Exhibit 10.1
AMENDED AND RESTATED
ACQUISITION AGREEMENT
BY AND AMONG
KANSAS CITY SOUTHERN,
A DELAWARE CORPORATION,
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 HOLDINGS, S.A. DE C.V.,
A SOCIEDAD ANONIMA DE CAPITAL VARIABLE
ORGANIZED UNDER THE LAWS OF THE UNITED MEXICAN STATES,
TMM MULTIMODAL, S.A. DE C.V.,
A SOCIEDAD ANONIMA DE CAPITAL VARIABLE
ORGANIZED UNDER THE LAWS OF THE UNITED MEXICAN STATES
AND
GRUPO TRANSPORTACION FERROVIARIA MEXICANA, S.A. DE C.V.,
A SOCIEDAD ANONIMA DE CAPITAL VARIABLE
ORGANIZED UNDER THE LAWS OF THE UNITED MEXICAN STATES
DATED AS OF DECEMBER 15, 2004
TABLE OF CONTENTS
ARTICLE 1 STOCK PURCHASE.......................................................2
Section 1.1 Stock Purchase and Escrow.......................................2
Section 1.2 Stock Purchase Price............................................2
Section 1.3 Intercompany Account Settlement.................................3
ARTICLE 2 CAPITAL REDUCTION; SUBSIDIARY INVESTMENT.............................4
Section 2.1 GTFM Capital Reduction; Subsidiary Investment...................4
ARTICLE 3 THE MERGER...........................................................4
Section 3.1 The Merger......................................................4
ARTICLE 4 CLOSING..............................................................5
Section 4.1 Closing.........................................................5
Section 4.2 Actions at Closing..............................................5
Section 4.3 Conversion of Securities........................................7
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLERS............................7
Section 5.1 Organization and Related Matters................................7
Section 5.2 Authorized Capitalization.......................................8
Section 5.3 GTFM and GTFM Subsidiaries.....................................10
Section 5.4 Authority; No Violation........................................10
Section 5.5 Consents and Approvals.........................................11
Section 5.6 Financial Statements; Undisclosed Liabilities..................12
Section 5.7 Contracts......................................................13
Section 5.8 Intellectual Property Rights...................................14
Section 5.9 Employee Benefit Matters.......................................14
Section 5.10 Labor and Other Employment Matters............................16
Section 5.11 Tax Matters...................................................17
Section 5.12 Legal Proceedings.............................................19
Section 5.13 Permits and Compliance........................................19
Section 5.14 Environmental Matters.........................................20
Section 5.15 Properties....................................................21
Section 5.16 Insurance.....................................................21
Section 5.17 No Other Broker...............................................21
Section 5.18 No GTFM Material Adverse Effect...............................22
Section 5.19 Sufficiency of and Title to Assets............................22
Section 5.20 Information in Filed Documents................................22
Section 5.21 Affiliate Agreements..........................................22
Section 5.22 No Loss of Significant Customers..............................23
Section 5.23 Trading in and Ownership of KCS Common Stock..................23
Section 5.24 Solvency......................................................23
Section 5.25 Termination of Option Agreement...............................23
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF KCS...............................24
Section 6.1 Organization and Related Matters...............................24
Section 6.2 Authority; No Violation........................................24
Section 6.3 Consents and Approvals.........................................26
Section 6.4 Authorized Capitalization......................................27
Section 6.5 SEC Filings....................................................27
Section 6.6 Financial Statements; Undisclosed Liabilities..................28
Section 6.7 No Other Broker................................................28
Section 6.8 Information in Filed Documents.................................28
Section 6.9 No KCS Material Adverse Effect; Other Actions..................29
Section 6.10 KCS Sub.......................................................29
Section 6.11 Legal Proceedings.............................................30
Section 6.12 KCS Capital Resources.........................................30
Section 6.13 Employee Benefit Matters......................................30
Section 6.14 Labor and Other Employment Matters............................31
Section 6.15 Tax...........................................................31
Section 6.16 Permits and Compliance........................................31
Section 6.17 Environmental Matters.........................................31
Section 6.18 Properties....................................................32
ARTICLE 7 COVENANTS AND ADDITIONAL AGREEMENTS.................................32
Section 7.1 Interim Governance Arrangements; Conduct of Business
by the GTFM Group..............................................32
Section 7.2 Conduct of Business by KCS and its Subsidiaries................36
Section 7.3 Confidentiality................................................37
Section 7.4 Regulatory Matters; Governing Documents; Third-Party Consents..37
Section 7.5 Stockholder Approvals..........................................39
Section 7.6 Tax Matters....................................................40
Section 7.7 Insurance......................................................41
Section 7.8 Notification of Certain Matters................................41
Section 7.9 Further Assurances.............................................41
Section 7.10 Third-Party Matters...........................................41
Section 7.11 Efforts of Parties to Close...................................43
Section 7.12 Expenses......................................................43
Section 7.13 VAT Contingency Payment.......................................43
Section 7.14 Financing for Acquisition.....................................45
Section 7.15 Suspension and Dismissal of Actions; Releases.................45
Section 7.16 Legal Representation Release..................................47
ARTICLE 8 CONDITIONS..........................................................48
Section 8.1 Mutual Conditions..............................................48
Section 8.2 Conditions to the Obligations of KCS...........................48
Section 8.3 Conditions to the Obligations of Sellers.......................49
ARTICLE 9 TERMINATION.........................................................50
Section 9.1 Termination....................................................50
Section 9.2 Survival after Termination.....................................51
ARTICLE 10 INDEMNIFICATION....................................................52
Section 10.1 Survival of Representations, Warranties and Covenants;
Exclusive Monetary Remedies...................................52
Section 10.2 Indemnification by Sellers....................................52
Section 10.3 Indemnification by KCS........................................55
Section 10.4 Procedures for Third-Party Claims.............................55
Section 10.5 Tax Indemnification...........................................57
ARTICLE 11 DEFINITIONS........................................................58
Section 11.1 Certain Defined Terms.........................................58
ARTICLE 12 MISCELLANEOUS......................................................66
Section 12.1 Amendments; Waiver............................................66
Section 12.2 Entire Agreement..............................................66
Section 12.3 Interpretation................................................67
Section 12.4 Severability..................................................67
Section 12.5 Notices.......................................................67
Section 12.6 Headings......................................................69
Section 12.7 Binding Effect; Persons Benefiting; No Assignment.............69
Section 12.8 No Third Party Beneficiaries..................................69
Section 12.9 Counterparts..................................................69
Section 12.10 Specific Enforcement.........................................69
Section 12.11 Governing Law; Dispute Resolution............................69
Section 12.12 Announcements................................................72
Section 12.13 Termination Fee..............................................72
TABLE OF DEFINED TERMS
TERM PAGE SECTION
Acquisition...................................1.......................Preamble
Acquisition Agreement Claims.................42........................7.15(a)
Affiliate....................................54...........................11.1
Affiliate Agreements.........................21...........................5.21
Agreement.....................................1.......................Preamble
Amended By-laws..............................30.........................7.1(a)
Amendment to the Trust Agreement.............58...........................11.1
Ancillary Agreements..........................1.......................Preamble
Applicable Law...............................54...........................11.1
Arbitration..................................43........................7.15(c)
Arbitration Costs............................66..................12.11(d)(iii)
Arbitration Demand...........................65.......................12.11(d)
Arbitrators..................................65....................12.11(d)(i)
Authority Litigation.........................58...........................11.1
Authority Litigation Agreement...............58...........................11.1
Benefit Plan.................................14.........................5.9(a)
Business Day.................................54...........................11.1
Buyer Parties................................40........................7.10(c)
Capital Reduction.............................4.........................2.1(a)
Caymex........................................1.......................Preamble
Certificate of Merger.........................4.........................3.1(a)
CFC..........................................35.........................7.4(d)
Change of Control............................54...........................11.1
Closing.......................................5............................4.1
Closing Date..................................5............................4.1
Closing Escrow................................2.........................1.1(b)
Closing Escrow Agreement......................2.........................1.1(b)
Code.........................................28...........................6.13
Commence.....................................42........................7.15(a)
Concession...................................55...........................11.1
Confidentiality Agreements...................55...........................11.1
Consultant...................................55...........................11.1
Consulting Agreement.........................55...........................11.1
Continuing Affiliate Agreements...........................................5.21
Contracts....................................55...........................11.1
Control......................................55...........................11.1
De Teresa...............................................................5.7(d)
De Teresa Agreements.........................13.........................5.7(d)
Del. G.C.L....................................4.........................3.1(a)
Designated Person............................53....................10.2(a)(ii)
Dismissals...................................56...........................11.1
Disputes.....................................64.......................12.11(a)
Dispute Notice...............................65.......................12.11(c)
Dispute Parties..............................64.......................12.11(a)
Dispute Party................................64.......................12.11(a)
Effective Time................................4.........................3.1(a)
EMVA.........................................20...........................5.17
Encumbrance..................................55...........................11.1
Environmental Laws...........................55...........................11.1
Environmental Permit.........................55...........................11.1
ERISA........................................28...........................6.13
ERISA Affiliate..............................56...........................11.1
Escrow Agent..................................5.........................4.2(a)
Exchange Act.................................56...........................11.1
Expiration Date..............................48........................10.1(a)
FIC..........................................36.........................7.4(e)
FIC Approval.................................36.........................7.4(e)
Final Tax Resolution.........................58....................10.5(e)(iv)
Final Resolution of the
VAT Claim and Put.........................56...........................11.1
GAAP.........................................56...........................11.1
Governmental Authority.......................56...........................11.1
GTFM..........................................1.......................Preamble
GTFM Assets..................................20...........................5.19
GTFM Benefit Plan............................14.........................5.9(a)
GTFM Business................................57...........................11.1
GTFM Financial Statements....................12............................5.6
GTFM Form 20-F...............................56...........................11.1
GTFM Group...................................57...........................11.1
GTFM Insurance Policies......................19...........................5.16
GTFM Material Adverse Effect.................57...........................11.1
GTFM Shares...................................2.........................1.1(a)
GTFM Sub Note.................................4.........................2.1(b)
GTFM Subsidiaries............................57...........................11.1
GTFM Taxpayer................................57........................10.5(e)
GTFM Trademarks..............................57...........................11.1
GTFM Voting Debt..............................8............................5.2
Hazardous Materials..........................57...........................11.1
HSR Act......................................57...........................11.1
IFRS.........................................57...........................11.1
Income Taxes.................................57...........................11.1
Indemnified Party............................52........................10.4(a)
Indemnity Escrow..............................3.........................1.2(c)
Indemnity Escrow Agreement....................3.........................1.2(c)
Indemnity Escrow Notes........................2.........................1.2(a)
Intellectual Property........................57...........................11.1
Investment Advisers Act......................57...........................11.1
Investment Company Act.......................57...........................11.1
KARA Sub......................................1.......................Preamble
KCS...........................................1.......................Preamble
KCS Acquisition Proposal.....................40........................7.10(c)
KCS Assets...................................58...........................11.1
KCS Board....................................26.........................6.3(c)
KCS Business.................................58...........................11.1
KCS Disclosure Schedule......................22.........Article 6 Introduction
KCS Investment................................1.......................Preamble
KCS Financial Statements.....................26.........................6.6(a)
KCS Indemnitees..............................49........................10.2(a)
KCS Material Adverse Effect..................58...........................11.1
KCS Preferred Stock..........................26............................6.4
KCS Purchasers................................1.......................Preamble
KCS SEC Documents............................25............................6.5
KCS Stockholder Approval.....................24.........................6.3(a)
KCS Stockholder Rights Plan...............................................11.1
KCS Stock Option Plan........................58...........................11.1
KCS Sub.......................................1.......................Preamble
KCS Sub Common Stock..........................4.........................2.1(b)
KCS Sub Note..................................4.........................2.1(b)
KCS Sub Shares................................4.........................2.1(b)
KCS Voting Debt..............................25............................6.4
Knowledge....................................58...........................11.1
Law..........................................58...........................11.1
Legal Representation Release.................47...........................7.16
Losses.......................................49........................10.2(a)
Management Claims............................42........................7.15(a)
Master Trust Agreement.......................21...........................5.25
Merger........................................1.......................Preamble
Mexican Litigation List......................44........................7.15(e)
MM............................................1.......................Preamble
MM Stockholder Approval......................11.........................5.5(a)
MM Subsidiaries..............................58...........................11.1
Net Receivable Amount.........................3.........................1.3(a)
New Series Preferred Stock...................24............................6.4
NOL Value....................................41........................7.13(a)
NYSE.........................................58...........................11.1
Ongoing Litigation Matters...................13.........................5.7(d)
Option Agreement.............................21...........................5.25
Original Acquisition Agreement................1.......................Preamble
Party.........................................1.......................Preamble
Parties.......................................1.......................Preamble
Permits......................................18........................5.13(a)
Permitted Encumbrance........................58...........................11.1
Person.......................................59...........................11.1
Proceedings..................................17...........................5.12
Process Agent................................67.......................12.11(f)
Put..........................................59...........................11.1
Put Agreement................................59...........................11.1
Put Assignment Agreement.....................59...........................11.1
Put Purchase Price...........................59...........................11.1
Reconciliation...............................12............................5.6
Releases.....................................59...........................11.1
Release Resolutions..........................59...........................11.1
Scheduled Contracts..........................12.........................5.7(a)
SEC..........................................59...........................11.1
Securities...................................59...........................11.1
Securities Act...............................59...........................11.1
Securities Laws..............................59...........................11.1
Selected Tax Advisor.........................57...................10.5(e)(iii)
Seller Disclosure Schedule....................7.........Article 5 Introduction
Seller Indemnitees...........................51........................10.3(a)
Seller Material Adverse Effect...............59...........................11.1
Seller Parties...............................39........................7.10(a)
Sellers.......................................7.........Article 5 Introduction
Stock Purchase................................1.......................Preamble
Stock Purchase Price..........................2.........................1.1(a)
Straddle Period..............................38.........................7.6(a)
Subscription Agreement........................4.........................2.1(b)
Subsidiary...................................60...........................11.1
Subsidiary Approvals.........................11.........................5.5(a)
Subsidiary Investment.........................1.......................Preamble
Surviving Company.............................4.........................3.1(a)
Tax..........................................60...........................11.1
Tax Assessment...............................57.....................10.5(e)(i)
Tax Return...................................60...........................11.1
Taxing Authority.............................60...........................11.1
Termination Date.............................48.....................9.1(a)(vi)
TFM..........................................60...........................11.1
Third-Party Claim............................52........................10.4(a)
TMM...........................................1.......................Preamble
TMM Acquisition Proposal.....................39........................7.10(a)
TMM Parties..................................36......................7.4(e)(i)
TMM Stockholder Approval.....................11.........................5.5(a)
TMMH..........................................1.......................Preamble
TMMH Stockholder Approval....................11.........................5.5(a)
Transition Management Team...................31.........................7.1(c)
Transition Managers..........................31.........................7.1(c)
Trust........................................21...........................5.25
UMS...........................................1.......................Preamble
U.S..........................................60...........................11.1
VAT..........................................60...........................11.1
VAT Claim....................................60...........................11.1
VAT Contingency Payment......................41........................7.13(a)
VAT Escrow...................................42........................7.13(a)
VAT Escrow Agreement.........................42........................7.13(a)
VAT Payment..................................60...........................11.1
Volume Weighted Price........................60...........................11.1
Voting Trust.................................60...........................11.1
Exhibit A.........Seller Disclosure Schedule
Exhibit B.........KCS Disclosure Schedule
Exhibit C.........Form of Release Resolutions
Exhibit D.........Certificate of Merger
Exhibit E.........Form of Indemnity Escrow Notes
Exhibit F.........GTFM Resolutions Effecting Capital Reduction
Exhibit G.........Form of GTFM Subordinated Promissory Note
Exhibit H.........Revoked Powers of Attorney
Exhibit I.........New Powers of Attorney
Exhibit J.........Amended By-laws of GTFM and TFM
Exhibit K.........Mexican Litigation List
Exhibit L.........Legal Representation Release
Exhibit M.........Omitted
Exhibit N.........Subscription Agreement
Exhibit O.........Selected Tax Advisor
Exhibit P.........Designated Person
AMENDED AND RESTATED ACQUISITION AGREEMENT, dated as of December 15, 2004
(this "Agreement"), by and among KANSAS CITY SOUTHERN, a Delaware corporation
("KCS"), KARA Sub, Inc., a Delaware corporation ("KARA Sub"), KCS Investment I,
Ltd., a Delaware corporation ("KCS Investment"), KCS Acquisition Subsidiary,
Inc., a Delaware corporation ("KCS Sub"), Caymex Transportation, Inc., a
Delaware corporation ("Caymex"), KARA Sub, KCS Investment, KCS Sub and Caymex
being subsidiaries of KCS, GRUPO TMM, S.A., a SOCIEDAD ANONIMA organized under
the laws of the United Mexican States ("UMS") ("TMM"), TMM HOLDINGS, S.A. de
C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS
and a subsidiary of TMM ("TMMH"), TMM MULTIMODAL, S.A. de C.V., a SOCIEDAD
ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS ("MM") and a
subsidiary of TMMH and Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V.,
a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS
("GTFM") and a subsidiary of MM (each, a "Party" and collectively, the
"Parties").
WHEREAS, certain of the Parties entered into an Acquisition Agreement dated
as of April 20, 2003 (the "Original Acquisition Agreement");
WHEREAS, disputes with respect to the Original Acquisition Agreement and
certain other matters have arisen between the parties to that agreement and the
Parties desire to amend and restate the Original Acquisition Agreement in order
to, among other things, facilitate settlement and final resolution of such
disputes;
WHEREAS, each of the Boards of Directors of KCS, TMM, TMMH and MM has
approved and declared advisable the acquisition by KCS of all of MM's interest
in GTFM, through (i) the purchase by KARA Sub, KCS Investment and Caymex
(together, the "KCS Purchasers") from MM of all of the capital stock of GTFM
held by MM (the "Stock Purchase"), (ii) the investment by MM in KCS Sub (the
"Subsidiary Investment"), and (iii) the merger of KCS Sub with and into KCS (the
"Merger") upon the terms and subject to the conditions of this Agreement
(collectively, the Stock Purchase, Subsidiary Investment and the Merger comprise
the "Acquisition"); and
WHEREAS, certain of the Parties and other parties are entering into
ancillary agreements (the "Ancillary Agreements," identified hereinafter) and a
Consulting Agreement to carry out certain of the objectives of this Agreement
and of the Acquisition.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the Parties agree as
follows:
ARTICLE 1
STOCK PURCHASE
SECTION 1.1 STOCK PURCHASE AND ESCROW.
(a) Upon the terms and subject to satisfaction or waiver of the conditions
set forth in Article 8, at the Closing (as defined in Section 4.1), the KCS
Purchasers shall purchase, acquire and receive from MM, and MM shall sell,
assign, transfer, convey and deliver to the KCS Purchasers, in the proportions
set forth below, all GTFM Shares held by MM, consisting of 25,500 shares of
Series "A" fixed capital stock of GTFM and 3,842,901 shares of Series "A"
variable capital stock of GTFM (collectively, the "GTFM Shares"), for the
consideration described in Section 1.2 (the "Stock Purchase Price").
Shares of GTFM Shares of GTFM
Series A fixed Series A variable
KCS capital stock capital stock
Purchasers to be purchased to be purchased
---------- --------------- -----------------
KARA Sub 12,750 1,696,201
KCS Investment 12,750 1,696,201
Caymex -0- 450,499
Total 25,500 3,842,901
(b) Immediately following execution of this Agreement by all of the
Parties, the GTFM Shares shall be deposited into an escrow account (the "Closing
Escrow") to be held in accordance with the terms and conditions of the escrow
agreement entered into as of the date of this Agreement by certain of the
Parties (the "Closing Escrow Agreement").
SECTION 1.2 STOCK PURCHASE PRICE.
(a) The Stock Purchase Price to be paid by the KCS Purchasers to MM for the
purchase of the GTFM Shares shall be paid by the delivery of: (i) at the
Closing, $200 million, in immediately available funds, by wire transfer to the
account designated by TMM by notice to the Escrow Agent (defined below), with a
copy to KCS, at least three (3) business days prior to the Closing Date (as
defined in Section 4.1), (ii) on that date which shall be determined as provided
in Section 7.13, the amount of any VAT Contingency Payment which shall then be
due under the terms and conditions in Section 7.13, and (iii) at the Closing,
promissory notes of KCS in the aggregate principal amount of $47 million in the
form set forth in Exhibit E hereto (the "Indemnity Escrow Notes").
(b) Immediately following execution of this Agreement by all of the
Parties, on behalf of the KCS Purchasers, KCS shall deposit $100 million, and
within five (5) business days after the
date of this Agreement, KCS shall deposit the additional $100 million, in the
Closing Escrow to be held in accordance with the terms and conditions of the
Closing Escrow Agreement.
(c) At the Closing, on behalf of the KCS Purchasers, KCS shall deposit the
Indemnity Escrow Notes in another escrow account (the "Indemnity Escrow") to be
held in accordance with the terms and conditions of an escrow agreement (the
"Indemnity Escrow Agreement") entered into as of the date of this Agreement by
certain of the Parties.
SECTION 1.3 INTERCOMPANY ACCOUNT SETTLEMENT.
(a) The Parties shall settle the net intercompany receivables as follows:
(A) the Parties shall calculate the amount, if any, of open accounts receivables
as of the Closing Date, or if the Closing shall not occur at the end of a month,
at the end of the month immediately preceding the month in which the Closing
occurs, (i) from TMM, TMM Logistics, S.A. de C.V. or any other Subsidiary of TMM
(other than GTFM or any of the GTFM Subsidiaries), on the one hand, to GTFM or
any of the GTFM Subsidiaries, on the other hand, and (ii) from GTFM or any of
the GTFM Subsidiaries, on the one hand, to TMM, TMM Logistics, S.A. de C.V. or
any other Subsidiary of TMM (other than GTFM or any of the GTFM Subsidiaries),
on the other hand; (B) the Parties shall calculate the absolute value of the
difference between the amount determined under clause (i) above, and the amount
determined under clause (ii), above (the "Net Receivable Amount"); and (C) such
Net Receivable Amount shall be paid to the Party with the greater amount of open
accounts receivables, within three (3) business days after the Net Receivable
Amount is finally determined as set forth in this Section 1.3.
(b) Each Party has the right to audit, upon reasonable written notice to
another Party (or Parties, in each case) (at the requesting Party's expense),
during normal business hours and at the principal office of the other Party such
other Party's records and procedures relating to the calculations required by
this Section 1.3. Such other Party shall reasonably cooperate with the
requesting Party during any such audit.
(c) Any Party may dispute another Party's computation of the Net Receivable
Amount by notice to the other Party within five (5) business days of the receipt
of the other Party's computation. In the event that any Party (i) fails to
provide any computation of the Net Receivable Amount within five (5) business
days of a written request therefor or (ii) having been furnished with the other
Party's computation, fails to provide a notice of dispute within the period set
forth above, the Party failing to provide the computation or failing to provide
such notice of dispute shall be deemed to have accepted and may not dispute the
other Party's computation for purposes of this Agreement. In the event that both
Parties provide a notice of dispute, the Parties' respective representatives
shall meet as promptly as practicable to attempt to agree on the computation of
the Net Receivable Amount. If the Parties are unable to agree within forty-five
(45) days following such meeting on the computation of the Net Receivable
Amount, then the computation of the Net Receivable Amount shall be determined by
arbitration as set forth in Section 12.11 (provided, that if the Parties agree,
they may appoint a single arbitrator for purposes of this Section 1.3).
ARTICLE 2
CAPITAL REDUCTION; SUBSIDIARY INVESTMENT
SECTION 2.1 GTFM CAPITAL REDUCTION; SUBSIDIARY INVESTMENT.
(a) GTFM shall, effective at the Closing Date, adopt the resolutions
attached as Exhibit F to effect, immediately prior to the Stock Purchase, the
capital reduction (the "Capital Reduction") under the Laws of the UMS, as
specified in such resolutions.
(b) At the Closing, (i) MM shall exchange the Subordinated Promissory Note
of GTFM, received pursuant to the Capital Reduction in the form attached hereto
as Exhibit G (the "GTFM Sub Note") for a subordinated promissory note of KCS Sub
in the principal amount equal to the principal amount of the GTFM Sub Note (the
"KCS Sub Note"), (ii) MM shall subscribe for and purchase from KCS Sub 100
shares (the "KCS Sub Shares") of KCS Sub common stock, $.01 par value per share
("KCS Sub Common Stock"), representing 10% of the issued and outstanding shares
of KCS Sub Common Stock pursuant to the terms and conditions of the Subscription
Agreement in the form attached hereto as Exhibit N (the "Subscription
Agreement"), (iii) KCS Sub shall issue, sell and transfer to MM the KCS Sub
Shares in consideration for delivery by MM to KCS Sub of the KCS Sub Note (the
transactions described in (i) through (iii) collectively, the "Subsidiary
Investment"), and (iv) the GTFM Sub Note shall be delivered to GTFM by KCS or
Subsidiaries of KCS in exchange for equity of GTFM as specified in the
resolutions attached hereto as Exhibit F.
(c) Simultaneously with the execution of this Agreement, MM and KCS Sub
shall enter into the Subscription Agreement for the purchase at the Closing by
MM of the KCS Sub Shares. Immediately following execution of this Agreement, the
Subscription Agreement, the KCS Sub Shares, the GTFM Sub Note and the KCS Sub
Note shall be deposited in the Closing Escrow, to be held in accordance with the
terms and conditions of the Closing Escrow Agreement.
ARTICLE 3
THE MERGER
SECTION 3.1 THE MERGER.
(a) Immediately following the Subsidiary Investment, KCS Sub shall be
merged with and into KCS in accordance with the General Corporation Law of the
State of Delaware ("Del. G.C.L."). KCS and KCS Sub shall cause the Merger to be
consummated by causing the Escrow Agent to file a certificate of merger in the
form attached hereto as Exhibit D (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, executed in accordance with the
relevant provisions of the Del. G.C.L. (the date and time of the filing of the
Certificate of Merger being the "Effective Time"). At the Effective Time, the
effects of the Merger shall be as provided in the Certificate of Merger and the
applicable provisions of the Del. G.C.L. As a result of the Merger, the separate
corporate existence of KCS Sub shall cease and KCS shall continue as the
surviving corporation of the Merger (the "Surviving Company").
(b) Immediately following execution of this Agreement by all of the
Parties, (i) KCS and KCS Sub shall deposit in the Closing Escrow the form of
Certificate of Merger to be executed in accordance with the Del. G.C.L., and
(ii) KCS shall deposit in the Closing Escrow the shares of KCS Common Stock to
be received by MM in the Merger, as provided in Section 4.3.
ARTICLE 4
CLOSING
SECTION 4.1 CLOSING. Unless this Agreement shall have been earlier
terminated in accordance with the terms hereof, the consummation of the
transactions contemplated by this Agreement (the "Closing") shall, subject to
the satisfaction or waiver of the conditions set forth in Article 8, take place
at the offices of Sonnenschein Nath & Rosenthal LLP, 1221 Avenue of the
Americas, 24th Floor, New York, New York, on the second (2nd) Business Day after
all of the conditions set forth in Article 8 have been satisfied or waived
(other than the conditions that relate to actions to be taken at the Closing) or
at such other date, time and place as KCS and TMM shall mutually agree in
writing (the date on which the Closing takes place, the "Closing Date"). The
closing of the Acquisition is dependent upon the closing of each of the Stock
Purchase, the Subsidiary Investment and the Merger and if any one of the Stock
Purchase, the Subsidiary Investment or the Merger shall not occur, then the
Acquisition shall not close and all shares, consideration, agreements,
instruments and other items shall be released from or retained in the Closing
Escrow as provided for in the Closing Escrow Agreement or as otherwise agreed in
writing by the Parties.
SECTION 4.2 ACTIONS AT CLOSING. At the Closing:
(a) Pursuant to the Closing Escrow Agreement, the escrow agent appointed
pursuant to the Closing Escrow Agreement (the "Escrow Agent") shall (i) deliver
to MM the Stock Purchase Price, on behalf of the KCS Purchasers, and (ii)
deliver to the KCS Purchasers, on behalf of MM, the stock certificates for the
GTFM Shares, duly endorsed and in proper form to transfer to the KCS Purchasers,
as their interests appear in Section 1.1(a), ownership of such shares free and
clear of any and all Encumbrances.
(b) Pursuant to the Closing Escrow Agreement, the Escrow Agent (i) on
behalf of MM, shall deliver to KCS Sub the GTFM Sub Note, duly endorsed for
transfer to KCS Sub free and clear of any and all Encumbrances, (ii) on behalf
of KCS Sub, shall deliver to MM the KCS Sub Note, (iii) on behalf of MM, shall
deliver to KCS Sub the KCS Sub Note, duly endorsed for transfer to KCS Sub free
and clear of any and all Encumbrances, and (iv) on behalf of KCS Sub, shall
issue and deliver to MM the KCS Sub Shares.
(c) [Omitted]
(d) Pursuant to the Closing Escrow Agreement, the Escrow Agent shall
deliver the Certificate of Merger to KCS for execution and filing with the
Secretary of State of Delaware to effect the Merger, and at the Effective Time
shall deliver to MM the shares of KCS Common Stock to which MM shall have become
entitled pursuant to Section 4.3.
(e) The Indemnity Escrow Notes shall be deposited into the Indemnity Escrow
to be held pursuant to the terms and conditions of the Indemnity Escrow
Agreement.
(f) The Parties shall deliver and receive, respectively, the officers'
certificates referred to in Section 8.2(c) and 8.3(c).
(g) To the extent in the possession of, or available to, TMM or MM, or any
of their respective Subsidiaries, Affiliates, directors, officers, employees or
representatives, TMM and MM shall, and TMM shall cause MM to, deliver to GTFM
all files and books of account, including business, financial and tax records,
of GTFM, including minute books, stock record books, the agreement relating to
the Concession and supporting exhibits and records relating thereto and work
papers. In addition, each Party shall deliver to the other Parties such other
documents, resolutions, appointments, powers of attorney and instruments of
transfer necessary or appropriate to implement this Agreement and effect the
transactions contemplated hereby and by the Ancillary Agreements, in each case
as may be reasonably requested and in form and substance reasonably acceptable
to the requesting Party.
(h) The Secretary of GTFM shall make the corresponding notation in the
Stock Registry Book of GTFM evidencing the KCS Purchasers, as their interests
appear in Section 1.1(a), as the record, legal and beneficial owners of the GTFM
Shares as of the Closing Date.
(i) All other instruments, agreements and items held in the Closing Escrow
(including the Releases, the Release Resolutions and the documents necessary for
the Dismissals) shall be delivered to the party entitled to receive the same
pursuant to the terms of the Closing Escrow Agreement and TMM shall deliver to
KCS the Legal Representation Release.
(j) Sellers shall deliver a copy of resolutions which Sellers and KCS shall
have caused to be adopted by the shareholders of GTFM and TFM, effective as of
the Closing, (i) accepting the resignations of the representatives of TMM
serving on such boards of directors, (ii) approving the financial statements of
GTFM and TFM for the year ended December 31, 2003, (iii) waiving all rights of
first refusal to, and approving, the transfer of the GTFM Shares to the KCS
Purchasers, and (iv) electing new directors of GTFM and of TFM.
(k) Each action taken at the Closing pursuant to this Agreement shall
depend on the occurrence of all actions required to be taken at the Closing
pursuant to this Agreement and no action or transaction will be deemed to have
taken place, or document delivered, or payment made, unless all actions and
transactions have been completed and all documents have been executed and
delivered; PROVIDED, that any agreements that, in accordance with their terms,
are to become effective prior to the Closing Date, shall be effective to the
extent provided therein.
Each Party shall take all action necessary to cause the Escrow Agent to take all
action required under the Closing Escrow Agreement to be taken by the Escrow
Agent on such Party's behalf.
SECTION 4.3 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any other action on the part of any Party:
(a) the KCS Sub Shares shall be converted into and exchanged for an
aggregate of 18,000,000 shares of KCS Common Stock;
(b) the shares of KCS Sub Common Stock issued and outstanding immediately
prior to the Effective Time, other than the KCS Sub Shares, shall be cancelled;
(c) each share of KCS Common Stock, KCS Preferred Stock (as defined in
Section 6.4) and New Series Preferred Stock (as defined in Section 6.4), issued
and outstanding immediately prior to the Effective Time shall remain issued and
outstanding as one share of KCS Common Stock, KCS Preferred Stock and New Series
Preferred Stock, respectively, of the Surviving Company;
(d) each share of KCS Common Stock and each share of KCS Preferred Stock
and New Series Preferred Stock that is owned by KCS immediately prior to the
Effective Time as treasury stock shall remain as one share of treasury stock of
the Surviving Company; and
(e) each option to acquire KCS Common Stock issued and outstanding
immediately prior to the Effective Time shall be adjusted as necessary to
provide that, at the Effective Time, such option shall be deemed an option to
acquire, on the same terms and conditions as were applicable under such option,
the number of shares of Common Stock of the Surviving Company equal to the
number of shares of KCS Common Stock subject to such option.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth under the applicable sections in the disclosure
schedule attached as Exhibit A to this Agreement (the "Seller Disclosure
Schedule"), TMM, TMMH and MM ("Sellers"), jointly and severally, represent and
warrant to KCS as set forth below. With respect to each such representation, it
shall be deemed qualified by matters set forth on the Seller Disclosure Schedule
under the corresponding section number, whether or not the representation or any
portion thereof refers to the Seller Disclosure Schedule by use of the phrase
"except as set forth in the Seller Disclosure Schedule" or words of similar
import.
SECTION 5.1 ORGANIZATION AND RELATED MATTERS.
(a) TMM is a SOCIEDAD ANONIMA, duly formed and validly existing under the
laws of the UMS. TMM has the corporate power and authority necessary to carry on
its business in the manner as it is now being conducted and to own, lease and
operate all of its properties and assets.
The copy of TMM's Corporate Charter and Bylaws previously provided to KCS is a
complete and correct copy of such instrument as in effect on the date hereof.
Sellers have provided KCS with an English translation of such documents.
(b) TMMH is a SOCIEDAD ANONIMA DE CAPITAL VARIABLE, duly formed and validly
existing under the laws of the UMS. TMMH has the corporate power and authority
necessary to carry on its business in the manner it is now being conducted and
to own, lease and operate all of its properties and assets. TMMH is a subsidiary
of TMM, which owns all of the issued and outstanding capital stock of TMMH,
except as set forth in Section 5.1 of the Seller Disclosure Schedule.
(c) MM is a SOCIEDAD ANONIMA DE CAPITAL VARIABLE, duly formed and validly
existing under the laws of the UMS. MM has the corporate power and authority
necessary to carry on its respective business in the manner it is now being
conducted and to own, lease and operate all of its properties and assets. MM is
a subsidiary of TMMH, which owns all of the issued and outstanding capital stock
of MM, except as set forth in Section 5.1 of the Seller Disclosure Schedule.
(d) GTFM is a SOCIEDAD ANONIMA DE CAPITAL VARIABLE, duly formed and validly
existing under the laws of the UMS, and each of the GTFM Subsidiaries is a
SOCIEDAD ANONIMA DE CAPITAL VARIABLE or other business entity duly formed,
validly existing and in good standing under the laws of the UMS. GTFM has the
corporate power and authority necessary to carry on its business in the manner
it is now being conducted and to own, lease and operate all of its properties
and assets.
(e) Each of TMM, TMMH, MM, GTFM and the GTFM Subsidiaries is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned, leased or operated by it makes such qualification or licensing
necessary, except in jurisdictions where the failure to be so licensed or
qualified would not individually or in the aggregate have a GTFM Material
Adverse Effect.
(f) The copies of the Corporate Charter and Bylaws of each of TMMH, MM,
GTFM, and of each of the GTFM Subsidiaries, delivered to KCS by TMM prior to the
execution of this Agreement are complete and correct copies of such instruments
as in effect immediately prior to the execution of this Agreement and Sellers
have provided KCS with English translations of such documents.
(g) The powers of attorney identified in Exhibit H hereto have been revoked
and replaced with new powers of attorney, identified in Exhibit I hereto,
effective as of the date of this Agreement.
SECTION 5.2 AUTHORIZED CAPITALIZATION. The authorized capital stock of GTFM
consists of (i) 25,500 shares of Series "A" fixed capital, of which 25,500
shares are held by MM, (ii) 3,842,901 shares of Series "A" variable capital, of
which 3,842,901 shares are held by MM, (iii)
24,500 shares of Series "B" fixed capital, of which 24,500 shares are held by
NAFTA Rail, S.A. de C.V., (iv) 3,692,199 shares of Series "B" variable capital,
of which 3,692,199 shares are held by NAFTA Rail, S.A. de C.V., and (v)
2,478,470 shares of Series "L-2" variable capital, of which 2,478,470 are held
by TFM. There are no other shares of capital stock of GTFM or other ownership
interests in GTFM issued, reserved for issuance or outstanding. All of the
shares of capital stock of GTFM outstanding are duly authorized, validly issued,
fully paid and nonassessable and, except as set forth in Section 5.2 of the
Seller Disclosure Schedule, free of any preemptive rights and are not subject to
any voting trust agreement (or similar agreement), or other Contract restricting
or otherwise relating to the voting, dividend rights or disposition of such
shares to which GTFM or any of the Sellers is a party or by which GTFM or any of
the Sellers is bound. Except as set forth in Section 5.2 of the Seller
Disclosure Schedule, there is no outstanding option, warrant, convertible or
exchangeable security, right, subscription, call, right of first refusal,
legally binding commitment, preemptive right or other agreement or right of any
kind to which GTFM or the Sellers are a party or are otherwise bound entitling
any Person to purchase or otherwise acquire (including by exchange or
conversion) from GTFM or any GTFM Subsidiary any shares of capital stock of
GTFM. Except as set forth in the Put Agreement (which is currently being
contested pursuant to pending legal proceedings), there are no outstanding
obligations of GTFM or any of its Subsidiaries to redeem, repurchase or
otherwise acquire any of the shares of capital stock of GTFM or any shares of
capital stock (or other ownership interests) of any of its Subsidiaries. Neither
GTFM nor any GTFM Subsidiary has outstanding any bonds, debentures, notes or
other indebtedness generally having the right to vote (or convertible into, or
exchangeable for, Securities having the right to vote) on any matters on which
holders of shares of capital stock of GTFM may consent or vote ("GTFM Voting
Debt"). There are no options, warrants, rights, convertible or exchangeable
Securities, "phantom" interests or other ownership interest appreciation rights,
commitments, Contracts, arrangements or undertakings of any kind to which GTFM
or any of the GTFM Subsidiaries is a party or by which any of them is bound (i)
obligating GTFM or any of the GTFM Subsidiaries or any other Person to issue,
deliver or sell, or cause to be issued, delivered or sold, existing or
additional shares of capital stock of GTFM or capital stock (or other ownership
interests) of any GTFM Subsidiary, or any security convertible into or
exercisable or exchangeable for any of the foregoing or for GTFM Voting Debt,
(ii) obligating GTFM or any GTFM Subsidiary or any other Person to issue, grant,
extend or enter into any such option, warrant, call, right, security commitment,
Contract, arrangement or undertaking, (iii) that give any Person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights accruing to holders of the shares of capital stock of GTFM
or capital stock (or other ownership interests) of any GTFM Subsidiary, or (iv)
that give rise to a right to receive any payment from GTFM or any GTFM
Subsidiary upon the execution of this Agreement or the consummation of the
Merger or any of the other transactions contemplated hereby, except as set forth
in Section 5.2 of the Seller Disclosure Schedule. Notwithstanding the
disclosures set forth in Section 5.2 of the Seller Disclosure Schedule or
otherwise, the shares of GTFM to be acquired by the KCS Purchasers and by KCS
Sub pursuant to this Agreement shall be acquired by the KCS Purchasers and KCS
Sub free and clear of any and all Encumbrances, except for any Encumbrances (y)
created by the KCS Purchasers or their Affiliates or (z) by operation of law
which does not involve a breach by TMM or any Affiliate of any provision of this
Agreement.
SECTION 5.3 GTFM AND GTFM SUBSIDIARIES.
(a) Section 5.3 of the Seller Disclosure Schedule lists each GTFM
Subsidiary and its jurisdiction of incorporation or organization and the
outstanding shares of capital stock and other ownership interests, if any, of
the GTFM Subsidiaries, and the record owner thereof. All of the outstanding
shares of capital stock of, or other equity interests in, each of the GTFM
Subsidiaries have been validly issued and are fully paid and nonassessable and
such shares or interests are owned directly or indirectly by GTFM free and clear
of all Encumbrances and free of any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests, except as
set forth in Section 5.3 of the Seller Disclosure Schedule. Except for the
capital stock or other ownership interests of the GTFM Subsidiaries as set forth
in Section 5.3 of the Seller Disclosure Schedule, GTFM does not beneficially own
directly or indirectly any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any Person.
(b) Neither GTFM nor any of the GTFM Subsidiaries engage in or conduct any
business other than as set forth in the GTFM Form 20-F, or as set forth in
Section 5.3 of the Seller Disclosure Schedule. Neither GTFM nor any of the GTFM
Subsidiaries has taken any action or commenced or threatened any legal
proceeding for the administration, winding-up or provisional winding-up or
dissolution of GTFM or any of the GTFM Subsidiaries or seeking to enter into any
arrangement or composition for the benefit of creditors, or for the appointment
of a receiver, administrator, administrative receiver, trustee or similar
officer of any of the properties, revenues, undertakings or assets of GTFM or
any of the GTFM Subsidiaries, nor have any orders been made for any of the
foregoing.
SECTION 5.4 AUTHORITY; NO VIOLATION.
(a) TMM, TMMH, MM and GTFM each has full corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements to which any of TMM, TMMH, MM or GTFM is
a party and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all requisite action on their
respective parts, and no other corporate action on the part of TMM, TMMH, MM or
GTFM, as the case may be, is necessary to approve this Agreement or the
Ancillary Agreements to which it is a party or to authorize or consummate the
transactions contemplated hereby or thereby, other than approvals from the
shareholders of TMM, TMMH and MM, to be obtained as provided in Section 5.5. TMM
has received the opinion of JP Morgan Securities, Inc. to the effect that the
consideration to be received in the Acquisition is fair from a financial point
of view to TMM. This Agreement and the Ancillary Agreements to which it is a
party have been duly and validly executed and delivered by TMM, TMMH, MM and
GTFM (except for those Ancillary Agreements that are not dated the date hereof,
which Ancillary Agreements shall be duly and validly executed and delivered
prior to the
Closing) and (assuming the due authorization, execution and delivery of this
Agreement and the Ancillary Agreements by the other Parties hereto and thereto)
constitute valid and binding obligations of TMM, TMMH, MM and GTFM (except for
those Ancillary Agreements that are not dated the date hereof or, by their terms
are not effective at the date hereof, which Ancillary Agreements shall
constitute valid and binding obligations of TMM, TMMH, MM and GTFM at the
Closing or the effective date thereof, as the case may be), enforceable against
TMM, TMMH, MM and GTFM in accordance with their terms, except as (i) the
enforceability thereof may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the rights
of creditors generally and the availability of equitable relief (whether in
proceedings at law or in equity), and (ii) rights to indemnification may be
limited by the Securities Laws and the policies underlying such laws.
(b) Neither the execution and delivery of this Agreement or the Ancillary
Agreements to which it is a party by TMM, TMMH, MM or GTFM nor the consummation
by TMM, TMMH, MM or GTFM of any of the transactions contemplated hereby or
thereby to be performed by them, nor compliance by TMM, TMMH, MM or GTFM with
any of the terms or provisions hereof or thereof, will (i) violate any provision
of the Charter or Bylaws of TMM, TMMH or MM or the Charter or Bylaws or
comparable organizational documents of GTFM or any GTFM Subsidiary, or (ii)
assuming that the consents and approvals referred to in Section 5.5 are duly
obtained, (x) violate, conflict with or require any notice, filing, consent,
waiver or approval under any Applicable Law to which TMM, TMMH, MM, GTFM or the
GTFM Subsidiaries or any of their respective properties, Contracts or assets are
subject, or (y) violate, conflict with, result in a breach of any provision of
or the loss of any benefit under, constitute a default (or an event which, with
or without notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate or result in a right of acceleration of the performance required by,
result in the creation of any liability under, result in the creation of any
Encumbrance other than any Permitted Encumbrance upon the properties, Contracts
or assets of TMM, TMMH, MM, GTFM or the GTFM Subsidiaries under, or require any
notice, approval, waiver or consent under, any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which TMM, TMMH, MM, GTFM or any of the GTFM Subsidiaries is a party, or by
which TMM, TMMH, MM, GTFM or any of the GTFM Subsidiaries or any of their
properties or assets may be bound or affected, except, in the case of this
clause (ii), would not have or be reasonably expected to have, individually or
in the aggregate, a GTFM Material Adverse Effect or result in an Encumbrance on
the GTFM Shares.
SECTION 5.5 CONSENTS AND APPROVALS.
(a) The affirmative vote of the holders of a majority of the outstanding
shares of Series A Shares of TMM (the "TMM Stockholder Approval"), is the only
vote of the holders of any Security of TMM necessary to approve this Agreement
and the other transactions contemplated by this Agreement and the Ancillary
Agreements. Holders of more than a majority of the outstanding shares of Series
A Shares of TMM have (i) entered into the Voting Trust with respect to 7,841,343
Series A Shares of TMM pursuant to which they have transferred such shares to an
irrevocable trust for the purpose of assuring that such shares are voted in
favor of the
TMM Stockholder Approval, and (ii) entered into the Amendment to the Trust
Agreement, with respect to 574,150 Series A Shares of TMM pursuant to which the
settlors have irrevocably instructed, and the trustee under such agreement has
irrevocably agreed, to vote the shares in favor of the TMM Stockholder Approval.
The affirmative vote of the shares subject to the Voting Trust and the Amendment
to the Trust Agreement, when it occurs, will be sufficient to constitute TMM
Stockholder Approval. The Voting Trust and Amendment to the Trust Agreement are
valid and binding obligations of the signatories thereto, enforceable in
accordance with their terms. The affirmative vote of the holders of a majority
of the outstanding shares of capital stock of TMMH (the "TMMH Stockholder
Approval") is the only vote of the holders of any Security of TMMH necessary to
approve this Agreement and the other transactions contemplated by this Agreement
and the Ancillary Agreements and the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of MM (the "MM Stockholder
Approval") is the only vote of the holders of any Security of MM necessary to
approve this Agreement and the other transactions contemplated by this Agreement
and the Ancillary Agreements (collectively, the "Subsidiary Approvals"). As a
part of the TMM Stockholder Approval, TMM, as holder owning all (but one) of the
shares of TMMH entitled to vote, will be irrevocably instructed to irrevocably
vote all such shares in favor of the TMMH Stockholder Approval. As a part of the
TMMH Stockholder Approval, TMMH, as holder of more than 91% of the shares of MM
entitled to vote, will be irrevocably instructed to irrevocably vote such shares
in favor of the MM Stockholder Approval.
(b) Except (i) as set forth in Section 5.5(a), in Section 5.5 of the Seller
Disclosure Schedule or in the Ancillary Agreements, (ii) the prior approval of
the Mexican Foreign Investments Commission, (iii) clearance by the Mexican
Antitrust Commission, (iv) notice to the Mexican Ministry of Communications and
Transportation, (v) compliance with and filings under the Securities Laws as may
be required in connection with this Agreement and the Ancillary Agreements and
the transactions contemplated hereby and thereby, (vi) any required filings with
the NYSE, (vii) the filing of the Certificate of Merger, and (viii) the
expiration or earlier termination of the waiting period under the HSR Act, no
consents or approvals of, or filings, declarations or registrations with any
Governmental Authority, any third party or any other Person are necessary on the
part of the Sellers in connection with the execution and delivery by each Seller
of this Agreement or the Ancillary Agreements to which it is a party and the
consummation by the Sellers of the Acquisition and the other transactions
contemplated by this Agreement and the Ancillary Agreements other than such
consents, approvals, filings, declarations or registrations which if not
obtained would not reasonably be expected to delay materially the Closing or
have a GTFM Material Adverse Effect. To the best of Sellers' Knowledge, no
control share, anti-takeover or similar statute under the Laws of the UMS is
applicable to the transactions contemplated hereby or by the Ancillary
Agreements.
SECTION 5.6 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Except as set
forth in Section 5.6 or Section 5.11 of the Seller Disclosure Schedule, the
audited consolidated financial statements of GTFM and its consolidated
Subsidiaries and the audited consolidated financial statements of TFM and its
consolidated subsidiaries for the period ended December 31, 2003, previously
provided to KCS (the "GTFM Financial Statements") present fairly, in all
material respects, in conformity with IFRS applied on a consistent basis (except
as may be indicated in the notes thereto), the consolidated financial position
of GTFM and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended.
The reconciliation ("Reconciliation") to U.S. GAAP from IFRS of the GTFM
Financial Statements prepared by PriceWaterhouseCoopers, provided by GTFM to
KCS, fairly presents in all material respects all adjustments necessary to
reflect the presentation of such financial statements on a U.S. GAAP basis.
Except as set forth in the GTFM Financial Statements, neither GTFM nor any of
its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by IFRS to be set forth on
a consolidated balance sheet of GTFM and the consolidated GTFM Subsidiaries or
in the notes thereto or which, individually or in the aggregate, could
reasonably be expected to have a GTFM Material Adverse Effect.
SECTION 5.7 CONTRACTS.
(a) Section 5.7 of the Seller Disclosure Schedule sets forth a complete and
accurate list or description, as of the date of this Agreement, of all
Contracts: (i) pursuant to which GTFM or any of the GTFM Subsidiaries is either
obligated to pay or entitled to receive in excess of $10 million in any year
(that is not otherwise required to be disclosed pursuant to this Section 5.7),
(ii) that are employment, management, consulting or severance agreements with
any officer or director of GTFM or any of the GTFM Subsidiaries, (iii) that
include any noncompetition or nonsolicitation covenant or any exclusive dealing
or similar arrangement that limits the ability of GTFM or any of the GTFM
Subsidiaries to compete (geographically or otherwise) in any line of business or
which would so limit the Surviving Company or any of its Subsidiaries after the
Effective Time, (iv) that are trackage rights agreements, interline or
interchange agreements with other railroads, or (v) that constitute
nondisclosure agreements or confidentiality agreements which could reasonably be
expected to have a significant effect on the conduct of the GTFM Business or the
business of the Surviving Company ((i) through (v) collectively, the "Scheduled
Contracts").
(b) As of the date of this Agreement, each of the Scheduled Contracts is a
legal, valid and binding obligation of GTFM or the GTFM Subsidiaries (assuming
the due authorization, execution and delivery by the other Parties thereto) and
is in full force and effect and enforceable in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar Laws relating to or affecting creditors generally and by
the availability of equitable remedies (whether in proceedings at law or in
equity).
(c) As of the date of this Agreement, neither GTFM nor any of the GTFM
Subsidiaries has received notice of cancellation of or default under or intent
to cancel or call a default under any of the Scheduled Contracts. Assuming
receipt of the consents and approvals set forth in Section 5.5, to the best of
the Sellers' Knowledge, nothing has occurred which with or without
notice or lapse of time or both would constitute a material breach of or a
material default under any of the Scheduled Contracts.
(d) On and after the Closing Date, GTFM, TFM and their respective
Subsidiaries shall have no liability or obligation under or with respect to any
agreement or arrangement with Jose Joaquin de Teresa y Polignac ("De Teresa") or
any of its affiliates (the "De Teresa Agreements") other than pursuant to the
ongoing litigation matters identified in Section 5.7 of the Seller Disclosure
Schedule (the "Ongoing Litigation Matters"). Since May 17, 2004 through the date
of this Agreement, (i) no amount has been paid by or on behalf of GTFM or any
GTFM Subsidiary to De Teresa other than for Ongoing Litigation Matters, and (ii)
the amounts paid or payable for the Ongoing Litigation Matters have not exceeded
the amount set forth in Section 5.7(d) of the Seller Disclosure Schedule.
SECTION 5.8 INTELLECTUAL PROPERTY RIGHTS.
(a) With respect to all Intellectual Property used in the conduct of the
GTFM Business, GTFM or a GTFM Subsidiary either has all right, title and
interest in or valid and binding rights under Contract to use such Intellectual
Property, except where the failure to have such rights would not reasonably be
expected to have a GTFM Material Adverse Effect. Except as disclosed in Section
5.8 of the Seller Disclosure Schedule or as would not reasonably be expected to
have a GTFM Material Adverse Effect, (i) all registrations with and applications
to Governmental Authorities in respect of Intellectual Property owned by GTFM or
any GTFM Subsidiary are valid and in full force and effect, (ii) there are no
material restrictions on the direct or indirect transfer of any Contract, or any
interest therein, held by GTFM or any GTFM Subsidiary in respect of such
Intellectual Property, (iii) to the Knowledge of the Sellers neither GTFM nor
any GTFM Subsidiary is in default (or with the giving of notice or lapse of time
or both, would be in default) in any material respect under any Contract to use
such Intellectual Property, and (iv) to the Knowledge of the Sellers, such
Intellectual Property owned by GTFM or any GTFM Subsidiary is not being
infringed by any other Person. Neither GTFM nor any GTFM Subsidiary has received
notice that GTFM or any GTFM Subsidiary is infringing in any material respect
any Intellectual Property of any other Person, to the Knowledge of Sellers, no
claim is pending or has been made to such effect that has not been resolved and,
to the Knowledge of the Sellers, neither GTFM nor any GTFM Subsidiary is
infringing any Intellectual Property of any other Person the effect of which,
individually or in the aggregate, could reasonably be expected to have a GTFM
Material Adverse Effect. GTFM owns and will own at the Closing, all right, title
and interest in and to that certain trademark of mixed type registered with the
Mexican Institute of Industrial Property under number 53951, class 37, in
connection with the name "TFM" and its design.
SECTION 5.9 EMPLOYEE BENEFIT MATTERS.
(a) Section 5.9 of the Seller Disclosure Schedule sets forth a true and
complete list of each material pension plan, deferred compensation plan,
retirement income plan, stock option or stock purchase plan, profit sharing
plan, bonus plan or policy, employee group insurance plan, hospitalization plan,
disability plan or other employee benefit plan, program, policy or practice,
formal or informal, funded or unfunded, to any current or former director,
officer or employee (or to any dependent or beneficiary thereof) of GTFM or any
GTFM Subsidiary under which GTFM or any GTFM Subsidiary has any present or
future material obligation or liability, whether actual or contingent. Each such
plan, agreement, program, policy and arrangement shall be referred to as a
"Benefit Plan." Each Benefit Plan is further designated in Section 5.9 of the
Seller Disclosure Schedule as either currently or formerly maintained, sponsored
or contributed to by GTFM or any GTFM Subsidiary (a "GTFM Benefit Plan") or by
any other entity (in which case such entity is identified). Neither GTFM nor any
GTFM Subsidiary, nor to the Knowledge of Sellers, any other Person, has any
express or implied commitment, whether legally enforceable or not, to modify,
change or terminate any GTFM Benefit Plan, other than with respect to a
modification, change or termination required by Applicable Law.
(b) With respect to each Benefit Plan, GTFM has delivered or made available
to KCS true, current, correct and complete copies of (i) each Benefit Plan (or,
if not written, a written summary of its material terms), including all plan
documents, adoption agreements, trust agreements, insurance Contracts or other
funding vehicles and all amendments thereto, (ii) any summaries and summary plan
descriptions, including any summary of material modifications, distributed to
Benefit Plan participants, (iii) the most recent actuarial report or other
financial statement relating to such Benefit Plan, as applicable, and (iv) all
filings made with any Governmental Authorities with respect to any Benefit Plan.
(c) Each Benefit Plan has been administered in material compliance with its
terms and all Applicable Laws and material contributions required to be made
under the terms of any of the Benefit Plans as of the date of this Agreement
have been timely made or, if not yet due, have been properly reflected in the
GTFM Financial Statements. With respect to the Benefit Plans, no event has
occurred and there exists no condition or set of circumstances in connection
with which GTFM could be subject to any material liability (other than for
liabilities to pay benefits) under the terms of, or with respect to, such
Benefit Plans, or any Applicable Law.
(d) Except as disclosed in Section 5.9 of the Seller Disclosure Schedule:
(i) there has been no prohibited transaction (within the meaning of Applicable
Law) with respect to any Benefit Plan that could result in material liability to
GTFM or the Surviving Company, (ii) subject to compliance with Applicable Law,
each Benefit Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without material liability (other
than liability for ordinary administrative expenses typically incurred in a
termination event), (iii) no suit, administrative proceeding, action or other
litigation has been brought or, to the Knowledge of Sellers, is threatened,
against or with respect to any such Benefit Plan, including any audit or inquiry
by any Governmental Authority, (iv) all tax, annual reporting and other
governmental filings required have been timely filed with the appropriate
Governmental Authority and all notices and disclosures have been timely provided
to participants, and (v) each Benefit Plan meets the requirement for
deductibility under the Law and regulations of the UMS.
(e) No Benefit Plan exists, and no other payment shall be made that, as a
result of the execution of this Agreement or the transactions contemplated by
this Agreement (whether alone or in connection with a subsequent event), could
result in the payment to any employee of the GTFM Group of any money or other
property or could result in the increase, acceleration or provision of any
payments, other rights or benefits to any such employee.
SECTION 5.10 LABOR AND OTHER EMPLOYMENT MATTERS.
(a) Sellers have delivered to KCS a complete and accurate list (giving name
and current payroll compensation) of each current employee of each company in
the GTFM Group as of the date of this Agreement. Except as set forth in Section
5.10 of the Seller Disclosure Schedule, none of the members of the GTFM Group
has any responsibility or liability to any of its employees for any delinquent
payments of wages, salaries, commissions, bonuses or other direct compensation
for any services performed for it or amounts required to be reimbursed to such
employee or paid to such employee for mandatory profit sharing, housing,
mandatory retirement benefits, vacation benefits or social security benefits
required under the Laws of the UMS in an amount that would have a GTFM Material
Adverse Effect.
(b) Except as set forth in Section 5.10 of the Seller Disclosure Schedule
or as would not reasonably be expected to have a GTFM Material Adverse Effect,
each of the members of the GTFM Group (i) are in compliance in all material
respects with all Applicable Law respecting labor, employment, immigration, fair
employment practices, terms and conditions of employment, workers' compensation,
occupational safety, plant closings, wages and hours and any other Law
applicable to any of their employees, and (ii) has withheld all amounts required
by Applicable Law or by agreement to be withheld from the wages, salaries, and
other payments to employees, and (iii) is not liable for any arrears of wages or
any Taxes or any penalty for failure to comply with any of the foregoing.
(c) Except as set forth in Section 5.10 of the Seller Disclosure Schedule
or, with respect to notices received after the date hereof by TMM or any TMM
Subsidiaries, disclosed in writing to KCS prior to the Closing, no current
officer of any member of the GTFM Group has given written notice to TMM or any
TMM Subsidiary of such person's termination of employment with the GTFM Group.
(d) Except as described in Section 5.10 of the Seller Disclosure Schedule,
the Mexican Railway Workers Union (EL SINDICATO DE TRABAJADORES FERROCARRILEROS
DE LA REPUBLICA MEXICANA) is the only trade union or labor union representing
any employees of GTFM or any GTFM Subsidiary. Sellers have provided to KCS a
true and complete copy of the collective bargaining agreement and any amendments
thereof. Neither GTFM nor any of the GTFM Subsidiaries is a party, or is
otherwise subject, to any other collective bargaining agreement or other labor
union contract applicable to its employees. There are no material activities or
proceedings by a labor union or representative thereof to organize any employees
of GTFM or any of the GTFM Subsidiaries. Except as set forth in Section 5.10 of
the Seller Disclosure Schedule, there are no pending negotiations between GTFM
or any of the GTFM Subsidiaries
and any labor union or representative thereof regarding any proposed material
changes to any existing collective bargaining agreement and no such collective
bargaining agreement is subject to expiration or renewal within one year after
the date hereof or the extension or renewal of such an agreement or the entering
of any such agreement. Except as set forth in Section 5.10 of the Seller
Disclosure Schedule, there are no pending, and none of GTFM or any of the GTFM
Subsidiaries has experienced since March 31, 2004 any, material labor disputes,
lockouts, strikes, slowdowns, work stoppages, or threats thereof nor, to the
Knowledge of Sellers, has any event occurred or does any circumstance exist that
would provide a reasonable basis for any such dispute, lockout, strike,
slowdown, work stoppage or threat thereof. Except as set forth in Section 5.10
of the Seller Disclosure Schedule, GTFM and the GTFM Subsidiaries are not in
default and have not breached in any material respect the terms of any
applicable collective bargaining or other labor union contract, and there are no
material claims or grievances outstanding against GTFM, any of the GTFM
Subsidiaries, or any of their respective employees under any such agreement or
contract.
(e) Except as specified in Section 5.10 of the Seller Disclosure Schedule,
(i) there are no claims, disputes or actions pending, or to the Knowledge of
Sellers threatened, between GTFM or any of the GTFM Subsidiaries, on the one
hand, and any of their employees, on the other hand, and (ii) to the Knowledge
of Sellers, there are no facts or circumstances involving any employee that
would form the basis of, or give rise to, any cause of action, including
unlawful termination based on discrimination of any kind, except in case of such
clause (i) or (ii) as would not reasonably be expected to have, individually or
in the aggregate, a GTFM Material Adverse Effect.
SECTION 5.11 TAX MATTERS.
(a) Except as set forth in Section 5.11 of the Seller Disclosure Schedule
or as would not have a GTFM Material Adverse Effect, all Tax Returns and reports
of GTFM and the GTFM Subsidiaries required to be filed on or before the Closing
Date have been duly and timely filed (taking into account all proper extensions)
with the appropriate Taxing Authorities and all such Tax Returns were complete,
correct and accurate. All Taxes shown on such Tax Returns as owed by GTFM or the
GTFM Subsidiaries have been paid.
(b) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
neither GTFM nor any of the GTFM Subsidiaries has received any written notice of
deficiency or assessment from any Taxing Authority with respect to material
liabilities for Taxes of GTFM or any of the GTFM Subsidiaries which have not
been paid or finally settled. No claim has ever been made in writing by an
authority in a jurisdiction where GTFM or any of the GTFM Subsidiaries do not
file Tax Returns that such entity is or may be subject to taxation by that
jurisdiction. Except as set forth in Section 5.11 of the Seller Disclosure
Schedule, no audit of any Tax Return concerning GTFM or any of the GTFM
Subsidiaries is pending, being conducted, or to the Knowledge of Sellers,
threatened to be instituted by a Taxing Authority. Except as set forth in
Section 5.11 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM
Subsidiaries has in effect a waiver of any statute of limitation in respect of
Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency that will be in effect as
of the Closing Date.
(c) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
there are no liens for Taxes on any assets of GTFM or any of the GTFM
Subsidiaries other than liens for current Taxes (i) not yet due and payable, or
(ii) that would not have a GTFM Material Adverse Effect.
(d) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
neither GTFM nor any of the GTFM Subsidiaries has any liability for the Taxes of
any other Person as a transferee or successor, by Contract, for withholding or
otherwise.
(e) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
there are no Tax sharing or Tax indemnity agreements or similar arrangements
with respect to or involving GTFM or any of the GTFM Subsidiaries, other than
agreements among GTFM and the GTFM Subsidiaries in which GTFM owns directly or
indirectly all equity interest.
(f) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
each of GTFM and the GTFM Subsidiaries has complied in all material respects
with all applicable governmental rules relating to the payment, collection and
withholding of Taxes.
(g) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
there is no Tax litigation pending or to the Knowledge of Sellers threatened
against GTFM and/or the GTFM Subsidiaries.
(h) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
neither GTFM nor any of the GTFM Subsidiaries will suffer any adverse tax
consequences under the Laws of the UMS from ceasing, as a result of the
Acquisition, to be members of the TMM consolidated group.
(i) Except as set forth in Section 5.11 of the Seller Disclosure Schedule,
during the period from the date of the GTFM Financial Statements until the date
of this Agreement, GTFM and each of the GTFM Subsidiaries (i) have made no
change in any accounting method used for Tax purposes or in depreciation or
amortization policies, and have made no election for Tax purposes which is not
consistent with the method, policies and elections made prior to the date of the
GTFM Financial Statements, and (ii) have not settled any pending Tax audits or
settled any Tax liability.
(j) The net operating loss carry forwards of GTFM and the GTFM Subsidiaries
shown on the most recent Tax Returns for GTFM and the GTFM Subsidiaries are not
subject to reduction as a result of consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements (other than any
reduction in connection with the Final Resolution of the VAT Claim and Put).
SECTION 5.12 LEGAL PROCEEDINGS. Except (i) as set forth in Section 5.12 of
the Seller Disclosure Schedule, and (ii) for actions brought or threatened to be
brought by or on behalf of KCS and its Affiliates or their respective officers,
directors, employees or agents, including persons named by them as directors or
alternate directors of GTFM or any GTFM Subsidiary, there are no legal,
administrative, arbitral or other proceedings (including disciplinary
proceedings), claims, suits, actions or governmental or regulatory
investigations of any nature whether in the UMS or elsewhere (collectively,
"Proceedings") that are pending or, to the Knowledge of Sellers, threatened
against GTFM or any of the GTFM Subsidiaries or any of their respective
directors or officers (in their capacities as such) or the GTFM Assets or the
GTFM Business, which if determined adversely would have a GTFM Material Adverse
Effect, or that challenge the validity or propriety of the transactions
contemplated by this Agreement or by any of the Ancillary Agreements. The
Proceedings set forth in Section 5.10 of the Seller Disclosure Schedule under
the heading "List of Direct Lawsuits Against GTFM By Former TFM Employees" are
not reasonably expected to have a GTFM Material Adverse Effect. There is no
injunction, order, judgment or decree imposed upon GTFM or any of the GTFM
Subsidiaries, any material portion of the GTFM Assets or the GTFM Business.
Section 5.12 of the Seller Disclosure Schedule sets forth a complete and
accurate list of all Proceedings which any of Sellers, any of Sellers'
Subsidiaries, or to the Knowledge of Sellers, any of Sellers', or their
Subsidiaries', respective officers, directors, agents or representatives,
including persons named by TMM as directors or alternate directors of GTFM or
any GTFM Subsidiary, have filed or caused to be filed against KCS, any KCS
Subsidiary or any of their respective officers, directors or stockholders, in
their capacity as such.
SECTION 5.13 PERMITS AND COMPLIANCE.
(a) Except as set forth in Section 5.13 of the Seller Disclosure Schedule,
GTFM and each of the GTFM Subsidiaries hold all licenses, franchises,
concessions, decrees, permits and authorizations required under Applicable Law
(collectively, "Permits") to operate the GTFM Business as currently conducted
where the failure to hold such Permits would reasonably be expected to have a
GTFM Material Adverse Effect. Each of GTFM and the GTFM Subsidiaries (i) holds,
and at all times has held, and at Closing will hold, all Permits for the lawful
ownership, operation and use of the GTFM Assets and the conduct of the GTFM
Business, (ii) has been and is in compliance with each such Permit, and (iii)
has not received notice asserting any violation of any such Permit, in each
case, where the failure to hold or comply or such violation would reasonably be
expected to have a GTFM Material Adverse Effect.
(b) Except (i) as set forth in Section 5.13 of the Seller Disclosure
Schedule, (ii) for normal examinations conducted by any Governmental Authority
in the regular course of the business of GTFM and the GTFM Subsidiaries, or
(iii) as would not reasonably be expected to have a GTFM Material Adverse
Effect, since December 31, 2003, no Governmental Authority has provided written
notice to GTFM or any of the GTFM Subsidiaries of any threatened proceeding or
investigation into the business or operations of GTFM or any of the GTFM
Subsidiaries or any of their members, officers, directors or employees in their
capacity as such with GTFM or any of the GTFM Subsidiaries and, to the Knowledge
of the Sellers, no such
proceedings or investigations are contemplated. Except as set forth in Section
5.13 of the Seller Disclosure Schedule, there is no unresolved deficiency,
violation or exception claimed or asserted by any Governmental Authority with
respect to any examination of GTFM or any of the GTFM Subsidiaries.
(c) Except as set forth in Section 5.13 of the Seller Disclosure Schedule,
neither GTFM nor any of the GTFM Subsidiaries is in violation of any Applicable
Laws or orders of any Governmental Authority except as would not reasonably be
expected to have a GTFM Material Adverse Effect. No event has occurred or exists
that would (with or without notice or lapse of time) give rise to any obligation
on the part of GTFM or any of the GTFM Subsidiaries to undertake or to bear all
or any portion of the cost of any remedial action of any nature which would
reasonably be expected to have a GTFM Material Adverse Effect.
(d) Without limiting the generality of the foregoing, to the Knowledge of
Sellers no basis exists for revocation, material modification or termination
prior to the expiration, of the Concession, except as set forth in Section 5.13
of the Seller Disclosure Schedule.
SECTION 5.14 ENVIRONMENTAL MATTERS. Except as set forth in Section 5.14 of
the Seller Disclosure Schedule, GTFM and each of the GTFM Subsidiaries (i) are
in compliance with, and are not subject to any liability under, in each case
with respect to all, applicable Environmental Laws, (ii) hold all Environmental
Permits necessary to conduct their current operations, and (iii) are in
compliance with their respective Environmental Permits, except where the failure
to hold or be in compliance with such Environmental Permits would not be
expected to have a GTFM Material Adverse Effect. Except as set forth in Section
5.14 of the Seller Disclosure Schedule, or as would not reasonably be expected
to have a GTFM Material Adverse Effect, neither GTFM nor any of the GTFM
Subsidiaries has received any written notice, demand, letter, claim or request
for information alleging that GTFM or any of the GTFM Subsidiaries may be in
violation of, or liable under, any Environmental Law. Except as set forth in
Section 5.14 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM
Subsidiaries (x) has entered into or agreed to any consent decree or order or is
subject to any judgment, decree or judicial order relating to compliance with
Environmental Laws, Environmental Permits or the investigation, sampling,
monitoring, treatment, remediation, removal or cleanup of Hazardous Materials
and no investigation, litigation or other proceeding is pending or, to the
Knowledge of the Sellers, threatened, with respect thereto, or (y) is an
indemnitor or has assumed liability in connection with any pending demand,
notice, claim, or other allegation, or to the Knowledge of the Sellers, any
claim threatened, by or against any third-party relating to any liability under
any Environmental Law or relating to any Hazardous Materials. Except as set
forth in Section 5.14 of the Seller Disclosure Schedule, none of the real
property owned or leased or operated by GTFM or any of the GTFM Subsidiaries is
listed or, to the Knowledge of the Sellers, proposed for listing on any list of
sites maintained by any Governmental Authority requiring investigation or
cleanup.
SECTION 5.15 PROPERTIES. Section 5.15 of the Seller Disclosure Schedule
sets forth a true and complete list of all real property and interests in real
property owned or leased by GTFM or any of the GTFM Subsidiaries and a summary
of the lease agreements with respect thereto (true and correct copies of which
leases have been provided to KCS) and a true and complete list of all personal
property, equipment and fixtures (other than items having a book value of less
than $1 million individually) owned by GTFM or any of the GTFM Subsidiaries, all
of which personal property, equipment and fixtures are in good condition and
repair, normal wear and tear excepted. Each of GTFM and the GTFM Subsidiaries
has good and marketable title to, or valid and enforceable leasehold or
concession interests in, all of its properties and tangible assets necessary to
conduct the GTFM Business as currently conducted except where the failure to
have such title or interest would not reasonably be expected to have a GTFM
Material Adverse Effect. All such property and assets which constitute personal
property, equipment, and fixtures, are in good condition and repair, normal wear
and tear excepted. Except as set forth in Section 5.15 of the Seller Disclosure
Schedule, all of such assets and properties, other than assets and properties in
which GTFM or any of the GTFM Subsidiaries has a leasehold interest, are free
and clear of all Encumbrances other than Permitted Encumbrances and Encumbrances
which would not individually or in the aggregate reasonably be expected to have
a GTFM Material Adverse Effect. Each of GTFM and the GTFM Subsidiaries has
complied in all material respects with the terms of all leases and concessions
(including the Concession) to which it is a party and under which it is in
occupancy, and all such leases and concessions (including the Concession) are in
full force and effect.
SECTION 5.16 INSURANCE. Section 5.16 of the Seller Disclosure Schedule
includes a list of all policies of fire, liability, product liability, workers'
compensation, health and other forms of insurance in effect as of the date of
this Agreement with respect to the GTFM Business (the "GTFM Insurance
Policies"), including the named insured(s) and all beneficiaries thereunder, and
true and complete copies of the GTFM Insurance Policies have been delivered to
KCS. Neither GTFM, nor any of the GTFM Subsidiaries has been refused any
insurance with respect to any aspect of the operations of its business, nor has
its coverage been rescinded by any insurance carrier to which it has applied for
insurance or with which it has carried insurance. No notice of cancellation or
termination has been received with respect to any such policy. The activities
and operations of GTFM and each of the GTFM Subsidiaries have been conducted in
a manner so as to conform in all material respects to all material provisions of
the GTFM Insurance Policies.
SECTION 5.17 NO OTHER BROKER. Other than J.P. Morgan Chase and Elek,
Moreno-Valle y Asociados, S.A. de C.V. ("EMVA"), the fees and expenses of which
have been or will be paid by TMM, no broker, finder or similar intermediary is
entitled to any broker's, finder's or similar fee or other remuneration from or
as a result of engagement by Sellers or any of their respective Affiliates in
connection with this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby.
SECTION 5.18 NO GTFM MATERIAL ADVERSE EFFECT. Since December 31, 2003, (i)
GTFM and the GTFM Subsidiaries have conducted their respective businesses only
in the ordinary course, consistent with past practice, except as set forth in
Section 5.18 of the Seller Disclosure Schedule, and (ii) there has not been (x)
any GTFM Material Adverse Effect or any event or development that could,
individually or in the aggregate, reasonably be expected to have a GTFM Material
Adverse Effect, or (y) to the Knowledge of Sellers, any event or development
that would, individually or in the aggregate, reasonably be expected to
materially delay or prevent the consummation of, or the performance by Sellers
or any of their respective Affiliates, of any of their obligations under, this
Agreement or any of the Ancillary Agreements, to which any Seller is a party.
SECTION 5.19 SUFFICIENCY OF AND TITLE TO ASSETS. GTFM and each of the GTFM
Subsidiaries owns or licenses, and upon the consummation of the Merger, the
Surviving Company and its Subsidiaries will own or license, all right, title and
interest in and to all of the properties, assets, Contracts and rights of any
kind, whether tangible or intangible, real or personal (including the
Concession), necessary to enable GTFM, the GTFM Subsidiaries (prior to the
Closing) and the Surviving Company (after the Closing) to conduct the GTFM
Business as presently conducted (the "GTFM Assets"), free and clear of any
Encumbrances other than Permitted Encumbrances, except as set forth in Section
5.19 of the Seller Disclosure Schedule.
SECTION 5.20 INFORMATION IN FILED DOCUMENTS. None of the information
regarding any of TMM, TMMH, MM, GTFM or any of the GTFM Subsidiaries supplied or
to be supplied by Sellers in writing prior to the Closing expressly for
inclusion or incorporation by reference in any documents to be filed with any
Governmental Authority prior to the Closing in connection with the transactions
contemplated hereby, including the proxy materials to be filed with the SEC by
KCS in connection with the Merger, will, at the respective times such
information is supplied, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 5.21 AFFILIATE AGREEMENTS. Section 5.21 of the Seller Disclosure
Schedule sets forth a complete and accurate list or description, as of the date
of this Agreement, of all Contracts, understandings and arrangements between
GTFM or any GTFM Subsidiary, on the one hand, and TMM or any TMM Affiliate
(other than GTFM and its Subsidiaries), on the other hand (the "Affiliate
Agreements") (other than this Agreement, the Ancillary Agreements and the other
Agreements contemplated herein and therein to be entered into in connection with
the transactions contemplated hereby and thereby) and identifying those: (i)
Affiliate Agreements which shall continue in effect in accordance with their
terms after the Closing Date (the "Continuing Affiliate Agreements"), and (ii)
Affiliate Agreements which shall be terminated as of the Closing Date (in each
case without penalty or obligation to GTFM or any GTFM
Subsidiary). With respect to the Affiliate Agreements, other than the Continuing
Affiliate Agreements, (w) KCS or a KCS Affiliate shall be entitled to terminate
any or all of those agreements after ninety (90) days following the Closing Date
at its sole discretion upon sixty (60) days notice and without liability or
further obligation thereunder, (x) TFM and its Affiliates after the Closing Date
shall be liable under those agreements only for the contracted basic charge for
services and not for any other charges, expenses, costs, interest, or penalties,
and (y) neither TFM, nor any entity which is after the Closing Date an Affiliate
of TFM, shall be responsible for any charges, payments, expenses, or other costs
incurred under those agreements prior to May 17, 2004.
SECTION 5.22 NO LOSS OF SIGNIFICANT CUSTOMERS. From January 1, 2004 through
the Business Day immediately preceding the date of this Agreement, neither GTFM
nor any of the GTFM Subsidiaries has had any customer which has canceled,
terminated or failed to renew, or threatened in writing to do so, any Contract
with such entity which accounted for more than $10 million in revenues to such
entity in the year ended December 31, 2003.
SECTION 5.23 TRADING IN AND OWNERSHIP OF KCS COMMON STOCK. None of Sellers
or any of their respective Affiliates has, during the sixty (60) Business Days
prior to the date hereof, either directly or indirectly, bought or sold, or
otherwise effected any trade in any shares of KCS Common Stock, or any Security
derivative of KCS Common Stock and none of Sellers or any of their respective
Affiliates, own as of the date of this Agreement any shares of KCS Common Stock
or any security derivative of KCS Common Stock.
SECTION 5.24 SOLVENCY. No insolvency or bankruptcy proceedings against TMM
or any of its Subsidiaries are pending as of the last Business Day preceding the
date of this Agreement.
SECTION 5.25 TERMINATION OF OPTION AGREEMENT. The Amended and Restated
Option Agreement between MM and The Bank of New York, as Trustee, dated October
25, 2002, as amended (the "Option Agreement"), entered into in connection with
the Logistics Trust 2000-A (the "Trust") formed pursuant to the Second Amended
and Restated Master Trust Agreement, dated as of December 10, 2002 (the "Master
Trust Agreement"), between TMM and The Bank of New York, as Trustee, has been
terminated, and the Master Trust Agreement and the Transaction Documents (as
defined in the Master Trust Agreement) have been amended, so that as of the date
of this Agreement and the Closing Date (i) there is and shall be no outstanding
option, warrant, right, subscription, call, legally binding commitment or other
agreement or right of any kind entitling any Person (including The Bank of New
York, as Trustee of the Trust) to acquire, or any other Encumbrance arising
under such agreements on, any shares of capital stock of GTFM, (ii) the
provision in Section 6.4 of the Option Agreement requiring a written agreement
to be bound by the terms of the Option Agreement and related agreements does not
and shall not apply to the purchase of the GTFM
Shares under this Agreement, and (iii) the purchase of the GTFM Shares hereunder
will be effective without KCS or any Subsidiary of KCS entering into any
agreement to be bound by the terms of the Option Agreement and related
agreements. MM has caused each legend affixed to any stock certificates
evidencing GTFM Shares pursuant to the Option Agreement to be cancelled or
removed, and MM has caused any annotation that was required by the Option
Agreement to be placed in the Stock Registry Book of GTFM to be cancelled or
removed. The Amended and Restated Put Option Agreement between MM and The Bank
of New York, as Trustee, dated October 25, 2002, as amended, entered into in
connection with the Trust has been terminated, and the Master Trust Agreement
and the Transaction Documents (as defined in the Master Trust Agreement) have
been amended so that as of the date of this Agreement and the Closing Date there
is and shall be no obligation of KCS, the KCS Purchasers or any of their
Affiliates to purchase or otherwise acquire any certificate or other interest in
or related to the Trust.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF KCS
Except as set forth in the disclosure schedule attached as Exhibit B to
this Agreement (the "KCS Disclosure Schedule"), KCS hereby represents and
warrants to each of the Sellers as follows:
SECTION 6.1 ORGANIZATION AND RELATED MATTERS.
(a) KCS is a corporation, duly formed, validly existing and in good
standing under the laws of the State of Delaware, and each of its Subsidiaries
is a corporation or other business entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization. KCS has the
corporate power and authority and each of its Subsidiaries has the corporate or
other applicable power and authority necessary to carry on their respective
businesses in the manner they are now being conducted and to own, lease and
operate all of their respective properties and assets.
(b) KCS and each of its respective Subsidiaries is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned, leased or operated by it makes such qualification or licensing
necessary, except in jurisdictions where the failure of such license or
qualification would not individually or in the aggregate have a KCS Material
Adverse Effect.
SECTION 6.2 AUTHORITY; NO VIOLATION.
(a) Each of KCS, KARA Sub, KCS Sub, KCS Investment and Caymex has full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
requisite
corporate action on the part of KCS, KARA Sub, KCS Sub, KCS Investment and
Caymex and no other corporate action on any of their parts is necessary to
approve this Agreement or the Ancillary Agreements to which it is a party or
authorize or consummate the transactions contemplated hereby and thereby, except
for obtaining the KCS Stockholder Approval as described in Section 6.3. KCS or
its Affiliates have taken all actions required to be taken on their part to
approve the execution, delivery and performance by GTFM of this Agreement and
any Ancillary Agreements to which GTFM is a Party. KCS has received the opinion
of Morgan Stanley & Co., Incorporated, to the effect that the Acquisition is
fair from a financial point of view to KCS. This Agreement and the Ancillary
Agreements to which it is a party have been duly and validly executed and
delivered by KCS, KARA Sub, KCS Sub, KCS Investment and Caymex (except for those
Ancillary Agreements that are not dated the date hereof, which Ancillary
Agreements shall be duly and validly executed and delivered prior to the
Closing) and (assuming the due authorization, execution and delivery of this
Agreement and the Ancillary Agreements by the other Parties hereto and thereto)
constitute valid and binding obligations of KCS, KARA Sub, KCS Sub, KCS
Investment and Caymex (except for those Ancillary Agreements that are not dated
the date hereof, which Ancillary Agreements shall constitute valid and binding
obligations of KCS, KARA Sub, KCS Sub, KCS Investment and Caymex at the
Closing), enforceable against each of them in accordance with their terms,
except as (i) the enforceability thereof may be subject to or limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting the rights of creditors generally and the availability of equitable
relief (whether in proceedings at law or in equity), and (ii) rights to
indemnification may be limited by the Securities Laws and the policies
underlying such laws.
(b) Neither the execution and delivery of this Agreement or the Ancillary
Agreements to which it is a party by KCS, KARA Sub, KCS Sub, KCS Investment and
Caymex nor the consummation by them of the transactions contemplated hereby or
thereby to be performed by them, nor compliance by them with any of the terms or
provisions hereof or thereof, will (i) violate any provision of their respective
Certificates of Incorporation or Bylaws, (ii) assuming that the consents and
approvals referred to in Section 6.3 are duly obtained, (x) violate, conflict
with or require any notice, filing, consent or approval under any Applicable Law
to which KCS or any of its Subsidiaries or any of its properties, contracts or
assets are subject, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with or without notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of termination or
cancellation under, accelerate or result in a right of acceleration of the
performance required by, result in the creation of any liability under, result
in the creation of any Encumbrance upon the properties, contracts or assets of
KCS, KARA Sub, KCS Sub, KCS Investment or Caymex under, or require any notice,
approval or consent under, any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which KCS or any
of its Subsidiaries is a party, or by which KCS or any of its Subsidiaries, or
any of its properties or assets, may be bound or affected except in the case of
this clause (ii) in each case as would not have or reasonably be expected to
have a KCS Material Adverse Effect.
(c) The shares of KCS Common Stock to be issued pursuant to this Agreement
have been duly authorized and, when issued as contemplated by this Agreement
will be duly and validly issued, fully paid and non-assessable and free of any
pre-emptive rights (except those provided in the Stockholders' Agreement) and
entitled to the benefits and rights set forth in the Certificate of
Incorporation of KCS, as in effect at the Effective Time.
SECTION 6.3 CONSENTS AND APPROVALS.
(a) The affirmative vote of the holders of a majority of the votes cast by
the holders of all outstanding shares of KCS Common Stock and KCS Preferred
Stock, voting together as a single class, to approve the issuance of the Common
Stock in accordance with the Del. G.C.L. and the rules of the NYSE (the "KCS
Stockholder Approval"), is the only vote of the holders of any Security of KCS
necessary to approve this Agreement and the other transactions contemplated by
this Agreement and the Ancillary Agreements.
(b) Except (i) as set forth in Section 6.3(a), (ii) the prior approval of
the Mexican Foreign Investments Commission, (iii) clearance by the Mexican
Competition Commission, (iv) notice to the Mexican Ministry of Communications
and Transportation, (v) compliance with and filings under the Securities Laws as
may be required in connection with this Agreement and the Ancillary Agreements
and the transactions contemplated hereby and thereby, (vi) any required filings
with the NYSE, (vii) the filing of the Certificate of Merger, and (viii) the
expiration or earlier termination of the waiting period under the HSR Act, no
consents or approvals of, or filings, declarations or registrations with any
Governmental Authority, any third party or any other Person are necessary in
connection with the execution and delivery by KCS of this Agreement and the
Ancillary Agreements to which it is a party and the consummation by KCS of the
Acquisition or the other transactions contemplated by this Agreement and the
Ancillary Agreements.
(c) The Board of Directors of KCS (the "KCS Board") has approved this
Agreement, the Ancillary Agreements, and the Acquisition contemplated herein,
including the issuance of more than 15% of the outstanding voting stock of KCS
pursuant to the Acquisition, to ensure that the restrictions on business
combinations set forth in Section 203 of the Del. G.C.L. will not apply to the
Acquisition or to the consummation of the other transactions referred to in this
Agreement and the Ancillary Agreements (including the exercise of pre-emptive
rights under and in accordance with the terms of the Stockholders' Agreement).
Prior to Closing, KCS shall take all corporate action necessary to amend the KCS
Stockholder Rights Plan so that the acquisition of the KCS Common Stock pursuant
to this Agreement and the Ancillary Agreements and the transactions contemplated
by this Agreement and the Ancillary Agreements will not constitute a "trigger
event" under the KCS Stockholder Rights Plan. To the best of KCS's Knowledge,
except for Section 203 of the Del. G.C.L., no control share, anti-takeover or
similar statute under the laws of any state in the United States is applicable
to the acquisition of KCS Common Stock contemplated hereby and by the Ancillary
Agreements.
SECTION 6.4 AUTHORIZED CAPITALIZATION. The authorized capital stock of KCS
consists of 400,000,000 shares of Common Stock, $.01 par value per share,
840,000 shares of Preferred Stock, $25 par value per share ("KCS Preferred
Stock") and 2,000,000 shares of New Series Preferred Stock, $1.00 par value per
share ("New Series Preferred Stock"). As of March 31, 2004, there were (i)
62,641,294 shares of KCS Common Stock, 242,170 shares of KCS Preferred Stock and
400,000 shares of 4.25% Redeemable Cumulative Convertible Perpetual Preferred
Stock, Series C, issued and outstanding, (ii) 4,730,485 shares of KCS Common
Stock reserved for issuance pursuant to options granted pursuant to the KCS
Stock Option Plan, and (iii) 13,389,120 shares of KCS Common Stock reserved for
issuance upon conversion of the 4.25% Redeemable Cumulative Convertible
Perpetual Preferred Stock, Series C. All of the shares of KCS Common Stock and
KCS Preferred Stock outstanding at the date of this Agreement are listed for
trading on the NYSE. All of the shares of capital stock of KCS outstanding are
duly authorized, validly issued, fully paid, nonassessable and free of any
preemptive rights and are not subject to any voting trust agreement (or similar
agreement) or other Contract restricting or otherwise relating to the voting,
dividend rights or disposition of such shares to which KCS is a party, except
for restricted share agreements between KCS and certain of its officers and
limited stock appreciation rights. Except as set forth in this Agreement, there
is no outstanding option, warrant, convertible or exchangeable security, right,
subscription, call, right of first refusal, legally binding commitment,
preemptive right or other agreement or right of any kind to purchase or
otherwise acquire (including by exchange or conversion) from KCS or any KCS
Subsidiary any shares of capital stock of KCS. There are no outstanding
obligations of KCS or any of its Subsidiaries to redeem, repurchase or otherwise
acquire any of the shares of capital stock of KCS or any shares of capital stock
(or other ownership interests) of any of its Subsidiaries. Neither KCS nor any
KCS Subsidiary has outstanding any bonds, debentures, notes or other
indebtedness generally having the right to vote (or convertible into, or
exchangeable for, Securities having the right to vote) on any matters on which
holders of shares of capital stock of KCS may consent or vote ("KCS Voting
Debt"). There are no options, warrants, rights, convertible or exchangeable
Securities, "phantom" interests or other ownership interest appreciation rights,
commitments, contracts, arrangements or undertakings of any kind to which KCS or
any of its Subsidiaries is a party or by which any of them is bound, except for
this Agreement, (i) obligating KCS or any of its Subsidiaries or any other
Person to issue, deliver or sell, or cause to be issued, delivered or sold,
existing or additional shares of capital stock of KCS or capital stock (or other
ownership interests) of its Subsidiaries, or any security convertible into or
exercisable or exchangeable for any of the foregoing or for KCS Voting Debt,
(ii) obligating KCS or any of its Subsidiaries or any other Person to issue,
grant, extend or enter into any such option, warrant, call, right, security
commitment, contract, arrangement or undertaking, (iii) that give any Person the
right to receive any economic benefit or right similar to or derived from the
economic benefits and rights accruing to holders of the shares of capital stock
of KCS or capital stock (or other ownership interests) of its Subsidiaries, or
(iv) that give rise to a right to receive any payment upon the execution of this
Agreement or the consummation of the Merger or any of the other transactions
contemplated hereby, except as set forth in this Agreement.
SECTION 6.5 SEC FILINGS. Since December 31, 2003, KCS has filed with the
SEC all documents required to be filed by it under the Exchange Act and the
Securities Act and as of
their requisite dates (or the dates of any amendments thereto) such documents
(the "KCS SEC Documents") did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading and complied in all
material respects with the applicable requirements of the Exchange Act and the
Securities Act and the applicable rules of the SEC thereunder.
SECTION 6.6 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Subject to the limitation in Section 6.6(b):
(i) the audited consolidated financial statements and unaudited
interim financial statements of KCS and its consolidated Subsidiaries
included in the KCS SEC Documents (the "KCS Financial Statements") present
fairly, in all material respects, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of KCS and its consolidated Subsidiaries as
of the dates thereof and their consolidated results of operations and cash
flows for the periods then ended (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments), and
(ii) except as set forth in the KCS Financial Statements or the KCS
SEC Documents filed prior to the date of this Agreement, neither KCS nor
any of its Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by GAAP to be
set forth on a consolidated balance sheet of KCS and the consolidated KCS
Subsidiaries or in the notes thereto or which, individually or in the
aggregate, could reasonably be expected to have a KCS Material Adverse
Effect.
(b) Notwithstanding the foregoing, no representation or warranty is made
with respect to any information regarding GTFM or any GTFM Subsidiary which is
based upon and in conformity with information provided in writing by GTFM and
included in, or relied upon with respect to information included in, the KCS
Financial Statements or the KCS SEC Documents.
SECTION 6.7 NO OTHER BROKER. Other than Morgan Stanley & Co., Incorporated,
whose fees and expenses will be paid by KCS, no broker, finder or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission from or as a result of engagement by KCS or any of its Subsidiaries
in connection with this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby.
SECTION 6.8 INFORMATION IN FILED DOCUMENTS. None of the information
regarding KCS or any of its Subsidiaries supplied or to be supplied by KCS for
inclusion in any documents to be filed with any Governmental Authority prior to
Closing in connection with the transactions contemplated hereby will, at the
respective times such information is supplied by KCS, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED that no
representation is made with respect to any information regarding GTFM or any
GTFM Subsidiary which is based upon and in conformity with information provided
in writing by GTFM and included in, or relied upon with respect to information
included in, documents referred to in this Section. Except as set forth in the
KCS SEC Documents filed prior to the date of this Agreement, neither KCS nor any
of its Subsidiaries has entered into any agreement or transaction with any
officer, director or other employee of KCS or any Subsidiary of KCS or any
immediate family member of any such person which would be required to be
reported or disclosed in the KCS SEC Documents.
SECTION 6.9 NO KCS MATERIAL ADVERSE EFFECT; OTHER ACTIONS.
(a) Since March 31, 2004, (i) KCS and its Subsidiaries have conducted their
respective businesses only in the ordinary course, consistent with past
practice, (ii) there has not been any KCS Material Adverse Effect or any event
or development that could, individually or in the aggregate, reasonably be
expected to have a KCS Material Adverse Effect, and (iii) to the Knowledge of
KCS, there has not occurred any event or development that would, individually or
in the aggregate, reasonably be expected to prevent the consummation of the
Acquisition or the performance by KCS of its obligations under this Agreement or
any of the Ancillary Agreements to which it is a party.
(b) Except as disclosed in the KCS SEC Documents, there are no ongoing
discussions regarding, and neither KCS nor any Subsidiary of KCS has entered
into any agreement or understanding regarding:
(i) a transaction which, if completed, would result in a Change of
Control of KCS or a KCS Acquisition Proposal;
(ii) the sale, lease or other disposition of all or substantially all
of the consolidated assets of KCS and its Subsidiaries or the creation of
any material joint ventures; or
(iii) the issuance of a material amount of equity securities of KCS
(except as contemplated in this Agreement).
SECTION 6.10 KCS SUB. The authorized capital stock of KCS Sub consists of
1,000 shares of KCS Sub Common Stock. There are 900 shares of KCS Sub Common
Stock issued and outstanding, all of which are owned by KCS, free and clear of
all Encumbrances. All of the shares of KCS Sub Common Stock outstanding are duly
authorized, validly issued, fully paid, nonassessable and free of any preemptive
rights and are not subject to any voting trust agreement (or similar agreement)
or other contract restricting or otherwise relating to the voting, dividend
rights of disposition of such shares. KCS Sub is not a party to any contract
other than this Agreement. KCS Sub has not conducted any business other than in
connection with the
transactions contemplated by this Agreement and the Ancillary Agreements and has
incurred no material indebtedness and has no material assets except as described
in this Agreement.
SECTION 6.11 LEGAL PROCEEDINGS.
(a) There are no Proceedings that are pending or, to the Knowledge of KCS,
threatened against KCS or any of its Subsidiaries or any of their respective
directors or officers (in their capacity as such) or the KCS Assets or the KCS
Business (other than the Proceedings referred to in Section 7.15) which (i) if
adversely determined, would have a KCS Material Adverse Effect, or (ii)
challenge the validity or propriety of the transactions contemplated by this
Agreement or by any of the Ancillary Agreements.
(b) Section 6.11 of the KCS Disclosure Schedule sets forth a complete and
accurate list of all litigation or arbitration actions, claims or proceedings,
which KCS, any of its Subsidiaries, or to the Knowledge of KCS, any of KCS's or
its Subsidiaries' respective officers, directors, agents or representatives,
including persons named by KCS as directors or alternate directors of GTFM or
any GTFM Subsidiary, have filed or caused to be filed against any of the
Sellers, any of the Sellers' Subsidiaries, or any of their respective officers,
directors or shareholders, in their capacity as such.
SECTION 6.12 KCS CAPITAL RESOURCES. The information set forth in the KCS
Annual Report on Form 10-K for the year ended December 31, 2003 filed with the
SEC accurately sets forth anticipated material capital expenditures required to
maintain in good repair and working order the KCS Assets and to provide for
material additions to KCS property, plant and equipment necessary to conduct the
business of KCS as described in such SEC Report. KCS has access to capital
resources sufficient to fund such capital expenditures in the amount and at the
time required.
SECTION 6.13 EMPLOYEE BENEFIT MATTERS. Each employee benefit plan, within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, ("ERISA") that is maintained, administered or contributed to
by KCS or any of its Subsidiaries for employees or former employees of KCS and
its Subsidiaries has been maintained in compliance with its terms and the
requirements of any applicable statutes, orders, rules and regulations,
including, but not limited to, ERISA and the Code. No prohibited transaction,
within the meaning of Section 406 of ERISA or Section 4975 of the Code, has
occurred with respect to any such plan, excluding transactions effected pursuant
to a statutory or administrative exemption. For each such plan which is subject
to the funding rules of Section 412 of the Code or Section 302 of ERISA, no
"accumulated funding deficiency," as defined in Section 412 of the Code, has
been incurred, whether or not waived, and the fair market value of the assets of
each such plan (excluding, for these purposes, accrued but unpaid contributions)
exceeds the present value of all benefits accrued under such plan as determined
using reasonable actuarial assumptions.
SECTION 6.14 LABOR AND OTHER EMPLOYMENT MATTERS. There are no existing or,
to the Knowledge of KCS and its Subsidiaries, threatened, labor disputes with
employees of KCS and its Subsidiaries which would be reasonably expected to have
a KCS Material Adverse Effect.
SECTION 6.15 TAX. KCS and its Subsidiaries have filed all federal, state,
local and foreign tax returns which have been required to be filed and have paid
all Taxes shown thereon and all assessments received by them or any of them to
the extent that such Taxes have become due and are not being contested in good
faith, except as would not, individually or in the aggregate, have a KCS
Material Adverse Effect. Except as disclosed in Section 6.15 of the KCS
Disclosure Schedule, there is no Tax deficiency which has been or might
reasonably be expected to be asserted or threatened against KCS or any of its
Subsidiaries, except as would not, individually or in the aggregate, have a KCS
Material Adverse Effect.
SECTION 6.16 PERMITS AND COMPLIANCE.
(a) Except as would not, individually or in the aggregate, have a KCS
Material Adverse Effect, (i) each of KCS and its Subsidiaries owns, possesses or
has obtained all licenses, permits, certificates, consents, orders, approvals
and other authorizations from, and has made all declarations and filings with,
all federal, state, local and other Governmental Authorities, all
self-regulatory organizations and all courts and other tribunals necessary to
own or lease, as the case may be, and to operate its properties and to carry on
its business as conducted as of the date hereof, and (ii) neither KCS nor any of
its Subsidiaries has received notice of any proceeding relating to revocation or
modification of any such license, permit, certificate, consent, order, approval
or other authorization.
(b) Except for normal examinations conducted by any Governmental Authority
in the regular course of the business of KCS and its Subsidiaries or as would
not reasonably be expected to have a KCS Material Adverse Effect, since March
31, 2004, no Governmental Authority has provided written notice to KCS or any of
its Subsidiaries of any threatened proceeding or investigation into the business
or operations of KCS or any of its Subsidiaries or any of their members,
officers, directors or employees in their capacity as such with KCS or any of
its Subsidiaries.
(c) Neither KCS nor any of its Subsidiaries is in violation of any
Applicable Laws or orders of any Governmental Authority, except as would not
reasonably be expected to have a KCS Material Adverse Effect. No event has
occurred or exists that would (with or without notice or lapse of time) give
rise to any obligation on the part of KCS or any of its Subsidiaries to
undertake or to bear all or any portion of the cost of any remedial action of
any nature which would reasonably be expected to have a KCS Material Adverse
Effect.
SECTION 6.17 ENVIRONMENTAL MATTERS. KCS and each of its Subsidiaries (i)
are in compliance with, and are not subject to any liability under, in each
case, all applicable
Environmental Laws, (ii) hold all Environmental Permits necessary to conduct
their current operations, and (iii) are in compliance with their respective
Environmental Permits, except where the failure to hold or be in compliance with
such Environmental Permits would not reasonably be expected to have a KCS
Material Adverse Effect. Neither KCS nor any of its Subsidiaries has received
any written notice, demand, letter, claim or request for information alleging
that KCS or any of its Subsidiaries may be in violation of, or liable under, any
Environmental Law, except where the preceding would not reasonably be expected
to have a KCS Material Adverse Effect. Neither KCS nor any of its Subsidiaries
(x) has entered into or agreed to any consent decree or order or is subject to
any judgment, decree or judicial order relating to compliance with Environmental
Laws, Environmental Permits or the investigation, sampling, monitoring,
treatment, remediation, removal or cleanup of Hazardous Materials and no
investigation, litigation or other proceeding is pending or, to the Knowledge of
KCS and its Subsidiaries, threatened with respect thereto, except as would not
reasonably be expected to have a KCS Material Adverse Effect, or (y) is an
indemnitor or has assumed liability in connection with any pending demand,
notice, claim, or other allegation, or to the Knowledge of KCS and its
Subsidiaries, any claim threatened by or against any third-party relating to any
liability under any Environmental Law or relating to any Hazardous Materials,
except as would not reasonably be expected to have a KCS Material Adverse
Effect. None of the real property owned or leased or operated by KCS or any of
its Subsidiaries is listed or, to the Knowledge of KCS and its Subsidiaries,
proposed for listing on any list of sites maintained by any Governmental
Authority requiring investigation or cleanup, except as would not reasonably be
expected to have a KCS Material Adverse Effect.
SECTION 6.18 PROPERTIES. Each of KCS and its Subsidiaries has good and
marketable title to, or valid and enforceable leasehold, easement or concession
interests in, all of its properties and tangible assets necessary to conduct the
KCS Business as it is currently conducted, except where the failure to have such
title or interest would not reasonably be expected to have a KCS Material
Adverse Effect. All such property and assets which constitute personal property,
equipment, and fixtures, are in good condition and repair, normal wear and tear
excepted. Each of KCS and its Subsidiaries has complied in all material respects
with the terms of all leases and concessions to which it is a party and under
which it is in occupancy, and all such leases and concessions are in full force
and effect, except in each case as would not reasonably be expected to have a
KCS Material Adverse Effect.
ARTICLE 7
COVENANTS AND ADDITIONAL AGREEMENTS
SECTION 7.1 INTERIM GOVERNANCE ARRANGEMENTS; CONDUCT OF BUSINESS BY THE
GTFM GROUP.
(a) TMM and KCS have caused the By-laws of GTFM and TFM to be amended,
effective upon execution of this Agreement, (i) to require that the number of
Directors of GTFM
and TFM shall not exceed, respectively, 7 and 8 and that all actions taken by
the Board of Directors of GTFM shall require the approval of at least 5 members
of such Board and all actions taken by the Board of Directors of TFM shall
require the approval of at least 5 members of such Board (6, if the Mexican
government elects a director), and that the tie-breaking vote of the Chairman of
GTFM and of TFM has been eliminated, and (ii) to require that 5 members of the
Board of Directors of GTFM and of TFM shall be required for a quorum for any
meeting of such Board of Directors, and (iii) as otherwise set forth in Exhibit
J hereto (as so amended, the "Amended By-laws"). TMM and KCS have taken all
action required by the Amended By-laws and the Laws of the UMS to appoint (A)
Messrs. Jose Vicente Corta Fernandez and Iker Ignacio Arriola Penalosa,
respectively, as Secretary and Alternate Secretary (PROSECRETARIO) of the Board
of Directors of GTFM and of the Board of Directors of TFM (replacing Romualdo
Segovia and Jose Manuel Munoz Arteaga), and (B) Messrs. Jose Manuel Rincon
Gallardo Puron and Javier Garcia Sabate, as Examiners (COMISARIOS PROPIETARIOS),
and Mario Fernandez Davalos and Carlos Mendez Rodriguez, as Alternate Examiners
(COMISARIOS SUPLENTES), of GTFM and TFM.
(b) During the period from the date of this Agreement and continuing
through the Closing Date, except as expressly permitted or required by this
Agreement (i) no Party shall cause, or permit any action to be taken to cause,
the Amended By-laws to be amended, revoked or repealed without the consent of
TMM and KCS, (ii) no Party shall permit TFM to establish, and will take, or
cause to be taken, all action on their part necessary (including voting or
causing to be voted all the shares of capital stock of GTFM and TFM) to prevent
TFM from establishing, any internal committees or decision making rules which
have not been approved in writing by KCS and TMM, (iii) Sellers shall take, or
cause to be taken, all action on their part necessary to cause Jose Vicente
Corta Fernandez and Iker Ignacio Arriola Penalosa to remain, respectively, as
Secretary and Alternate Secretary (PROSECRETARIO) of the Board of Directors of
GTFM and TFM, and (iv) Sellers and KCS shall take, or cause to be taken, all
action on their part necessary to cause Jose Manuel Rincon Gallardo Puron and
Javier Garcia Sabate to remain as Examiners (COMISARIOS PROPIETARIOS), and Mario
Fernandez Davalos and Carlos Mendez Rodriguez to remain as Alternate Examiners
(COMISARIOS SUPLENTES), of GTFM and TFM.
(c) After the date of this Agreement, KCS shall create a transition
management team (the "Transition Management Team") to facilitate the transition
to KCS of ownership of the GTFM Group at the Closing. KCS shall have the right
to designate up to six (6) persons who shall serve until the Closing or earlier
termination of this Agreement (the "Transition Managers") and shall pay the
salaries of, and direct expenses incurred by, the Transition Managers. The
management of GTFM and of TFM shall cooperate fully with the Transition Managers
with the goal of ensuring a smooth transition at the Closing Date. To facilitate
the transition, the Transition Managers shall have access as they deem
reasonably necessary to all books, records, and meetings of the officers,
directors or other employees, agents or representatives of TFM and GTFM, and
each of TFM and GTFM shall cause each of their respective officers, directors,
and other employees, agents and representatives to provide such access to the
Transition Managers. Notwithstanding the foregoing, the Transition Managers
shall function only as observers with respect to the foregoing, and shall have
no authority to control or direct the actions of TFM or
GTFM or any of their respective directors, officers, employees, agents, or
representatives and shall not materially interfere with the normal operations of
TFM or GTFM.
(d) During the period from the date of this Agreement and continuing
through the Closing Date, except as expressly permitted or required by this
Agreement, the Sellers and KCS shall use commercially reasonable efforts to
cause GTFM and each of its Subsidiaries to (x) carry on its business in the
ordinary course consistent with past practice, subject to the restrictions
imposed by court order identified in Section 5.18 of the Seller Disclosure
Schedule and (y) use commercially reasonable efforts to preserve their present
business organizations and relationships (including keeping available the
present services of their employees and preserving their rights, franchises,
goodwill and relations with their customers and others with whom they conduct
business).
(e) During the period from the date of this Agreement and continuing
through the Closing Date, neither TMM nor KCS shall cause GTFM or any GTFM
Subsidiaries to take any of the following actions without the express written
consent of the other Party:
(i) amend or agree to amend their charters or bylaws (or comparable
organizational documents) except as provided in Section 7.1(a) and (b), or
merge with or into or consolidate with, or agree to merge with or into or
consolidate with, any other Person, subdivide or in any way reclassify any
of their membership interests, shares or any other ownership interests, or
change or agree to change in any manner the rights of their membership
interests, shares or any other ownership interests or liquidate or
dissolve;
(ii) (x) issue, sell, redeem or acquire any share or any other
ownership interest or any debt security in GTFM or any of the GTFM
Subsidiaries, (y) issue, sell or grant any option, warrant, convertible or
exchangeable Security, right, "phantom" or other ownership interest,
subscription, call, unsatisfied preemptive right or other agreement or
right of any kind to purchase or otherwise acquire (including by exchange
or conversion) any shares or any other ownership interests in GTFM or any
of the GTFM Subsidiaries, or (z) enter into any Contracts, agreements or
arrangements to issue, redeem, acquire or sell any shares or any other
ownership interests in GTFM or any of the GTFM Subsidiaries;
(iii) refinance existing indebtedness on materially different terms or
incur any additional indebtedness for borrowed money in excess of $10
million in the aggregate (outstanding at any one time), or guarantee any
liability, obligation or indebtedness (whether or not currently due or
payable) of any other Person or incur any GTFM Voting Debt;
(iv) except as required by Law or IFRS, make any change in their
accounting methods or practices for Tax or accounting purposes or make any
change in depreciation or amortization policies or rates adopted by them
for Tax or accounting purposes or make any material, or change any
existing, Tax election, settle any pending audits or make voluntary
disclosure agreements or settle or compromise any Tax liability, except in
the case of any such liability to the extent reserved for on the GTFM
Financial Statements or except to the extent such change would not have a
GTFM Material Adverse Effect;
(v) make any loan or advance or capital contribution to any of their
Affiliates who are not members of the GTFM Group, or any of their officers,
directors, employees, consultants, agents or other representatives (other
than reasonable and customary travel advances made in the ordinary course
of business consistent with past practice);
(vi) sell, transfer, lease, license, offer to sell, abandon or make
any other disposition of any of their assets or rights or grant or suffer,
or agree to grant or suffer, any Encumbrance other than Permitted
Encumbrances on any of their assets or rights, other than in the ordinary
course of business consistent with past practice and not exceeding $1
million in the aggregate;
(vii) except as expressly permitted pursuant to subsection (xv) below,
settle any claim, action or proceeding involving any liability for money
damages or any restrictions upon any of their operations, any of the GTFM
Assets or the GTFM Business, except to the extent such settlement would not
have a GTFM Material Adverse Effect;
(viii) create, renew, amend, terminate or cancel, any Contract other
than in the ordinary course of business consistent with past practice and
providing for consideration payable by or to GTFM or any GTFM Subsidiaries
equal to or less than $1 million individually;
(ix) enter into, amend, or agree to enter into or amend any Contract,
agreement or arrangement or any financial transaction with any of their
officers, directors, consultants, agents representatives, (in the case of
agents and representatives, other than in the ordinary course of business
consistent with past practice), or Affiliates who are not members of the
GTFM Group; provided, however, that this clause (ix) shall not prohibit the
performance of Contracts executed prior to the date of this Agreement, the
terms of which have been disclosed to KCS in the Seller Disclosure
Schedule;
(x) except as set forth in Section 2.1(a), declare or make any
dividends or declare or make any other distributions of any kind payable to
MM or any Affiliate of MM (in any such case other than any other member of
the GTFM Group) or to KCS or any Affiliate of KCS;
(xi) acquire or agree to acquire in any manner any equity interests
in, or any business of, any Person or other business organization or
division thereof, including by way of merger, consolidation, or purchase of
an equity interest or assets;
(xii) enter into, amend, modify or renew any Benefit Plan or other
written employment, consulting, severance or similar employment agreements
or arrangements, or grant any salary or wage increase or increase in
severance or termination pay or increase any employee benefit or hire any
new employee for a management position, except as may be required by
Applicable Law, or in the ordinary course of business consistent with past
practice.
(xiii) take any action to accelerate any material rights or benefits,
or make any material determinations not in the ordinary course of business
consistent with past practice,
under any collective bargaining agreement, Benefit Plan or employment,
indemnification, severance or termination agreement;
(xiv) make or incur any capital expenditures in excess of those set
forth in the GTFM 2004 Capital Budget, a copy of which has been provided to
KCS, or cease to make capital expenditures in the ordinary course of
business consistent with past practice;
(xv) cancel any indebtedness or waive any claims or rights in amounts,
in each case, in excess of $500,000 ($10,000 in the case of claims or
rights against any Affiliate) in the aggregate;
(xvi) accrue or pay any bonuses to any employee of the GTFM Group
other than in the ordinary course of business consistent with past
practices, except as set forth in Section 7.1 of the Seller Disclosure
Schedule; and
(xvii) authorize or agree (by Contract or otherwise) to do any of the
foregoing.
(f) During the period from the date of this Agreement and continuing
through the Closing Date, neither GTFM nor any GTFM Subsidiary shall pay or
incur any fees, expenses or other costs to De Teresa other than amounts with
respect to the Ongoing Litigation Matters, which amounts shall not aggregate
more than $50,000 per month (on average, computed as of the Closing Date for the
months or portions thereof occurring during such period) without the prior
written consent of KCS.
SECTION 7.2 CONDUCT OF BUSINESS BY KCS AND ITS SUBSIDIARIES.
(a) During the period from the date of this Agreement and continuing
through the Closing Date, except as expressly permitted or required by this
Agreement or with the prior written consent of TMM, KCS and its Subsidiaries
shall take no action that would reasonably be expected to prevent completion of,
or materially delay, the Acquisition, or change materially the terms of the
Acquisition to the detriment of Sellers, and take none of the following actions
if it would materially change the economic benefits of the Acquisition to the
detriment of the Sellers:
(i) amend their charters or bylaws (or comparable organizational
documents), or merge or consolidate with, any other Person, subdivide or
reclassify their common stock or other ownership interests, or change the
rights of their common stock or other ownership interests or liquidate or
dissolve;
(ii) issue, sell or acquire any common stock or other ownership
interest of any of the KCS Subsidiaries;
(iii) make any loan or advance or capital contribution to any of their
Affiliates (other than any KCS Subsidiary), or any of their officers,
directors, employees, consultants, agents or other representatives (other
than in the ordinary course of business consistent with past practice);
(iv) declare or make any dividends or declare or make any other
distributions of any kind on or payable to the holders of its capital stock
(other than regularly scheduled dividends payable on KCS Preferred Stock or
New Series Preferred Stock);
(v) acquire any equity interests in, or assets of any business of, any
Person; or
(vi) authorize or agree to do any of the foregoing.
SECTION 7.3 CONFIDENTIALITY. The Parties agree, and KCS agrees to cause the
Transition Managers, to continue to be bound by and comply with the provisions
set forth in the Confidentiality Agreements, and all amendments thereto, the
provisions of which are hereby incorporated herein by reference, to the extent
such provisions are not in conflict with the terms of this Agreement.
SECTION 7.4 REGULATORY MATTERS; GOVERNING DOCUMENTS; THIRD-PARTY CONSENTS.
(a) The Parties shall cooperate with each other and use their commercially
reasonable efforts promptly to prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals, waivers and
authorizations of all Governmental Authorities, third parties and other Persons
which are necessary or advisable to consummate the transactions contemplated by
this Agreement and the Ancillary Agreements, and requests for required consents
under any contracts, including those referred to in Sections 5.5 and 6.3. KCS
and Sellers agree to take all reasonable steps necessary to satisfy any
conditions or requirements imposed by any Governmental Authority in connection
with the consummation of the transactions contemplated by this Agreement, other
than those conditions or requirements, in the aggregate, the satisfaction of
which are reasonably likely to result in either a GTFM Material Adverse Effect,
a KCS Material Adverse Effect or a Seller Material Adverse Effect. The Parties
agree that, subject to the exclusive authority granted to KCS in Section 7.4(e),
they will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all Governmental Authorities, third
parties and other Persons necessary or advisable to consummate the Merger and
the other transactions contemplated by this Agreement and the Ancillary
Agreements and each Party will keep the other Parties apprised of the status of
matters relating to completion of the transactions contemplated herein and
therein.
(b) The Parties shall promptly advise each other Party hereto upon
receiving any communication from any Governmental Authority whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements.
(c) Each Party will (i) within five (5) business days of the date of this
Agreement take all actions necessary to make the filings required of such Party
or its Affiliates under the HSR Act (which filings shall include a request for
the early termination of the waiting period under the HSR Act), (ii) comply at
the earliest practicable date with any request for additional information
received by such Party or its Affiliates from the Federal Trade Commission or
the Antitrust Division of the Department of Justice pursuant to the HSR Act, and
(iii) cooperate with each other Party in connection with such other Party's
filing under the HSR Act and in connection with resolving any investigation or
other inquiry concerning the transactions contemplated by this Agreement
commenced by either the Federal Trade Commission or the Antitrust Division of
the Department of Justice or state attorneys general.
(d) If the current authorization issued by the Mexican Antitrust Commission
(COMISION FEDERAL DE COMPETENCIA, the "CFC") shall have expired, KCS shall, in a
timely manner after the date of this Agreement, with the cooperation of TMM, (i)
file before the CFC the notification required pursuant to Articles 20 and 21 of
the Mexican Antitrust Law (LEY FEDERAL DE COMPETENCIA ECONUMICA), using
commercially reasonable efforts to assure that the notification is accurate and
complete and contains all of the information required pursuant to the
regulations of the Mexican Antitrust Law (REGLAMENTO DE LA LEY FEDERAL DE
COMPETENCIA ECONOMICA) and other official forms therefor, and (ii) assure that
any request for any additional information that may be required or otherwise
solicited by the CFC from KCS or any of its Affiliates in connection with such
notification is complied with on a timely basis. Sellers shall use their
reasonable best efforts to provide KCS with all information regarding Sellers,
GTFM and GTFM Subsidiaries requested by KCS, within the time requested by KCS,
in connection with KCS's obligations under this Section 7.4(d). The Parties
shall cooperate with each other in connection with such Mexican antitrust
notification and in connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement, commenced by either
the CFC directly or as a result of any person filing any claim before the CFC in
connection therewith.
(e) If the current authorization issued by the Foreign Investment
Commission ("FIC") shall have expired, KCS shall have exclusive authority,
notwithstanding any other provision of this Agreement, to seek the approval of
the FIC to the acquisition of control of TFM contemplated in this Agreement
("FIC Approval"). Without limiting the generality of the foregoing:
(i) TMM shall, and TMM shall assure that its controlled Affiliates,
including TMMH and MM, and their respective employees, officers, directors,
corporate secretaries, attorneys-in-fact and agents (collectively, the "TMM
Parties") shall, cooperate with KCS to obtain as soon as possible the FIC
Approval, including using their reasonable best efforts to provide KCS with
all information regarding Sellers, GTFM and GTFM Subsidiaries that may be
requested by KCS, within the time requested by KCS, in connection with
obtaining FIC Approval.
(ii) TMM shall assure that none of the TMM Parties initiate any
communication, formal or informal, with the FIC or its directors or
employees, concerning this Agreement or the FIC Approval or any other
matter which could have an adverse effect on obtaining FIC Approval.
(iii) TMM shall assure that any communications by any of the TMM
Parties with the FIC concerning this Agreement or the FIC Approval shall
(i) be made solely at the express written request of Jose Vicente Corta
Fernandez or an officer of KCS, and (ii) be made through Carlos Galvan 0
Duque or EMVA. TMM shall assure that if the FIC communicates with any of
the TMM Parties, that party shall promptly notify Jose Vicente Corta
Fernandez of the communication and shall direct the FIC to communicate with
Carlos Galvan Duque or EMVA for a response, and that Carlos Galvan Duque or
EMVA shall consult with KCS before responding to the FIC or providing any
documents or other information to the FIC concerning this Agreement or the
FIC Approval.
(iv) All references in this Section 7.4(e) to communications with or
by the FIC shall include communications with members of the FIC, including
officers of the Ministry of Communication and Transport (SCT), the Ministry
of Economy, and the Ministry of Finance but shall not include
communications in the ordinary course of business of TMM or the GTFM Group
that do not concern this Agreement or the FIC Approval provided, that if in
the course of such communications the subject of this Agreement or the FIC
Approval is raised, no discussions concerning those subjects are held and
all inquiries related to such subjects are referred to Jose Vicente Corta
Fernandez (unless Jose Vicente Corta Fernandez requests otherwise).
(v) KCS shall keep TMM and EMVA informed, on a current basis,
regarding any communications with the FIC and will provide TMM with any
materials received from the FIC concerning this Agreement or FIC Approval.
(f) TMM and KCS shall cause GTFM and the GTFM Subsidiaries to use their
commercially reasonable efforts to obtain the consents of the lessor and the
lenders required under the Sublease of Locomotives identified in Section 5.5 of
the Seller Disclosure Schedule, to the change of control resulting from the
Acquisition.
SECTION 7.5 STOCKHOLDER APPROVALS.
(a) As soon as practicable following the date of this Agreement, but in any
event within sixty (60) days following the date of this Agreement, KCS shall
file with the SEC an amended proxy statement for a special meeting of its
stockholders to be called to obtain the KCS Stockholder Approval and shall use
its commercially reasonable efforts to obtain clearance of such proxy statement
from the SEC as soon as practicable. Promptly after the definitive proxy
statement has been cleared by the SEC, KCS will call and give notice of a
special meeting of its stockholders, cause a proxy statement and any amendments
thereto to be mailed to its stockholders, convene the special meeting of its
stockholders, which KCS shall endeavor to hold within forty-five (45) days
following the mailing of such proxy statement or the last of any amendment or
supplement thereto, and seek to obtain the approval of its stockholders to the
matters set forth therein as requiring such approval, including recommending
such approval to its
stockholders, PROVIDED that the KCS Board may withdraw its recommendation of the
Acquisition if it is advised by counsel to the effect that because of a third
party proposal occurring after the date of the KCS Board's initial approval of
the Acquisition, for the KCS Board to continue to recommend the Acquisition
would be a breach of the KCS Board's fiduciary duties to the KCS stockholders.
(b) Within forty-five (45) days following the date of this Agreement,
subject to extension for such period of time as is necessary to receive any
clearances or approvals in connection with the Corporate Restructure Information
Memorandum described below, TMM shall hold a meeting of its stockholders to
obtain the TMM Stockholder Approval and the shares of capital stock of TMM
subject to the Voting Trust shall be voted at such meeting in accordance with
the terms of the Voting Trust. The Board of Directors of TMM shall recommend
such approval to the TMM stockholders. TMM will provide to KCS a draft of the
relevant Corporate Restructure Information Memorandum that TMM must present to
the Mexican Banking and Securities Commission (COMISION NACIONAL BANCARIA Y DE
VALORES) and the Mexican Stock Exchange (BOLSA MEXICANA DE VALORES, S.A. DE
C.V.) with respect to the approval of this Agreement for review by KCS prior to
distribution of such memorandum to the shareholders of TMM. TMM shall not
unreasonably exclude from such memorandum any information reasonably requested
by KCS for inclusion therein.
(c) Immediately following TMM Stockholder Approval, TMM shall obtain the
TMMH Stockholder Approval, and TMMH shall obtain the MM Stockholder Approval.
SECTION 7.6 TAX MATTERS.
(a) GTFM shall prepare or cause to be prepared and shall timely file or
cause to be timely filed all Tax Returns for GTFM and the GTFM Subsidiaries for
all periods ending on or prior to the Closing Date and for Tax periods that
begin before the Closing Date and end after the Closing Date (a "Straddle
Period").
(b) After the Closing Date, KCS, GTFM and their respective Subsidiaries, on
the one hand, and TMM and its Subsidiaries, on the other hand, shall provide
each other with such cooperation and information, to the extent available to
such Parties, relating to TMM, GTFM and their respective Subsidiaries as the
Parties may reasonably request in (i) filing any Tax Return, (ii) determining
any liability for Taxes or a right to a Tax refund, or (iii) conducting or
defending any proceeding in respect of Taxes.
(c) At the Closing, TMM (to the extent available or in TMM's possession or
the possession of any TMM Subsidiaries or any of their respective directors,
officers, employees or representatives) shall deliver to GTFM and KCS shall, and
shall cause GTFM and the GTFM Subsidiaries to, retain for a period of five (5)
years following the Closing Date, all Tax Returns, books and records (including
computer files) of, or with respect to the activities of, GTFM and the GTFM
Subsidiaries for all taxable periods from date of incorporation to the Closing
Date for GTFM and all GTFM Subsidiaries.
(d) After the Closing, KCS shall control and manage any audit, contest,
claim, proceeding or inquiry with respect to Taxes of GTFM and any of the GTFM
Subsidiaries for any taxable period ending on or before the Closing Date and for
any Straddle Period; PROVIDED, that KCS shall promptly provide TMM with notice
and information regarding any such audit, contest, claim, proceeding or inquiry.
KCS shall have the right, after consultation with TMM, to settle or contest any
such audit, contest, claim, proceeding or inquiry.
SECTION 7.7 INSURANCE. Each of the Sellers and KCS shall cause GTFM and the
GTFM Subsidiaries to maintain in effect and pay all premiums due for the period
ending on the Closing Date with respect to any and all fidelity bonds maintained
by them on the date hereof and all GTFM Insurance Policies or procure comparable
replacement policies and bonds (or such replacement coverage as is obtainable on
a commercially reasonable basis) and maintain such policies and bonds in effect
until the Closing Date.
SECTION 7.8 NOTIFICATION OF CERTAIN MATTERS. Each Party to this Agreement
shall give prompt notice to the other parties, to the extent known by such
Party, of (i) the occurrence, or failure to occur, of any event or existence of
any condition that has caused or could reasonably be expected to cause any of
the representations or warranties of such Party contained in this Agreement to
be untrue or inaccurate in any material respect at any time after the date of
this Agreement, up to and including the Closing Date, or (ii) any failure on its
part to comply with or satisfy, in any material respect, any covenant, condition
or agreement to be complied with or satisfied by such Party under this
Agreement.
SECTION 7.9 FURTHER ASSURANCES. Each Party to this Agreement shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions of this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby. Upon the
request of the Sellers or KCS, as the case may be, KCS or the Sellers and their
respective Affiliates, as the case may be, shall promptly execute and deliver
such further instruments of assignment, transfer, conveyance, endorsement,
direction or authorization and other documents as the other Party may reasonably
request to effectuate the purposes of this Agreement and the Ancillary
Agreements.
SECTION 7.10 THIRD-PARTY MATTERS.
(a) From the date of this Agreement to the Effective Time, (i) neither
Sellers, nor any of their respective Affiliates, officers, directors, employees,
members, controlling shareholders (which shall include for this purpose all
signatories to any of the Ancillary Agreements), representatives or agents,
including any investment banker, attorney or accountant engaged by any of them
shall, directly or indirectly solicit, encourage or facilitate inquiries or
proposals, or enter into any agreement, with respect to, or initiate or
participate in any negotiations or discussions with any Person concerning, any
acquisition or purchase of all or a substantial
portion of the assets of, or of any equity interest in, or any merger or
business combination with, TMMH, MM, GTFM or any of their respective
Subsidiaries, and (ii) TMM shall not enter into any agreement with any Person
concerning any acquisition or purchase of a controlling equity interest in TMM
by any Competitor (as defined in the Stockholders' Agreement which is part of
the Ancillary Agreements) (each acquisition, purchase, merger or business
combination, a "TMM Acquisition Proposal"), or furnish any information regarding
a TMM Acquisition Proposal to any such Person. Sellers shall notify KCS,
providing full information, within twenty-four (24) hours if any TMM Acquisition
Proposal is received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, TMM, TMMH, MM,
GTFM, any of their respective Affiliates, officers, directors, employees,
members, or controlling shareholders (for purposes of this Section 7.10,
collectively, the "Seller Parties"), or their representatives and agents,
including any investment banker, attorney or accountant engaged by any of them.
It is understood that any breach of the restrictions set forth in this Section
7.10 by any Seller Party or any investment banker, attorney or other advisor or
representative of the Seller Parties shall be deemed to be a breach of this
Section 7.10 by Sellers.
(b) Sellers shall, and shall cause their respective Affiliates, officers,
directors, employees, members, shareholders, representatives and advisors to,
immediately cease or cause to be terminated any existing activities, including
discussions or negotiations with any Parties, conducted prior to the date hereof
with respect to any TMM Acquisition Proposal and, subject to the terms of any
existing confidentiality agreements, shall seek to have all materials
distributed to Persons in connection therewith by Sellers or any of their
respective Affiliates or advisors returned to TMM promptly. Neither Sellers or
any of their respective Affiliates, officers, directors, employees, members,
shareholders, representatives or agents, including any investment banker,
attorney or accountant engaged by any of them, shall amend, modify, waive or
terminate, or otherwise release any Person from, any standstill, confidentiality
or similar agreement or arrangement currently in effect relating to this
Agreement or the transactions contemplated hereby. Sellers shall cause their
respective Affiliates, officers, directors, employees, members, shareholders,
representatives and agents to comply with the provisions of Sections 7.10(a) and
7.10(b).
(c) From the date of this Agreement to the Effective Time, neither KCS, nor
any of its respective Affiliates, officers, directors, employees,
representatives or agents, including any investment banker, attorney or
accountant engaged by any of them shall, directly or indirectly solicit,
encourage or facilitate inquiries or proposals, or enter into any agreement,
with respect to, or initiate or participate in any negotiations or discussions
with any Person concerning, any acquisition or purchase of all or substantially
all of the assets of, or a controlling equity interest in, KCS or KCSR or any
merger or business combination with KCS or KCSR which, if consummated would
result in a Change of Control of KCS or KCSR (each, a "KCS Acquisition
Proposal"), or furnish any information regarding a KCS Acquisition Proposal to
any such Person. KCS shall notify TMM, providing full information, within
twenty-four (24) hours if any KCS Acquisition Proposal is received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, KCS, any of its respective Affiliates, officers,
directors, employees (for purposes of this Section 7.10, collectively, the
"Buyer
Parties"), or their representatives and agents, including any investment banker,
attorney or accountant engaged by any of them. It is understood that any breach
of the restrictions set forth in this Section 7.10 by any Buyer Party or any
investment banker, attorney or other advisor or representative of the Buyer
Parties shall be deemed to be a breach of this Section 7.10 by KCS.
(d) KCS shall, and shall cause its KCS Affiliates, officers, directors,
employees, representatives and advisors to, immediately cease or cause to be
terminated any existing activities, including discussions or negotiations with
any Parties, conducted prior to the date hereof with respect to any KCS
Acquisition Proposal and, subject to the terms of any existing confidentiality
agreements, shall seek to have all materials distributed to Persons in
connection therewith by KCS or its Affiliates or advisors returned to KCS
promptly. Neither KCS nor any of its Affiliates, officers, directors, employees,
representatives or agents, including any investment banker, attorney or
accountant engaged by any of them, shall amend, modify, waive or terminate, or
otherwise release any Person from, any standstill, confidentiality or similar
agreement or arrangement currently in effect relating to this Agreement or the
transactions contemplated hereby. KCS shall cause its Affiliates, officers,
directors, employees, representatives and agents to comply with the provisions
of Sections 7.10(c) and 7.10(d).
(e) Nothing set forth in this Section 7.10 shall preclude the KCS Board or
TMM from taking any action in good faith if it is advised by counsel that
failure to do so would be a breach of duty to its stockholders.
SECTION 7.11 EFFORTS OF PARTIES TO CLOSE. During the period from the date
of this Agreement through the Closing Date, each party hereto shall use its
commercially reasonable efforts to fulfill or obtain the fulfillment of the
conditions precedent to the consummation of the transactions contemplated
hereby, including the execution and delivery of any documents, certificates,
instruments or other papers that are reasonably required for the consummation of
the transactions contemplated hereby. During the period from the date of this
Agreement and continuing through the Closing, except as required by Applicable
Law, no party to this Agreement shall knowingly take any action which, or
knowingly fail to take any action the failure of which to be taken, could
reasonably be expected to: (i) result in any of the representations and
warranties set forth in this Agreement on the part of the party taking or
failing to take such action being or becoming untrue in any material respect,
(ii) result in any conditions to the Closing set forth in Article 8 not being
satisfied, or (iii) result in a violation of any provision of this Agreement or
the Ancillary Agreements.
SECTION 7.12 EXPENSES. Except as expressly provided otherwise in this
Agreement, the Parties shall each bear their respective direct and indirect
expenses incurred in connection with the negotiation and preparation of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby.
SECTION 7.13 VAT CONTINGENCY PAYMENT.
(a) On the later to occur of (i) the Closing Date, or (ii) the Final
Resolution of the VAT Claim and Put, KCS shall pay the sum of $110 million,
reduced (but not below zero) by: (i) any cash payments required to be made by
KCS, TFM or any of their respective Affiliates (including for purposes of this
Section 7.13, GTFM) to any agency of the Mexican government to obtain the Final
Resolution of the VAT Claim and Put, net of any cash payments received by KCS,
TFM or such Affiliates from any such agency related to the Final Resolution of
the VAT Claim and Put, (ii) the NOL Value, (iii) 67% of the face amount of any
other Tax credits under the Laws of the UMS which TFM or any of its Affiliates
is required to apply, use or relinquish to the Mexican government without any
value received in exchange therefor (other than the value resulting from the
Final Resolution of the VAT Claim and Put), to obtain the Final Resolution of
the VAT Claim and Put, and (iv) any Taxes incurred with respect to the Final
Resolution of the VAT Claim and Put which are not offset by the NOL Value or the
other Tax credits referred to in Section 7.13(a)(iii), and (v) the contingency
fees, in an amount of $1,500,000 each (but not any portion of the ongoing legal
fees and expenses) to the extent they are required to be paid by GTFM or any
GTFM Subsidiary to (y) Rocha y Asociados, S.C., or Zambrano, Rocha y Espina,
S.C. in connection with the successful resolution of the Put and (z) CEA
Abogados, S.C., in connection with the successful resolution of the VAT Claim
(the "VAT Contingency Payment"). The VAT Contingency Payment shall be paid as
follows: (i) $35 million shall be paid in cash; (ii) $35 million shall be paid
by delivery of that number of shares of KCS Common Stock as, valued at the
Volume Weighted Price, shall be equal to $35 million, and (iii) $40 million
shall be paid by deposit into escrow (the "VAT Escrow"), to be held and be
subject to reduction in accordance with the terms of an escrow agreement (the
"VAT Escrow Agreement"), of a note in the principal amount of $40 million, which
shall be converted at the fifth anniversary of the Closing Date, or at such
earlier date following the date that is two (2) years after the Final Resolution
of the VAT Claim and Put as KCS may, in its sole discretion, deem appropriate
after consultation with a Tax consultant knowledgeable about Mexican Tax Laws,
into that number of shares of KCS Common Stock as, valued at the Volume Weighted
Price, shall be equal to the remaining principal amount of the VAT Escrow as of
such date. Any reduction in the VAT Contingency Payment pursuant to this Section
7.13(a) shall be made in equal proportions in the amounts set forth in clauses
(i) through (iii) in the immediately preceding sentence. KCS may at its election
deliver shares of KCS Common Stock valued at the Volume Weighted Price, in lieu
of any portion of the cash payment. The term "NOL Value" means 23% of the amount
of any net operating losses available to TFM and its Subsidiaries under
applicable Tax Laws of the UMS which are relinquished to the Mexican government
by TFM and its Affiliates without any other value received therefor. .
(b) KCS shall have the exclusive right to manage the negotiation,
prosecution and settlement of the VAT Claim and any extensions or other
modifications of the obligations under the Put and in doing so shall act
prudently and in good faith. As used in this section, "prudently" shall mean
acting as a reasonably prudent person would act in dealing with its own property
and without regard to the obligation to make the VAT Contingency Payment. TMM
shall, and shall use its reasonable best efforts to cause its Affiliates,
officers, directors, agents and attorneys-in-fact to, cooperate with KCS in any
matters reasonably required by KCS in connection with these negotiations;
PROVIDED TMM and its Affiliates shall not be required to pay any amounts or
relinquish any assets, Tax credits or other Tax attributes or other items of
value. TMM, TMMH and MM, hereby release KCS, its Affiliates, officers,
directors, agents and attorneys-in-fact from any and all claims, liabilities and
obligations arising out of or in connection with the negotiations or settlement
with the Federal Government of the UMS with respect to the VAT Claim and Put,
except for any breach of the obligation to pay the VAT Contingency Payment
pursuant to Section 7.13(a) or any breach of its obligations under this Section
7.13(b).
SECTION 7.14 FINANCING FOR ACQUISITION. In connection with the financing
for the Acquisition (including any amounts due under Section 7.13), KCS shall
not, and shall cause its Subsidiaries not to, enter into any financing
arrangements that materially (i) restrict the ability of KCS and its
Subsidiaries to make any payments required to be made by this Agreement, or (ii)
deny or restrict in any material way any material rights granted to TMM or any
of its Subsidiaries under this Agreement or the Ancillary Agreements.
SECTION 7.15 SUSPENSION AND DISMISSAL OF ACTIONS; RELEASES.
(a) During the period from the date of this Agreement to the Closing Date
or the date of a termination in accordance with Article 9, none of KCS, TMM, any
controlled Affiliate of KCS or TMM, or any officer, director, agent or
representative of KCS acting on behalf of KCS, TMM or their respective
controlled Affiliates, including persons named by them as directors or alternate
directors of GTFM or any GTFM Subsidiary, shall initiate, file, commence,
publicly threaten to initiate, file or commence, or continue to pursue
(collectively, "Commence") any proceedings previously filed, except as necessary
in the opinion of their counsel to avoid dismissal or adverse ruling or to
preserve or exercise rights arising under this Agreement, before any court,
arbitral panel, regulatory body or other agency or body which, directly or
indirectly, is based upon or arises out of, in whole or in part, the Original
Acquisition Agreement or the transactions referred to therein (collectively,
"Acquisition Agreement Claims") or any claim or allegation with respect to
actions taken or meetings held prior to the date of this Agreement by, or in
their capacity as, the directors, officers, employees, shareholders or agents of
TMM, KCS, or any Subsidiary of TMM or KCS (collectively, "Management Claims").
(b) The Acquisition Agreement Claims and the Management Claims shall be
dismissed, or may be reinstated, as follows:
(i) If this Agreement is terminated in accordance with Section
9.1(a)(i), then the Acquisition Agreement Claims and the Management Claims,
and if the termination is in accordance with Section 9.1(a)(vii), then only
the Acquisition Agreement Claims, shall be dismissed with prejudice. Each
Party shall make all filings necessary, and shall take all steps reasonably
requested by the other Parties, to effect such dismissal on the date of
such termination or as soon thereafter as possible, with each Party to bear
its own costs and expenses.
(ii) If the Agreement is terminated other than as described in Section
7.15(b)(i), then, upon termination, the Acquisition Agreement Claims and
the Management Claims which were suspended as described in Section 7.15(a)
(and
any other related claims (whether as cross-claims or otherwise)) may be
Commenced.
(iii) If the Agreement is not terminated, then on the Closing Date,
the Acquisition Agreement Claims and the Management Claims shall be
dismissed with prejudice. Each Party shall make all filings necessary, and
shall take all steps reasonably requested by the other Parties, to effect
such dismissal on the Closing Date or as soon thereafter as possible, with
each Party to bear its own costs and expenses.
(c) Within ten days after the date of this Agreement, the Parties shall
cause their respective litigation counsel to inform the American Arbitration
Association of the suspension of proceedings in the matter styled KANSAS CITY
SOUTHERN AND KARA SUB, INC. V. GRUPO TMM, S.A.; TMM HOLDINGS, S.A. DE C.V.; AND
TMM MULTIMODAL, S.A. DE C.V., No. 50 T 181 00514 03 (the "Arbitration"). The
Arbitration shall be held in abeyance, but not dismissed or terminated, until
the Closing Date. Immediately following Closing or, if this Agreement is
terminated as described in Section 7.15(b)(i) on a basis which requires
dismissal of Acquisition Agreement Claims, immediately following such
termination, the Parties shall cause their respective litigation counsel to
request that the Arbitration be terminated and shall take all other action
necessary to have the Arbitration terminated as promptly as possible, with the
Parties to bear their own costs and expenses. If this Agreement is terminated
other than as described in Section 7.15(b)(i), then any Party may reinstate
proceedings in the Arbitration, request a hearing and, reinstate or pursue any
claims it may have in such proceeding (whether as a counter-claim or otherwise).
(d) On the date of this Agreement, KCS and TMM, each on behalf of itself
and its controlled Affiliates, have entered into Releases, which shall be
deposited in the Closing Escrow immediately following execution of this
Agreement. The Releases shall become effective on the Closing Date and be
released from the Closing Escrow to the parties entitled to receive them at the
Closing in accordance with the terms of the Closing Escrow Agreement; PROVIDED,
that if this Agreement is terminated as described in to Section 7.15(b) on a
basis which requires dismissal of Acquisition Agreement Claims and Management
Claims, then, at the effective time of such termination, the Releases relating
to the claims to be dismissed shall become effective and be released from the
Closing Escrow to the Parties entitled to receive them. The Parties agree that
the Releases shall not release Sellers from any indemnification obligations
under Article 10 of this Agreement.
(e) Within ten (10) days after execution of this Agreement, the Parties
will cause their respective litigation counsel to jointly file briefs before any
relevant authority to suspend, except for the Authority Litigation, any pending
civil litigation either as a pre-judgment measure (MEDIDA CAUTELAR) or as an
Ordinary Commercial Proceeding as described in the "Mexican Litigation List"
attached hereto as Exhibit K. The Parties acknowledge that the suspensions
previously obtained in those proceedings (which are in effect on the date
hereof) will remain in full force and effect during the suspension period. The
proceedings described in the "Mexican Litigation List" shall be held in
abeyance, but not dismissed or terminated, until the Closing
Date. Upon Closing, or a termination of this Agreement as referred to in Section
7.15(b)(i), the Parties will cause their respective litigation counsel to
jointly request that, except for the Authority Litigation, the proceedings
described in the "Mexican Litigation List" be terminated in accordance with
Section 7.15(b)(i), with the Parties to bear their own costs and expenses. If
for any reason this Agreement is terminated, except for a termination in
accordance with Section 9.1(a)(i), or if any Party repudiates this Agreement,
then any Party may reinitiate the proceedings described in the "Mexican
Litigation List."
(f) Except for the Authority Litigation, the Parties agree to suspend after
admission and before service any lawsuit filed by such Party before the
execution of this Agreement and not yet admitted and/or served on the
defendant(s) so long as such suspension does not imply the loss of any
proceeding rights such as the filing of any deadline brief. Upon Closing or
termination of this Agreement as referred to in Section 7.15(b)(i), the Parties
will cause their litigation counsel to request that such proceedings be
terminated in accordance with Section 7.15(b)(i). If for any reason this
Agreement is terminated otherwise than in accordance with Section 7.15(b)(i) or
if any Party repudiates this Agreement, then any Party may reinitiate the
proceeding so admitted and suspended and not yet served.
(g) Since the "Amparo" proceedings in the UMS are not subject to be
suspended by agreement of the Parties, the Parties acknowledge the right of each
Party to file any briefs or legal resources, such as QUEJA, RECLAMACIUN or
REVISIUN in order to preserve their rights against any Amparo resolution or any
decree or resolution entered into in any Amparo proceeding related to the
proceedings described in the "Mexican Litigation List," and the Parties
acknowledge the right of the Party to file a new Amparo complaint only: (i)
against resolutions adopted before the Parties filed the suspension briefs after
the execution of this Agreement, and (ii) against those resolutions entered into
after the execution of this Agreement so long as: (x) they are the consequence
of the accomplishment of an Amparo resolution, or (y) they are entered into in
any appeal related to any proceeding listed in the "Mexican Litigation List."
(h) At the time of the execution of this Agreement, KCS and TMM shall take
all action necessary to cause GTFM, TFM and the other GTFM Subsidiaries to adopt
the Release Resolutions and will not subsequently take, or permit to be taken,
any action to amend, repeal, revoke, or otherwise change, in whole or in part,
such Release Resolutions.
(i) With respect to the Authority Litigation, KCS will grant releases,
which will be independent of the Releases identified in Section 7.15(d) above,
to those persons identified in the Authority Litigation Agreement.
SECTION 7.16 LEGAL REPRESENTATION RELEASE. TMM shall deliver to KCS at the
Closing, a full and complete release, in the form attached hereto as Exhibit L
(the "Legal Representation Release"), of GTFM, TFM and their respective
Subsidiaries of any and all claims for fees or expenses of De Teresa and its
Affiliates other than with respect to the Ongoing Litigation Matters.
ARTICLE 8
CONDITIONS
SECTION 8.1 MUTUAL CONDITIONS. The obligations of each party to this
Agreement to consummate the Acquisition shall be subject to the satisfaction of
each of the following conditions, unless any such condition is waived by KCS and
TMM:
(a) No order, injunction or decree issued by any Governmental Authority of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Acquisition shall be in effect. No statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Authority which prohibits, restricts
in any material manner or makes illegal consummation of the Acquisition;
(b) Each of the consents, waivers, authorizations and approvals required
from all Governmental Authorities shall have been obtained without the
imposition of conditions or requirements, in the aggregate, the satisfaction of
which by KCS or its Subsidiaries or TMM or its Subsidiaries is reasonably likely
to result in either a KCS Material Adverse Effect, a GTFM Material Adverse
Effect or a Seller Material Adverse Effect;
(c) The Common Stock to be issued by KCS pursuant to this Agreement shall
have been approved for listing by the NYSE; and
(d) The Release Resolutions, the Releases, the Dismissals, the Ancillary
Agreements and the Consulting Agreement shall be eligible for release from the
Closing Escrow, subject only to the occurrence of the Closing.
SECTION 8.2 CONDITIONS TO THE OBLIGATIONS OF KCS. The obligations of KCS to
consummate the Acquisition shall be subject to the satisfaction of each of the
following conditions, any of which may be waived in writing by KCS:
(a) For purposes of this Section 8.2(a), the accuracy of the
representations and warranties of Sellers set forth in this Agreement shall be
assessed as of the date of this Agreement and shall be assessed as of the
Closing Date with the same effect as though all such representations and
warranties had been made again on and as of the Closing Date (provided, however,
that the representations and warranties that speak as of a specific date other
than the date of this Agreement shall speak only as of such date) and such
representations and warranties shall be true and correct in all material
respects;
(b) Sellers shall have performed and complied in all material respects with
all agreements, covenants, obligations and conditions required by this Agreement
to be performed or complied with by them at or prior to the Closing Date;
(c) TMM, TMMH and MM shall have delivered to KCS a certificate, dated as of
the Closing Date, signed on their behalves by their respective Presidents and
Chief Financial Officers confirming their satisfaction of the conditions
applicable to them contained in Sections 8.2(a) and 8.2(b);
(d) There shall not exist any event or combination of events that,
individually or in the aggregate, will (or would reasonably be expected to)
prevent any of the Sellers from performing any of its material post-closing
obligations under this Agreement, any Ancillary Agreement or the Consulting
Agreement at or after the Effective Time;
(e) Since December 31, 2003, there shall not have been any GTFM Material
Adverse Effect or any development or combination of developments that,
individually or in the aggregate, has had or is reasonably likely to have a GTFM
Material Adverse Effect, of which KCS did not have Knowledge prior to the date
of this Agreement;
(f) KCS shall have received copies of all other consents, approvals,
authorizations, qualifications and orders of all Governmental Authorities and
all other Persons party to Contracts with any member of the GTFM Group that are
required in respect of the transactions to be consummated at the Closing, other
than those that if not obtained would not individually or in the aggregate
reasonably be expected to have a GTFM Material Adverse Effect or a KCS Material
Adverse Effect and such consents and other items shall remain in full force and
effect as of the Closing Date;
(g) KCS shall have received the KCS Stockholder Approval;
(h) There shall not be pending any insolvency or bankruptcy proceeding
(including a CONCURSO MERCANTIL under the laws of the UMS) against TMM, MM,
TMMH, GTFM or TFM; and
(i) The Legal Representation Release shall have been duly executed and
delivered to KCS.
SECTION 8.3 CONDITIONS TO THE OBLIGATIONS OF SELLERS. The obligation of
Sellers to consummate the Acquisition shall be subject to satisfaction of each
of the following conditions, any of which may be waived in writing by TMM:
(a) For purposes of this Section 8.3(a), the accuracy of the
representations and warranties of KCS and the KCS Purchasers set forth in this
Agreement shall be assessed as of the date of this Agreement and shall be
assessed as of the Closing Date with the same effect as though all such
representations and warranties had been made again on and as of the Closing Date
(provided, however, that the representations and warranties that speak as of a
specific date other than the date of this Agreement shall speak only as of such
date) and such representations and warranties shall be true and correct in all
material respects;
(b) Each of KCS and the KCS Purchasers shall have performed and complied in
all material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date;
(c) Each of KCS and the KCS Purchasers shall have delivered to TMM a
certificate, dated as of the Closing Date, signed on its behalf by its Chief
Executive Officer and Chief Financial Officer, confirming the satisfaction of
the conditions contained in Sections 8.3(a) and 8.3(b);
(d) There shall not exist any event or combination of events that,
individually or in the aggregate, will (or would reasonably be expected to)
prevent KCS from performing any of its material post-Closing obligations under
this Agreement or any Ancillary Agreement at or after the Effective Time;
(e) Since December 31, 2003, there shall not have been any KCS Material
Adverse Effect or any development or combination of developments that,
individually or in the aggregate, has had or is reasonably likely to have a KCS
Material Adverse Effect, of which TMM did not have Knowledge prior to the date
of this Agreement; and
(f) TMM shall have received copies of all other consents, approvals,
authorizations, qualifications and orders of all Governmental Authorities and
all other Persons party to contracts with KCS or any of its Subsidiaries that
are required in respect of the transactions to be consummated at Closing, other
than those that, if not obtained, would not, individually or in the aggregate,
reasonably be expected to have a KCS Material Adverse Effect and such consents
and other items shall remain in full force and effect as of the Closing Date.
ARTICLE 9
TERMINATION
SECTION 9.1 TERMINATION.
(a) This Agreement may be terminated prior to the Closing as follows:
(i) by written consent of KCS and TMM;
(ii) by KCS or TMM if any order of any Governmental Authority
permanently restraining, enjoining or otherwise prohibiting the
consummation of the Acquisition shall have become final and non-appealable
or if any of the approvals of any Governmental Authority to perform the
transactions herein, imposes any condition or requirement, the satisfaction
of which is reasonably likely to result in either a KCS Material Adverse
Effect or a GTFM Material Adverse Effect;
(iii) by KCS if any condition to the obligations of KCS hereunder
becomes incapable of fulfillment through no fault of KCS and is not waived
by KCS;
(iv) by TMM if any condition to the obligations of Sellers hereunder
becomes incapable of fulfillment through no fault of Sellers and is not
waived by TMM;
(v) by KCS if TMM shall have experienced a Change of Control or
publicly announced any agreement or intention to complete a transaction
which, if completed, would result in a Change of Control, or by TMM if KCS
shall have experienced a Change of Control or publicly announced any
agreement or intention to complete a transaction which, if completed, would
result in a Change of Control;
(vi) by KCS or TMM if the Closing shall not have occurred by the close
of business on December 31, 2005 (the "Termination Date"); PROVIDED,
however, that the Termination Date may be extended by KCS and TMM by
written agreement; and
(vii) by KCS or TMM if KCS shall not have obtained the KCS Stockholder
Approval at any meeting of its stockholders called for that purpose
(including any adjournments or continuances of such meeting).
(b) The termination of this Agreement shall be effectuated by the delivery
by the Party terminating this Agreement to the other Parties of a written notice
of such termination. If this Agreement so terminates, it shall become null and
void and have no further force or effect, except as provided in Section 9.2.
SECTION 9.2 SURVIVAL AFTER TERMINATION. If this Agreement is terminated in
accordance with Section 9.1 and the transactions contemplated hereby are not
consummated, this Agreement, each Ancillary Agreement and the Consulting
Agreement (other than any Ancillary Agreement that this Agreement or such
Ancillary Agreement provides shall become effective in the event of such
termination) shall become void and of no further force and effect, without any
liability on the part of any party hereto, except for the provisions of this
Section 9.2 and Sections 7.3, 7.12, 7.15, 12.5, 12.11 and 12.13. Notwithstanding
the foregoing, nothing in this Section 9.2 shall relieve any Party to this
Agreement of liability for a breach of any provision of this Agreement or any
agreement made as of the date hereof or subsequent thereto pursuant to this
Agreement.
ARTICLE 10
INDEMNIFICATION
SECTION 10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
EXCLUSIVE MONETARY REMEDIES.
(a) All representations and warranties in this Agreement or in any
instrument executed and delivered in fulfillment of the requirements of this
Agreement shall survive the Closing until April 1, 2007 (the "Expiration Date"),
except that the representations and warranties of the Sellers set forth in
Sections 5.10(b)(ii) and 5.10(b)(iii) with respect (in both subsections) to the
payment or withholding of Taxes, and the representations and warranties in
Sections 5.7(d) and 5.11, shall survive for the applicable statute of
limitations. All representations and warranties of KCS set forth in this
Agreement shall survive the Closing until the Expiration Date. All covenants or
other agreements in this Agreement shall terminate at the Effective Time, except
the covenants in Sections 7.3, 7.6, 7.9, 7.12, 7.13, 7.14 and 7.15 which shall
survive the Closing indefinitely or for the period of the respective statutes of
limitation relating thereto.
(b) Notwithstanding anything in this Agreement to the contrary, the sole
and exclusive basis on which any Party may recover monetary damages for any
breach of this Agreement by any other Party, whether based upon breach of
representations and warranties, breach of any covenant, or otherwise, shall be
in accordance with the indemnification provisions set forth in this Article 10,
and subject to the limitations and exclusions set forth in this Article 10,
PROVIDED however, that such exclusive remedies for monetary damages shall not
preclude any Party from pursuing the remedies of specific performance,
injunctive relief, declaratory judgment or any other non-monetary equitable
remedies available to such Party under Applicable Law.
(c) All Losses (as defined below) for which any Party may seek
indemnification hereunder shall be net of (i) any insurance recoveries received
by such Party or to which such party is entitled, (ii) any amounts which such
Party has received or is entitled to receive from any third party under any
indemnification or other similar agreement, and (iii) any Tax benefits accruing
to such Party as a result of the Losses.
SECTION 10.2 INDEMNIFICATION BY SELLERS.
(a) Subject to the limitations contained in this Article 10, Sellers,
jointly and severally, shall indemnify and hold KCS, the Surviving Company and
each of their Subsidiaries (including GTFM and the GTFM Subsidiaries), and each
of their respective officers, directors, alternate directors, employees,
members, stockholders, agents and representatives ("KCS Indemnitees") harmless
from and against all losses, damages, liabilities, claims, demands, obligations,
deficiencies, payments, judgments, settlements, costs and expenses of any nature
whatsoever (including the costs and expenses of any and all investigations,
actions, suits, proceedings, demands, assessments, judgments, orders,
settlements and compromises relating thereto, and reasonable attorneys',
accountants', experts' and other fees and expenses in connection
therewith) ("Losses") resulting from, arising out of, or due to, directly or
indirectly, any of the following:
(i) Any inaccuracy or misrepresentation in, or breach of, any
representation or warranty of Sellers contained in Article 5 (excluding, to
avoid duplication, those which are the subject of indemnification under
Section 10.5), in any schedule or exhibit delivered hereunder by any of
Sellers or in any certificates delivered by any of Sellers pursuant to this
Agreement, or any breach or nonfulfillment of any covenant or agreement of
any of Sellers contained in this Agreement, in any schedule or exhibit
delivered hereunder by any of Sellers or in any certificates delivered by
any of Sellers pursuant to this Agreement, or any claims, causes of
actions, rights asserted or demands made by any third parties (including
any Governmental Authority) arising from or relating to any of the
foregoing;
(ii) Any action (other than any actions relating to the arrangements
with DeTeresa or which are the subject of the Management Claims, the
Acquisition Claims or the Authority Litigation) by or at the direction of
any Person released pursuant to Section 7.15 hereof (except for Larry M.
Lawrence and the officers and directors of KCS) or the Authority Litigation
Agreement, or any Designated Person that (x) constituted a fraud or a
criminal act equivalent to a felony under the Laws of the jurisdiction
where the act occurred (including the burden of proof required under such
Laws) or (y) occurred during the period from April 20, 2003 to the date of
this Agreement and required the approval of KCS under the terms of the
Original Acquisition Agreement, which approval was not obtained and
resulted in Losses to GTFM or any GTFM Subsidiary in excess of $1 million.
The term "Designated Person" means any person identified on Exhibit P.
(iii) Penalties and other termination payments aggregating more than
$1 million (including any punitive, special, exemplary or other similar
damages not incurred as a result of a wrongful act by KCS) required to be
paid by the GTFM Group to terminate any Contract (x) which was required to
be, but was not, identified in Section 5.7 of the Seller Disclosure
Schedule and (y) which is actually terminated prior to the eighteen (18)
month anniversary of the Closing Date; PROVIDED, that prior to any such
termination, KCS shall give notice to the Sellers of its desire to
terminate the Contract and the Sellers shall have the right at their
expense to negotiate with the other parties to such Contract as to the
termination of any such Contract, but the exercise of such right by Sellers
shall not prejudice or prevent the exercise by KCS of its rights under this
subsection (iii);
(iv) Claims against TMM or any of its Affiliates for any breach in the
performance during the two year period following the Closing Date of any
obligation of TMM or any of its Affiliates under any Continuing Affiliate
Agreement; and
(v) Any litigation, arbitration, mediation or other adversary
proceeding brought against any KCS Indemnitee by De Teresa or any of its
Affiliates, other than for fees or expenses incurred in the Ongoing
Litigation Matters which do not exceed the amounts contemplated in Section
5.7(d).
(b) Sellers' indemnification obligations under Section 10.2(a)(i) for any
inaccuracy or misrepresentation in, or breach of any representation or warranty
regarding GTFM or its Subsidiaries, except for the representations and
warranties set forth in Sections 5.7, 5.11 and 5.21, shall be limited to 51% of
Losses and then only to the extent such 51% of Losses amount to, in the
aggregate, $5 million or more; PROVIDED, that for the purpose of computing this
limitation on Sellers' indemnification obligations, (i) Losses shall be computed
without regard to whether such Losses resulted in a GTFM Material Adverse Effect
(i.e., if a representation or warranty is qualified by GTFM Material Adverse
Effect or words of similar import and, giving effect to any such qualification,
there has been a breach of such representation or warranty, then the computation
of Losses as a result of such breach shall take effect of the full amount of
such Losses and not solely the amount that exceeded an amount that resulted in a
GTFM Material Adverse Effect), (ii) Losses shall exclude all Losses with respect
to any single matter where the amount of the Losses arising out of such matter
is less than $50,000 (PROVIDED, that in computing such amount, all matters
arising out of the same set of facts or substantially the same set of facts
shall be aggregated), (iii) to the extent that the calculation of Losses
depends, in whole or in part, on any matters relating to the financial
statements of any member of the GTFM Group, such calculation shall be made
exclusively by reference to IFRS and to financial statements prepared in
accordance with IFRS, and (iv) Losses which could be subject to the limitations
of this subsection (b) but which also constitute Losses that are not subject to
such limitations, shall be deemed not subject to the limitations in this
subsection (b).
(c) Any claim against Sellers for indemnification for Losses (except for
those relating to Taxes, or the matters referred to in Sections 10.2(a)(iii),
(iv) and (v) and any Losses arising out of or resulting from any action or
omission on the part of any Seller or its Affiliate that involved a crime, fraud
or willful misconduct,) shall be satisfied exclusively out of, and the maximum
aggregate liability of all the Sellers for such Losses shall be limited to, the
assets held in the Indemnity Escrow; provided, at KCS's election, any claim
against Sellers for indemnification for Losses may be satisfied from assets
remaining in the Indemnity Escrow. Any claim for indemnification against the
assets in the Indemnity Escrow, unless such claim is not contested by TMM, shall
be made by KCS by instituting arbitration proceedings in accordance with the
dispute resolution procedures set forth in Section 12.11; PROVIDED, no more than
two (2) such arbitration proceedings may be instituted and no such claim or
arbitration proceeding may be instituted later than April 1, 2007.
(d) Any claim for indemnification pursuant to Article 10 by a KCS
Indemnitee other than KCS shall be brought only by and through KCS, and not
directly by such other KCS Indemnitee.
SECTION 10.3 INDEMNIFICATION BY KCS.
(a) Subject to the limitations contained in this Article 10, KCS shall
indemnify and hold harmless Sellers, each of their Subsidiaries and each of
their respective officers, directors, alternate directors, employees, members,
stockholders, agents and representatives ("Seller Indemnitees") from and against
all Losses resulting from, arising out of, or due to, directly or indirectly,
any inaccuracy or misrepresentation in, or breach of, any representation or
warranty of KCS contained in Article 6, in any schedule or exhibit delivered
hereunder by KCS or in any certificates delivered by KCS pursuant to this
Agreement, or any breach or nonfulfillment of any covenant of KCS contained in
this Agreement, in any schedule or exhibit delivered hereunder by KCS or in any
certificates delivered by KCS pursuant to this Agreement, or any claims, causes
of actions, rights asserted or demands made by any third parties (including any
Governmental Authority) arising from or relating to any of the foregoing.
(b) KCS's indemnification obligations under this Article 10 shall be
limited to Losses which amount to, in the aggregate, $10 million or more,
provided that for the purpose of computing this limitation or KCS's
indemnification obligations, Losses shall be calculated without regard to
whether such Losses involved a KCS Material Adverse Effect (i.e., if a
representation or warranty is qualified by KCS Material Adverse Effect or words
of similar import and, giving effect to any such qualification, there has been a
breach of such representation or warranty, then the computation of Losses as a
result of such breach shall take effect of the full amount of such Losses and
not solely the amount that exceeded an amount that resulted in a KCS Material
Adverse Effect). The limitation set forth in the first sentence of this Section
10.3(b) shall not be applicable to any Losses arising out of or resulting from
any action or omission on the part of KCS or its Affiliate that involved a
crime, fraud or willful misconduct. Losses shall also exclude all Losses with
respect to any single matter where the amount of the Losses arising out of such
matter are less than $50,000 (provided, that in computing such amount, all
matters arising out of the same set of facts or substantially the same set of
facts shall be aggregated).
(c) Any claim for indemnification pursuant to this Article 10 by a Seller
Indemnitee other than TMM shall be brought only by and through TMM and not
directly by such other Seller Indemnitee.
SECTION 10.4 PROCEDURES FOR THIRD-PARTY CLAIMS.
(a) In order for a Person (the "Indemnified Party") to be entitled to any
indemnification provided for under Section 10.2 or 10.3 in respect of, arising
out of or involving a claim made by any Person (other than another Party or its
Affiliate) against the Indemnified Party (a "Third-Party Claim"), such
Indemnified Party must notify the indemnifying party in writing of the
Third-Party Claim promptly (but in any event not later than the second Business
Day in the case
of any litigation, arbitration or other adversary proceedings) following receipt
by such Indemnified Party of written notice of the Third-Party Claim; PROVIDED,
however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually materially prejudiced (including with respect to the
defense of such Third Party-Claim) as a result of such failure. Thereafter, the
Indemnified Party shall deliver to the indemnifying party, as promptly as
practicable following the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified Party
relating to the Third-Party Claim that are not separately addressed to the
indemnifying party.
(b) If a Third-Party Claim is made against an Indemnified Party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party; provided, however, that such counsel is not reasonably
objected to by the Indemnified Party. Should the indemnifying party so elect to
assume the defense of a Third-Party Claim, the indemnifying party shall not be
liable to the Indemnified Party for any reasonable legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof. If the
indemnifying party assumes such defense, the Indemnified Party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense; PROVIDED,
however, that the indemnifying party shall bear the reasonable fees and expenses
of such separate counsel (i) if the Parties to any such action or proceeding
(including impleaded parties) include other Parties and representation of both
Parties would, in the reasonable opinion of counsel for the Indemnified Party,
be inappropriate due to a conflict of interest, or (ii) if the indemnifying
party shall not have employed counsel (other than counsel that is reasonably
objected to by the Indemnified Party) within a reasonable time after the
Indemnified Party has given notice of the institution of a Third-Party Claim in
compliance with Section 10.4(a). The indemnifying party shall be liable for the
reasonable fees and expenses of counsel employed by the Indemnified Party for
any period during which the indemnifying party has not assumed the defense
thereof, PROVIDED, however, that such counsel is not reasonably objected to by
the indemnifying party. If the indemnifying party chooses to defend or prosecute
a Third-Party Claim, all the Indemnified Parties shall cooperate in the defense
or prosecution thereof at the indemnifying party's expense. Such cooperation
shall include the retention and (upon the indemnifying party's request) the
provision to the indemnifying party of records and information that are
reasonably relevant to such Third-Party Claim, and making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder. If the indemnifying party assumes the defense
of a Third-Party Claim, the Indemnified Party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third-Party Claim without
the indemnifying party's prior written consent (which consent shall not be
unreasonably withheld or delayed). If the indemnifying party assumes the defense
of a Third-Party Claim, the Indemnified Party shall agree to any settlement,
compromise or discharge of a Third-Party Claim that the indemnifying party may
recommend and that by its terms obligates the indemnifying party to pay the full
amount of the liability in connection with such Third-Party Claim, which
releases the Indemnified Party completely in connection with such Third-Party
Claim and that would not otherwise materially adversely affect the Indemnified
Party.
SECTION 10.5 TAX INDEMNIFICATION.
(a) Sellers shall, jointly and severally, indemnify and hold each of the
KCS Indemnitees harmless from and against 51% of all Taxes and associated
penalties, interest and similar charges of GTFM and the GTFM Subsidiaries
relating to periods ending prior to the Closing Date and that part of any
Straddle Period ending on the Closing Date and which exceed the amounts set
forth on the Tax Returns and reports filed by GTFM or its Affiliates for such
periods which GTFM or any GTFM Subsidiary becomes obligated to pay pursuant to
this Section 10.5.
(b) Sellers' indemnification obligations under this Section 10.5 shall not
be limited to the assets held in the Indemnity Escrow or the VAT Escrow;
PROVIDED, however, that at the election of KCS, to the extent assets remain in
the Indemnity Escrow or the VAT Escrow, Sellers' indemnification obligations may
be satisfied therefrom.
(c) None of the KCS Indemnitees, GTFM or any GTFM Subsidiaries shall make
any payment to any of the Sellers or any other Person or Persons on account of
any adjustment to any Tax item of GTFM or the GTFM Subsidiaries for any Tax
period ending prior to the Closing Date, or any portion of any Straddle Period
ending on the Closing Date, regardless of whether any such payments would
otherwise be payable pursuant to any agreement among any of the Sellers, GTFM
and the GTFM Subsidiaries or any other Person or Persons, or pursuant to any
provision of Applicable Law relating to Tax consolidation or otherwise.
(d) KCS shall indemnify and hold Sellers harmless from and against all
Taxes of GTFM and the GTFM Subsidiaries for periods beginning after the Closing
Date and the portion of any Straddle Period beginning after the Closing Date, as
to which Sellers have no indemnification obligations to the KCS Indemnitees
under this Section 10.5.
(e) (i) In the event that any Mexican governmental taxing authority shall
assert that Taxes are due (a "Tax Assessment") from GTFM or any GTFM
Subsidiary (the "GTFM Taxpayer") with respect to any period covered by
Sellers' indemnification obligations under this Section 10.5, GTFM shall
give written notice thereof to TMM and shall consult with an advisor chosen
by GTFM which is knowledgeable about Tax Laws of the UMS.
(ii) Following such consultation, GTFM shall give written notice to
TMM of GTFM's determination, including the reasons therefor, to pay,
contest, or pay and contest the Tax Assessment. If the Tax Assessment is
$10,000 or more, the procedure set forth below in clauses (iii) through (v)
of this Section 10.5(e) shall be followed. For Tax Assessments of less than
$10,000, TMM shall be bound by GTFM's determination, without resort to that
procedure or to arbitration pursuant to Section 12.11.
(iii) If TMM disagrees with GTFM's determination, TMM shall advise
GTFM in writing within ten (10) days after the notice from GTFM. Following
receipt of a notice of disagreement
from TMM, GTFM shall promptly consult with one of the advisors identified
in Exhibit O (a "Selected Tax Advisor") as to whether GTFM's determination
is reasonable from the perspective of the GTFM Taxpayer. If the Selected
Tax Advisor agrees that GTFM's determination was reasonable, then Seller
shall have an indemnification obligation pursuant to Section 10.5 with
respect to such matter and shall pay (or advance, in the case of payment
and contest) 51% of the Tax Assessment upon demand from KCS.
(iv) If the Selected Tax Advisor disagrees with GTFM's determination,
GTFM may consult another Selected Tax Advisor. If the second Selected Tax
Advisor agrees with GTFM's determination, then Sellers' indemnification
obligations shall be as set forth above in subsection (iii). If the second
Selected Tax Advisor disagrees with GTFM, then Sellers' indemnification
obligations pursuant to this Section 10.5 with respect to such matter shall
arise only when the Tax Assessment is finally judicially affirmed by a
final judgment resolving the complaint (QUEJA) of a constitutional appeal
(aMPARO) (a "Final Tax Resolution") If the Tax Assessment is finally
judicially rejected by a Final Tax Resolution, then any amount of the Tax
Assessment paid or advanced by TMM shall be returned to TMM promptly
following receipt thereof by GTFM from the Taxing Authority.
(v) The procedure set forth in this Section 10.5(e) shall be the
exclusive procedure followed by the Parties for resolution of disputes
among the Parties regarding Tax Assessments, and shall be in lieu of the
dispute resolution procedure set forth in Section 12.11. The Parties shall
bear their own expenses incurred under this Section 10.5(e), except that
the fees and expenses of the Selected Tax Advisors shall be borne by GTFM.
ARTICLE 11
DEFINITIONS
SECTION 11.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" shall mean any Person that directly, or indirectly through one
or more intermediaries, Controls, is Controlled by or is under common Control
with the Person specified.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Amendment to the Trust Agreement" means the Amended and Restated
Irrevocable Trust Agreement F-410 dated as of December 14, 2001, among Jose
Francisco Serrano Segovia, Ramon Serrano Segovia, Teresa Serrano Segovia, as
settlors, and GE Capital Bank, S.A., Instituciun de Banca Multiple, GE Capital
Grupo Financiero, as trustee, with the appearance of Citibank, N.A., and with
the acknowledgement and agreement of TMM, TMMH and MM.
"Ancillary Agreements" shall mean the following agreements entered into as
of the date of this Acquisition Agreement: (i) Stockholders' Agreement by and
among KCS, TMM,
TMMH and MM and certain other parties, (ii) Registration Rights Agreement among
KCS, TMM, TMMH and MM and certain other parties, (iii) the Marketing and
Services Agreement; (iv) the Releases, (v) the Closing Escrow Agreement, (vi)
the Indemnity Escrow Agreement, (vii) the VAT Escrow Agreement, (viii) the
Authority Litigation Agreement, (ix) the Put Assignment Agreement, and (x) the
agreement between TMM and KCS relating to cooperation with respect to the Final
Resolution of the Vat Claim and Put.
"Applicable Law" shall mean any Law applicable to KCS, TMM, TMMH, MM or any
of their respective Affiliates, properties, assets, officers, directors,
employees or agents, as the case may be.
"Authority Litigation" shall have the meaning set forth in the Authority
Litigation Agreement.
"Authority Litigation Agreement" shall mean that certain agreement dated
contemporaneously herewith among the Parties relating to the Authority
Litigation claims.
"Business Day" shall mean any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the United
States or the UMS.
"Certificate of Merger" shall have the meaning set forth in Section 3.1 of
this Agreement.
"Change of Control" shall mean, with respect to such Person, the occurrence
of any of the following prior to the Closing Date: (a) any Person or Group,
other than a Subsidiary or any employee benefit plan (or any related trust) of
such Person or a Subsidiary of such Person, becomes the beneficial owner of
voting Securities representing 20% or more of the combined voting power of all
voting Securities of such Person, (b) the individuals who, as of the date of
this Agreement, constitute the board of directors of such Person (the "Incumbent
Directors") cease for any reason to constitute at least 75% of the members of
such board of directors unless, at least 75% of the individuals then
constituting such board of directors were nominated upon the recommendation of
at least 75% of the Incumbent Directors or other directors so nominated, or (c)
approval by the stockholders of such Person of any of the following: (1) a
merger, reorganization or consolidation ("Consolidation") with respect to which
the individuals and entities who were the respective beneficial owners of the
stock and voting Securities of the Person immediately before such Consolidation
do not, after such Consolidation, beneficially own, directly or indirectly, more
than 80% of the combined voting power of the voting Securities of the Person
resulting from such Consolidation in substantially the same proportion as their
ownership immediately before such Consolidation, (2) a liquidation or
dissolution of such Person, or (3) the sale or other disposition of all or
substantially all of the assets of such Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Concession" shall mean the concession title from the Mexican government
held by TFM to provide freight transportation services over its rail lines in
the UMS.
"Confidentiality Agreements" shall mean the Confidentiality Agreements
dated as of November 9, 2002, by and between KCS and TMM, and all amendments
thereto.
"Consultant" shall mean the Company owned by Jose Francisco Serrano Segovia
that has entered into the Consulting Agreement with KCS.
"Consulting Agreement" shall mean that agreement between Consultant and KCS
dated as of the date hereof.
"Contracts" shall mean all written or oral contracts, agreements, evidences
of indebtedness, guarantees, leases and executory commitments to which any
member of the GTFM Group is a party (jointly or severally, in whole or in part,
with others or solely) or by which any of the GTFM Assets are bound, or
otherwise related to the GTFM Business.
"Control" shall mean the ability whether directly or indirectly to direct
the affairs of another by means of ownership of assets or voting Securities, or
by contract.
"Designated Person" shall have the meaning set forth in Section 10.2(a)(ii)
of this Agreement.
"Dismissals" shall mean the dismissals or terminations that are required in
accordance with the terms of this Agreement, of the Acquisition Agreement Claims
and the Management Claims referred to in Section 7.15(a), the Arbitration
referred to in Section 7.15(c) and the litigation matters referred to in
Sections 7.15(e) and (f).
"Encumbrance" shall mean any lien, pledge, mortgage, security interest,
claim, charge, easement, limitation, commitment, encroachment, restriction
(other than a restriction on transferability imposed by federal or state
securities laws) or other encumbrance of any kind or nature whatsoever (whether
absolute or contingent).
"Environmental Laws" shall mean any and all U.S. and Mexican federal, state
and local statutes, laws, regulations, ordinances or rules in existence on or
prior to the Closing Date relating to (i) the protection of the environment or
natural resources, occupational safety and health, (ii) the effect of the
environment or Hazardous Materials on human health, (iii) emissions, discharges
or releases of Hazardous Materials into the environment, including, ambient air,
surface water, groundwater or land, or (iv) otherwise relating to the handling
of Hazardous Materials or the investigation, clean-up or other remediation or
analysis thereof.
"Environmental Permit" shall mean any permit, approval, identification
number, license and other authorization required under any applicable
Environmental Law, including any administratively complete application that is
sufficient to serve as an authorization for an activity regulated under
Environmental Law.
"ERISA Affiliate" shall mean any Person who is in the same controlled group
of corporations or who is under common control with KCS (within the meaning of
Section 414 of the Code).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
"Final Resolution of the VAT Claim and Put" shall mean any combination of
settlements, resolutions, agreements or other legal actions which collectively
result in KCS or any Affiliate or GTFM or any GTFM Subsidiary receiving the
shares of TFM owned by the Mexican government, without any appeal or other claim
having been brought within one hundred eighty (180) days thereafter by any
governmental agency or other person, and the favorable cancellation of the 1997
Tax audit carried out by the Mexican Tax Administration Service (SERVICIO DE
ADMINISTRACIUN TRIBUTARIA) as a result of which no additional Tax liability is
imposed in connection with the amortization or deduction of the value of the
Concession and Concession related assets and the termination or dismissal with
prejudice, as applicable, of all litigation relating to the VAT Claim and the
Put, or which is otherwise agreed to in writing by KCS, provided KCS receives
the consideration provided for in such written agreement.
"GAAP" shall mean generally accepted accounting principles, consistently
applied, as used in the United States of America as in effect at the time any
applicable financial statements were or are prepared or any act requiring the
application of GAAP was or is performed.
"Governmental Authority" shall mean any United States, Mexican or foreign
government, any state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including the SEC or any other United
States, Mexican or foreign government authority, agency, department, board,
commission or instrumentality of the United States, any state of the United
States or any political subdivision thereof or any foreign jurisdiction, and any
court, tribunal or arbitrator(s) of competent jurisdiction, and any United
States, Mexican or foreign governmental or non-governmental self-regulatory
organization, agency or authority (including the NYSE).
"GTFM Business" shall mean the business and operations of the GTFM Group in
the manner in which the same have been conducted prior to the date hereof, are
currently being conducted and are currently proposed by the GTFM Group to be
conducted, whether conducted by GTFM or any of its Subsidiaries.
"GTFM Financial Statements" shall mean those financial statements referred
to in Section 5.6.
"GTFM Form 20-F" shall mean the Annual Report on Form 20-F for the year
ended December 31, 2003 filed by GTFM with the SEC.
"GTFM Group" shall mean GTFM and the GTFM Subsidiaries, collectively.
"GTFM Material Adverse Effect" shall mean a change, event or occurrence
that has had, or is reasonably likely to have, a material adverse effect on the
business, assets, properties, liabilities, financial condition or results of
operations of the GTFM Group taken as a whole other than any change, event or
occurrence resulting from (i) changes in the railroad industry in the UMS or the
United States generally, (ii) changes in general economic conditions in the
United States or the UMS or the securities markets in general, (iii) terrorist
activities or the commencement or escalation of any war or armed hostilities,
which do not disproportionately affect the GTFM Group, or (iv) performance of
this Agreement in accordance with its terms.
"GTFM Subsidiaries" shall mean all of the Subsidiaries of GTFM except
Mexrail, Inc. and its Subsidiaries.
"GTFM Trademarks" shall mean all trademarks of GTFM and its Subsidiaries.
"Hazardous Materials" shall mean (i) any petroleum, petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls, or (ii) any chemical, material or other
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
"HSR Act" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder.
"IFRS" shall mean International Financial Reporting Standards, consistently
applied as used in the UMS as in effect at the time any applicable financial
statements were or are prepared or any act requiring compliance with IFRS was or
is performed.
"Income Taxes" shall mean all Taxes, charges, fees, levies or other
assessments imposed by any Taxing Authority and based on or measured solely with
respect to income or profits, including any interest, penalties or additions
attributable or imposed with respect thereto.
"Intellectual Property" shall mean all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions copyrights and copyright rights, processes, formulae, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"Investment Advisers Act" shall mean the Investment Advisers Act of 1940,
as amended, and the rules and regulations of the SEC thereunder.
"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
"KCS Assets" shall mean the properties, assets, contracts and rights of any
kind, whether tangible or intangible, real or personal, necessary to enable KCS
(prior to the Closing) and the Surviving Company (after the Closing) to conduct
the KCS Business as presently conducted.
"KCS Business" shall mean the consolidated business and operations of KCS
and its Subsidiaries in the manner in which the same have been conducted prior
to the date hereof, are currently being conducted and are currently proposed by
KCS and its Subsidiaries to be conducted, whether conducted by KCS or any of its
Subsidiaries.
"KCS Disclosure Schedule" shall have the meaning set forth in the
introduction to Article 6 of this Agreement.
"KCS Material Adverse Effect" shall mean a change, event or occurrence that
has had, or is reasonably likely to have, a material adverse effect on the
business, assets, properties, liabilities, financial condition or results of
operations of KCS and its Subsidiaries, taken as a whole other than any change,
event or occurrence resulting from (i) changes in the railroad industry in the
United States generally, (ii) changes in general economic conditions in the
United States or the securities markets in general, (iii) terrorist activities
or the commencement or escalation of any war or armed hostilities, which do not
disproportionately affect KCS or its Subsidiaries, or (iv) performance of this
Agreement in accordance with its terms.
"KCS Stockholder Rights Plan" shall mean the Rights Agreement, dated as of
September 19, 1995, between KCS and Harris Trust & Savings Bank, as Rights
Agent.
"KCS Stock Option Plan" shall mean the 1991 Amended and Restated Stock
Option and Performance Award Plan, as amended and restated effective November 7,
2002.
"Knowledge" of (a) KCS shall mean actual knowledge after reasonable inquiry
of Michael Haverty, Ronald Russ, Gerald Davies, Larry Lawrence, Jay Nadlman or
any other executive officer of KCS, and (b) TMM, TMMH or MM shall mean actual
knowledge after reasonable inquiry by Jose Segovia Serrano, Javier Segovia
Serrano, Juan Fernandez Galeazzi, Jacinto Marina Cortes, Mario Mohar Ponce, or
any executive officer of TMM, TMMH or MM.
"Law" shall mean any U.S., Mexican or foreign federal, state or local
statute, law (whether statutory or common law), ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment,
decree, policy, guideline or other requirement or arbitration award or finding
(including those of the NYSE or any other applicable self-regulatory
organization).
"Losses" shall have the meaning set forth in Section 10.2(a) of this
Agreement.
"MM Subsidiaries" shall mean GTFM and the GTFM Subsidiaries.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Permitted Encumbrance" shall mean (i) liens reflected in the GTFM
Financial Statements, (ii) liens imposed by operation of law and not for
borrowed money, such as materialmen's, mechanics', workers', repairmen's,
employees', carriers', vendors' warehousemen's and other like liens that are
insignificant, individually and in the aggregate, to the operation of the GTFM
Business, and (iii) liens incurred in the ordinary course of business and not
for borrowed money that are insignificant, individually and in the aggregate, to
the operation of the GTFM Business.
"Person" shall mean any individual, firm, corporation, partnership (limited
or general), limited liability company, joint venture, association, trust or
other entity.
"Put" shall mean the right (currently being contested through legal
proceedings) of the Federal Government of the United Mexican States under the
Put Agreement to compel purchase of the shares of TFM held by the government.
"Put Agreement" shall mean the Agreement between the Federal Government of
the United Mexican States, GTFM, TMM and KCS, dated June 9, 1997.
"Put Assignment Agreement" shall mean the Agreement of Assignment and
Assumption of Rights, Duties and Obligations among TMM, KCS and TFM dated as of
the date of this Agreement.
"Put Purchase Price" shall mean the purchase price for the 20% of TFM stock
held by the Federal Government of the United Mexican States, as defined in the
Put Agreement and calculated under the Twenty-Sixth Clause of the Stock Purchase
Agreement.
"Releases" shall mean the mutual Release agreements, dated the date hereof
(which shall become effective at the Closing or as otherwise specified therein)
between KCS, TMM, certain of their respective Affiliates and other parties
identified therein.
"Release Resolutions" shall mean the resolutions, in the form attached
hereto as Exhibit C, adopted by the respective Boards of Directors identified
therein.
"SEC" shall mean the Securities and Exchange Commission, and any successor
thereto.
"Securities" shall mean any securities as defined in the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder.
"Securities Laws" shall mean the Securities Act, the Exchange Act, the
Investment Company Act, the Investment Advisers Act, all applicable state "blue
sky" laws, all applicable Mexican and foreign securities laws, and the rules and
regulations promulgated thereunder.
"Seller Material Adverse Effect" shall mean a change, event or occurrence
that has had, or is reasonably likely to have, a material adverse effect on the
business, assets, properties, liabilities, financial condition or results of
operations of Sellers and their Subsidiaries, taken as a whole other than any
change, event or occurrence resulting from (i) changes in the railroad industry
in the United States generally, (ii) changes in general economic conditions in
the United States or the securities markets in general, (iii) terrorist
activities or the commencement or escalation of any war or armed hostilities,
which do not disproportionately affect a Seller or any of its Subsidiaries, or
(iv) performance of this Agreement in accordance with its terms.
"Subsidiary" of a Person shall mean any other Person more than 50% of the
voting stock (or of any other form of other voting or controlling equity
interest in the case of a Person that is not a corporation) of which is
beneficially owned by the Person directly or indirectly through one or more
other Persons.
"Tax" and "Taxes" shall mean all U.S. and Mexican federal, provincial,
territorial, state, municipal, local, foreign or other taxes, imposts, rates,
levies, assessments, contributions and other similar charges (and all interest
and penalties thereon and additions thereto imposed by any Governmental
Authority), including all income, excise, franchise, gains, capital, real
property, goods and services, transfer, value added, gross receipts, windfall
profits, severance, ad valorem, personal property, production, sales, use,
license, stamp, documentary stamp, mortgage recording, employment, payroll,
social security (IMSS), housing, unemployment, disability, estimated or
withholding taxes, housing fund (Infonavit), retirement fund contributions (SAR)
and all customs and import duties.
"Tax Return" shall mean any and all returns, reports, declarations,
information statements, schedules or other documents required to be provided by
GTFM or any of its Subsidiaries with respect to Taxes to any Governmental
Authority or Tax authority or agency, whether U.S., Mexican or foreign.
"Taxing Authority" shall mean any government authority, U.S., Mexican or
other, having jurisdiction over the assessment, determination, collection, or
other imposition of Taxes.
"TFM" shall mean TFM, S.A. de C.V.
"U.S." means the United States of America.
"VAT" means the Mexican value added tax.
"VAT Claim" means TFM's claim against the Mexican Treasury for the refund
of a VAT payment in the original principal amount of 2,111,111,790 pesos, plus
indexation and interest.
"VAT Payment" means the shares or cash compensation received by TFM or its
designee from the Mexican government on the VAT Claim.
"Volume Weighted Price" means the average trading price per share for KCS
Common Stock on the NYSE, as reported on Bloomberg (VAP function), for the
twenty (20) consecutive trading days immediately preceding the later of (i) the
Closing Date, or (ii) the date of the public announcement by KCS of the Final
Resolution of the VAT Claim and Put.
"Voting Trust" means the irrevocable Trust Agreement dated as of December
15, 2004, among Jose Francisco Serrano Segovia, Ramon Serrano Segovia, Teresa
Serrano Segovia, and Servicios Directivos Servia, S.A. de C.V., as settlors and
beneficiaries, and Ixe Banco, S.A., Instituciun de Banca Multiple, Ixe Grupo
Financiero, Division Fiduciaris, as trustee, with the acknowledgement and
agreement of TMM, TMMH and MM.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 AMENDMENTS; WAIVER. This Agreement may not be amended, altered
or modified except by written instrument executed by KCS and TMM. KCS and TMM
may amend this Agreement without notice to or the consent of any other Party and
any third party. Any agreement on the part of KCS and TMM to waive (i) any
inaccuracies in any representation and warranty contained herein or in any
document, certificate or writing delivered pursuant hereto, or (ii) compliance
with any of the agreements, covenants or conditions contained herein, shall be
valid only if set forth in an instrument in writing signed on behalf of the
party against whom the waiver is to be effective. No such waiver shall
constitute a waiver of, or estoppel with respect to, any subsequent or other
inaccuracy, breach or failure to strictly comply with the provisions of this
Agreement. Any delay or omission on the part of KCS or TMM to exercise any right
hereunder shall not in any manner impair the exercise of any right accruing to
it hereafter.
SECTION 12.2 ENTIRE AGREEMENT. This Agreement (including the Seller
Disclosure Schedule, the KCS Disclosure Schedule, any other exhibits, schedules,
certificates, lists and documents referred to herein, and any other agreements
or documents executed by the Parties simultaneously herewith or pursuant
thereto), the Ancillary Agreements, the Consulting Agreement and the
Confidentiality Agreements shall constitute the entire agreement of the Parties
with respect to the subject matter hereof and thereof and to the extent this
Agreement (as defined in this Section 12.2) is in conflict with any prior
agreements or understandings, written and oral, among the Parties, this
Agreement shall prevail. Upon Closing, the following agreements shall be deemed
terminated notwithstanding any provisions therein to the contrary: Letter of
Intent, dated August 28, 1995, between TMM and KCS; the Joint Venture
Implementation Agreement, dated September 7, 1995, between TMM and KCS; the
undated Letter of Understanding between TMM and KCS; the Shareholders Agreement
dated as of May 1997, by and among KCS, Caymex, Grupo Servia, S.A. de C.V., TMM
and MM; Management Services Agreements between KCS and TFM, dated May 9, 1997,
and between TMM and TFM, dated May 9, 1997 (as such agreements have been amended
and extended from time to time).
SECTION 12.3 INTERPRETATION.
(a) The Recitals, Exhibits and Schedules to this Agreement are incorporated
by reference into, and are deemed to be part of, this Agreement. When a
reference is made in this Agreement to Sections, Exhibits or Schedules, such
reference shall be to a Section of or an Exhibit or a Schedule to this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The word "shall" when used in this
Agreement is a word of mandate, construed as "must." Unless expressly stated
otherwise, all references to "Dollars" or "$" in this Agreement shall mean U.S.
dollars.
(b) Each of the Seller Disclosure Schedule and the KCS Disclosure Schedule
shall set forth items the disclosure of which is necessary or appropriate either
in response to an express disclosure requirement contained in a provision hereof
or as an exception to one or more of such Party's representations or warranties
or one or more of its covenants contained in this Agreement, in each case making
reference to the particular subsection of this Agreement requiring such
disclosure or to which such exception is being taken.
(c) This Agreement is written in the English language. The Parties waive
any rights they may have under Applicable Law to have this Agreement or any of
the Ancillary Agreements made in any language other than English; PROVIDED to
the extent that any such waiver shall not be valid under Applicable Law, the
Parties agree that in case of any ambiguity or contradiction between the English
language version of this Agreement and any translation into any other language,
that the English language version shall control.
SECTION 12.4 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
SECTION 12.5 NOTICES. Unless otherwise provided herein, all notices and
other communications hereunder shall be in writing and shall be deemed given if
(a) delivered in person, (b) transmitted by facsimile (with written
confirmation), or (c) delivered by an express courier (with written
confirmation) to the Parties at the following addresses (or at such other
address for a Party as shall be specified by like notice):
If to Sellers:
Grupo TMM, S.A.,
Avenida de la Cuspide, No. 4755
Colonia Parques del Pedregal
14010 Mexico, D.F.
Attention: Corporate Secretary
CT Corporation
111 Eighth Avenue
New York, New York 10011
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.
Any Party hereto may from time to time change its address for notices under this
Section 12.5 by giving at least ten (10) days' notice of such changed address to
the other Parties hereto.
SECTION 12.6 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions of this Agreement.
SECTION 12.7 BINDING EFFECT; PERSONS BENEFITING; NO ASSIGNMENT. This
Agreement shall inure to the benefit of and be binding upon the Parties and
their respective successors and assigns. No provision of this Agreement is
intended or shall be construed to confer upon any entity or Person other than
the Parties and their respective successors and permitted assigns any right,
remedy or claim under or by reason of this Agreement or any part hereof. This
Agreement may not be assigned by any of the Parties without the prior written
consent of the other Parties.
SECTION 12.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the Parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision of this Agreement
be enforced by, any other Person.
SECTION 12.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each original or facsimile of which shall be deemed an original,
but all of which taken together shall constitute one and the same agreement, it
being understood that all of the Parties need not sign the same counterpart.
SECTION 12.10 SPECIFIC ENFORCEMENT. The Parties acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that each of the Parties hereto
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement by the other and to enforce specifically the
terms and provisions of this Agreement, this being in addition to any other
remedy to which they may be entitled by law or equity. The Parties agree that
each Party shall have the right to apply for any of the prejudgment measures
(MEDIDAS CAUTELARES) to which the Parties may be entitled to under the
applicable law of the UMS to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions of this
Agreement. The Parties agree that actions with respect to any such prejudgment
measures (MEDIDAS CAUTELARES) may be instituted in any local or federal civil
courts of the UMS which has proper jurisdiction to enforce those prejudgment
measures (MEDIDAS CAULTELARES).
SECTION 12.11 GOVERNING LAW; DISPUTE RESOLUTION.
(a) Resolution of any and all disputes between KCS and one or more of
Sellers (each of KCS, on the one hand, and one or more of the Sellers, on the
other hand, a "Dispute Party" and together, the "Dispute Parties") arising from
or in connection with this Agreement (except those to be resolved pursuant to
Section 10.5(e)), the Ancillary Agreements or any transactions contemplated by
this Agreement or the Ancillary Agreements, whether based on contract, tort,
common law, equity, statute, regulation, order or otherwise, ("Disputes")
including Disputes arising in connection with claims by third persons, shall be
exclusively governed by and settled in accordance with the provisions of this
Section 12.11; PROVIDED, that the foregoing shall not
preclude equitable or other judicial relief to enforce the provisions hereof or
to preserve the status quo pending resolution of Disputes hereunder.
(b) THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN THE PARTIES HERETO AND THE
ADJUDICATION AND ENFORCEMENT THEREOF, SHALL BE GOVERNED BY AND INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE AND
THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO APPLICABLE
CHOICE OF LAW PROVISIONS.
(c) As to any Dispute which is not resolved in the ordinary course of
business, the Dispute Parties shall first attempt in good faith to promptly
resolve any Dispute by negotiations between executives. Either of the Dispute
Parties may initiate this procedure by delivery of written notice of the Dispute
(the "Dispute Notice") to the other. Not later than twenty (20) days after
delivery of the Dispute Notice, one executive of one of the Dispute Parties with
authority to settle the Dispute shall meet with one executive of the other
Dispute Party with authority to settle the Dispute at a reasonably acceptable
time and place, and thereafter as such executives shall deem reasonably
necessary. The executives shall exchange relevant information and endeavor to
resolve the Dispute. Prior to any such meeting, each Dispute Party's executive
shall advise the other as to any individuals who will attend such meeting with
the executive. All negotiations pursuant to this Section 12.11(c) shall be
confidential and shall be treated as compromise negotiations for purposes of
Rule 408 of the Federal Rules of Evidence and similarly under other local or
foreign rules of evidence.
(d) Each Dispute Party hereby agrees to submit all Disputes not resolved
pursuant to Section 12.11(c) to final and binding arbitration in New York, New
York. Either Dispute Party may initiate such arbitration by delivery of a demand
therefor (the "Arbitration Demand") to the other Dispute Party not sooner than
sixty (60) days after the date of delivery of the Dispute Notice but promptly
thereafter; PROVIDED, that if a Dispute Party rejects participation in the
procedures provided under Section 12.11(c), the other Dispute Party may initiate
arbitration at such earlier time as such rejection shall become reasonably
apparent, and, whenever arbitration is initiated, may seek recovery of any
damages or expenses arising from such rejection, including attorney's fees and
expenses, Arbitration Costs (as defined below) in connection with arbitration
hereunder.
(i) Three (3) Arbitrators shall be appointed (the "Arbitrators"), one
of whom shall be appointed by KCS, one by TMM, and the third of whom, who
shall act as the chairman of the arbitral tribunal, shall be appointed by
the first two (2) Arbitrators within ten (10) Business Days of the first
two (2) Arbitrators confirmation by the American Arbitration Association.
Each Party agrees that Sellers shall be considered jointly as one side for
the purposes of constitution of the arbitration tribunal hereunder. If
either Dispute Party fails to appoint an Arbitrator within ten (10)
Business Days of a request in writing by the other Dispute Party to do so
or if the first two Arbitrators cannot agree on the appointment of the
third Arbitrator within ten (10) Business Days of their confirmation by the
American Arbitration Association, then such
Arbitrator shall be appointed by the American Arbitration Association in
accordance with its Commercial Arbitration Rules. As soon as the
arbitration tribunal has been convened, a hearing date shall be set within
fifteen (15) days thereafter; PROVIDED, that the Arbitrators may extend the
date of the hearing upon request of any Dispute Party to the extent
necessary to insure that such Dispute Party is given a reasonable period of
time to prepare for the hearing. Written submittals in the English language
shall be presented and exchanged by both Dispute Parties five (5) Business
Days before the hearing date. At such time the Dispute Parties shall also
exchange copies of all documentary evidence upon which they will rely at
the arbitration hearing and a list of the witnesses whom they intend to
call to testify at the hearing. The Arbitrators shall make their
determination as promptly as practicable after conclusion of the hearing.
(ii) The arbitration shall be conducted in the English language
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. Notwithstanding the foregoing, (A) each Dispute Party shall
have the right to audit the books and records of the other Dispute Party
that are reasonably related to the Dispute; (B) each Dispute Party shall
provide to the other, reasonably in advance of any hearing, copies of all
documents which a Dispute Party intends to present in such hearing; (C) all
hearings shall be conducted on an expedited schedule; and (D) all
proceedings shall be confidential, except that either Dispute Party may at
its expense make a stenographic record thereof.
(iii) The Arbitrators shall endeavor to complete all hearings not
later than one hundred twenty (120) days after their tribunal has been
convened, and shall make a final award as promptly as practicable
thereafter. Such award shall be communicated, in writing, by the
Arbitrators to the Dispute Parties, and shall contain specific findings of
fact and conclusions of law in accordance with the governing law set forth
in Section 12.11(b) of this Agreement. Any award of such Arbitrators shall
be final and binding upon the Parties to this Agreement and shall not be
attacked by any of the Parties to this Agreement in any court of law and
may be enforced in any court having jurisdiction, including expressly the
courts of the State of New York, United States of America, and the courts
of the Federal District of Mexico. Any such award shall include appropriate
instructions to the Escrow Agent under the Closing Escrow Agreement. The
Arbitrators shall apportion all costs and expenses of the arbitration,
including the Arbitrators' fees and expenses, fees and expenses of experts
and fees and expenses of translators ("Arbitration Costs") between the
prevailing and non-prevailing Dispute Party as the Arbitrators shall deem
fair and reasonable. In circumstances where (A) a Dispute has been asserted
or defended against on grounds that the Arbitrators deem manifestly
unreasonable, or (B) the non-prevailing Dispute Party has rejected
participation in procedures under Section 12.11(c), the Arbitrators may
assess all Arbitration Costs against the non-prevailing Dispute Party and
may include in the award the prevailing Dispute Party's attorney's fees and
expenses in connection with any and all proceedings under this Section
12.11. Notwithstanding the foregoing, in no event may the Arbitrators award
multiple or punitive damages.
(e) Pursuant to an agreement of the Parties hereto or a judicial
determination that a Dispute is not subject to final and binding arbitration as
set forth in Section 12.11, KCS and each of Sellers irrevocably agrees that any
legal action or proceeding against it with respect to
this Agreement and any transaction contemplated by this Agreement shall be
brought only in the courts of the State of New York, or of Federal courts of the
United States of America sitting in New York, and by execution and delivery of
this Agreement, KCS and each of Sellers irrevocably submits to the venue and
jurisdiction of each such court and irrevocably waives any objection or defense
such Party may have to venue or personal jurisdiction in any such court for the
purpose of resolving any claim, dispute, cause of action arising out of or
related to this Agreement (including any claim that the suit or action has been
brought in an inconvenient forum and any right to which it may become entitled
on account of place of residence or domicile), the alleged breach of this
Agreement, the enforcement of the terms of this Agreement, the Acquisition, the
Ancillary Agreements and the other terms contemplated hereby and thereby. A
final judgment in any suit, action or proceeding shall be conclusive and may be
enforced in any court where jurisdiction over the Parties may be had or in which
the Parties are subject to service of process.
(f) Each of the Parties irrevocably appoints CT Corporation (the "Process
Agent"), at 111 Eighth Avenue, New York, New York 10011 (212-894-8940),
respectively, as its agent and true and lawful attorney-in-fact in its name,
place and stead to accept on behalf of each of the Parties and their respective
properties and revenues, service of copies of the summons and complaint and any
other process which may be served in any such suit, action or proceeding brought
in the State of New York, and each of the Parties hereto agrees that failure of
the Process Agent to give any notice of any such service of process to any of
the Parties hereto shall not impair or affect the validity of such service or
the enforcement of any judgment based thereon.
SECTION 12.12 ANNOUNCEMENTS. KCS and TMM shall consult with each other
before issuing, and provide each other the opportunity to review, comment on and
concur with, any press release or other public statement with respect to this
Agreement, the Acquisition, the Ancillary Agreements and the other transactions
contemplated hereby and thereby, except as either Party may determine is
otherwise required by Applicable Law, judicial or administrative action or any
requirement of the NYSE or any other applicable self-regulatory organization.
SECTION 12.13 TERMINATION FEE. In the event of (i) a termination pursuant
to Section 9.1(a)(v), the Party experiencing the Change of Control shall
promptly after a demand therefor remit to the Party terminating in immediately
available funds the sum of Eighteen Million Dollars ($18,000,000), and (ii) a
termination pursuant to Section 9.1(a)(iii) or 9.1(a)(iv) as a result of the
failure of the stockholders of KCS or of TMM to approve the Acquisition if at or
prior to the meeting of such stockholders to approve the Acquisition, the Board
of Directors of KCS, in the case of the KCS stockholders' meeting, or the Board
of Directors of TMM, in the case of the TMM stockholders' meeting, shall have
failed to recommend or shall have withdrawn and not reinstated its
recommendation of, the Acquisition, then the Party whose stockholders shall not
have approved the Acquisition shall remit to the other Party, if the other Party
elects to terminate and promptly after a demand therefor, in immediately
available funds, the sum of Eighteen Million Dollars ($18,000,000). The receipt
of any sums pursuant to this Section 12.13 shall not preclude or diminish any
other rights a Party may have under this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
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 and Secretary
GRUPO TMM, S.A.
By: /s/ Jose Francisco Serrano Segovia
---------------------------------
Name: Jose Francisco 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 Francisco Serrano Segovia
---------------------------------
Name: Jose Francisco 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 Francisco Serrano Segovia
---------------------------------
Name: Jose Francisco Serrano Segovia
Title: Attorney in Fact
By: /s/ Javier Segovia Serrano
---------------------------------
Name: Javier Segovia Serrano
Title: Attorney in Fact
GRUPO TRANSPORTACION FERROVIARIA
MEXICANA, S.A. de C.V.
By: /s/ Jose Francisco Serrano Segovia
---------------------------------
Name: Jose Francisco Serrano Segovia
Title: Attorney in Fact
By: /s/ Javier Segovia Serrano
---------------------------------
Name: Javier Segovia Serrano
Title: Attorney in Fact