Exhibit 10.10
VAT ESCROW AGREEMENT
This VAT ESCROW AGREEMENT (this "Agreement") is entered into and effective
as of this 15th day of December, 2004, by and among KANSAS CITY SOUTHERN, a
Delaware corporation ("KCS"), KARA SUB, INC., a Delaware corporation, KCS
INVESTMENT I, LTD., a Delaware corporation, KCS ACQUISITION SUBSIDIARY, INC., a
Delaware corporation, CAYMEX TRANSPORTATION, INC., a Delaware corporation, GRUPO
TMM, S.A., a SOCIEDAD ANONIMA organized under the laws of the United Mexican
States ("TMM"), TMM HOLDINGS, S.A. de C.V., and TMM MULTIMODAL, S.A. de C.V.,
and a subsidiary of TMMH ("MM") (collectively, the "Parties") and The Bank of
Nova Scotia Trust Company of New York (the "Escrow Agent).
WHEREAS, pursuant to Section 7.13 of the Amended and Restated Acquisition
Agreement dated as of the date hereof among the Parties and the other parties
named therein (the "Acquisition Agreement") certain funds, in the form of a
promissory note, are to be deposited in escrow (the "VAT Escrow"); and
WHEREAS, the Parties desire to appoint the Escrow Agent to hold the VAT
Escrow (defined below) on the terms and conditions set forth in this Escrow
Agreement and the Escrow Agent is willing to serve in that capacity.
NOW, THEREFORE, in consideration of the premises and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Parties, it is hereby agreed
by and among the Parties and the Escrow Agent as follows:
1. APPOINTMENT AND DEPOSIT INTO ESCROW.
(a) The Parties hereby appoint the Escrow Agent to serve as escrow
agent hereunder. In accordance with and subject to the terms and provision
hereof, the Escrow Agent accepts such appointment and agrees to hold and
distribute the VAT Escrow in accordance with the terms hereof.
(b) On the later to occur (the "Deposit Date") of (i) the Closing
Date, or (ii) the Final Resolution of the VAT Claim and Put (as those terms
are defined in the Acquisition Agreement), KCS shall deliver to the Escrow
Agent, to be held by the Escrow Agent in the VAT Escrow, and reduced and
released only pursuant to the terms and conditions of this VAT Escrow
Agreement, a promissory note of KCS in the principal amount of $40 million
(the "VAT Escrow Note").
(c) The principal amount of VAT Escrow Note shall be reduced only upon
the occurrence of any of the following:
(i) If the Escrow Agent receives joint written instructions from
KCS and TMM to make such reduction, specifying the amount thereof;
(ii) If the Escrow Agent receives written instructions from KCS
to make such reduction, specifying the amount thereof, simultaneously
copied and sent by same means to TMM, and the Escrow Agent does not
receive written objection from TMM within ten (10) Business Days
(defined below) of the date such instructions are received by the
Escrow Agent. As used herein, the term "Business Day" shall mean a day
of the year on which national banks in New York, New York, are not
required or permitted to be closed; or
(iii) If the Escrow Agent receives a final order, decree or
judgment of a court of competent jurisdiction or arbitration tribunal
(and in the case of an arbitration tribunal, accompanied by a
certificate signed by the President or a Vice-President (each, an
"Appropriate Officer") of KCS and TMM stating that such arbitration
was undertaken in accordance with Section 12.11 or 10.5 of the
Acquisition Agreement), and accompanied by an opinion of counsel that
such order, decree or judgment is final.
The Escrow Agent shall mark on Schedule A to the VAT Escrow Note the amount
of each reduction in the principal amount thereof as provided in this Section 3.
2. The VAT Escrow shall be held for the exclusive benefit of the Parties,
their successors and assigns and no other person or entity shall have any right,
title or interest therein, except as provided in Section 5.
3. The Parties agree that any dispute between the Parties arising under
this Agreement shall be resolved in accordance with the dispute resolution
procedures set forth in Section 10.5(e) or 12.11, as appropriate, of the
Acquisition Agreement.
4. On the earliest to occur (the "Release Date") of (i) the fifth
anniversary of the Deposit Date (provided there is no unresolved objection from
TMM pursuant to Section 2(c)(ii)), (ii) the receipt by the Escrow Agent of
written instructions from KCS (provided there is no unresolved objection from
TMM pursuant to Section 2(c)(ii)), or (iii) receipt by the Escrow Agent of an
order of a final order, decree or judgment of a court or an arbitration tribunal
(and in the case of an arbitration tribunal of competent jurisdiction,
accompanied by a certificate signed by an Appropriate Officer of KCS and TMM
stating that such arbitration was undertaken in accordance with Section 12.11 of
the Acquisition Agreement), accompanied by an opinion of
counsel that such order, decree or judgment is final (a "Final Resolution"),
that release of the VAT Escrow Note is otherwise ordered,
(a) the VAT Escrow Note, as reduced in accordance with Section 1(c)
hereof, shall automatically be converted into the right to receive that
number of shares of KCS Common Stock (the "Shares") as provided for in the
VAT Escrow Note; and
(b) KCS shall issue and deliver to MM one or more stock certificates
representing the Shares referenced in sub-section 4(a) and the VAT Escrow
Note shall be returned by the Escrow Agent to KCS.
(c) In the event that there is an unresolved objection from TMM
pursuant to Section 2(c)(ii) with respect to any claim for reduction of the
principal amount of the VAT Escrow Note on the Release Date, (i) KCS shall
deliver to MM that number of Shares as equal the portion of the VAT Escrow
Note which is not subject to such dispute, if any, and shall deliver the
balance, if any, upon agreement of the Parties or a Final Resolution of
such dispute, and (ii) the Escrow Agent shall continue to hold the VAT
Escrow Note, as reduced by any partial payment thereof in accordance with
this Section 4(c), in accordance with the terms of this Agreement, and
shall deliver the VAT Escrow Note to KCS upon receipt of written
instructions signed by both TMM and KCS as to the disposition of the VAT
Escrow Note, or a Final Resolution of such dispute.
5. (a) The Escrow Agent may act or refrain from acting in reliance upon
any instructions, notice, certification, demand, consent, authorization,
receipt, power of attorney or other writing delivered to it by any other
party and believed by the Escrow Agent to be genuine without being required
to determine the authenticity or validity thereof or the correctness of any
facts stated therein. The Escrow Agent may act or refrain from acting in
reliance upon any signature believed by it to be genuine, and may assume
that any such person has been properly authorized to do so.
(b) The Parties hereto, jointly and severally, agree to reimburse the
Escrow Agent on demand for, and to indemnify and hold the Escrow Agent
harmless against and with respect to, any and all loss, liability, damage
or expense (including, without limitation, reasonable attorneys' fees,
costs and disbursements) that the Escrow Agent may suffer or incur in
connection with this Agreement in its performance hereunder or in
connection herewith, except to the extent such loss, liability, damage or
expense is caused by the Escrow Agent's willful misconduct or gross
negligence as adjudicated by a court of competent jurisdiction. The Escrow
Agent shall have the right to apply the VAT Escrow held by it in escrow
hereunder, and
any proceeds thereof, to the payment of any amounts owing to it by TMM or
KCS hereunder upon one (1) Business Days' notice to TMM and KCS.
(c) As between themselves, KCS and TMM agree that in the event that
the Escrow Agent exercises its right to apply funds from the VAT Escrow
Note to the payment of any amounts owing to it hereunder ("Escrow Agent
Receivable") as a result of the failure of one of KCS or TMM to make
payment in full of 50% of the Escrow Agent Receivable in accordance with
Section 11 hereof, such non-paying Party shall promptly transfer to the
account of the other Party in accordance with such other Party's
instructions in immediately available funds an amount equal to the
difference between 50% of the Escrow Agent Receivable and the amount, if
any, actually paid by the non-paying Party to the Escrow Agent in respect
of the Escrow Agent Receivable. In the event that the Escrow Agent
exercises its right to apply funds from the VAT Escrow Note to the payment
of the Escrow Agent Receivable as a result of the failure of both of KCS
and TMM to make payment in full of 50% of the Escrow Agent Receivable in
accordance with Section 11 hereof, each such non-paying Party shall
promptly transfer to the account of the other Party in accordance with such
other Party's instructions in immediately available funds an amount equal
to the difference between 50% of the Escrow Agent Receivable and the
amount, if any, actually paid by the non-paying Party to the Escrow Agent
in respect of the Escrow Agent Receivable.
6. (a) The Escrow Agent may consult legal counsel of its selection in the
event of any dispute or question as to the meaning or construction of any
of the provisions of this Agreement or its duties hereunder, including,
without limitation, the validity of any order of any court or arbitration
tribunal, and it shall incur no liability and shall be fully protected in
acting or refraining from acting in accordance with the opinion and
instructions of such counsel
(b) Each of the Parties acknowledges and agrees that the Escrow Agent
(i) shall not be deemed to have knowledge of the terms of, or be
responsible for, any of the agreements referred to or described herein
(including, without limitation, the Acquisition Agreement, but excluding
this Agreement) or for determining compliance therewith and shall not
otherwise be bound thereby and (ii) shall be obligated only for the
performance of such duties as are specifically set forth in this Agreement
on its part to be performed and no implied duties or obligations of any
kind shall be read into this Agreement against the Escrow Agent.
7. In the event of any disagreement between any of the Parties to this
Agreement, any adverse claims or demands being made in connection with the
subject matter of the escrow, or in the event that the Escrow Agent, in good
faith, is in doubt as to what action it should take hereunder, the Escrow Agent
may, at its option, refuse to comply with any claims and demands on it and
retain in its possession without liability to anyone all or any of the property
held by it
hereunder, or refuse to take any other action hereunder, so long as such
disagreement continues or such doubt exists. The Escrow Agent shall not become
liable in any way or to any person for its failure or refusal to act in such
event, and the Escrow Agent shall be entitled to continue to refrain from acting
until (i) the rights of all parties shall have been fully and finally
adjudicated by a final order, decree, or judgment of a court or arbitration
tribunal of competent jurisdiction (and in the case of an arbitration tribunal,
accompanied by a certificate signed by an Appropriate Officer of KCS and TMM
stating that such arbitration was undertaken in accordance with Section 12.11 or
10.5 of the Acquisition Agreement), accompanied by an opinion of counsel that
such order, decree or judgment is final, or (ii) all differences shall have been
resolved by agreement among all the interested persons, and Escrow Agent shall
have been notified thereof in writing signed by all such persons. Escrow Agent
shall have the option, after thirty (30) calendar days notice to the Parties, of
its intention to do so, to file an action in interpleader requiring the Parties
to answer and litigate any claims and rights among themselves. The rights of the
Escrow Agent under this paragraph are cumulative of all other rights which it
may have by law or otherwise.
8. Notice to the Parties shall be given as provided below. Whenever under
the terms hereof the time for giving a notice or performing an act falls upon a
Saturday, a Sunday or a banking holiday in New York, such time shall be extended
to the next day on which the Escrow Agent is open for business.
9. The Escrow Agent may, in its sole discretion, resign and terminate its
position hereunder at any time following thirty (30) calendar days written
notice to the other Parties to the Escrow Agreement. Prior to the effective date
of resignation specified in such notice, the Parties will jointly appoint a
successor escrow agent. On the effective date of such appointment, the Escrow
Agent shall deliver this Escrow Agreement together with any and all related
instruments or documents and all of the funds, securities, documents and other
assets held in escrow hereunder to any successor escrow agent selected in
writing by Parties to this Agreement. If a successor escrow agent has not been
appointed prior to the expiration of thirty (30) calendar days following the
date of notice of such resignation, then (i) the Escrow Agent's sole
responsibility after that time shall be to safekeep the property held in escrow
by it hereunder until receipt by it of designation of a successor escrow agent
and (ii) the Escrow Agent may petition any court of competent jurisdiction for
the appointment of a successor escrow agent, or other appropriate relief. Any
such resulting appointment shall be binding upon all the Parties to this
Agreement.
10. The Parties to this Agreement may by mutual written agreement, with a
copy of such agreement forwarded to the Escrow Agent, at any time substitute a
new escrow agent by giving ten (10) days notice thereof to the Escrow Agent and
paying all fees and expenses due to the Escrow Agent. Any such substitution
shall terminate all obligations and duties of the Escrow
Agent hereunder. On the effective date of such substitution, the Escrow Agent
shall deliver this Agreement together with any and all related instruments or
documents and all of the funds, securities, documents and other assets held in
escrow hereunder to a successor escrow agent that the Parties have selected in
writing.
11. The Escrow Agent shall receive the fees provided in Appendix B hereto.
Except as provided in Section 5(b), the Escrow Agent shall not be permitted to
utilize the Escrow Fund to cover any of its fees or expenses. TMM and KCS agree
as between themselves that all fees and expenses of the Escrow Agent shall be
paid equally (50% by KCS and 50% by TMM).
12. Any modification of this Agreement or any additional obligations
assumed by any party hereto shall be binding only if evidenced by a writing
signed by each of the parties hereto. Upon the earlier to occur of (i) the
reduction of the VAT Escrow Note in full principal amount, or (ii) the delivery
of the VAT Escrow Note to KCS, this Agreement shall be thereupon terminated and
of no further force or effect; provided that the provisions of Section 5(b) and
11 (for the period prior to such termination, resignation or substitution) shall
survive the termination of this Agreement and the resignation or substitution of
the Escrow Agent.
13. This Agreement shall be governed by the laws of the state of New York
in all respects. The Parties hereto irrevocably and unconditionally submit to
the jurisdiction of a federal or state court located in New York, New York in
connection with any proceedings commenced regarding this Agreement including but
not limited to a interpleader proceeding or a proceeding for the employment of a
successor escrow agent. The Parties irrevocably submit to the jurisdiction of
such courts for the determination of all issues in such proceedings, without
regard to any principles of conflicts of laws, and irrevocably waive any
objection to venue or inconvenient forum.
14. This Agreement may be executed in one or more counterparts, each of
which counterpart shall be deemed to be an original and all of which
counterparts, taken together, shall constitute one and the same Agreement.
15. 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 Grupo TMM:
Grupo TMM, S.A.
Avenida de la Cuspide, No. 4755
Colonia Parques del Pedregal
14010 Mexico, D.F.
Attention: Corporate Secretary
CT Corporation
1209 Orange Street
Wilmington, Delaware 19801
With a copy (which shall not constitute notice) to:
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, New York 10005
Attention: Thomas C. Janson, Esq.
If to KCS:
By U.S. Mail:
Kansas City Southern
P.O. Box 219335
Kansas City, MO 64121-9335
Attention: Senior Vice President and General Counsel
By Delivery Service:
Kansas City Southern
427 West 12th Street
Kansas City, MO 64105
Attention: Senior Vice President and General Counsel
With a copy (which shall not constitute notice) to:
Sonnenschein Nath & Rosenthal LLP
4520 Main Street, Suite 1100
Kansas City, MO 64111
Attention: John F. Marvin, Esq.
If to the Escrow Agent:
The Bank of Nova Scotia Trust Company of New York
One Liberty Plaza
New York, NY 10006
Attention John Neylan
With a copy to (which shall not constitute notice) to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022
Attention: Helen Doo
Any Party hereto may from time to time change its address for notices under this
Section 16 giving at least ten (10) days' notice of such changed address to the
other Parties hereto.
SIGNATURE PAGES FOLLOWING
IN WITNESS WHEREOF, the Parties and the Escrow Agent have executed this
Agreement as of the date first above written.
KANSAS CITY SOUTHERN
By: /s/ Michael R. Haverty
-----------------------------
Name: Michael R. Haverty
Title: Chairman, President & CEO
KARA SUB, INC.
By: /s/ Ronald G. Russ
-----------------------------
Name: Ronald G. Russ
Title: Vice President
KCS INVESTMENT I, LTD.
By: /s/ Ronald G. Russ
-----------------------------
Name: Ronald G. Russ
Title: Vice President
KCS ACQUISITION SUBSIDIARY, INC.
By: /s/ Ronald G. Russ
-----------------------------
Name: Ronald G. Russ
Title: Vice President
CAYMEX TRANSPORTATION, INC.
By: /s/ Jay M. Nadlman
-----------------------------
Name: Jay M. Nadlman
Title: Vice President & Secretary
GRUPO TMM, S.A.
By: /s/ Jose F. Serrano Segovia
-----------------------------
Name: Jose F. Serrano Segovia
Title: Attorney in Fact
By: /s/ Javier Segovia Serrano
-----------------------------
Name: Javier Segovia Serrano
Title: Attorney in Fact
TMM HOLDINGS, S.A. de C.V.
By: /s/ Jose F. Serrano Segovia
-----------------------------
Name: Jose F. Serrano Segovia
Title: Attorney in Fact
By: /s/ Javier Segovia Serrano
-----------------------------
Name: Javier Segovia Serrano
Title: Attorney in Fact
TMM MULTIMODAL, S.A. de C.V.
By: /s/ Jose F. Serrano Segovia
-----------------------------
Name: Jose F. Serrano Segovia
Title: Attorney in Fact
By: /s/ Javier Segovia Serrano
-----------------------------
Name: Javier Segovia Serrano
Title: Attorney in Fact
The Bank of Nova Scotia Trust Company of New York
By: /s/ Andrew Bicker
-----------------------------
Name: Andrew Bicker
Title: Associate Director
APPENDIX A
[INSTRUCTIONS TO ESCROW AGENT]
APPENDIX B
[FEES]