Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Railamerica, Inc. 85 425K
2: EX-2.2 Merger Agreement 45 247K
3: EX-2.3 Stock Purchase Agreement 43 230K
4: EX-2.4 Letter Agreement 5 25K
5: EX-4.11 Warrant to Purchase/Stonegate 9 39K
6: EX-4.12 Warrant to Purchase/Railamerica 8 39K
7: EX-4.13 First Supplemental Indenture Dated 2/13/02 8 24K
8: EX-4.14 Second Supplemental Indenture Dated 1/24/02 8 25K
9: EX-10.79 Waiver and Amendment No. 3 to Credit Agreement 87 127K
10: EX-10.80 Change in Control Service Agreement 15 70K
11: EX-10.81 Service Agreement Dated 4/4/01 8 27K
12: EX-10.82 Amend. & Restated Employment Agreement (Marino) 13 62K
13: EX-10.83 Amend. & Restated Employment Agreement (Redfearn) 12 53K
14: EX-10.84 Executive Employment Agreement (Gary Spiegel) 12 53K
15: EX-21.1 Subsidiaries of the Company 2 14K
16: EX-23.1 Consent of Pricewaterhousecoopers 1 9K
17: EX-23.2 Consent of Langton Clarke Limitada 1 9K
EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
AMONG
NEW STATESRAIL HOLDINGS, INC.,
STATESRAIL L.L.C.,
RAILAMERICA, INC.,
WEST TEXAS AND LUBBOCK RAILROAD COMPANY, INC.
AND
THE MEMBERS OF STATESRAIL L.L.C.
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DATED AS OF OCTOBER 12, 2001
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TABLE OF CONTENTS
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ARTICLE I
AGREEMENT OF PURCHASE
1.01. The Purchase.............................................................................................2
1.02. Closing..................................................................................................2
1.03. Directors................................................................................................2
1.04. Officers.................................................................................................2
ARTICLE II
CONSIDERATION AND DELIVERIES
2.01. Aggregate Consideration..................................................................................2
2.02. Closing Procedures.......................................................................................3
2.03. Deliveries...............................................................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
3.01. Due Organization.........................................................................................3
3.02. Due Authorization........................................................................................4
3.03. Brokers, Finders and Financial Advisors..................................................................4
3.04. Investment Intent........................................................................................4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KAURI AND THE COMPANY
4.01. Capitalization...........................................................................................5
4.02. Other Rights to Acquire Capital Stock....................................................................5
4.03. Due Organization.........................................................................................5
4.04. Subsidiaries.............................................................................................5
4.05. Due Authorization........................................................................................6
4.06. Financial Statements.....................................................................................7
4.07. Conduct of Business; Certain Actions.....................................................................8
4.08. Ownership of Properties..................................................................................9
4.09. Environmental Matters....................................................................................9
4.10. Licenses and Permits....................................................................................10
4.11. Intellectual Rights.....................................................................................10
4.12. Compliance with Laws....................................................................................11
4.13. Insurance...............................................................................................12
4.14. ERISA Compliance........................................................................................12
4.15. Contracts and Agreements................................................................................13
(i)
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4.16. Claims and Proceedings..................................................................................13
4.17. Taxes...................................................................................................13
4.18. Personnel...............................................................................................16
4.19. Business Relations......................................................................................17
4.20. Accounts Receivable.....................................................................................17
4.21. Bank Accounts...........................................................................................17
4.22. Agents..................................................................................................17
4.23. Indebtedness To and From Officers, Directors, Shareholders and Employees................................17
4.24. Certain Consents........................................................................................17
4.25. Brokers.................................................................................................18
4.26. Interest in Competitors, Suppliers and Customers........................................................18
4.27. Inventory...............................................................................................18
4.28. Transactions With Affiliates............................................................................18
4.29. Absence of Certain Payments.............................................................................18
4.30. Equipment...............................................................................................19
4.31. Current Assets..........................................................................................19
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLER
5.01. Ownership of Shares/No Liens............................................................................19
5.02. Tax Status of Seller....................................................................................19
ARTICLE VI
COVENANTS
6.01. Inspection..............................................................................................20
6.02. Compliance by the Company and Seller....................................................................20
6.03. Satisfaction of All Conditions Precedent to the Obligations of Buyer....................................20
6.04. No Solicitation.........................................................................................20
6.05. Notice of Developments..................................................................................21
6.06. Notice of Breach........................................................................................21
6.07. Notice of Litigation....................................................................................21
6.08. Continuation of Insurance Coverage......................................................................21
6.09. Maintenance of Credit Terms.............................................................................21
6.10. Updating Information....................................................................................22
6.11. Financial Statements....................................................................................22
6.12. Interim Operations of the Company.......................................................................22
6.13. Surface Transportation Board............................................................................23
6.14. Resignations of Directors and Officers..................................................................24
6.15. Compliance by Buyer and Sub.............................................................................24
6.16. Satisfaction of All Conditions Precedent to the Obligations of Seller and the Company...................24
6.17. Notice by Buyer and Sub of Breach.......................................................................24
6.18. Notice by Buyer and Sub of Litigation...................................................................24
6.19. Termination of Employees................................................................................24
(ii)
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6.20. Filing of Tax Returns...................................................................................25
6.21. Effectuation of Restructuring...........................................................................25
6.22. Delivery of Schedules...................................................................................25
ARTICLE VII
CONDITIONS TO CLOSING
7.01. Conditions to Obligations of Buyer and Sub..............................................................26
7.02. Conditions to Obligations of Seller.....................................................................28
ARTICLE VIII
TERMINATION
8.01. Termination.............................................................................................29
8.02. Effect of Termination...................................................................................30
8.03. Waiver..................................................................................................30
ARTICLE IX
MISCELLANEOUS
9.01. Collateral Agreements, Amendments and Waivers...........................................................30
9.02. Interpretation and Certain Definitions..................................................................30
9.03. Successors and Assigns..................................................................................31
9.04. Expenses................................................................................................31
9.05. Invalid Provisions......................................................................................31
9.06. Information and Confidentiality.........................................................................31
9.07. Waiver..................................................................................................32
9.08. Notices.................................................................................................32
9.09. Public Announcement.....................................................................................33
9.10. Waiver of Certain Rights................................................................................33
9.11. Further Assurances......................................................................................33
9.12. No Third-Party Beneficiaries............................................................................34
9.13. Governing Law...........................................................................................34
9.14. Prevailing Party........................................................................................34
9.15. Counterparts............................................................................................34
9.16. Dispute Resolution......................................................................................34
9.17. Remedies in Indemnification Agreement Control...........................................................35
(iii)
SCHEDULES
1 Members
2 Kiamichi Assets and Liabilities
3 StatesRail LLC Assets and Liabilities
3.02 No Conflicts
4.03 Foreign Qualification of the Company
4.04 Subsidiaries and Foreign Qualification Thereof
4.06(b) Undisclosed Liabilities
4.07(a) Conduct of Business
4.07(c) Capital Expenditures
4.08 Real and Personal Properties
4.09 Environmental Matters
4.10 Licenses and Permits
4.11 Intellectual Rights
4.12 Compliance With Laws
4.13 Insurance
4.14 ERISA
4.15 Contracts and Agreements
4.16 Claims and Proceedings
4.17 Taxes
4.18 Personnel
4.19 Business Relations
4.20 Accounts Receivable
4.21 Bank Accounts
4.22 Agents
4.23 Indebtedness to and from Officers, Directors, Shareholders and
Employees
4.24 Required Consents
4.25 Brokers
4.26 Interest in Competitors, Suppliers and Customers
4.27 Inventory
4.28 Transactions with Affiliates
4.30 Equipment
5.01 List of Sellers
6.19 Corporate Employees
9.02 Directors, officers and General Managers
EXHIBITS
A - Form of Escrow Agreement
B - Legal Opinion Matters of Opinion of Fish & Richardson P.C., counsel for
Seller, the Company and the Members
C - Legal Opinion Matters of Opinion of Greenberg Traurig, P.A., counsel for
Buyer and Sub
D - Form of Indemnification Agreement
(iv)
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
October 12, 2001, among RailAmerica, Inc., a Delaware corporation ("BUYER"),
West Texas and Lubbock Railroad Company, Inc., a Texas corporation and
subsidiary of Buyer ("SUB"), New StatesRail Holdings, Inc., a Delaware
corporation (the "COMPANY"), StatesRail L.L.C., a Delaware limited liability
company ("SELLER") and all of the persons and entities listed on SCHEDULE 1 who
are all of the holders of the equity interests ("MEMBERSHIP INTERESTS") of
Seller (the "MEMBERS"); and
WHEREAS, as a condition precedent to entering into this Agreement and
consummating the transactions contemplated hereby, the Members, Seller and the
Company hereby agree that, prior to the Closing (as defined herein), (i) Seller
and Kauri, Inc. , a Delaware corporation and a Member ("KAURI"), shall
contribute all of the equity interests of Alabama & Gulf Coast Railway L.L.C. ,
a Delaware limited liability company and wholly-owned Subsidiary of Seller and
Kauri ("ALABAMA") and StatesRail Equipment Company L.L.C., a Delaware limited
liability company and wholly-owned Subsidiary of Kauri and Seller ("STATESRAIL
EQUIPMENT"), to the Company, (ii) Seller and Kauri will contribute all of the
equity interests in Kiamichi Railroad L.L.C., a Delaware limited liability
company and wholly-owned Subsidiary of Kauri and Seller ("KIAMICHI LLC" and,
together with Alabama and StatesRail Equipment, the "STATESRAIL LLCS"), to
Kiamichi Holdings, Inc. ("KIAMICHI"), a Delaware corporation, which will be a
wholly-owned Subsidiary of the Company, (iii) Kiamichi LLC will assign those
assets and liabilities as set forth on SCHEDULE 2 to Seller, or will otherwise
enter into an agreement with Seller providing for Seller to realize the economic
and other benefits of such assets and to be responsible for the payment and/or
performance of such liabilities and the obligations of Kiamichi LLC with respect
to such liabilities and (iv) Seller will assign to the Company all of its assets
and liabilities except for those set forth on SCHEDULE 3 to the Company, and as
a result of the transactions in clauses (i) through (iv) above, (x) Kiamichi LLC
will be the wholly-owned Subsidiary of Kiamichi, (y) Alabama, StatesRail
Equipment and Kiamichi will be the direct wholly-owned Subsidiaries of the
Company and (z) the Company will be the wholly-owned Subsidiary of Seller (the
"RESTRUCTURING"); and
WHEREAS, as a condition precedent to the Members, Seller and the
Company undertaking the Restructuring, Buyer and Sub agree to enter into this
Agreement; and
WHEREAS, the Members, the respective Boards of Directors (or equivalent
thereof) of Buyer, Sub, Seller and the Company have each determined that it is
in the best interests of their respective companies, stockholders and Members
that Seller and the Company effectuate the Restructuring and that Sub acquire
(the "PURCHASE") all of the outstanding shares of capital stock of the Company
(the "COMPANY SHARES") from Seller pursuant to the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, upon the terms and subject to the conditions set forth herein,
Seller desires to sell, transfer and assign to Sub and Sub desires to purchase
from Seller, all of the Company Shares; and
WHEREAS, Buyer, Sub, Seller, the Members and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Purchase and also to prescribe various conditions to the Purchase.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Buyer, Sub, Seller, the Members and the Company hereby agree as follows:
ARTICLE I
AGREEMENT OF PURCHASE
1.01. THE PURCHASE. Upon the terms and subject to the conditions set
forth in this Agreement, Seller shall sell, transfer, assign, convey and deliver
to Sub, and Sub shall accept from Seller, all of the Company Shares free and
clear of any and all Liens (as defined herein) for the aggregate purchase price
set forth in Section 2.01.
1.02. CLOSING. The closing (the "CLOSING") of the Purchase will take
place at 1:00 p.m. (E.S.T.) on a date to be specified by Buyer and Kauri which
shall be no later than the last day of the month in which satisfaction or waiver
of the conditions set forth in Article VII shall have occurred, but in any event
not later than the Termination Date (as defined in Section 8.01) (the "CLOSING
DATE"), at the offices of Greenberg Traurig, P.A., counsel to Buyer, unless
another date, time or place is agreed to in writing by Buyer and Kauri;
PROVIDED, HOWEVER, that the Closing shall take place simultaneously with the
"Closing" under the Merger Agreement (as defined in Section 7.01(i)).
1.03. DIRECTORS. The directors of the Company and Kiamichi and the
managers of the StatesRail LLCs shall resign pursuant to Section 6.14 hereof and
the directors of Sub immediately prior to the Closing shall become the directors
of the Company and Kiamichi and the managers of the StatesRail LLCs until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
1.04. OFFICERS. The officers of the Company, Kiamichi and the
StatesRail LLCs shall resign if required to do so pursuant to Section 6.14
hereof, and the officers of Sub immediately prior to the Closing, or such other
persons as Buyer shall designate, shall become the officers of the Company,
Kiamichi and the StatesRail LLCs, until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
ARTICLE II
CONSIDERATION AND CLOSING DELIVERIES
2.01. AGGREGATE CONSIDERATION. Seller shall receive, in
consideration of the Company Shares, according to the terms and conditions set
forth in this Agreement and the Letter Agreement, dated as of the date hereof
(the "LETTER AGREEMENT"), by and among Buyer, Sub, Seller, the Members, the
Company, StatesRail Acquisition Corp., a Delaware corporation ("SUB II"),
StatesRail, Inc., a Delaware corporation ("STATESRAIL") and the stockholders of
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StatesRail, total consideration of $38,814,000, subject to the adjustments set
forth in the Letter Agreement (the "PURCHASE CONSIDERATION"). The Purchase
Consideration shall be paid in cash (the "CASH CONSIDERATION") as provided in
the Letter Agreement.
2.02. CLOSING PROCEDURES.
(a) ESCROW. On the Closing Date, Buyer shall deposit with
Greenberg Traurig, P.A., as escrow agent (the "ESCROW AGENT"), a portion of the
Cash Consideration, as set forth in the Letter Agreement (the "ESCROW AMOUNT"),
for the purpose of securing (but not limiting) the obligations of Seller
hereunder (the "ESCROW"). The Escrow shall be subject to the terms and
conditions of the Escrow Agreement in the form attached hereto as Exhibit A (the
"ESCROW AGREEMENT").
(b) NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. The
Cash Consideration paid upon the surrender of Certificates in accordance with
the terms of this Article II shall be deemed to have been paid and issued in
full satisfaction of all rights pertaining to the Company Shares theretofore
represented by such Certificates.
2.03. DELIVERIES. Deliveries: At the Closing, Seller shall
deliver to Sub:
(a) The certificate or certificates which represent the
Company Shares (the "CERTIFICATES"), endorsed in blank together with duly
executed stock powers transferring the Company Shares represented by such
Certificates to Sub.
(b) stock books, stock ledgers, minute books, corporate seals
and other organizational documents of the Company and the Subsidiaries
(including Kiamichi and the StatesRail LLCs) (provided that any of the foregoing
items shall be deemed to have been delivered pursuant to this Section 2.03 if
such item has been delivered to, or is otherwise located at, the offices of the
Company); and
(c) All other documents required to be delivered by Seller on
or prior to the Closing pursuant to this Agreement or otherwise reasonably
required from Seller in connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Sub jointly and severally represent and warrant to Seller,
the Members and the Company as follows (with the understanding that Seller, the
Members and the Company are relying materially on such representations and
warranties in entering into and performing this Agreement):
3.01. DUE ORGANIZATION. (i) Buyer is a corporation, validly existing
and in good standing under the laws of the State of Delaware and (ii) Sub is a
corporation, validly existing and in good standing under the laws of the State
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of Texas, and each has full corporate power and authority to enter into and
perform this Agreement and each other instrument, agreement and document to be
executed by it in connection herewith.
3.02. DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement , and such other agreements, instruments and documents to be
executed in connection herewith by Buyer and Sub have been duly authorized by
the Board of Directors of Buyer and Sub. This Agreement has been duly and
validly authorized, executed and delivered by each of Buyer and Sub and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, Seller, and the Members, constitutes a valid and binding obligation of
Buyer and Sub enforceable against Buyer and Sub in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and the application of general principles of equity. Assuming the
accuracy of the representations and warranties made by the Company, Kauri and
Seller in this Agreement, the execution, delivery and performance of this
Agreement by Buyer and Sub will not, except as set forth on SCHEDULE 3.02, (a)
violate any federal, state, county or local law, rule or regulation applicable
to Buyer, Sub or their respective property, (b) violate or conflict with, or
permit the cancellation of, any agreement to which Buyer or Sub is a party or by
which either of them or any of its property is bound (other than such violations
or conflicts as shall have been waived in writing by Seller at or prior to
Closing), (c) permit the acceleration of the maturity of any indebtedness of, or
any indebtedness secured by the property of, Buyer or Sub (except as shall have
been waived in writing by Seller at or prior to Closing), or (d) violate or
conflict with any provision of Buyer's or Sub's certificate of incorporation or
by-laws. Assuming the accuracy of the representations and warranties made by
Seller and Kauri in this Agreement, no action, consent or approval of or filing
with any federal, state, county or local governmental authority is required in
connection with the execution, delivery or performance of this Agreement (or any
agreement or other document executed in connection herewith by Buyer or Sub) by
Buyer or Sub, except for the filings described in Section 6.13 hereof.
3.03. BROKERS, FINDERS AND FINANCIAL ADVISORS. Neither Buyer nor Sub
has engaged, or caused to be incurred any liability to, any finder, broker or
sales agent in connection with the execution, delivery or performance of this
Agreement or the transactions contemplated hereby.
3.04. INVESTMENT INTENT. Sub is acquiring the Company Shares for its
own account for investment and not with a view toward resale or redistribution
in a manner which would require registration under the Securities Act of 1933,
as amended (the "SECURITIES ACT"). Sub has not offered or sold the Company
Shares or any part thereof or interest therein, and has no present intention of
dividing the Company Shares with others or of reselling or otherwise disposing
of the Company Shares or any part thereof or interest therein either currently
or after the passage of a fixed or determinable period of time or upon the
occurrence or nonoccurrence of any predetermined event or circumstance.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND KAURI
Seller and Kauri jointly and severally represent and warrant to Buyer
and Sub as follows (with the understanding that (i) Buyer and Sub are relying
materially on each such representation and warranty in entering into and
performing this Agreement and (ii) the following representations, except 4.06
hereof, are being made as if the Restructuring had occurred immediately prior to
the date hereof and therefore as though Kiamichi, Alabama and StatesRail
Equipment are the wholly-owned Subsidiaries of the Company, Kiamichi LLC is the
wholly-owned Subsidiary of Kiamichi, and Seller is the owner of all of the
Company Shares):
4.01. CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 1000 shares of common stock, par value $.001 per share (the
"COMMON SHARES"). There are currently issued and outstanding 100 Common Shares.
All of the issued and outstanding Common Shares are duly authorized, validly
issued, fully paid and nonassessable. Seller has no assets, is not engaged in
any active operations and is not contractually bound to acquire any assets or
engage in any active operations, other than the ownership of the equity
interests of the StatesRail LLCs and those assets listed on SCHEDULE 2 and
SCHEDULE 3.
4.02. OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. There are no authorized or
outstanding warrants, options or rights of any kind to acquire from the Company,
Kauri or Seller any equity or debt securities of the Company or any of the
Subsidiaries or securities convertible into or exchangeable for equity or debt
securities of the Company or any of the Subsidiaries.
4.03. DUE ORGANIZATION. The Company is a corporation, validly existing
and in good standing under the laws of the State of Delaware and has full power
and authority to carry on its business as now conducted. Complete and accurate
copies of the certificate of incorporation, by-laws (together with any and all
amendments to both) and the corporate records of the Company have been delivered
to Buyer and have been certified by the Secretary of the Company. The Company is
qualified to do business and is in good standing in the jurisdictions set forth
on SCHEDULE 4.03 attached hereto, which jurisdictions represent every
jurisdiction where such qualification is required except where failure to be so
qualified would not have a material adverse effect (as defined in Section 9.02)
on the Company.
4.04. SUBSIDIARIES. All of the subsidiaries, direct and indirect, of
the Company are listed on SCHEDULE 4.04 attached hereto (the "SUBSIDIARIES").
Except as set forth on SCHEDULE 4.04 attached hereto, the Company does not
directly or indirectly have (or possess any options or other rights to acquire)
any subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, association, joint venture, trust or other
entity. Except as set forth on SCHEDULE 4.04 attached hereto, the Company is, or
upon completion of the Restructuring will be, the true and lawful owner, of
record and beneficially, of all of the outstanding capital stock or equivalent
equity interests of each Subsidiary, free and clear of any liens, restrictions,
security interests, claims, rights of another or encumbrances. Each Subsidiary
is a corporation or limited liability company, validly existing and in good
standing under the laws of the State of its incorporation or organization and
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has full power and authority to carry on its business as now conducted. Complete
and correct copies of the articles or certificate of incorporation and by-laws
of each of the Subsidiaries, operating agreement or organizational documents
equivalent thereto, and all amendments thereto have been delivered to Buyer and
have been certified by the Secretary of each Subsidiary. Each Subsidiary is
qualified to do business and is in good standing in the jurisdictions set forth
on SCHEDULE 4.04 attached hereto, which jurisdictions represent every
jurisdiction where such qualification is required except where failure to be so
qualified would not have a material adverse effect on such Subsidiary. There are
no authorized or outstanding warrants, options or rights of any kind to acquire
from the Company or any Subsidiary any equity or debt securities of any
Subsidiary or securities convertible into or exchangeable for equity or debt
securities of any Subsidiary.
4.05. DUE AUTHORIZATION.
(a) Seller, the Company and the Subsidiaries have full
corporate power and authority to enter into and perform this Agreement and each
other agreement, instrument and document required to be executed by it in
connection herewith (the "ANCILLARY AGREEMENTS"). The execution, delivery and
performance of this Agreement and the Ancillary Agreements have been duly
authorized by the Board of Directors of the Company and the Boards of Directors
(or the equivalent thereof) of Seller and each of the Company's Subsidiaries.
(b) This Agreement has been duly and validly executed and
delivered by Seller and the Company and, assuming this Agreement constitutes a
valid and binding obligation of Buyer and Sub, constitutes a valid and binding
obligation of Seller and the Company enforceable against them in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally and the application of general principles of equity.
(c) Upon its execution in accordance with this Agreement, each
Ancillary Agreement to which Seller, the Company and any of the Subsidiaries is
a party shall have been duly and validly executed and delivered by Seller, the
Company and the Subsidiaries and, assuming such Ancillary Agreement constitutes
a valid and binding obligation of Buyer and Sub, shall constitute a valid and
binding obligation of Seller, the Company and the Subsidiaries enforceable
against Seller, the Company and the Subsidiaries in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and the application of general principles of equity.
(d) Assuming the accuracy of the representations and
warranties made by Buyer and Sub in this Agreement, neither the execution,
delivery and performance of this Agreement by the Company, the Members and
Seller, nor the execution, delivery and performance of any Ancillary Agreement
by the Company, Seller, and/or any Member or Subsidiary, shall (i) violate any
federal, state, county or local law, rule or regulation applicable to the
Company, any Subsidiary, any Member, Seller, or their respective properties,
(ii) violate or conflict with, or permit the cancellation of, any agreement to
which the Company, any Subsidiary, Seller or any Member is a party, or by which
any of them or any of their respective properties is bound (other than such
violations or conflicts as shall have been waived in writing by Buyer and Sub at
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or prior to Closing), or result in the creation of any lien, security interest,
charge or encumbrance upon any of such properties, (iii) permit the acceleration
of the maturity of any indebtedness of, or indebtedness secured by the property
of, the Company, Seller, any Subsidiary or any Member (except for indebtedness
outstanding under the Company's senior credit facilities and except as shall
have been waived in writing by Buyer and Sub at or prior to Closing), or (iv)
violate or conflict with any provision of the articles or certificate of
incorporation or by-laws (or other organizational documents equivalent thereto)
of the Company, Seller, any Member or any Subsidiary.
(e) No action, consent or approval of or filing with any
federal, state, county or local governmental authority is required in connection
with the execution, delivery or performance of this Agreement or any Ancillary
Agreement by the Company, Seller, any Subsidiary or any Member, except for the
filings described in Section 6.13 hereof.
4.06. FINANCIAL STATEMENTS. The following Financial Statements (herein
so called) of Seller and the Subsidiaries have been delivered to Buyer by the
Company:
(a) Audited combined balance sheets, and related combined
statements of operations, cash flows, and members' equity of the Subsidiaries as
of and for the years ended December 31, 2000 and December 31, 1999, and together
with notes thereto and the report of Deloitte & Touche LLP with respect thereto
(collectively, the "AUDITED FINANCIAL STATEMENTS"); and
(b) An unaudited balance sheet and an unaudited income
statement of each of Alabama, Kiamichi LLC and Seller as of and for the seven
months ended July 31, 2001, and an unaudited balance sheet and an unaudited
income statement of StatesRail Equipment as of and for the quarter ended June
30, 2001 (collectively, the "INTERIM FINANCIAL STATEMENTS").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and (i) with respect to the Audited Financial Statements,
present fairly the combined financial position, results of operations and
changes in financial position of the Subsidiaries, and the combined results of
operations of the Subsidiaries, and (ii) with respect to the Interim Financial
Statements, present fairly the separate financial position, results of
operations and changes in financial position of each of Seller and each
Subsidiary, as the case may be, and the separate results of operations of Seller
and each Subsidiary, as the case may be, as of the indicated dates and for the
indicated periods (except, in the case of the Interim Financial Statements, for
the absence of notes thereto and subject to normal year-end audit adjustments
and accruals required to be made in the ordinary course of business which are
not materially adverse and are consistent with past practices). Except as
disclosed in SCHEDULE 4.06(B) or to the extent reflected, disclosed or provided
for in the balance sheets included in the Interim Financial Statements, to the
knowledge of the Company and Kauri, none of Seller, the Company or the
Subsidiaries have any liabilities or obligations (whether absolute, contingent
or otherwise), which are material either individually or in the aggregate, other
7
than current liabilities incurred in the ordinary course of business consistent
with past practices subsequent to July 31, 2001 and neither the Company nor
Kauri has knowledge of any basis for the assertion of any such liability or
obligation. For purposes of the preceding sentence, "knowledge" shall mean the
actual knowledge and the constructive knowledge of the Members and of the
directors, officers and general managers named on SCHEDULE 9.02 hereof. Since
July 31, 2001, there has been no material adverse change (as defined in Section
9.02) with respect to Seller, the Company and the Subsidiaries (including, for
purposes of this representation only, StatesRail and its direct and indirect
majority owned subsidiaries listed on SCHEDULE 4.04 hereto (collectively, the
"STATESRAIL ENTITIES")). To the knowledge of the Company and Kauri, there are no
pending or proposed statutes, rules or regulations nor any current or pending
developments or circumstances, which would have a material adverse effect on
Seller, the Company and the Subsidiaries (including, for purposes of this
representation only, the StatesRail Entities).
4.07. CONDUCT OF BUSINESS; CERTAIN ACTIONS. Except as set forth on
SCHEDULE 4.07 attached hereto, since July 31, 2001, the Company, Seller and the
Subsidiaries have conducted their business and operations in the ordinary course
and consistent with their past practices and have not (a) paid or declared any
dividend or distribution or purchased, retired or redeemed any (i) capital stock
from any shareholder or (ii) membership interests from any member, (b) except
for severance payments to be made to certain employees as contemplated by
Section 6.19, increased the compensation of any of the directors, officers or
key employees of, or consultants to, the Company or the Subsidiaries or, except
for wage and salary increases made in the ordinary course of business and
consistent with past practices, increased the compensation of any other
employees of the Company or the Subsidiaries, (c) made any capital expenditures
(other than those described on SCHEDULE 4.07(C) attached hereto) exceeding
$25,000 individually or $50,000 in the aggregate, (d) sold any asset essential
to the Company's or any Subsidiary's railroad operations (or any group of
related assets) in any transaction (or series of related transactions) in which
the purchase price for such asset (or group of related assets) exceeded $100,000
(other than sales of inventory in the ordinary course of business and sales of
surplus or non-essential assets), (e) discharged or satisfied any lien or
encumbrance or paid any obligation or liability, absolute or contingent, other
than (i) current liabilities incurred and paid in the ordinary course of
business, and (ii) payments of third-party interest bearing indebtedness, which
indebtedness is listed on SCHEDULE 4.07 (including that outstanding under the
Company's senior credit facilities), (f) made or guaranteed any loans or
advances to any third party whatsoever, (g) suffered or permitted any lien,
security interest, claim, charge or other encumbrance to arise or be granted or
created against or upon any of the assets of the Company or the Subsidiaries,
real or personal, tangible or intangible, (h) canceled, waived or released any
of the Company's or any Subsidiary's debts, rights or claims against third
parties, other than in the ordinary course of business consistent with past
practices, (i) amended the articles or certificate of incorporation or by-laws
(or other organizational documents equivalent thereto) of the Company or any
Subsidiary, (j) made any change in the method of accounting of the Company or
any Subsidiary, (k) made any investment or commitment therefor in any person,
business, corporation, association, partnership, joint venture, trust or other
entity, (l) except as contemplated by Section 6.19, made, entered into, amended
or terminated any written or oral consulting contract, created, made, amended or
8
terminated any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement or withdrawn from any "multi-employer plan"
(as defined in Section 414(f) of the Internal Revenue Code of 1986, as amended
(the "CODE")) so as to create any liability under Article IV of ERISA (as
hereinafter defined) to any entity, (m) amended or experienced a termination of
any material contract, agreement, lease, franchise or license to which the
Company or any Subsidiary is a party, except in the ordinary course of business,
(n) entered into any other material transactions except in the ordinary course
of business, (o) entered into any contract, commitment, agreement or
understanding to do any acts described in the foregoing clauses (a)-(n) of this
Section 4.07, (p) suffered any material damage, destruction or loss (whether or
not covered by insurance) to any assets, (q) experienced any strike, slowdown or
demand for recognition by a labor organization by or with respect to any of the
employees of the Company or the Subsidiaries, (r) experienced or effected any
shutdown, slow-down or cessation of any operations conducted by, or constituting
part of, the Company or the Subsidiaries, or (s) made or changed any election
relating to any Tax.
4.08. OWNERSHIP OF PROPERTIES. Attached hereto as SCHEDULE 4.08 is an
asset list of all real and personal properties (excluding, in the case of
personal properties, any asset having a net book value of less than $25,000 as
of July 31, 2001) owned or leased by the Company, Seller or any Subsidiary as of
July 31, 2001 (collectively, the "COMPANY PROPERTIES"). Except as set forth on
SCHEDULE 4.08 attached hereto, (a) the real and personal properties of the
Company and the Subsidiaries are free and clear of all liens, security
interests, claims, options, rights of another and encumbrances ("LIENS"), (b)
the Company or each Subsidiary, as the case may be, has full and unrestricted
legal and equitable title to, or a valid leasehold interest in, all such
properties, and (c) the operation of the properties and business of the Company
and the Subsidiaries in the manner in which they are now and have been operated
by the Company and the Subsidiaries (and, to the knowledge of the Company and
Kauri, by the Company's and each Subsidiary's respective predecessors in
interest) does not violate in any respect any zoning ordinances, municipal
regulations or other rules, regulations or laws, the violation of which could
have a material adverse effect on the Company (including, for purposes of this
representation only, the StatesRail Entities). No covenants, easements,
rights-of-way or regulations of record impair in any material respect the uses
of the respective properties of the Company and the Subsidiaries for the
purposes for which they are now operated.
4.09. ENVIRONMENTAL MATTERS.
(a) To the knowledge of the Company and Kauri, except as set
forth on SCHEDULE 4.09, the Company and each of the Subsidiaries (i) have
obtained all applicable permits, licenses and other authorizations, which are
required to be obtained under all Environmental Laws (as defined below)
applicable to the Company or any of the Subsidiaries; (ii) are in compliance in
all material respects with all terms and conditions of such required permits,
licenses and authorizations, and also are in compliance with all other
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any uncured past or present violations of Environmental Laws
or any event, condition, circumstance, activity, practice, incident, action or
plan which is reasonably likely to interfere with or prevent continued
compliance with Environmental Laws or which could give rise to any material
capital expenditure or common law or statutory liability, or otherwise form the
9
basis of any claim, action, suit or proceeding against the Company or any of the
Subsidiaries under any Environmental Law or otherwise based on or resulting from
the Management of any Substance; (iv) have taken all actions necessary under
applicable Environmental Laws to register any products or materials required to
be registered by the Company or any of the Subsidiaries thereunder; (v) have not
entered into any agreement to undertake or pay for any response action of any
kind or nature or to pay any damages (including punitive damages), costs, fines
or penalties associated with any release or threatened release of any Substance,
at any location; and (vi) have disclosed on SCHEDULE 4.09 all Environmental
Company Property (as defined below) known to be contaminated with Substances.
(b) As used in this Section: "ENVIRONMENTAL COMPANY PROPERTY"
means any real property owned or operated by the Company and the Subsidiaries
since their respective inceptions; "ENVIRONMENTAL LAW" means any federal, state
or local law or any applicable regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder
relating to pollution or protection of the environment or the Management of
Substances, each as in effect on the Closing Date; "MANAGEMENT", with respect to
any material, means the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, handling, or the emission, discharge or release
into the environment; and "SUBSTANCE" means any pollutant, petroleum, waste,
contaminant, hazardous or toxic material, or any other material the Management
of which is regulated by Environmental Law.
4.10. LICENSES AND PERMITS. Attached hereto as SCHEDULE 4.10 is a list
of all federal, state, county and local governmental licenses, certificates and
permits held or applied for by the Company or the Subsidiaries. Except as set
forth on SCHEDULE 4.10 attached hereto, the Company and the Subsidiaries have
complied in all material respects, and are in compliance in all material
respects, with the terms and conditions of all such licenses, certificates and
permits and no violation of any such licenses, certificates or permits or the
laws or rules governing the issuance or continued validity thereof has occurred,
the violation of which could have a material adverse effect on the Company
(including, for purposes of this representation only, the StatesRail Entities).
Except as set forth on SCHEDULE 4.10 attached hereto, no additional license,
certificate or permit is required from any federal, state, county or local
governmental agency or body thereof in connection with the conduct of the
business of the Company or the Subsidiaries which, if not obtained, would have a
material adverse effect on the Company and the Subsidiaries (including, for
purposes of this representation only, StatesRail). Except as set forth on
SCHEDULE 4.10 attached hereto, no claim has been made by any governmental
authority (and, to the knowledge of the Company and Kauri, no such claim is
anticipated) to the effect that a license, permit or order is necessary in
respect of the business conducted by the Company or any Subsidiary.
4.11. INTELLECTUAL RIGHTS.
(a) Except as set forth on SCHEDULE 4.11:
(i) the Company and each of the Subsidiaries owns,
clear of any Liens , or is licensed or otherwise has the legally
enforceable right to use, all Intellectual Property (as hereinafter
defined) used in or necessary for the conduct of its business as
currently conducted;
10
(ii) no claims are pending or, to the knowledge of
the Company and Kauri, threatened that the Company or any of the
Subsidiaries is infringing on or otherwise violating the rights of any
person with regard to any Intellectual Property used by, owned by
and/or licensed to the Company or any of the Subsidiaries and, to the
knowledge of the Company and Kauri, there are no valid grounds for any
such claims;
(iii) to the knowledge of the Company and Kauri, no
person is infringing on or otherwise violating any right of the Company
or any of the Subsidiaries with respect to any Intellectual Property
owned by and/or licensed to the Company or any of the Subsidiaries;
(iv) to the knowledge of the Company and Kauri, there
are no valid grounds for any claim challenging the ownership or
validity of any Intellectual Property owned by the Company or any of
the Subsidiaries or challenging the Company's or any of the
Subsidiaries' license or legally enforceable right to use any
Intellectual Property licensed by it; and
(v) to the knowledge of the Company and Kauri, all
patents, registered trademarks, service marks and copyrights held by
the Company and each of the Subsidiaries are valid and subsisting.
(b) For purposes of this Agreement, "INTELLECTUAL PROPERTY"
means trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patented, patentable or not in any jurisdiction; trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works of authorship, whether
copyrighted, copyrightable or not in any jurisdiction; registration or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or proprietary
rights and computer programs and software (including source code, object code
and data); licenses, immunities, covenants not to sue and the like relating to
the foregoing; and any claims or causes of action arising out of or related to
any infringement or misappropriation of any of the foregoing.
4.12. COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.12
attached hereto, Seller, the Company and the Subsidiaries have complied in all
material respects, and are in compliance in all material respects, with all
federal, foreign, state, county and local laws, regulations and orders
applicable to their respective businesses and have filed with the proper
authorities all statements and reports required by the laws, regulations and
orders to which the Company, the Subsidiaries or any of their respective
properties or operations are subject. No claim has been made by any governmental
authority (and, to the knowledge of the Company and Kauri, no such claim is
anticipated) to the effect that the business conducted by the Company or any of
the Subsidiaries fails to comply, in any respect, with any law, rule, regulation
or ordinance.
11
4.13. INSURANCE. Attached hereto as SCHEDULE 4.13 is a list of all
policies of fire, liability, business interruption and other forms of insurance
and all fidelity bonds held by or applicable to Seller, the Company or the
Subsidiaries at any time within the past three years, which schedule sets forth
in respect of each such policy the policy name, policy number, carrier, term,
type of coverage, deductible amount or self-insured retention amount, limits of
coverage and annual premium. Except as disclosed on SCHEDULE 4.13 attached
hereto, there has been no material change in the type of insurance coverage
maintained by Seller, the Company or the Subsidiaries during the past three
years that has resulted in any period during which Seller, the Company or the
Subsidiaries had no insurance coverage. Excluding insurance policies which have
expired and been replaced, no insurance policy of Seller, the Company or the
Subsidiaries has been canceled within the last three years and, to the knowledge
of the Company and Kauri, no threat has been made to cancel any insurance policy
of the Company or the Subsidiaries within such period.
4.14. ERISA COMPLIANCE. Except as set forth in SCHEDULE 4.14 attached
hereto, none of Seller, the Company or any Subsidiary maintains or contributes
to any "employee pension benefit plans" ("PENSION PLANS"), as such term is
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). Except as set forth in SCHEDULE 4.14 attached hereto, none
of Seller, the Company or any Subsidiary is subject to liability for any
obligation of any Pension Plan which Seller, the Company or any Subsidiary
formerly maintained or to which Seller, the Company or any Subsidiary formerly
was required to contribute. None of Seller, the Company, any Subsidiary, any
officer of Seller, the Company or any Subsidiary or any of the Pension Plans of
Seller, the Company or any Subsidiary which are subject to ERISA, or any trusts
created thereunder, or any trustee or administrator thereof, has engaged in, or
permitted the assets of any such plan or trust to be involved in, a "prohibited
transaction", as such term is defined in Section 4975 of the Code or Sections
406 and 407 of ERISA, which could subject Seller, the Company, any Subsidiary,
any officer of Seller, the Company or any Subsidiary, any of such plans or any
trust to any material tax or penalty on prohibited transactions imposed by
Section 4975 of the Code or which would have a material adverse effect on the
Company (including, for purposes of this representation only, the StatesRail
Entities). Except as set forth in SCHEDULE 4.14 attached hereto, none of Seller,
the Company or any Subsidiary is obligated to provide any benefit under any
"employee welfare benefit plans", as such term is defined in Section 3(1) of
ERISA, which Seller, the Company or any Subsidiary maintains ("WELFARE PLANS"),
or to which Seller, the Company or any Subsidiary is obligated to contribute, to
any retiree from Seller, the Company or any Subsidiary, except to the extent
that such benefits may be required by the continuation coverage provisions of
Part 6 of Title I of ERISA and Section 4980B of the Code. Each Welfare Plan
subject to such continuation coverage requirements has complied in all material
respects with such continuation coverage requirements. Except as set forth in
SCHEDULE 4.14 attached hereto, none of Seller, the Company or any Subsidiary is,
or has been, a contributing employer to any "multiemployer plan" (without regard
to whether it was a Pension Plan or a Welfare Plan) as such term is defined in
Section 3(37) or Section 4001(a)(3) of ERISA, or to any "multiple employer plan"
within the meaning of Section 413(c) of the Code. None of Seller, the Company or
12
any Subsidiary has withdrawn from such a plan, and neither is subject to any
withdrawal liability with respect to any such plan. All Welfare Plans, Pension
Plans and Seller, the Company and the Subsidiaries have timely complied with the
requirements of Part I of Title I of ERISA and currently comply and have
complied in the past, both as to form and operation, with ERISA, the Code and
all other applicable laws, and with all applicable Statements of Financial
Accounting Standards, including Statements 87 and 106.
4.15. CONTRACTS AND AGREEMENTS. Attached hereto as SCHEDULE 4.15 is a
list of all written and oral contracts, commitments, leases and other agreements
(including, without limitation, promissory notes, loan agreements and other
evidences of indebtedness) to which Seller, the Company or any Subsidiary is a
party or by which Seller, the Company, the Subsidiaries or their respective
properties are bound, pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, in respect of any such
individual contracts, commitments, leases or other agreements during the term
thereof, $100,000 or greater or which are otherwise material to the business of
Seller, the Company or any Subsidiary (including, without limitation, all
mortgages, deeds of trust, security agreements, pledge agreements and similar
agreements and instruments and all confidentiality agreements). Except as set
forth on SCHEDULE 4.15 attached hereto, none of Seller, the Company or any
Subsidiary, and, to the knowledge of the Company and Kauri, no other party
thereto, is in default (and no event has occurred which, with the passage of
time or the giving of notice or both, would constitute a default) under any such
contracts, commitments, leases or other agreements, and none of Seller, the
Company or any Subsidiary has waived any right under any such contracts,
commitments, leases or other agreements. Except as set forth on SCHEDULE 4.15
attached hereto, none of Seller, the Company nor any Subsidiary has guaranteed
any obligations of any other person nor entered into any contract or agreement,
contingent or otherwise, relating to any right to lease, operate, use, supply or
purchase any material Company asset.
4.16. CLAIMS AND PROCEEDINGS. Attached hereto as SCHEDULE 4.16 is a
list and brief description of all claims, actions, suits, proceedings and
investigations pending or, to the knowledge of the Company and Kauri, threatened
against Seller, the Company, any Subsidiary or any of their respective
properties or assets, at law or in equity, or before or by any court, municipal
or other governmental department, commission, board, agency or instrumentality.
Except as set forth on SCHEDULE 4.16 attached hereto, none of Seller, the
Company or any Subsidiary is now subject to any order, judgment, decree,
stipulation or consent of any court, governmental body or agency. No inquiry,
action or proceeding has been asserted, instituted or, to the knowledge of the
Company and Kauri, threatened to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the validity of such
transactions or any part thereof or seeking damages on account thereof. To the
knowledge of the Company and Kauri, there is no basis for any claim or action
which would have a material adverse effect on the Company (including, for
purposes of this representation only, the StatesRail Entities), or result in a
material liability of the Company or the Subsidiaries.
4.17. TAXES.
(a) Seller, the Company and each of the Subsidiaries has filed
all Tax Returns (as defined below) that it was required to file. All such Tax
Returns were correct and complete in all respects. All Taxes (as defined below)
owed by Seller, the Company or any of the Subsidiaries (whether or not shown on
any Tax Return and whether or not any Tax Return was required) have been paid.
Except as set forth on SCHEDULE 4.17 attached hereto, none of Seller, the
13
Company or any Subsidiary currently is the beneficiary of any extension of time
within which to file any Tax Return or has entered into any closing agreement
with any federal, state, local or foreign taxing authority. No claim has ever
been made by any authority in a jurisdiction where Seller, the Company or any of
the Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no liens on any of the assets of
Seller, the Company or any of the Subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Tax, except for Liens for Taxes not yet
due.
(b) Each of Seller, the Company and the Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(c) No director or officer (or employee responsible for Tax
matters) of Seller, the Company or any of the Subsidiaries expects any authority
to assess any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax liability of Seller, the
Company or any of the Subsidiaries either (i) claimed or raised by any authority
in writing or (ii) as to which any of the directors and officers (and employees
responsible for Tax matters) of Seller, the Company or any of the Subsidiaries
has actual knowledge. SCHEDULE 4.17 attached hereto lists all federal, state,
local and foreign income Tax Returns filed with respect to Seller, the Company
or any of the Subsidiaries for taxable periods ended on or after December 31,
1996, indicates those Tax Returns that have been audited and indicates those Tax
Returns that currently are the subject of audit or in respect of which any
written or unwritten notice of any audit or examination has been received by
Seller, the Company or any of the Subsidiaries. Except as set forth in SCHEDULE
4.17, no issue relating to Taxes has been raised in writing by an authority
during any pending audit or examination, and no issue relating to Taxes was
raised in writing by an authority in any completed audit or examination, that
reasonably can be expected to recur in a later taxable period. Seller has made
available to the Buyer correct and complete copies of all Federal income Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by any of Seller, the Company or any of the Subsidiaries since January
1, 1996.
(d) None of Seller, the Company or any Subsidiary has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(e) None of Seller, the Company or any Subsidiary has filed a
consent under Section 341(f) of the Code concerning collapsible corporations.
None of Seller, the Company or any Subsidiary has made any payments, is
obligated to make any payments or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code Section 280G. Seller is not a foreign person within the meaning of
Section 1445(a) of the Code. Seller, the Company and each of the Subsidiaries
has disclosed on its Federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of Federal income Tax within the
meaning of Section 6662 of the Code. None of Seller, the Company or any
14
Subsidiary (i) is a party to any Tax allocation or sharing agreement, (ii) has
been a member of an Affiliated Group (as defined below) filing a consolidated
Federal income Tax Return (other than a group the common parent of which was
Seller), or (iii) has any liability for the Taxes of any Person (as defined
below) (other than Seller, the Company and the Subsidiaries) under Treasury
regulation section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(f) SCHEDULE 4.17 sets forth the following information with
respect to Seller, the Company and each of the Subsidiaries (or, in the case of
clause (ii) below, with respect to each of the Subsidiaries) as of the most
recent practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions contemplated
hereby): (i) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax or excess charitable contribution
allocable to Seller, the Company or any Subsidiary; and (ii) the amount of any
deferred gain or loss allocable to Seller, the Company or any Subsidiary arising
out of any intercompany transaction (within the meaning of Treasury regulation
Section 1.1502-13).
(g) The unpaid Taxes of Seller, the Company and the
Subsidiaries, on a collective basis, (i) did not, as of the most recent fiscal
month end, exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the balance sheet included in the Interim
Financial Statements (rather than in any notes thereto) and (ii) do not exceed
that reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Seller, the Company or any
Subsidiary in filing its Tax Returns.
(h) Except as set forth on SCHEDULE 4.17, none of Seller, the
Company or any Subsidiary shall be required to include in a taxable period
ending after the Closing Date taxable income attributable to income that accrued
in a prior taxable period but was not recognized in any prior taxable period as
a result of the installment method of accounting, the completed contract method
of accounting, the long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or any comparable provision of state,
local or foreign Tax law.
(i) Except as set forth in SCHEDULE 4.17, none of Seller, the
Company or any Subsidiary is a party to any joint venture, partnership or other
arrangement or contract that could be treated as a partnership for Federal
income Tax purposes.
(j) Except as set forth in SCHEDULE 4.17, none of Seller, the
Company or any Subsidiary has entered into any sale leaseback or leveraged lease
transaction that fails to satisfy the requirements of Revenue Procedure 75-21 or
Revenue Procedure 2001-28 (or similar provisions of foreign law) or any safe
harbor lease transaction. None of the property of Seller, the Company or any of
the Subsidiaries is tax-exempt use property within the meaning of Section 168(h)
of the Code.
(k) To the knowledge of the Company and Kauri, none of Seller,
the Company or any Subsidiary has ever been an S corporation (within the meaning
of Section 1361(a)(1) of the Code) or a qualified subchapter S subsidiary within
the meaning of Section 1361(b)(3) of the Code.
15
(l) All material elections with respect to Taxes affecting
Seller, the Company or any Subsidiary have been disclosed or attached to the Tax
Returns of Seller, the Company or such Subsidiary, respectively.
(m) All private letter rulings issued by the Internal Revenue
Service to Seller, the Company or any of the Subsidiaries (and any corresponding
ruling or determination of any state, local or foreign authority) have been
disclosed in SCHEDULE 4.17, and there are no pending requests for any such
rulings (or corresponding determinations).
(n) None of Seller, the Company or any Subsidiary is a
controlled corporation or a distributing corporation in respect of a
distribution to which Section 355(e) of the Code would apply by reason of the
acquisition of the Company Shares pursuant to this Agreement.
(o) As used in this Agreement, "AFFILIATED GROUP" means any
affiliated group within the meaning of Section 1504(a) of the Code or any
similar group defined under a similar provision of state, local or foreign law;
"PERSON" means an individual, a partnership, a corporation, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization or
a governmental entity (or any department, agency or political subdivision
thereof); "TAX" means any Federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs, duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including taxes relating
to the Railroad Retirement Act or the Railroad Retirement Board regulations and
requirements, including any interest, penalty or addition thereto, whether
disputed or not; and "TAX RETURN" means any return, declaration, report, claim
for refund or information return or statement relating to Taxes, including any
schedule or attachment thereto and including any amendment thereof.
4.18. PERSONNEL. Attached hereto as SCHEDULE 4.18 is a list of the
names and current rates of compensation of the directors, officers and managers
of Seller, the Company and the Subsidiaries and of the employees of Seller, the
Company and the Subsidiaries. SCHEDULE 4.18 attached hereto also summarizes the
bonus, profit sharing, percentage compensation, company automobile, club
membership and other like benefits, if any, paid or payable to such directors,
officers, managers and employees during the Company's 2000 fiscal year and to
the date hereof and/or under which such directors, officers and employees are
entitled to receive benefits. The employee relations of Seller, the Company and
the Subsidiaries are good and there is no pending or, to the knowledge of the
Company and Kauri, threatened labor dispute. Except as set forth on SCHEDULE
4.18 attached hereto, none of the employees of Seller, the Company or the
Subsidiaries are represented by any labor union or organization. Seller, the
Company and the Subsidiaries are in compliance in all material respects with all
federal and state laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and are not engaged in any unfair
labor practices. Except as set forth on SCHEDULE 4.18 attached hereto, there is
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no claim against Seller, the Company or the Subsidiaries before the National
Mediation Board, the Public Law Board or any similar body, or any strike, labor
dispute, work slowdown or work stoppage pending or, to the knowledge of the
Company and Kauri, threatened against or involving Seller, the Company or the
Subsidiaries.
4.19. BUSINESS RELATIONS. Except as set forth in SCHEDULE 4.19, neither
the Company nor Kauri has knowledge that any customer or supplier of Seller, the
Company or the Subsidiaries will, as a result of the transactions contemplated
hereby or otherwise, cease to do business with the Company or the Subsidiaries
after the consummation of the transactions contemplated hereby in the same
manner as previously conducted with Seller, the Company or the Subsidiaries.
None of Seller, the Company or any Subsidiary has received any notice of any
disruption (including delayed deliveries or allocations by suppliers) in the
availability of the materials or products used by the Company or such
Subsidiary.
4.20. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 4.20
attached hereto, all of the accounts, notes and loans receivable (net of
reserves, which reserves are adequate under generally accepted accounting
principles) that have been recorded on the books of the Company and the
Subsidiaries are bona fide and represent amounts validly due. All of such
accounts, notes and loans receivable are pledged to the Company's senior bank
lenders to secure the payment of indebtedness outstanding under the Company's
senior credit facilities.
4.21. BANK ACCOUNTS. Attached hereto as SCHEDULE 4.21 is a list of all
banks or other financial institutions with which Seller, the Company or any
Subsidiary has an account or maintains a safe deposit box, showing the type and
account number of each such account and safe deposit box and the names of the
persons authorized as signatories thereon or to act or deal in connection
therewith.
4.22. AGENTS. Except as set forth on SCHEDULE 4.22 attached hereto,
neither the Company nor any Subsidiary has designated or appointed any person or
other entity to act for it or on its behalf pursuant to any power of attorney or
any agency which is presently in effect.
4.23. INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS AND
EMPLOYEES. Except as set forth on SCHEDULE 4.23 attached hereto, neither the
Company nor any Subsidiary owes any indebtedness to any of its officers,
directors, managers, members, shareholders or employees (other than accrued
salaries, benefits or expenses payable in the ordinary course of business) or
has indebtedness owed to it from any of its officers, directors, managers,
members, shareholders or employees, excluding indebtedness for travel advances
or similar advances for expenses incurred on behalf of and in the ordinary
course of business of the Company or such Subsidiary and consistent with the
Company's past practices.
4.24. CERTAIN CONSENTS. Except as set forth on SCHEDULE 4.24 attached
hereto and except in connection with the filings to be made with the Surface
Transportation Board (the "STB"), there are no consents, waivers or approvals
required to be executed and/or obtained from third parties in connection with
the execution, delivery and performance by the Company, Seller or any Member of
this Agreement, the Ancillary Agreements, and the transactions contemplated
hereby or thereby.
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4.25. BROKERS. Except as set forth on SCHEDULE 4.25 attached hereto,
none of Seller, any of the Members, the Company or any Subsidiary has engaged,
or caused any liability to be incurred to, any finder, broker or sales agent in
connection with the execution, delivery or performance of this Agreement or the
transactions contemplated hereby.
4.26. INTEREST IN COMPETITORS, SUPPLIERS AND CUSTOMERS. Except as set
forth on SCHEDULE 4.26 attached hereto and except for the ownership, as a
passive investment, of less than one percent of the outstanding shares of
capital stock of any corporation or other entity listed on a national securities
exchange in the United States or publicly traded in the over-the-counter market
in the United States, no officer or director of the Company or any Subsidiary or
any affiliate of any such officer or director has any ownership interest in any
competitor, supplier or customer of the Company or the Subsidiaries or any
property used in the operation of the business of the Company or the
Subsidiaries.
4.27. INVENTORY. Except as set forth on SCHEDULE 4.27 attached hereto,
the inventories shown on the balance sheet (inclusive of allowances) contained
in the Interim Financial Statements consist of (and the inventories of the
Company and the Subsidiaries on the Closing Date shall consist of) items of a
quality and quantity usable in the ordinary course of business by the Company
and the Subsidiaries.
4.28. TRANSACTIONS WITH AFFILIATES. Except for (a) those transactions
set forth on SCHEDULE 4.28, (b) normal advances to employees consistent with
past practices, (c) payment of compensation for employment to employees
consistent with past practices, (d) inter-company transactions in the ordinary
course with the StatesRail Entities, and (e) participation in scheduled Pension
Plans, Welfare Plans, employment agreements and employee benefit plans, none of
Seller, the Company or any Subsidiary has, since December 31, 1999, purchased,
acquired or leased any property or services from, or sold, transferred or leased
any property or services to, or loaned or advanced any money to, or borrowed any
money from, or entered into or been subject to any management, consulting or
similar agreement with, or engaged in any other significant transaction with any
officer, director or shareholder of the Company or any Subsidiary or any of
their respective affiliates. None of Seller, any of the Members or any other
affiliate of the Company is indebted to the Company for money borrowed or other
loans or advances, and the Company is not indebted to any such affiliate.
4.29. ABSENCE OF CERTAIN PAYMENTS. None of the Company, Seller, any of
the Members, any of the Subsidiaries or any of their respective affiliates,
officers, directors, managers, members, employees or agents or other people
acting on behalf of any of them have (a) engaged in any activity prohibited by
the United States Foreign Corrupt Practices Act of 1977 or any other similar
law, regulation, decree, directive or order of any other country, and (b)
without limiting the generality of the preceding clause (a), used any corporate
or other funds for unlawful contributions, payments, gifts or entertainment, or
made any unlawful expenditures relating to political activity to government
officials or others. None of the Company, any of the Subsidiaries or any of
their respective affiliates, directors, officers, employees or agents of other
persons acting on behalf of any of them, has accepted or received any unlawful
contributions, payments, gifts or expenditures.
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4.30. EQUIPMENT. Except as otherwise set forth on SCHEDULE 4.30, (i)
the Company's and the Subsidiaries' track and bridge infrastructure has been
maintained to a condition that meets the Federal Railroad Administration's Class
of standards for current speeds, as shown in time tables in effect for each
railroad as of August 15, 2001, including both permanent and temporary speed
restrictions in effect from time to time either before or after August 15, 2001,
(ii) the number of the Company's, the Subsidiaries' and the StatesRail Entities'
locomotives (on a collective basis), both leased and owned, that were in service
without bad orders as of August 15, 2001 was 88, (iii) the number of the
Company's, the Subsidiaries' and the StatesRail Entities' locomotives (on a
collective basis), both leased and owned, that are in service without bad orders
as of the date of this Agreement is 88, and (iv) such number that will be in
service without bad orders as of the Closing Date will not be less than 88.
4.31. CURRENT ASSETS. As of the Closing Date, the Company and the
Subsidiaries shall have current assets, determined in accordance with generally
accepted accounting principles consistently applied, of not less than One Dollar
($1.00).
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer and Sub as follows (with the
understanding that (i) Buyer and Sub are relying materially on each such
representation and warranty in entering into and performing this Agreement and
(ii) the following representations, unless specifically indicated to the
contrary, are being made as if the Restructuring had occurred immediately prior
to the date hereof and therefore as though Seller owns all of the Company
Shares:
5.01. OWNERSHIP OF SHARES/NO LIENS. Seller owns of record and
beneficially the Company Shares as set forth on SCHEDULE 5.01 attached hereto.
None of the Company Shares was issued or will be transferred under this
Agreement in violation of any preemptive or preferential rights of any person.
Except as set forth on SCHEDULE 5.01 attached hereto and except for (a)
restrictions on transfer imposed by federal and state securities laws, and (b)
security interests created in favor of Seller's senior bank lenders as a result
of the pledge of the Company Shares to such lenders, Seller is the true and
lawful owner, of record and beneficially, of the Company Shares, free and clear
of any liens, restrictions, security interests, claims, rights of another or
encumbrances; none of the Company Shares owned by Seller are subject to any
outstanding options, warrants, calls or similar rights of any other person to
acquire the same; none of the Company Shares owned by Seller is subject to any
restrictions on transfer thereof; and Seller has the full power and authority to
convey, and will convey to Sub at Closing, good and marketable title to the
Company Shares, free and clear of any liens, restrictions, security interests,
claims, rights of another or encumbrances.
5.02. TAX STATUS OF SELLER. Seller is not a foreign person, and no Tax
is required to be withheld from Seller pursuant to Section 1445 of the Code as a
result of any of the transfers contemplated by this Agreement.
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ARTICLE VI
COVENANTS
6.01. INSPECTION. From the date hereof to the Closing, Kauri shall give
and cause Seller, the Company and the Subsidiaries to give to Buyer and its
officers, attorneys, accountants and representatives free, full and complete
access during reasonable business hours to all books, records, Tax Returns,
files, correspondence, personnel, facilities and properties of Seller, the
Company and the Subsidiaries; provide Buyer and its officers, attorneys,
accountants and representatives with reasonable access to all information and
material pertaining to the business and affairs of the Company and the
Subsidiaries as Buyer may deem necessary or appropriate; and use their
reasonable best efforts to afford Buyer and its officers, attorneys, accountants
and representatives the opportunity to meet with the customers and suppliers of
Seller, the Company and the Subsidiaries to discuss the business, condition
(financial or otherwise), operations and prospects of the Company and the
Subsidiaries; PROVIDED, HOWEVER, that neither Buyer nor any of its
representatives shall contact any customer or supplier of Seller, the Company or
the Subsidiaries without the prior approval of the Company. At the Closing, the
Company shall deliver to Buyer the originals of all minute books and stock
transfer records of the Company and the Subsidiaries. Any investigation by Buyer
or its officers, attorneys, accountants or representatives shall not in any
manner affect the representations and warranties of Seller, the Company or any
Member contained herein. Buyer shall inform Seller and the Company within five
business days after becoming aware of any breach by Seller, any Member or the
Company of any of their covenants, agreements, representations or warranties
contained or referred to herein or in any document delivered in accordance with
the terms hereof.
6.02. COMPLIANCE BY THE COMPANY, KAURI AND SELLER. From the date hereof
to the Closing, none of Seller, Kauri or the Company shall take or fail to take
any action which action or failure to take such action shall cause the
representations and warranties made by Seller, Kauri and/or the Company herein
to be untrue or incorrect as of the Closing.
6.03. SATISFACTION OF ALL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
BUYER. From the date hereof to the Closing, Seller, Kauri and the Company shall
use his or its commercially reasonable efforts to cause all conditions precedent
to the obligations of Buyer hereunder to be satisfied by the Closing.
6.04. NO SOLICITATION. From the date hereof to the Closing, none of
Seller, the Company or any Member shall, or cause any agent on its behalf to,
offer any of the Company Shares, the Company (or a material part of its assets
in one transaction or a series of transactions) or any Subsidiary (or a material
part of its assets or securities in one transaction or a series of transactions)
for sale or lease, or solicit offers to buy or lease the Company Shares, the
Company (or a material part of its assets in one transaction or in a series of
related transactions) or any Subsidiary (or a material part of its assets or
securities in one transaction or a series of related transactions), or hold
discussions with any party (other than Buyer) looking toward such an offer or
solicitation or toward a merger, share exchange or consolidation of the Company
20
or any Subsidiary with or into another entity or any similar transaction. From
the date hereof to the Closing, neither Seller nor any Member, directly or
indirectly, shall, and shall not allow the Company or the Subsidiaries to, enter
into any agreement with any party other than Buyer and Sub with respect to the
sale, lease or other disposition of either the capital stock or the assets of
the Company or any Subsidiary (except for surplus or non-essential assets
disposed of for fair market value in the ordinary course of the Company's
operations consistent with past practices) or with respect to any merger, share
exchange, consolidation or similar transaction involving the Company or any
Subsidiary.
6.05. NOTICE OF DEVELOPMENTS. From the date hereof to the Closing,
Seller, the Members and the Company shall notify Buyer of any material problems,
changes or developments with respect to the business, operations or prospects of
the Company or the Subsidiaries (whether or not a breach of a representation or
warranty) which come to the knowledge of Seller, the Members or the Company.
6.06. NOTICE OF BREACH. From the date hereof to the Closing, Seller,
the Members and the Company shall, promptly upon becoming aware thereof, give
detailed written notice to Buyer of the occurrence of, or the impending or
threatened occurrence of, any event which would cause or constitute a breach, or
would have caused or constituted a breach had such event occurred or been known
to Seller, any Member or the Company prior to the date of this Agreement, of any
of their covenants, agreements, representations or warranties contained or
referred to herein or in any document delivered in accordance with the terms
hereof.
6.07. NOTICE OF LITIGATION. From the date hereof to the Closing,
promptly upon becoming aware thereof, Seller, the Members and the Company shall
notify Buyer of (a) any suit, action or proceeding (including, without
limitation, any Tax action or any proceeding involving a labor dispute or
grievance or union recognition) to which the Company or any Subsidiary becomes a
party or which is threatened against the Company or any Subsidiary, (b) any
order or decree or any complaint praying for an order or decree restraining or
enjoining the consummation of this Agreement or the transactions contemplated
hereby, or (c) any notice from any tribunal of its intention to institute an
investigation into, or to institute a suit or proceeding to restrain or enjoin
the consummation of, this Agreement or the transactions contemplated hereby or
to nullify or render ineffective this Agreement or such transactions if
consummated.
6.08. CONTINUATION OF INSURANCE COVERAGE. From the date hereof to the
Closing, Seller and the Members shall cause the Company and the Subsidiaries to
keep in full force and effect insurance coverage for the Company, the
Subsidiaries and their respective assets and operations comparable in amount and
scope to the coverage now maintained covering the Company, the Subsidiaries and
their respective assets and operations.
6.09. MAINTENANCE OF CREDIT TERMS. From the date hereof to the Closing,
Seller and the Members shall cause the Company and the Subsidiaries to continue
to effect sales of their products and services only on the terms that have
historically been offered by the Company and the Subsidiaries or on such other
terms as market conditions may dictate consistent with sound business practices.
21
6.10. UPDATING INFORMATION. Prior to the Closing, Seller may update any
schedules or exhibits to this Agreement; PROVIDED, HOWEVER, that except as
provided in the last sentence of Section 7.01, any such update shall not cure
any breach of any representation or warranty contained herein made by Seller,
the Company, or any Member, as the case may be, nor shall it constitute a waiver
by Buyer of any of its rights or remedies with respect to such breach.
6.11. FINANCIAL STATEMENTS. Until the Closing, as soon as available,
and in any event within 35 days after the end of each calendar month after July
31, 2001 (other than the month of August, which shall be within 45 days after
August 31, 2001), the Company shall furnish to Buyer an unaudited balance sheet
of each of Seller, Alabama and Kiamichi LLC as of the last day of such month,
and an unaudited income statement of each of Seller, Alabama and Kiamichi LLC
for such month, prepared in accordance with the generally accepted accounting
principles applied in the preparation of the Audited Financial Statements
(except for the absence of notes to such financial statements and subject to
normal year-end adjustments and accruals required to be made in the ordinary
course of business which are not materially adverse and are consistent with past
practices). Until the Closing, as soon as available, and in any event within 35
days after the end of each fiscal quarter after June 30, 2001, the Company shall
furnish to Buyer an unaudited balance sheet of StatesRail Equipment as of the
last day of such quarter, and an unaudited income statement of StatesRail
Equipment for such quarter, prepared in accordance with the generally accepted
accounting principles applied in the preparation of the Audited Financial
Statements (except for the absence of notes to such financial statements and
subject to normal year-end adjustments and accruals required to be made in the
ordinary course of business which are not materially adverse and are consistent
with past practices). Such financial statements shall fairly present the
financial position, results of operations and changes in financial position of
each of Seller and each such Subsidiary, as of the indicated dates and for the
indicated periods.
6.12. INTERIM OPERATIONS OF THE COMPANY.
(a) From the date hereof to the Closing, Seller and the
Members shall cause the Company and the Subsidiaries to conduct their respective
businesses only in the ordinary course consistent with past practices and pay or
cause to be paid their respective obligations in a timely fashion in accordance
with their respective terms and neither the Company nor any Subsidiary shall,
unless Buyer gives its prior written approval (which approval shall not be
unreasonably withheld, conditioned or delayed), (i) amend or otherwise change
its articles or certificate of incorporation or by-laws (or organizational
documents equivalent thereto), as each such document is in effect on the date
hereof, (ii) issue or sell, or authorize for issuance or sale, additional shares
of any class of capital stock or membership interests or issue, grant or enter
into any subscription, option, warrant, right, convertible security or other
agreement or commitment of any character obligating the Company or the
Subsidiaries to issue securities, (iii) in the case of the Company, declare, set
aside, make or pay any dividend or other distribution with respect to its
capital stock or membership interests, (iv) redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock or membership
interests, (v) authorize any capital expenditure in excess of $50,000 (other
than the capital expenditures described on SCHEDULE 4.07(C) attached hereto,
which Buyer hereby consents to) or sell, pledge, dispose of or encumber, or
agree to sell, pledge, dispose of or encumber, any assets of the Company or the
Subsidiaries, except for sales of assets in the ordinary course of business and
sales of surplus or non-essential assets disposed of for fair market value in
22
the ordinary course of the Company's operations consistent with past practices,
(vi) acquire (by merger, share exchange, consolidation, acquisition of stock or
assets, or otherwise) any corporation, partnership or other business
organization or division thereof or enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing, (vii) incur any
indebtedness for borrowed money (other than pursuant to credit, loan or other
financing agreements or arrangements as in effect on the date hereof), issue any
debt securities or enter into or modify any contract, agreement, commitment or
arrangement with respect thereto, (viii) enter into, amend or terminate any
employment or consulting agreement with any director, officer, consultant or key
employee of the Company or the Subsidiaries, enter into, amend or terminate any
employment agreement with any other person otherwise than in the ordinary course
of business or take any action with respect to the grant or payment of any
severance or termination pay, other than pursuant to policies or agreements of
the Company or the Subsidiaries in effect on the date hereof or as contemplated
by Section 6.19, (ix) enter into, extend or renew any lease for office or
manufacturing space, (x) except as required by law, adopt, amend or terminate
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or arrangement for the benefit or welfare of any officer or employee
of the Company or the Subsidiaries or withdraw from any multi-employer plan so
as to create any liability under Article IV of ERISA to any entity, (xi) grant
any increase in compensation, or grant or make any bonus or other compensatory
payments, to any director, officer, consultant or key employee of the Company or
the Subsidiaries, except (A) pursuant to agreements entered into prior to August
9, 2001, (B) in the ordinary course of business consistent with past practices,
or (C) as contemplated by Section 6.19, (xii) grant any increase in compensation
to any other employee of the Company or the Subsidiaries except in the ordinary
course of business consistent with past practice, or (xiii) make or change any
election relating to Taxes.
(b) From the date hereof to the Closing, Seller and the
Members shall cause the Company and the Subsidiaries to use their commercially
reasonable efforts to preserve intact the business organization of the Company
and the Subsidiaries, to keep available in all material respects the services of
their present officers, consultants and key employees, to preserve intact their
banking relationships and credit facilities, to preserve intact their
relationships with their customers, suppliers and distributors, to preserve the
goodwill of those having business relationships with them and to comply with all
applicable laws.
6.13. SURFACE TRANSPORTATION BOARD. Each party hereto shall make such
filings with the STB required of such party by the STB and/or by the rules and
regulations promulgated or governed thereby in connection with the transactions
contemplated hereby. Each party hereto required to make such a filing shall use
its reasonable best efforts to make such filing (and any responses to requests
for additional information in respect of such filing) so as to permit the
closing of the transactions contemplated by this Agreement at the Closing Date.
Buyer shall pay all filing fees required in connection with any such filing made
under this Section 6.13.
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6.14. RESIGNATIONS OF DIRECTORS AND OFFICERS. Seller and the Members
shall cause all directors of the Company and the Subsidiaries (and, if requested
by Buyer, all officers of the Company and the Subsidiaries) to deliver their
written resignations to Buyer, which resignations shall be effective at or
before the Closing and shall be in form and substance reasonably satisfactory to
Buyer.
6.15. COMPLIANCE BY BUYER AND SUB. From the date hereof to the Closing,
neither Buyer nor Sub shall take or fail to take any action which action or
failure to take such action shall cause the representations and warranties made
by Buyer or Sub herein to be untrue or incorrect as of the Closing.
6.16. SATISFACTION OF ALL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
SELLER. From the date hereof to the Closing, each of Buyer and Sub shall use its
commercially reasonable efforts to cause all conditions precedent to the
obligations of Seller hereunder to be satisfied by the Closing.
6.17. NOTICE BY BUYER AND SUB OF BREACH. From the date hereof to the
Closing, each of Buyer and Sub shall, promptly upon becoming aware thereof, give
detailed written notice to Kauri and Seller of the occurrence of, or the
impending or threatened occurrence of, any event which would cause or constitute
a breach, or would have caused or constituted a breach had such event occurred
or been known to Buyer or Sub prior to the date of this Agreement, of any of its
covenants, agreements, representations or warranties contained or referred to
herein or in any document delivered in accordance with the terms hereof.
6.18. NOTICE BY BUYER AND SUB OF LITIGATION. From the date hereof to
the Closing, promptly upon becoming aware thereof, each of Buyer and Sub shall
notify Seller and Kauri of (a) any order or decree or any complaint praying for
an order or decree restraining or enjoining the consummation of this Agreement
or the transactions contemplated hereby, or (b) any notice from any tribunal of
its intention to institute an investigation into, or to institute a suit or
proceeding to restrain or enjoin the consummation of, this Agreement or the
transactions contemplated hereby or to nullify or render ineffective this
Agreement or such transactions if consummated.
6.19. TERMINATION OF EMPLOYEES. SCHEDULE 6.19 lists all corporate
general and administrative employees of the Company and the Subsidiaries (the
"CORPORATE EMPLOYEES") and describes all severance arrangements made with each
Corporate Employee prior to the Closing. At least five (5) days prior to
Closing, upon written notice, Buyer may provide a list to the Company of
Corporate Employees whose employment the Buyer wishes to terminate. Any
severance, termination, or other payments to be made to such terminated
Corporate Employees shall be paid by Buyer or by the Company on or after the
Closing Date (and not by Seller or the Members); provided that the amount of any
such payments is to be deducted from the net consideration to be paid by Buyer
for the Company Shares, as contemplated by the Letter Agreement. For purposes of
this Section, Buyer may notify Seller of a termination of a Corporate Employee
for a date following the Closing of up to two months subsequent thereto, to
provide for a smooth transition after Closing. It shall be the responsibility of
Buyer and the Company to pay all wages of the Corporate Employees after Closing
until the effective termination date.
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6.20. FILING OF TAX RETURNS; TRANSFER TAXES.
(a) Seller shall prepare and timely file each Tax Return with
respect to the Company and the Subsidiaries in respect of periods that end on or
before the Closing Date that are required to be filed after the Closing Date.
Seller shall provide a copy of each such Tax Return to Buyer at least ten (10)
days prior to the filing thereof in order to give Buyer the opportunity to
comment thereon. Seller shall make all changes thereto reasonably requested by
Buyer and shall not file any such Tax Return to which Buyer reasonably objects.
Seller shall timely pay all Taxes payable with respect to each such Tax Return
in excess of the reserves for such Taxes (excluding any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
reflected on the balance sheets of Seller, the Company and the Subsidiaries, on
a collective basis, as of the last day of the calendar month immediately
preceding the Closing Date, or the Closing Date if the Closing is on the last
day of a calendar month, on or prior to the date such Taxes are due.
(b) Buyer shall prepare and file all Tax Returns with respect
to the Company and the Subsidiaries that cover a taxable period beginning on or
before the Closing Date and ending after the Closing Date that is required to be
filed after the Closing Date (a "STRADDLE PERIOD RETURN"). Seller shall pay to
Buyer at least five days prior to the due date for the filing of any Straddle
Period Return an amount equal to the portion of the Taxes, in excess of the
reserves for such Taxes (excluding any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) reflected on the balance
sheets of Seller, the Company and the Subsidiaries, on a collective basis, as of
the last day of the calendar month immediately preceding the Closing Date, or
the Closing Date if the Closing is on the last day of a calendar month, shown on
such return which relate to the portion of such taxable period ending on the
Closing Date (the "PRE-CLOSING STRADDLE PERIOD"). The portion of a Straddle
Period Tax that relates to the Pre-Closing Straddle Period shall be based on an
interim closing of the books on the Closing Date (except with respect to ad
valorem taxes, which shall be prorated).
6.21. EFFECTUATION OF RESTRUCTURING. Prior to the Closing Date, Seller,
the Members, the Company and the Subsidiaries shall effectuate the
Restructuring. Seller, the Members, the Company and the Subsidiaries shall not,
without the prior written consent of Buyer (which consent shall not be
unreasonably withheld, conditioned or delayed), take any of the actions set
forth in Section 6.12(a) in order to effectuate the Restructuring. Buyer and Sub
shall, upon the reasonable written request of Seller, provide any information
Seller reasonably requires in order to effectuate the Restructuring.
6.22. DELIVERY OF SCHEDULES. Seller shall deliver to Buyer the
Schedules referred to in Article IV, Article V, Article VI and Article IX not
later than the 15th day after the date hereof. Such Schedules shall be deemed to
have been a part of this Agreement since the date hereof unless the Schedule
Non-Acceptance Notice (as defined in Section 7.01(q)) shall be timely given by
Buyer.
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ARTICLE VII
CONDITIONS TO CLOSING
7.01. CONDITIONS TO OBLIGATIONS OF BUYER AND SUB. The obligations of
Buyer and Sub to consummate the transactions contemplated by this Agreement are
subject to the fulfillment of each of the following conditions:
(a) The representations and warranties of Seller, the Members
and the Company contained in this Agreement not qualified by materiality shall
be true and correct in all material respects and the representations and
warranties of such parties contained in this Agreement containing qualifications
as to materiality shall be true and correct, in both cases, as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the Closing Date; Seller, the Members and the Company shall
have performed and complied with all agreements required by this Agreement to be
performed or complied with by Seller, the Members and the Company at or prior to
the Closing Date; and Buyer shall have received a certificate, dated as of the
Closing Date, signed by the Chief Executive Officer of Seller and the Company to
the foregoing effects;
(b) No action or proceeding shall have been instituted or
threatened for the purpose or with the probable or reasonably likely effect of
enjoining or preventing the consummation of this Agreement or seeking damages on
account thereof;
(c) Buyer shall have received an opinion of Fish & Richardson
P.C., counsel for Seller, the Company and the Members, dated as of the Closing
Date, in a form reasonably acceptable to Buyer, with respect to the matters
listed on EXHIBIT B;
(d) Since July 31, 2001, there shall have been no material
adverse change with respect to the Company and the Subsidiaries (including, for
purposes of this condition (d) only, the StatesRail Entities); and the business
of the Company and the Subsidiaries shall have been conducted in accordance with
this Agreement;
(e) Buyer shall have received the Company deliveries
contemplated by Section 2.03 hereof and the resignations contemplated by Section
6.14 hereof;
(f) All consents and approvals (if any) required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained and, if applicable, the STB shall have approved the transactions
contemplated hereby;
(g) All necessary action (corporate or otherwise) shall have
been taken by Seller, the Members and the Company to authorize, approve and
adopt this Agreement and the consummation and performance of the transactions
contemplated hereby, and Buyer shall have received a certificate, dated as of
the Closing Date, of the Chief Executive Officer of Seller and the Company to
the foregoing effect;
26
(h) Buyer shall have received from Seller or its duly
appointed agent and attorney-in-fact the Certificate or Certificates
representing all of the Company Shares owned by Seller duly endorsed for
transfer or accompanied by stock powers duly executed in blank;
(i) The transactions contemplated by that certain Merger
Agreement of even date herewith among Buyer, Sub II, StatesRail, Inc. and the
Members (the "MERGER AGREEMENT") shall have been consummated;
(j) Buyer shall have satisfactorily completed its due
diligence investigation of the Company and the Subsidiaries and shall be
satisfied with the results of such investigation in its sole discretion, it
being understood that this condition shall be deemed satisfied unless, on or
prior to the 30th day after the date hereof (the "DUE DILIGENCE NOTICE DATE"),
Buyer gives notice of its intention to terminate this Agreement because it shall
have determined that the results of such investigation were not satisfactory
(the "DUE DILIGENCE NOTICE");
(k) Seller and the Company shall have delivered such good
standing certificates, officers' certificates and similar documents and
certificates as counsel for Buyer shall have reasonably requested prior to the
Closing Date;
(l) Kauri and Onyx Holdings, Inc., a Delaware corporation
("ONYX"), shall have executed and delivered the Indemnification Agreement by and
among Buyer, Sub, Sub II, Kauri and Onyx, in the form attached hereto as EXHIBIT
D (the "INDEMNIFICATION AGREEMENT");
(m) Seller shall have executed and delivered the Escrow
Agreement;
(n) [intentionally left blank];
(o) The Restructuring shall have been effectuated in
accordance with Section 6.21;
(p) A Voting Trust Agreement, to be executed in connection
with the issuance of the shares of capital stock of Kiamichi to the Company,
shall be sufficient under the rules and regulations of the STB to permit the
Closing hereunder to occur without any regulatory approval or additional
regulatory conditions; and
(q) The Schedules referred to in Article IV, Article V,
Article VI and Article IX to be delivered to Buyer by the Company and Seller
shall have been delivered to Buyer not later than the 15th day after the date
hereof and Buyer shall have deemed such Schedules to be satisfactory, in its
sole discretion, it being understood that this condition shall be deemed
satisfied unless, not later than the 30th day after the date hereof (the
"SCHEDULE NOTICE DATE"), Buyer shall have given written notice of its
determination that the Schedules were not satisfactory (the "SCHEDULE
NON-ACCEPTANCE NOTICE").
The decision of Buyer to consummate the transactions contemplated by this
Agreement without the satisfaction of any of the preceding conditions shall not
27
constitute a waiver of any of Seller's and/or the Company's representations,
warranties, covenants or indemnities herein, other than the failure of a
representation or warranty made in Article IV or Article V hereof to be true and
correct if the matter or circumstance causing such failure was set forth in an
amended schedule pursuant to Section 6.10 hereof.
7.02. CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment of the following conditions:
(a) Buyer's and Sub's representations and warranties contained
in this Agreement not qualified by materiality shall be true and correct in all
material respects and the representations and warranties of such parties
contained in this Agreement containing qualifications as to materiality shall be
true and correct, in both cases, at and as of the Closing Date with the same
effect as though such representations and warranties had been made as of the
Closing Date; Buyer and Sub shall have performed and complied with all
agreements required by this Agreement to be performed or complied with by Buyer
and Sub at or prior to the Closing Date; and Seller shall have received a
certificate, dated as of the Closing Date, signed by the President, the Chief
Financial Officer or any Vice President of Buyer and Sub to the foregoing
effects;
(b) No action or proceeding shall have been instituted or
threatened for the purpose or with the probable or reasonably likely effect of
enjoining or preventing the consummation of this Agreement or seeking damages on
account thereof;
(c) Seller shall have received an opinion of Greenberg
Traurig, P.A., counsel to Buyer and Sub, dated as of the Closing Date, in a form
reasonably acceptable to Seller, with respect to the matters listed on EXHIBIT
C;
(d) Sub or Buyer shall have delivered to Seller the Purchase
Consideration for the Company Shares in accordance with Article II hereof and
the Letter Agreement;
(e) All necessary action (corporate or otherwise) shall have
been taken by Buyer and Sub to authorize, approve and adopt this Agreement and
the consummation and performance of the transactions contemplated hereby, and
Seller shall have received a certificate, dated as of the Closing Date, signed
by the President, the Chief Financial Officer or any Vice President of Buyer and
Sub to the foregoing effect;
(f) All consents and approvals (if any) required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained and, if applicable, the STB shall have approved the transactions
contemplated hereby;
(g) The transactions contemplated by the Merger Agreement
shall have been consummated;
28
(h) Buyer and Sub shall have delivered to Seller such good
standing certificates, officers' certificates and similar documents and
certificates as counsel for Seller shall have reasonably requested prior to the
Closing Date;
(i) Buyer and Sub shall have executed and delivered the
Indemnification Agreement and the Escrow Agreement; and
(j) A Voting Trust Agreement, to be executed in connection
with the issuance of the shares of capital stock of Kiamichi to the Company,
shall be sufficient under the rules and regulations of the STB to permit the
Closing hereunder to occur without any regulatory approval or additional
regulatory conditions.
The decision of Seller, the Members and the Company to consummate the
transactions contemplated by this Agreement without the satisfaction of any of
the preceding conditions shall not constitute a waiver of any of Buyer's and/or
Sub's representations, warranties, covenants or indemnities herein
ARTICLE VIII
TERMINATION
8.01. TERMINATION. This Agreement may be terminated prior to the
Closing by (a) the mutual consent of Buyer and Seller, (b) Seller upon the
failure of Buyer and Sub to perform or comply with any of their covenants or
agreements contained herein prior to the Closing or if the representations and
warranties not qualified by materiality of Buyer and Sub hereunder shall not
have been true and correct in all material respects or if the representations
and warranties of such parties qualified by materiality shall not have been true
and correct, in both cases as of the time at which such were made, (c) Buyer
upon the failure of Seller, the Company or any Member to perform or comply with
any of its or his covenants or agreements contained herein prior to the Closing
or if the representations and warranties not qualified by materiality of Seller,
Kauri and the Company hereunder shall not have been true and correct in all
material respects or if the representations and warranties of such parties
qualified by materiality shall not have been true and correct, in both cases as
of the time at which such were made, (d) either Seller or Buyer if the Closing
does not occur by January 4, 2002 (the "TERMINATION DATE"), (e) Buyer, if
satisfactory Schedules have not been delivered on or prior to the Schedule
Notice Date, or if it shall have determined that its due diligence was not
satisfactory on or prior to the Due Diligence Notice Date, (f) Seller, if Buyer
shall have given (i) the Schedule Non-Acceptance Notice (provided that none of
Seller, the Company or any Member is in breach of any of its respective
covenants contained in Section 6.01 or Section 6.21) or (ii) the Due Diligence
Notice (provided that none of Seller, the Company or any Member is in breach of
any of its respective covenants contained in Section 6.01 or Section 6.21), and
(g) Seller, if on or prior to the 45th day after the date hereof Buyer shall
have failed to give Seller notice that it has received the waiver and consent
referred to on Schedule 3.02; PROVIDED, HOWEVER, that no party may terminate
this Agreement pursuant to (b) or (c) or (d) above if such party is, at the time
of any such attempted termination, in breach of any term hereof.
29
8.02. EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to the provisions of Section 8.01, all further obligations of each party under
this Agreement shall terminate without further liability of such party;
PROVIDED, HOWEVER, that such termination shall not constitute a waiver by any
party of any claim it may have for specific performance or for damages caused by
reason of a breach by any other party of a representation, warranty, covenant,
or agreement contained herein; and PROVIDED FURTHER, that, anything herein to
the contrary notwithstanding, the respective rights and obligations of the
parties pursuant to Article IX hereof shall survive the termination of this
Agreement.
8.03. WAIVER. If any condition specified in Section 7.01 or Section
7.02 of Buyer, on the one hand, and Seller, the Members and the Company, on the
other, has not been satisfied, the parties, in addition to any other rights
which may be available to it or them, shall have the right to waive any
condition that is for its or their benefit and to require the other party or
parties to proceed with the Closing.
ARTICLE IX
MISCELLANEOUS
9.01. COLLATERAL AGREEMENTS, AMENDMENTS AND WAIVERS. This Agreement
(together with the documents delivered pursuant hereto) supersedes all prior
documents, understandings and agreements, oral or written, relating to this
transaction and constitutes the entire understanding among the parties with
respect to the subject matter hereof. Any modification or amendment to, or
waiver of, any provision of this Agreement (or any document delivered pursuant
to this Agreement unless otherwise expressly provided therein) may be made only
by an instrument in writing executed by the party against whom enforcement
thereof is sought. Notwithstanding the foregoing, this Agreement may be amended
prior to the Closing but not thereafter in any respect by written agreement of
Buyer and Kauri, and no such amendment of any nature shall require the consent
(written or oral) of Seller, the Company or any other Member to be effective
against, and binding upon, Seller, the Company or such Member. Seller, the other
Members and the Company consent to the foregoing provisions of this Section 9.01
and acknowledge and agree that each of them is aware of and understands the
implications thereof.
9.02. INTERPRETATION AND CERTAIN DEFINITIONS. When a reference is made
in this Agreement to an Article or a Section, such reference shall be to an
Article or a Section of 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 phrase "MADE AVAILABLE" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
term "AFFILIATE" shall have the meaning set forth in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended. As used in this
Agreement, "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, with
respect to any entity referred to, any change or effect (or any development
30
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that, individually or in the aggregate with any such other changes or
effects, is materially adverse to the business, operations, assets (including
intangible assets), financial condition or results of operations of such entity
and its subsidiaries, taken as a whole. As used in this Agreement, "KNOWLEDGE OF
THE COMPANY AND KAURI" means the actual knowledge (except as set forth in
Section 4.06(b)) of the Members and of the directors, officers, managers and
general managers of Seller, the Company and the Subsidiaries named on SCHEDULE
9.02 with respect to the matter in question. As used in this Agreement,
"KNOWLEDGE OF BUYER" means the actual knowledge of the Buyer's directors,
officers and persons listed on SCHEDULE 9.02 with respect to the matter in
question.
9.03. SUCCESSORS AND ASSIGNS. None of Buyer's, Seller's, the Company's,
or any Member's rights or obligations under this Agreement may be assigned
(except that Buyer may assign its rights and obligations to any affiliate (as
defined in Rule 144 promulgated under the Securities Act) thereof with the
written consent of Seller, the Company or the Members); provided, however, that
any time prior to the Closing Date Buyer and Sub may assign all (but not less
than all) of Sub's rights and obligations under this Agreement to any direct or
indirect, wholly-owned subsidiary of Buyer without the prior written consent of
any other party. Any assignment in violation of the foregoing shall be null and
void. Subject to the preceding sentences of this Section 9.03, the provisions of
this Agreement (and, unless otherwise expressly provided therein, of any
document delivered pursuant to this Agreement) shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
9.04. EXPENSES. Buyer shall pay all of its costs and expenses incurred
in connection with the transactions contemplated by this Agreement. Seller shall
pay all of Seller's and the Company's costs and expenses incurred in connection
with the transactions contemplated by this Agreement. In addition, Seller shall
bear the reasonable costs and expenses of providing the Financial Statements
pursuant to Section 4.06 hereof and the monthly financial statements pursuant to
Section 6.11 hereof. The Members, and not Seller, shall pay all of the Members'
(but not Seller's or the Company's) costs and expenses incurred in connection
with this Agreement.
9.05. INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
9.06. INFORMATION AND CONFIDENTIALITY. Each party hereto agrees that
such party shall hold in strict confidence all information and documents
received from any other party hereto and if the Closing does not occur each such
party shall return to the other parties hereto all such documents then in such
receiving party's possession without retaining copies; PROVIDED, HOWEVER, that
each party's obligations under this Section 9.06 shall not apply to (a) any
information or document required to be disclosed by law, (b) any information or
31
document in the public domain other than because of the wrongful actions of the
disclosing party, or (c) any information or document that Buyer discloses to any
potential lender to or investor in Buyer, Sub or the Company.
9.07. WAIVER. No failure or delay on the part of any party in
exercising any right, power or privilege hereunder or under any of the documents
delivered in connection with this Agreement shall operate as a waiver of such
right, power or privilege; nor shall any single or partial exercise of any such
right, power or privilege preclude any other or future exercise thereof or the
exercise of any other right, power or privilege.
9.08. NOTICES. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document
delivered pursuant to this Agreement) shall be given in writing and shall be
deemed received (a) when personally delivered to the relevant party at its
address as set forth below, (b) if sent by mail, on the third day following the
date when deposited in the United States mail, certified or registered mail,
postage prepaid, or (c) if sent by facsimile transmission, when electronic
confirmation is received by the transmitting party, to the relevant party at its
address indicated below:
Buyer and Sub: RailAmerica, Inc.
5300 Broken Sound Blvd., NW
Boca Raton, Florida 33487
Attn: John T. White, Esq.
Fax: (561) 994-3929
With a copy to: Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Fern S. Watts, Esq.
Fax: (305) 579-0717
Seller and the Company: StatesRail L.L.C.
7557 Rambler Road, Suite 280
Dallas, Texas 75231
Attn: J. Peter Kleifgen
Fax:(214) 691-2582
With a copy to: Warren W. Garden, Esq.
Fish & Richardson P.C.
1717 Main Street
Suite 5000
Dallas, Texas 75201
Fax:(214) 747-2091
32
The Members: c/o Kauri, Inc.
300 Delaware Avenue
9th Floor
Wilmington, Delaware 19801
Attn: Francis B. Jacobs
Fax:(302) 552-3128
With copies to: J. Peter Kleifgen
9622 Moss Haven
Dallas, Texas 75231
Fax:(214) 340-0658
and:
Warren W. Garden, Esq.
Fish & Richardson P.C.
1717 Main Street
Suite 5000
Dallas, Texas 75201
Fax:(214) 747-2091
Each party may change its address for purposes of this Section 9.08 by proper
notice to the other parties. The Members hereby acknowledge and agree that, in
giving notice to any or all of the Members, Buyer need only deliver one copy of
such notice to Kauri (who shall be responsible for delivering copies of such
notice to the Members). The Company hereby acknowledges and agrees that, in
giving notice to the Company, Buyer need only deliver one copy of such notice to
Kauri (which shall be responsible for delivering copies of such notice to the
Company).
9.09. PUBLIC ANNOUNCEMENT. Except as required by applicable law, all
press releases and other public announcements concerning this Agreement and the
transactions contemplated hereby must be approved by Buyer and Kauri prior to
publication.
9.10. WAIVER OF CERTAIN RIGHTS. Seller and each Member hereby waives
any rights of first refusal, preemptive rights or other rights of any nature
whatsoever which Seller or such Member may have to purchase any of the Company
Shares or other capital stock or equity securities of any nature of the Company
and the Subsidiaries.
9.11. FURTHER ASSURANCES. At, and from time to time after, the Closing,
at the request of Buyer but without further consideration, Seller and each
Member shall execute and deliver such other instruments of conveyance,
assignment, transfer and delivery and take such other action as Buyer may
reasonably request in order more effectively to consummate the transactions
contemplated hereby.
33
9.12. NO THIRD-PARTY BENEFICIARIES. No person or entity not a party to
this Agreement shall be deemed to be a third-party beneficiary hereunder or
entitled to any rights hereunder.
9.13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
9.14. PREVAILING PARTY. If any legal action, arbitration or any other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
9.15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when said counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all parties
need not sign the same counterpart. A facsimile signature shall be deemed an
original.
9.16. DISPUTE RESOLUTION. If the parties should have a dispute arising
out of or relating to this Agreement or the parties' respective rights and
duties hereunder, then the parties will resolve such dispute in the following
manner: (i) any party may at any time deliver to the others a written dispute
notice setting forth a brief description of the issue for which such notice
initiates the dispute resolution mechanism contemplated by this Section; (ii)
during the forty-five (45) day period following the delivery of the notice
described in clause (i) above, appropriate representatives of the various
parties will meet and seek to resolve the disputed issue through negotiation;
and (iii) if representatives of the parties are unable to resolve the disputed
issue through negotiation, then within thirty (30) days after the period
described in clause (ii) above, the parties will refer the issue (to the
exclusion of a court of law) to final and binding arbitration in Miami, Florida
in accordance with the then existing rules (the "RULES") of the American
Arbitration Association ("AAA"), and judgment upon the award rendered by the
34
arbitrators may be entered in any court having jurisdiction thereof; PROVIDED,
HOWEVER, that the law applicable to any controversy shall be the law of the
State of Delaware, regardless of principles of conflicts of laws. In any
arbitration pursuant to this Agreement, (i) discovery shall be allowed and
governed by the applicable Delaware code of civil procedure and (ii) the award
or decision shall be rendered by a majority of the members of a Board of
Arbitration consisting of three (3) members, one (1) of whom shall be appointed
by each of the respective parties and the third of whom shall be the chairman of
the panel and be appointed by mutual agreement of said two (2) party-appointed
arbitrators. In the event of failure of said two (2) arbitrators to agree within
sixty (60) days after the commencement of the arbitration proceeding upon the
appointment of the third arbitrator, the third arbitrator shall be appointed by
the AAA in accordance with the Rules. In the event that either party shall fail
to appoint an arbitrator within thirty (30) days after the commencement of the
arbitration proceedings, such arbitrator and the third arbitrator shall be
appointed by the AAA in accordance with the Rules. Nothing set forth above shall
be interpreted to prevent the parties from agreeing in writing to submit any
dispute to a single arbitrator in lieu of a three (3) member Board of
Arbitration. Upon the completion of the selection of the Board of Arbitration
(or if the parties agree otherwise in writing, a single arbitrator), an award or
decision shall be rendered within no more than forty-five (45) days.
Notwithstanding the foregoing, the request by any party for preliminary or
permanent injunctive relief, whether prohibitive or mandatory, shall not be
subject to arbitration and may be adjudicated only by the courts of the State of
Florida or the U.S. District Court in Florida. Notwithstanding the foregoing,
any actions for specific performance, including for injunctive relief, may be
brought before a court of competent jurisdiction.
9.17. REMEDIES IN INDEMNIFICATION AGREEMENT CONTROL. Notwithstanding
any provision in this Agreement to the contrary, but except for the right to
seek specific performance of any of the agreements contained herein, from and
after the Closing Date the remedies of the parties specifically provided for by
the Indemnification Agreement shall be the sole and exclusive remedies of the
parties for (a) any breach or inaccuracy of the representations and warranties
contained in this Agreement or in any document furnished or delivered pursuant
hereto, (b) the failure to perform any covenants, agreements or obligations
contained in this Agreement or in any document furnished or delivered pursuant
hereto, or (c) any Loss (as defined in the Indemnification Agreement) relating
to, resulting from or arising out of any transaction or matter relating in any
manner whatsoever to this Agreement or to any other agreement or document
furnished or delivered pursuant hereto. In the event of any conflict between or
among the provisions set forth in this Agreement and the provisions set forth in
the Indemnification Agreement, the provisions set forth in the Indemnification
Agreement shall control.
35
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
RAILAMERICA, INC.
By: /s/ GARY O. MARINO
---------------------------------------------------
Gary O. Marino, CHAIRMAN, PRESIDENT & CEO
WEST TEXAS AND LUBBOCK RAILROAD COMPANY, INC.
By: /s/ GARY O. MARINO
---------------------------------------------------
Gary O. Marino, CHAIRMAN, PRESIDENT & CEO
STATESRAIL L.L.C.:
By: /s/ J. PETER KLIEFGEN
---------------------------------------------------
J. Peter Kleifgen, PRESIDENT AND CEO
NEW STATESRAIL HOLDINGS, INC.
By: /s/ J. PETER KLIEFGEN
---------------------------------------------------
J. Peter Kleifgen, PRESIDENT & CEO
THE MEMBERS:
KAURI, INC.
By: /s/ FRANCIS B. JACOBS
---------------------------------------------------
Francis B. Jacobs, PRESIDENT
/s/ J. PETER KLIEFGEN
---------------------------------------------------
J. Peter Kleifgen
/s/ DAVID L. WIDENER
---------------------------------------------------
David L. Widener
36
THE KATHERINE D. JACULLO 1993 CHILDREN'S IRREVOCABLE
TRUST
By: /s/ GEORGE P. ALBERICI
---------------------------------------------------
George P. Alberici, TRUSTEE
/s/ WILLIAM P. NICOLETTI
---------------------------------------------------
William P. Nicoletti
/s/ JAMES S. SHAFFER
---------------------------------------------------
James S. Shaffer
/s/ DANIEL A. LOVELADY
---------------------------------------------------
Daniel A. Lovelady
/s/ MICHAEL A. HAEG
---------------------------------------------------
Michael A. Haeg
37
SCHEDULE 3.02
Prior to Closing, Buyer and Sub shall be required to get a waiver and consent by
the "Required Lenders" under that certain Credit Agreement, dated as of February
4, 2001 (as amended, supplemented, amended and restated or otherwise modified
from time to time), by and among Buyer, its subsidiaries and the lenders
signatory thereto.
Dates Referenced Herein and Documents Incorporated by Reference
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