Exhibit 10.5
CONSULTING AGREEMENT
BETWEEN
KANSAS CITY SOUTHERN
AND
JOSE F. SERRANO INTERNATIONAL BUSINESS, S.A. DE C.V.
TABLE OF CONTENTS
PAGE
1. Construction.............................................................1
2. Engagement...............................................................2
3. Duties...................................................................3
4. Term.....................................................................4
5. Consulting Services Fees and Escrow......................................4
6. VAT Claim and Put Advisory Fee...........................................5
7. Restrictions on Transfer of Consulting Firm Stock........................5
8. Termination..............................................................5
9. Non-Disclosure...........................................................7
10. Duties Upon Termination; Survival........................................8
11. Compliance with Laws.....................................................8
12. Indemnification..........................................................9
13. Notice..................................................................10
14. Amendment...............................................................11
15. Successors in Interest..................................................11
16. Severability............................................................11
17. Governing Law; Dispute Resolution.......................................11
18. Entire Agreement; Effective Time........................................14
TABLE OF DEFINITIONS
"ACQUISITION" shall have the meaning set forth in the Recitals to this
Agreement.
"ACQUISITION AGREEMENT" shall have the meaning set forth in the Recitals to this
Agreement.
"AFFILIATE" shall mean, with respect to a specified person, (i) any person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified person, and (ii)
any person that is an officer, director, trustee, member or general member of,
or serves in a similar capacity with respect to, the specified person, or of
which the specified person is an officer, director, trustee, member or general
member, or with respect to which the specified person serves in a similar
capacity. For purposes of this definition, the term "control" when used with
respect to a person (including entities incorporated or organized in the UMS)
means (a) the beneficial ownership of 10% or more of the voting interests in
such person, or (b) the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such person, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall have the meaning set forth in the preamble of this Agreement.
"ANNUAL FEE" shall have the meaning set forth in SECTION 5(A) of this Agreement.
"ARBITRATION COSTS" shall have the meaning set forth in SECTION 17(E)(II) of
this Agreement.
"ARBITRATION DEMAND" shall have the meaning set forth in SECTION 17(D) of this
Agreement.
"ARBITRATORS" shall have the meaning set forth in SECTION 18(E) of this
Agreement.
"BOARD" shall mean the Board of Directors of Company.
"BUSINESS" shall have the meaning set forth in the Recitals to this Agreement.
"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 U.S. or the
UMS.
"COMPANY" shall have the meaning set forth in the preamble of this Agreement.
"COMPANY TRADE SECRET" shall have the meaning set forth in SECTION 9 of this
Agreement.
"CONSOLIDATED FEE" shall have the meaning set forth in SECTION 5(A) of this
Agreement.
"CONSULTING COMPENSATION ESCROW" shall have the meaning set forth in SECTION
5(A) of this Agreement.
"CONSULTING COMPENSATION ESCROW AGENT" shall have the meaning set forth in
SECTION 5(A) of this Agreement.
"CONSULTING COMPENSATION ESCROW AGREEMENT" shall have the meaning set forth in
SECTION 5(A) of this Agreement.
"CONSULTING FIRM" shall have the meaning set forth in the preamble of this
Agreement.
"CONSULTING FIRM STOCK" shall have the meaning set forth in SECTION 5(C) of this
Agreement.
"CONSULTING SERVICES" shall have the meaning set forth in SECTION 3(A) of this
Agreement.
"DISABILITY" shall have the meaning set forth in SECTION 8(B) of this Agreement.
"DISPUTES" shall have the meaning set forth in SECTION 17(A) of this Agreement.
"DISPUTE NOTICE" shall have the meaning set forth in SECTION 17(C) of this
Agreement.
"DOLLARS" or "$" shall have the meaning set forth in SECTION 1(A)(IX) of this
Agreement.
"EFFECTIVE TIME" shall mean the time of the occurrence of the Closing of the
Acquisition Agreement.
"EXCHANGE ACT" shall have the meaning set forth in SECTION 5(C) of this
Agreement.
"FOR CAUSE" shall have the meaning set forth in SECTION 8(E) of this Agreement.
"GTFM" shall mean Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V., a
SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS.
"INCLUDING" shall have the meaning set forth in SECTION 1(A)(V) of this
Agreement.
"IRS" shall mean Internal Revenue Service of the U.S.
"JSS" shall have the meaning set forth in the Recitals to this Agreement.
"LABOR LAWSUIT" shall have the meaning set forth in SECTION 8(E)(VIII) of this
Agreement.
"LOSSES" shall have the meaning set forth in SECTION 12 of this Agreement.
"MM" shall mean TMM Multimodal S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL
VARIABLE organized under the laws of the UMS.
"NON-MANAGEMENT DIRECTORS" shall have the meaning set forth in SECTION 5(B) of
this Agreement.
"PARTY" or "PARTIES" shall have the meaning set forth in the preamble of this
Agreement.
"PAYMENT CONDITIONS" shall have the meaning set forth in SECTION 5(B) of this
Agreement.
"PAYMENT DATE" shall have the meaning set forth in SECTION 5(A) of this
Agreement.
"PAYMENT DATE PERIOD" shall have the meaning set forth in SECTION 5(B) of this
Agreement.
"PERSON" shall have the meaning set forth in SECTION 1(A)(VI) of this Agreement.
"PROCESS AGENT" shall have the meaning set forth in SECTION 17(G) of this
Agreement.
"RECORDS" shall have the meaning set forth in SECTION 11(E) of this Agreement.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights Agreement,
dated as of the date of this Agreement, among Company, TMM, TMMH, MM and certain
stockholders of TMM.
"SHALL" shall have the meaning set forth in SECTION 1(A)(VIII) of this
Agreement.
"STOCKHOLDERS' AGREEMENT" shall mean the Stockholders' Agreement, dated as of
the date of this Agreement, among Company, Grupo TMM, S.A. and certain
subsidiaries and stockholders of Grupo TMM, S.A.
"TERM" shall have the meaning set forth in SECTION 4 of this Agreement.
"TFM" shall mean TFM, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE
organized under the laws of the UMS.
"TMM" shall mean Grupo TMM S.A., a SOCIEDAD ANONIMA organized under the laws of
the UMS.
"TMMH" shall mean TMM Holdings S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL
VARIABLE organized under the laws of the UMS and a subsidiary of GTMM.
"TRANSFER" shall have the meaning set forth in SECTION 7 of this Agreement.
"UMS" shall mean the United Mexican States.
"U.S." shall mean the United States of America.
"U.S. LAWS" shall have the meaning set forth in SECTION 11(B) of this Agreement.
"VAT CLAIM AND PUT ADVISORY FEE" shall have the meaning set forth in SECTION
6(A) of this Agreement.
"VOLUME WEIGHTED PRICE" means the average trading price per share of Company
Common Stock on the New York Stock Exchange for the twenty (20) consecutive
trading days immediately preceding the announcement of the Final Resolution of
the VAT and Put (excluding for this purpose the 180 day period for claims and
appeals), as reported on Bloomberg (VAP function).
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "AGREEMENT"), made and entered into as of
this 15th day of December, 2004, but to become effective as hereinafter
provided, by and between Kansas City Southern, a Delaware corporation
("COMPANY"), and Jose F. Serrano International Business, S.A. de C.V., a
SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS,
organized under the laws of the UMS ("CONSULTING FIRM") (individually, a
"PARTY"; collectively, the "PARTIES"). Unless otherwise specified herein, all
capitalized terms used and not defined in this Agreement shall have the meanings
ascribed to them in the Acquisition Agreement (defined below).
RECITALS
WHEREAS, Company, along with its Affiliates, owns and operates a North
American rail network which connects key commercial and industrial markets in
the central U.S. with major industrial cities in the UMS (the "BUSINESS");
WHEREAS, Company, TMM, MM, TMMH and others have entered into an amended and
restated acquisition agreement dated as of December 15, 2004 (the "ACQUISITION
AGREEMENT"), pursuant to which, among other things, all of the shares of stock
of GTFM owned by MM are to be acquired by subsidiaries of Company (the
"ACQUISITION"), resulting in an increase in the Company's interest in and need
for support of the operations of the Business in the UMS;
WHEREAS, Jose F. Serrano Segovia ("JSS"), as Chairman of the Board of
Directors of GTFM, has knowledge and experience regarding Mexican governmental
relationships relevant to the Business;
WHEREAS, JSS has established Consulting Firm to provide certain consulting
services; and
WHEREAS, as a condition to its willingness to enter into the Acquisition
Agreement, Company desires that Consulting Firm agree to provide to the Company
certain consulting services, and Consulting Firm is willing to make such
services available to Company, all on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is agreed by and between Company and Consulting Firm as
follows:
1. CONSTRUCTION.
(a) REFERENCES.
(i) The Recitals to this Agreement shall be incorporated by reference
into, and deemed part of, this Agreement and all references to
this Agreement shall include the Recitals.
(ii) References to any law, legislative act, rule or regulation shall
mean references to such law, legislative act, rule or regulation
in changed or supplemented form or to a newly adopted law,
legislative act, rule or regulation replacing a previous law,
legislative act, rule or regulation.
(iii)References to a number of days shall mean calendar days, unless
expressly indicated otherwise.
(iv) References to an Exhibit, Schedule, Section or Article shall be
to such Exhibit, Schedule, Section or Article of this Agreement,
unless otherwise provided herein.
(v) References to the word "INCLUDING" shall mean "including, without
limitation."
(vi) The word "PERSON" includes, where appropriate, firms,
associations, companies, partnerships, trusts, corporations and
other legal entities, including public bodies, as well as natural
persons.
(vii)Words importing the singular import the plural, and vice versa,
and words importing one gender import the other gender.
(viii) The word "SHALL" when used in this Agreement or any Schedules
hereto is a word of mandate, construed as "must."
(ix) References to "DOLLARS" and "$" in this Agreement shall mean
Dollars of the U.S.
(b) HEADINGS. The Article, Section, Schedule and Exhibit headings of, and
the Table of Contents to, this Agreement are for reference and convenience only
and shall not be considered in the interpretation of this Agreement.
(c) DEFINITIONS. Defined terms used in this Agreement shall have the
meanings specified in the Table of Definitions set forth immediately prior to
the preamble.
2. ENGAGEMENT.
(a) Company hereby agrees to engage Consulting Firm as of the Effective
Time during the Term to provide the Consulting Services, and Consulting Firm
hereby accepts such engagement and agrees to perform the Consulting Services,
upon the terms and conditions of this Agreement. Consulting Firm represents and
warrants that it has full authority to enter into this Agreement and that it is
not restricted in any manner whatsoever from performing services hereunder.
(b) The relationship hereby created between Company and Consulting Firm
shall be that of an independent contractor and shall not be considered as
creating the relationship of employer-employee/laborer, partnership,
principal-agent, joint venture or association of any other kind. Consulting Firm
acknowledges that there does not exist between one or more of
Consulting Firm, JSS or any employee or representative of Consulting Firm, on
the one side, and one or more of Company or its Affiliates, on the other side,
the relationship of employer-employee/laborer, partnership, principal-agent or
joint venture.
(c) Notwithstanding any other provision of this Agreement, unless
Consulting Firm is or becomes subject to taxation in the U.S. as a result of
actions other than those of Company set forth below, Company agrees that it will
not during the Term or thereafter:
(i) take any action that would subject Consulting Firm or JSS to
federal income taxation in the U.S. of any payments or benefits
received by Consulting Firm under this Agreement;
(ii) take any tax position inconsistent with Consulting Firm or JSS
being an independent contractor or not being subject to federal
income taxation in the U.S. in connection with its performance
under this Agreement (unless and until there is a final
non-appealable judgment of a court of competent jurisdiction that
requires Company to do otherwise); or
(iii)require Consulting Firm to perform any Consulting Services that
Consulting Firm's counsel advises Company would reasonably be
expected to subject Consulting Firm or JSS to taxation in the
U.S.
3. DUTIES.
(a) PROVISION OF CONSULTING SERVICES. Consulting Firm shall provide such
consulting services as may be reasonably requested in writing by the Board of
the Company related to the maintenance, fostering and promotion of a positive
relationship between the Company and/or its Affiliates and high-ranking
officials of those branches of the Mexican government that have an impact on the
Mexican railroad industry or the Business (the "CONSULTING SERVICES").
Consulting Firm shall faithfully perform its duties under this Agreement to the
best of its ability, utilizing all of its skills and experience, and shall
devote all business time necessary for the performance of the Consulting
Services hereunder. Company acknowledges that Consulting Firm will render the
Consulting Services in Mexico and in no event in the U.S.
(b) PARTICIPATION OF JSS. Consulting Firm represents and warrants that (i)
JSS is an officer of the Consulting Firm, serving as the legal representative,
and (ii) JSS personally is actively engaged in the provision of Consulting
Services to Company. Company acknowledges that JSS is employed full-time as the
Chief Executive Officer of another corporation and may during the Term have
other or additional business activities or interests, including managing other
enterprises and managing his and his family's investments and business
activities. Nothing herein shall be interpreted to require that JSS devote his
full time and full attention to providing the Consulting Services, provided that
during the Term (whether or not this Agreement has been terminated) JSS shall
not be employed by or provide any advice or service to any Competitor, as
defined in the Stockholders' Agreement.
4. TERM. The term of this Agreement shall be for a period of three (3)
years, commencing on the first Business Day following the Effective Time and
terminating on the third anniversary thereof, unless terminated earlier in
accordance with SECTION 8 (the "TERM").
5. CONSULTING SERVICES FEES AND ESCROW.
(a) Subject to the limitations in this Agreement, Company shall pay
Consulting Firm during the Term as consideration for providing the Consulting
Services an annual fee of $3,000,000 (three million Dollars) in cash (the
"ANNUAL FEE"), which Annual Fee shall be paid no later than the last day of the
month following the first, second and third anniversary of the date of this
Agreement (the "PAYMENT DATE"). At Closing (as defined in the Acquisition
Agreement), Company shall deposit the total amount of the Annual Fee for each of
the years comprising the three (3) year Term equal to $9,000,000 (nine million
Dollars) (the "CONSOLIDATED FEE") in an escrow account (the "CONSULTING
COMPENSATION ESCROW"). The Consolidated Fee deposited in the Consulting
Compensation Escrow shall be held and released by an escrow agent (the
"CONSULTING COMPENSATION ESCROW AGENT") in accordance with the terms and
conditions of this Agreement and the escrow agreement in the form attached
hereto as Exhibit A (the "CONSULTING COMPENSATION ESCROW AGREEMENT").
(b) Notwithstanding any other provision of this Agreement, the Annual Fee
payable with respect to each successive one-year period within the Term shall
not be paid on the respective Payment Date if the members of the Board who are
independent directors of the Company, as defined under the applicable rules of
the New York Stock Exchange (the "NON-MANAGEMENT DIRECTORS"), shall have
reasonably determined in good faith prior to the applicable Payment Date that,
during such one-year period (the "PAYMENT DATE PERIOD"), Consulting Firm or JSS
has failed to comply in one or more material respects with the terms of this
Agreement, which failure was not remedied within ten (10) Business Days after
written notice from the Non-Management Directors setting forth in reasonable
detail the actions which the Non-Management Directors believe constitute such
failure (collectively, the "PAYMENT CONDITIONS"). In the event that the
Non-Management Directors determine that Consulting Firm or JSS has not satisfied
the Payment Conditions, the Non-Management Directors shall, prior to the
relevant Payment Date, provide written notice to Consulting Firm specifically
identifying the manner in which the Non-Management Directors believe that
Consulting Firm or JSS has failed to satisfy the Payment Conditions during such
period and the Annual Fee which would have been paid pursuant to Section 5(a)
shall be forfeited. In such case, the Company shall provide written notice to
the Consulting Compensation Escrow Agent prior to the relevant Payment Date that
the Payment Conditions have not been satisfied. If the Consulting Compensation
Escrow Agent has not received such written notice prior to the relevant Payment
Date, the Consulting Compensation Escrow Agent shall transfer the Annual Fee for
such period to Consulting Firm pursuant to SECTION 5(A). For purposes of this
Agreement, the determination of a majority of the Non-Management Directors shall
be deemed the determination of the Non-Management Directors.
(c) As of the date of execution of the Consulting Compensation Escrow
Agreement, Consulting Firm shall control all investment decisions of the amounts
held in escrow by the Consulting Compensation Escrow Agent. Subject to the
Stockholders' Agreement and in a manner that complies with the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") and other
applicable U.S. Laws and regulations, if so instructed by Consulting Firm, the
Consulting Compensation Escrow Agent may acquire shares representing the capital
stock of Company ("CONSULTING FIRM STOCK").
6. VAT CLAIM AND PUT ADVISORY FEE. On the later of (i) the Effective Date
and (ii) the Final Resolution of the VAT Claim and Put (as defined in the
Acquisition Agreement), Company shall pay to Consulting Firm $9,000,000 (nine
million Dollars), which at the Company's election upon ten (10) days notice to
Consulting Firm may be paid in cash or common stock of the Company, valued at
the Volume Weighted Price (the "VAT CLAIM AND PUT ADVISORY Fee") as
consideration for Consulting Firm's services to Company in connection with the
resolution of the VAT Claim and Put advisory services to Company. The Parties
acknowledge that the Final Resolution may occur prior to the Effective Time,
which shall not affect the Company's obligation to make payment of the VAT Claim
and Put Advisory Fee pursuant to this Section 6.
7. RESTRICTIONS ON TRANSFER OF CONSULTING FIRM STOCK. Consulting Firm shall
not sell, transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law) ("TRANSFER") any interest in any shares of Consulting Firm Stock, except
in accordance with the terms of the Stockholders' Agreement.
8. TERMINATION.
(a) EXPIRATION. This Agreement shall terminate automatically upon the
expiration of the Term, except for the provisions of Section 6, which shall
survive such termination.
(b) DEATH OR DISABILITY OF JSS. This Agreement and Consulting Firm's
engagement hereunder shall terminate automatically on the death or disability of
JSS. For purposes of this Agreement, "DISABILITY" shall mean the inability, in
the reasonable good faith judgment of the Board, of JSS personally to be
actively engaged in the day-to-day management, business and operations of
Consulting Firm or personally to be actively engaged in the provision of
Consulting Services to Company on account of physical or mental illness or
incapacity, which illness or incapacity continues uninterruptedly for a period
of six (6) consecutive months or continues with interruptions for an aggregate
period of six (6) months within any given twelve (12) month period. In the event
that this Agreement is terminated as a result of JSS's death or disability,
Consulting Firm shall be entitled only to (i) any unpaid Annual Fee due for any
Payment Date that occured prior to such termination, (ii) a pro rata portion of
the applicable Annual Fee for the period from the last Payment Date to the date
of death or disability and, (iii) if the Final Resolution of the VAT Claim and
Put (excluding for this purpose the one hundred eighty (180) day period for
claims and appeals) has occurred, or occurs within six (6) months of the date of
death or disability, the VAT Claim and Put Advisory Fee, if not previously paid,
and such fee shall be payable at the date of the Final Resolution of the VAT
Claim and Put. The payments required by clause (i) and (ii) of the preceding
sentence shall be made in a lump sum within five (5) business days of the
termination.
(c) DISSOLUTION OR BANKRUPTCY OF CONSULTING FIRM. This Agreement and
Consulting Firm's engagement hereunder shall terminate automatically upon the
commencement in any
court of competent jurisdiction of a proceeding or case seeking (i) Consulting
Firm's reorganization, liquidation, dissolution, arrangement or winding-up, or
the composition or readjustment of its debts, (ii) appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of Consulting Firm or of
all or any substantial part of its property or assets or (iii) similar relief in
respect of Consulting Firm under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts; or upon an
order for relief against Consulting Firm entered in an involuntary case under
any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts. In the event that this Agreement is
terminated in accordance with the preceding sentence, Consulting Firm shall be
entitled only to (i) any unpaid Annual Fee due for any Payment Date that occured
prior to such termination, and (ii) a pro rata portion of the applicable Annual
Fee for the period from the last Payment Date to the date of termination. The
payments required by clause (i) and (ii) of the preceding sentence shall be made
in a lump sum within five (5) business days of the termination.
(d) TERMINATION BY CONSULTING FIRM. Consulting Firm may terminate this
Agreement and its engagement hereunder (i) at any time without reason by the
giving of at least thirty (30) days' advance written notice to Company, and (ii)
in the event of any material breach of this Agreement by Company, upon Company's
failure to cure the same within ten (10) days of receipt of Consulting Firm's
written notice thereof. In the event that this Agreement is terminated by
Consulting Firm (x) pursuant to clause (i) of the preceding sentence, Consulting
Firm shall be entitled only to (i) any unpaid Annual Fee due for any Payment
Date that occured prior to such termination, (ii) a pro rata portion of the
applicable Annual Fee for the period from the last Payment Date to the date of
termination or (y) pursuant to clause (ii) of the preceding sentence, Consulting
Firm shall be entitled only to (i) any unpaid Annual Fees due for any Payment
Date that occurred prior to such termination, (ii) all remaining Annual Fees
payable during the remainder of the Term (assuming the Agreement had not been
terminated and the Payment Condition had been met), and (iii) if the Final
Resolution of the VAT Claim and Put (excluding for this purpose the one hundred
eighty (180) day period for claims and appeals) has occurred, or occurs
thereafter, the VAT Claim or Put Advisory Fee, if not previously paid, shall be
payable at the date of the Final Resolution of the VAT Claim and Put. The
payments required by clause (x)(i) and (ii) or (y)(i) and (ii) of the preceding
sentence, as the case may be, shall be made in a lump sum within five (5)
business days of the termination.
(e) TERMINATION BY COMPANY FOR CAUSE. Company may terminate this Agreement
and Consulting Firm's engagement hereunder "FOR CAUSE" immediately upon notice
to Consulting Firm. In the event that this Agreement is terminated by the
Company for Cause, Consulting Firm shall be entitled only to (i) any unpaid
Annual Fee due for any Payment Date that occured prior to such termination, (ii)
a pro rata portion of the applicable Annual Fee for the period from the last
Payment Date to the date of termination. The payments required by clause (i) and
(ii) of the preceding sentence shall be made in a lump sum within five (5)
business days of the termination. For purposes of this Agreement, termination
"FOR CAUSE" shall mean termination based upon any one or more of the following
occurring after the Effective Date:
(i) Any material breach of this Agreement by Consulting Firm which is
not cured within ten (10) days after Consulting Firm receives
from the Board written notice of the breach which identifies in
reasonable detail the
actions which are alleged to constitute a material breach of this
Agreement;
(ii) Material dishonesty of Consulting Firm (including that of JSS or
one or more of Consulting Firm's directors, officers or
employees) involving Company or any Affiliate of Company;
(iii)Gross negligence or willful misconduct in the performance of
Consulting Firm's duties as determined in good faith by the
Non-Management Directors which continues after written notice to
the Consulting Firm from the Non-Management Directors identifying
in reasonable detail the manner in which the Non-Management
Directors believe that the Consulting Firm's conduct constitutes
gross negligence or willful misconduct;
(iv) Willful failure by Consulting Firm to provide Consulting Services
as reasonably required from time to time by the Board or the
Chief Executive Officer of the Company, which continues after
written notice to the Consulting Firm from the Non-Management
Directors identifying in reasonable detail the manner in which
the Non-Management Directors believe that the Consulting Firm has
not provided such Consulting Services (other than any such
failure due to JSS's disability);
(v) The indictment for, conviction of, or plea of NOLO CONTENDRE to,
a felony involving moral turpitude by Consulting Firm (including
one or more of Consulting Firm's directors or officers);
(vi) Embezzlement or misappropriation by Consulting Firm (including
one or more of Consulting Firm's directors, officers or
employees) involving the Company or its Affiliates;
(vii)The failure of JSS to be an officer and (x) legal
representative, or (y) actively engaged in the provision of the
Consulting Services to Company (other than as a result of JSS's
death or disability); or
(viii) The commencement of a lawsuit by or on behalf of one or more of
Consulting Firm or any director, officer or employee of
Consulting Firm, including JSS, on the one side, against one or
more of Company or any of its Affiliates, on the other side,
claiming, in violation of SECTION 2(B), that there exists a
relationship, other than an independent contractor relationship,
between any director, officer or employee of Consulting Firm,
including JSS, on the one side, and one or more of Company or its
Affiliates, on the other side, including an
employer-employee/laborer relationship, a partnership
relationship, a principal-agent relationship, a joint venture
relationship or an association of any other kind (a "LABOR
LAWSUIT").
(f) TERMINATION BY COMPANY OTHER THAN FOR CAUSE. Company may terminate this
Agreement and Consulting Firm's engagement hereunder other than for Cause at any
time by written notice to Consulting Firm. In the event that this Agreement is
terminated by the Company other than for Cause, Consulting Firm shall be
entitled only to (i) any unpaid Annual Fee due for any Payment Date that occured
prior to such termination, (ii) all remaining Annual Fees payable during the
remainder of the Term (assuming the Agreement had not been terminated and the
Payment Condition had been met) and, (iii) if the Final Resolution of the VAT
Claim and Put (excluding for this purpose the one hundred eighty (180) day
period for claims and appeals) has occurred, or occurs thereafter, the VAT Claim
or Put Advisory Fee, if not previously paid, shall be paid at the date of the
Final Resolution of the VAT Claim and Put. The payments required by clause (i)
and (ii) of the preceding sentence shall be made in a lump sum within five (5)
business days of the termination.
9. NON-DISCLOSURE. During the Term and at all times after any termination
of this Agreement, Consulting Firm, its employees (including JSS), officers,
directors, Affiliates and agents shall not, either directly or indirectly, use
or disclose any Company trade secret, except to the extent necessary for
Consulting Firm to perform its duties hereunder. For purposes of this Agreement,
the term "COMPANY TRADE SECRET" shall mean any information regarding the
business or activities of Company or any subsidiary or Affiliate, including any
formula, pattern, compilation, program, device, method, technique, process,
customer list, technical information or other confidential or proprietary
information, that (a) derives independent economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use, and (b) is the subject of efforts of Company or its subsidiary or Affiliate
that are reasonable under the circumstances to maintain its secrecy.
Notwithstanding the foregoing, Consulting Firm shall be entitled to make such
disclosures as are required by applicable law or by the requirements of any
governmental or judicial agency or body. In the event of any breach of this
SECTION 9 by Consulting Firm, notwithstanding the requirement pursuant to
SECTION 8(F) that Company pay to Consulting Firm all remaining unpaid portions
of the Consolidated Fee, Company shall not be required to pay to Consulting Firm
any remaining unpaid portions of the Consolidated Fee and shall be entitled to
pursue such other legal and equitable remedies as may be available.
10. DUTIES UPON TERMINATION; SURVIVAL.
(a) DUTIES. Upon termination of this Agreement, whether by Company,
Consulting Firm or automatically, for any or no reason whatsoever, Consulting
Firm shall immediately return to Company all Company trade secrets which exist
in tangible form (including those in the possession of Consulting Firm's
officers, directors or employees).
(b) SURVIVAL. The provisions of SECTIONS 8, 9, 10, 11, 12 and 17 shall
survive any termination of this Agreement by Company or Consulting Firm.
11. COMPLIANCE WITH LAWS.
(a) In performing its obligations hereunder, and with regard to any funds,
assets, or records relating thereto, Consulting Firm shall, and shall use its
commercially reasonable efforts to cause each of its employees and agents to,
comply in all material respects with all applicable
laws and/or regulations which are applicable to Consulting Firm, the violation
of which would reasonably be expected to adversely affect the Company.
(b) Consulting Firm hereby acknowledges that it is the policy of Company to
refrain from engaging in any act which may violate any federal, state, local or
other laws of the U.S., including the Foreign Corrupt Practices Act ("U.S.
LAWS"), or any foreign laws, including foreign anti-bribery laws, which are
applicable to Consulting Firm. Consulting Firm shall, and shall use its best
efforts to cause its officers, directors, employees and agents to, comply with
this policy.
(c) In performing its obligations under this Agreement, Consulting Firm
shall not, and shall use its best efforts to cause each of its employees and
agents not to, directly or indirectly pay, offer, give or promise to pay or
give, or authorize the payment or gift of any, monies or other things of value,
to (a) an official, employee or agent of any government, (b) an official,
employee or agent of any agency or instrumentality of any government, (c) a
candidate for political office in any country, (d) a political party or party
official in any country to influence any acts or decisions of such political
party or party official, or (e) any other person, individual or entity at the
suggestion, request or direction or for the benefit of any of the persons
described in items (a) through (d) of this SECTION 11(C), in any such case in
material violation of any laws and/or regulations applicable to Consulting Firm
where it would reasonably be expected that such violation would constitute a
violation by Company or by Consulting Firm as a result of its engagement
hereunder.
(d) Consulting Firm agrees promptly and completely to respond to Company's
reasonable requests for information necessary for Company to determine if any
particular transaction can be conducted in compliance with U.S. Laws which are
applicable to one or more of Consulting Firm, Company or any of Company's
Affiliates. Consulting Firm shall, and shall use its best efforts to cause each
of its employees and agents to, execute all certifications and provide all
information as Company may reasonably request for Company to comply with such
applicable laws, regulations and orders. Consulting Firm agrees promptly to
report to Company all violations of this SECTION 11 that Consulting Firm becomes
aware of.
(e) Consulting Firm shall, and shall use commercially reasonable efforts to
cause each of its employees and agents to, maintain and keep in a safe place,
for a period of five (5) years from the date of their origination, books,
records and accounts in any media which adequately reflect the recipient, nature
and terms of every payment, expenditure or other disbursement made directly or
indirectly in connection with the sale and/or resale by Company of the services
of Company or its employees (collectively, "RECORDS"), and, upon judicial or
arbitral order, shall make such Records available at Consulting Firm's premises
for inspection. Consulting Firm shall certify in writing that such Records at
the time of such judicial or arbitral order, accurately and completely reflect
the recipient, nature and terms of such payments, expenditures or disbursements.
Immediately upon judicial or arbitral order, Consulting Firm shall provide to
the issuing court or arbitration tribunal such supplementary information and
explanation as is requested by such courts or arbitration tribunals (whether
requested of Consulting Firm or of Company or its Affiliates) to fully
understand the material contained in the Records and trace the application and
use of every payment, expenditure or other disbursement made in connection with
the sale of the services of Company or its Affiliates.
(f) Consulting Firm represents and warrants that, to the best knowledge of
its president, as of the date hereof, except as disclosed to Company, none of
the officers, employees or agents of Consulting Firm, and none of their
respective spouses, children (including step-children), siblings, parents
(including step-parents), parents-in-law (including step-parents-in-law), uncles
and aunts, is an employee, officer or representative of any government or agency
or instrumentality of any government, or of a political party or is a candidate
for political office. Consulting Firm agrees promptly to notify Company of any
change in the status of the officers, employees or agents of Consulting Firm, or
their respective family members specified above of which it becomes aware after
the date hereof, which would make the representations or warranties set forth in
this paragraph inaccurate.
(g) Company shall withhold from any payment under this Agreement any amount
required to be withheld by Company under applicable law.
12. INDEMNIFICATION. Consulting Firm shall indemnify and hold Company and
each of its Affiliates, and each of their respective officers, directors,
employees, members, stockholders, agents and representatives, 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,
the filing of a Labor Lawsuit by or on behalf of Consulting Firm or any
director, officer or employee of Consulting Firm, including JSS. The
indemnification set forth in the preceding sentence shall be in addition to any
other remedy to which Company may be entitled by law or equity. All
indemnification payments of Consulting Firm hereunder shall be in Dollars. The
indemnification obligations of Consulting Firm set forth in this SECTION 12
shall survive the termination or expiration of this Agreement. In addition to
any other remedy, Company shall be entitled, but shall not be obligated, to
offset all Losses against any obligations of Company to Consulting Firm, now or
hereafter existing, including payments of the Annual Fee.
13. NOTICE. Notices and all other communications to either Party pursuant
to this Agreement shall be in writing and shall be deemed to have been given
when personally delivered, sent via express courier such as UPS or DHL (as high
priority) or delivered by facsimile (but only to the extent that a copy of such
facsimile is sent via express courier such as UPS or DHL (as high priority)
promptly thereafter), addressed as follows, or to such other address as a Party
shall designate by notice to the other Party:
(a) in the case of Company, to:
Kansas City Southern
427 West 12th Street
Kansas City, Missouri 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
and
White & Case, S.C.
Blvd. Manuel Avila Camacho 24, PH
Colonia Lomas de Chapultepec, 11000
Mexico, D.F., Mexico
Attention: Jose Vicente Corta Fernandez and/or Iker I. Arriola Penalosa
(b) in the case of Consulting Firm, to:
Jose F. Serrano International Business, S.A. de C.V.
[ ]
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Attention: Jose Francisco Serrano Segovia
With a copy (which shall not constitute notice) to:
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, New York 10005, U.S.A.
Attention: Thomas C. Janson
and
Martinez, Algaba, Estrella, De Haro y Galvan Duque, S.C.
Paseo de los Tamarindos [*]
Colonia Bosques de las Lomas [*]
Mexico, D.F., Mexico
Attention: Carlos Galvan Duque
14. AMENDMENT. No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, modification, waiver or discharge is
agreed to in writing, signed by Consulting Firm, the Chairman of the Board and a
duly authorized member of the Board. No waiver by either Party at any time of
any breach by the other Party of, or compliance with, any condition or provision
of this Agreement to be performed by such other Party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the time or at any prior or
subsequent time.
15. SUCCESSORS IN INTEREST. The rights and obligations of Company under
this Agreement shall inure to the benefit of and be binding in each and every
respect upon the direct and indirect successors and assigns of Company,
regardless of the manner in which such successors or assigns shall succeed to
the interest of Company hereunder, and this Agreement shall not be terminated by
the voluntary or involuntary dissolution of Company or by any merger or
consolidation or acquisition involving Company, or upon any transfer of all or
substantially all of Company's assets, or terminated otherwise than in
accordance with its terms. In the event of any such merger or consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon and
shall inure to the benefit of the surviving corporation or the corporation or
other person to which such assets shall be transferred. Neither this Agreement
nor any of the payments or benefits hereunder may be pledged, assigned or
transferred by Consulting Firm either in whole or in part in any manner, without
the prior written consent of Company.
16. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
17. GOVERNING LAW; DISPUTE RESOLUTION.
(a) Resolution of any and all disputes between the Parties arising from or
in connection with this Agreement or any transactions contemplated by this
Agreement, 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 17; 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 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,
UNITED STATES OF AMERICA AND THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA,
WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS THEREOF.
(c) As to any Dispute which is not resolved in the ordinary course of
business, the Parties shall first attempt in good faith to promptly resolve any
Dispute by negotiations between executives. Either of the Parties may initiate
this procedure by delivery of written notice of the Dispute (the "DISPUTE
NOTICE") to the other. Not later than 20 days after delivery of the Dispute
Notice, one executive of one of the Parties with authority to settle the Dispute
shall meet with one executive of the other 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 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 17(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 Party hereby agrees to submit all Disputes not resolved pursuant
to SECTION 17(C) to final and binding arbitration in New York, New York, U.S.
Either Party may initiate such arbitration by delivery of a demand therefor (the
"ARBITRATION DEMAND") to the other Party not sooner than 60 days after the date
of delivery of the Dispute Notice but promptly thereafter; provided, that if a
Party rejects participation in the procedures provided under SECTION 17(C), the
other 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
attorneys' fees and expenses, and Arbitration Costs (as defined below) in
connection with arbitration hereunder.
(e) Three Arbitrators shall be appointed (the "ARBITRATORS"), one of whom
shall be appointed by Company, one by Consulting Firm, and the third of whom,
who shall act as the chairman of the arbitral tribunal, shall be appointed by
the first two Arbitrators within ten (10) Business Days of the first two
Arbitrators' confirmation by the American Arbitration Association. If either
Party fails to appoint an Arbitrator within ten (10) Business Days of a request
in writing by the other 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 Party to the extent necessary to insure that such 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 Parties five
Business Days before the hearing date. At such time the 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.
(i) 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
Party shall have the right to audit the books and records of the
other Party that are reasonably related to the Dispute; (B) each
Party shall provide to the other, reasonably in advance of any
hearing, copies of all documents which a Party intends to present
at such hearing; (C) all hearings shall be conducted on an
expedited schedule; and (D) all proceedings shall be
confidential, except that either Party may at its expense make a
stenographic record thereof.
(ii) The Arbitrators shall endeavor to complete all hearings not later
than 120 days after their tribunal has been convened, and shall
make a final award as promptly as practicable thereafter. Such
award shall be communicated, in writing, by the Arbitrators to
the Parties, and shall contain specific findings of fact and
conclusions of law in accordance with the governing law set forth
in SECTION 17(B). 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, U.S., and the courts of the Federal District of Mexico. The
Arbitrators shall apportion all costs and expenses of the
arbitration, including the Arbitrators' fees and expenses, fees
and expenses of experts and fees and expenses of translators
("ARBITRATION COSTS") between the prevailing and non-prevailing
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 Party has rejected
participation in procedures under SECTION 17(C), the Arbitrators
may assess all Arbitration Costs against the non-prevailing Party
and may include in the award the prevailing Party's attorneys'
fees and expenses in connection with any and all proceedings
under this SECTION 17. Notwithstanding the foregoing, in no event
may the Arbitrators award multiple or punitive damages.
(f) Pursuant to an agreement of the Parties or a judicial determination
that a Dispute is not subject to final and binding arbitration as set forth in
SECTION 17, each Party 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 U.S. sitting in New York, and by execution and delivery
of this Agreement, each Party 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 and the other terms contemplated
hereby. 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.
(g) 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 agrees that failure of the
Process Agent to give any notice of any such service of process to any of the
Parties shall not impair or affect the validity of such service or the
enforcement of any judgment based thereon.
18. ENTIRE AGREEMENT; EFFECTIVE TIME. This Agreement constitutes the entire
agreement among the Parties with respect to the subject matter hereof and
terminates and supersedes all other prior agreements and understandings, both
written and oral, between the Parties with respect to the terms of Consulting
Firm's engagement or severance arrangements. This Agreement shall become
effective at the Effective Time.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.
KANSAS CITY SOUTHERN
By: /s/ Michael R. Haverty
-----------------------------------
Name: Michael R. Haverty
Title: Chairman, President & CEO
Jose F. Serrano International Business,
S.A. DE C.V.
By: /s/ Jose Francisco Serrano Segovia
-----------------------------------
Name: Jose Francisco Serrano Segovia
Unless otherwise specified herein, all capitalized terms used and not defined in
the following Guaranty (as defined below) shall have the meanings ascribed to
them in the above Consulting Agreement.
JSS hereby, unconditionally and irrevocably, personally guarantees (the
"GUARANTY"), by way of an independent obligation to Company, the obligation of
Consulting Firm pursuant to SECTION 12 of the Agreement to indemnify and hold
Company and each of its Affiliates, and each of their respective officers,
directors, employees, members, stockholders, agents and representatives harmless
from and against all Losses (as such term is defined in SECTION 12 of the
Agreement) resulting from, arising out of, or due to, directly or indirectly,
the filing of a Labor Lawsuit by Consulting Firm or any director, officer or
employee of Consulting Firm, including JSS ("GUARANTEED OBLIGATION"). This is a
guaranty of payment and not of collection only. If for any reason whatsoever
Consulting Firm shall fail or be unable promptly to comply with the Guaranteed
Obligation, JSS will promptly upon receipt of notice thereof from Company, pay
or cause to be paid in lawful money of the U.S. the unpaid Guaranteed Obligation
then due and payable to Company (in the amounts and to the extent required of
Consulting Firm under the Agreement). JSS waives any and all notice of the
creation, renewal, extension or accrual of the Guaranteed Obligation and notice
of or proof of reliance by Company upon this Guaranty or acceptance of this
Guaranty; the Guaranteed Obligation shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Guaranty; and all dealings between Company and Consulting
Firm shall be conclusively presumed to have been had or consummated in reliance
upon this Guaranty. Guarantor agrees that (i) any notice provided in the manner
required under the Agreement shall be deemed to constitute notice to JSS for
purposes hereof and (ii) any knowledge of Consulting Firm shall be deemed
knowledge of JSS for purposes hereof. The liability of the undersigned under
this Guaranty shall not be affected or excused by (x) any lack of enforceability
against Consulting Firm of the Guaranteed Obligation for any reason whatsoever
and (y) any other circumstance
which might otherwise constitute a discharge of a guarantor. JSS waives
promptness, diligence and notices with respect to the Guaranteed Obligation and
this Guaranty and any requirement that Company exhaust any right or take any
action against Consulting Firm. Any term or provision of this paragraph 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
paragraph or affecting the validity or enforceability of any of the terms or
provisions of this paragraph in any other jurisdiction. If any provision of this
paragraph is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. This Guaranty is strictly limited to the
Guaranteed Obligations.
AGREED AND ACCEPTED AS OF THE DATE OF THE ABOVE CONSULTING AGREEMENT
JOSE FRANCISCO SERRANO SEGOVIA
/s/ Jose Francisco Serrano Segovia
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