EXECUTION VERSION
KANSAS CITY SOUTHERN
4.25% Redeemable Cumulative Convertible Perpetual Preferred Stock
PLACEMENT AGREEMENT
April 29, 2003
Xxxxxx Xxxxxxx & Co. Incorporated
Deutsche Bank Securities Inc.
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs and Mesdames:
Kansas City Southern, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several purchasers named in Schedule I hereto
(the "INITIAL PURCHASERS") 350,000 shares (the "FIRM SECURITIES") of its 4.25%
Redeemable Cumulative Convertible Perpetual Preferred Stock par value $1.00 per
share which shall have the rights, powers and preferences set forth in the
Certificate of Designation (the "CERTIFICATE OF DESIGNATION") of 4.25%
Redeemable Cumulative Convertible Perpetual Preferred Stock, a form of which is
attached hereto as Exhibit B (the "CONVERTIBLE PREFERRED STOCK") and up to an
aggregate of 50,000 shares of Convertible Preferred Stock (the "OPTION
SECURITIES," and together with the Firm Securities, the "SECURITIES") that the
Initial Purchasers may elect to purchase pursuant to Section 2 hereof, each
having a liquidation preference of $500 per Security, for the aggregate purchase
price listed in Schedule I hereto. The Convertible Preferred Stock is
convertible into common stock ("COMMON STOCK") of the Company.
The Securities will be offered without being registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), or qualification
under state securities or blue sky laws, to qualified institutional buyers in
compliance with the exemption from Securities Act registration provided by Rule
144A under the Securities Act.
The Initial Purchasers and their direct and indirect transferees
will be entitled to the benefits of a Registration Rights Agreement dated the
Closing Date (as defined below) among the Company and the Initial Purchasers
(the "REGISTRATION RIGHTS AGREEMENT").
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum (the "PRELIMINARY MEMORANDUM") and
will prepare a final offering memorandum (the "FINAL MEMORANDUM" and, with the
Preliminary Memorandum, each a "MEMORANDUM") including or incorporating by
reference a description of the terms of the Securities, the terms of the
offering and a description of the Company. As used herein, the term "Memorandum"
shall include in each case the documents incorporated by reference therein. The
terms "SUPPLEMENT", "AMENDMENT" and "AMEND" as used herein with respect to a
Memorandum shall include all documents deemed to be incorporated by reference in
the Preliminary Memorandum or Final Memorandum that are filed subsequent to the
date of such Memorandum with the Securities and Exchange Commission (the
"COMMISSION") pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT").
1. REPRESENTATIONS AND WARRANTIES. (A) The Company represents and warrants to,
and agrees with, each of you that as of the date hereof, as of the Closing Date
and as of each Date of Delivery (if any) referred to in Section 4 hereof:
(a) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in either Memorandum complied or
will comply when so filed in all material respects with the Exchange Act
and the applicable rules and regulations of the Commission thereunder and
(ii) the Preliminary Memorandum does not contain and the Final Memorandum,
in the form used by the Initial Purchasers to confirm sales on the Closing
Date, or any Date of Delivery (as defined in Section 4), will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements or
omissions in either Memorandum based upon information relating to any
Initial Purchaser furnished to the Company in writing by such Initial
Purchaser through you expressly for use therein.
(b) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of Delaware, has the corporate
power and authority to own its property and to conduct its business as
described in each Memorandum and is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(c) Each subsidiary of the Company has been duly organized, is validly
existing as a corporation, limited liability company or limited
partnership, as the case may be, in good standing under the laws of the
jurisdiction of its organization, has the corporate, limited liability
company or limited partnership power and authority, as the case may be, to
own its property and to conduct its business as described in each
Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries, taken
as a whole; all of the outstanding shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable, and all of the issued shares of capital stock, membership
interests or partnership interests, as the case may be, of each subsidiary
of the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims,
except those that arise under the Amended and Restated Credit Agreement
dated as of June 12, 2002, as amended through the date hereof, among the
Company, The Kansas City Southern Railway Company ("KCSR"), the lenders
thereto, JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank),
as administrative agent, collateral agent, issuing bank and swingline
lender (the "KCS CREDIT FACILITIES").
(d) This Agreement has been duly authorized, executed and delivered by
the Company.
(e) The Company has full right, power and authority to execute and
deliver this Agreement and the Registration Rights Agreement (collectively,
the "TRANSACTION DOCUMENTS") to which it is a party and perform its
obligations thereunder, to issue, sell and deliver the Securities and, upon
conversion thereof, to issue and deliver the Common Stock, issuable upon
conversion of the Securities ("CONVERSION SHARES"); and all corporate
action required to be taken for the due and proper authorization, execution
and delivery of each of the Transaction Documents and the consummation of
the transactions contemplated thereby and the authorization, issuance and
delivery of the Securities and, upon conversion of the Securities, the
issuance and delivery of the Conversion Shares have been duly and validly
taken.
(f) The Securities, when issued, sold and delivered in accordance with
the terms hereof, will be duly and validly issued, fully paid and
nonassessable. The Common Stock originally issuable upon conversion of the
Securities has been duly and validly reserved for issuance, and upon
issuance in accordance with the certificate of incorporation of the
Company, shall be duly and validly issued, fully paid and non-assessable.
Neither the issuance, sale or delivery of the Securities nor, upon the
conversion thereof, the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company arising
under law or certificate of incorporation or by-laws of the Company, to any
contractual right of first refusal or other right in favor of any person.
(g) The Certificate of Designations has been duly authorized and
acknowledged by the Company and filed with the Secretary of State of the
State of Delaware. Upon issuance and delivery of the Securities in
accordance with this Agreement, the Securities will be convertible at the
option of the holder thereof into the Common Stock in accordance with the
terms of the Certificate of Designations. The Securities and the
Certificate of Designations conform in all material respects to the
description thereof contained in each Memorandum under the heading
"Description of the Preferred Stock".
(h) The Registration Rights Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, receivership, moratorium and
similar laws relating to or affecting creditors' rights generally and
equitable principles of general applicability (whether applied by a court
of law or equity) and except as rights to indemnification and contribution
under the Registration Rights Agreement may be limited under applicable
law.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under the Transaction Documents, the
issuance, sale and delivery of the Securities and, upon conversion thereof,
the issuance and delivery of the Conversion Shares, will not contravene any
provision of applicable law or the certificate of incorporation or by-laws
of the Company and its subsidiaries or any agreement or
other instrument binding upon the Company and its subsidiaries that are
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company and its subsidiaries, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company
of their obligations under the Transaction Documents, except such as may be
required by the securities or blue sky laws of the various states in
connection with the offer and sale of the Securities and by federal and
state securities and blue sky laws with respect to the Company's
obligations under the Registration Rights Agreement.
(j) KPMG LLP are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of Rule 101 of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants ("AICPA") and its interpretations and rulings thereunder. The
historical financial statements (including the related notes) contained in
each Memorandum comply in all material respects with the requirements
applicable to a registration statement on Form S-1 under the Securities Act
(except that disclosure of earnings per share and certain supporting
schedules are omitted); such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods covered thereby and fairly present the
financial position of the entities purported to be covered thereby at the
respective dates indicated and the results of their operations and their
cash flows for the respective periods indicated; and the financial
information contained in each Memorandum under the headings "Summary--First
Quarter 2003 Earnings", "Capitalization", "Pro-forma Effects on Financial
Statements" and "Principal Stockholders and Stock Owned Beneficially by
Directors and Certain Executive Officers" is derived from the accounting
records of the Company and its subsidiaries and fairly presents the
information purported to be shown thereby. The other historical financial
and statistical information and data included in each Memorandum are, in
all material respects, fairly presented.
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Preliminary Memorandum (including, if applicable, any
amendment or supplement thereto) provided to prospective purchasers of the
Securities.
(l) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject other than proceedings accurately
described in all material respects in each Memorandum and proceedings that
could not reasonably be expected to have a material adverse effect on the
Company and its subsidiaries, taken as a whole, or on the power or ability
of the Company to perform their respective obligations under the
Transaction Documents or to consummate the transactions contemplated by the
Final Memorandum.
(m) There are no contracts, documents, pending legal or governmental
actions, suits or proceedings of a character that would be required to be
described in each Memorandum, if it were a prospectus filed as part of a
registration statement under the Securities Act, that are not set forth or
incorporated by reference in each Memorandum. All descriptions in each
Memorandum of such contracts or documents are accurate in all material
respects.
(n) To the knowledge of the Company, no action has been taken and no
statute, rule, regulation or order has been enacted, adopted or issued by
any governmental agency or body which prevents the issuance of the
Securities or suspends the sale of the Securities in any jurisdiction; no
injunction, restraining order or order of any nature by any federal or
state court of competent jurisdiction has been issued with respect to the
Company or any of its subsidiaries which would prevent or suspend the
issuance or sale of the Securities or the use of the Preliminary Memorandum
or the Final Memorandum in any jurisdiction; no action, suit or proceeding
is pending against or, to the knowledge of the Company , threatened against
or affecting the Company or any of its subsidiaries before any court or
arbitrator or any governmental agency, body or official, domestic or
foreign, which could reasonably be expected to interfere with or adversely
affect the issuance of the Securities or the validity or enforceability of
any of the Transaction Documents or any action taken or to be taken
pursuant thereto.
(o) The Company is not in violation of its charter or by-laws and none
of the Company or its subsidiaries is (i) in default in any material
respect, and no event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance
of any term, covenant or condition contained in any material indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which it is a party or by which it is bound or to which any
of its property or assets is subject or (ii) in violation in any material
respect of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject, except, in the
case of clause (i) and (ii), for any default or violation that could not be
reasonably expected to have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(p) The Company and each of its subsidiaries possess all material
licenses, certificates, authorizations and permits issued by, and have made
all declarations and filings with, the appropriate federal, state or
foreign regulatory agencies or bodies which are necessary or desirable for
the ownership of their respective properties or the conduct of their
respective businesses as described in each Memorandum, except where the
failure to possess or make the same would not, singularly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries taken as a whole, and neither the Company nor any of its
subsidiaries has received notification of any revocation or modification of
any such license, certificate, authorization or permit or has any reason to
believe that any such license, certificate, authorization or permit will
not be renewed in the ordinary course, except where such revocation,
modification or nonrenewal could not reasonably be expected to, singularly
or in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(q) The Company and each of its subsidiaries have filed all federal,
state, local and foreign income and franchise tax returns required to be
filed through the date hereof and have paid all taxes due thereon, and no
tax deficiency has been determined adversely to the Company or any of its
subsidiaries which has had (nor does the Company or any of the Guarantors
have any knowledge of any tax deficiency which, if determined adversely to
the Company or any of its subsidiaries, could reasonably be expected to
have) a material adverse effect on the Company and its subsidiaries taken
as a whole.
(r) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, in each case except as
described in each Memorandum or where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(s) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries. On the basis
of such review, the Company has concluded that, except as described in each
Memorandum, there are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(t) The Company and each of its subsidiaries carry, or are covered by,
insurance covering their respective properties, operations, personnel and
businesses, which insurance is in amounts and insures against such losses
and risks as are adequate to protect the Company and its subsidiaries and
their respective businesses. Neither the Company nor any of its
subsidiaries has received notice from any insurer or agent of such insurer
that material capital improvements or other material expenditures are
required or necessary to be made in order to continue such insurance.
(u) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences, to the extent
necessary.
(v) The Company and each of its subsidiaries own or possess adequate
rights to use all patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service xxxx registrations,
copyrights, licenses and know-how (including trade secrets and other
unpatented and/or upatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of their respective
businesses, except where the failure to possess such rights could not
reasonably be expected to have a material adverse effect on the Company and
its subsidiaries taken as a whole, and the conduct of their respective
businesses will not conflict with, and, except as described in each
Memorandum, the Company and its subsidiaries have not received any notice
of any claim or conflict with, any such rights of others that, if
determined adversely to the Company or any of its subsidiaries, would,
individually or in the aggregate, have a material adverse effect on the
Company and its subsidiaries taken as whole.
(w) The Company and each of its subsidiaries have good and marketable
title in fee simple to, or have valid rights to lease or otherwise use, all
items of real and personal property which are material to the business of
the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances, claims and defects and imperfections of title except those
that (i) arise under the KCS Credit Facilities or (ii) do not materially
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries and could not reasonably be expected to have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(x) No labor disturbance by or dispute with the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the
Company , is threatened that could reasonably be expected to have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(y) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section
4975 of the Internal Revenue Code of 1986, as amended from time to time
(the "CODE")) or "accumulated funding deficiency" (as defined in Section
302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement
under Section 4043 of ERISA has been waived) has occurred with respect to
any employee benefit plan of the Company or any of its subsidiaries which
could reasonably be expected to have a material adverse effect on the
Company and its subsidiaries taken as a whole, each such employee benefit
plan is in compliance with applicable law, including ERISA and the Code,
except where such noncompliance, individually or in the aggregate, could
not reasonably be expected to have a material adverse effect on the Company
and its subsidiaries taken as a whole, the Company and each of its
subsidiaries have not incurred and do not expect to incur liability under
Title IV of ERISA with
respect to the termination of, or withdrawal from, any pension plan for
which the Company or any of its subsidiaries would have any liability; and
each such pension plan that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which could reasonably be
expected to cause the loss of such qualification.
(z) Except as otherwise disclosed in each Memorandum, there has been
no storage, generation, transportation, handling, treatment, disposal,
discharge, emission or other release of any kind of toxic or other wastes
or other hazardous substances by, due to or caused by the Company or any of
its subsidiaries (or, to the knowledge of the Company, any other entity
(including any predecessor) for whose acts or omissions the Company or any
of its subsidiaries is or could reasonably be expected to be liable) upon
any of the property now or previously owned or leased by the Company or any
of its subsidiaries, or upon any other property, in violation of any
statute or any ordinance, rule, regulation, order, judgment, decree or
permit or which would, under any statute or any ordinance, rule (including
rule of common law), regulation, order, judgment, decree or permit, give
rise to any liability, except for any violation or liability that could not
reasonably be expected to have, singularly or in the aggregate with all
such violations and liabilities, a material adverse effect, on the Company
and its subsidiaries taken as a whole; and, except as otherwise disclosed
in each Memorandum, there has been no disposal, discharge, emission or
other release of any kind onto such property or into the environment
surrounding such property of any toxic or other wastes or other hazardous
substances with respect to which the Company or each of the Guarantors has
knowledge, except for any such disposal, discharge, emission or other
release of any kind which could not reasonably be expected to have,
singularly or in the aggregate with all such discharges and other releases,
a material adverse effect on the Company and its subsidiaries taken as a
whole.
(aa) Neither the Company nor, to the best knowledge of the Company ,
any director, officer, agent employee or other person associated with or
acting on behalf of the Company or any of its subsidiaries has (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(bb) On and immediately after the Closing Date, or any Date of
Delivery, the Company (after giving effect to the issuance of the
Securities and to the other transactions related thereto as described in
the Final Memorandum) will be Solvent. As used in this paragraph, the term
"Solvent" means, with respect to a particular date, that on such date (i)
the present fair market value (or present fair saleable value) of the
assets of the Company is not less than the total amount required to pay the
probable liabilities of the Company on its total existing debts and
liabilities (including contingent liabilities) as they become absolute and
matured, (ii) the Company is able to realize upon its assets and pay its
debts and other liabilities, contingent obligations and commitments as they
mature
and become due in the normal course of business, (iii) assuming the sale of
the Securities as contemplated by this Agreement and the Final Memorandum,
the Company is not incurring debts or liabilities beyond its ability to pay
as such debts and liabilities mature and (iv) the Company is not engaged in
any business or transaction, and is not about to engage in any business or
transaction, for which its property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in the
industry in which the Company is engaged. In computing the amount of such
contingent liabilities at any time, it is intended that such liabilities
will be computed at the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
(cc) None of the proceeds of the sale of the Securities will be used,
directly or indirectly, for the purpose of purchasing or carrying any
"margin security" as that term is defined in Regulation U of the Board of
Governors of the Federal Reserve System (the "FEDERAL RESERVE BOARD"), for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose
which might cause any of the Securities to be considered a "purpose credit"
within the meanings of Regulation T, U or X of the Federal Reserve Board.
(dd) Except as contemplated hereby, neither the Company nor any of its
subsidiaries is a party to any contract, agreement or understanding with
any person that would give rise to a valid claim against the Company, any
of its subsidiaries, or the Initial Purchasers for a brokerage commission,
finder's fee or like payment in connection with the offering and sale of
the Securities.
(ee) The Company are not, and after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Final Memorandum will not be, required to register as an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended.
(ff) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
Preliminary Memorandum or the Final Memorandum has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good faith.
(gg) None of the Company or any affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act, an "AFFILIATE") of the Company
has directly, or through any agent, (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be integrated with the sale
of the Securities in a manner that would require the registration under the
Securities Act of the Securities or (ii) offered, solicited offers to buy
or sold the Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities
Act) or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act.
(hh) None of the Company, its Affiliates or any person acting on its
or their behalf has engaged or will engage in any directed selling efforts
(within the meaning of Regulation S) with respect to the Securities and the
Company and its Affiliates and any person acting on its or their behalf
have complied and will comply with the offering restrictions requirement of
Regulation S.
(ii) Assuming that your representations and warranties herein are true
and compliance by you with your covenants set forth herein, it is not
necessary in connection with the offer, sale and delivery of the Securities
to the Initial Purchasers in the manner contemplated by this Agreement to
register the Securities or the Conversion Shares under the Securities Act.
(jj) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
(kk) The Company and its officers and directors are in compliance with
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the rules and
regulations promulgated in connection therewith (the "XXXXXXXX-XXXXX ACT")
that are effective and are actively taking steps to ensure that they will
be in compliance with other applicable provisions of the Xxxxxxxx-Xxxxx Act
upon the effectiveness of such provisions including Section 402 related to
loans and Sections 302 and 906 related to certifications.
2. AGREEMENTS TO SELL AND PURCHASE. The Company, subject to the conditions
hereinafter stated, hereby agrees to sell to the several Initial Purchasers, and
each Initial Purchaser, upon the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter stated, agrees,
severally and not jointly, to purchase from the Company the respective principal
amounts of Firm Securities set forth in Schedule I hereto opposite its name at a
purchase price of $483.75 per share of the Convertible Preferred Stock (the
"PURCHASE PRICE"). In the event and to the extent that the Initial Purchasers
shall exercise the election to purchase Option Securities as provided below, the
Company agrees to issue and sell to each of the Initial Purchasers, and each of
the Purchasers agrees, severally and not jointly, to purchase from the Company,
at the purchase price per share set forth in the first sentence of this Section
2, that portion of the number of Option Securities as to which such election
shall have been exercised (to be adjusted by you so as to eliminate fractional
shares) determined by multiplying such number of Option Securities by a
fraction, the numerator of which is the maximum number of Option Securities
which such Initial Purchaser is entitled to purchase as set forth opposite the
name of such Initial Purchaser in Schedule I hereto and the denominator of which
is the maximum number of Option Securities that all of the Initial Purchasers
are entitled to purchase hereunder.
The Company hereby grants to the Initial Purchasers the right to purchase
at their election up to 50,000 Option Securities, in aggregate, at the purchase
price per share set forth in the paragraph above. Any such election to purchase
Option Securities may be exercised only by written notice from you to the
Company, given within a period of thirty calendar days after the date of this
Agreement, setting forth the aggregate number of Option Securities to be
purchased and the date on which such Option Securities are to be delivered, as
determined by you but in no
event earlier than the Closing Date (as defined in Section 4 hereof) or, unless
you and the Company otherwise agree in writing, no earlier than two or later
than ten business days after the date of such notice.
The Company shall not and shall cause its directors, executive officers and
certain other stockholders of the Company to not (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any equity securities
or any securities convertible into or exercisable or exchangeable for equity
securities or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the equity securities, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of equity securities or such other
securities, in cash or otherwise, for a 90-day period after the date of the
Final Memorandum, without the prior written consent of Xxxxxx Xxxxxxx & Co.
Incorporated, other than (i) the Securities offered hereby, (ii) the shares of
Common Stock issuable upon conversion of the Securities, or (iii) the issuance
by the Company of shares of Common Stock upon the exercise of an option or a
warrant or the conversion of a security outstanding on the date of the Final
Memorandum of which the Initial Purchasers have been advised in writing or
(iv)shares of Common Stock or Class A Common Stock of the Company issued in
connection with the Acquisition Agreement and ancillary agreements thereto (as
described in the Memorandum).
3. TERMS OF OFFERING. You have advised the Company that the Initial
Purchasers will make an offering of the Securities purchased by the Initial
Purchasers hereunder in accordance with Section 7 hereof on the terms to be
described in the Final Memorandum, as soon as practicable after this Agreement
is entered into as in your judgment is advisable.
4. PAYMENT AND DELIVERY. Payment for the Securities shall be made to the
Company in federal or other funds immediately available in New York City against
delivery of such Securities for the respective accounts of the several Initial
Purchasers at 10:00 a.m., New York City time, on May 5, 2003, or at such other
time on the same or such other date, not later than May 10, 2003, as shall be
designated in writing by you. The time and date of such payment are hereinafter
referred to as the "CLOSING DATE". In addition, in the event that the Initial
Purchasers have exercised their option to purchase any or all of the Option
Securities, payment of the purchase price for, and delivery of such Option
Securities, shall be made at the above mentioned offices of Shearman & Sterling
or at such other place as shall be agreed upon by Xxxxxx Xxxxxxx & Co.
Incorporated and the Company on the relevant date of delivery ("DATE OF
DELIVERY") as specified in the notice from Xxxxxx Xxxxxxx & Co. Incorporated to
the Company.
The Securities shall be in definitive form or global form, as specified by
you, and registered in such names and in such denominations as you shall request
in writing not later than two full business days prior to the Closing Date or
the Date of Delivery. The Securities shall be delivered to you on the Closing
Date or the Date of Delivery for the respective accounts of the several Initial
Purchasers, with any transfer taxes payable in connection with the transfer of
the Securities to the Initial Purchasers duly paid, against payment of the
Purchase Price therefore plus accrued interest, if any, to the date of payment
and delivery.
5. CONDITIONS TO THE INITIAL PURCHASERS' OBLIGATIONS. The several
obligations of the Initial Purchasers to purchase and pay for the Securities on
the Closing Date are subject to the following conditions:
(kk) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) (A) the Securities shall have the ratings of no lower than B3
(negative outlook) by Xxxxx'x Investors Service and B (CreditWatch
with negative implications) by Standard & Poor's accorded to them, and
the Company shall have delivered to the Initial Purchasers at the
Closing Date and any Date of Delivery, a letter, dated as of such
date, from each rating organization, or other evidence satisfactory to
the Initial Purchasers, confirming the Securities have such ratings;
and (B) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded the Company or any of
its subsidiaries, any of the Company's or its subsidiaries' securities
or in the rating outlook for the Company or any of its subsidiaries by
any "nationally recognized statistical rating organization", as such
term is defined for purposes of Rule 436(g)(2) under the Securities
Act, other than a downgrading that results in a rating of the
Securities at or above the levels set forth in (A) above; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Preliminary Memorandum (including, if applicable, any amendment or
supplement thereto) provided to prospective purchasers of the
Securities that, in your judgment, is material and adverse and that
makes it, in your judgment, impracticable to market the Securities on
the terms and in the manner contemplated in the Final Memorandum.
(ll) The Initial Purchasers shall have received on the Closing Date a
certificate dated the Closing Date and signed by an executive officer of
the Company and the Company respectively, to the effect set forth in
Section 5(a)(i)(B). The Initial Purchasers shall have also received on the
Closing Date a certificate, dated the Closing Date and signed by an
executive officer of the Company, to the effect that the representations
and warranties of the Company contained in this Agreement are true and
correct as of the Closing Date and that the Company has complied with all
of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date. The officer
signing and delivering such certificate may rely upon the best of his or
her knowledge as to proceedings threatened.
(mm) The Initial Purchasers shall have received on the Closing Date
the opinions of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, outside counsel for the
Company, and Xxx X. Xxxxxxx, Esq., associate general counsel for the
Company, each dated the Closing
Date, to the effect set forth in Exhibit A. Such opinions shall be rendered
to the Initial Purchasers at the request of the Company and shall so state
therein. The opinion of the outside counsel for the Company shall cover the
matters set forth in clauses (iii), (iv), the first clause of clause (vi)
(other than "Business - Legal Matters", and "Part I, Item 3 - Legal
Proceedings" of the Company's Form 10-K referred to therein) and (vii) -
(xviii) of Exhibit A. The opinion of the associate general counsel for the
Company shall cover the matters set forth in clauses (i), (ii), (v), (vi)
(other than the matters covered by the opinion of the outside counsel, as
set forth above), (xi), (xiii) (other than with respect to the laws of the
State of New York with respect to clause (xiii)(b)), (xiv) and (xviii) of
Exhibit A.
(nn) The Initial Purchasers shall have received on the Closing Date an
opinions of Xxxxx, Xxxx & Xxxxxxxx and Xxxxxxxx & Sterling, counsels for
the Initial Purchasers, dated the Closing Date in form and substance
satisfactory to you.
(oo) The Initial Purchasers shall have received on each of the date
hereof and the Closing Date a letter, dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the Initial
Purchasers, from KPMG LLP, independent public accountants, with respect to
the Company and its subsidiaries, containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in or incorporated by reference into each Memorandum;
PROVIDED that the letter delivered on the Closing Date shall use a "cut-off
date" not earlier than the date hereof.
(pp) The Initial Purchasers shall have received on each of the date
hereof and the Closing Date a letter, dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the Initial
Purchasers from PricewaterhouseCoopers LLP, independent public accountants,
with respect to the Company and its subsidiaries, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in or incorporated by reference
into each Memorandum; PROVIDED that the letter delivered on the Closing
Date shall use a "cut-off date" not earlier than the date hereof.
(qq) The Initial Purchasers shall have received on each of the date
hereof and the Closing Date a letter, dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the Initial
Purchasers from PricewaterhouseCoopers LLP, independent public accountants,
with respect to Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V.,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into each Memorandum; PROVIDED that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier than
the date hereof.
(rr) Prior to the Closing Date, the Certificate of Designations will
be duly executed and acknowledged by the Company and filed with the
Secretary of State of the
State of Delaware and will become effective in accordance with the
provisions of the General Corporation Law of the State of Delaware.
(ss) The "lockup" agreements, each substantially in the form of
Exhibit C hereto, between the initial purchasers and certain shareholders,
officers and directors of the Company as listed in Schedule II hereto
relating to sales and certain other dispositions of shares of the equity
securities or certain other securities, delivered to you on or before the
date hereof, shall be in full force and effect on the Closing Date.
(tt) In the event that the Initial Purchasers exercise their option
provided in Section 2 hereof to purchase all or any portion of the Option
Securities, the representations and warranties of the Company contained
herein and the statements in any certificates furnished by the Company
hereunder shall be true and correct as of each Date of Delivery, and, the
several obligations of the Initial Purchasers to purchase the Option
Securities hereunder are subject to the conditions set forth in this
Section 5, except that the opinions, certificates and letters required by
Sections 5(a) -5(g) shall be dated the relevant Date of Delivery.
6. COVENANTS OF THE COMPANY. In further consideration of the agreements of
the Initial Purchasers contained in this Agreement, the Company covenants with
each Initial Purchaser as follows:
(uu) To furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the date
of this Agreement and during the period mentioned in Section 6(c), as many
copies of the Final Memorandum, any documents incorporated by reference
therein and any supplements and amendments thereto as you may reasonably
request.
(vv) Before amending or supplementing either Memorandum, to furnish to
you a copy of each such proposed amendment or supplement and not to use any
such proposed amendment or supplement to which you reasonably object.
(ww) If, during such period after the date hereof and prior to the
date on which all of the Securities shall have been sold by the Initial
Purchasers, any event shall occur or condition exist as a result of which
it is necessary to amend or supplement the Final Memorandum in order to
make the statements therein, in the light of the circumstances when the
Final Memorandum is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Initial Purchasers, it is necessary to amend or
supplement the Final Memorandum to comply with applicable law, forthwith to
prepare and furnish, at its own expense, to the Initial Purchasers, either
amendments or supplements to the Final Memorandum so that the statements in
the Final Memorandum as so amended or supplemented will not, in the light
of the circumstances when the Final Memorandum is delivered to a purchaser,
be misleading or so that the Final Memorandum, as amended or supplemented,
will comply with applicable law.
(xx) To endeavor to qualify the Securities for offer and sale under
the securities or blue sky laws of such jurisdictions as you shall
reasonably request; PROVIDED that the Company and its subsidiaries shall
not be obligated to qualify as a Foreign corporation in any jurisdiction in
which they have not so qualified or to file a general consent to service of
process in any jurisdiction.
(yy) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountant in connection with the
issuance and sale of the Securities and all other fees or expenses in
connection with the preparation of each Memorandum and all amendments and
supplements thereto, including all printing costs associated therewith, and
the delivering of copies thereof to the Initial Purchasers, in the
quantities herein above specified, (ii) all costs and expenses related to
the transfer and delivery of the Securities to the Initial Purchasers,
including any transfer or other taxes payable thereon, (iii) the cost of
printing or producing any blue sky or legal investment memorandum in
connection with the offer and sale of the Securities under state securities
laws and all expenses in connection with the qualification of the
Securities for offer and sale under state securities laws as provided in
Section 6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Initial Purchasers in connection with such
qualification and in connection with the blue sky or legal investment
memorandum, (iv) any fees charged by rating agencies for the rating of the
Securities, (v) the fees and expenses, if any, incurred in connection with
the admission of the Securities for trading in PORTAL or any appropriate
market system, (vi) the costs and charges of any transfer agent, registrar
or depositary, (vii) the cost of the preparation, issuance and delivery of
the Securities, (viii) one-half of the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Securities, including,
without limitation, expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company , travel and lodging expenses of the representatives and officers
of the Company and any such consultants, and the cost of any aircraft
chartered in connection with the road show, (ix) all other costs and
expenses incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section, Section 8,
and the last paragraph of Section 10, the Initial Purchasers will pay all
of their costs and expenses, including fees and disbursements of their
counsel, transfer taxes payable on resale of any of the Securities by them
and any advertising expenses connected with any offers they may make.
(zz) Neither the Company nor any Affiliate will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the Securities Act) which could be integrated with the sale
of the Securities in a manner which would require the registration under
the Securities Act of the Securities.
(aaa) Not to solicit any offer to buy or offer or sell the Securities
by means of any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of
the Securities Act.
(bbb) While any of the Securities remain "restricted securities"
within the meaning of the Securities Act, to make available, upon request,
to any seller of such Securities the information specified in Rule
144A(d)(4) under the Securities Act, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act.
(ccc) If requested by you, to use its best efforts to permit the
Securities to be designated PORTAL securities in accordance with the rules
and regulations adopted by the National Association of Securities Dealers,
Inc. relating to trading in the PORTAL Market.
(ddd) None of the Company, its Affiliates or any person acting on its
or their behalf (other than the Initial Purchasers) will engage in any
directed selling efforts (as that term is defined in Regulation S) with
respect to the Securities, and the Company and its Affiliates and each
person acting on its or their behalf (other than the Initial Purchasers)
will comply with the offering restrictions requirement of Regulation S.
(eee) During the period of two years after the Closing Date and the
Date of Delivery (if any), the Company will not, and will not permit any of
their affiliates (as defined in Rule 144 under the Securities Act) to
resell any of the Securities which constitute "restricted securities" under
Rule 144 that have been reacquired by any of them.
(fff) Not to take any action prohibited by Regulation M under the
Exchange Act in connection with the distribution of the Securities
contemplated hereby.
(ggg) The Securities (and all securities issued in exchange therefore
or in substitution thereof) shall bear the following legend until, in our
judgment, such legend shall no longer be necessary or advisable because
such Securities are no longer subject to the restrictions on transfer
described therein:
THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS
SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE")
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH KANSAS CITY SOUTHERN (THE "COMPANY") OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY) ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (C) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT OR (D) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE RIGHTS OF THE COMPANY AND THE WITHIN MENTIONED TRANSFER AGENT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
(hhh) Prior to the Closing Date, the Certificate of Designations will
be duly executed and acknowledged by the Company and filed with the
Secretary of State of the State of Delaware and will become effective in
accordance with the provisions of the General Corporation Law of the State
of Delaware.
7. OFFERING OF SECURITIES; RESTRICTIONS ON TRANSFER. (iii) Each Initial
Purchaser, severally and not jointly, represents and warrants that such Initial
Purchaser is a qualified institutional buyer as defined in Rule 144A under the
Securities Act (a "QIB"). Each Initial Purchaser, severally and not jointly,
agrees with the Company that (i) it will not solicit offers for, or offer or
sell, such Securities by any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act and (ii) it will solicit offers for such Securities only from,
and will offer such Securities only to, persons that it reasonably believes to
be QIBs, in purchasing such Securities are deemed to have represented and agreed
as provided in the Final Memorandum under the caption "Transfer Restrictions".
8. INDEMNITY AND CONTRIBUTION. (jjj) The Company agrees to indemnify and
hold harmless each Initial Purchaser, each person, if any, who controls any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act,
and each affiliate of any Initial Purchaser within the meaning of Rule 405 under
the Securities Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in either Memorandum (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact necessary
to make the statements therein in the light of the circumstances under which
they were made not misleading, except (i) insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Initial Purchaser furnished to the Company in writing by such Initial Purchaser
through any of you expressly for use therein and (ii) insofar as the sale to the
person asserting any such losses, claims, damages or liabilities was an initial
resale by such Initial Purchaser and any such losses, claims, damages or
liabilities of or with respect to such Initial Purchaser results from the fact
that both (A) to the extent required by applicable law, the Company has
sustained the burden of proving that a copy of the Final Memorandum was not sent
or given to such person at or prior to the written confirmation of the sale of
such Securities to such person and (B) the untrue statement in or omission from
the Preliminary Memorandum was corrected in the Final Memorandum unless, in
either case, such failure to deliver the Final Memorandum was a result of the
Company's failure to provide copies of the corrected Final Memorandum to such
Initial Purchaser prior to the written confirmation of the sale of such
Securities.
(kkk) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, their directors, their officers
and each person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
to the same extent as the foregoing indemnity from the Company to such
Initial Purchaser, but only with reference to information relating to such
Initial Purchaser furnished to the Company in writing by such Initial
Purchaser through any of you expressly for use in either Memorandum or any
amendments or supplements thereto.
(lll) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 8(a) or 8(b), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed
as they are incurred. Such firm shall be designated in writing by Xxxxxx
Xxxxxxx & Co. Incorporated, in the case of parties indemnified pursuant to
Section 8(a), and by the Company, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding.
(mmm) To the extent the indemnification provided for in Section 8(a)
or 8(b) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand from the offering of the Securities or
(ii) if the allocation provided by clause 8(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company on the one hand and of the Initial Purchasers
on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Initial Purchasers on the other hand in
connection with the offering of the Securities shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the
Securities (before deducting expenses) received by the Company and the
total discounts and commissions received by the Initial Purchasers, in each
case as set forth in the Final Memorandum, bear to the aggregate offering
price of the Securities. The relative fault of the Company on the one hand
and of the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the
Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Initial Purchasers' respective obligations to contribute
pursuant to this Section 8 are several in proportion to the respective
number of Securities they have purchased hereunder, and not joint.
(nnn) The Company and the Initial Purchasers agree that it would not
be just or equitable if contribution pursuant to this Section 8 were
determined by PRO RATA allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in Section 8(d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred
to in Section 8(d) shall be deemed to include, subject to the limitations
set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no
Initial Purchaser shall be required to contribute any amount in excess of
the amount by which the total price at which the Securities resold by it in
the initial placement of such Securities were offered to investors exceeds
the amount of any damages that such Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The remedies provided for in this
Section 8 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in
equity.
(ooo) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Initial Purchaser, any person
controlling any Initial Purchaser or any affiliate of any Initial Purchaser
or by or on behalf of the Company, their officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any
of the Securities.
9. TERMINATION. The Initial Purchasers may terminate this Agreement by
notice given by you to the Company and the Guarantors, if, after the execution
and delivery of this Agreement and prior to the Closing Date or the Date of
Delivery (i) trading generally shall have been suspended or materially limited
on, or by, as the case may be, any of the New York Stock Exchange, the American
Stock Exchange, the Nasdaq National Market, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company or the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a material
disruption in securities settlement, payment or clearance services in the United
States shall have occurred, (iv) any moratorium on commercial banking activities
shall have been declared by federal or New York State authorities or (v) there
shall have occurred any outbreak or escalation of hostilities, or any change in
financial markets or any calamity or crisis that, in your judgment, is material
and adverse and which, singly or together with any other event specified in this
clause (v), makes it, in your judgment, impracticable or inadvisable to proceed
with the offer, sale or delivery of the Securities on the terms and in the
manner contemplated in the Final Memorandum.
10. EFFECTIVENESS. DEFAULTING INITIAL PURCHASERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, or any Date of Delivery, any one or more Initial
Purchasers shall fail or refuse to purchase Securities that it or they have
agreed to purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Initial Purchaser or Initial Purchasers agreed
but failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Securities to be purchased on such date, the other Initial
Purchasers shall be obligated severally in the proportions that the principal
amount of Securities set forth opposite their respective names in Schedule I
bears to the aggregate principal
amount of Securities set forth opposite the names of all such non-defaulting
Initial Purchasers, or in such other proportions as you may specify, to purchase
the Securities which such defaulting Initial Purchaser or Initial Purchasers
agreed but failed or refused to purchase on such date; PROVIDED that in no event
shall the principal amount of Securities that any Initial Purchaser has agreed
to purchase pursuant to this Agreement be increased pursuant to this Section 10
by an amount in excess of one-ninth of such principal amount of Securities
without the written consent of such Initial Purchaser. If, on the Closing Date,
or any Date of Delivery, any Initial Purchaser or Initial Purchasers shall fail
or refuse to purchase Securities which it or they have agreed to purchase
hereunder on such date and the aggregate principal amount of Securities with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount of Securities to be purchased on such date, and arrangements
satisfactory to you and the Company for the purchase of such Securities are not
made within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Initial Purchaser or of the Company.
In any such case either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Final Memorandum or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Initial Purchaser from liability in respect of any
default of such Initial Purchaser under this Agreement.
If this Agreement shall be terminated by the Initial Purchasers, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform their obligations under this
Agreement, the Company will reimburse the Initial Purchasers or such Initial
Purchasers as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Initial Purchasers in connection
with this Agreement or the offering contemplated hereunder. If this Agreement is
terminated by reason of the default of one or more of the Initial Purchasers,
the Company shall not be obligated to reimburse each such defaulting Initial
Purchaser on account of such expenses.
11. NOTICES, ETC. All statements requests, notices and agreements hereunder
shall be in writing, and:
(A) If to the Initial Purchasers shall be delivered or sent by mail,
telex or facsimile transmission to Xxxxxx Xxxxxxx & Co. Incorporated, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Equity Capital Markets
Syndicate Desk (Fax: 000-000-0000), with a copy to Shearman & Sterling, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxx, Xx.,
Esq. (Fax: 000-000-0000); and
(B) If to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to Kansas City Southern, 000 Xxxx 00xx Xxxxxx,
Xxxxxx Xxxx, Xxxxxxxx 00000, Attention: Chief Financial Officer (Fax:
000-000-0000), with a copy to the Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, 0000 Xxxx
Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxxxxxxx 00000, Attention: Xxxx Xxxxxx,
Esq. (Fax: 000-000-0000).
12. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the Company, the Initial Purchasers and their respective successors and
assigns. This Agreement and the terms and provisions hereof are for the sole
benefit of only those persons, except that (i) the representations, warranties,
indemnities and agreements of the Company contained in this Agreement shall also
be deemed to be for the benefit of the person or persons, if any, who control
any Initial Purchaser within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, and each affiliate of any Initial
Purchaser within the meaning of Rule 405 under the Securities Act and (ii) the
representations, warranties, indemnities and agreements of the Initial
Purchasers contained in this Agreement shall also be deemed to be for the
benefit of officers and directors of the Company and any person who controls the
Company within the meaning of either Section 15 of the Securities Act and
Section 20 of the Exchange Act. Nothing in this Agreement is intended or shall
be construed to give any person, other than the persons referred to in this
Section 12, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
13. AMENDMENTS. No amendment or waiver of any provision of this Agreement,
nor any consent or approval to any departure therefrom, shall in any event be
effective unless the same is in writing and signed by the partied hereto.
14. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
16. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
Kansas City Southern
By: /S/ XXXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman, President & CEO
Accepted as of the date hereof
Xxxxxx Xxxxxxx & Co. Incorporated
By: /S/ XXXXXXX X. XXXX
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Managing Director
Deutsche Bank Securities Inc.
By: /S/ XXXXX X. XXXXXXXX
------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director
SCHEDULE I
AGGREGATE AMOUNT OF AGGREGATE NUMBER OF
SECURITIES TO BE SECURITIES TO BE
INITIAL PURCHASER PURCHASED PURCHASED
Xxxxxx Xxxxxxx & Co. Incorporated... $140,000,000 280,000
Deutsche Bank Securities Inc........ $35,000,000 70,000
----------- --------
Total ....................... $175,000,000 350,000
============ ========
SCHEDULE II
A. Xxxxxx Xxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxxxxx
Xxxxx X.Xxxxx
Xxxxxx X. XxXxxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxx
Xxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx
Xxxxx X. Xxx Xxxx
EXHIBIT A
OPINION OF COUNSEL FOR THE COMPANY
The opinion of the counsel for the Company, to be delivered
pursuant to Section 5(c) of the Placement Agreement, shall be to the effect
that:
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of Delaware, and has the
corporate power and authority to own its property and to conduct its
business as described in the Final Memorandum.
(ii) The Company has been duly organized, is validly existing as a
corporation, in good standing under the laws of the jurisdiction of its
organization, and has the corporate power and authority to own its property
and to conduct its business as described in the Final Memorandum.
(iii) The Placement Agreement has been duly authorized, executed and
delivered by the Company.
(iv) The statements in the Final Memorandum under the caption "Certain
United States Federal Tax Considerations", insofar as such statements
constitute a summary of the United States federal income tax laws referred
to therein, are accurate and fairly summarize in all material respects the
United States federal tax laws referred to therein.
(v) The authorized, issued and outstanding shares of capital stock of
the Company is as set forth in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances thereof, if any,
contemplated under the, pursuant to reservations, agreements or employee
benefit plans referred to in the Final Memorandum or pursuant to the
exercise of convertible securities or options referred to in the Final
Memorandum).
(vi) The statements in the Final Memorandum under the headings
"Description of the Preferred Stock," "Description of the Capital Stock,"
"Description of the Class A Common Stock," "Description of the
Acquisitions," "Private Placement" and "Transfer Restrictions" and the
statements under the headings "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Other - Environmental
Matters," "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Recent Developments - New Credit Agreement,"
"Business - Rail Network," "Business - Legal Matters," and in "Part I, Item
3 - Legal Proceedings" of the Company's most recent annual report on Form
10-K, to the extent that they constitute summaries of matters of law or
regulation or legal conclusions or of the Company's Certificate of
Designations, certificate of incorporation and by-laws, have been reviewed
by such counsel and fairly summarize the matters described therein in all
material respects; all descriptions in the Final Memorandum of statutes and
material contracts and other documents are accurate in all material
respects and such counsel does not have
actual knowledge of any contracts, documents, current or pending legal or
governmental actions, suits or proceedings which would be required to be
described in the Final Memorandum if the Final Memorandum were a prospectus
included in a registration statement on Form S-1 which are not described as
so required.
(vii) The Securities have been duly authorized by the Company for
issuance and sale pursuant to this Agreement and, when issued against
payment of the consideration therefor, will be validly issued, fully paid
and non-assessable and will not be subject to preemptive or other similar
rights of any security holder of the Company. No holder of the Securities
is or will be subject to personal liability under the certificate of
incorporation or by-laws or Certificate of Designations by reason of being
such a holder. The form of certificate used to evidence the Securities is
in due and proper form and complies with the applicable statutory
requirements and with any applicable requirements of the certificate of
incorporation or by-laws of the Company or the Certificate of Designation.
(viii) The Certificate of Designations has been duly authorized and
acknowledged by the Company and filed with the Secretary of State of the
State of Delaware and has become effective in accordance with the
provisions of the General Corporation Law of the State of Delaware. Upon
issuance and delivery of the Securities in accordance with this Agreement,
the Securities will be convertible at the option of the holder thereof into
the Conversion Shares in accordance with the terms of the Certificate of
Designations.
(ix) The Securities and the Conversion Shares being sold pursuant to
this Agreement conform in all material respects to the statements relating
thereto contained in the Final Memorandum, and such descriptions conform to
the rights set forth in the instruments defining the Securities and the
Conversion Shares.
(x) The Conversion Shares have been duly authorized and reserved for
issuance by the Company upon conversion of the Securities. The Conversion
Shares, when issued upon such conversion, will be validly issued, fully
paid and non-assessable and will not be subject to preemptive or other
similar rights of any securityholder of the Company. No holder of the
Conversion Shares is or will be subject to personal liability under the
certificate of incorporation or by-laws or Certificate of Designations by
reason of being such a holder.
(xi) The Company has full right, power and authority to execute and
deliver each of the Transaction Documents and the Certificate of
Designation and to perform its obligations thereunder; and all corporate
action required to be taken for the due and proper authorization, execution
and delivery of each of the Transaction Documents and the Certificate of
Designation and the consummation of the transactions contemplated thereby
have been duly and validly taken.
(xii) The Registration Rights Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization,
receivership, moratorium and similar laws relating to or affecting
creditors' rights generally and equitable principles of general
applicability (whether applied by a court of law or equity) and except as
rights to indemnification and contribution under the Registration Rights
Agreement may be limited under applicable law.
(xiii) The execution, delivery and performance by the Company of each
of the Transaction Documents or execution, acknowledgement and filing of
the Certificate of Designation and the consummation of the transactions
contemplated by the Transaction Documents and compliance by the Company
with its obligations thereunder will not (a) result in any violation of the
provisions of the charter or by-laws of the Company, (b) violate any
statute, rule or regulation of the United States, the States of Delaware or
New York or the General Corporation Law of the State of Delaware, (c) to
the knowledge of such counsel, conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument filed as an exhibit to the
Company's Form 10-K for the year ended December 31, 2002, except for
breaches, violations, defaults, liens, charges or encumbrances which are
not material to the Company and its subsidiaries taken as a whole, or (d)
to the knowledge of such counsel, violate any judgment, order, or decree of
any court or arbitrator or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties or
assets; and no consent, approval, authorization or order of, or filing or
registration with, any such court or arbitrator or governmental agency or
body under any such statue, judgment, order, decree, rule or regulation is
required for the execution, delivery and performance by the Company of each
of the Transaction Documents, or execution, acknowledgement and filing of
the Certificate of Designation and the consummation of the transactions
contemplated by the Transaction Documents and compliance by the Company
with its obligations thereunder, except for such consents, approvals,
authorizations, filings, registrations or qualifications (i) which have
been obtained or made prior to the Closing Date and (ii) as may be required
to be obtained or made under the Securities Act and applicable state
securities laws as provided in the Registration Rights Agreement.
(xiv) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any
of its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject other than proceedings fairly
summarized in all material respects in the Final Memorandum and proceedings
which would not be required to be described in the Final Memorandum if the
Final Memorandum were a prospectus included in a registration statement on
Form S-1 under the Securities Act.
(xv) Each of the Company are not, and after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Final Memorandum will not be, required to
register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(xvi) Based upon the representations, warranties and agreements of the
Company in Sections 1 and 6 of the Placement Agreement and of the Initial
Purchasers in Section 7 of the Placement Agreement, it is not necessary in
connection with the offer, sale and delivery of the Securities to the
Initial Purchasers under the Placement Agreement or in connection with the
initial resale of such Securities by the Initial Purchasers in accordance
with Section 7 of the Placement Agreement to register the Securities or the
Conversion Shares under the Securities Act of 1933.
(xvii) The rights under the Company's Rights Agreement dated September
19, 1995 to which holders of the Conversion Securities are entitled to,
have been duly authorized and reserved for issuance and upon conversion,
shall be validly issued.
(xviii) In addition, such counsel shall also state that such counsel
has participated in conferences with officers of the Company and its
subsidiaries and with the independent public accountants for the Company
and its subsidiaries concerning the preparation of each Memorandum and,
although such counsel has made certain inquiries and investigations in
connection with the preparation of each Memorandum, it is not passing upon
and, except as expressly set forth in paragraphs (iv) and (vi) above, does
not assume any responsibility for the accuracy or completeness of the
statements contained in or incorporated by reference in each Memorandum and
has not independently checked or verified the factual statements contained
or incorporated by reference therein, and nothing has come to the attention
of such counsel that causes such counsel to believe that (i) each document
incorporated by reference in the Final Memorandum (except for the financial
statements and financial schedules and other financial and statistical data
included therein, as to which such counsel need not express any belief),
did not comply as to form when filed with the Commission in all material
respects with the Exchange Act and the rules and regulations of the
Commission thereunder and (ii) the Final Memorandum (except for the
financial statements and financial schedules and other financial and
statistical data, as to which such counsel need not express any belief)
when issued contained, or as of the date such opinion is delivered
contains, any untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The opinion of such counsel may be limited to the laws of the States of New
York, the State of Delaware, and the Federal laws of the United States. In
rendering such opinion, such counsel may rely as to matters of fact, to the
extent such counsel deems proper, on certificates of responsible officers of the
Company and public officials.
EXHIBIT B
[FORM OF CERTIFICATE OF DESIGNATIONS OF 4.25% PERPETUAL
CUMULATIVE CONVERTIBLE PREFERRED STOCK]
EXHIBIT C
FORM OF LOCK-UP LETTER
April [_], 2003
Xxxxxx Xxxxxxx & Co. Incorporated
Deutsche Bank Securities Inc.
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Dear Sirs and Mesdames:
The undersigned understands that Xxxxxx Xxxxxxx & Co. Incorporated
("XXXXXX XXXXXXX") and Deutsche Bank Securities Inc. ("DEUTSCHE BANK") proposes
to enter into a Placement Agreement (the "PLACEMENT AGREEMENT") with Kansas City
Southern, a Delaware corporation (the "COMPANY") providing for the private
offering pursuant to Rule 144A (the "OFFERING") by the Initial Purchasers,
including Xxxxxx Xxxxxxx and Deutsche Bank (the "INITIAL PURCHASERS"), of up to
400,000 shares (the "SHARES") of the 4.25% Redeemable Cumulative Convertible
Perpetual Preferred Stock par value $1.00 per share of the Company (the
"PREFERRED STOCK"), each having a liquidation preference of $500 per Share.
To induce the Initial Purchasers that may participate in the Offering to
continue their efforts in connection with the Offering, the undersigned hereby
agrees that, without the prior written consent of Xxxxxx Xxxxxxx on behalf of
the Initial Purchasers, it will not, during the period commencing on the date
hereof and ending 90 days after the date of the final offering memorandum
relating to the Offering (the "OFFERING MEMORANDUM"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any equity securities
or any securities convertible into or exercisable or exchangeable for equity
securities or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
equity securities, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of equity securities or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (a)
the sale of any Shares to the Initial Purchasers pursuant to the Placement
Agreement or (b) transactions relating to shares of Preferred Stock or other
securities acquired in open market transactions after the completion of the
Offering. In addition, the undersigned agrees that, without the prior written
consent of Xxxxxx Xxxxxxx on behalf of the Initial Purchasers, it will not,
during the period commencing on the date hereof and ending 90 days after the
date of the Offering Memorandum, make any demand for or exercise any right with
respect to, the registration of any shares of equity securities or any security
convertible into or exercisable or exchangeable for equity securities. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the
transfer of the undersigned's shares of Preferred Stock except in compliance
with the foregoing restrictions.
The undersigned understands that the Company and the Initial Purchasers
are relying upon this Lock-Up Agreement in proceeding toward consummation of the
Offering. The undersigned further understands that this Lock-Up Agreement is
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns.
Whether or not the Offering actually occurs depends on a number of
factors, including market conditions. Any Offering will only be made pursuant to
a Placement Agreement, the terms of which are subject to negotiation between the
Company and the Initial Purchasers.
Very truly yours,
-----------------------
Name:
-----------------------
Address:
