shall
prepare and file with the SEC a proxy statement for a special meeting of its
stockholders to be called to approve the matters referred to in Section 6.3(a)
and to obtain clearance of such proxy statement from the SEC. As soon as
practicable after the definitive proxy statement has been cleared by the SEC,
KCS will call and give notice of a special meeting of its stockholders, cause a
proxy statement and any amendments thereto to be mailed to its stockholders,
convene the special meeting of its stockholders and seek to obtain the approval
of its stockholders to the matters set forth therein as requiring such approval,
including recommending such approval to its Stockholders, provided that the KCS
Board may withdraw its recommendation of the Acquisition if it is advised by
counsel to the effect that because of a third party proposal occurring after the
date of the Board's initial approval of the Acquisition, for the Board to
continue to recommend the Acquisition would be a breach of the Board's fiduciary
duties to the KCS Stockholders.
(b) As soon as practicable following the date of this Agreement, TMM shall
use its commercially reasonable efforts to obtain the approval of its
stockholders and of the stockholders of MM referred to in Section 5.4. The
Boards of Directors of TMM and of MM shall recommend such approval to their
respective stockholders.
(c) As soon as practicable following the date of this Agreement, TMM shall
use its commercially reasonable efforts to obtain the approvals of its
debtholders referred to in Section 5.5.
Section 7.6 Tax Matters.
(a) TMM shall prepare or cause to be prepared and shall timely file or
cause to be timely filed all Tax Returns for GTFM and the GTFM Subsidiaries for
all periods ending on or prior to the Closing Date. To the extent permitted by
law, all such Tax Returns shall be prepared in a manner consistent with past
practices of GTFM and the GTFM Subsidiaries, respectively.
(b) The Surviving Company shall prepare or cause to be prepared and timely
file or cause to be timely filed any Tax Returns of GTFM or the GTFM
Subsidiaries for Tax periods that begin before the Closing Date and end after
the Closing Date (a "Straddle Period"). To the extent permitted by law, all such
Tax Returns shall be prepared in a manner consistent with past practices of GTFM
and the GTFM Subsidiaries.
(c) After the Closing Date, the Surviving Company, TMM and their respective
Subsidiaries shall provide each other with such cooperation and information
relating to TMM, GTFM, the Surviving Company or their respective Subsidiaries as
the Parties reasonably may request in (i) filing any Tax Return, (ii)
determining any liability for Taxes or a right to a Tax refund or (iii)
conducting or defending any proceeding in respect of Taxes. Such cooperation and
information shall include provisions by the Surviving Company to provide powers
of attorney for the purpose of signing Tax Returns and defending any Tax Audits
for Pre-Closing Periods.
(d) At the Closing, TMM and GTFM shall deliver to the Surviving Company and the
Surviving Company shall, and shall cause GTFM and the GTFM Subsidiaries to,
retain for a period of six (6) years following the Closing Date, all Tax
Returns, books and records (including
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computer files) of, or with respect to the activities of, GTFM and the GTFM
Subsidiaries for all taxable periods from date of incorporation to the Closing
Date for GTFM and all GTFM Subsidiaries.
(e) The Surviving Company shall, in consultation with TMM, control, manage
and be solely responsible for any audit, contest, claim, proceeding or inquiry
with respect to Taxes for any Taxable period ending on or before the Closing
Date and for any Straddle Period and shall have the right, in consultation with
TMM, to settle or contest any such audit, contest, claim, proceeding or inquiry;
provided, however, that the Surviving Company shall not settle any such issue
that would adversely affect TMM or any of its respective Subsidiaries in a
material way, without the prior written consent of TMM, which consent shall not
be unreasonably withheld or delayed.
Section 7.7 Insurance. Each of the Sellers shall cause GTFM and the GTFM
Subsidiaries shall maintain in effect and pay all premiums due thereon for the
period ending on the Closing Date with respect to any and all fidelity bonds
maintained by them on the date hereof and all GTFM Insurance Policies or procure
comparable replacement policies and bonds (or such replacement coverage as is
obtainable on a commercially reasonable basis) and maintain such policies and
bonds in effect until the Closing Date.
Section 7.8 Notification of Certain Matters. Each party to this Agreement
shall give prompt notice to the other Parties, to the extent known by such
party, of (i) the occurrence, or failure to occur, of any event or existence of
any condition that has caused or could reasonably be expected to cause any of
the representations or warranties of such party contained in this Agreement to
be untrue or inaccurate in any material respect at any time after the date of
this Agreement, up to and including the Closing Date; (ii) any failure on its
part to comply with or satisfy, in any material respect, any covenant, condition
or agreement to be complied with or satisfied by such party under this
Agreement.
Section 7.9 Further Assurances. Each party to this Agreement shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions of this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby. Upon the
request of KCS, Sellers and their respective Affiliates shall promptly execute
and deliver such further instruments of assignment, transfer, conveyance,
endorsement, direction or authorization and other documents as KCS may
reasonably request to effectuate the purposes of this Agreement and the
Ancillary Agreements.
Section 7.10 Third-Party Matters.
(a) From the date of this Agreement to the Effective Time, (i) neither
Sellers, nor any of their respective Affiliates, officers, directors, employees,
members, shareholders, representatives or agents, including any investment
banker, attorney or accountant engaged by any of them shall, directly or
indirectly solicit, encourage or facilitate inquiries or proposals, or enter
into any agreement, with respect to, or initiate or participate in any
negotiations or discussions with any Person concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or of any equity
interest in, or any merger or business combination with, TMMH, MM, GTFM or any
of their respective Subsidiaries, and (ii) TMM shall not enter into any
agreement with any Person concerning any acquisition or purchase of a
controlling equity interest in TMM by any
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Competitor (as defined in the Stockholders' Agreement which is part of the
Ancillary Agreements) (each acquisition, purchase, merger or business
combination, a "TMM Acquisition Proposal"), or furnish any information regarding
a TMM Acquisition Proposal to any such Person. Sellers shall notify KCS,
providing full information, within twenty-four (24) hours if any TMM Acquisition
Proposal is received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, TMM, TMMH, MM,
GTFM, any of their respective Affiliates, officers, directors, employees,
members, or shareholders (for purposes of this Section 7.10, collectively, the
"Seller Parties"), or their representatives and agents, including any investment
banker, attorney or accountant engaged by any of them. It is understood that any
breach of the restrictions set forth in this Section 7.10 by any Seller Party or
any investment banker, attorney or other advisor or representative of the Seller
Parties shall be deemed to be a breach of this Section 7.10 by Sellers.
(b) Sellers shall, and shall cause their respective Affiliates, officers,
directors, employees, members, shareholders, representatives and advisors to,
immediately cease or cause to be terminated any existing activities, including
discussions or negotiations with any Parties, conducted prior to the date hereof
with respect to any TMM Acquisition Proposal and, subject to the terms of any
existing confidentiality agreements, shall seek to have all materials
distributed to Persons in connection therewith by Sellers or any of their
respective Affiliates or advisors returned to TMM promptly. Neither Sellers or
any of their respective Affiliates, officers, directors, employees, members,
shareholders, representatives or agents, including any investment banker,
attorney or accountant engaged by any of them, shall amend, modify, waive or
terminate, or otherwise release any Person from, any standstill, confidentiality
or similar agreement or arrangement currently in effect relating to this
Agreement or the transactions contemplated hereby. Sellers shall cause their
respective Affiliates, officers, directors, employees, members, shareholders,
representatives and agents to comply with the provisions of Sections 7.10(a) and
7.10(b).
(c) From the date of this Agreement to the Effective Time, neither KCS, nor
any of its respective Affiliates, officers, directors, employees,
representatives or agents, including any investment banker, attorney or
accountant engaged by any of them shall, directly or indirectly solicit,
encourage or facilitate inquiries or proposals, or enter into any agreement,
with respect to, or initiate or participate in any negotiations or discussions
with any Person concerning, any acquisition or purchase of all or substantially
all of the assets of, or a controlling equity interest in, KCS or KCSR or any
merger or business combination with KCS or KCSR (each, a "KCS Acquisition
Proposal"), or furnish any information regarding a KCS Acquisition Proposal to
any such Person. KCS shall notify TMM, providing full information, within
twenty-four (24) hours if any KCS Acquisition Proposal is received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, KCS, any of its respective Affiliates, officers,
directors, employees, (for purposes of this Section 7.10, collectively, the
"Buyer Parties"), or their representatives and agents, including any investment
banker, attorney or accountant engaged by any of them. It is understood that any
breach of the restrictions set forth in this Section 7.10 by any Buyer Party or
any investment banker, attorney or other advisor or representative of the Buyer
Parties shall be deemed to be a breach of this Section 7.10 by KCS.
(d) KCS shall, and shall cause its KCS Affiliates, officers, directors,
employees, representatives and advisors to, immediately cease or cause to be
terminated any existing
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activities, including discussions or negotiations with any Parties, conducted
prior to the date hereof with respect to any KCS Acquisition Proposal and,
subject to the terms of any existing confidentiality agreements, shall seek to
have all materials distributed to Persons in connection therewith by KCS or its
Affiliates or advisors returned to KCS promptly. Neither KCS or any of its
Affiliates, officers, directors, employees, representatives or agents, including
any investment banker, attorney or accountant engaged by any of them, shall
amend, modify, waive or terminate, or otherwise release any Person from, any
standstill, confidentiality or similar agreement or arrangement currently in
effect relating to this Agreement or the transactions contemplated hereby. KCS
shall cause its Affiliates, officers, directors, employees, representatives and
agents to comply with the provisions of Sections 7.10(c) and 7.10(d).
(e) Nothing set forth in this Section 7.10 shall preclude the Board of
Directors of KCS or TMM from taking any action in good faith if it is advised by
counsel that failure to do so would be a breach of duty to its stockholders.
Section 7.11 Efforts of Parties to Close. During the period from the date
of this Agreement through the Closing Date, each party hereto shall use its
commercially reasonable efforts to fulfill or obtain the fulfillment of the
conditions precedent to the consummation of the transactions contemplated
hereby, including the execution and delivery of any documents, certificates,
instruments or other papers that are reasonably required for the consummation of
the transactions contemplated hereby. During the period from the date of this
Agreement and continuing through the Closing, except as required by Applicable
Law, no party to this Agreement shall knowingly take any action which, or
knowingly fail to take any action the failure of which to be taken, could
reasonably be expected to: (i) result in any of the representations and
warranties set forth in this Agreement on the part of the party taking or
failing to take such action being or becoming untrue in any material respect;
(ii) result in any conditions to the Closing set forth in Article 8 not being
satisfied; or (iii) result in a violation of any provision of this Agreement or
the Ancillary Agreements.
Section 7.12 Expenses. Except as expressly provided otherwise in this
Agreement, the Parties shall each bear their respective direct and indirect
expenses incurred in connection with the negotiation and preparation of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby.
Section 7.13 VAT Contingency Payment. Provided the Acquisition has occurred
and that neither KCS nor any Subsidiary of KCS has purchased the TFM "Class III"
shares referred to in clause (i) of this Section 7.13 upon exercise of the Put,
as compensation for TMM's services in obtaining Final Resolution of the VAT
Claim, KCS shall make or shall cause TFM to make a cash payment (the "VAT
Contingency Payment") to TMM, as set forth below, following the date of Final
Resolution of the VAT Claim, and the receipt by TFM or its designee of the VAT
Payment, so long as the VAT Payment consists of at least (i) all of the TFM
"Class III" shares (representing 20% of the capital stock of TFM) currently held
by the Mexican Government or (ii) a cash payment or other property acceptable to
the Parties which has a fair value equal to or greater than the Put Purchase
Price as calculated on the date the VAT Payment is received (or a combination
thereof). In such event, KCS shall, at its option, pay or cause TFM to pay to
TMM (iii) $100,000,000 within 90 days thereafter or (iv) $50,000,000 within 90
days thereafter and an additional $55,000,000 within 365 days thereafter. If the
VAT Payment exceeds the Put Purchase Price as calculated on the date that the
VAT Payment is received, KCS
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shall pay or cause TFM to pay to TMM within 90 days after the VAT Payment and
Final Resolution of the VAT Claim the first $25,000,000 received above the Put
Purchase Price, and 15% of any additional amount received above the Put Purchase
Price beyond the first $25,000,000 (but such 15% payment shall not exceed
$50,000,000). The calculation of all cash payments and property distributions
received by TFM or its designee referred to in this Section 7.13 as a VAT
Contingency Payment shall be made after reducing the value of such payments and
distributions by the amount of all expenses incurred by or on behalf of TFM in
effecting Final Resolution of the VAT Claim and receipt of the VAT Payment,
including without limitation legal fees and net of Mexican corporate tax (paid
or payable in cash assuming utilization of all available net operating loss
carry forwards). As part of the services to be performed under the Consulting
Agreement, Consultant shall have the right to, and shall, manage the
negotiation, prosecution and settlement of the VAT Claim and any extensions or
other modifications of the obligations under the Put.
Section 7.14 Financing for the Acquisition. In connection with the
financing for the Acquisition (including any amounts due under Section 7.13),
KCS shall not, and shall cause its Subsidiaries and Affiliates not to, enter
into any financing arrangements that materially (i) restrict the ability of KCS
and its subsidiaries and affiliates to make any payments required to be made by
this Agreement or (ii) deny or restrict in any material way any rights granted
to TMM, its Subsidiaries and Affiliates under this Agreement or the Ancillary
Agreements.
Section 7.15 Release. At the Closing, KCS shall deliver to TMM a release,
effective as of the Closing, of each Person, not identified in Exhibit D as a
continuing officer or director, who served at the request of any Seller as a
director or officer of GTFM or any of its Subsidiaries at any time prior to
Closing, from any and all claims of KCS and its Subsidiaries for any actions
taken or omitted by such Person in such capacity, except for any action or
omission which was in violation of law or the bylaws of GTFM or any of its
Subsidiaries, or constituted fraud, willful misconduct, gross negligence or a
breach of this Agreement or any of the Ancillary Agreements.
ARTICLE 8
CONDITIONS
Section 8.1 Mutual Conditions. The obligations of each party to this
Agreement to consummate the Acquisition shall be subject to the satisfaction of
each of the following conditions, unless any such condition is waived by KCS and
TMM:
(a) No order, injunction or decree issued by any Governmental Authority of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Acquisition shall be in effect. No proceeding initiated by
any Governmental Authority seeking an injunction to restrain or prohibit the
consummation of the Acquisition shall be pending. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Authority which prohibits, restricts in any
material manner or makes illegal consummation of the Acquisition;
(b) All consents, waivers, authorizations and approvals required from all
Governmental Authorities to consummate the Acquisition, without the imposition
of conditions or requirements, in the aggregate, the satisfaction of which by
KCS or its Subsidiaries or TMM or
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its Subsidiaries is reasonably likely to result in either a KCS Material Adverse
Effect, a GTFM Material Adverse Effect or a Seller Material Adverse Effect,
shall have been obtained and shall remain in full force and effect as of the
Closing Date;
(c) A general moratorium on commercial banking activities in New York or
Mexico shall not have been declared by either Federal or state authorities and
be continuing nor shall there occur and be continuing any calamity or crisis in
the U.S. or Mexican financial markets; and
(d) The securities to be issued pursuant to the Merger and, if KCS so
elects pursuant to Section 1.2, in payment of a portion of the cash
consideration, shall have been be approved for listing by the NYSE.
Section 8.2 Conditions to the Obligations of KCS. The obligations of KCS
to consummate the Acquisition shall be subject to the satisfaction of each of
the following conditions, any of which may be waived in writing by KCS:
(a) For purposes of this Section 8.2(a), the accuracy of the
representations and warranties of Sellers set forth in this Agreement shall be
assessed as of the date of this Agreement and shall be assessed as of the
Closing Date with the same effect as though all such representations and
warranties had been made again on and as of the Closing Date (provided, however,
that the representations and warranties that speak as of a specific date other
than the date of this Agreement shall speak only as of such date) and such
representations and warranties shall be true and correct in all material
respects;
(b) Sellers shall have performed and complied in all material respects with
all agreements, covenants, obligations and conditions required by this Agreement
to be performed or complied with by them at or prior to the Closing Date;
(c) TMM, TMMH and MM shall have delivered to KCS a certificate, dated as of
the Closing Date, signed on their behalves by their respective Presidents and
Chief Financial Officers confirming their satisfaction of the conditions
applicable to them contained in Sections 8.2(a) and 8.2(b);
(d) Each of the Ancillary Agreements shall have been duly executed and
delivered by or on behalf of each of Sellers as the case may be;
(e) KCS shall have received an opinion dated the Closing Date of Milbank,
Tweed, Xxxxxx & XxXxxx LLP, U.S. counsel to Sellers and Xxxxxx & Xxxxx, S.C.,
Mexican counsel to Sellers, in the form and as to the matters set forth on
Exhibit G-1 and G-2, respectively, with such exceptions and qualifications as
are reasonably acceptable to KCS;
(f) KCS shall have received from the Holders of the requisite number of
outstanding shares of KCS Common Stock and KCS Preferred Stock the affirmative
vote referred to in Section 6.3(a);
(g) Since December 31, 2002, there shall not have been any GTFM Material
Adverse Effect or any development or combination of developments that,
individually or in the aggregate,
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has had or is reasonably likely to have a GTFM Material Adverse Effect, of which
KCS did not have Knowledge prior to the date of this Agreement;
(h) KCS shall have received copies of all other consents, approvals,
authorizations, qualifications and orders of all Governmental Authorities and
all other Persons party to Contracts with any member of the GTFM Group that are
required in respect of the transactions to be consummated at the Closing, other
than those that if not obtained would not individually or in the aggregate
reasonably be expected to have a GTFM Material Adverse Effect or a KCS Material
Adverse Effect and such consents and other items shall remain in full force and
effect as of the Closing Date; and
(i) KCS shall have received the officers' and directors' resignations
referred to in Section 4.2(j).
(j) There shall not be pending any insolvency or bankruptcy proceeding
against MM, TMMH or TFM, provided that if any such proceeding is pending MM,
TMMH or TFM shall have had at least 60 days to obtain dismissal of any such
proceeding.
Section 8.3 Conditions to the Obligations of Sellers. The obligation of
Sellers to consummate the Acquisition shall be subject to satisfaction of each
of the following conditions, which may be waived in writing by TMM:
(a) For purposes of this Section 8.3(a), the accuracy of the
representations and warranties of KCS and KARA Sub set forth in this Agreement
shall be assessed as of the date of this Agreement and shall be assessed as of
the Closing Date with the same effect as though all such representations and
warranties had been made again on and as of the Closing Date (provided, however,
that the representations and warranties that speak as of a specific date other
than the date of this Agreement shall speak only as of such date) and such
representations and warranties shall be true and correct in all material
respects;
(b) Each of KCS and KARA Sub shall have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date;
(c) Each of KCS and KARA Sub shall have delivered to TMM a certificate,
dated as of the Closing Date, signed on behalf of KCS or KARA Sub, as the case
may be, by its Chief Executive Officer and Chief Financial Officer confirming
the satisfaction of the conditions contained in Sections 8.3(a) and 8.3(b);
(d) Each of the Ancillary Agreements shall have been duly executed and
delivered by or on behalf of KCS, and Sellers shall have no reasonable basis for
belief that any of such agreements shall not become effective at the Effective
Time;
(e) TMM shall have received an opinion dated the Closing Date of
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, counsel to KCS, and Xxx Xxxxxxx, Associate
General Counsel to KCS, in the form and as to the matters set forth on Exhibit
H-1 and H-2, respectively, with such exceptions and qualifications as are
reasonably acceptable to TMM;
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(f) There shall not exist any event or combination of events that,
individually or in the aggregate, will (or would reasonably be expected to)
prevent KCS from performing any of its post-Closing obligations under this
Agreement or any Ancillary Agreement at or after the Effective Time;
(g) Since December 31, 2002, there has not been any KCS Material Adverse
Effect or any development or combination of developments that, individually or
in the aggregate, has had or is reasonably likely to have a KCS Material Adverse
Effect of which TMM did not have knowledge prior to the date of this Agreement;
(h) TMM shall have received copies of all other consents, approvals,
authorizations, qualifications and orders of all Governmental Authorities and
all other Persons party to contracts with KCS or any of its Subsidiaries that
are required in respect of the transactions to be consummated at Closing, other
than those that, if not obtained, would not, individually or in the aggregate,
reasonably be expected to have a KCS Material Adverse Effect and such consents
and other items shall remain in full force and effect as of the Closing Date;
(i) TMM shall have received the consents of the holders of the 2003 Notes
and of the 2006 Notes referred to in Section 5.5, provided that TMM shall have
used its commercially reasonable efforts to obtain such consents; and.
(j) TMM shall have received the release referred to in Section 7.15.
ARTICLE 9
TERMINATION
Section 9.1 Termination.
(a) This Agreement may be terminated prior to the Closing as follows:
(i) by written consent of KCS and TMM;
(ii) by KCS or TMM if any order of any Governmental Authority
permanently restraining, enjoining or otherwise prohibiting the
consummation of the Acquisition shall have become final and non-appealable
or if any of the approvals of any Governmental Authority to perform the
transactions herein, imposes any condition or requirement, the satisfaction
of which is reasonably likely to result in either a KCS Material Adverse
Effect or a GTFM Material Adverse Effect;
(iii) by KCS if any condition to the obligations of KCS hereunder
becomes incapable of fulfillment through no fault of KCS and is not waived
by KCS;
(iv) by TMM if any condition to the obligations of Sellers hereunder
becomes incapable of fulfillment through no fault of Sellers and is not
waived by TMM;
(v) by KCS if TMM shall have experienced a Change of Control, or by
TMM if KCS shall have experienced a Change of Control; and
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(vi) by KCS or TMM if the Closing does not occur by the close of
business on or prior to December 31, 2004 (the "Termination Date");
provided, however, that the Termination Date may be extended by KCS and TMM
by written agreement.
(b) The termination of this Agreement shall be effectuated by the delivery
by the party terminating this Agreement to the other Parties of a written notice
of such termination. If this Agreement so terminates, it shall become null and
void and have no further force or effect, except as provided in Section 9.2.
Section 9.2 Survival after Termination. If this Agreement is terminated in
accordance with Section 9.1 hereof and the transactions contemplated hereby are
not consummated, this Agreement and each Ancillary Agreement shall become void
and of no further force and effect, without any liability on the part of any
party hereto, except for the provisions of Sections 7.12, 12.5 and 12.11 and
this Article 9. Notwithstanding the foregoing, nothing in this Section 9.2 shall
relieve any party to this Agreement of liability for a breach of any provision
of this Agreement or any agreement made as of the date hereof or subsequent
thereto pursuant to this Agreement.
ARTICLE 10
INDEMNIFICATION
Section 10.1 Survival of Representations, Warranties and Covenants;
Exclusive Monetary Remedies.
(a) All representations and warranties in this Agreement or in any
instrument executed and delivered in fulfillment of the requirements of this
Agreement shall survive the Closing for the following periods of time following
the Closing Date (in each case, the "Expiration Date"). The representations and
warranties of the Sellers set forth in Sections 5.1, 5.2, 5.3, 5.4, 5.5, and
5.17 shall survive until the fifth anniversary of the Closing. The
representations and warranties of the Sellers set forth in Section 5.11 shall
survive for the applicable statute of limitations. All other representations and
warranties of the Sellers shall survive until the third anniversary of the
Closing, provided, if the Spin-off Merger referred to in the Stockholders'
Agreement that is part of the Ancillary Agreements shall have occurred, such
representations and warranties shall survive only until the second anniversary
of the Closing. The representations and warranties of KCS set forth in Sections
6.1, 6.2, 6.3, 6.4 and 6.7 shall survive until the fifth anniversary of the
Closing. The representations and warranties of KCS set forth in Section 6.15
shall survive for the applicable statute of limitations. All other
representations and warranties of KCS shall survive until the second anniversary
of the Closing. All covenants or other agreements in this Agreement shall
terminate at the Effective Time, except the covenants in Sections 7.6, 7.9 and
7.13 which shall survive the Closing indefinitely or for the period of the
respective statutes of limitation relating thereto.
(b) Notwithstanding anything in this Agreement to the Contrary, the sole
and exclusive basis on which any party may recover monetary damages for any
breach of this Agreement by any other party, whether based upon breach of
representations and warranties, breach of any covenant, or otherwise, shall be
in accordance with the indemnification provisions set forth in this Article 10,
and subject to the limitations and exclusions set forth in this Article 10,
provided
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however, that such exclusive remedies for monetary damages shall not preclude
any party from pursuing the remedies of specific performance, injunctive relief,
declaratory judgment or any other non-monetary equitable remedies available to
such party under Applicable Law.
(c) All Losses (as defined below) for which any party may seek
indemnification hereunder shall be net of (i) any insurance recoveries received
by such party or to which such party is entitled and (ii) any amounts which such
party has received or is entitled to receive from any third party under any
indemnification or other similar agreement.
Section 10.2 Indemnification by Sellers. Subject to the limitations
contained in this Article 10, Sellers, jointly and severally, shall indemnify
and hold KCS, the Surviving Company and each of their Subsidiaries, and each of
their respective officers, directors, employees, members, stockholders, agents
and representatives ("KCS Indemnitees") harmless from and against all losses,
damages, liabilities, claims, demands, obligations, deficiencies, payments,
judgments, settlements, costs and expenses of any nature whatsoever (including
the costs and expenses of any and all investigations, actions, suits,
proceedings, demands, assessments, judgments, orders, settlements and
compromises relating thereto, and reasonable attorneys', accountants', experts'
and other fees and expenses in connection therewith) ("Losses") resulting from,
arising out of, or due to, directly or indirectly, any of the following:
(a) Any inaccuracy or misrepresentation in, or breach of, any
representation or warranty of Sellers contained in Article 5, in any schedule or
exhibit delivered hereunder by any of Sellers or in any certificates delivered
by any of Sellers pursuant to this Agreement, or any breach or nonfulfillment of
any covenant or agreement of any of Sellers contained in this Agreement, in any
schedule or exhibit delivered hereunder by any of Sellers or in any certificates
delivered by any of Sellers pursuant to this Agreement, or any claims, causes of
actions, rights asserted or demands made by any third parties (including any
Governmental Authority) arising from or relating to any of the foregoing (it
being agreed that for purposes of such right to indemnification, the
representations and warranties made by Sellers shall be deemed not qualified by
any references therein to materiality or whether or not any breach could result
or could reasonably be expected to result in a GTFM Material Adverse Effect);
and
(b) Sellers' indemnification obligations under this Article 10 for any
inaccuracy or misrepresentation in, or breach of any representation or warranty
regarding Grupo TFM or its Subsidiaries shall be limited to 51% of Losses and
then only to the extent such 51% of Losses amount to, in the aggregate, $5
million or more; provided, that for the purpose of computing this limitation on
Sellers' indemnification obligations, Losses shall be calculated without regard
to whether such Losses involved a GTFM Material Adverse Effect. The limitation
in this Section 10.2(b) shall not be applicable to any Losses arising out of or
resulting from any action or omission on the part of any Seller or its Affiliate
that involved a crime, fraud, willful misconduct or gross negligence.
Section 10.3 Indemnification by KCS. (a) Subject to the limitations
contained in this Article 10, KCS shall indemnify and hold harmless Sellers,
each of their Subsidiaries and each of their respective officers, directors,
employees, members, stockholders, agents and representatives ("Seller
Indemnitees") from and against all Losses resulting from, arising out of, or due
to, directly or indirectly, any inaccuracy or misrepresentation in, or breach
of, any representation or warranty of KCS contained in Article 6, in any
schedule or exhibit delivered hereunder by KCS
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or in any certificates delivered by KCS pursuant to this Agreement, or any
breach or nonfulfillment of any covenant of KCS contained in this Agreement, in
any schedule or exhibit delivered hereunder by KCS or in any certificates
delivered by KCS pursuant to this Agreement, or any claims, causes of actions,
rights asserted or demands made by any third parties (including any Governmental
Authority) arising from or relating to any of the foregoing.
(b) KCS's indemnification obligations under this Article 10 shall be
limited to Losses which amount to, in the aggregate, $10 million or more,
provided that for the purpose of computing this limitation or KCS's
indemnification obligations, Losses shall be calculated without regard to
whether such Losses involved a KCS Material Adverse Effect. The limitation in
this Section 10.3(b) shall not be applicable to any Losses arising out of or
resulting from any action or omission on the part of KCS or its Affiliate that
involved a crime, fraud, willful misconduct or gross negligence.
Section 10.4 Procedures for Third-Party Claims.
(a) In order for a Person (the "Indemnified Party") to be entitled to any
indemnification provided for under Section 10.2 or 10.3 hereof in respect of,
arising out of or involving a claim made by any Person (other than another Party
or its Affiliate) against the Indemnified Party (a "Third-Party Claim"), such
Indemnified Party must notify the indemnifying party in writing of the
Third-Party Claim promptly following receipt by such Indemnified Party of
written notice of the Third-Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the indemnifying party shall have been actually materially
prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the indemnifying party, as promptly as practicable following the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
Third-Party Claim that are not separately addressed to the indemnifying party.
(b) If a Third-Party Claim is made against an Indemnified Party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party; provided, however, that such counsel is not reasonably
objected to by the Indemnified Party. Should the indemnifying party so elect to
assume the defense of a Third-Party Claim, the indemnifying party shall not be
liable to the Indemnified Party for any reasonable legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof. If the
indemnifying party assumes such defense, the Indemnified Party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense; provided,
however, that the indemnifying party shall bear the reasonable fees and expenses
of such separate counsel (i) if the Parties to any such action or proceeding
(including impleaded parties) include other Parties and representation of both
Parties would, in the reasonable opinion of counsel for the Indemnified Party,
be inappropriate due to a conflict of interest or (ii) if the indemnifying party
shall not have employed counsel (other than counsel that is reasonably objected
to by the Indemnified Party) within a reasonable time after the Indemnified
Party has given notice of the institution of a Third-Party Claim in compliance
with Section 10.4(a) hereof. The indemnifying party shall be liable for the
reasonable fees and expenses of counsel employed by the Indemnified Party for
any period during which the indemnifying party has not assumed the
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defense thereof, provided, however, that such counsel is not reasonably objected
to by the indemnifying party. If the indemnifying party chooses to defend or
prosecute a Third-Party Claim, all the Indemnified Parties shall cooperate in
the defense or prosecution thereof at the indemnifying party's expense. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information that
are reasonably relevant to such Third-Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. If the indemnifying party
assumes the defense of a Third-Party Claim, the Indemnified Party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third-Party Claim without the indemnifying party's prior written consent (which
consent shall not be unreasonably withheld). If the indemnifying party assumes
the defense of a Third-Party Claim, the Indemnified Party shall agree to any
settlement, compromise or discharge of a Third-Party Claim that the indemnifying
party may recommend and that by its terms obligates the indemnifying party to
pay the full amount of the liability in connection with such Third-Party Claim,
which releases the Indemnified Party completely in connection with such
Third-Party Claim and that would not otherwise materially adversely affect the
Indemnified Party.
Section 10.5 Tax Indemnification.
(a) Sellers shall indemnify and hold each of the KCS Indemnitees harmless
from and against all Taxes of GTFM, and the GTFM Subsidiaries, the payment of
which would result in a breach of any representation or warranty set forth in
Section 5.11 or an agreement set forth in Sections 7.1(e) or 7.6 (it being
agreed that for purposes of such right to indemnification, the representations
and warranties set forth in Section 5.11 or a breach of any agreement set forth
in Section 7.1(e) or 7.6 shall be deemed not qualified by any references therein
to materiality or whether or not any breach could result or could reasonably be
expected to result in a GTFM Material Adverse Effect).
(b) KCS shall, and shall cause the Surviving Company and its Subsidiaries,
to indemnify and hold Sellers harmless from and against all Taxes of the
Surviving Company and its Subsidiaries the payment of which would not result in
a breach described in Section 10.5(a)
ARTICLE 11
DEFINITIONS
Section 11.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" shall mean any Person that directly, or indirectly through one
or more intermediaries, Controls, is Controlled by or is under common Control
with the Person specified.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Ancillary Agreements" shall mean the following agreements entered into as
of the date of this Acquisition Agreement or to be entered into as of the
Closing: (i) Stockholders' Agreement by and among KCS, TMM, TMMH and MM; (ii)
Registration Rights Agreement
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among KCS, TMM, TMMH and MM; (iii) Stock Purchase Agreement among KCS, TMM, TMMH
and MM; (iv) the Consulting Agreement; (v) the Marketing and Services Agreement;
and (vi) the Put Agreement.
"Applicable Law" shall mean any Law applicable to KCS, TMM, TMMH, MM or
any of their respective Affiliates, properties, assets, officers, directors,
employees or agents, as the case may be.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in the
United States or Mexico.
"Certificate of Merger" shall have the meaning set forth in Section 3.1 of
this Agreement.
"Change of Control" shall mean, with respect to such Person, the
occurrence of any of the following prior to the Closing Date: (a) any Person or
Group, other than a subsidiary or any employee benefit plan (or any related
trust) of such Person or a subsidiary of such Person, becomes the beneficial
owner of Voting Securities representing 20.0% or more of the combined Total
Voting Power of all Voting Securities of such Person, or (b) the individuals
who, as of the date of this Agreement, constitute the board of directors of such
Person (the "Incumbent Directors") cease for any reason to constitute at least
75.0% of the members of such board of directors unless, at least 75.0% of the
individuals then constituting such board of directors were nominated upon the
recommendation of at least 75.0% of the Incumbent Directors or other directors
so nominated; or (c) approval by the stockholders of such Person of any of the
following: (1) a merger, reorganization or consolidation ("Acquisition") with
respect to which the individuals and entities who were the respective beneficial
owners of the stock and Voting Securities of the Person immediately before such
Acquisition do not, after such Acquisition, beneficially own, directly or
indirectly, more than 80.0% of the combined voting power of the Voting
Securities of the Person resulting from such Acquisition in substantially the
same proportion as their ownership immediately before such Acquisition, (2) a
liquidation or dissolution of such Person, or (3) the sale or other disposition
of all or substantially all of the assets of such Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Concession" shall mean the concession title from the Mexican government
held by TFM to provide freight transportation services over its rail lines in
Mexico.
"Confidentiality Agreements" shall mean the Confidentiality Agreements
dated as of November 9, 2002 by and between KCS and TMM and all amendments
thereto.
"Consultant" shall mean the Company owned by Xxxx Xxxxxxx Xxxxxxx that has
entered into the Consulting Agreement with KCS.
"Consulting Agreement" shall mean that agreement between Consultant and
the Surviving Company dated as of the Effective Time.
"Contracts" shall mean all written or oral contracts, agreements,
evidences of indebtedness, guarantees, leases and executory commitments to which
any member of the GTFM
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Group is a party (jointly or severally, in whole or in part, with others or
solely) or by which any of the GTFM Assets are bound, or otherwise related to
the GTFM Business.
"Control" shall mean the ability whether directly or indirectly to direct
the affairs of another by means of ownership of assets or voting securities, or
by contract.
"Encumbrance" shall mean any lien, pledge, mortgage, security interest,
claim, charge, easement, limitation, commitment, encroachment, restriction
(other than a restriction on transferability imposed by federal or state
securities laws) or other encumbrance of any kind or nature whatsoever (whether
absolute or contingent).
"Environmental Laws" shall mean any and all U.S. and Mexican federal,
state and local statutes, laws, regulations, ordinances or rules in existence on
or prior to the Closing Date relating to the protection of the environment or
natural resources, occupational safety and health; the effect of the environment
or Hazardous Materials on human health; or emissions, discharges or releases of
Hazardous Materials into the environment, including, without limitation, ambient
air, surface water, groundwater or land; or otherwise relating to the handling
of Hazardous Materials or the investigation, clean-up or other remediation or
analysis thereof.
"Environmental Permit" shall mean any permit, approval, identification
number, license and other authorization required under any applicable
Environmental Law, including any administratively complete application that is
sufficient to serve as an authorization for an activity regulated under
Environmental Law.
"ERISA Affiliate" shall mean any Person who is in the same controlled
group of corporations or who is under common control with KCS (within the
meaning of Section 414 of the Code).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
"Final Resolution of the VAT Claim" shall mean the final settlement or
resolution of the VAT Claim, whether by a voluntary settlement or judgment, that
is not subject to any form or manner of appeal, collateral claim under the
January 31, 1997 Stock Purchase Agreement for the acquisition of Ferrocarril del
Noreste, S.A. de C.V. or otherwise or offset or reclaim by any Governmental
entity or any other Person in any manner whatsoever, provided, that if KCS shall
have received the TFM Class III shares referred to in 7.13(i) in settlement of
all or a portion of the VAT Claim or if KCS shall have received the payment
referred to in 7.13(ii) along with the written agreement (in form reasonably
satisfactory to KCS) of TMM to defend and indemnify KCS against any claim,
collateral claim, offset, reclaim, appeal or challenge of any kind whatsoever
which seeks to rescind , set aside, revoke or diminish the amount of such
payment or the VAT Claim, then a "Final Resolution of the VAT Claim" shall be
deemed to have occurred for the purpose of the VAT Payment.
"GAAP" shall mean generally accepted accounting principles, consistently
applied, as used in the United States of America as in effect at the time any
applicable financial statements were or are prepared or any act requiring the
application of GAAP was or is performed.
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"Governmental Authority" shall mean any United States, Mexican or foreign
government, any state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including the SEC or any other United
States, Mexican or foreign government authority, agency, department, board,
commission or instrumentality of the United States, any state of the United
States or any political subdivision thereof or any foreign jurisdiction, and any
court, tribunal or arbitrator(s) of competent jurisdiction, and any United
States, Mexican or foreign governmental or non-governmental self-regulatory
organization, agency or authority (including the NYSE).
"GTFM Assets" shall mean the properties, assets, Contracts and rights of
any kind, whether tangible or intangible, real or personal, of the GTFM Group
necessary to enable GTFM and the GTFM Subsidiaries to conduct the GTFM Business
as presently conducted.
"GTFM Business" shall mean the business and operations of the GTFM Group
in the manner in which the same have been conducted prior to the date hereof,
are currently being conducted and are currently proposed by the GTFM Group to be
conducted, whether conducted by GTFM or any of its Subsidiaries.
"GTFM Financial Statements" shall mean those financial statements referred
to in Section 5.6.
"GTFM Form 20-F" shall mean the Annual Report on Form 20-F for the year
ended December 31, 2001 filed by GTFM with the SEC.
"GTFM Group" shall mean GTFM and all of its Subsidiaries, collectively.
"GTFM Material Adverse Effect" shall mean a change, event or occurrence
that has had, or is reasonably likely to have, a material adverse effect on the
business, assets, properties, liabilities, financial condition or results of
operations of the GTFM Group taken as a whole other than any change, event or
occurrence resulting from (i) changes in the railroad industry in Mexico or the
United States generally, (ii) changes in general economic conditions in the
United States or Mexico or the securities markets in general, (iii) terrorist
activities or the commencement or escalation of any war or armed hostilities,
which do not disproportionately affect the GTFM Group, or (iv) performance of
this Agreement in accordance with its terms.
"GTFM Subsidiaries" shall mean all of the Subsidiaries of GTFM except
Mexrail, Inc. and its Subsidiaries.
"GTFM Trademarks" shall mean all trademarks of GTFM and its Subsidiaries.
"Hazardous Materials" shall mean (i) any petroleum, petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any chemical, material or other
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
"HSR Act" means Section 7A of the Xxxxxxx Act (Title II of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder.
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"IAS" shall mean International Accounting Standards, consistently applied
as used in the UMS as in effect at the time any applicable financial statements
were or are prepared or any act requiring compliance with IAS was or is
performed.
"Income Taxes" shall mean all Taxes, charges, fees, levies or other
assessments imposed by any Taxing Authority and based on or measured solely with
respect to income or profits including any interest, penalties or additions
attributable or imposed with respect thereto.
"Intellectual Property" shall mean all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service xxxx rights, service names and service name rights, brand
names, inventions copyrights and copyright rights, processes, formulae, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"Investment Advisers Act" shall mean the Investment Advisers Act of 1940,
as amended, and the rules and regulations of the SEC thereunder.
"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
"KCS Assets" shall mean the properties, assets, Contracts and rights of
any kind, whether tangible or intangible, real or personal, necessary to enable
KCS (prior to the Closing) and the Surviving Company (after the Closing) to
conduct the KCS Business as presently conducted.
"KCS Business" shall mean the consolidated business and operations of KCS
and its Subsidiaries in the manner in which the same have been conducted prior
to the date hereof, are currently being conducted and are currently proposed by
KCS and its Subsidiaries to be conducted, whether conducted by KCS or any of its
Subsidiaries.
"KCS Disclosure Schedule" shall have the meaning set forth in the
introduction to Article 6 of this Agreement.
"KCS Material Adverse Effect" shall mean a change, event or occurrence
that has had, or is reasonably likely to have, a material adverse effect on the
business, assets, properties, liabilities, financial condition or results of
operations of KCS and its Subsidiaries, taken as a whole other than any change,
event or occurrence resulting from (i) changes in the railroad industry in the
United States generally, (ii) changes in general economic conditions in the
United States or the securities markets in general, (iii) terrorist activities
or the commencement or escalation of any war or armed hostilities, which do not
disproportionately affect KCS or its Subsidiaries, or (iv) performance of this
Agreement in accordance with its terms.
"KCS Stock Option Plan" shall mean the 1991 Amended and Restated Stock
Option and Performance Award Plan, as amended and restated effective November 7,
2002.
"Knowledge" of (a) KCS shall mean actual knowledge after reasonable
inquiry of any executive officer of KCS, (b) TMM, TMMH or MM shall mean actual
knowledge
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after reasonable inquiry by any executive officer of TMM, TMMH or MM, and (c)
Sellers shall mean actual knowledge after reasonable inquiry by any executive
officer of Sellers.
"Law" shall mean any U.S., Mexican or foreign federal, state or local
statute, law (whether statutory or common law), ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment,
decree, policy, guideline or other requirement or arbitration award or finding
(including, without limitation, those of the NYSE or any other applicable
self-regulatory organization).
"Losses" shall have the meaning set forth in Section 10.2 of this
Agreement.
"MM Subsidiaries" shall mean GTFM and GTFM Subsidiaries.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Permitted Encumbrance" shall mean (i) liens reflected in the GTFM
Financial Statements; (ii) liens imposed by operation of law and not for
borrowed money, such as materialmen's, mechanics', workers', repairmen's,
employees', carriers', vendors' warehousemen's and other like liens that are
insignificant, individually and in the aggregate, to the operation of the GTFM
Business and (iii) liens incurred in the ordinary course of business and not for
borrowed money that are insignificant, individually and in the aggregate, to the
operation of the GTFM Business.
"Person" shall mean any individual, firm, corporation, partnership
(limited or general), limited liability company, joint venture, association,
trust or other entity.
"Put Agreement" shall mean the Agreement between the Federal Government of
the United Mexican States, GTFM, TMM and KCS, dated June 9, 1997.
"Put" shall mean the right of the Federal Government of the United Mexican
States under the Put Agreement to compel purchase of the Shares of TFM held by
it.
"Put Purchase Price" shall mean the purchase price for the 20% of TFM
stock held by the Federal Government of the United Mexican States, as defined in
the Put Agreement and calculated under the Twenty-Sixth Clause of the Stock
Purchase Agreement.
"SEC" shall mean the Securities and Exchange Commission, and any successor
thereto.
"Securities" shall mean any securities as defined in the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder.
"Securities Laws" shall mean the Securities Act, the Exchange Act, the
Investment Company Act, the Investment Advisers Act, all applicable state "blue
sky" laws, all applicable Mexican and foreign securities laws, and the rules and
regulations promulgated thereunder.
"Seller Material Adverse Effect" shall mean a change, event or occurrence
that has had, or is reasonably likely to have, a material adverse effect on the
business, assets, properties,
-46-
liabilities, financial condition or results of operations of Sellers and their
Subsidiaries, taken as a whole other than any change, event or occurrence
resulting from (i) changes in the railroad industry in the United States
generally, (ii) changes in general economic conditions in the United States or
the securities markets in general, (iii) terrorist activities or the
commencement or escalation of any war or armed hostilities, which do not
disproportionately affect a Seller or any of its Subsidiaries, or (iv)
performance of this Agreement in accordance with its terms.
"Strategic Investor" shall mean a U.S. Class 1 railroad, or its Affiliate,
which purchases or commits to purchase from KCS equity or debt securities of KCS
within one year from the date of this Agreement.
"Subsidiary" of a Person shall mean any other Person more than 50% of the
voting stock (or of any other form of other voting or controlling equity
interest in the case of a Person that is not a corporation) of which is
beneficially owned by the Person directly or indirectly through one or more
other Persons.
"Tax" shall mean all U.S. and Mexican federal, provincial, territorial,
state, municipal, local, foreign or other taxes, imposts, rates, levies,
assessments, contributions and other similar charges (and all interest and
penalties thereon and additions thereto imposed by any Governmental Authority),
including, without limitation, all income, excise, franchise, gains, capital,
real property, goods and services, transfer, value added, gross receipts,
windfall profits, severance, ad valorem, personal property, production, sales,
use, license, stamp, documentary stamp, mortgage recording, employment, payroll,
social security (IMSS), housing, unemployment, disability, estimated or
withholding taxes, housing fund (Infonavit), retirement fund contributions (SAR)
and all customs and import duties.
"Tax Return" shall mean any and all returns, reports, declarations,
information statements, schedules or other documents required to be provided by
GTFM or any of its Subsidiaries with respect to Taxes to any Governmental
Authority or Tax authority or agency, whether U.S., Mexican or foreign.
"Taxing Authority" shall mean any government authority, U.S., Mexican or
other, having jurisdiction over the assessment, determination, collection, or
other imposition of Taxes.
"TFM" shall mean TFM, S.A. de C.V.
"U.S." means the United States of America.
"VAT" means the Mexican value added tax.
"VAT Claim" means TFM's claim against the Mexican Treasury for the refund
of a value added tax payment in the original principal amount of 2,111,111,790
pesos.
"VAT Payment" means the shares or cash compensation received by TFM or its
designee from the Mexican Government on the VAT Claim.
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ARTICLE 12
MISCELLANEOUS
Section 12.1 Amendments; Waiver. This Agreement may not be amended, altered
or modified except by written instrument executed by KCS and TMM. KCS and TMM
may amend this Agreement without notice to or the consent of any other party and
any third party. Any agreement on the part of KCS and TMM to waive (i) any
inaccuracies in any representation and warranty contained herein or in any
document, certificate or writing delivered pursuant hereto, or (ii) compliance
with any of the agreements, covenants or conditions contained herein, shall be
valid only if set forth in an instrument in writing signed on behalf of the
party against whom the waiver is to be effective. No such waiver shall
constitute a waiver of, or estoppel with respect to, any subsequent or other
inaccuracy, breach or failure to strictly comply with the provisions of this
Agreement. Any delay or omission on the part of KCS or TMM to exercise any right
hereunder shall not in any manner impair the exercise of any right accruing to
it hereafter.
Section 12.2 Entire Agreement. This Agreement (including the Seller
Disclosure Schedule, the KCS Disclosure Schedule, any other exhibits, schedules,
certificates, lists and documents referred to herein, and any documents executed
by the Parties simultaneously herewith or pursuant thereto), the Ancillary
Agreements, the Consulting Agreement and the Confidentiality Agreements
constitute the entire agreement of the Parties, except as provided herein, and
supersede all prior agreements and understandings, written and oral, among the
Parties with respect to the subject matter hereof and thereof, including without
limitation, the Letter of Intent, dated August 28, 1995, between TMM and KCS;
the Joint Venture Implementation Agreement, dated September 7, 1995, between TMM
and KCS; the Joint Venture Agreement, dated December 1, 1995, between TMM and
KCS; the undated Letter of Understanding between TMM and KCS; the Shareholders
Agreement dated as of May 1997, by and among KCS, Caymex Transportacion, Grupo
Servia, S.A. de C.V., TMM and MM; Management Services Agreements between KCS and
TFM, dated May 9, 1997, and between TMM and TFM, dated May 9, 1997 (as such
agreements have been amended and extended from time to time); the Stock Purchase
Agreement dated as of February 27, 2002, by and among MM, TMM, KCS, The Kansas
City Southern Railway Company and TFM; and the Omnibus Agreement by and among
TMM, MM, TFM, Mexrail, Inc., The Kansas City Southern Railway Company, NAFTA
Rail, S.A. de C.V. and KCS, dated March 8, 2002; provided that, if the Closing
shall not have occurred prior to the Termination Date, or if this Agreement
shall have been terminated pursuant to the terms set forth in Article 9, then
this Section 12.2 shall be null and void retroactively to the date first set
forth above and the prior agreements and understandings referred to herein shall
be and remain effective as if this Agreement had never been effective.
Section 12.3 Interpretation.
(a) The Recitals, Exhibits and Schedules to this Agreement are incorporated
by reference into, and are deemed to be part of, this Agreement. When a
reference is made in this Agreement to Sections, Exhibits or Schedules, such
reference shall be to a Section of or an Exhibit or a Schedule to this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or
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"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
(b) Each of the Seller Disclosure Schedule and the KCS Disclosure Schedule
shall set forth items the disclosure of which is necessary or appropriate either
in response to an express disclosure requirement contained in a provision hereof
or as an exception to one or more of such party's representations or warranties
or one or more of its covenants contained in this Agreement, in each case making
reference to the particular subsection of this Agreement requiring such
disclosure or to which such exception is being taken.
(c) This Agreement is in the English language. The Parties waive any rights
they may have under Applicable Law to have this Agreement or any of the
Ancillary Agreements made in any language other than English; provided to the
extent that any such waiver shall not be valid under Applicable Law, the Parties
agree that in case of any ambiguity or contradiction between the English
language version of this Agreement and any translation into any other language,
that the English language version shall control.
Section 12.4 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 12.5 Notices. Unless otherwise provided herein, all notices and
other communications hereunder shall be in writing and shall be deemed given if
(a) delivered in person, (b) transmitted by facsimile (with written
confirmation), (c) mailed by certified or registered mail (return receipt
requested) (in which case such notice shall be deemed given on the third day
after such mailing) or (d) delivered by an express courier (with written
confirmation) to the Parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to Sellers:
Grupo TMM, S.A.
Xxxxxxx xx xx Xxxxxxx, Xx. 0000
Xxxxxxx Xxxxxxx del Xxxxxxxx
00000 Xxxxxx, D.F.
CT Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
With a copy (which shall not constitute notice) to:
Milbank, Tweed, Xxxxxx & XxXxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
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Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
If to KCS or the Surviving Company:
Kansas City Southern
P.O. Box 219335
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, XX 00000-0000
With a copy (which shall not constitute notice) to:
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
Any party hereto may from time to time change its address for notices under this
Section 12.5 by giving at least 10 days' notice of such changed address to the
other Parties hereto.
Section 12.6 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
Section 12.7 Binding Effect; Persons Benefiting; No Assignment. This
Agreement shall inure to the benefit of and be binding upon the Parties and
their respective successors and assigns. No provision of this Agreement is
intended or shall be construed to confer upon any entity or Person other than
the Parties and their respective successors and permitted assigns any right,
remedy or claim under or by reason of this Agreement or any part hereof. This
Agreement may not be assigned by any of the Parties without the prior written
consent of the other Parties.
Section 12.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the Parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other Person.
Section 12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each original or facsimile of which shall be deemed an original,
but all of which taken together shall constitute one and the same agreement, it
being understood that all of the Parties need not sign the same counterpart.
Section 12.10 Specific Enforcement. The Parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that each of
the Parties hereto shall be entitled to an injunction or injunctions to prevent
or cure breaches of the provisions of this Agreement by the other and to enforce
specifically the terms and provisions of this Agreement, this being in addition
to any other remedy to which they may be entitled by law or equity.
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Section 12.11 Governing Law; Dispute Resolution.
(a) Resolution of any and all disputes between KCS and one or more of
Sellers (each of KCS, on the one hand, and one or more of the Sellers, on the
other hand, a "Dispute Party" and together, the "Dispute Parties') arising from
or in connection with this Agreement, the Ancillary Agreements or any
transactions contemplated by this Agreement or the Ancillary Agreements, whether
based on contract, tort, common law, equity, statute, regulation, order or
otherwise, ("Disputes") including Disputes arising in connection with claims by
third persons, shall be exclusively governed by and settled in accordance with
the provisions of this Section 12.11; provided, that the foregoing shall not
preclude equitable or other judicial relief to enforce the provisions hereof or
to preserve the status quo pending resolution of Disputes hereunder.
(b) THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN THE PARTIES HERETO AND THE
ADJUDICATION AND ENFORCEMENT THEREOF, SHALL BE GOVERNED BY AND INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE AND
THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO APPLICABLE
CHOICE OF LAW PROVISIONS THEREOF.
(c) As to any Dispute which is not resolved in the ordinary course of
business, the Dispute Parties shall first attempt in good faith to promptly
resolve any Dispute by negotiations between executives. Either of the Dispute
Parties may initiate this procedure by delivery of written notice of the Dispute
(the "Dispute Notice") to the other. Not later than 20 days after delivery of
the Dispute Notice, one executive of one of the Dispute Parties with authority
to settle the Dispute shall meet with the one executive of the other Dispute
Party with authority to settle the Dispute at a reasonably acceptable time and
place, and thereafter as such executives shall deem reasonably necessary. The
executives shall exchange relevant information and endeavor to resolve the
Dispute. Prior to any such meeting, each Dispute Party's executive shall advise
the other as to any individuals who will attend such meeting with the executive.
All negotiations pursuant to this Section 12.11(c) shall be confidential and
shall be treated as compromise negotiations for purposes of Rule 408 of the
Federal Rules of Evidence and similarly under other local or foreign rules of
evidence.
(d) Each Dispute Party hereby agrees to submit all Disputes not resolved
pursuant to Section 12.11(c) hereof to final and binding arbitration in New
York, New York. Either Dispute Party may initiate such arbitration by delivery
of a demand therefor (the "Arbitration Demand") to the other Dispute Party not
sooner than 60 days after the date of delivery of the Dispute Notice but
promptly thereafter; provided, that if a Dispute Party rejects participation in
the procedures provided under Section 12.11(c), the other Dispute Party may
initiate arbitration at such earlier time as such rejection shall become
reasonably apparent, and, whenever arbitration is initiated, may seek recovery
of any damages or expenses arising from such rejection, including attorney's
fees and expenses, Arbitration Costs (as defined below) in connection with
arbitration hereunder.
(i) Three Arbitrators shall be appointed (the "Arbitrators"),
one of whom shall be appointed by KCS, one by TMM, and the third of
whom, who shall act as the chairman of the arbitral tribunal, shall
be appointed by the first two Arbitrators within 10 business days of
the first two Arbitrators confirmation by the American Arbitration
Association. Each Party agrees that Sellers shall be
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considered jointly as one side for the purposes of constitution of the
arbitration tribunal hereunder. If either Dispute Party fails to
appoint an Arbitrator within 10 business days of a request in writing
by the other Dispute Party to do so or if the first two Arbitrators
cannot agree on the appointment of the third Arbitrator within 10
business days of their confirmation by the American Arbitration
Association, then such Arbitrator shall be appointed by the American
Arbitration Association in accordance with its Commercial Arbitration
Rules. As soon as the arbitration tribunal has been convened, a
hearing date shall be set within 15 days thereafter; provided, that
the Arbitrators may extend the date of the hearing upon request of any
Dispute Party to the extent necessary to insure that such Dispute
Party is given a reasonable period of time to prepare for the hearing.
Written submittals in the English language shall be presented and
exchanged by both Dispute Parties five business days before the
hearing date. At such time the Dispute Parties shall also exchange
copies of all documentary evidence upon which they will rely at the
arbitration hearing and a list of the witnesses whom they intend to
call to testify at the hearing. The Arbitrators shall make their
determination as promptly as practicable after conclusion of the
hearing.
(ii) The arbitration shall be conducted in the English language
pursuant to the Commercial Arbitration Rules of American Arbitration
Association. Notwithstanding the foregoing, (A) each Dispute Party
shall have the right to audit the books and records of the other
Dispute Party that are reasonably related to the Dispute; (B) each
Dispute Party shall provide to the other, reasonably in advance of any
hearing, copies of all documents which a Dispute Party intends to
present in such hearing; (C) all hearings shall be conducted on an
expedited schedule; and (D) all proceedings shall be confidential,
except that either Dispute Party may at its expense make a
stenographic record thereof.
(iii) The Arbitrators shall endeavor to complete all hearings not
later than 120 days after their tribunal has been convened, and shall
make a final award as promptly as practicable thereafter. Such award
shall be communicated, in writing, by the Arbitrators to the Dispute
Parties, and shall contain specific findings of fact and conclusions
of law in accordance with the governing law set forth in Section
12.11(c) of this Agreement. Any award of such Arbitrators shall be
final and binding upon the Parties to this Agreement and shall not be
attacked by any of the Parties to this Agreement in any court of law
and may be enforced in any court having jurisdiction, including
expressly the courts of the State of Delaware, United States of
America, and the courts of the Federal District of Mexico. The
Arbitrators shall apportion all costs and expenses of the arbitration,
including the Arbitrators' fees and expenses, fees and expenses of
experts and fees and expenses of translators ("Arbitration Costs")
between the prevailing and non-prevailing Dispute Party as the
Arbitrators shall deem fair and reasonable. In circumstances where (A)
a Dispute has been asserted or defended against on grounds that the
Arbitrators deem manifestly unreasonable, or (B) the non-prevailing
Dispute Party has rejected participation in procedures under Section
12.11(c), the Arbitrators may assess all Arbitration Costs against the
non-prevailing Dispute Party and may include in the award the
prevailing Dispute
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Party's attorney's fees and expenses in connection with any and all
proceedings under this Section 12.11. Notwithstanding the foregoing,
in no event may the arbitrator award multiple or punitive damages.
(e) Pursuant to an agreement of the Parties hereto or a judicial
determination that a Dispute is not subject to final and binding arbitration as
set forth in Section 12.11, KCS and each of Sellers irrevocably agrees that any
legal action or proceeding against it with respect to this Agreement and any
transaction contemplated by this Agreement shall be brought only in the courts
of the State of Delaware, or of Federal courts of the United States of America
sitting in Delaware, and by execution and delivery of this Agreement, KCS and
each of Sellers irrevocably submits to the venue and jurisdiction of each such
court and irrevocably waives any objection or defense such party may have to
venue or personal jurisdiction in any such court for the purpose of resolving
any claim, dispute, cause of action arising out of or related to this Agreement
(including any claim that the suit or action has been brought in an inconvenient
forum and any right to which it may become entitled on account of place of
residence or domicile), the alleged breach of this Agreement, the enforcement of
the terms of this Agreement, the Acquisition, the Ancillary Agreements and the
other terms contemplated hereby and thereby. A final judgment in any suit,
action or proceeding shall be conclusive and may be enforced in any court where
jurisdiction over the Parties may be had or in which the Parties are subject to
service of process.
(f) Each of the parties hereto irrevocably appoints CT Corporation (the
"Process Agent"), at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx of Xxx Xxxxxx,
Xxxxxxxx 00000 (302-658-7581), respectively as its agent and true and lawful
attorney-in-fact in its name, place and stead to accept on behalf of each of the
parties and their respective properties and revenues, service of copies of the
summons and complaint and any other process which may be served in any such
suit, action or proceeding brought in the State of Delaware, and each of the
parties hereto agrees that failure of the Process Agent to give any notice of
any such service of process to any of the parties hereto shall not impair or
affect the validity of such service or the enforcement of any judgment based
thereon.
Section 12.12 Announcements. KCS and TMM shall consult with each other
before issuing, and provide each other the opportunity to review, comment on and
concur with, any press release or other public statement with respect to this
Agreement, the Acquisition, the Ancillary Agreements and the other transactions
contemplated hereby and thereby, except as either party may determine is
otherwise required by Applicable Law, judicial or administrative action or any
requirement of the NYSE or any other applicable self-regulatory organization.
Section 12.13 Termination Fee. In the event of (i) a termination pursuant
to Section 9.1(a)(v), the Party experiencing the Change of Control shall
promptly after a demand therefor remit to the Party terminating in immediately
available funds the sum of $18 million and (ii) a termination pursuant to
Section 9.1(a)(iii) or 9.1(a)(iv) as a result of the failure of the stockholders
of KCS or of TMM to approve the Acquisition if at or prior to the meeting of
such stockholders to approve the Acquisition, the Board of Directors of KCS, in
the case of the KCS Stockholders' meeting, or the Board of Directors of TMM, in
the case of the TMM Stockholders' meeting, shall have failed to recommend or
shall have withdrawn and not reinstated its recommendation of, the Acquisition,
then the Party whose stockholders shall not have approved the Acquisition shall
remit to the other Party, promptly after a demand therefor, in immediately
available funds, the sum of $18 million. The receipt of any sums pursuant to
this
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Section 12.13 shall not preclude or diminish any other rights a Party may have
under this Agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as of the date first above written.
KANSAS CITY SOUTHERN
By: /s/ X.X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman, President & CEO
KARA Sub, Inc.
By: /s/ X.X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman, President & CEO
GRUPO TMM, S.A.
By: /s/ Xxxx Xxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxx
Title: Chairman
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
TMM HOLDINGS, S.A. de C.V.
By: /s/ Xxxx Xxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxx
Title: Chairman
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
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TMM MULTIMODAL, S.A. de C.V.
By: /s/ Xxxx Xxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxx
Title: Chairman
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
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