-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E/FsCML+Q0RMdLFYpl1XEpYy+yHNdZJ7UOxzBBAQE+ovipfTvA33vEj8m7EiKuLg WMReEBy87U0VCWHpEPAL6w== 0001013816-04-000738.txt : 20041221 0001013816-04-000738.hdr.sgml : 20041221 20041221171739 ACCESSION NUMBER: 0001013816-04-000738 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20041215 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041221 DATE AS OF CHANGE: 20041221 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KANSAS CITY SOUTHERN CENTRAL INDEX KEY: 0000054480 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 440663509 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04717 FILM NUMBER: 041218266 BUSINESS ADDRESS: STREET 1: 427 WEST 12TH STREET CITY: KANSAS CITY STATE: MO ZIP: 64105 BUSINESS PHONE: 8169831303 MAIL ADDRESS: STREET 1: 427 WEST 12TH STREET CITY: KANSAS CITY STATE: MO ZIP: 64105 FORMER COMPANY: FORMER CONFORMED NAME: KANSAS CITY SOUTHERN INDUSTRIES INC DATE OF NAME CHANGE: 19920703 8-K 1 form8k_122004.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): DECEMBER 15, 2004 KANSAS CITY SOUTHERN --------------------------------------------------- (Exact name of company as specified in its charter) DELAWARE 1-4717 44-0663509 - ---------------------------- ------------------------ ---------------------- (State or other jurisdiction (Commission file number) (IRS Employer of incorporation) Identification Number) 427 West 12th Street, Kansas City, Missouri 64105 --------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: --------------------------------------------------- (816) 983 - 1303 Not Applicable ------------------------------------------------------------ (Former name or former address if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [x] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT On December 15, 2004, Kansas City Southern ("KCS") and Grupo TMM, S.A. ("TMM") announced that they had entered into an Amended and Restated Acquisition Agreement (the "Amended Acquisition Agreement") on that date for KCS to acquire control of TFM, S.A. de C.V. ("TFM"). A copy of the press release making this announcement is attached as Exhibit 99.1. Since 1997, pursuant to a joint venture agreement (which terminated on December 1, 2003), and other agreements, entered into by KCS and TMM, subsidiaries of KCS and TMM have owned, along with Mexican governmental agencies, interests in Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. ("Grupo TFM"). Grupo TFM is the owner of 80% of the stock of TFM, and 100% of its full voting stock. TFM holds the concession to operate, and operates, a major rail system located in the north and central portions of Mexico. In 1995, KCS acquired from TMM 49% of the stock of Mexrail, Inc. ("Mexrail"), owner of 100% of the voting stock of The Texas-Mexican Railway Company ("Tex-Mex"). Tex-Mex operates a 157 mile rail line from Laredo to Corpus Christi, Texas, and connects the operations of The Kansas City Southern Railway Company ("KCSR") with TFM. Tex-Mex connects with TFM at Laredo and connects to KCSR through trackage rights at Beaumont, Texas. Mexrail also owns the northern half of the international railway bridge at Laredo, Texas. TFM, through its concession with the Mexican government, has the right to control and operate the southern half of the rail-bridge at Laredo. In March, 2002, KCS and TMM sold their interests in Mexrail to TFM, with KCS receiving approximately $31.4 million for its 49% interest in Mexrail. On August 16, 2004, KCS reacquired from TFM 51% of the shares of Mexrail for approximately $32.7 million and deposited the Mexrail shares into a voting trust pending resolution of KCS's application to the Surface Transportation Board ("STB") seeking authority to exercise common control over Tex-Mex and KCS's other rail companies, KCSR and the Gateway Eastern Railway Company. The STB approved KCS's application on November 29, 2004 and the decision will become effective on December 29, 2004. KCS intends to dissolve the voting trust following effectiveness of the STB decision and the Mexrail shares will be released by the voting trust to KCS on January 1, 2005. KCS has an exclusive option to purchase from TFM on or before October 31, 2005 the remaining 49% of the shares of Mexrail. If KCS does not fully exercise this option by October 31, 2005, KCS is obligated to purchase any remaining shares on October 31, 2005. The purchase price for the remaining 49% of the Mexrail shares is approximately $31.4 million. AMENDED ACQUISITION AGREEMENT The Amended Acquisition Agreement, dated December 15, 2004, amends and restates the acquisition agreement entered into by KCS and TMM on April 20, 2003. The parties to the Amended Acquisition Agreement are KCS and its subsidiaries, KARA Sub, Inc. ("KARA Sub"), KCS Investment I, Ltd. ("KCS Investment"), KCS Acquisition Subsidiary, Inc. ("KCS Sub") and Caymex Transportation, Inc. ("Caymex"), TMM and its subsidiaries, TMM Holdings, S.A. de C.V. ("TMMH"), TMM Multimodal, S.A. de C.V. ("MM"), and Grupo TFM. Pursuant to the Amended Acquisition Agreement for the acquisition of control of Grupo TFM, TFM and their subsidiaries (the "Acquisition"), KCS will acquire all of the interest of TMM (held by its subsidiary, MM) in Grupo TFM for the following consideration: (i) at the closing of the Acquisition (the "Closing"), $200 million in cash and 18,000,000 shares of KCS Common Stock; (ii) upon resolution of certain proceedings related to TFM's VAT claim and the Mexican government's Put (defined below), payments up to $110 million in cash and KCS Common Stock (the "VAT Contingency Payment"); and (iii) at the Closing, KCS promissory notes in the aggregate principal amount of $47 million (the "Indemnity Escrow Notes") which will be deposited in an escrow account (the "Indemnity Escrow") and held, reduced and released in accordance with the terms of an indemnity escrow agreement (the "Indemnity Escrow Agreement"). At KCS's option, KCS may convert the remaining balance due under the Indemnity Escrow Notes into shares of KCS Common Stock on the terms set forth in the Indemnity Escrow Notes. A copy of the form of Indemnity Escrow Note is attached hereto as Exhibit 10.2. The cash, notes and securities have been placed into escrow to be delivered in accordance with the terms of a closing escrow agreement (the "Closing Escrow Agreement"). The obligations of KCS and TMM to complete the Acquisition are subject to a number of conditions, including approval by KCS's stockholders of the issuance of KCS Common Stock in connection with the Acquisition. TMM's controlling shareholders have entered into and amended voting trusts pursuant to which the trustees have been irrevocably instructed to vote such shares in favor of the Amended Acquisition Agreement and related transactions. The Amended Acquisition Agreement is subject to termination prior to the Closing under certain circumstances. A termination fee of $18 million is payable in the event of termination of the Amended Acquisition Agreement under certain circumstances. The Amended Acquisition Agreement also contains indemnification provisions pursuant to which the Parties will indemnify each other and certain of their affiliates against certain losses and tax liabilities. KCS and TMM have also agreed that upon Closing of the Acquisition all litigation between them will be dismissed. Upon completion of the Acquisition, KCS will acquire TMM's right, and will assume TMM's obligations to make any required payment, upon the exercise by the Mexican government of its right to compel the purchase of its 20% interest in TFM (the "Put") and will indemnify TMM and its affiliates, and their respective officers, directors, employees and shareholders, against obligations or liabilities relating thereto. KCS and Harris Trust & Savings Bank, as Rights Agent will amend the Stockholder Rights Agreement dated September 19, 1995 (the "Rights Agreement") to, among other things, amend the definition of "Acquiring Person" so that the Acquisition will not trigger the rights under the Rights Agreement. The description of the Amended Acquisition Agreement and related documents, contained herein, is qualified in its entirety by reference to the terms of the documents attached hereto as exhibits. In connection with the Acquisition, except as otherwise indicated, KCS has entered into, effective as of the Closing, the following additional agreements: STOCKHOLDERS' AGREEMENT This agreement, with TMM, certain subsidiaries of TMM and certain stockholders of TMM (the "Principal Stockholders") contains standstill provisions, restrictions on transfer provisions and pre-emptive rights provisions with respect to TMM, such subsidiaries, the Principal Stockholders, and their respective affiliates who are then holders of KCS Common Stock (collectively, the "TMM Holders"). Under the standstill provisions, the TMM Holders agree not to (i) acquire (other than in connection with the Acquisition or pursuant to the Stockholders' Agreement or the Consulting Agreement) aggregate beneficial ownership of more than 20% of the Total Voting Power of KCS (as defined in the Stockholders' Agreement), (ii) propose any matter for submission to a vote of stockholders of KCS or participate in making, or solicit stockholders for the approval of, any stockholder proposal, grant certain proxies with respect to any voting securities of KCS, or (iii) seek to control or influence materially the management, Board of Directors or policies of KCS. The transfer restrictions prohibit the TMM Holders from certain dispositions of voting securities of KCS which they hold (i) to a competitor of KCS, (ii) to an affiliate unless the affiliate agrees to be bound by the provisions of the Stockholders' Agreement, (iii) that in the aggregate represents 5% or more of the outstanding voting securities of KCS, or (iv) to any person or group that would, after giving effect to such acquisition, beneficially own or have the right to acquire more than 15% of the Total Voting Power of KCS. In addition, the TMM Holders may not dispose of any capital stock or voting securities of KCS or control of any person that, directly or indirectly, beneficially owns any voting securities of KCS to a competitor of KCS, except as otherwise permitted by the Stockholders' Agreement. The standstill provisions and the restrictions on transfer provisions apply for a period of seven years from the effective date of the Stockholders' Agreement, subject to earlier termination of such provisions under certain circumstances. The TMM Holders' pre-emptive rights under the Stockholders' Agreement terminate on the earlier to occur of (i) the date that the TMM Holders beneficially own in the aggregate less than 40% of the voting securities of KCS initially acquired by MM pursuant to the Amended Acquisition Agreement; or (ii) three years following the effective date of the Stockholders' Agreement. The Stockholders' Agreement also requires the TMM Holders to vote their shares of KCS in favor of the KCS Board of Directors' slate of director nominees and against any proposal to remove any director nominated by the KCS Nominating and Corporate Governance Committee (the "Nominating Committee") and elected to the KCS Board of Directors by KCS stockholders. Subject to specific termination provisions contained in the Stockholders' Agreement, the agreement (with a few exceptions) terminates when the TMM Holders' ownership, for 30 consecutive days, falls below 40% of the 18 million shares of KCS Common Stock acquired at the Closing of the Acquisition. REGISTRATION RIGHTS AGREEMENT This agreement with TMM, MM and certain of the Principal Stockholders provides TMM, MM, such Principal Stockholders and Permitted Transferees (as defined in the Registration Rights Agreement) (collectively, the "Holders") with registration rights with respect to shares of KCS Common Stock issued pursuant to the Amended Acquisition Agreement and the Consulting Agreement (described below) and shares otherwise acquired upon the exercise of pre-emptive rights in compliance with the Stockholders' Agreement. Pursuant to the terms and conditions of the Registration Rights Agreement, the Holders will have the right to request at any time prior to the five year anniversary of the effective date of the Registration Rights Agreement up to six demand registrations upon the request of Holders of 10% or more of the shares of Registrable Stock. However, KCS will not be required to file more than one "shelf registration." The Holders will also be entitled to unlimited incidental, or "piggy-back," registrations. This agreement also contains certain indemnification provisions under which KCS will be obligated to indemnify certain persons against certain losses and KCS will be entitled to indemnification against certain losses from the Holders. CONSULTING AGREEMENT This agreement with Jose F. Serrano International Business, S.A. de C.V. (the "Consulting Firm") provides for the Consulting Firm to provide certain consulting services to the KCS Board of Directors. Jose F. Serrano Segovia is required under the terms of the Consulting Agreement to be personally involved in the provision of services by the consulting firm. The Consulting Agreement has a term of three years commencing on the first business day following the Closing Date. Subject to the limitations set forth in the Consulting Agreement, KCS will pay to the Consulting Firm an annual fee of $3,000,000 in cash. In addition, upon the resolution of certain disputes with the Mexican government, KCS will pay to the Consulting Firm $9,000,000 (the "VAT Claim and Put Advisory Fee"). Such amount may be paid, at KCS's election, in cash or KCS Common Stock. The Consulting Agreement contains certain restrictions on transfer of shares of KCS Common Stock. MARKETING AND SERVICES AGREEMENT. This agreement by and among TMM Logistics, S.A. de C.V. ("TMM Logistics" and together with its subsidiaries, affiliates and joint venture companies, the "Parent Group"), TFM and The Kansas City Southern Railway Company ("KCSR" and together with its subsidiaries and affiliates the "KCS Group"), provides, among other things, that the KCS Group will provide certain services to any member of the Parent Group on terms which are no less favorable than the terms provided to other Logistics Companies (as defined in the agreement), subject to certain exceptions. It also sets forth certain rights of the Parent Group to provide, be preferred to provide, or make a bid to provide, certain services. The initial term of the Marketing and Services Agreement is for five years beginning on the Closing Date, and will be automatically renewed for periods of one year unless terminated by the Parent Group or the KCS Group or automatically terminated. The agreement automatically terminates in the event (i) TMM Logistics files bankruptcy proceedings, or has filed against it any bankruptcy proceedings that are not dismissed or stayed within 30 days, or (ii) a change of control of the Parent Group occurs and the party effecting the change of control is a competitor of KCS. The agreement may also be terminated by TFM or the KCS Group under certain circumstances. This agreement also contains mutual indemnification provisions against losses by an indemnified party resulting from any breach of any warranty, representation, covenant or obligation of an indemnifying party under the Marketing and Services Agreement. AGREEMENT OF ASSIGNMENT AND ASSUMPTION OF RIGHTS, AND AGENCY AGREEMENT WITH UNDISCLOSED PRINCIPAL, DUTIES AND OBLIGATIONS This agreement with TMM and Grupo TFM, provides for the assignment and transfer by TMM to KCS, and the acceptance and assumption by KCS, of TMM's and Grupo TFM's rights, duties and obligations with respect to the purchase of the TFM limited voting shares from the Mexican government under the Put Agreement (defined below). The potential obligation to purchase the Mexican government's 20% interest in TFM arises under the original TFM share purchase agreement, as amended by an agreement entered into by and among the Federal Government of the United Mexican States, Grupo TFM, TMM and KCS, referred to as the "Put Agreement." Following an adverse final resolution of the declaratory judgment lawsuit currently pending in Mexico seeking a judicial interpretation of the Put obligation, or the lifting of the injunction issued by the Mexican court pending its final decision, the Mexican government may put its 20% interest in TFM to Grupo TFM. In the event that Grupo TFM does not under those circumstances then purchase the Mexican government's 20% interest in TFM, TMM and KCS, or either of TMM or KCS alone, would, following notification by the Mexican government in accordance with the terms of the applicable agreements, be obligated to purchase the Mexican government's remaining interest in TFM. If the Acquisition is completed prior to the purchase of the Mexican government's interest in TFM, KCS will be solely responsible for purchasing the Mexican government's 20% interest in TFM. CERTAIN ANCILLARY AGREEMENTS TO THE AMENDED ACQUISITION AGREEMENT AND CERTAIN RELATED AGREEMENTS In connection with the Acquisition, KCS has entered into escrow agreements, dated and effective as of December 15, 2004, that contain provisions regarding the holding, in some cases the reduction, and the release, of cash, documents and securities placed into escrow. These escrow agreements include the Closing Escrow Agreement, the Indemnity Escrow Agreement and a VAT escrow agreement (the "VAT Escrow Agreement," governing the holding and release of a $40 million promissory note (the "VAT Escrow Note") constituting part of the VAT Contingency Payment) and an escrow agreement governing the holding and release of the $9,000,000 total amount of annual fee payable to Consulting Firm over the three year term of the Consulting Agreement (the "Consulting Compensation Escrow Agreement"). The other parties to the Closing Escrow Agreement and the VAT Escrow Agreement are KARA Sub, KCS Investment, KCS Sub, Caymex, TMM, TMMH, MM and The Bank of Nova Scotia of New York as the escrow agent. The other parties to the Indemnity Escrow Agreement are KARA Sub, KCS Investment, Caymex, TMM, TMMH, MM and The Bank of Nova Scotia of New York as the escrow agent. The other parties to the Consulting Compensation Escrow Agreement are Consulting Firm and The Bank of Nova Scotia of New York as escrow agent. KCS has also entered into an agreement, dated and effective as of December 15, 2004, which provides for KCS to grant releases to certain persons from all claims in connection with (i) certain powers of attorney purportedly granted by the TFM Board of Directors, (ii) the purported approval by the Grupo TFM Board of Directors of the purported execution of certain agreements by TFM, and (iii) the purported ratification of the TFM Board of Directors of the purported execution of certain agreements by TFM (the "Authority Litigation"). The releases will become effective and be released from escrow to the parties entitled to receive them at the Closing in accordance with the terms of the Closing Escrow Agreement. The Authority Litigation Agreement further provides that within 10 days after the Closing, KCS will request that actions in the Authority Litigation against certain individuals be dismissed. KCS may reinitiate actions in the Authority Litigation against the released persons under certain circumstances. In addition, KCS has entered into an agreement, dated and effective as of December 15, 2004, which provides for TMM, TMMH and MM to indemnify certain KCS indemnitees against losses from certain proceedings brought against any such KCS indemnitee by TMM security holders in connection with the Acquisition. ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES As noted in Item 1.01 above, pursuant to the terms of the Amended Acquisition Agreement, KCS is obligated to issue at the Closing of the Acquisition 18,000,000 shares of KCS Common Stock, par value $0.01 per share, in partial consideration for the shares of Grupo TFM being acquired by KCS in the Acquisition. Additionally, as noted in Item 1.01 above, on the later to occur of the Closing of the Acquisition and the successful resolution of certain proceedings related to TFM's VAT claim and the Mexican government's Put, KCS is obligated to pay up to $35 million of the VAT Contingency Payment, reduced as set forth in the Amended Acquisition Agreement, in shares of KCS Common Stock. Pursuant to the Amended Acquisition Agreement, at that time, KCS is obligated to issue up to that number of shares of KCS Common Stock, valued at the Volume Weighted Price (defined below), as equals $35 million (as it may be reduced). Further, KCS is obligated to convert on the fifth anniversary of the Closing of the Acquisition, or such earlier date as KCS deems appropriate, the $40 million VAT Escrow Note, as it may be reduced in connection with certain indemnity claims, into that number of shares of KCS Common Stock, valued at the Volume Weighted Price, equal to the remaining principal amount of the VAT Escrow as of such date. Under the Amended Acquisition Agreement, the Volume Weighted Price means the average trading price per share for KCS Common Stock on the New York Stock Exchange, as reported on the Bloomberg (VAP function), for the 20 consecutive trading days immediately preceding the later of (i) the date of Closing of the Acquisition, or (ii) the date of the public announcement by KCS of the final resolution of the such proceedings. The exact number of shares of KCS Common Stock that KCS is obligated to issue in connection with the VAT Contingency Payment cannot be determined until the later of the date of Closing of the Acquisition or the date of such public announcement. KCS may, but is not obligated to, issue shares of KCS Common Stock in lieu of (i) any portion of the $35 million cash payment portion of the VAT Contingency Payment, (ii) all or any portion of the remaining amount due under the Indemnity Escrow Notes and (iii) the $9,000,000 VAT Claim and Put Advisory Fee under the Consulting Agreement. All of the shares of KCS Common Stock discussed above will be issued in reliance on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(2). The issuances of such shares by KCS does not involve a public offering of securities as the issuances are only to MM pursuant to the Amended Acquisition Agreement and, if so elected by KCS, to Consulting Firm pursuant to the Consulting Agreement. Disposition of such shares will be restricted by the Stockholders' Agreement and the certificates for such shares will bear a transfer restriction legend. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (C) EXHIBITS EXHIBIT NO. DOCUMENT (10) MATERIAL CONTRACTS 10.1 Amended Acquisition Agreement 10.2 Form of Indemnity Escrow Note 10.3 Stockholders' Agreement 10.4 Registration Rights Agreement 10.5 Consulting Agreement 10.6 Marketing and Services Agreement 10.7 Form of VAT Escrow Note 10.8 Closing Escrow Agreement 10.9 Indemnity Escrow Agreement 10.10 VAT Escrow Agreement 10.11 Consulting Compensation Escrow Agreement 10.12 Agreement of Assignment and Assumption of Rights, and Agency Agreement with Undisclosed Principal, Duties and Obligations (99) ADDITIONAL EXHIBITS 99.1 Press release dated December 15, 2004. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Kansas City Southern Date: December 20, 2004 By: /s/ James S. Brook --------------------------------- James S. Brook Vice President and Comptroller (Principal Accounting Officer) EX-10 2 form8k_122004ex101.txt EXH. 10.1 AMENDED & RESTATED ACQUISITION AGMT Exhibit 10.1 AMENDED AND RESTATED ACQUISITION AGREEMENT BY AND AMONG KANSAS CITY SOUTHERN, A DELAWARE CORPORATION, KARA SUB, INC., A DELAWARE CORPORATION, KCS INVESTMENT I, LTD., A DELAWARE CORPORATION KCS ACQUISITION SUBSIDIARY, INC., A DELAWARE CORPORATION CAYMEX TRANSPORTATION, INC., A DELAWARE CORPORATION GRUPO TMM, S.A., A SOCIEDAD ANONIMA ORGANIZED UNDER THE LAWS OF THE UNITED MEXICAN STATES, TMM HOLDINGS, S.A. DE C.V., A SOCIEDAD ANONIMA DE CAPITAL VARIABLE ORGANIZED UNDER THE LAWS OF THE UNITED MEXICAN STATES, TMM MULTIMODAL, S.A. DE C.V., A SOCIEDAD ANONIMA DE CAPITAL VARIABLE ORGANIZED UNDER THE LAWS OF THE UNITED MEXICAN STATES AND GRUPO TRANSPORTACION FERROVIARIA MEXICANA, S.A. DE C.V., A SOCIEDAD ANONIMA DE CAPITAL VARIABLE ORGANIZED UNDER THE LAWS OF THE UNITED MEXICAN STATES DATED AS OF DECEMBER 15, 2004 TABLE OF CONTENTS ARTICLE 1 STOCK PURCHASE.......................................................2 Section 1.1 Stock Purchase and Escrow.......................................2 Section 1.2 Stock Purchase Price............................................2 Section 1.3 Intercompany Account Settlement.................................3 ARTICLE 2 CAPITAL REDUCTION; SUBSIDIARY INVESTMENT.............................4 Section 2.1 GTFM Capital Reduction; Subsidiary Investment...................4 ARTICLE 3 THE MERGER...........................................................4 Section 3.1 The Merger......................................................4 ARTICLE 4 CLOSING..............................................................5 Section 4.1 Closing.........................................................5 Section 4.2 Actions at Closing..............................................5 Section 4.3 Conversion of Securities........................................7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLERS............................7 Section 5.1 Organization and Related Matters................................7 Section 5.2 Authorized Capitalization.......................................8 Section 5.3 GTFM and GTFM Subsidiaries.....................................10 Section 5.4 Authority; No Violation........................................10 Section 5.5 Consents and Approvals.........................................11 Section 5.6 Financial Statements; Undisclosed Liabilities..................12 Section 5.7 Contracts......................................................13 Section 5.8 Intellectual Property Rights...................................14 Section 5.9 Employee Benefit Matters.......................................14 Section 5.10 Labor and Other Employment Matters............................16 Section 5.11 Tax Matters...................................................17 Section 5.12 Legal Proceedings.............................................19 Section 5.13 Permits and Compliance........................................19 Section 5.14 Environmental Matters.........................................20 Section 5.15 Properties....................................................21 Section 5.16 Insurance.....................................................21 Section 5.17 No Other Broker...............................................21 Section 5.18 No GTFM Material Adverse Effect...............................22 Section 5.19 Sufficiency of and Title to Assets............................22 Section 5.20 Information in Filed Documents................................22 Section 5.21 Affiliate Agreements..........................................22 Section 5.22 No Loss of Significant Customers..............................23 Section 5.23 Trading in and Ownership of KCS Common Stock..................23 Section 5.24 Solvency......................................................23 Section 5.25 Termination of Option Agreement...............................23 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF KCS...............................24 Section 6.1 Organization and Related Matters...............................24 Section 6.2 Authority; No Violation........................................24 Section 6.3 Consents and Approvals.........................................26 Section 6.4 Authorized Capitalization......................................27 Section 6.5 SEC Filings....................................................27 Section 6.6 Financial Statements; Undisclosed Liabilities..................28 Section 6.7 No Other Broker................................................28 Section 6.8 Information in Filed Documents.................................28 Section 6.9 No KCS Material Adverse Effect; Other Actions..................29 Section 6.10 KCS Sub.......................................................29 Section 6.11 Legal Proceedings.............................................30 Section 6.12 KCS Capital Resources.........................................30 Section 6.13 Employee Benefit Matters......................................30 Section 6.14 Labor and Other Employment Matters............................31 Section 6.15 Tax...........................................................31 Section 6.16 Permits and Compliance........................................31 Section 6.17 Environmental Matters.........................................31 Section 6.18 Properties....................................................32 ARTICLE 7 COVENANTS AND ADDITIONAL AGREEMENTS.................................32 Section 7.1 Interim Governance Arrangements; Conduct of Business by the GTFM Group..............................................32 Section 7.2 Conduct of Business by KCS and its Subsidiaries................36 Section 7.3 Confidentiality................................................37 Section 7.4 Regulatory Matters; Governing Documents; Third-Party Consents..37 Section 7.5 Stockholder Approvals..........................................39 Section 7.6 Tax Matters....................................................40 Section 7.7 Insurance......................................................41 Section 7.8 Notification of Certain Matters................................41 Section 7.9 Further Assurances.............................................41 Section 7.10 Third-Party Matters...........................................41 Section 7.11 Efforts of Parties to Close...................................43 Section 7.12 Expenses......................................................43 Section 7.13 VAT Contingency Payment.......................................43 Section 7.14 Financing for Acquisition.....................................45 Section 7.15 Suspension and Dismissal of Actions; Releases.................45 Section 7.16 Legal Representation Release..................................47 ARTICLE 8 CONDITIONS..........................................................48 Section 8.1 Mutual Conditions..............................................48 Section 8.2 Conditions to the Obligations of KCS...........................48 Section 8.3 Conditions to the Obligations of Sellers.......................49 ARTICLE 9 TERMINATION.........................................................50 Section 9.1 Termination....................................................50 Section 9.2 Survival after Termination.....................................51 ARTICLE 10 INDEMNIFICATION....................................................52 Section 10.1 Survival of Representations, Warranties and Covenants; Exclusive Monetary Remedies...................................52 Section 10.2 Indemnification by Sellers....................................52 Section 10.3 Indemnification by KCS........................................55 Section 10.4 Procedures for Third-Party Claims.............................55 Section 10.5 Tax Indemnification...........................................57 ARTICLE 11 DEFINITIONS........................................................58 Section 11.1 Certain Defined Terms.........................................58 ARTICLE 12 MISCELLANEOUS......................................................66 Section 12.1 Amendments; Waiver............................................66 Section 12.2 Entire Agreement..............................................66 Section 12.3 Interpretation................................................67 Section 12.4 Severability..................................................67 Section 12.5 Notices.......................................................67 Section 12.6 Headings......................................................69 Section 12.7 Binding Effect; Persons Benefiting; No Assignment.............69 Section 12.8 No Third Party Beneficiaries..................................69 Section 12.9 Counterparts..................................................69 Section 12.10 Specific Enforcement.........................................69 Section 12.11 Governing Law; Dispute Resolution............................69 Section 12.12 Announcements................................................72 Section 12.13 Termination Fee..............................................72 TABLE OF DEFINED TERMS TERM PAGE SECTION Acquisition...................................1.......................Preamble Acquisition Agreement Claims.................42........................7.15(a) Affiliate....................................54...........................11.1 Affiliate Agreements.........................21...........................5.21 Agreement.....................................1.......................Preamble Amended By-laws..............................30.........................7.1(a) Amendment to the Trust Agreement.............58...........................11.1 Ancillary Agreements..........................1.......................Preamble Applicable Law...............................54...........................11.1 Arbitration..................................43........................7.15(c) Arbitration Costs............................66..................12.11(d)(iii) Arbitration Demand...........................65.......................12.11(d) Arbitrators..................................65....................12.11(d)(i) Authority Litigation.........................58...........................11.1 Authority Litigation Agreement...............58...........................11.1 Benefit Plan.................................14.........................5.9(a) Business Day.................................54...........................11.1 Buyer Parties................................40........................7.10(c) Capital Reduction.............................4.........................2.1(a) Caymex........................................1.......................Preamble Certificate of Merger.........................4.........................3.1(a) CFC..........................................35.........................7.4(d) Change of Control............................54...........................11.1 Closing.......................................5............................4.1 Closing Date..................................5............................4.1 Closing Escrow................................2.........................1.1(b) Closing Escrow Agreement......................2.........................1.1(b) Code.........................................28...........................6.13 Commence.....................................42........................7.15(a) Concession...................................55...........................11.1 Confidentiality Agreements...................55...........................11.1 Consultant...................................55...........................11.1 Consulting Agreement.........................55...........................11.1 Continuing Affiliate Agreements...........................................5.21 Contracts....................................55...........................11.1 Control......................................55...........................11.1 De Teresa...............................................................5.7(d) De Teresa Agreements.........................13.........................5.7(d) Del. G.C.L....................................4.........................3.1(a) Designated Person............................53....................10.2(a)(ii) Dismissals...................................56...........................11.1 Disputes.....................................64.......................12.11(a) Dispute Notice...............................65.......................12.11(c) Dispute Parties..............................64.......................12.11(a) Dispute Party................................64.......................12.11(a) Effective Time................................4.........................3.1(a) EMVA.........................................20...........................5.17 Encumbrance..................................55...........................11.1 Environmental Laws...........................55...........................11.1 Environmental Permit.........................55...........................11.1 ERISA........................................28...........................6.13 ERISA Affiliate..............................56...........................11.1 Escrow Agent..................................5.........................4.2(a) Exchange Act.................................56...........................11.1 Expiration Date..............................48........................10.1(a) FIC..........................................36.........................7.4(e) FIC Approval.................................36.........................7.4(e) Final Tax Resolution.........................58....................10.5(e)(iv) Final Resolution of the VAT Claim and Put.........................56...........................11.1 GAAP.........................................56...........................11.1 Governmental Authority.......................56...........................11.1 GTFM..........................................1.......................Preamble GTFM Assets..................................20...........................5.19 GTFM Benefit Plan............................14.........................5.9(a) GTFM Business................................57...........................11.1 GTFM Financial Statements....................12............................5.6 GTFM Form 20-F...............................56...........................11.1 GTFM Group...................................57...........................11.1 GTFM Insurance Policies......................19...........................5.16 GTFM Material Adverse Effect.................57...........................11.1 GTFM Shares...................................2.........................1.1(a) GTFM Sub Note.................................4.........................2.1(b) GTFM Subsidiaries............................57...........................11.1 GTFM Taxpayer................................57........................10.5(e) GTFM Trademarks..............................57...........................11.1 GTFM Voting Debt..............................8............................5.2 Hazardous Materials..........................57...........................11.1 HSR Act......................................57...........................11.1 IFRS.........................................57...........................11.1 Income Taxes.................................57...........................11.1 Indemnified Party............................52........................10.4(a) Indemnity Escrow..............................3.........................1.2(c) Indemnity Escrow Agreement....................3.........................1.2(c) Indemnity Escrow Notes........................2.........................1.2(a) Intellectual Property........................57...........................11.1 Investment Advisers Act......................57...........................11.1 Investment Company Act.......................57...........................11.1 KARA Sub......................................1.......................Preamble KCS...........................................1.......................Preamble KCS Acquisition Proposal.....................40........................7.10(c) KCS Assets...................................58...........................11.1 KCS Board....................................26.........................6.3(c) KCS Business.................................58...........................11.1 KCS Disclosure Schedule......................22.........Article 6 Introduction KCS Investment................................1.......................Preamble KCS Financial Statements.....................26.........................6.6(a) KCS Indemnitees..............................49........................10.2(a) KCS Material Adverse Effect..................58...........................11.1 KCS Preferred Stock..........................26............................6.4 KCS Purchasers................................1.......................Preamble KCS SEC Documents............................25............................6.5 KCS Stockholder Approval.....................24.........................6.3(a) KCS Stockholder Rights Plan...............................................11.1 KCS Stock Option Plan........................58...........................11.1 KCS Sub.......................................1.......................Preamble KCS Sub Common Stock..........................4.........................2.1(b) KCS Sub Note..................................4.........................2.1(b) KCS Sub Shares................................4.........................2.1(b) KCS Voting Debt..............................25............................6.4 Knowledge....................................58...........................11.1 Law..........................................58...........................11.1 Legal Representation Release.................47...........................7.16 Losses.......................................49........................10.2(a) Management Claims............................42........................7.15(a) Master Trust Agreement.......................21...........................5.25 Merger........................................1.......................Preamble Mexican Litigation List......................44........................7.15(e) MM............................................1.......................Preamble MM Stockholder Approval......................11.........................5.5(a) MM Subsidiaries..............................58...........................11.1 Net Receivable Amount.........................3.........................1.3(a) New Series Preferred Stock...................24............................6.4 NOL Value....................................41........................7.13(a) NYSE.........................................58...........................11.1 Ongoing Litigation Matters...................13.........................5.7(d) Option Agreement.............................21...........................5.25 Original Acquisition Agreement................1.......................Preamble Party.........................................1.......................Preamble Parties.......................................1.......................Preamble Permits......................................18........................5.13(a) Permitted Encumbrance........................58...........................11.1 Person.......................................59...........................11.1 Proceedings..................................17...........................5.12 Process Agent................................67.......................12.11(f) Put..........................................59...........................11.1 Put Agreement................................59...........................11.1 Put Assignment Agreement.....................59...........................11.1 Put Purchase Price...........................59...........................11.1 Reconciliation...............................12............................5.6 Releases.....................................59...........................11.1 Release Resolutions..........................59...........................11.1 Scheduled Contracts..........................12.........................5.7(a) SEC..........................................59...........................11.1 Securities...................................59...........................11.1 Securities Act...............................59...........................11.1 Securities Laws..............................59...........................11.1 Selected Tax Advisor.........................57...................10.5(e)(iii) Seller Disclosure Schedule....................7.........Article 5 Introduction Seller Indemnitees...........................51........................10.3(a) Seller Material Adverse Effect...............59...........................11.1 Seller Parties...............................39........................7.10(a) Sellers.......................................7.........Article 5 Introduction Stock Purchase................................1.......................Preamble Stock Purchase Price..........................2.........................1.1(a) Straddle Period..............................38.........................7.6(a) Subscription Agreement........................4.........................2.1(b) Subsidiary...................................60...........................11.1 Subsidiary Approvals.........................11.........................5.5(a) Subsidiary Investment.........................1.......................Preamble Surviving Company.............................4.........................3.1(a) Tax..........................................60...........................11.1 Tax Assessment...............................57.....................10.5(e)(i) Tax Return...................................60...........................11.1 Taxing Authority.............................60...........................11.1 Termination Date.............................48.....................9.1(a)(vi) TFM..........................................60...........................11.1 Third-Party Claim............................52........................10.4(a) TMM...........................................1.......................Preamble TMM Acquisition Proposal.....................39........................7.10(a) TMM Parties..................................36......................7.4(e)(i) TMM Stockholder Approval.....................11.........................5.5(a) TMMH..........................................1.......................Preamble TMMH Stockholder Approval....................11.........................5.5(a) Transition Management Team...................31.........................7.1(c) Transition Managers..........................31.........................7.1(c) Trust........................................21...........................5.25 UMS...........................................1.......................Preamble U.S..........................................60...........................11.1 VAT..........................................60...........................11.1 VAT Claim....................................60...........................11.1 VAT Contingency Payment......................41........................7.13(a) VAT Escrow...................................42........................7.13(a) VAT Escrow Agreement.........................42........................7.13(a) VAT Payment..................................60...........................11.1 Volume Weighted Price........................60...........................11.1 Voting Trust.................................60...........................11.1 Exhibit A.........Seller Disclosure Schedule Exhibit B.........KCS Disclosure Schedule Exhibit C.........Form of Release Resolutions Exhibit D.........Certificate of Merger Exhibit E.........Form of Indemnity Escrow Notes Exhibit F.........GTFM Resolutions Effecting Capital Reduction Exhibit G.........Form of GTFM Subordinated Promissory Note Exhibit H.........Revoked Powers of Attorney Exhibit I.........New Powers of Attorney Exhibit J.........Amended By-laws of GTFM and TFM Exhibit K.........Mexican Litigation List Exhibit L.........Legal Representation Release Exhibit M.........Omitted Exhibit N.........Subscription Agreement Exhibit O.........Selected Tax Advisor Exhibit P.........Designated Person AMENDED AND RESTATED ACQUISITION AGREEMENT, dated as of December 15, 2004 (this "Agreement"), by and among KANSAS CITY SOUTHERN, a Delaware corporation ("KCS"), KARA Sub, Inc., a Delaware corporation ("KARA Sub"), KCS Investment I, Ltd., a Delaware corporation ("KCS Investment"), KCS Acquisition Subsidiary, Inc., a Delaware corporation ("KCS Sub"), Caymex Transportation, Inc., a Delaware corporation ("Caymex"), KARA Sub, KCS Investment, KCS Sub and Caymex being subsidiaries of KCS, GRUPO TMM, S.A., a SOCIEDAD ANONIMA organized under the laws of the United Mexican States ("UMS") ("TMM"), TMM HOLDINGS, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS and a subsidiary of TMM ("TMMH"), TMM MULTIMODAL, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS ("MM") and a subsidiary of TMMH and Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS ("GTFM") and a subsidiary of MM (each, a "Party" and collectively, the "Parties"). WHEREAS, certain of the Parties entered into an Acquisition Agreement dated as of April 20, 2003 (the "Original Acquisition Agreement"); WHEREAS, disputes with respect to the Original Acquisition Agreement and certain other matters have arisen between the parties to that agreement and the Parties desire to amend and restate the Original Acquisition Agreement in order to, among other things, facilitate settlement and final resolution of such disputes; WHEREAS, each of the Boards of Directors of KCS, TMM, TMMH and MM has approved and declared advisable the acquisition by KCS of all of MM's interest in GTFM, through (i) the purchase by KARA Sub, KCS Investment and Caymex (together, the "KCS Purchasers") from MM of all of the capital stock of GTFM held by MM (the "Stock Purchase"), (ii) the investment by MM in KCS Sub (the "Subsidiary Investment"), and (iii) the merger of KCS Sub with and into KCS (the "Merger") upon the terms and subject to the conditions of this Agreement (collectively, the Stock Purchase, Subsidiary Investment and the Merger comprise the "Acquisition"); and WHEREAS, certain of the Parties and other parties are entering into ancillary agreements (the "Ancillary Agreements," identified hereinafter) and a Consulting Agreement to carry out certain of the objectives of this Agreement and of the Acquisition. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound hereby, the Parties agree as follows: ARTICLE 1 STOCK PURCHASE SECTION 1.1 STOCK PURCHASE AND ESCROW. (a) Upon the terms and subject to satisfaction or waiver of the conditions set forth in Article 8, at the Closing (as defined in Section 4.1), the KCS Purchasers shall purchase, acquire and receive from MM, and MM shall sell, assign, transfer, convey and deliver to the KCS Purchasers, in the proportions set forth below, all GTFM Shares held by MM, consisting of 25,500 shares of Series "A" fixed capital stock of GTFM and 3,842,901 shares of Series "A" variable capital stock of GTFM (collectively, the "GTFM Shares"), for the consideration described in Section 1.2 (the "Stock Purchase Price"). Shares of GTFM Shares of GTFM Series A fixed Series A variable KCS capital stock capital stock Purchasers to be purchased to be purchased ---------- --------------- ----------------- KARA Sub 12,750 1,696,201 KCS Investment 12,750 1,696,201 Caymex -0- 450,499 Total 25,500 3,842,901 (b) Immediately following execution of this Agreement by all of the Parties, the GTFM Shares shall be deposited into an escrow account (the "Closing Escrow") to be held in accordance with the terms and conditions of the escrow agreement entered into as of the date of this Agreement by certain of the Parties (the "Closing Escrow Agreement"). SECTION 1.2 STOCK PURCHASE PRICE. (a) The Stock Purchase Price to be paid by the KCS Purchasers to MM for the purchase of the GTFM Shares shall be paid by the delivery of: (i) at the Closing, $200 million, in immediately available funds, by wire transfer to the account designated by TMM by notice to the Escrow Agent (defined below), with a copy to KCS, at least three (3) business days prior to the Closing Date (as defined in Section 4.1), (ii) on that date which shall be determined as provided in Section 7.13, the amount of any VAT Contingency Payment which shall then be due under the terms and conditions in Section 7.13, and (iii) at the Closing, promissory notes of KCS in the aggregate principal amount of $47 million in the form set forth in Exhibit E hereto (the "Indemnity Escrow Notes"). (b) Immediately following execution of this Agreement by all of the Parties, on behalf of the KCS Purchasers, KCS shall deposit $100 million, and within five (5) business days after the date of this Agreement, KCS shall deposit the additional $100 million, in the Closing Escrow to be held in accordance with the terms and conditions of the Closing Escrow Agreement. (c) At the Closing, on behalf of the KCS Purchasers, KCS shall deposit the Indemnity Escrow Notes in another escrow account (the "Indemnity Escrow") to be held in accordance with the terms and conditions of an escrow agreement (the "Indemnity Escrow Agreement") entered into as of the date of this Agreement by certain of the Parties. SECTION 1.3 INTERCOMPANY ACCOUNT SETTLEMENT. (a) The Parties shall settle the net intercompany receivables as follows: (A) the Parties shall calculate the amount, if any, of open accounts receivables as of the Closing Date, or if the Closing shall not occur at the end of a month, at the end of the month immediately preceding the month in which the Closing occurs, (i) from TMM, TMM Logistics, S.A. de C.V. or any other Subsidiary of TMM (other than GTFM or any of the GTFM Subsidiaries), on the one hand, to GTFM or any of the GTFM Subsidiaries, on the other hand, and (ii) from GTFM or any of the GTFM Subsidiaries, on the one hand, to TMM, TMM Logistics, S.A. de C.V. or any other Subsidiary of TMM (other than GTFM or any of the GTFM Subsidiaries), on the other hand; (B) the Parties shall calculate the absolute value of the difference between the amount determined under clause (i) above, and the amount determined under clause (ii), above (the "Net Receivable Amount"); and (C) such Net Receivable Amount shall be paid to the Party with the greater amount of open accounts receivables, within three (3) business days after the Net Receivable Amount is finally determined as set forth in this Section 1.3. (b) Each Party has the right to audit, upon reasonable written notice to another Party (or Parties, in each case) (at the requesting Party's expense), during normal business hours and at the principal office of the other Party such other Party's records and procedures relating to the calculations required by this Section 1.3. Such other Party shall reasonably cooperate with the requesting Party during any such audit. (c) Any Party may dispute another Party's computation of the Net Receivable Amount by notice to the other Party within five (5) business days of the receipt of the other Party's computation. In the event that any Party (i) fails to provide any computation of the Net Receivable Amount within five (5) business days of a written request therefor or (ii) having been furnished with the other Party's computation, fails to provide a notice of dispute within the period set forth above, the Party failing to provide the computation or failing to provide such notice of dispute shall be deemed to have accepted and may not dispute the other Party's computation for purposes of this Agreement. In the event that both Parties provide a notice of dispute, the Parties' respective representatives shall meet as promptly as practicable to attempt to agree on the computation of the Net Receivable Amount. If the Parties are unable to agree within forty-five (45) days following such meeting on the computation of the Net Receivable Amount, then the computation of the Net Receivable Amount shall be determined by arbitration as set forth in Section 12.11 (provided, that if the Parties agree, they may appoint a single arbitrator for purposes of this Section 1.3). ARTICLE 2 CAPITAL REDUCTION; SUBSIDIARY INVESTMENT SECTION 2.1 GTFM CAPITAL REDUCTION; SUBSIDIARY INVESTMENT. (a) GTFM shall, effective at the Closing Date, adopt the resolutions attached as Exhibit F to effect, immediately prior to the Stock Purchase, the capital reduction (the "Capital Reduction") under the Laws of the UMS, as specified in such resolutions. (b) At the Closing, (i) MM shall exchange the Subordinated Promissory Note of GTFM, received pursuant to the Capital Reduction in the form attached hereto as Exhibit G (the "GTFM Sub Note") for a subordinated promissory note of KCS Sub in the principal amount equal to the principal amount of the GTFM Sub Note (the "KCS Sub Note"), (ii) MM shall subscribe for and purchase from KCS Sub 100 shares (the "KCS Sub Shares") of KCS Sub common stock, $.01 par value per share ("KCS Sub Common Stock"), representing 10% of the issued and outstanding shares of KCS Sub Common Stock pursuant to the terms and conditions of the Subscription Agreement in the form attached hereto as Exhibit N (the "Subscription Agreement"), (iii) KCS Sub shall issue, sell and transfer to MM the KCS Sub Shares in consideration for delivery by MM to KCS Sub of the KCS Sub Note (the transactions described in (i) through (iii) collectively, the "Subsidiary Investment"), and (iv) the GTFM Sub Note shall be delivered to GTFM by KCS or Subsidiaries of KCS in exchange for equity of GTFM as specified in the resolutions attached hereto as Exhibit F. (c) Simultaneously with the execution of this Agreement, MM and KCS Sub shall enter into the Subscription Agreement for the purchase at the Closing by MM of the KCS Sub Shares. Immediately following execution of this Agreement, the Subscription Agreement, the KCS Sub Shares, the GTFM Sub Note and the KCS Sub Note shall be deposited in the Closing Escrow, to be held in accordance with the terms and conditions of the Closing Escrow Agreement. ARTICLE 3 THE MERGER SECTION 3.1 THE MERGER. (a) Immediately following the Subsidiary Investment, KCS Sub shall be merged with and into KCS in accordance with the General Corporation Law of the State of Delaware ("Del. G.C.L."). KCS and KCS Sub shall cause the Merger to be consummated by causing the Escrow Agent to file a certificate of merger in the form attached hereto as Exhibit D (the "Certificate of Merger") with the Secretary of State of the State of Delaware, executed in accordance with the relevant provisions of the Del. G.C.L. (the date and time of the filing of the Certificate of Merger being the "Effective Time"). At the Effective Time, the effects of the Merger shall be as provided in the Certificate of Merger and the applicable provisions of the Del. G.C.L. As a result of the Merger, the separate corporate existence of KCS Sub shall cease and KCS shall continue as the surviving corporation of the Merger (the "Surviving Company"). (b) Immediately following execution of this Agreement by all of the Parties, (i) KCS and KCS Sub shall deposit in the Closing Escrow the form of Certificate of Merger to be executed in accordance with the Del. G.C.L., and (ii) KCS shall deposit in the Closing Escrow the shares of KCS Common Stock to be received by MM in the Merger, as provided in Section 4.3. ARTICLE 4 CLOSING SECTION 4.1 CLOSING. Unless this Agreement shall have been earlier terminated in accordance with the terms hereof, the consummation of the transactions contemplated by this Agreement (the "Closing") shall, subject to the satisfaction or waiver of the conditions set forth in Article 8, take place at the offices of Sonnenschein Nath & Rosenthal LLP, 1221 Avenue of the Americas, 24th Floor, New York, New York, on the second (2nd) Business Day after all of the conditions set forth in Article 8 have been satisfied or waived (other than the conditions that relate to actions to be taken at the Closing) or at such other date, time and place as KCS and TMM shall mutually agree in writing (the date on which the Closing takes place, the "Closing Date"). The closing of the Acquisition is dependent upon the closing of each of the Stock Purchase, the Subsidiary Investment and the Merger and if any one of the Stock Purchase, the Subsidiary Investment or the Merger shall not occur, then the Acquisition shall not close and all shares, consideration, agreements, instruments and other items shall be released from or retained in the Closing Escrow as provided for in the Closing Escrow Agreement or as otherwise agreed in writing by the Parties. SECTION 4.2 ACTIONS AT CLOSING. At the Closing: (a) Pursuant to the Closing Escrow Agreement, the escrow agent appointed pursuant to the Closing Escrow Agreement (the "Escrow Agent") shall (i) deliver to MM the Stock Purchase Price, on behalf of the KCS Purchasers, and (ii) deliver to the KCS Purchasers, on behalf of MM, the stock certificates for the GTFM Shares, duly endorsed and in proper form to transfer to the KCS Purchasers, as their interests appear in Section 1.1(a), ownership of such shares free and clear of any and all Encumbrances. (b) Pursuant to the Closing Escrow Agreement, the Escrow Agent (i) on behalf of MM, shall deliver to KCS Sub the GTFM Sub Note, duly endorsed for transfer to KCS Sub free and clear of any and all Encumbrances, (ii) on behalf of KCS Sub, shall deliver to MM the KCS Sub Note, (iii) on behalf of MM, shall deliver to KCS Sub the KCS Sub Note, duly endorsed for transfer to KCS Sub free and clear of any and all Encumbrances, and (iv) on behalf of KCS Sub, shall issue and deliver to MM the KCS Sub Shares. (c) [Omitted] (d) Pursuant to the Closing Escrow Agreement, the Escrow Agent shall deliver the Certificate of Merger to KCS for execution and filing with the Secretary of State of Delaware to effect the Merger, and at the Effective Time shall deliver to MM the shares of KCS Common Stock to which MM shall have become entitled pursuant to Section 4.3. (e) The Indemnity Escrow Notes shall be deposited into the Indemnity Escrow to be held pursuant to the terms and conditions of the Indemnity Escrow Agreement. (f) The Parties shall deliver and receive, respectively, the officers' certificates referred to in Section 8.2(c) and 8.3(c). (g) To the extent in the possession of, or available to, TMM or MM, or any of their respective Subsidiaries, Affiliates, directors, officers, employees or representatives, TMM and MM shall, and TMM shall cause MM to, deliver to GTFM all files and books of account, including business, financial and tax records, of GTFM, including minute books, stock record books, the agreement relating to the Concession and supporting exhibits and records relating thereto and work papers. In addition, each Party shall deliver to the other Parties such other documents, resolutions, appointments, powers of attorney and instruments of transfer necessary or appropriate to implement this Agreement and effect the transactions contemplated hereby and by the Ancillary Agreements, in each case as may be reasonably requested and in form and substance reasonably acceptable to the requesting Party. (h) The Secretary of GTFM shall make the corresponding notation in the Stock Registry Book of GTFM evidencing the KCS Purchasers, as their interests appear in Section 1.1(a), as the record, legal and beneficial owners of the GTFM Shares as of the Closing Date. (i) All other instruments, agreements and items held in the Closing Escrow (including the Releases, the Release Resolutions and the documents necessary for the Dismissals) shall be delivered to the party entitled to receive the same pursuant to the terms of the Closing Escrow Agreement and TMM shall deliver to KCS the Legal Representation Release. (j) Sellers shall deliver a copy of resolutions which Sellers and KCS shall have caused to be adopted by the shareholders of GTFM and TFM, effective as of the Closing, (i) accepting the resignations of the representatives of TMM serving on such boards of directors, (ii) approving the financial statements of GTFM and TFM for the year ended December 31, 2003, (iii) waiving all rights of first refusal to, and approving, the transfer of the GTFM Shares to the KCS Purchasers, and (iv) electing new directors of GTFM and of TFM. (k) Each action taken at the Closing pursuant to this Agreement shall depend on the occurrence of all actions required to be taken at the Closing pursuant to this Agreement and no action or transaction will be deemed to have taken place, or document delivered, or payment made, unless all actions and transactions have been completed and all documents have been executed and delivered; PROVIDED, that any agreements that, in accordance with their terms, are to become effective prior to the Closing Date, shall be effective to the extent provided therein. Each Party shall take all action necessary to cause the Escrow Agent to take all action required under the Closing Escrow Agreement to be taken by the Escrow Agent on such Party's behalf. SECTION 4.3 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any other action on the part of any Party: (a) the KCS Sub Shares shall be converted into and exchanged for an aggregate of 18,000,000 shares of KCS Common Stock; (b) the shares of KCS Sub Common Stock issued and outstanding immediately prior to the Effective Time, other than the KCS Sub Shares, shall be cancelled; (c) each share of KCS Common Stock, KCS Preferred Stock (as defined in Section 6.4) and New Series Preferred Stock (as defined in Section 6.4), issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding as one share of KCS Common Stock, KCS Preferred Stock and New Series Preferred Stock, respectively, of the Surviving Company; (d) each share of KCS Common Stock and each share of KCS Preferred Stock and New Series Preferred Stock that is owned by KCS immediately prior to the Effective Time as treasury stock shall remain as one share of treasury stock of the Surviving Company; and (e) each option to acquire KCS Common Stock issued and outstanding immediately prior to the Effective Time shall be adjusted as necessary to provide that, at the Effective Time, such option shall be deemed an option to acquire, on the same terms and conditions as were applicable under such option, the number of shares of Common Stock of the Surviving Company equal to the number of shares of KCS Common Stock subject to such option. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLERS Except as set forth under the applicable sections in the disclosure schedule attached as Exhibit A to this Agreement (the "Seller Disclosure Schedule"), TMM, TMMH and MM ("Sellers"), jointly and severally, represent and warrant to KCS as set forth below. With respect to each such representation, it shall be deemed qualified by matters set forth on the Seller Disclosure Schedule under the corresponding section number, whether or not the representation or any portion thereof refers to the Seller Disclosure Schedule by use of the phrase "except as set forth in the Seller Disclosure Schedule" or words of similar import. SECTION 5.1 ORGANIZATION AND RELATED MATTERS. (a) TMM is a SOCIEDAD ANONIMA, duly formed and validly existing under the laws of the UMS. TMM has the corporate power and authority necessary to carry on its business in the manner as it is now being conducted and to own, lease and operate all of its properties and assets. The copy of TMM's Corporate Charter and Bylaws previously provided to KCS is a complete and correct copy of such instrument as in effect on the date hereof. Sellers have provided KCS with an English translation of such documents. (b) TMMH is a SOCIEDAD ANONIMA DE CAPITAL VARIABLE, duly formed and validly existing under the laws of the UMS. TMMH has the corporate power and authority necessary to carry on its business in the manner it is now being conducted and to own, lease and operate all of its properties and assets. TMMH is a subsidiary of TMM, which owns all of the issued and outstanding capital stock of TMMH, except as set forth in Section 5.1 of the Seller Disclosure Schedule. (c) MM is a SOCIEDAD ANONIMA DE CAPITAL VARIABLE, duly formed and validly existing under the laws of the UMS. MM has the corporate power and authority necessary to carry on its respective business in the manner it is now being conducted and to own, lease and operate all of its properties and assets. MM is a subsidiary of TMMH, which owns all of the issued and outstanding capital stock of MM, except as set forth in Section 5.1 of the Seller Disclosure Schedule. (d) GTFM is a SOCIEDAD ANONIMA DE CAPITAL VARIABLE, duly formed and validly existing under the laws of the UMS, and each of the GTFM Subsidiaries is a SOCIEDAD ANONIMA DE CAPITAL VARIABLE or other business entity duly formed, validly existing and in good standing under the laws of the UMS. GTFM has the corporate power and authority necessary to carry on its business in the manner it is now being conducted and to own, lease and operate all of its properties and assets. (e) Each of TMM, TMMH, MM, GTFM and the GTFM Subsidiaries is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such qualification or licensing necessary, except in jurisdictions where the failure to be so licensed or qualified would not individually or in the aggregate have a GTFM Material Adverse Effect. (f) The copies of the Corporate Charter and Bylaws of each of TMMH, MM, GTFM, and of each of the GTFM Subsidiaries, delivered to KCS by TMM prior to the execution of this Agreement are complete and correct copies of such instruments as in effect immediately prior to the execution of this Agreement and Sellers have provided KCS with English translations of such documents. (g) The powers of attorney identified in Exhibit H hereto have been revoked and replaced with new powers of attorney, identified in Exhibit I hereto, effective as of the date of this Agreement. SECTION 5.2 AUTHORIZED CAPITALIZATION. The authorized capital stock of GTFM consists of (i) 25,500 shares of Series "A" fixed capital, of which 25,500 shares are held by MM, (ii) 3,842,901 shares of Series "A" variable capital, of which 3,842,901 shares are held by MM, (iii) 24,500 shares of Series "B" fixed capital, of which 24,500 shares are held by NAFTA Rail, S.A. de C.V., (iv) 3,692,199 shares of Series "B" variable capital, of which 3,692,199 shares are held by NAFTA Rail, S.A. de C.V., and (v) 2,478,470 shares of Series "L-2" variable capital, of which 2,478,470 are held by TFM. There are no other shares of capital stock of GTFM or other ownership interests in GTFM issued, reserved for issuance or outstanding. All of the shares of capital stock of GTFM outstanding are duly authorized, validly issued, fully paid and nonassessable and, except as set forth in Section 5.2 of the Seller Disclosure Schedule, free of any preemptive rights and are not subject to any voting trust agreement (or similar agreement), or other Contract restricting or otherwise relating to the voting, dividend rights or disposition of such shares to which GTFM or any of the Sellers is a party or by which GTFM or any of the Sellers is bound. Except as set forth in Section 5.2 of the Seller Disclosure Schedule, there is no outstanding option, warrant, convertible or exchangeable security, right, subscription, call, right of first refusal, legally binding commitment, preemptive right or other agreement or right of any kind to which GTFM or the Sellers are a party or are otherwise bound entitling any Person to purchase or otherwise acquire (including by exchange or conversion) from GTFM or any GTFM Subsidiary any shares of capital stock of GTFM. Except as set forth in the Put Agreement (which is currently being contested pursuant to pending legal proceedings), there are no outstanding obligations of GTFM or any of its Subsidiaries to redeem, repurchase or otherwise acquire any of the shares of capital stock of GTFM or any shares of capital stock (or other ownership interests) of any of its Subsidiaries. Neither GTFM nor any GTFM Subsidiary has outstanding any bonds, debentures, notes or other indebtedness generally having the right to vote (or convertible into, or exchangeable for, Securities having the right to vote) on any matters on which holders of shares of capital stock of GTFM may consent or vote ("GTFM Voting Debt"). There are no options, warrants, rights, convertible or exchangeable Securities, "phantom" interests or other ownership interest appreciation rights, commitments, Contracts, arrangements or undertakings of any kind to which GTFM or any of the GTFM Subsidiaries is a party or by which any of them is bound (i) obligating GTFM or any of the GTFM Subsidiaries or any other Person to issue, deliver or sell, or cause to be issued, delivered or sold, existing or additional shares of capital stock of GTFM or capital stock (or other ownership interests) of any GTFM Subsidiary, or any security convertible into or exercisable or exchangeable for any of the foregoing or for GTFM Voting Debt, (ii) obligating GTFM or any GTFM Subsidiary or any other Person to issue, grant, extend or enter into any such option, warrant, call, right, security commitment, Contract, arrangement or undertaking, (iii) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights accruing to holders of the shares of capital stock of GTFM or capital stock (or other ownership interests) of any GTFM Subsidiary, or (iv) that give rise to a right to receive any payment from GTFM or any GTFM Subsidiary upon the execution of this Agreement or the consummation of the Merger or any of the other transactions contemplated hereby, except as set forth in Section 5.2 of the Seller Disclosure Schedule. Notwithstanding the disclosures set forth in Section 5.2 of the Seller Disclosure Schedule or otherwise, the shares of GTFM to be acquired by the KCS Purchasers and by KCS Sub pursuant to this Agreement shall be acquired by the KCS Purchasers and KCS Sub free and clear of any and all Encumbrances, except for any Encumbrances (y) created by the KCS Purchasers or their Affiliates or (z) by operation of law which does not involve a breach by TMM or any Affiliate of any provision of this Agreement. SECTION 5.3 GTFM AND GTFM SUBSIDIARIES. (a) Section 5.3 of the Seller Disclosure Schedule lists each GTFM Subsidiary and its jurisdiction of incorporation or organization and the outstanding shares of capital stock and other ownership interests, if any, of the GTFM Subsidiaries, and the record owner thereof. All of the outstanding shares of capital stock of, or other equity interests in, each of the GTFM Subsidiaries have been validly issued and are fully paid and nonassessable and such shares or interests are owned directly or indirectly by GTFM free and clear of all Encumbrances and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests, except as set forth in Section 5.3 of the Seller Disclosure Schedule. Except for the capital stock or other ownership interests of the GTFM Subsidiaries as set forth in Section 5.3 of the Seller Disclosure Schedule, GTFM does not beneficially own directly or indirectly any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person. (b) Neither GTFM nor any of the GTFM Subsidiaries engage in or conduct any business other than as set forth in the GTFM Form 20-F, or as set forth in Section 5.3 of the Seller Disclosure Schedule. Neither GTFM nor any of the GTFM Subsidiaries has taken any action or commenced or threatened any legal proceeding for the administration, winding-up or provisional winding-up or dissolution of GTFM or any of the GTFM Subsidiaries or seeking to enter into any arrangement or composition for the benefit of creditors, or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of any of the properties, revenues, undertakings or assets of GTFM or any of the GTFM Subsidiaries, nor have any orders been made for any of the foregoing. SECTION 5.4 AUTHORITY; NO VIOLATION. (a) TMM, TMMH, MM and GTFM each has full corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which any of TMM, TMMH, MM or GTFM is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite action on their respective parts, and no other corporate action on the part of TMM, TMMH, MM or GTFM, as the case may be, is necessary to approve this Agreement or the Ancillary Agreements to which it is a party or to authorize or consummate the transactions contemplated hereby or thereby, other than approvals from the shareholders of TMM, TMMH and MM, to be obtained as provided in Section 5.5. TMM has received the opinion of JP Morgan Securities, Inc. to the effect that the consideration to be received in the Acquisition is fair from a financial point of view to TMM. This Agreement and the Ancillary Agreements to which it is a party have been duly and validly executed and delivered by TMM, TMMH, MM and GTFM (except for those Ancillary Agreements that are not dated the date hereof, which Ancillary Agreements shall be duly and validly executed and delivered prior to the Closing) and (assuming the due authorization, execution and delivery of this Agreement and the Ancillary Agreements by the other Parties hereto and thereto) constitute valid and binding obligations of TMM, TMMH, MM and GTFM (except for those Ancillary Agreements that are not dated the date hereof or, by their terms are not effective at the date hereof, which Ancillary Agreements shall constitute valid and binding obligations of TMM, TMMH, MM and GTFM at the Closing or the effective date thereof, as the case may be), enforceable against TMM, TMMH, MM and GTFM in accordance with their terms, except as (i) the enforceability thereof may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the rights of creditors generally and the availability of equitable relief (whether in proceedings at law or in equity), and (ii) rights to indemnification may be limited by the Securities Laws and the policies underlying such laws. (b) Neither the execution and delivery of this Agreement or the Ancillary Agreements to which it is a party by TMM, TMMH, MM or GTFM nor the consummation by TMM, TMMH, MM or GTFM of any of the transactions contemplated hereby or thereby to be performed by them, nor compliance by TMM, TMMH, MM or GTFM with any of the terms or provisions hereof or thereof, will (i) violate any provision of the Charter or Bylaws of TMM, TMMH or MM or the Charter or Bylaws or comparable organizational documents of GTFM or any GTFM Subsidiary, or (ii) assuming that the consents and approvals referred to in Section 5.5 are duly obtained, (x) violate, conflict with or require any notice, filing, consent, waiver or approval under any Applicable Law to which TMM, TMMH, MM, GTFM or the GTFM Subsidiaries or any of their respective properties, Contracts or assets are subject, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with or without notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate or result in a right of acceleration of the performance required by, result in the creation of any liability under, result in the creation of any Encumbrance other than any Permitted Encumbrance upon the properties, Contracts or assets of TMM, TMMH, MM, GTFM or the GTFM Subsidiaries under, or require any notice, approval, waiver or consent under, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which TMM, TMMH, MM, GTFM or any of the GTFM Subsidiaries is a party, or by which TMM, TMMH, MM, GTFM or any of the GTFM Subsidiaries or any of their properties or assets may be bound or affected, except, in the case of this clause (ii), would not have or be reasonably expected to have, individually or in the aggregate, a GTFM Material Adverse Effect or result in an Encumbrance on the GTFM Shares. SECTION 5.5 CONSENTS AND APPROVALS. (a) The affirmative vote of the holders of a majority of the outstanding shares of Series A Shares of TMM (the "TMM Stockholder Approval"), is the only vote of the holders of any Security of TMM necessary to approve this Agreement and the other transactions contemplated by this Agreement and the Ancillary Agreements. Holders of more than a majority of the outstanding shares of Series A Shares of TMM have (i) entered into the Voting Trust with respect to 7,841,343 Series A Shares of TMM pursuant to which they have transferred such shares to an irrevocable trust for the purpose of assuring that such shares are voted in favor of the TMM Stockholder Approval, and (ii) entered into the Amendment to the Trust Agreement, with respect to 574,150 Series A Shares of TMM pursuant to which the settlors have irrevocably instructed, and the trustee under such agreement has irrevocably agreed, to vote the shares in favor of the TMM Stockholder Approval. The affirmative vote of the shares subject to the Voting Trust and the Amendment to the Trust Agreement, when it occurs, will be sufficient to constitute TMM Stockholder Approval. The Voting Trust and Amendment to the Trust Agreement are valid and binding obligations of the signatories thereto, enforceable in accordance with their terms. The affirmative vote of the holders of a majority of the outstanding shares of capital stock of TMMH (the "TMMH Stockholder Approval") is the only vote of the holders of any Security of TMMH necessary to approve this Agreement and the other transactions contemplated by this Agreement and the Ancillary Agreements and the affirmative vote of the holders of a majority of the outstanding shares of capital stock of MM (the "MM Stockholder Approval") is the only vote of the holders of any Security of MM necessary to approve this Agreement and the other transactions contemplated by this Agreement and the Ancillary Agreements (collectively, the "Subsidiary Approvals"). As a part of the TMM Stockholder Approval, TMM, as holder owning all (but one) of the shares of TMMH entitled to vote, will be irrevocably instructed to irrevocably vote all such shares in favor of the TMMH Stockholder Approval. As a part of the TMMH Stockholder Approval, TMMH, as holder of more than 91% of the shares of MM entitled to vote, will be irrevocably instructed to irrevocably vote such shares in favor of the MM Stockholder Approval. (b) Except (i) as set forth in Section 5.5(a), in Section 5.5 of the Seller Disclosure Schedule or in the Ancillary Agreements, (ii) the prior approval of the Mexican Foreign Investments Commission, (iii) clearance by the Mexican Antitrust Commission, (iv) notice to the Mexican Ministry of Communications and Transportation, (v) compliance with and filings under the Securities Laws as may be required in connection with this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby, (vi) any required filings with the NYSE, (vii) the filing of the Certificate of Merger, and (viii) the expiration or earlier termination of the waiting period under the HSR Act, no consents or approvals of, or filings, declarations or registrations with any Governmental Authority, any third party or any other Person are necessary on the part of the Sellers in connection with the execution and delivery by each Seller of this Agreement or the Ancillary Agreements to which it is a party and the consummation by the Sellers of the Acquisition and the other transactions contemplated by this Agreement and the Ancillary Agreements other than such consents, approvals, filings, declarations or registrations which if not obtained would not reasonably be expected to delay materially the Closing or have a GTFM Material Adverse Effect. To the best of Sellers' Knowledge, no control share, anti-takeover or similar statute under the Laws of the UMS is applicable to the transactions contemplated hereby or by the Ancillary Agreements. SECTION 5.6 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Except as set forth in Section 5.6 or Section 5.11 of the Seller Disclosure Schedule, the audited consolidated financial statements of GTFM and its consolidated Subsidiaries and the audited consolidated financial statements of TFM and its consolidated subsidiaries for the period ended December 31, 2003, previously provided to KCS (the "GTFM Financial Statements") present fairly, in all material respects, in conformity with IFRS applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of GTFM and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended. The reconciliation ("Reconciliation") to U.S. GAAP from IFRS of the GTFM Financial Statements prepared by PriceWaterhouseCoopers, provided by GTFM to KCS, fairly presents in all material respects all adjustments necessary to reflect the presentation of such financial statements on a U.S. GAAP basis. Except as set forth in the GTFM Financial Statements, neither GTFM nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by IFRS to be set forth on a consolidated balance sheet of GTFM and the consolidated GTFM Subsidiaries or in the notes thereto or which, individually or in the aggregate, could reasonably be expected to have a GTFM Material Adverse Effect. SECTION 5.7 CONTRACTS. (a) Section 5.7 of the Seller Disclosure Schedule sets forth a complete and accurate list or description, as of the date of this Agreement, of all Contracts: (i) pursuant to which GTFM or any of the GTFM Subsidiaries is either obligated to pay or entitled to receive in excess of $10 million in any year (that is not otherwise required to be disclosed pursuant to this Section 5.7), (ii) that are employment, management, consulting or severance agreements with any officer or director of GTFM or any of the GTFM Subsidiaries, (iii) that include any noncompetition or nonsolicitation covenant or any exclusive dealing or similar arrangement that limits the ability of GTFM or any of the GTFM Subsidiaries to compete (geographically or otherwise) in any line of business or which would so limit the Surviving Company or any of its Subsidiaries after the Effective Time, (iv) that are trackage rights agreements, interline or interchange agreements with other railroads, or (v) that constitute nondisclosure agreements or confidentiality agreements which could reasonably be expected to have a significant effect on the conduct of the GTFM Business or the business of the Surviving Company ((i) through (v) collectively, the "Scheduled Contracts"). (b) As of the date of this Agreement, each of the Scheduled Contracts is a legal, valid and binding obligation of GTFM or the GTFM Subsidiaries (assuming the due authorization, execution and delivery by the other Parties thereto) and is in full force and effect and enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar Laws relating to or affecting creditors generally and by the availability of equitable remedies (whether in proceedings at law or in equity). (c) As of the date of this Agreement, neither GTFM nor any of the GTFM Subsidiaries has received notice of cancellation of or default under or intent to cancel or call a default under any of the Scheduled Contracts. Assuming receipt of the consents and approvals set forth in Section 5.5, to the best of the Sellers' Knowledge, nothing has occurred which with or without notice or lapse of time or both would constitute a material breach of or a material default under any of the Scheduled Contracts. (d) On and after the Closing Date, GTFM, TFM and their respective Subsidiaries shall have no liability or obligation under or with respect to any agreement or arrangement with Jose Joaquin de Teresa y Polignac ("De Teresa") or any of its affiliates (the "De Teresa Agreements") other than pursuant to the ongoing litigation matters identified in Section 5.7 of the Seller Disclosure Schedule (the "Ongoing Litigation Matters"). Since May 17, 2004 through the date of this Agreement, (i) no amount has been paid by or on behalf of GTFM or any GTFM Subsidiary to De Teresa other than for Ongoing Litigation Matters, and (ii) the amounts paid or payable for the Ongoing Litigation Matters have not exceeded the amount set forth in Section 5.7(d) of the Seller Disclosure Schedule. SECTION 5.8 INTELLECTUAL PROPERTY RIGHTS. (a) With respect to all Intellectual Property used in the conduct of the GTFM Business, GTFM or a GTFM Subsidiary either has all right, title and interest in or valid and binding rights under Contract to use such Intellectual Property, except where the failure to have such rights would not reasonably be expected to have a GTFM Material Adverse Effect. Except as disclosed in Section 5.8 of the Seller Disclosure Schedule or as would not reasonably be expected to have a GTFM Material Adverse Effect, (i) all registrations with and applications to Governmental Authorities in respect of Intellectual Property owned by GTFM or any GTFM Subsidiary are valid and in full force and effect, (ii) there are no material restrictions on the direct or indirect transfer of any Contract, or any interest therein, held by GTFM or any GTFM Subsidiary in respect of such Intellectual Property, (iii) to the Knowledge of the Sellers neither GTFM nor any GTFM Subsidiary is in default (or with the giving of notice or lapse of time or both, would be in default) in any material respect under any Contract to use such Intellectual Property, and (iv) to the Knowledge of the Sellers, such Intellectual Property owned by GTFM or any GTFM Subsidiary is not being infringed by any other Person. Neither GTFM nor any GTFM Subsidiary has received notice that GTFM or any GTFM Subsidiary is infringing in any material respect any Intellectual Property of any other Person, to the Knowledge of Sellers, no claim is pending or has been made to such effect that has not been resolved and, to the Knowledge of the Sellers, neither GTFM nor any GTFM Subsidiary is infringing any Intellectual Property of any other Person the effect of which, individually or in the aggregate, could reasonably be expected to have a GTFM Material Adverse Effect. GTFM owns and will own at the Closing, all right, title and interest in and to that certain trademark of mixed type registered with the Mexican Institute of Industrial Property under number 53951, class 37, in connection with the name "TFM" and its design. SECTION 5.9 EMPLOYEE BENEFIT MATTERS. (a) Section 5.9 of the Seller Disclosure Schedule sets forth a true and complete list of each material pension plan, deferred compensation plan, retirement income plan, stock option or stock purchase plan, profit sharing plan, bonus plan or policy, employee group insurance plan, hospitalization plan, disability plan or other employee benefit plan, program, policy or practice, formal or informal, funded or unfunded, to any current or former director, officer or employee (or to any dependent or beneficiary thereof) of GTFM or any GTFM Subsidiary under which GTFM or any GTFM Subsidiary has any present or future material obligation or liability, whether actual or contingent. Each such plan, agreement, program, policy and arrangement shall be referred to as a "Benefit Plan." Each Benefit Plan is further designated in Section 5.9 of the Seller Disclosure Schedule as either currently or formerly maintained, sponsored or contributed to by GTFM or any GTFM Subsidiary (a "GTFM Benefit Plan") or by any other entity (in which case such entity is identified). Neither GTFM nor any GTFM Subsidiary, nor to the Knowledge of Sellers, any other Person, has any express or implied commitment, whether legally enforceable or not, to modify, change or terminate any GTFM Benefit Plan, other than with respect to a modification, change or termination required by Applicable Law. (b) With respect to each Benefit Plan, GTFM has delivered or made available to KCS true, current, correct and complete copies of (i) each Benefit Plan (or, if not written, a written summary of its material terms), including all plan documents, adoption agreements, trust agreements, insurance Contracts or other funding vehicles and all amendments thereto, (ii) any summaries and summary plan descriptions, including any summary of material modifications, distributed to Benefit Plan participants, (iii) the most recent actuarial report or other financial statement relating to such Benefit Plan, as applicable, and (iv) all filings made with any Governmental Authorities with respect to any Benefit Plan. (c) Each Benefit Plan has been administered in material compliance with its terms and all Applicable Laws and material contributions required to be made under the terms of any of the Benefit Plans as of the date of this Agreement have been timely made or, if not yet due, have been properly reflected in the GTFM Financial Statements. With respect to the Benefit Plans, no event has occurred and there exists no condition or set of circumstances in connection with which GTFM could be subject to any material liability (other than for liabilities to pay benefits) under the terms of, or with respect to, such Benefit Plans, or any Applicable Law. (d) Except as disclosed in Section 5.9 of the Seller Disclosure Schedule: (i) there has been no prohibited transaction (within the meaning of Applicable Law) with respect to any Benefit Plan that could result in material liability to GTFM or the Surviving Company, (ii) subject to compliance with Applicable Law, each Benefit Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without material liability (other than liability for ordinary administrative expenses typically incurred in a termination event), (iii) no suit, administrative proceeding, action or other litigation has been brought or, to the Knowledge of Sellers, is threatened, against or with respect to any such Benefit Plan, including any audit or inquiry by any Governmental Authority, (iv) all tax, annual reporting and other governmental filings required have been timely filed with the appropriate Governmental Authority and all notices and disclosures have been timely provided to participants, and (v) each Benefit Plan meets the requirement for deductibility under the Law and regulations of the UMS. (e) No Benefit Plan exists, and no other payment shall be made that, as a result of the execution of this Agreement or the transactions contemplated by this Agreement (whether alone or in connection with a subsequent event), could result in the payment to any employee of the GTFM Group of any money or other property or could result in the increase, acceleration or provision of any payments, other rights or benefits to any such employee. SECTION 5.10 LABOR AND OTHER EMPLOYMENT MATTERS. (a) Sellers have delivered to KCS a complete and accurate list (giving name and current payroll compensation) of each current employee of each company in the GTFM Group as of the date of this Agreement. Except as set forth in Section 5.10 of the Seller Disclosure Schedule, none of the members of the GTFM Group has any responsibility or liability to any of its employees for any delinquent payments of wages, salaries, commissions, bonuses or other direct compensation for any services performed for it or amounts required to be reimbursed to such employee or paid to such employee for mandatory profit sharing, housing, mandatory retirement benefits, vacation benefits or social security benefits required under the Laws of the UMS in an amount that would have a GTFM Material Adverse Effect. (b) Except as set forth in Section 5.10 of the Seller Disclosure Schedule or as would not reasonably be expected to have a GTFM Material Adverse Effect, each of the members of the GTFM Group (i) are in compliance in all material respects with all Applicable Law respecting labor, employment, immigration, fair employment practices, terms and conditions of employment, workers' compensation, occupational safety, plant closings, wages and hours and any other Law applicable to any of their employees, and (ii) has withheld all amounts required by Applicable Law or by agreement to be withheld from the wages, salaries, and other payments to employees, and (iii) is not liable for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing. (c) Except as set forth in Section 5.10 of the Seller Disclosure Schedule or, with respect to notices received after the date hereof by TMM or any TMM Subsidiaries, disclosed in writing to KCS prior to the Closing, no current officer of any member of the GTFM Group has given written notice to TMM or any TMM Subsidiary of such person's termination of employment with the GTFM Group. (d) Except as described in Section 5.10 of the Seller Disclosure Schedule, the Mexican Railway Workers Union (EL SINDICATO DE TRABAJADORES FERROCARRILEROS DE LA REPUBLICA MEXICANA) is the only trade union or labor union representing any employees of GTFM or any GTFM Subsidiary. Sellers have provided to KCS a true and complete copy of the collective bargaining agreement and any amendments thereof. Neither GTFM nor any of the GTFM Subsidiaries is a party, or is otherwise subject, to any other collective bargaining agreement or other labor union contract applicable to its employees. There are no material activities or proceedings by a labor union or representative thereof to organize any employees of GTFM or any of the GTFM Subsidiaries. Except as set forth in Section 5.10 of the Seller Disclosure Schedule, there are no pending negotiations between GTFM or any of the GTFM Subsidiaries and any labor union or representative thereof regarding any proposed material changes to any existing collective bargaining agreement and no such collective bargaining agreement is subject to expiration or renewal within one year after the date hereof or the extension or renewal of such an agreement or the entering of any such agreement. Except as set forth in Section 5.10 of the Seller Disclosure Schedule, there are no pending, and none of GTFM or any of the GTFM Subsidiaries has experienced since March 31, 2004 any, material labor disputes, lockouts, strikes, slowdowns, work stoppages, or threats thereof nor, to the Knowledge of Sellers, has any event occurred or does any circumstance exist that would provide a reasonable basis for any such dispute, lockout, strike, slowdown, work stoppage or threat thereof. Except as set forth in Section 5.10 of the Seller Disclosure Schedule, GTFM and the GTFM Subsidiaries are not in default and have not breached in any material respect the terms of any applicable collective bargaining or other labor union contract, and there are no material claims or grievances outstanding against GTFM, any of the GTFM Subsidiaries, or any of their respective employees under any such agreement or contract. (e) Except as specified in Section 5.10 of the Seller Disclosure Schedule, (i) there are no claims, disputes or actions pending, or to the Knowledge of Sellers threatened, between GTFM or any of the GTFM Subsidiaries, on the one hand, and any of their employees, on the other hand, and (ii) to the Knowledge of Sellers, there are no facts or circumstances involving any employee that would form the basis of, or give rise to, any cause of action, including unlawful termination based on discrimination of any kind, except in case of such clause (i) or (ii) as would not reasonably be expected to have, individually or in the aggregate, a GTFM Material Adverse Effect. SECTION 5.11 TAX MATTERS. (a) Except as set forth in Section 5.11 of the Seller Disclosure Schedule or as would not have a GTFM Material Adverse Effect, all Tax Returns and reports of GTFM and the GTFM Subsidiaries required to be filed on or before the Closing Date have been duly and timely filed (taking into account all proper extensions) with the appropriate Taxing Authorities and all such Tax Returns were complete, correct and accurate. All Taxes shown on such Tax Returns as owed by GTFM or the GTFM Subsidiaries have been paid. (b) Except as set forth in Section 5.11 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM Subsidiaries has received any written notice of deficiency or assessment from any Taxing Authority with respect to material liabilities for Taxes of GTFM or any of the GTFM Subsidiaries which have not been paid or finally settled. No claim has ever been made in writing by an authority in a jurisdiction where GTFM or any of the GTFM Subsidiaries do not file Tax Returns that such entity is or may be subject to taxation by that jurisdiction. Except as set forth in Section 5.11 of the Seller Disclosure Schedule, no audit of any Tax Return concerning GTFM or any of the GTFM Subsidiaries is pending, being conducted, or to the Knowledge of Sellers, threatened to be instituted by a Taxing Authority. Except as set forth in Section 5.11 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM Subsidiaries has in effect a waiver of any statute of limitation in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency that will be in effect as of the Closing Date. (c) Except as set forth in Section 5.11 of the Seller Disclosure Schedule, there are no liens for Taxes on any assets of GTFM or any of the GTFM Subsidiaries other than liens for current Taxes (i) not yet due and payable, or (ii) that would not have a GTFM Material Adverse Effect. (d) Except as set forth in Section 5.11 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM Subsidiaries has any liability for the Taxes of any other Person as a transferee or successor, by Contract, for withholding or otherwise. (e) Except as set forth in Section 5.11 of the Seller Disclosure Schedule, there are no Tax sharing or Tax indemnity agreements or similar arrangements with respect to or involving GTFM or any of the GTFM Subsidiaries, other than agreements among GTFM and the GTFM Subsidiaries in which GTFM owns directly or indirectly all equity interest. (f) Except as set forth in Section 5.11 of the Seller Disclosure Schedule, each of GTFM and the GTFM Subsidiaries has complied in all material respects with all applicable governmental rules relating to the payment, collection and withholding of Taxes. (g) Except as set forth in Section 5.11 of the Seller Disclosure Schedule, there is no Tax litigation pending or to the Knowledge of Sellers threatened against GTFM and/or the GTFM Subsidiaries. (h) Except as set forth in Section 5.11 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM Subsidiaries will suffer any adverse tax consequences under the Laws of the UMS from ceasing, as a result of the Acquisition, to be members of the TMM consolidated group. (i) Except as set forth in Section 5.11 of the Seller Disclosure Schedule, during the period from the date of the GTFM Financial Statements until the date of this Agreement, GTFM and each of the GTFM Subsidiaries (i) have made no change in any accounting method used for Tax purposes or in depreciation or amortization policies, and have made no election for Tax purposes which is not consistent with the method, policies and elections made prior to the date of the GTFM Financial Statements, and (ii) have not settled any pending Tax audits or settled any Tax liability. (j) The net operating loss carry forwards of GTFM and the GTFM Subsidiaries shown on the most recent Tax Returns for GTFM and the GTFM Subsidiaries are not subject to reduction as a result of consummation of the transactions contemplated by this Agreement and the Ancillary Agreements (other than any reduction in connection with the Final Resolution of the VAT Claim and Put). SECTION 5.12 LEGAL PROCEEDINGS. Except (i) as set forth in Section 5.12 of the Seller Disclosure Schedule, and (ii) for actions brought or threatened to be brought by or on behalf of KCS and its Affiliates or their respective officers, directors, employees or agents, including persons named by them as directors or alternate directors of GTFM or any GTFM Subsidiary, there are no legal, administrative, arbitral or other proceedings (including disciplinary proceedings), claims, suits, actions or governmental or regulatory investigations of any nature whether in the UMS or elsewhere (collectively, "Proceedings") that are pending or, to the Knowledge of Sellers, threatened against GTFM or any of the GTFM Subsidiaries or any of their respective directors or officers (in their capacities as such) or the GTFM Assets or the GTFM Business, which if determined adversely would have a GTFM Material Adverse Effect, or that challenge the validity or propriety of the transactions contemplated by this Agreement or by any of the Ancillary Agreements. The Proceedings set forth in Section 5.10 of the Seller Disclosure Schedule under the heading "List of Direct Lawsuits Against GTFM By Former TFM Employees" are not reasonably expected to have a GTFM Material Adverse Effect. There is no injunction, order, judgment or decree imposed upon GTFM or any of the GTFM Subsidiaries, any material portion of the GTFM Assets or the GTFM Business. Section 5.12 of the Seller Disclosure Schedule sets forth a complete and accurate list of all Proceedings which any of Sellers, any of Sellers' Subsidiaries, or to the Knowledge of Sellers, any of Sellers', or their Subsidiaries', respective officers, directors, agents or representatives, including persons named by TMM as directors or alternate directors of GTFM or any GTFM Subsidiary, have filed or caused to be filed against KCS, any KCS Subsidiary or any of their respective officers, directors or stockholders, in their capacity as such. SECTION 5.13 PERMITS AND COMPLIANCE. (a) Except as set forth in Section 5.13 of the Seller Disclosure Schedule, GTFM and each of the GTFM Subsidiaries hold all licenses, franchises, concessions, decrees, permits and authorizations required under Applicable Law (collectively, "Permits") to operate the GTFM Business as currently conducted where the failure to hold such Permits would reasonably be expected to have a GTFM Material Adverse Effect. Each of GTFM and the GTFM Subsidiaries (i) holds, and at all times has held, and at Closing will hold, all Permits for the lawful ownership, operation and use of the GTFM Assets and the conduct of the GTFM Business, (ii) has been and is in compliance with each such Permit, and (iii) has not received notice asserting any violation of any such Permit, in each case, where the failure to hold or comply or such violation would reasonably be expected to have a GTFM Material Adverse Effect. (b) Except (i) as set forth in Section 5.13 of the Seller Disclosure Schedule, (ii) for normal examinations conducted by any Governmental Authority in the regular course of the business of GTFM and the GTFM Subsidiaries, or (iii) as would not reasonably be expected to have a GTFM Material Adverse Effect, since December 31, 2003, no Governmental Authority has provided written notice to GTFM or any of the GTFM Subsidiaries of any threatened proceeding or investigation into the business or operations of GTFM or any of the GTFM Subsidiaries or any of their members, officers, directors or employees in their capacity as such with GTFM or any of the GTFM Subsidiaries and, to the Knowledge of the Sellers, no such proceedings or investigations are contemplated. Except as set forth in Section 5.13 of the Seller Disclosure Schedule, there is no unresolved deficiency, violation or exception claimed or asserted by any Governmental Authority with respect to any examination of GTFM or any of the GTFM Subsidiaries. (c) Except as set forth in Section 5.13 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM Subsidiaries is in violation of any Applicable Laws or orders of any Governmental Authority except as would not reasonably be expected to have a GTFM Material Adverse Effect. No event has occurred or exists that would (with or without notice or lapse of time) give rise to any obligation on the part of GTFM or any of the GTFM Subsidiaries to undertake or to bear all or any portion of the cost of any remedial action of any nature which would reasonably be expected to have a GTFM Material Adverse Effect. (d) Without limiting the generality of the foregoing, to the Knowledge of Sellers no basis exists for revocation, material modification or termination prior to the expiration, of the Concession, except as set forth in Section 5.13 of the Seller Disclosure Schedule. SECTION 5.14 ENVIRONMENTAL MATTERS. Except as set forth in Section 5.14 of the Seller Disclosure Schedule, GTFM and each of the GTFM Subsidiaries (i) are in compliance with, and are not subject to any liability under, in each case with respect to all, applicable Environmental Laws, (ii) hold all Environmental Permits necessary to conduct their current operations, and (iii) are in compliance with their respective Environmental Permits, except where the failure to hold or be in compliance with such Environmental Permits would not be expected to have a GTFM Material Adverse Effect. Except as set forth in Section 5.14 of the Seller Disclosure Schedule, or as would not reasonably be expected to have a GTFM Material Adverse Effect, neither GTFM nor any of the GTFM Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that GTFM or any of the GTFM Subsidiaries may be in violation of, or liable under, any Environmental Law. Except as set forth in Section 5.14 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM Subsidiaries (x) has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and no investigation, litigation or other proceeding is pending or, to the Knowledge of the Sellers, threatened, with respect thereto, or (y) is an indemnitor or has assumed liability in connection with any pending demand, notice, claim, or other allegation, or to the Knowledge of the Sellers, any claim threatened, by or against any third-party relating to any liability under any Environmental Law or relating to any Hazardous Materials. Except as set forth in Section 5.14 of the Seller Disclosure Schedule, none of the real property owned or leased or operated by GTFM or any of the GTFM Subsidiaries is listed or, to the Knowledge of the Sellers, proposed for listing on any list of sites maintained by any Governmental Authority requiring investigation or cleanup. SECTION 5.15 PROPERTIES. Section 5.15 of the Seller Disclosure Schedule sets forth a true and complete list of all real property and interests in real property owned or leased by GTFM or any of the GTFM Subsidiaries and a summary of the lease agreements with respect thereto (true and correct copies of which leases have been provided to KCS) and a true and complete list of all personal property, equipment and fixtures (other than items having a book value of less than $1 million individually) owned by GTFM or any of the GTFM Subsidiaries, all of which personal property, equipment and fixtures are in good condition and repair, normal wear and tear excepted. Each of GTFM and the GTFM Subsidiaries has good and marketable title to, or valid and enforceable leasehold or concession interests in, all of its properties and tangible assets necessary to conduct the GTFM Business as currently conducted except where the failure to have such title or interest would not reasonably be expected to have a GTFM Material Adverse Effect. All such property and assets which constitute personal property, equipment, and fixtures, are in good condition and repair, normal wear and tear excepted. Except as set forth in Section 5.15 of the Seller Disclosure Schedule, all of such assets and properties, other than assets and properties in which GTFM or any of the GTFM Subsidiaries has a leasehold interest, are free and clear of all Encumbrances other than Permitted Encumbrances and Encumbrances which would not individually or in the aggregate reasonably be expected to have a GTFM Material Adverse Effect. Each of GTFM and the GTFM Subsidiaries has complied in all material respects with the terms of all leases and concessions (including the Concession) to which it is a party and under which it is in occupancy, and all such leases and concessions (including the Concession) are in full force and effect. SECTION 5.16 INSURANCE. Section 5.16 of the Seller Disclosure Schedule includes a list of all policies of fire, liability, product liability, workers' compensation, health and other forms of insurance in effect as of the date of this Agreement with respect to the GTFM Business (the "GTFM Insurance Policies"), including the named insured(s) and all beneficiaries thereunder, and true and complete copies of the GTFM Insurance Policies have been delivered to KCS. Neither GTFM, nor any of the GTFM Subsidiaries has been refused any insurance with respect to any aspect of the operations of its business, nor has its coverage been rescinded by any insurance carrier to which it has applied for insurance or with which it has carried insurance. No notice of cancellation or termination has been received with respect to any such policy. The activities and operations of GTFM and each of the GTFM Subsidiaries have been conducted in a manner so as to conform in all material respects to all material provisions of the GTFM Insurance Policies. SECTION 5.17 NO OTHER BROKER. Other than J.P. Morgan Chase and Elek, Moreno-Valle y Asociados, S.A. de C.V. ("EMVA"), the fees and expenses of which have been or will be paid by TMM, no broker, finder or similar intermediary is entitled to any broker's, finder's or similar fee or other remuneration from or as a result of engagement by Sellers or any of their respective Affiliates in connection with this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby. SECTION 5.18 NO GTFM MATERIAL ADVERSE EFFECT. Since December 31, 2003, (i) GTFM and the GTFM Subsidiaries have conducted their respective businesses only in the ordinary course, consistent with past practice, except as set forth in Section 5.18 of the Seller Disclosure Schedule, and (ii) there has not been (x) any GTFM Material Adverse Effect or any event or development that could, individually or in the aggregate, reasonably be expected to have a GTFM Material Adverse Effect, or (y) to the Knowledge of Sellers, any event or development that would, individually or in the aggregate, reasonably be expected to materially delay or prevent the consummation of, or the performance by Sellers or any of their respective Affiliates, of any of their obligations under, this Agreement or any of the Ancillary Agreements, to which any Seller is a party. SECTION 5.19 SUFFICIENCY OF AND TITLE TO ASSETS. GTFM and each of the GTFM Subsidiaries owns or licenses, and upon the consummation of the Merger, the Surviving Company and its Subsidiaries will own or license, all right, title and interest in and to all of the properties, assets, Contracts and rights of any kind, whether tangible or intangible, real or personal (including the Concession), necessary to enable GTFM, the GTFM Subsidiaries (prior to the Closing) and the Surviving Company (after the Closing) to conduct the GTFM Business as presently conducted (the "GTFM Assets"), free and clear of any Encumbrances other than Permitted Encumbrances, except as set forth in Section 5.19 of the Seller Disclosure Schedule. SECTION 5.20 INFORMATION IN FILED DOCUMENTS. None of the information regarding any of TMM, TMMH, MM, GTFM or any of the GTFM Subsidiaries supplied or to be supplied by Sellers in writing prior to the Closing expressly for inclusion or incorporation by reference in any documents to be filed with any Governmental Authority prior to the Closing in connection with the transactions contemplated hereby, including the proxy materials to be filed with the SEC by KCS in connection with the Merger, will, at the respective times such information is supplied, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. SECTION 5.21 AFFILIATE AGREEMENTS. Section 5.21 of the Seller Disclosure Schedule sets forth a complete and accurate list or description, as of the date of this Agreement, of all Contracts, understandings and arrangements between GTFM or any GTFM Subsidiary, on the one hand, and TMM or any TMM Affiliate (other than GTFM and its Subsidiaries), on the other hand (the "Affiliate Agreements") (other than this Agreement, the Ancillary Agreements and the other Agreements contemplated herein and therein to be entered into in connection with the transactions contemplated hereby and thereby) and identifying those: (i) Affiliate Agreements which shall continue in effect in accordance with their terms after the Closing Date (the "Continuing Affiliate Agreements"), and (ii) Affiliate Agreements which shall be terminated as of the Closing Date (in each case without penalty or obligation to GTFM or any GTFM Subsidiary). With respect to the Affiliate Agreements, other than the Continuing Affiliate Agreements, (w) KCS or a KCS Affiliate shall be entitled to terminate any or all of those agreements after ninety (90) days following the Closing Date at its sole discretion upon sixty (60) days notice and without liability or further obligation thereunder, (x) TFM and its Affiliates after the Closing Date shall be liable under those agreements only for the contracted basic charge for services and not for any other charges, expenses, costs, interest, or penalties, and (y) neither TFM, nor any entity which is after the Closing Date an Affiliate of TFM, shall be responsible for any charges, payments, expenses, or other costs incurred under those agreements prior to May 17, 2004. SECTION 5.22 NO LOSS OF SIGNIFICANT CUSTOMERS. From January 1, 2004 through the Business Day immediately preceding the date of this Agreement, neither GTFM nor any of the GTFM Subsidiaries has had any customer which has canceled, terminated or failed to renew, or threatened in writing to do so, any Contract with such entity which accounted for more than $10 million in revenues to such entity in the year ended December 31, 2003. SECTION 5.23 TRADING IN AND OWNERSHIP OF KCS COMMON STOCK. None of Sellers or any of their respective Affiliates has, during the sixty (60) Business Days prior to the date hereof, either directly or indirectly, bought or sold, or otherwise effected any trade in any shares of KCS Common Stock, or any Security derivative of KCS Common Stock and none of Sellers or any of their respective Affiliates, own as of the date of this Agreement any shares of KCS Common Stock or any security derivative of KCS Common Stock. SECTION 5.24 SOLVENCY. No insolvency or bankruptcy proceedings against TMM or any of its Subsidiaries are pending as of the last Business Day preceding the date of this Agreement. SECTION 5.25 TERMINATION OF OPTION AGREEMENT. The Amended and Restated Option Agreement between MM and The Bank of New York, as Trustee, dated October 25, 2002, as amended (the "Option Agreement"), entered into in connection with the Logistics Trust 2000-A (the "Trust") formed pursuant to the Second Amended and Restated Master Trust Agreement, dated as of December 10, 2002 (the "Master Trust Agreement"), between TMM and The Bank of New York, as Trustee, has been terminated, and the Master Trust Agreement and the Transaction Documents (as defined in the Master Trust Agreement) have been amended, so that as of the date of this Agreement and the Closing Date (i) there is and shall be no outstanding option, warrant, right, subscription, call, legally binding commitment or other agreement or right of any kind entitling any Person (including The Bank of New York, as Trustee of the Trust) to acquire, or any other Encumbrance arising under such agreements on, any shares of capital stock of GTFM, (ii) the provision in Section 6.4 of the Option Agreement requiring a written agreement to be bound by the terms of the Option Agreement and related agreements does not and shall not apply to the purchase of the GTFM Shares under this Agreement, and (iii) the purchase of the GTFM Shares hereunder will be effective without KCS or any Subsidiary of KCS entering into any agreement to be bound by the terms of the Option Agreement and related agreements. MM has caused each legend affixed to any stock certificates evidencing GTFM Shares pursuant to the Option Agreement to be cancelled or removed, and MM has caused any annotation that was required by the Option Agreement to be placed in the Stock Registry Book of GTFM to be cancelled or removed. The Amended and Restated Put Option Agreement between MM and The Bank of New York, as Trustee, dated October 25, 2002, as amended, entered into in connection with the Trust has been terminated, and the Master Trust Agreement and the Transaction Documents (as defined in the Master Trust Agreement) have been amended so that as of the date of this Agreement and the Closing Date there is and shall be no obligation of KCS, the KCS Purchasers or any of their Affiliates to purchase or otherwise acquire any certificate or other interest in or related to the Trust. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF KCS Except as set forth in the disclosure schedule attached as Exhibit B to this Agreement (the "KCS Disclosure Schedule"), KCS hereby represents and warrants to each of the Sellers as follows: SECTION 6.1 ORGANIZATION AND RELATED MATTERS. (a) KCS is a corporation, duly formed, validly existing and in good standing under the laws of the State of Delaware, and each of its Subsidiaries is a corporation or other business entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. KCS has the corporate power and authority and each of its Subsidiaries has the corporate or other applicable power and authority necessary to carry on their respective businesses in the manner they are now being conducted and to own, lease and operate all of their respective properties and assets. (b) KCS and each of its respective Subsidiaries is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such qualification or licensing necessary, except in jurisdictions where the failure of such license or qualification would not individually or in the aggregate have a KCS Material Adverse Effect. SECTION 6.2 AUTHORITY; NO VIOLATION. (a) Each of KCS, KARA Sub, KCS Sub, KCS Investment and Caymex has full corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite corporate action on the part of KCS, KARA Sub, KCS Sub, KCS Investment and Caymex and no other corporate action on any of their parts is necessary to approve this Agreement or the Ancillary Agreements to which it is a party or authorize or consummate the transactions contemplated hereby and thereby, except for obtaining the KCS Stockholder Approval as described in Section 6.3. KCS or its Affiliates have taken all actions required to be taken on their part to approve the execution, delivery and performance by GTFM of this Agreement and any Ancillary Agreements to which GTFM is a Party. KCS has received the opinion of Morgan Stanley & Co., Incorporated, to the effect that the Acquisition is fair from a financial point of view to KCS. This Agreement and the Ancillary Agreements to which it is a party have been duly and validly executed and delivered by KCS, KARA Sub, KCS Sub, KCS Investment and Caymex (except for those Ancillary Agreements that are not dated the date hereof, which Ancillary Agreements shall be duly and validly executed and delivered prior to the Closing) and (assuming the due authorization, execution and delivery of this Agreement and the Ancillary Agreements by the other Parties hereto and thereto) constitute valid and binding obligations of KCS, KARA Sub, KCS Sub, KCS Investment and Caymex (except for those Ancillary Agreements that are not dated the date hereof, which Ancillary Agreements shall constitute valid and binding obligations of KCS, KARA Sub, KCS Sub, KCS Investment and Caymex at the Closing), enforceable against each of them in accordance with their terms, except as (i) the enforceability thereof may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the rights of creditors generally and the availability of equitable relief (whether in proceedings at law or in equity), and (ii) rights to indemnification may be limited by the Securities Laws and the policies underlying such laws. (b) Neither the execution and delivery of this Agreement or the Ancillary Agreements to which it is a party by KCS, KARA Sub, KCS Sub, KCS Investment and Caymex nor the consummation by them of the transactions contemplated hereby or thereby to be performed by them, nor compliance by them with any of the terms or provisions hereof or thereof, will (i) violate any provision of their respective Certificates of Incorporation or Bylaws, (ii) assuming that the consents and approvals referred to in Section 6.3 are duly obtained, (x) violate, conflict with or require any notice, filing, consent or approval under any Applicable Law to which KCS or any of its Subsidiaries or any of its properties, contracts or assets are subject, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with or without notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate or result in a right of acceleration of the performance required by, result in the creation of any liability under, result in the creation of any Encumbrance upon the properties, contracts or assets of KCS, KARA Sub, KCS Sub, KCS Investment or Caymex under, or require any notice, approval or consent under, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which KCS or any of its Subsidiaries is a party, or by which KCS or any of its Subsidiaries, or any of its properties or assets, may be bound or affected except in the case of this clause (ii) in each case as would not have or reasonably be expected to have a KCS Material Adverse Effect. (c) The shares of KCS Common Stock to be issued pursuant to this Agreement have been duly authorized and, when issued as contemplated by this Agreement will be duly and validly issued, fully paid and non-assessable and free of any pre-emptive rights (except those provided in the Stockholders' Agreement) and entitled to the benefits and rights set forth in the Certificate of Incorporation of KCS, as in effect at the Effective Time. SECTION 6.3 CONSENTS AND APPROVALS. (a) The affirmative vote of the holders of a majority of the votes cast by the holders of all outstanding shares of KCS Common Stock and KCS Preferred Stock, voting together as a single class, to approve the issuance of the Common Stock in accordance with the Del. G.C.L. and the rules of the NYSE (the "KCS Stockholder Approval"), is the only vote of the holders of any Security of KCS necessary to approve this Agreement and the other transactions contemplated by this Agreement and the Ancillary Agreements. (b) Except (i) as set forth in Section 6.3(a), (ii) the prior approval of the Mexican Foreign Investments Commission, (iii) clearance by the Mexican Competition Commission, (iv) notice to the Mexican Ministry of Communications and Transportation, (v) compliance with and filings under the Securities Laws as may be required in connection with this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby, (vi) any required filings with the NYSE, (vii) the filing of the Certificate of Merger, and (viii) the expiration or earlier termination of the waiting period under the HSR Act, no consents or approvals of, or filings, declarations or registrations with any Governmental Authority, any third party or any other Person are necessary in connection with the execution and delivery by KCS of this Agreement and the Ancillary Agreements to which it is a party and the consummation by KCS of the Acquisition or the other transactions contemplated by this Agreement and the Ancillary Agreements. (c) The Board of Directors of KCS (the "KCS Board") has approved this Agreement, the Ancillary Agreements, and the Acquisition contemplated herein, including the issuance of more than 15% of the outstanding voting stock of KCS pursuant to the Acquisition, to ensure that the restrictions on business combinations set forth in Section 203 of the Del. G.C.L. will not apply to the Acquisition or to the consummation of the other transactions referred to in this Agreement and the Ancillary Agreements (including the exercise of pre-emptive rights under and in accordance with the terms of the Stockholders' Agreement). Prior to Closing, KCS shall take all corporate action necessary to amend the KCS Stockholder Rights Plan so that the acquisition of the KCS Common Stock pursuant to this Agreement and the Ancillary Agreements and the transactions contemplated by this Agreement and the Ancillary Agreements will not constitute a "trigger event" under the KCS Stockholder Rights Plan. To the best of KCS's Knowledge, except for Section 203 of the Del. G.C.L., no control share, anti-takeover or similar statute under the laws of any state in the United States is applicable to the acquisition of KCS Common Stock contemplated hereby and by the Ancillary Agreements. SECTION 6.4 AUTHORIZED CAPITALIZATION. The authorized capital stock of KCS consists of 400,000,000 shares of Common Stock, $.01 par value per share, 840,000 shares of Preferred Stock, $25 par value per share ("KCS Preferred Stock") and 2,000,000 shares of New Series Preferred Stock, $1.00 par value per share ("New Series Preferred Stock"). As of March 31, 2004, there were (i) 62,641,294 shares of KCS Common Stock, 242,170 shares of KCS Preferred Stock and 400,000 shares of 4.25% Redeemable Cumulative Convertible Perpetual Preferred Stock, Series C, issued and outstanding, (ii) 4,730,485 shares of KCS Common Stock reserved for issuance pursuant to options granted pursuant to the KCS Stock Option Plan, and (iii) 13,389,120 shares of KCS Common Stock reserved for issuance upon conversion of the 4.25% Redeemable Cumulative Convertible Perpetual Preferred Stock, Series C. All of the shares of KCS Common Stock and KCS Preferred Stock outstanding at the date of this Agreement are listed for trading on the NYSE. All of the shares of capital stock of KCS outstanding are duly authorized, validly issued, fully paid, nonassessable and free of any preemptive rights and are not subject to any voting trust agreement (or similar agreement) or other Contract restricting or otherwise relating to the voting, dividend rights or disposition of such shares to which KCS is a party, except for restricted share agreements between KCS and certain of its officers and limited stock appreciation rights. Except as set forth in this Agreement, there is no outstanding option, warrant, convertible or exchangeable security, right, subscription, call, right of first refusal, legally binding commitment, preemptive right or other agreement or right of any kind to purchase or otherwise acquire (including by exchange or conversion) from KCS or any KCS Subsidiary any shares of capital stock of KCS. There are no outstanding obligations of KCS or any of its Subsidiaries to redeem, repurchase or otherwise acquire any of the shares of capital stock of KCS or any shares of capital stock (or other ownership interests) of any of its Subsidiaries. Neither KCS nor any KCS Subsidiary has outstanding any bonds, debentures, notes or other indebtedness generally having the right to vote (or convertible into, or exchangeable for, Securities having the right to vote) on any matters on which holders of shares of capital stock of KCS may consent or vote ("KCS Voting Debt"). There are no options, warrants, rights, convertible or exchangeable Securities, "phantom" interests or other ownership interest appreciation rights, commitments, contracts, arrangements or undertakings of any kind to which KCS or any of its Subsidiaries is a party or by which any of them is bound, except for this Agreement, (i) obligating KCS or any of its Subsidiaries or any other Person to issue, deliver or sell, or cause to be issued, delivered or sold, existing or additional shares of capital stock of KCS or capital stock (or other ownership interests) of its Subsidiaries, or any security convertible into or exercisable or exchangeable for any of the foregoing or for KCS Voting Debt, (ii) obligating KCS or any of its Subsidiaries or any other Person to issue, grant, extend or enter into any such option, warrant, call, right, security commitment, contract, arrangement or undertaking, (iii) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights accruing to holders of the shares of capital stock of KCS or capital stock (or other ownership interests) of its Subsidiaries, or (iv) that give rise to a right to receive any payment upon the execution of this Agreement or the consummation of the Merger or any of the other transactions contemplated hereby, except as set forth in this Agreement. SECTION 6.5 SEC FILINGS. Since December 31, 2003, KCS has filed with the SEC all documents required to be filed by it under the Exchange Act and the Securities Act and as of their requisite dates (or the dates of any amendments thereto) such documents (the "KCS SEC Documents") did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading and complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act and the applicable rules of the SEC thereunder. SECTION 6.6 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. (a) Subject to the limitation in Section 6.6(b): (i) the audited consolidated financial statements and unaudited interim financial statements of KCS and its consolidated Subsidiaries included in the KCS SEC Documents (the "KCS Financial Statements") present fairly, in all material respects, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of KCS and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject, in the case of the unaudited interim financial statements, to normal year-end adjustments), and (ii) except as set forth in the KCS Financial Statements or the KCS SEC Documents filed prior to the date of this Agreement, neither KCS nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of KCS and the consolidated KCS Subsidiaries or in the notes thereto or which, individually or in the aggregate, could reasonably be expected to have a KCS Material Adverse Effect. (b) Notwithstanding the foregoing, no representation or warranty is made with respect to any information regarding GTFM or any GTFM Subsidiary which is based upon and in conformity with information provided in writing by GTFM and included in, or relied upon with respect to information included in, the KCS Financial Statements or the KCS SEC Documents. SECTION 6.7 NO OTHER BROKER. Other than Morgan Stanley & Co., Incorporated, whose fees and expenses will be paid by KCS, no broker, finder or similar intermediary is entitled to any broker's, finder's or similar fee or other commission from or as a result of engagement by KCS or any of its Subsidiaries in connection with this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby. SECTION 6.8 INFORMATION IN FILED DOCUMENTS. None of the information regarding KCS or any of its Subsidiaries supplied or to be supplied by KCS for inclusion in any documents to be filed with any Governmental Authority prior to Closing in connection with the transactions contemplated hereby will, at the respective times such information is supplied by KCS, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; PROVIDED that no representation is made with respect to any information regarding GTFM or any GTFM Subsidiary which is based upon and in conformity with information provided in writing by GTFM and included in, or relied upon with respect to information included in, documents referred to in this Section. Except as set forth in the KCS SEC Documents filed prior to the date of this Agreement, neither KCS nor any of its Subsidiaries has entered into any agreement or transaction with any officer, director or other employee of KCS or any Subsidiary of KCS or any immediate family member of any such person which would be required to be reported or disclosed in the KCS SEC Documents. SECTION 6.9 NO KCS MATERIAL ADVERSE EFFECT; OTHER ACTIONS. (a) Since March 31, 2004, (i) KCS and its Subsidiaries have conducted their respective businesses only in the ordinary course, consistent with past practice, (ii) there has not been any KCS Material Adverse Effect or any event or development that could, individually or in the aggregate, reasonably be expected to have a KCS Material Adverse Effect, and (iii) to the Knowledge of KCS, there has not occurred any event or development that would, individually or in the aggregate, reasonably be expected to prevent the consummation of the Acquisition or the performance by KCS of its obligations under this Agreement or any of the Ancillary Agreements to which it is a party. (b) Except as disclosed in the KCS SEC Documents, there are no ongoing discussions regarding, and neither KCS nor any Subsidiary of KCS has entered into any agreement or understanding regarding: (i) a transaction which, if completed, would result in a Change of Control of KCS or a KCS Acquisition Proposal; (ii) the sale, lease or other disposition of all or substantially all of the consolidated assets of KCS and its Subsidiaries or the creation of any material joint ventures; or (iii) the issuance of a material amount of equity securities of KCS (except as contemplated in this Agreement). SECTION 6.10 KCS SUB. The authorized capital stock of KCS Sub consists of 1,000 shares of KCS Sub Common Stock. There are 900 shares of KCS Sub Common Stock issued and outstanding, all of which are owned by KCS, free and clear of all Encumbrances. All of the shares of KCS Sub Common Stock outstanding are duly authorized, validly issued, fully paid, nonassessable and free of any preemptive rights and are not subject to any voting trust agreement (or similar agreement) or other contract restricting or otherwise relating to the voting, dividend rights of disposition of such shares. KCS Sub is not a party to any contract other than this Agreement. KCS Sub has not conducted any business other than in connection with the transactions contemplated by this Agreement and the Ancillary Agreements and has incurred no material indebtedness and has no material assets except as described in this Agreement. SECTION 6.11 LEGAL PROCEEDINGS. (a) There are no Proceedings that are pending or, to the Knowledge of KCS, threatened against KCS or any of its Subsidiaries or any of their respective directors or officers (in their capacity as such) or the KCS Assets or the KCS Business (other than the Proceedings referred to in Section 7.15) which (i) if adversely determined, would have a KCS Material Adverse Effect, or (ii) challenge the validity or propriety of the transactions contemplated by this Agreement or by any of the Ancillary Agreements. (b) Section 6.11 of the KCS Disclosure Schedule sets forth a complete and accurate list of all litigation or arbitration actions, claims or proceedings, which KCS, any of its Subsidiaries, or to the Knowledge of KCS, any of KCS's or its Subsidiaries' respective officers, directors, agents or representatives, including persons named by KCS as directors or alternate directors of GTFM or any GTFM Subsidiary, have filed or caused to be filed against any of the Sellers, any of the Sellers' Subsidiaries, or any of their respective officers, directors or shareholders, in their capacity as such. SECTION 6.12 KCS CAPITAL RESOURCES. The information set forth in the KCS Annual Report on Form 10-K for the year ended December 31, 2003 filed with the SEC accurately sets forth anticipated material capital expenditures required to maintain in good repair and working order the KCS Assets and to provide for material additions to KCS property, plant and equipment necessary to conduct the business of KCS as described in such SEC Report. KCS has access to capital resources sufficient to fund such capital expenditures in the amount and at the time required. SECTION 6.13 EMPLOYEE BENEFIT MATTERS. Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA") that is maintained, administered or contributed to by KCS or any of its Subsidiaries for employees or former employees of KCS and its Subsidiaries has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including, but not limited to, ERISA and the Code. No prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any such plan, excluding transactions effected pursuant to a statutory or administrative exemption. For each such plan which is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no "accumulated funding deficiency," as defined in Section 412 of the Code, has been incurred, whether or not waived, and the fair market value of the assets of each such plan (excluding, for these purposes, accrued but unpaid contributions) exceeds the present value of all benefits accrued under such plan as determined using reasonable actuarial assumptions. SECTION 6.14 LABOR AND OTHER EMPLOYMENT MATTERS. There are no existing or, to the Knowledge of KCS and its Subsidiaries, threatened, labor disputes with employees of KCS and its Subsidiaries which would be reasonably expected to have a KCS Material Adverse Effect. SECTION 6.15 TAX. KCS and its Subsidiaries have filed all federal, state, local and foreign tax returns which have been required to be filed and have paid all Taxes shown thereon and all assessments received by them or any of them to the extent that such Taxes have become due and are not being contested in good faith, except as would not, individually or in the aggregate, have a KCS Material Adverse Effect. Except as disclosed in Section 6.15 of the KCS Disclosure Schedule, there is no Tax deficiency which has been or might reasonably be expected to be asserted or threatened against KCS or any of its Subsidiaries, except as would not, individually or in the aggregate, have a KCS Material Adverse Effect. SECTION 6.16 PERMITS AND COMPLIANCE. (a) Except as would not, individually or in the aggregate, have a KCS Material Adverse Effect, (i) each of KCS and its Subsidiaries owns, possesses or has obtained all licenses, permits, certificates, consents, orders, approvals and other authorizations from, and has made all declarations and filings with, all federal, state, local and other Governmental Authorities, all self-regulatory organizations and all courts and other tribunals necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as conducted as of the date hereof, and (ii) neither KCS nor any of its Subsidiaries has received notice of any proceeding relating to revocation or modification of any such license, permit, certificate, consent, order, approval or other authorization. (b) Except for normal examinations conducted by any Governmental Authority in the regular course of the business of KCS and its Subsidiaries or as would not reasonably be expected to have a KCS Material Adverse Effect, since March 31, 2004, no Governmental Authority has provided written notice to KCS or any of its Subsidiaries of any threatened proceeding or investigation into the business or operations of KCS or any of its Subsidiaries or any of their members, officers, directors or employees in their capacity as such with KCS or any of its Subsidiaries. (c) Neither KCS nor any of its Subsidiaries is in violation of any Applicable Laws or orders of any Governmental Authority, except as would not reasonably be expected to have a KCS Material Adverse Effect. No event has occurred or exists that would (with or without notice or lapse of time) give rise to any obligation on the part of KCS or any of its Subsidiaries to undertake or to bear all or any portion of the cost of any remedial action of any nature which would reasonably be expected to have a KCS Material Adverse Effect. SECTION 6.17 ENVIRONMENTAL MATTERS. KCS and each of its Subsidiaries (i) are in compliance with, and are not subject to any liability under, in each case, all applicable Environmental Laws, (ii) hold all Environmental Permits necessary to conduct their current operations, and (iii) are in compliance with their respective Environmental Permits, except where the failure to hold or be in compliance with such Environmental Permits would not reasonably be expected to have a KCS Material Adverse Effect. Neither KCS nor any of its Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that KCS or any of its Subsidiaries may be in violation of, or liable under, any Environmental Law, except where the preceding would not reasonably be expected to have a KCS Material Adverse Effect. Neither KCS nor any of its Subsidiaries (x) has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and no investigation, litigation or other proceeding is pending or, to the Knowledge of KCS and its Subsidiaries, threatened with respect thereto, except as would not reasonably be expected to have a KCS Material Adverse Effect, or (y) is an indemnitor or has assumed liability in connection with any pending demand, notice, claim, or other allegation, or to the Knowledge of KCS and its Subsidiaries, any claim threatened by or against any third-party relating to any liability under any Environmental Law or relating to any Hazardous Materials, except as would not reasonably be expected to have a KCS Material Adverse Effect. None of the real property owned or leased or operated by KCS or any of its Subsidiaries is listed or, to the Knowledge of KCS and its Subsidiaries, proposed for listing on any list of sites maintained by any Governmental Authority requiring investigation or cleanup, except as would not reasonably be expected to have a KCS Material Adverse Effect. SECTION 6.18 PROPERTIES. Each of KCS and its Subsidiaries has good and marketable title to, or valid and enforceable leasehold, easement or concession interests in, all of its properties and tangible assets necessary to conduct the KCS Business as it is currently conducted, except where the failure to have such title or interest would not reasonably be expected to have a KCS Material Adverse Effect. All such property and assets which constitute personal property, equipment, and fixtures, are in good condition and repair, normal wear and tear excepted. Each of KCS and its Subsidiaries has complied in all material respects with the terms of all leases and concessions to which it is a party and under which it is in occupancy, and all such leases and concessions are in full force and effect, except in each case as would not reasonably be expected to have a KCS Material Adverse Effect. ARTICLE 7 COVENANTS AND ADDITIONAL AGREEMENTS SECTION 7.1 INTERIM GOVERNANCE ARRANGEMENTS; CONDUCT OF BUSINESS BY THE GTFM GROUP. (a) TMM and KCS have caused the By-laws of GTFM and TFM to be amended, effective upon execution of this Agreement, (i) to require that the number of Directors of GTFM and TFM shall not exceed, respectively, 7 and 8 and that all actions taken by the Board of Directors of GTFM shall require the approval of at least 5 members of such Board and all actions taken by the Board of Directors of TFM shall require the approval of at least 5 members of such Board (6, if the Mexican government elects a director), and that the tie-breaking vote of the Chairman of GTFM and of TFM has been eliminated, and (ii) to require that 5 members of the Board of Directors of GTFM and of TFM shall be required for a quorum for any meeting of such Board of Directors, and (iii) as otherwise set forth in Exhibit J hereto (as so amended, the "Amended By-laws"). TMM and KCS have taken all action required by the Amended By-laws and the Laws of the UMS to appoint (A) Messrs. Jose Vicente Corta Fernandez and Iker Ignacio Arriola Penalosa, respectively, as Secretary and Alternate Secretary (PROSECRETARIO) of the Board of Directors of GTFM and of the Board of Directors of TFM (replacing Romualdo Segovia and Jose Manuel Munoz Arteaga), and (B) Messrs. Jose Manuel Rincon Gallardo Puron and Javier Garcia Sabate, as Examiners (COMISARIOS PROPIETARIOS), and Mario Fernandez Davalos and Carlos Mendez Rodriguez, as Alternate Examiners (COMISARIOS SUPLENTES), of GTFM and TFM. (b) During the period from the date of this Agreement and continuing through the Closing Date, except as expressly permitted or required by this Agreement (i) no Party shall cause, or permit any action to be taken to cause, the Amended By-laws to be amended, revoked or repealed without the consent of TMM and KCS, (ii) no Party shall permit TFM to establish, and will take, or cause to be taken, all action on their part necessary (including voting or causing to be voted all the shares of capital stock of GTFM and TFM) to prevent TFM from establishing, any internal committees or decision making rules which have not been approved in writing by KCS and TMM, (iii) Sellers shall take, or cause to be taken, all action on their part necessary to cause Jose Vicente Corta Fernandez and Iker Ignacio Arriola Penalosa to remain, respectively, as Secretary and Alternate Secretary (PROSECRETARIO) of the Board of Directors of GTFM and TFM, and (iv) Sellers and KCS shall take, or cause to be taken, all action on their part necessary to cause Jose Manuel Rincon Gallardo Puron and Javier Garcia Sabate to remain as Examiners (COMISARIOS PROPIETARIOS), and Mario Fernandez Davalos and Carlos Mendez Rodriguez to remain as Alternate Examiners (COMISARIOS SUPLENTES), of GTFM and TFM. (c) After the date of this Agreement, KCS shall create a transition management team (the "Transition Management Team") to facilitate the transition to KCS of ownership of the GTFM Group at the Closing. KCS shall have the right to designate up to six (6) persons who shall serve until the Closing or earlier termination of this Agreement (the "Transition Managers") and shall pay the salaries of, and direct expenses incurred by, the Transition Managers. The management of GTFM and of TFM shall cooperate fully with the Transition Managers with the goal of ensuring a smooth transition at the Closing Date. To facilitate the transition, the Transition Managers shall have access as they deem reasonably necessary to all books, records, and meetings of the officers, directors or other employees, agents or representatives of TFM and GTFM, and each of TFM and GTFM shall cause each of their respective officers, directors, and other employees, agents and representatives to provide such access to the Transition Managers. Notwithstanding the foregoing, the Transition Managers shall function only as observers with respect to the foregoing, and shall have no authority to control or direct the actions of TFM or GTFM or any of their respective directors, officers, employees, agents, or representatives and shall not materially interfere with the normal operations of TFM or GTFM. (d) During the period from the date of this Agreement and continuing through the Closing Date, except as expressly permitted or required by this Agreement, the Sellers and KCS shall use commercially reasonable efforts to cause GTFM and each of its Subsidiaries to (x) carry on its business in the ordinary course consistent with past practice, subject to the restrictions imposed by court order identified in Section 5.18 of the Seller Disclosure Schedule and (y) use commercially reasonable efforts to preserve their present business organizations and relationships (including keeping available the present services of their employees and preserving their rights, franchises, goodwill and relations with their customers and others with whom they conduct business). (e) During the period from the date of this Agreement and continuing through the Closing Date, neither TMM nor KCS shall cause GTFM or any GTFM Subsidiaries to take any of the following actions without the express written consent of the other Party: (i) amend or agree to amend their charters or bylaws (or comparable organizational documents) except as provided in Section 7.1(a) and (b), or merge with or into or consolidate with, or agree to merge with or into or consolidate with, any other Person, subdivide or in any way reclassify any of their membership interests, shares or any other ownership interests, or change or agree to change in any manner the rights of their membership interests, shares or any other ownership interests or liquidate or dissolve; (ii) (x) issue, sell, redeem or acquire any share or any other ownership interest or any debt security in GTFM or any of the GTFM Subsidiaries, (y) issue, sell or grant any option, warrant, convertible or exchangeable Security, right, "phantom" or other ownership interest, subscription, call, unsatisfied preemptive right or other agreement or right of any kind to purchase or otherwise acquire (including by exchange or conversion) any shares or any other ownership interests in GTFM or any of the GTFM Subsidiaries, or (z) enter into any Contracts, agreements or arrangements to issue, redeem, acquire or sell any shares or any other ownership interests in GTFM or any of the GTFM Subsidiaries; (iii) refinance existing indebtedness on materially different terms or incur any additional indebtedness for borrowed money in excess of $10 million in the aggregate (outstanding at any one time), or guarantee any liability, obligation or indebtedness (whether or not currently due or payable) of any other Person or incur any GTFM Voting Debt; (iv) except as required by Law or IFRS, make any change in their accounting methods or practices for Tax or accounting purposes or make any change in depreciation or amortization policies or rates adopted by them for Tax or accounting purposes or make any material, or change any existing, Tax election, settle any pending audits or make voluntary disclosure agreements or settle or compromise any Tax liability, except in the case of any such liability to the extent reserved for on the GTFM Financial Statements or except to the extent such change would not have a GTFM Material Adverse Effect; (v) make any loan or advance or capital contribution to any of their Affiliates who are not members of the GTFM Group, or any of their officers, directors, employees, consultants, agents or other representatives (other than reasonable and customary travel advances made in the ordinary course of business consistent with past practice); (vi) sell, transfer, lease, license, offer to sell, abandon or make any other disposition of any of their assets or rights or grant or suffer, or agree to grant or suffer, any Encumbrance other than Permitted Encumbrances on any of their assets or rights, other than in the ordinary course of business consistent with past practice and not exceeding $1 million in the aggregate; (vii) except as expressly permitted pursuant to subsection (xv) below, settle any claim, action or proceeding involving any liability for money damages or any restrictions upon any of their operations, any of the GTFM Assets or the GTFM Business, except to the extent such settlement would not have a GTFM Material Adverse Effect; (viii) create, renew, amend, terminate or cancel, any Contract other than in the ordinary course of business consistent with past practice and providing for consideration payable by or to GTFM or any GTFM Subsidiaries equal to or less than $1 million individually; (ix) enter into, amend, or agree to enter into or amend any Contract, agreement or arrangement or any financial transaction with any of their officers, directors, consultants, agents representatives, (in the case of agents and representatives, other than in the ordinary course of business consistent with past practice), or Affiliates who are not members of the GTFM Group; provided, however, that this clause (ix) shall not prohibit the performance of Contracts executed prior to the date of this Agreement, the terms of which have been disclosed to KCS in the Seller Disclosure Schedule; (x) except as set forth in Section 2.1(a), declare or make any dividends or declare or make any other distributions of any kind payable to MM or any Affiliate of MM (in any such case other than any other member of the GTFM Group) or to KCS or any Affiliate of KCS; (xi) acquire or agree to acquire in any manner any equity interests in, or any business of, any Person or other business organization or division thereof, including by way of merger, consolidation, or purchase of an equity interest or assets; (xii) enter into, amend, modify or renew any Benefit Plan or other written employment, consulting, severance or similar employment agreements or arrangements, or grant any salary or wage increase or increase in severance or termination pay or increase any employee benefit or hire any new employee for a management position, except as may be required by Applicable Law, or in the ordinary course of business consistent with past practice. (xiii) take any action to accelerate any material rights or benefits, or make any material determinations not in the ordinary course of business consistent with past practice, under any collective bargaining agreement, Benefit Plan or employment, indemnification, severance or termination agreement; (xiv) make or incur any capital expenditures in excess of those set forth in the GTFM 2004 Capital Budget, a copy of which has been provided to KCS, or cease to make capital expenditures in the ordinary course of business consistent with past practice; (xv) cancel any indebtedness or waive any claims or rights in amounts, in each case, in excess of $500,000 ($10,000 in the case of claims or rights against any Affiliate) in the aggregate; (xvi) accrue or pay any bonuses to any employee of the GTFM Group other than in the ordinary course of business consistent with past practices, except as set forth in Section 7.1 of the Seller Disclosure Schedule; and (xvii) authorize or agree (by Contract or otherwise) to do any of the foregoing. (f) During the period from the date of this Agreement and continuing through the Closing Date, neither GTFM nor any GTFM Subsidiary shall pay or incur any fees, expenses or other costs to De Teresa other than amounts with respect to the Ongoing Litigation Matters, which amounts shall not aggregate more than $50,000 per month (on average, computed as of the Closing Date for the months or portions thereof occurring during such period) without the prior written consent of KCS. SECTION 7.2 CONDUCT OF BUSINESS BY KCS AND ITS SUBSIDIARIES. (a) During the period from the date of this Agreement and continuing through the Closing Date, except as expressly permitted or required by this Agreement or with the prior written consent of TMM, KCS and its Subsidiaries shall take no action that would reasonably be expected to prevent completion of, or materially delay, the Acquisition, or change materially the terms of the Acquisition to the detriment of Sellers, and take none of the following actions if it would materially change the economic benefits of the Acquisition to the detriment of the Sellers: (i) amend their charters or bylaws (or comparable organizational documents), or merge or consolidate with, any other Person, subdivide or reclassify their common stock or other ownership interests, or change the rights of their common stock or other ownership interests or liquidate or dissolve; (ii) issue, sell or acquire any common stock or other ownership interest of any of the KCS Subsidiaries; (iii) make any loan or advance or capital contribution to any of their Affiliates (other than any KCS Subsidiary), or any of their officers, directors, employees, consultants, agents or other representatives (other than in the ordinary course of business consistent with past practice); (iv) declare or make any dividends or declare or make any other distributions of any kind on or payable to the holders of its capital stock (other than regularly scheduled dividends payable on KCS Preferred Stock or New Series Preferred Stock); (v) acquire any equity interests in, or assets of any business of, any Person; or (vi) authorize or agree to do any of the foregoing. SECTION 7.3 CONFIDENTIALITY. The Parties agree, and KCS agrees to cause the Transition Managers, to continue to be bound by and comply with the provisions set forth in the Confidentiality Agreements, and all amendments thereto, the provisions of which are hereby incorporated herein by reference, to the extent such provisions are not in conflict with the terms of this Agreement. SECTION 7.4 REGULATORY MATTERS; GOVERNING DOCUMENTS; THIRD-PARTY CONSENTS. (a) The Parties shall cooperate with each other and use their commercially reasonable efforts promptly to prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, and to obtain as promptly as practicable all permits, consents, approvals, waivers and authorizations of all Governmental Authorities, third parties and other Persons which are necessary or advisable to consummate the transactions contemplated by this Agreement and the Ancillary Agreements, and requests for required consents under any contracts, including those referred to in Sections 5.5 and 6.3. KCS and Sellers agree to take all reasonable steps necessary to satisfy any conditions or requirements imposed by any Governmental Authority in connection with the consummation of the transactions contemplated by this Agreement, other than those conditions or requirements, in the aggregate, the satisfaction of which are reasonably likely to result in either a GTFM Material Adverse Effect, a KCS Material Adverse Effect or a Seller Material Adverse Effect. The Parties agree that, subject to the exclusive authority granted to KCS in Section 7.4(e), they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all Governmental Authorities, third parties and other Persons necessary or advisable to consummate the Merger and the other transactions contemplated by this Agreement and the Ancillary Agreements and each Party will keep the other Parties apprised of the status of matters relating to completion of the transactions contemplated herein and therein. (b) The Parties shall promptly advise each other Party hereto upon receiving any communication from any Governmental Authority whose consent or approval is required for consummation of the transactions contemplated by this Agreement or the Ancillary Agreements. (c) Each Party will (i) within five (5) business days of the date of this Agreement take all actions necessary to make the filings required of such Party or its Affiliates under the HSR Act (which filings shall include a request for the early termination of the waiting period under the HSR Act), (ii) comply at the earliest practicable date with any request for additional information received by such Party or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act, and (iii) cooperate with each other Party in connection with such other Party's filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general. (d) If the current authorization issued by the Mexican Antitrust Commission (COMISION FEDERAL DE COMPETENCIA, the "CFC") shall have expired, KCS shall, in a timely manner after the date of this Agreement, with the cooperation of TMM, (i) file before the CFC the notification required pursuant to Articles 20 and 21 of the Mexican Antitrust Law (LEY FEDERAL DE COMPETENCIA ECONUMICA), using commercially reasonable efforts to assure that the notification is accurate and complete and contains all of the information required pursuant to the regulations of the Mexican Antitrust Law (REGLAMENTO DE LA LEY FEDERAL DE COMPETENCIA ECONOMICA) and other official forms therefor, and (ii) assure that any request for any additional information that may be required or otherwise solicited by the CFC from KCS or any of its Affiliates in connection with such notification is complied with on a timely basis. Sellers shall use their reasonable best efforts to provide KCS with all information regarding Sellers, GTFM and GTFM Subsidiaries requested by KCS, within the time requested by KCS, in connection with KCS's obligations under this Section 7.4(d). The Parties shall cooperate with each other in connection with such Mexican antitrust notification and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement, commenced by either the CFC directly or as a result of any person filing any claim before the CFC in connection therewith. (e) If the current authorization issued by the Foreign Investment Commission ("FIC") shall have expired, KCS shall have exclusive authority, notwithstanding any other provision of this Agreement, to seek the approval of the FIC to the acquisition of control of TFM contemplated in this Agreement ("FIC Approval"). Without limiting the generality of the foregoing: (i) TMM shall, and TMM shall assure that its controlled Affiliates, including TMMH and MM, and their respective employees, officers, directors, corporate secretaries, attorneys-in-fact and agents (collectively, the "TMM Parties") shall, cooperate with KCS to obtain as soon as possible the FIC Approval, including using their reasonable best efforts to provide KCS with all information regarding Sellers, GTFM and GTFM Subsidiaries that may be requested by KCS, within the time requested by KCS, in connection with obtaining FIC Approval. (ii) TMM shall assure that none of the TMM Parties initiate any communication, formal or informal, with the FIC or its directors or employees, concerning this Agreement or the FIC Approval or any other matter which could have an adverse effect on obtaining FIC Approval. (iii) TMM shall assure that any communications by any of the TMM Parties with the FIC concerning this Agreement or the FIC Approval shall (i) be made solely at the express written request of Jose Vicente Corta Fernandez or an officer of KCS, and (ii) be made through Carlos Galvan 0 Duque or EMVA. TMM shall assure that if the FIC communicates with any of the TMM Parties, that party shall promptly notify Jose Vicente Corta Fernandez of the communication and shall direct the FIC to communicate with Carlos Galvan Duque or EMVA for a response, and that Carlos Galvan Duque or EMVA shall consult with KCS before responding to the FIC or providing any documents or other information to the FIC concerning this Agreement or the FIC Approval. (iv) All references in this Section 7.4(e) to communications with or by the FIC shall include communications with members of the FIC, including officers of the Ministry of Communication and Transport (SCT), the Ministry of Economy, and the Ministry of Finance but shall not include communications in the ordinary course of business of TMM or the GTFM Group that do not concern this Agreement or the FIC Approval provided, that if in the course of such communications the subject of this Agreement or the FIC Approval is raised, no discussions concerning those subjects are held and all inquiries related to such subjects are referred to Jose Vicente Corta Fernandez (unless Jose Vicente Corta Fernandez requests otherwise). (v) KCS shall keep TMM and EMVA informed, on a current basis, regarding any communications with the FIC and will provide TMM with any materials received from the FIC concerning this Agreement or FIC Approval. (f) TMM and KCS shall cause GTFM and the GTFM Subsidiaries to use their commercially reasonable efforts to obtain the consents of the lessor and the lenders required under the Sublease of Locomotives identified in Section 5.5 of the Seller Disclosure Schedule, to the change of control resulting from the Acquisition. SECTION 7.5 STOCKHOLDER APPROVALS. (a) As soon as practicable following the date of this Agreement, but in any event within sixty (60) days following the date of this Agreement, KCS shall file with the SEC an amended proxy statement for a special meeting of its stockholders to be called to obtain the KCS Stockholder Approval and shall use its commercially reasonable efforts to obtain clearance of such proxy statement from the SEC as soon as practicable. Promptly after the definitive proxy statement has been cleared by the SEC, KCS will call and give notice of a special meeting of its stockholders, cause a proxy statement and any amendments thereto to be mailed to its stockholders, convene the special meeting of its stockholders, which KCS shall endeavor to hold within forty-five (45) days following the mailing of such proxy statement or the last of any amendment or supplement thereto, and seek to obtain the approval of its stockholders to the matters set forth therein as requiring such approval, including recommending such approval to its stockholders, PROVIDED that the KCS Board may withdraw its recommendation of the Acquisition if it is advised by counsel to the effect that because of a third party proposal occurring after the date of the KCS Board's initial approval of the Acquisition, for the KCS Board to continue to recommend the Acquisition would be a breach of the KCS Board's fiduciary duties to the KCS stockholders. (b) Within forty-five (45) days following the date of this Agreement, subject to extension for such period of time as is necessary to receive any clearances or approvals in connection with the Corporate Restructure Information Memorandum described below, TMM shall hold a meeting of its stockholders to obtain the TMM Stockholder Approval and the shares of capital stock of TMM subject to the Voting Trust shall be voted at such meeting in accordance with the terms of the Voting Trust. The Board of Directors of TMM shall recommend such approval to the TMM stockholders. TMM will provide to KCS a draft of the relevant Corporate Restructure Information Memorandum that TMM must present to the Mexican Banking and Securities Commission (COMISION NACIONAL BANCARIA Y DE VALORES) and the Mexican Stock Exchange (BOLSA MEXICANA DE VALORES, S.A. DE C.V.) with respect to the approval of this Agreement for review by KCS prior to distribution of such memorandum to the shareholders of TMM. TMM shall not unreasonably exclude from such memorandum any information reasonably requested by KCS for inclusion therein. (c) Immediately following TMM Stockholder Approval, TMM shall obtain the TMMH Stockholder Approval, and TMMH shall obtain the MM Stockholder Approval. SECTION 7.6 TAX MATTERS. (a) GTFM shall prepare or cause to be prepared and shall timely file or cause to be timely filed all Tax Returns for GTFM and the GTFM Subsidiaries for all periods ending on or prior to the Closing Date and for Tax periods that begin before the Closing Date and end after the Closing Date (a "Straddle Period"). (b) After the Closing Date, KCS, GTFM and their respective Subsidiaries, on the one hand, and TMM and its Subsidiaries, on the other hand, shall provide each other with such cooperation and information, to the extent available to such Parties, relating to TMM, GTFM and their respective Subsidiaries as the Parties may reasonably request in (i) filing any Tax Return, (ii) determining any liability for Taxes or a right to a Tax refund, or (iii) conducting or defending any proceeding in respect of Taxes. (c) At the Closing, TMM (to the extent available or in TMM's possession or the possession of any TMM Subsidiaries or any of their respective directors, officers, employees or representatives) shall deliver to GTFM and KCS shall, and shall cause GTFM and the GTFM Subsidiaries to, retain for a period of five (5) years following the Closing Date, all Tax Returns, books and records (including computer files) of, or with respect to the activities of, GTFM and the GTFM Subsidiaries for all taxable periods from date of incorporation to the Closing Date for GTFM and all GTFM Subsidiaries. (d) After the Closing, KCS shall control and manage any audit, contest, claim, proceeding or inquiry with respect to Taxes of GTFM and any of the GTFM Subsidiaries for any taxable period ending on or before the Closing Date and for any Straddle Period; PROVIDED, that KCS shall promptly provide TMM with notice and information regarding any such audit, contest, claim, proceeding or inquiry. KCS shall have the right, after consultation with TMM, to settle or contest any such audit, contest, claim, proceeding or inquiry. SECTION 7.7 INSURANCE. Each of the Sellers and KCS shall cause GTFM and the GTFM Subsidiaries to maintain in effect and pay all premiums due for the period ending on the Closing Date with respect to any and all fidelity bonds maintained by them on the date hereof and all GTFM Insurance Policies or procure comparable replacement policies and bonds (or such replacement coverage as is obtainable on a commercially reasonable basis) and maintain such policies and bonds in effect until the Closing Date. SECTION 7.8 NOTIFICATION OF CERTAIN MATTERS. Each Party to this Agreement shall give prompt notice to the other parties, to the extent known by such Party, of (i) the occurrence, or failure to occur, of any event or existence of any condition that has caused or could reasonably be expected to cause any of the representations or warranties of such Party contained in this Agreement to be untrue or inaccurate in any material respect at any time after the date of this Agreement, up to and including the Closing Date, or (ii) any failure on its part to comply with or satisfy, in any material respect, any covenant, condition or agreement to be complied with or satisfied by such Party under this Agreement. SECTION 7.9 FURTHER ASSURANCES. Each Party to this Agreement shall execute such documents and other papers and perform such further acts as may be reasonably required to carry out the provisions of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby. Upon the request of the Sellers or KCS, as the case may be, KCS or the Sellers and their respective Affiliates, as the case may be, shall promptly execute and deliver such further instruments of assignment, transfer, conveyance, endorsement, direction or authorization and other documents as the other Party may reasonably request to effectuate the purposes of this Agreement and the Ancillary Agreements. SECTION 7.10 THIRD-PARTY MATTERS. (a) From the date of this Agreement to the Effective Time, (i) neither Sellers, nor any of their respective Affiliates, officers, directors, employees, members, controlling shareholders (which shall include for this purpose all signatories to any of the Ancillary Agreements), representatives or agents, including any investment banker, attorney or accountant engaged by any of them shall, directly or indirectly solicit, encourage or facilitate inquiries or proposals, or enter into any agreement, with respect to, or initiate or participate in any negotiations or discussions with any Person concerning, any acquisition or purchase of all or a substantial portion of the assets of, or of any equity interest in, or any merger or business combination with, TMMH, MM, GTFM or any of their respective Subsidiaries, and (ii) TMM shall not enter into any agreement with any Person concerning any acquisition or purchase of a controlling equity interest in TMM by any Competitor (as defined in the Stockholders' Agreement which is part of the Ancillary Agreements) (each acquisition, purchase, merger or business combination, a "TMM Acquisition Proposal"), or furnish any information regarding a TMM Acquisition Proposal to any such Person. Sellers shall notify KCS, providing full information, within twenty-four (24) hours if any TMM Acquisition Proposal is received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated with, TMM, TMMH, MM, GTFM, any of their respective Affiliates, officers, directors, employees, members, or controlling shareholders (for purposes of this Section 7.10, collectively, the "Seller Parties"), or their representatives and agents, including any investment banker, attorney or accountant engaged by any of them. It is understood that any breach of the restrictions set forth in this Section 7.10 by any Seller Party or any investment banker, attorney or other advisor or representative of the Seller Parties shall be deemed to be a breach of this Section 7.10 by Sellers. (b) Sellers shall, and shall cause their respective Affiliates, officers, directors, employees, members, shareholders, representatives and advisors to, immediately cease or cause to be terminated any existing activities, including discussions or negotiations with any Parties, conducted prior to the date hereof with respect to any TMM Acquisition Proposal and, subject to the terms of any existing confidentiality agreements, shall seek to have all materials distributed to Persons in connection therewith by Sellers or any of their respective Affiliates or advisors returned to TMM promptly. Neither Sellers or any of their respective Affiliates, officers, directors, employees, members, shareholders, representatives or agents, including any investment banker, attorney or accountant engaged by any of them, shall amend, modify, waive or terminate, or otherwise release any Person from, any standstill, confidentiality or similar agreement or arrangement currently in effect relating to this Agreement or the transactions contemplated hereby. Sellers shall cause their respective Affiliates, officers, directors, employees, members, shareholders, representatives and agents to comply with the provisions of Sections 7.10(a) and 7.10(b). (c) From the date of this Agreement to the Effective Time, neither KCS, nor any of its respective Affiliates, officers, directors, employees, representatives or agents, including any investment banker, attorney or accountant engaged by any of them shall, directly or indirectly solicit, encourage or facilitate inquiries or proposals, or enter into any agreement, with respect to, or initiate or participate in any negotiations or discussions with any Person concerning, any acquisition or purchase of all or substantially all of the assets of, or a controlling equity interest in, KCS or KCSR or any merger or business combination with KCS or KCSR which, if consummated would result in a Change of Control of KCS or KCSR (each, a "KCS Acquisition Proposal"), or furnish any information regarding a KCS Acquisition Proposal to any such Person. KCS shall notify TMM, providing full information, within twenty-four (24) hours if any KCS Acquisition Proposal is received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated with, KCS, any of its respective Affiliates, officers, directors, employees (for purposes of this Section 7.10, collectively, the "Buyer Parties"), or their representatives and agents, including any investment banker, attorney or accountant engaged by any of them. It is understood that any breach of the restrictions set forth in this Section 7.10 by any Buyer Party or any investment banker, attorney or other advisor or representative of the Buyer Parties shall be deemed to be a breach of this Section 7.10 by KCS. (d) KCS shall, and shall cause its KCS Affiliates, officers, directors, employees, representatives and advisors to, immediately cease or cause to be terminated any existing activities, including discussions or negotiations with any Parties, conducted prior to the date hereof with respect to any KCS Acquisition Proposal and, subject to the terms of any existing confidentiality agreements, shall seek to have all materials distributed to Persons in connection therewith by KCS or its Affiliates or advisors returned to KCS promptly. Neither KCS nor any of its Affiliates, officers, directors, employees, representatives or agents, including any investment banker, attorney or accountant engaged by any of them, shall amend, modify, waive or terminate, or otherwise release any Person from, any standstill, confidentiality or similar agreement or arrangement currently in effect relating to this Agreement or the transactions contemplated hereby. KCS shall cause its Affiliates, officers, directors, employees, representatives and agents to comply with the provisions of Sections 7.10(c) and 7.10(d). (e) Nothing set forth in this Section 7.10 shall preclude the KCS Board or TMM from taking any action in good faith if it is advised by counsel that failure to do so would be a breach of duty to its stockholders. SECTION 7.11 EFFORTS OF PARTIES TO CLOSE. During the period from the date of this Agreement through the Closing Date, each party hereto shall use its commercially reasonable efforts to fulfill or obtain the fulfillment of the conditions precedent to the consummation of the transactions contemplated hereby, including the execution and delivery of any documents, certificates, instruments or other papers that are reasonably required for the consummation of the transactions contemplated hereby. During the period from the date of this Agreement and continuing through the Closing, except as required by Applicable Law, no party to this Agreement shall knowingly take any action which, or knowingly fail to take any action the failure of which to be taken, could reasonably be expected to: (i) result in any of the representations and warranties set forth in this Agreement on the part of the party taking or failing to take such action being or becoming untrue in any material respect, (ii) result in any conditions to the Closing set forth in Article 8 not being satisfied, or (iii) result in a violation of any provision of this Agreement or the Ancillary Agreements. SECTION 7.12 EXPENSES. Except as expressly provided otherwise in this Agreement, the Parties shall each bear their respective direct and indirect expenses incurred in connection with the negotiation and preparation of this Agreement and the consummation of the Merger and the other transactions contemplated hereby. SECTION 7.13 VAT CONTINGENCY PAYMENT. (a) On the later to occur of (i) the Closing Date, or (ii) the Final Resolution of the VAT Claim and Put, KCS shall pay the sum of $110 million, reduced (but not below zero) by: (i) any cash payments required to be made by KCS, TFM or any of their respective Affiliates (including for purposes of this Section 7.13, GTFM) to any agency of the Mexican government to obtain the Final Resolution of the VAT Claim and Put, net of any cash payments received by KCS, TFM or such Affiliates from any such agency related to the Final Resolution of the VAT Claim and Put, (ii) the NOL Value, (iii) 67% of the face amount of any other Tax credits under the Laws of the UMS which TFM or any of its Affiliates is required to apply, use or relinquish to the Mexican government without any value received in exchange therefor (other than the value resulting from the Final Resolution of the VAT Claim and Put), to obtain the Final Resolution of the VAT Claim and Put, and (iv) any Taxes incurred with respect to the Final Resolution of the VAT Claim and Put which are not offset by the NOL Value or the other Tax credits referred to in Section 7.13(a)(iii), and (v) the contingency fees, in an amount of $1,500,000 each (but not any portion of the ongoing legal fees and expenses) to the extent they are required to be paid by GTFM or any GTFM Subsidiary to (y) Rocha y Asociados, S.C., or Zambrano, Rocha y Espina, S.C. in connection with the successful resolution of the Put and (z) CEA Abogados, S.C., in connection with the successful resolution of the VAT Claim (the "VAT Contingency Payment"). The VAT Contingency Payment shall be paid as follows: (i) $35 million shall be paid in cash; (ii) $35 million shall be paid by delivery of that number of shares of KCS Common Stock as, valued at the Volume Weighted Price, shall be equal to $35 million, and (iii) $40 million shall be paid by deposit into escrow (the "VAT Escrow"), to be held and be subject to reduction in accordance with the terms of an escrow agreement (the "VAT Escrow Agreement"), of a note in the principal amount of $40 million, which shall be converted at the fifth anniversary of the Closing Date, or at such earlier date following the date that is two (2) years after the Final Resolution of the VAT Claim and Put as KCS may, in its sole discretion, deem appropriate after consultation with a Tax consultant knowledgeable about Mexican Tax Laws, into that number of shares of KCS Common Stock as, valued at the Volume Weighted Price, shall be equal to the remaining principal amount of the VAT Escrow as of such date. Any reduction in the VAT Contingency Payment pursuant to this Section 7.13(a) shall be made in equal proportions in the amounts set forth in clauses (i) through (iii) in the immediately preceding sentence. KCS may at its election deliver shares of KCS Common Stock valued at the Volume Weighted Price, in lieu of any portion of the cash payment. The term "NOL Value" means 23% of the amount of any net operating losses available to TFM and its Subsidiaries under applicable Tax Laws of the UMS which are relinquished to the Mexican government by TFM and its Affiliates without any other value received therefor. . (b) KCS shall have the exclusive right to manage the negotiation, prosecution and settlement of the VAT Claim and any extensions or other modifications of the obligations under the Put and in doing so shall act prudently and in good faith. As used in this section, "prudently" shall mean acting as a reasonably prudent person would act in dealing with its own property and without regard to the obligation to make the VAT Contingency Payment. TMM shall, and shall use its reasonable best efforts to cause its Affiliates, officers, directors, agents and attorneys-in-fact to, cooperate with KCS in any matters reasonably required by KCS in connection with these negotiations; PROVIDED TMM and its Affiliates shall not be required to pay any amounts or relinquish any assets, Tax credits or other Tax attributes or other items of value. TMM, TMMH and MM, hereby release KCS, its Affiliates, officers, directors, agents and attorneys-in-fact from any and all claims, liabilities and obligations arising out of or in connection with the negotiations or settlement with the Federal Government of the UMS with respect to the VAT Claim and Put, except for any breach of the obligation to pay the VAT Contingency Payment pursuant to Section 7.13(a) or any breach of its obligations under this Section 7.13(b). SECTION 7.14 FINANCING FOR ACQUISITION. In connection with the financing for the Acquisition (including any amounts due under Section 7.13), KCS shall not, and shall cause its Subsidiaries not to, enter into any financing arrangements that materially (i) restrict the ability of KCS and its Subsidiaries to make any payments required to be made by this Agreement, or (ii) deny or restrict in any material way any material rights granted to TMM or any of its Subsidiaries under this Agreement or the Ancillary Agreements. SECTION 7.15 SUSPENSION AND DISMISSAL OF ACTIONS; RELEASES. (a) During the period from the date of this Agreement to the Closing Date or the date of a termination in accordance with Article 9, none of KCS, TMM, any controlled Affiliate of KCS or TMM, or any officer, director, agent or representative of KCS acting on behalf of KCS, TMM or their respective controlled Affiliates, including persons named by them as directors or alternate directors of GTFM or any GTFM Subsidiary, shall initiate, file, commence, publicly threaten to initiate, file or commence, or continue to pursue (collectively, "Commence") any proceedings previously filed, except as necessary in the opinion of their counsel to avoid dismissal or adverse ruling or to preserve or exercise rights arising under this Agreement, before any court, arbitral panel, regulatory body or other agency or body which, directly or indirectly, is based upon or arises out of, in whole or in part, the Original Acquisition Agreement or the transactions referred to therein (collectively, "Acquisition Agreement Claims") or any claim or allegation with respect to actions taken or meetings held prior to the date of this Agreement by, or in their capacity as, the directors, officers, employees, shareholders or agents of TMM, KCS, or any Subsidiary of TMM or KCS (collectively, "Management Claims"). (b) The Acquisition Agreement Claims and the Management Claims shall be dismissed, or may be reinstated, as follows: (i) If this Agreement is terminated in accordance with Section 9.1(a)(i), then the Acquisition Agreement Claims and the Management Claims, and if the termination is in accordance with Section 9.1(a)(vii), then only the Acquisition Agreement Claims, shall be dismissed with prejudice. Each Party shall make all filings necessary, and shall take all steps reasonably requested by the other Parties, to effect such dismissal on the date of such termination or as soon thereafter as possible, with each Party to bear its own costs and expenses. (ii) If the Agreement is terminated other than as described in Section 7.15(b)(i), then, upon termination, the Acquisition Agreement Claims and the Management Claims which were suspended as described in Section 7.15(a) (and any other related claims (whether as cross-claims or otherwise)) may be Commenced. (iii) If the Agreement is not terminated, then on the Closing Date, the Acquisition Agreement Claims and the Management Claims shall be dismissed with prejudice. Each Party shall make all filings necessary, and shall take all steps reasonably requested by the other Parties, to effect such dismissal on the Closing Date or as soon thereafter as possible, with each Party to bear its own costs and expenses. (c) Within ten days after the date of this Agreement, the Parties shall cause their respective litigation counsel to inform the American Arbitration Association of the suspension of proceedings in the matter styled KANSAS CITY SOUTHERN AND KARA SUB, INC. V. GRUPO TMM, S.A.; TMM HOLDINGS, S.A. DE C.V.; AND TMM MULTIMODAL, S.A. DE C.V., No. 50 T 181 00514 03 (the "Arbitration"). The Arbitration shall be held in abeyance, but not dismissed or terminated, until the Closing Date. Immediately following Closing or, if this Agreement is terminated as described in Section 7.15(b)(i) on a basis which requires dismissal of Acquisition Agreement Claims, immediately following such termination, the Parties shall cause their respective litigation counsel to request that the Arbitration be terminated and shall take all other action necessary to have the Arbitration terminated as promptly as possible, with the Parties to bear their own costs and expenses. If this Agreement is terminated other than as described in Section 7.15(b)(i), then any Party may reinstate proceedings in the Arbitration, request a hearing and, reinstate or pursue any claims it may have in such proceeding (whether as a counter-claim or otherwise). (d) On the date of this Agreement, KCS and TMM, each on behalf of itself and its controlled Affiliates, have entered into Releases, which shall be deposited in the Closing Escrow immediately following execution of this Agreement. The Releases shall become effective on the Closing Date and be released from the Closing Escrow to the parties entitled to receive them at the Closing in accordance with the terms of the Closing Escrow Agreement; PROVIDED, that if this Agreement is terminated as described in to Section 7.15(b) on a basis which requires dismissal of Acquisition Agreement Claims and Management Claims, then, at the effective time of such termination, the Releases relating to the claims to be dismissed shall become effective and be released from the Closing Escrow to the Parties entitled to receive them. The Parties agree that the Releases shall not release Sellers from any indemnification obligations under Article 10 of this Agreement. (e) Within ten (10) days after execution of this Agreement, the Parties will cause their respective litigation counsel to jointly file briefs before any relevant authority to suspend, except for the Authority Litigation, any pending civil litigation either as a pre-judgment measure (MEDIDA CAUTELAR) or as an Ordinary Commercial Proceeding as described in the "Mexican Litigation List" attached hereto as Exhibit K. The Parties acknowledge that the suspensions previously obtained in those proceedings (which are in effect on the date hereof) will remain in full force and effect during the suspension period. The proceedings described in the "Mexican Litigation List" shall be held in abeyance, but not dismissed or terminated, until the Closing Date. Upon Closing, or a termination of this Agreement as referred to in Section 7.15(b)(i), the Parties will cause their respective litigation counsel to jointly request that, except for the Authority Litigation, the proceedings described in the "Mexican Litigation List" be terminated in accordance with Section 7.15(b)(i), with the Parties to bear their own costs and expenses. If for any reason this Agreement is terminated, except for a termination in accordance with Section 9.1(a)(i), or if any Party repudiates this Agreement, then any Party may reinitiate the proceedings described in the "Mexican Litigation List." (f) Except for the Authority Litigation, the Parties agree to suspend after admission and before service any lawsuit filed by such Party before the execution of this Agreement and not yet admitted and/or served on the defendant(s) so long as such suspension does not imply the loss of any proceeding rights such as the filing of any deadline brief. Upon Closing or termination of this Agreement as referred to in Section 7.15(b)(i), the Parties will cause their litigation counsel to request that such proceedings be terminated in accordance with Section 7.15(b)(i). If for any reason this Agreement is terminated otherwise than in accordance with Section 7.15(b)(i) or if any Party repudiates this Agreement, then any Party may reinitiate the proceeding so admitted and suspended and not yet served. (g) Since the "Amparo" proceedings in the UMS are not subject to be suspended by agreement of the Parties, the Parties acknowledge the right of each Party to file any briefs or legal resources, such as QUEJA, RECLAMACIUN or REVISIUN in order to preserve their rights against any Amparo resolution or any decree or resolution entered into in any Amparo proceeding related to the proceedings described in the "Mexican Litigation List," and the Parties acknowledge the right of the Party to file a new Amparo complaint only: (i) against resolutions adopted before the Parties filed the suspension briefs after the execution of this Agreement, and (ii) against those resolutions entered into after the execution of this Agreement so long as: (x) they are the consequence of the accomplishment of an Amparo resolution, or (y) they are entered into in any appeal related to any proceeding listed in the "Mexican Litigation List." (h) At the time of the execution of this Agreement, KCS and TMM shall take all action necessary to cause GTFM, TFM and the other GTFM Subsidiaries to adopt the Release Resolutions and will not subsequently take, or permit to be taken, any action to amend, repeal, revoke, or otherwise change, in whole or in part, such Release Resolutions. (i) With respect to the Authority Litigation, KCS will grant releases, which will be independent of the Releases identified in Section 7.15(d) above, to those persons identified in the Authority Litigation Agreement. SECTION 7.16 LEGAL REPRESENTATION RELEASE. TMM shall deliver to KCS at the Closing, a full and complete release, in the form attached hereto as Exhibit L (the "Legal Representation Release"), of GTFM, TFM and their respective Subsidiaries of any and all claims for fees or expenses of De Teresa and its Affiliates other than with respect to the Ongoing Litigation Matters. ARTICLE 8 CONDITIONS SECTION 8.1 MUTUAL CONDITIONS. The obligations of each party to this Agreement to consummate the Acquisition shall be subject to the satisfaction of each of the following conditions, unless any such condition is waived by KCS and TMM: (a) No order, injunction or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Acquisition shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Authority which prohibits, restricts in any material manner or makes illegal consummation of the Acquisition; (b) Each of the consents, waivers, authorizations and approvals required from all Governmental Authorities shall have been obtained without the imposition of conditions or requirements, in the aggregate, the satisfaction of which by KCS or its Subsidiaries or TMM or its Subsidiaries is reasonably likely to result in either a KCS Material Adverse Effect, a GTFM Material Adverse Effect or a Seller Material Adverse Effect; (c) The Common Stock to be issued by KCS pursuant to this Agreement shall have been approved for listing by the NYSE; and (d) The Release Resolutions, the Releases, the Dismissals, the Ancillary Agreements and the Consulting Agreement shall be eligible for release from the Closing Escrow, subject only to the occurrence of the Closing. SECTION 8.2 CONDITIONS TO THE OBLIGATIONS OF KCS. The obligations of KCS to consummate the Acquisition shall be subject to the satisfaction of each of the following conditions, any of which may be waived in writing by KCS: (a) For purposes of this Section 8.2(a), the accuracy of the representations and warranties of Sellers set forth in this Agreement shall be assessed as of the date of this Agreement and shall be assessed as of the Closing Date with the same effect as though all such representations and warranties had been made again on and as of the Closing Date (provided, however, that the representations and warranties that speak as of a specific date other than the date of this Agreement shall speak only as of such date) and such representations and warranties shall be true and correct in all material respects; (b) Sellers shall have performed and complied in all material respects with all agreements, covenants, obligations and conditions required by this Agreement to be performed or complied with by them at or prior to the Closing Date; (c) TMM, TMMH and MM shall have delivered to KCS a certificate, dated as of the Closing Date, signed on their behalves by their respective Presidents and Chief Financial Officers confirming their satisfaction of the conditions applicable to them contained in Sections 8.2(a) and 8.2(b); (d) There shall not exist any event or combination of events that, individually or in the aggregate, will (or would reasonably be expected to) prevent any of the Sellers from performing any of its material post-closing obligations under this Agreement, any Ancillary Agreement or the Consulting Agreement at or after the Effective Time; (e) Since December 31, 2003, there shall not have been any GTFM Material Adverse Effect or any development or combination of developments that, individually or in the aggregate, has had or is reasonably likely to have a GTFM Material Adverse Effect, of which KCS did not have Knowledge prior to the date of this Agreement; (f) KCS shall have received copies of all other consents, approvals, authorizations, qualifications and orders of all Governmental Authorities and all other Persons party to Contracts with any member of the GTFM Group that are required in respect of the transactions to be consummated at the Closing, other than those that if not obtained would not individually or in the aggregate reasonably be expected to have a GTFM Material Adverse Effect or a KCS Material Adverse Effect and such consents and other items shall remain in full force and effect as of the Closing Date; (g) KCS shall have received the KCS Stockholder Approval; (h) There shall not be pending any insolvency or bankruptcy proceeding (including a CONCURSO MERCANTIL under the laws of the UMS) against TMM, MM, TMMH, GTFM or TFM; and (i) The Legal Representation Release shall have been duly executed and delivered to KCS. SECTION 8.3 CONDITIONS TO THE OBLIGATIONS OF SELLERS. The obligation of Sellers to consummate the Acquisition shall be subject to satisfaction of each of the following conditions, any of which may be waived in writing by TMM: (a) For purposes of this Section 8.3(a), the accuracy of the representations and warranties of KCS and the KCS Purchasers set forth in this Agreement shall be assessed as of the date of this Agreement and shall be assessed as of the Closing Date with the same effect as though all such representations and warranties had been made again on and as of the Closing Date (provided, however, that the representations and warranties that speak as of a specific date other than the date of this Agreement shall speak only as of such date) and such representations and warranties shall be true and correct in all material respects; (b) Each of KCS and the KCS Purchasers shall have performed and complied in all material respects with all agreements, covenants, obligations and conditions required by this Agreement to be performed or complied with by it at or prior to the Closing Date; (c) Each of KCS and the KCS Purchasers shall have delivered to TMM a certificate, dated as of the Closing Date, signed on its behalf by its Chief Executive Officer and Chief Financial Officer, confirming the satisfaction of the conditions contained in Sections 8.3(a) and 8.3(b); (d) There shall not exist any event or combination of events that, individually or in the aggregate, will (or would reasonably be expected to) prevent KCS from performing any of its material post-Closing obligations under this Agreement or any Ancillary Agreement at or after the Effective Time; (e) Since December 31, 2003, there shall not have been any KCS Material Adverse Effect or any development or combination of developments that, individually or in the aggregate, has had or is reasonably likely to have a KCS Material Adverse Effect, of which TMM did not have Knowledge prior to the date of this Agreement; and (f) TMM shall have received copies of all other consents, approvals, authorizations, qualifications and orders of all Governmental Authorities and all other Persons party to contracts with KCS or any of its Subsidiaries that are required in respect of the transactions to be consummated at Closing, other than those that, if not obtained, would not, individually or in the aggregate, reasonably be expected to have a KCS Material Adverse Effect and such consents and other items shall remain in full force and effect as of the Closing Date. ARTICLE 9 TERMINATION SECTION 9.1 TERMINATION. (a) This Agreement may be terminated prior to the Closing as follows: (i) by written consent of KCS and TMM; (ii) by KCS or TMM if any order of any Governmental Authority permanently restraining, enjoining or otherwise prohibiting the consummation of the Acquisition shall have become final and non-appealable or if any of the approvals of any Governmental Authority to perform the transactions herein, imposes any condition or requirement, the satisfaction of which is reasonably likely to result in either a KCS Material Adverse Effect or a GTFM Material Adverse Effect; (iii) by KCS if any condition to the obligations of KCS hereunder becomes incapable of fulfillment through no fault of KCS and is not waived by KCS; (iv) by TMM if any condition to the obligations of Sellers hereunder becomes incapable of fulfillment through no fault of Sellers and is not waived by TMM; (v) by KCS if TMM shall have experienced a Change of Control or publicly announced any agreement or intention to complete a transaction which, if completed, would result in a Change of Control, or by TMM if KCS shall have experienced a Change of Control or publicly announced any agreement or intention to complete a transaction which, if completed, would result in a Change of Control; (vi) by KCS or TMM if the Closing shall not have occurred by the close of business on December 31, 2005 (the "Termination Date"); PROVIDED, however, that the Termination Date may be extended by KCS and TMM by written agreement; and (vii) by KCS or TMM if KCS shall not have obtained the KCS Stockholder Approval at any meeting of its stockholders called for that purpose (including any adjournments or continuances of such meeting). (b) The termination of this Agreement shall be effectuated by the delivery by the Party terminating this Agreement to the other Parties of a written notice of such termination. If this Agreement so terminates, it shall become null and void and have no further force or effect, except as provided in Section 9.2. SECTION 9.2 SURVIVAL AFTER TERMINATION. If this Agreement is terminated in accordance with Section 9.1 and the transactions contemplated hereby are not consummated, this Agreement, each Ancillary Agreement and the Consulting Agreement (other than any Ancillary Agreement that this Agreement or such Ancillary Agreement provides shall become effective in the event of such termination) shall become void and of no further force and effect, without any liability on the part of any party hereto, except for the provisions of this Section 9.2 and Sections 7.3, 7.12, 7.15, 12.5, 12.11 and 12.13. Notwithstanding the foregoing, nothing in this Section 9.2 shall relieve any Party to this Agreement of liability for a breach of any provision of this Agreement or any agreement made as of the date hereof or subsequent thereto pursuant to this Agreement. ARTICLE 10 INDEMNIFICATION SECTION 10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; EXCLUSIVE MONETARY REMEDIES. (a) All representations and warranties in this Agreement or in any instrument executed and delivered in fulfillment of the requirements of this Agreement shall survive the Closing until April 1, 2007 (the "Expiration Date"), except that the representations and warranties of the Sellers set forth in Sections 5.10(b)(ii) and 5.10(b)(iii) with respect (in both subsections) to the payment or withholding of Taxes, and the representations and warranties in Sections 5.7(d) and 5.11, shall survive for the applicable statute of limitations. All representations and warranties of KCS set forth in this Agreement shall survive the Closing until the Expiration Date. All covenants or other agreements in this Agreement shall terminate at the Effective Time, except the covenants in Sections 7.3, 7.6, 7.9, 7.12, 7.13, 7.14 and 7.15 which shall survive the Closing indefinitely or for the period of the respective statutes of limitation relating thereto. (b) Notwithstanding anything in this Agreement to the contrary, the sole and exclusive basis on which any Party may recover monetary damages for any breach of this Agreement by any other Party, whether based upon breach of representations and warranties, breach of any covenant, or otherwise, shall be in accordance with the indemnification provisions set forth in this Article 10, and subject to the limitations and exclusions set forth in this Article 10, PROVIDED however, that such exclusive remedies for monetary damages shall not preclude any Party from pursuing the remedies of specific performance, injunctive relief, declaratory judgment or any other non-monetary equitable remedies available to such Party under Applicable Law. (c) All Losses (as defined below) for which any Party may seek indemnification hereunder shall be net of (i) any insurance recoveries received by such Party or to which such party is entitled, (ii) any amounts which such Party has received or is entitled to receive from any third party under any indemnification or other similar agreement, and (iii) any Tax benefits accruing to such Party as a result of the Losses. SECTION 10.2 INDEMNIFICATION BY SELLERS. (a) Subject to the limitations contained in this Article 10, Sellers, jointly and severally, shall indemnify and hold KCS, the Surviving Company and each of their Subsidiaries (including GTFM and the GTFM Subsidiaries), and each of their respective officers, directors, alternate directors, employees, members, stockholders, agents and representatives ("KCS Indemnitees") harmless from and against all losses, damages, liabilities, claims, demands, obligations, deficiencies, payments, judgments, settlements, costs and expenses of any nature whatsoever (including the costs and expenses of any and all investigations, actions, suits, proceedings, demands, assessments, judgments, orders, settlements and compromises relating thereto, and reasonable attorneys', accountants', experts' and other fees and expenses in connection therewith) ("Losses") resulting from, arising out of, or due to, directly or indirectly, any of the following: (i) Any inaccuracy or misrepresentation in, or breach of, any representation or warranty of Sellers contained in Article 5 (excluding, to avoid duplication, those which are the subject of indemnification under Section 10.5), in any schedule or exhibit delivered hereunder by any of Sellers or in any certificates delivered by any of Sellers pursuant to this Agreement, or any breach or nonfulfillment of any covenant or agreement of any of Sellers contained in this Agreement, in any schedule or exhibit delivered hereunder by any of Sellers or in any certificates delivered by any of Sellers pursuant to this Agreement, or any claims, causes of actions, rights asserted or demands made by any third parties (including any Governmental Authority) arising from or relating to any of the foregoing; (ii) Any action (other than any actions relating to the arrangements with DeTeresa or which are the subject of the Management Claims, the Acquisition Claims or the Authority Litigation) by or at the direction of any Person released pursuant to Section 7.15 hereof (except for Larry M. Lawrence and the officers and directors of KCS) or the Authority Litigation Agreement, or any Designated Person that (x) constituted a fraud or a criminal act equivalent to a felony under the Laws of the jurisdiction where the act occurred (including the burden of proof required under such Laws) or (y) occurred during the period from April 20, 2003 to the date of this Agreement and required the approval of KCS under the terms of the Original Acquisition Agreement, which approval was not obtained and resulted in Losses to GTFM or any GTFM Subsidiary in excess of $1 million. The term "Designated Person" means any person identified on Exhibit P. (iii) Penalties and other termination payments aggregating more than $1 million (including any punitive, special, exemplary or other similar damages not incurred as a result of a wrongful act by KCS) required to be paid by the GTFM Group to terminate any Contract (x) which was required to be, but was not, identified in Section 5.7 of the Seller Disclosure Schedule and (y) which is actually terminated prior to the eighteen (18) month anniversary of the Closing Date; PROVIDED, that prior to any such termination, KCS shall give notice to the Sellers of its desire to terminate the Contract and the Sellers shall have the right at their expense to negotiate with the other parties to such Contract as to the termination of any such Contract, but the exercise of such right by Sellers shall not prejudice or prevent the exercise by KCS of its rights under this subsection (iii); (iv) Claims against TMM or any of its Affiliates for any breach in the performance during the two year period following the Closing Date of any obligation of TMM or any of its Affiliates under any Continuing Affiliate Agreement; and (v) Any litigation, arbitration, mediation or other adversary proceeding brought against any KCS Indemnitee by De Teresa or any of its Affiliates, other than for fees or expenses incurred in the Ongoing Litigation Matters which do not exceed the amounts contemplated in Section 5.7(d). (b) Sellers' indemnification obligations under Section 10.2(a)(i) for any inaccuracy or misrepresentation in, or breach of any representation or warranty regarding GTFM or its Subsidiaries, except for the representations and warranties set forth in Sections 5.7, 5.11 and 5.21, shall be limited to 51% of Losses and then only to the extent such 51% of Losses amount to, in the aggregate, $5 million or more; PROVIDED, that for the purpose of computing this limitation on Sellers' indemnification obligations, (i) Losses shall be computed without regard to whether such Losses resulted in a GTFM Material Adverse Effect (i.e., if a representation or warranty is qualified by GTFM Material Adverse Effect or words of similar import and, giving effect to any such qualification, there has been a breach of such representation or warranty, then the computation of Losses as a result of such breach shall take effect of the full amount of such Losses and not solely the amount that exceeded an amount that resulted in a GTFM Material Adverse Effect), (ii) Losses shall exclude all Losses with respect to any single matter where the amount of the Losses arising out of such matter is less than $50,000 (PROVIDED, that in computing such amount, all matters arising out of the same set of facts or substantially the same set of facts shall be aggregated), (iii) to the extent that the calculation of Losses depends, in whole or in part, on any matters relating to the financial statements of any member of the GTFM Group, such calculation shall be made exclusively by reference to IFRS and to financial statements prepared in accordance with IFRS, and (iv) Losses which could be subject to the limitations of this subsection (b) but which also constitute Losses that are not subject to such limitations, shall be deemed not subject to the limitations in this subsection (b). (c) Any claim against Sellers for indemnification for Losses (except for those relating to Taxes, or the matters referred to in Sections 10.2(a)(iii), (iv) and (v) and any Losses arising out of or resulting from any action or omission on the part of any Seller or its Affiliate that involved a crime, fraud or willful misconduct,) shall be satisfied exclusively out of, and the maximum aggregate liability of all the Sellers for such Losses shall be limited to, the assets held in the Indemnity Escrow; provided, at KCS's election, any claim against Sellers for indemnification for Losses may be satisfied from assets remaining in the Indemnity Escrow. Any claim for indemnification against the assets in the Indemnity Escrow, unless such claim is not contested by TMM, shall be made by KCS by instituting arbitration proceedings in accordance with the dispute resolution procedures set forth in Section 12.11; PROVIDED, no more than two (2) such arbitration proceedings may be instituted and no such claim or arbitration proceeding may be instituted later than April 1, 2007. (d) Any claim for indemnification pursuant to Article 10 by a KCS Indemnitee other than KCS shall be brought only by and through KCS, and not directly by such other KCS Indemnitee. SECTION 10.3 INDEMNIFICATION BY KCS. (a) Subject to the limitations contained in this Article 10, KCS shall indemnify and hold harmless Sellers, each of their Subsidiaries and each of their respective officers, directors, alternate directors, employees, members, stockholders, agents and representatives ("Seller Indemnitees") from and against all Losses resulting from, arising out of, or due to, directly or indirectly, any inaccuracy or misrepresentation in, or breach of, any representation or warranty of KCS contained in Article 6, in any schedule or exhibit delivered hereunder by KCS or in any certificates delivered by KCS pursuant to this Agreement, or any breach or nonfulfillment of any covenant of KCS contained in this Agreement, in any schedule or exhibit delivered hereunder by KCS or in any certificates delivered by KCS pursuant to this Agreement, or any claims, causes of actions, rights asserted or demands made by any third parties (including any Governmental Authority) arising from or relating to any of the foregoing. (b) KCS's indemnification obligations under this Article 10 shall be limited to Losses which amount to, in the aggregate, $10 million or more, provided that for the purpose of computing this limitation or KCS's indemnification obligations, Losses shall be calculated without regard to whether such Losses involved a KCS Material Adverse Effect (i.e., if a representation or warranty is qualified by KCS Material Adverse Effect or words of similar import and, giving effect to any such qualification, there has been a breach of such representation or warranty, then the computation of Losses as a result of such breach shall take effect of the full amount of such Losses and not solely the amount that exceeded an amount that resulted in a KCS Material Adverse Effect). The limitation set forth in the first sentence of this Section 10.3(b) shall not be applicable to any Losses arising out of or resulting from any action or omission on the part of KCS or its Affiliate that involved a crime, fraud or willful misconduct. Losses shall also exclude all Losses with respect to any single matter where the amount of the Losses arising out of such matter are less than $50,000 (provided, that in computing such amount, all matters arising out of the same set of facts or substantially the same set of facts shall be aggregated). (c) Any claim for indemnification pursuant to this Article 10 by a Seller Indemnitee other than TMM shall be brought only by and through TMM and not directly by such other Seller Indemnitee. SECTION 10.4 PROCEDURES FOR THIRD-PARTY CLAIMS. (a) In order for a Person (the "Indemnified Party") to be entitled to any indemnification provided for under Section 10.2 or 10.3 in respect of, arising out of or involving a claim made by any Person (other than another Party or its Affiliate) against the Indemnified Party (a "Third-Party Claim"), such Indemnified Party must notify the indemnifying party in writing of the Third-Party Claim promptly (but in any event not later than the second Business Day in the case of any litigation, arbitration or other adversary proceedings) following receipt by such Indemnified Party of written notice of the Third-Party Claim; PROVIDED, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually materially prejudiced (including with respect to the defense of such Third Party-Claim) as a result of such failure. Thereafter, the Indemnified Party shall deliver to the indemnifying party, as promptly as practicable following the Indemnified Party's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third-Party Claim that are not separately addressed to the indemnifying party. (b) If a Third-Party Claim is made against an Indemnified Party, the indemnifying party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the indemnifying party; provided, however, that such counsel is not reasonably objected to by the Indemnified Party. Should the indemnifying party so elect to assume the defense of a Third-Party Claim, the indemnifying party shall not be liable to the Indemnified Party for any reasonable legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. If the indemnifying party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such defense; PROVIDED, however, that the indemnifying party shall bear the reasonable fees and expenses of such separate counsel (i) if the Parties to any such action or proceeding (including impleaded parties) include other Parties and representation of both Parties would, in the reasonable opinion of counsel for the Indemnified Party, be inappropriate due to a conflict of interest, or (ii) if the indemnifying party shall not have employed counsel (other than counsel that is reasonably objected to by the Indemnified Party) within a reasonable time after the Indemnified Party has given notice of the institution of a Third-Party Claim in compliance with Section 10.4(a). The indemnifying party shall be liable for the reasonable fees and expenses of counsel employed by the Indemnified Party for any period during which the indemnifying party has not assumed the defense thereof, PROVIDED, however, that such counsel is not reasonably objected to by the indemnifying party. If the indemnifying party chooses to defend or prosecute a Third-Party Claim, all the Indemnified Parties shall cooperate in the defense or prosecution thereof at the indemnifying party's expense. Such cooperation shall include the retention and (upon the indemnifying party's request) the provision to the indemnifying party of records and information that are reasonably relevant to such Third-Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. If the indemnifying party assumes the defense of a Third-Party Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, such Third-Party Claim without the indemnifying party's prior written consent (which consent shall not be unreasonably withheld or delayed). If the indemnifying party assumes the defense of a Third-Party Claim, the Indemnified Party shall agree to any settlement, compromise or discharge of a Third-Party Claim that the indemnifying party may recommend and that by its terms obligates the indemnifying party to pay the full amount of the liability in connection with such Third-Party Claim, which releases the Indemnified Party completely in connection with such Third-Party Claim and that would not otherwise materially adversely affect the Indemnified Party. SECTION 10.5 TAX INDEMNIFICATION. (a) Sellers shall, jointly and severally, indemnify and hold each of the KCS Indemnitees harmless from and against 51% of all Taxes and associated penalties, interest and similar charges of GTFM and the GTFM Subsidiaries relating to periods ending prior to the Closing Date and that part of any Straddle Period ending on the Closing Date and which exceed the amounts set forth on the Tax Returns and reports filed by GTFM or its Affiliates for such periods which GTFM or any GTFM Subsidiary becomes obligated to pay pursuant to this Section 10.5. (b) Sellers' indemnification obligations under this Section 10.5 shall not be limited to the assets held in the Indemnity Escrow or the VAT Escrow; PROVIDED, however, that at the election of KCS, to the extent assets remain in the Indemnity Escrow or the VAT Escrow, Sellers' indemnification obligations may be satisfied therefrom. (c) None of the KCS Indemnitees, GTFM or any GTFM Subsidiaries shall make any payment to any of the Sellers or any other Person or Persons on account of any adjustment to any Tax item of GTFM or the GTFM Subsidiaries for any Tax period ending prior to the Closing Date, or any portion of any Straddle Period ending on the Closing Date, regardless of whether any such payments would otherwise be payable pursuant to any agreement among any of the Sellers, GTFM and the GTFM Subsidiaries or any other Person or Persons, or pursuant to any provision of Applicable Law relating to Tax consolidation or otherwise. (d) KCS shall indemnify and hold Sellers harmless from and against all Taxes of GTFM and the GTFM Subsidiaries for periods beginning after the Closing Date and the portion of any Straddle Period beginning after the Closing Date, as to which Sellers have no indemnification obligations to the KCS Indemnitees under this Section 10.5. (e) (i) In the event that any Mexican governmental taxing authority shall assert that Taxes are due (a "Tax Assessment") from GTFM or any GTFM Subsidiary (the "GTFM Taxpayer") with respect to any period covered by Sellers' indemnification obligations under this Section 10.5, GTFM shall give written notice thereof to TMM and shall consult with an advisor chosen by GTFM which is knowledgeable about Tax Laws of the UMS. (ii) Following such consultation, GTFM shall give written notice to TMM of GTFM's determination, including the reasons therefor, to pay, contest, or pay and contest the Tax Assessment. If the Tax Assessment is $10,000 or more, the procedure set forth below in clauses (iii) through (v) of this Section 10.5(e) shall be followed. For Tax Assessments of less than $10,000, TMM shall be bound by GTFM's determination, without resort to that procedure or to arbitration pursuant to Section 12.11. (iii) If TMM disagrees with GTFM's determination, TMM shall advise GTFM in writing within ten (10) days after the notice from GTFM. Following receipt of a notice of disagreement from TMM, GTFM shall promptly consult with one of the advisors identified in Exhibit O (a "Selected Tax Advisor") as to whether GTFM's determination is reasonable from the perspective of the GTFM Taxpayer. If the Selected Tax Advisor agrees that GTFM's determination was reasonable, then Seller shall have an indemnification obligation pursuant to Section 10.5 with respect to such matter and shall pay (or advance, in the case of payment and contest) 51% of the Tax Assessment upon demand from KCS. (iv) If the Selected Tax Advisor disagrees with GTFM's determination, GTFM may consult another Selected Tax Advisor. If the second Selected Tax Advisor agrees with GTFM's determination, then Sellers' indemnification obligations shall be as set forth above in subsection (iii). If the second Selected Tax Advisor disagrees with GTFM, then Sellers' indemnification obligations pursuant to this Section 10.5 with respect to such matter shall arise only when the Tax Assessment is finally judicially affirmed by a final judgment resolving the complaint (QUEJA) of a constitutional appeal (aMPARO) (a "Final Tax Resolution") If the Tax Assessment is finally judicially rejected by a Final Tax Resolution, then any amount of the Tax Assessment paid or advanced by TMM shall be returned to TMM promptly following receipt thereof by GTFM from the Taxing Authority. (v) The procedure set forth in this Section 10.5(e) shall be the exclusive procedure followed by the Parties for resolution of disputes among the Parties regarding Tax Assessments, and shall be in lieu of the dispute resolution procedure set forth in Section 12.11. The Parties shall bear their own expenses incurred under this Section 10.5(e), except that the fees and expenses of the Selected Tax Advisors shall be borne by GTFM. ARTICLE 11 DEFINITIONS SECTION 11.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" shall mean any Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified. "Agreement" shall have the meaning set forth in the preamble to this Agreement. "Amendment to the Trust Agreement" means the Amended and Restated Irrevocable Trust Agreement F-410 dated as of December 14, 2001, among Jose Francisco Serrano Segovia, Ramon Serrano Segovia, Teresa Serrano Segovia, as settlors, and GE Capital Bank, S.A., Instituciun de Banca Multiple, GE Capital Grupo Financiero, as trustee, with the appearance of Citibank, N.A., and with the acknowledgement and agreement of TMM, TMMH and MM. "Ancillary Agreements" shall mean the following agreements entered into as of the date of this Acquisition Agreement: (i) Stockholders' Agreement by and among KCS, TMM, TMMH and MM and certain other parties, (ii) Registration Rights Agreement among KCS, TMM, TMMH and MM and certain other parties, (iii) the Marketing and Services Agreement; (iv) the Releases, (v) the Closing Escrow Agreement, (vi) the Indemnity Escrow Agreement, (vii) the VAT Escrow Agreement, (viii) the Authority Litigation Agreement, (ix) the Put Assignment Agreement, and (x) the agreement between TMM and KCS relating to cooperation with respect to the Final Resolution of the Vat Claim and Put. "Applicable Law" shall mean any Law applicable to KCS, TMM, TMMH, MM or any of their respective Affiliates, properties, assets, officers, directors, employees or agents, as the case may be. "Authority Litigation" shall have the meaning set forth in the Authority Litigation Agreement. "Authority Litigation Agreement" shall mean that certain agreement dated contemporaneously herewith among the Parties relating to the Authority Litigation claims. "Business Day" shall mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the United States or the UMS. "Certificate of Merger" shall have the meaning set forth in Section 3.1 of this Agreement. "Change of Control" shall mean, with respect to such Person, the occurrence of any of the following prior to the Closing Date: (a) any Person or Group, other than a Subsidiary or any employee benefit plan (or any related trust) of such Person or a Subsidiary of such Person, becomes the beneficial owner of voting Securities representing 20% or more of the combined voting power of all voting Securities of such Person, (b) the individuals who, as of the date of this Agreement, constitute the board of directors of such Person (the "Incumbent Directors") cease for any reason to constitute at least 75% of the members of such board of directors unless, at least 75% of the individuals then constituting such board of directors were nominated upon the recommendation of at least 75% of the Incumbent Directors or other directors so nominated, or (c) approval by the stockholders of such Person of any of the following: (1) a merger, reorganization or consolidation ("Consolidation") with respect to which the individuals and entities who were the respective beneficial owners of the stock and voting Securities of the Person immediately before such Consolidation do not, after such Consolidation, beneficially own, directly or indirectly, more than 80% of the combined voting power of the voting Securities of the Person resulting from such Consolidation in substantially the same proportion as their ownership immediately before such Consolidation, (2) a liquidation or dissolution of such Person, or (3) the sale or other disposition of all or substantially all of the assets of such Person. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Concession" shall mean the concession title from the Mexican government held by TFM to provide freight transportation services over its rail lines in the UMS. "Confidentiality Agreements" shall mean the Confidentiality Agreements dated as of November 9, 2002, by and between KCS and TMM, and all amendments thereto. "Consultant" shall mean the Company owned by Jose Francisco Serrano Segovia that has entered into the Consulting Agreement with KCS. "Consulting Agreement" shall mean that agreement between Consultant and KCS dated as of the date hereof. "Contracts" shall mean all written or oral contracts, agreements, evidences of indebtedness, guarantees, leases and executory commitments to which any member of the GTFM Group is a party (jointly or severally, in whole or in part, with others or solely) or by which any of the GTFM Assets are bound, or otherwise related to the GTFM Business. "Control" shall mean the ability whether directly or indirectly to direct the affairs of another by means of ownership of assets or voting Securities, or by contract. "Designated Person" shall have the meaning set forth in Section 10.2(a)(ii) of this Agreement. "Dismissals" shall mean the dismissals or terminations that are required in accordance with the terms of this Agreement, of the Acquisition Agreement Claims and the Management Claims referred to in Section 7.15(a), the Arbitration referred to in Section 7.15(c) and the litigation matters referred to in Sections 7.15(e) and (f). "Encumbrance" shall mean any lien, pledge, mortgage, security interest, claim, charge, easement, limitation, commitment, encroachment, restriction (other than a restriction on transferability imposed by federal or state securities laws) or other encumbrance of any kind or nature whatsoever (whether absolute or contingent). "Environmental Laws" shall mean any and all U.S. and Mexican federal, state and local statutes, laws, regulations, ordinances or rules in existence on or prior to the Closing Date relating to (i) the protection of the environment or natural resources, occupational safety and health, (ii) the effect of the environment or Hazardous Materials on human health, (iii) emissions, discharges or releases of Hazardous Materials into the environment, including, ambient air, surface water, groundwater or land, or (iv) otherwise relating to the handling of Hazardous Materials or the investigation, clean-up or other remediation or analysis thereof. "Environmental Permit" shall mean any permit, approval, identification number, license and other authorization required under any applicable Environmental Law, including any administratively complete application that is sufficient to serve as an authorization for an activity regulated under Environmental Law. "ERISA Affiliate" shall mean any Person who is in the same controlled group of corporations or who is under common control with KCS (within the meaning of Section 414 of the Code). "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder. "Final Resolution of the VAT Claim and Put" shall mean any combination of settlements, resolutions, agreements or other legal actions which collectively result in KCS or any Affiliate or GTFM or any GTFM Subsidiary receiving the shares of TFM owned by the Mexican government, without any appeal or other claim having been brought within one hundred eighty (180) days thereafter by any governmental agency or other person, and the favorable cancellation of the 1997 Tax audit carried out by the Mexican Tax Administration Service (SERVICIO DE ADMINISTRACIUN TRIBUTARIA) as a result of which no additional Tax liability is imposed in connection with the amortization or deduction of the value of the Concession and Concession related assets and the termination or dismissal with prejudice, as applicable, of all litigation relating to the VAT Claim and the Put, or which is otherwise agreed to in writing by KCS, provided KCS receives the consideration provided for in such written agreement. "GAAP" shall mean generally accepted accounting principles, consistently applied, as used in the United States of America as in effect at the time any applicable financial statements were or are prepared or any act requiring the application of GAAP was or is performed. "Governmental Authority" shall mean any United States, Mexican or foreign government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the SEC or any other United States, Mexican or foreign government authority, agency, department, board, commission or instrumentality of the United States, any state of the United States or any political subdivision thereof or any foreign jurisdiction, and any court, tribunal or arbitrator(s) of competent jurisdiction, and any United States, Mexican or foreign governmental or non-governmental self-regulatory organization, agency or authority (including the NYSE). "GTFM Business" shall mean the business and operations of the GTFM Group in the manner in which the same have been conducted prior to the date hereof, are currently being conducted and are currently proposed by the GTFM Group to be conducted, whether conducted by GTFM or any of its Subsidiaries. "GTFM Financial Statements" shall mean those financial statements referred to in Section 5.6. "GTFM Form 20-F" shall mean the Annual Report on Form 20-F for the year ended December 31, 2003 filed by GTFM with the SEC. "GTFM Group" shall mean GTFM and the GTFM Subsidiaries, collectively. "GTFM Material Adverse Effect" shall mean a change, event or occurrence that has had, or is reasonably likely to have, a material adverse effect on the business, assets, properties, liabilities, financial condition or results of operations of the GTFM Group taken as a whole other than any change, event or occurrence resulting from (i) changes in the railroad industry in the UMS or the United States generally, (ii) changes in general economic conditions in the United States or the UMS or the securities markets in general, (iii) terrorist activities or the commencement or escalation of any war or armed hostilities, which do not disproportionately affect the GTFM Group, or (iv) performance of this Agreement in accordance with its terms. "GTFM Subsidiaries" shall mean all of the Subsidiaries of GTFM except Mexrail, Inc. and its Subsidiaries. "GTFM Trademarks" shall mean all trademarks of GTFM and its Subsidiaries. "Hazardous Materials" shall mean (i) any petroleum, petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials or polychlorinated biphenyls, or (ii) any chemical, material or other substance defined or regulated as toxic or hazardous or as a pollutant or contaminant or waste under any applicable Environmental Law. "HSR Act" means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules and regulations promulgated thereunder. "IFRS" shall mean International Financial Reporting Standards, consistently applied as used in the UMS as in effect at the time any applicable financial statements were or are prepared or any act requiring compliance with IFRS was or is performed. "Income Taxes" shall mean all Taxes, charges, fees, levies or other assessments imposed by any Taxing Authority and based on or measured solely with respect to income or profits, including any interest, penalties or additions attributable or imposed with respect thereto. "Intellectual Property" shall mean all patents and patent rights, trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, brand names, inventions copyrights and copyright rights, processes, formulae, trade dress, business and product names, logos, slogans, trade secrets, industrial models, processes, designs, methodologies, computer programs (including all source codes) and related documentation, technical information, manufacturing, engineering and technical drawings, know-how and all pending applications for and registrations of patents, trademarks, service marks and copyrights. "Investment Advisers Act" shall mean the Investment Advisers Act of 1940, as amended, and the rules and regulations of the SEC thereunder. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder. "KCS Assets" shall mean the properties, assets, contracts and rights of any kind, whether tangible or intangible, real or personal, necessary to enable KCS (prior to the Closing) and the Surviving Company (after the Closing) to conduct the KCS Business as presently conducted. "KCS Business" shall mean the consolidated business and operations of KCS and its Subsidiaries in the manner in which the same have been conducted prior to the date hereof, are currently being conducted and are currently proposed by KCS and its Subsidiaries to be conducted, whether conducted by KCS or any of its Subsidiaries. "KCS Disclosure Schedule" shall have the meaning set forth in the introduction to Article 6 of this Agreement. "KCS Material Adverse Effect" shall mean a change, event or occurrence that has had, or is reasonably likely to have, a material adverse effect on the business, assets, properties, liabilities, financial condition or results of operations of KCS and its Subsidiaries, taken as a whole other than any change, event or occurrence resulting from (i) changes in the railroad industry in the United States generally, (ii) changes in general economic conditions in the United States or the securities markets in general, (iii) terrorist activities or the commencement or escalation of any war or armed hostilities, which do not disproportionately affect KCS or its Subsidiaries, or (iv) performance of this Agreement in accordance with its terms. "KCS Stockholder Rights Plan" shall mean the Rights Agreement, dated as of September 19, 1995, between KCS and Harris Trust & Savings Bank, as Rights Agent. "KCS Stock Option Plan" shall mean the 1991 Amended and Restated Stock Option and Performance Award Plan, as amended and restated effective November 7, 2002. "Knowledge" of (a) KCS shall mean actual knowledge after reasonable inquiry of Michael Haverty, Ronald Russ, Gerald Davies, Larry Lawrence, Jay Nadlman or any other executive officer of KCS, and (b) TMM, TMMH or MM shall mean actual knowledge after reasonable inquiry by Jose Segovia Serrano, Javier Segovia Serrano, Juan Fernandez Galeazzi, Jacinto Marina Cortes, Mario Mohar Ponce, or any executive officer of TMM, TMMH or MM. "Law" shall mean any U.S., Mexican or foreign federal, state or local statute, law (whether statutory or common law), ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment, decree, policy, guideline or other requirement or arbitration award or finding (including those of the NYSE or any other applicable self-regulatory organization). "Losses" shall have the meaning set forth in Section 10.2(a) of this Agreement. "MM Subsidiaries" shall mean GTFM and the GTFM Subsidiaries. "NYSE" shall mean the New York Stock Exchange, Inc. "Permitted Encumbrance" shall mean (i) liens reflected in the GTFM Financial Statements, (ii) liens imposed by operation of law and not for borrowed money, such as materialmen's, mechanics', workers', repairmen's, employees', carriers', vendors' warehousemen's and other like liens that are insignificant, individually and in the aggregate, to the operation of the GTFM Business, and (iii) liens incurred in the ordinary course of business and not for borrowed money that are insignificant, individually and in the aggregate, to the operation of the GTFM Business. "Person" shall mean any individual, firm, corporation, partnership (limited or general), limited liability company, joint venture, association, trust or other entity. "Put" shall mean the right (currently being contested through legal proceedings) of the Federal Government of the United Mexican States under the Put Agreement to compel purchase of the shares of TFM held by the government. "Put Agreement" shall mean the Agreement between the Federal Government of the United Mexican States, GTFM, TMM and KCS, dated June 9, 1997. "Put Assignment Agreement" shall mean the Agreement of Assignment and Assumption of Rights, Duties and Obligations among TMM, KCS and TFM dated as of the date of this Agreement. "Put Purchase Price" shall mean the purchase price for the 20% of TFM stock held by the Federal Government of the United Mexican States, as defined in the Put Agreement and calculated under the Twenty-Sixth Clause of the Stock Purchase Agreement. "Releases" shall mean the mutual Release agreements, dated the date hereof (which shall become effective at the Closing or as otherwise specified therein) between KCS, TMM, certain of their respective Affiliates and other parties identified therein. "Release Resolutions" shall mean the resolutions, in the form attached hereto as Exhibit C, adopted by the respective Boards of Directors identified therein. "SEC" shall mean the Securities and Exchange Commission, and any successor thereto. "Securities" shall mean any securities as defined in the Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder. "Securities Laws" shall mean the Securities Act, the Exchange Act, the Investment Company Act, the Investment Advisers Act, all applicable state "blue sky" laws, all applicable Mexican and foreign securities laws, and the rules and regulations promulgated thereunder. "Seller Material Adverse Effect" shall mean a change, event or occurrence that has had, or is reasonably likely to have, a material adverse effect on the business, assets, properties, liabilities, financial condition or results of operations of Sellers and their Subsidiaries, taken as a whole other than any change, event or occurrence resulting from (i) changes in the railroad industry in the United States generally, (ii) changes in general economic conditions in the United States or the securities markets in general, (iii) terrorist activities or the commencement or escalation of any war or armed hostilities, which do not disproportionately affect a Seller or any of its Subsidiaries, or (iv) performance of this Agreement in accordance with its terms. "Subsidiary" of a Person shall mean any other Person more than 50% of the voting stock (or of any other form of other voting or controlling equity interest in the case of a Person that is not a corporation) of which is beneficially owned by the Person directly or indirectly through one or more other Persons. "Tax" and "Taxes" shall mean all U.S. and Mexican federal, provincial, territorial, state, municipal, local, foreign or other taxes, imposts, rates, levies, assessments, contributions and other similar charges (and all interest and penalties thereon and additions thereto imposed by any Governmental Authority), including all income, excise, franchise, gains, capital, real property, goods and services, transfer, value added, gross receipts, windfall profits, severance, ad valorem, personal property, production, sales, use, license, stamp, documentary stamp, mortgage recording, employment, payroll, social security (IMSS), housing, unemployment, disability, estimated or withholding taxes, housing fund (Infonavit), retirement fund contributions (SAR) and all customs and import duties. "Tax Return" shall mean any and all returns, reports, declarations, information statements, schedules or other documents required to be provided by GTFM or any of its Subsidiaries with respect to Taxes to any Governmental Authority or Tax authority or agency, whether U.S., Mexican or foreign. "Taxing Authority" shall mean any government authority, U.S., Mexican or other, having jurisdiction over the assessment, determination, collection, or other imposition of Taxes. "TFM" shall mean TFM, S.A. de C.V. "U.S." means the United States of America. "VAT" means the Mexican value added tax. "VAT Claim" means TFM's claim against the Mexican Treasury for the refund of a VAT payment in the original principal amount of 2,111,111,790 pesos, plus indexation and interest. "VAT Payment" means the shares or cash compensation received by TFM or its designee from the Mexican government on the VAT Claim. "Volume Weighted Price" means the average trading price per share for KCS Common Stock on the NYSE, as reported on Bloomberg (VAP function), for the twenty (20) consecutive trading days immediately preceding the later of (i) the Closing Date, or (ii) the date of the public announcement by KCS of the Final Resolution of the VAT Claim and Put. "Voting Trust" means the irrevocable Trust Agreement dated as of December 15, 2004, among Jose Francisco Serrano Segovia, Ramon Serrano Segovia, Teresa Serrano Segovia, and Servicios Directivos Servia, S.A. de C.V., as settlors and beneficiaries, and Ixe Banco, S.A., Instituciun de Banca Multiple, Ixe Grupo Financiero, Division Fiduciaris, as trustee, with the acknowledgement and agreement of TMM, TMMH and MM. ARTICLE 12 MISCELLANEOUS SECTION 12.1 AMENDMENTS; WAIVER. This Agreement may not be amended, altered or modified except by written instrument executed by KCS and TMM. KCS and TMM may amend this Agreement without notice to or the consent of any other Party and any third party. Any agreement on the part of KCS and TMM to waive (i) any inaccuracies in any representation and warranty contained herein or in any document, certificate or writing delivered pursuant hereto, or (ii) compliance with any of the agreements, covenants or conditions contained herein, shall be valid only if set forth in an instrument in writing signed on behalf of the party against whom the waiver is to be effective. No such waiver shall constitute a waiver of, or estoppel with respect to, any subsequent or other inaccuracy, breach or failure to strictly comply with the provisions of this Agreement. Any delay or omission on the part of KCS or TMM to exercise any right hereunder shall not in any manner impair the exercise of any right accruing to it hereafter. SECTION 12.2 ENTIRE AGREEMENT. This Agreement (including the Seller Disclosure Schedule, the KCS Disclosure Schedule, any other exhibits, schedules, certificates, lists and documents referred to herein, and any other agreements or documents executed by the Parties simultaneously herewith or pursuant thereto), the Ancillary Agreements, the Consulting Agreement and the Confidentiality Agreements shall constitute the entire agreement of the Parties with respect to the subject matter hereof and thereof and to the extent this Agreement (as defined in this Section 12.2) is in conflict with any prior agreements or understandings, written and oral, among the Parties, this Agreement shall prevail. Upon Closing, the following agreements shall be deemed terminated notwithstanding any provisions therein to the contrary: Letter of Intent, dated August 28, 1995, between TMM and KCS; the Joint Venture Implementation Agreement, dated September 7, 1995, between TMM and KCS; the undated Letter of Understanding between TMM and KCS; the Shareholders Agreement dated as of May 1997, by and among KCS, Caymex, Grupo Servia, S.A. de C.V., TMM and MM; Management Services Agreements between KCS and TFM, dated May 9, 1997, and between TMM and TFM, dated May 9, 1997 (as such agreements have been amended and extended from time to time). SECTION 12.3 INTERPRETATION. (a) The Recitals, Exhibits and Schedules to this Agreement are incorporated by reference into, and are deemed to be part of, this Agreement. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or an Exhibit or a Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The word "shall" when used in this Agreement is a word of mandate, construed as "must." Unless expressly stated otherwise, all references to "Dollars" or "$" in this Agreement shall mean U.S. dollars. (b) Each of the Seller Disclosure Schedule and the KCS Disclosure Schedule shall set forth items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more of such Party's representations or warranties or one or more of its covenants contained in this Agreement, in each case making reference to the particular subsection of this Agreement requiring such disclosure or to which such exception is being taken. (c) This Agreement is written in the English language. The Parties waive any rights they may have under Applicable Law to have this Agreement or any of the Ancillary Agreements made in any language other than English; PROVIDED to the extent that any such waiver shall not be valid under Applicable Law, the Parties agree that in case of any ambiguity or contradiction between the English language version of this Agreement and any translation into any other language, that the English language version shall control. SECTION 12.4 SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. SECTION 12.5 NOTICES. Unless otherwise provided herein, all notices and other communications hereunder shall be in writing and shall be deemed given if (a) delivered in person, (b) transmitted by facsimile (with written confirmation), or (c) delivered by an express courier (with written confirmation) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice): If to Sellers: Grupo TMM, S.A., Avenida de la Cuspide, No. 4755 Colonia Parques del Pedregal 14010 Mexico, D.F. Attention: Corporate Secretary CT Corporation 111 Eighth Avenue New York, New York 10011 With a copy (which shall not constitute notice) to: Milbank, Tweed, Hadley & McCloy LLP One Chase Manhattan Plaza New York, New York 10005 Attention: Thomas C. Janson, Esq. If to KCS: By U.S. Mail: Kansas City Southern P.O. Box 219335 Kansas City, MO 64121-9335 Attention: Senior Vice President and General Counsel By Delivery Service: Kansas City Southern 427 West 12th Street Kansas City, MO 64105 Attention: Senior Vice President and General Counsel With a copy (which shall not constitute notice) to: Sonnenschein Nath & Rosenthal LLP 4520 Main Street, Suite 1100 Kansas City, MO 64111 Attention: John F. Marvin, Esq. Any Party hereto may from time to time change its address for notices under this Section 12.5 by giving at least ten (10) days' notice of such changed address to the other Parties hereto. SECTION 12.6 HEADINGS. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions of this Agreement. SECTION 12.7 BINDING EFFECT; PERSONS BENEFITING; NO ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and assigns. No provision of this Agreement is intended or shall be construed to confer upon any entity or Person other than the Parties and their respective successors and permitted assigns any right, remedy or claim under or by reason of this Agreement or any part hereof. This Agreement may not be assigned by any of the Parties without the prior written consent of the other Parties. SECTION 12.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the Parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision of this Agreement be enforced by, any other Person. SECTION 12.9 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each original or facsimile of which shall be deemed an original, but all of which taken together shall constitute one and the same agreement, it being understood that all of the Parties need not sign the same counterpart. SECTION 12.10 SPECIFIC ENFORCEMENT. The Parties acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each of the Parties hereto shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement by the other and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they may be entitled by law or equity. The Parties agree that each Party shall have the right to apply for any of the prejudgment measures (MEDIDAS CAUTELARES) to which the Parties may be entitled to under the applicable law of the UMS to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions of this Agreement. The Parties agree that actions with respect to any such prejudgment measures (MEDIDAS CAUTELARES) may be instituted in any local or federal civil courts of the UMS which has proper jurisdiction to enforce those prejudgment measures (MEDIDAS CAULTELARES). SECTION 12.11 GOVERNING LAW; DISPUTE RESOLUTION. (a) Resolution of any and all disputes between KCS and one or more of Sellers (each of KCS, on the one hand, and one or more of the Sellers, on the other hand, a "Dispute Party" and together, the "Dispute Parties") arising from or in connection with this Agreement (except those to be resolved pursuant to Section 10.5(e)), the Ancillary Agreements or any transactions contemplated by this Agreement or the Ancillary Agreements, whether based on contract, tort, common law, equity, statute, regulation, order or otherwise, ("Disputes") including Disputes arising in connection with claims by third persons, shall be exclusively governed by and settled in accordance with the provisions of this Section 12.11; PROVIDED, that the foregoing shall not preclude equitable or other judicial relief to enforce the provisions hereof or to preserve the status quo pending resolution of Disputes hereunder. (b) THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN THE PARTIES HERETO AND THE ADJUDICATION AND ENFORCEMENT THEREOF, SHALL BE GOVERNED BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE AND THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS. (c) As to any Dispute which is not resolved in the ordinary course of business, the Dispute Parties shall first attempt in good faith to promptly resolve any Dispute by negotiations between executives. Either of the Dispute Parties may initiate this procedure by delivery of written notice of the Dispute (the "Dispute Notice") to the other. Not later than twenty (20) days after delivery of the Dispute Notice, one executive of one of the Dispute Parties with authority to settle the Dispute shall meet with one executive of the other Dispute Party with authority to settle the Dispute at a reasonably acceptable time and place, and thereafter as such executives shall deem reasonably necessary. The executives shall exchange relevant information and endeavor to resolve the Dispute. Prior to any such meeting, each Dispute Party's executive shall advise the other as to any individuals who will attend such meeting with the executive. All negotiations pursuant to this Section 12.11(c) shall be confidential and shall be treated as compromise negotiations for purposes of Rule 408 of the Federal Rules of Evidence and similarly under other local or foreign rules of evidence. (d) Each Dispute Party hereby agrees to submit all Disputes not resolved pursuant to Section 12.11(c) to final and binding arbitration in New York, New York. Either Dispute Party may initiate such arbitration by delivery of a demand therefor (the "Arbitration Demand") to the other Dispute Party not sooner than sixty (60) days after the date of delivery of the Dispute Notice but promptly thereafter; PROVIDED, that if a Dispute Party rejects participation in the procedures provided under Section 12.11(c), the other Dispute Party may initiate arbitration at such earlier time as such rejection shall become reasonably apparent, and, whenever arbitration is initiated, may seek recovery of any damages or expenses arising from such rejection, including attorney's fees and expenses, Arbitration Costs (as defined below) in connection with arbitration hereunder. (i) Three (3) Arbitrators shall be appointed (the "Arbitrators"), one of whom shall be appointed by KCS, one by TMM, and the third of whom, who shall act as the chairman of the arbitral tribunal, shall be appointed by the first two (2) Arbitrators within ten (10) Business Days of the first two (2) Arbitrators confirmation by the American Arbitration Association. Each Party agrees that Sellers shall be considered jointly as one side for the purposes of constitution of the arbitration tribunal hereunder. If either Dispute Party fails to appoint an Arbitrator within ten (10) Business Days of a request in writing by the other Dispute Party to do so or if the first two Arbitrators cannot agree on the appointment of the third Arbitrator within ten (10) Business Days of their confirmation by the American Arbitration Association, then such Arbitrator shall be appointed by the American Arbitration Association in accordance with its Commercial Arbitration Rules. As soon as the arbitration tribunal has been convened, a hearing date shall be set within fifteen (15) days thereafter; PROVIDED, that the Arbitrators may extend the date of the hearing upon request of any Dispute Party to the extent necessary to insure that such Dispute Party is given a reasonable period of time to prepare for the hearing. Written submittals in the English language shall be presented and exchanged by both Dispute Parties five (5) Business Days before the hearing date. At such time the Dispute Parties shall also exchange copies of all documentary evidence upon which they will rely at the arbitration hearing and a list of the witnesses whom they intend to call to testify at the hearing. The Arbitrators shall make their determination as promptly as practicable after conclusion of the hearing. (ii) The arbitration shall be conducted in the English language pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Notwithstanding the foregoing, (A) each Dispute Party shall have the right to audit the books and records of the other Dispute Party that are reasonably related to the Dispute; (B) each Dispute Party shall provide to the other, reasonably in advance of any hearing, copies of all documents which a Dispute Party intends to present in such hearing; (C) all hearings shall be conducted on an expedited schedule; and (D) all proceedings shall be confidential, except that either Dispute Party may at its expense make a stenographic record thereof. (iii) The Arbitrators shall endeavor to complete all hearings not later than one hundred twenty (120) days after their tribunal has been convened, and shall make a final award as promptly as practicable thereafter. Such award shall be communicated, in writing, by the Arbitrators to the Dispute Parties, and shall contain specific findings of fact and conclusions of law in accordance with the governing law set forth in Section 12.11(b) of this Agreement. Any award of such Arbitrators shall be final and binding upon the Parties to this Agreement and shall not be attacked by any of the Parties to this Agreement in any court of law and may be enforced in any court having jurisdiction, including expressly the courts of the State of New York, United States of America, and the courts of the Federal District of Mexico. Any such award shall include appropriate instructions to the Escrow Agent under the Closing Escrow Agreement. The Arbitrators shall apportion all costs and expenses of the arbitration, including the Arbitrators' fees and expenses, fees and expenses of experts and fees and expenses of translators ("Arbitration Costs") between the prevailing and non-prevailing Dispute Party as the Arbitrators shall deem fair and reasonable. In circumstances where (A) a Dispute has been asserted or defended against on grounds that the Arbitrators deem manifestly unreasonable, or (B) the non-prevailing Dispute Party has rejected participation in procedures under Section 12.11(c), the Arbitrators may assess all Arbitration Costs against the non-prevailing Dispute Party and may include in the award the prevailing Dispute Party's attorney's fees and expenses in connection with any and all proceedings under this Section 12.11. Notwithstanding the foregoing, in no event may the Arbitrators award multiple or punitive damages. (e) Pursuant to an agreement of the Parties hereto or a judicial determination that a Dispute is not subject to final and binding arbitration as set forth in Section 12.11, KCS and each of Sellers irrevocably agrees that any legal action or proceeding against it with respect to this Agreement and any transaction contemplated by this Agreement shall be brought only in the courts of the State of New York, or of Federal courts of the United States of America sitting in New York, and by execution and delivery of this Agreement, KCS and each of Sellers irrevocably submits to the venue and jurisdiction of each such court and irrevocably waives any objection or defense such Party may have to venue or personal jurisdiction in any such court for the purpose of resolving any claim, dispute, cause of action arising out of or related to this Agreement (including any claim that the suit or action has been brought in an inconvenient forum and any right to which it may become entitled on account of place of residence or domicile), the alleged breach of this Agreement, the enforcement of the terms of this Agreement, the Acquisition, the Ancillary Agreements and the other terms contemplated hereby and thereby. A final judgment in any suit, action or proceeding shall be conclusive and may be enforced in any court where jurisdiction over the Parties may be had or in which the Parties are subject to service of process. (f) Each of the Parties irrevocably appoints CT Corporation (the "Process Agent"), at 111 Eighth Avenue, New York, New York 10011 (212-894-8940), respectively, as its agent and true and lawful attorney-in-fact in its name, place and stead to accept on behalf of each of the Parties and their respective properties and revenues, service of copies of the summons and complaint and any other process which may be served in any such suit, action or proceeding brought in the State of New York, and each of the Parties hereto agrees that failure of the Process Agent to give any notice of any such service of process to any of the Parties hereto shall not impair or affect the validity of such service or the enforcement of any judgment based thereon. SECTION 12.12 ANNOUNCEMENTS. KCS and TMM shall consult with each other before issuing, and provide each other the opportunity to review, comment on and concur with, any press release or other public statement with respect to this Agreement, the Acquisition, the Ancillary Agreements and the other transactions contemplated hereby and thereby, except as either Party may determine is otherwise required by Applicable Law, judicial or administrative action or any requirement of the NYSE or any other applicable self-regulatory organization. SECTION 12.13 TERMINATION FEE. In the event of (i) a termination pursuant to Section 9.1(a)(v), the Party experiencing the Change of Control shall promptly after a demand therefor remit to the Party terminating in immediately available funds the sum of Eighteen Million Dollars ($18,000,000), and (ii) a termination pursuant to Section 9.1(a)(iii) or 9.1(a)(iv) as a result of the failure of the stockholders of KCS or of TMM to approve the Acquisition if at or prior to the meeting of such stockholders to approve the Acquisition, the Board of Directors of KCS, in the case of the KCS stockholders' meeting, or the Board of Directors of TMM, in the case of the TMM stockholders' meeting, shall have failed to recommend or shall have withdrawn and not reinstated its recommendation of, the Acquisition, then the Party whose stockholders shall not have approved the Acquisition shall remit to the other Party, if the other Party elects to terminate and promptly after a demand therefor, in immediately available funds, the sum of Eighteen Million Dollars ($18,000,000). The receipt of any sums pursuant to this Section 12.13 shall not preclude or diminish any other rights a Party may have under this Agreement. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written. KANSAS CITY SOUTHERN By: /s/ Michael R. Haverty --------------------------------- Name: Michael R. Haverty Title: Chairman, President & CEO KARA Sub, Inc. By: /s/ Ronald G. Russ --------------------------------- Name: Ronald G. Russ Title: Vice President KCS INVESTMENT I, LTD. By: /s/ Ronald G. Russ --------------------------------- Name: Ronald G. Russ Title: Vice President KCS ACQUISITION SUBSIDIARY, INC. By: /s/ Ronald G. Russ --------------------------------- Name: Ronald G. Russ Title: Vice President CAYMEX TRANSPORTATION, INC. By: /s/ Jay M. Nadlman --------------------------------- Name: Jay M. Nadlman Title: Vice President and Secretary GRUPO TMM, S.A. By: /s/ Jose Francisco Serrano Segovia --------------------------------- Name: Jose Francisco Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano --------------------------------- Name: Javier Segovia Serrano Title: Attorney in Fact TMM HOLDINGS, S.A. de C.V. By: /s/ Jose Francisco Serrano Segovia --------------------------------- Name: Jose Francisco Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano --------------------------------- Name: Javier Segovia Serrano Title: Attorney in Fact TMM MULTIMODAL, S.A. de C.V. By: /s/ Jose Francisco Serrano Segovia --------------------------------- Name: Jose Francisco Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano --------------------------------- Name: Javier Segovia Serrano Title: Attorney in Fact GRUPO TRANSPORTACION FERROVIARIA MEXICANA, S.A. de C.V. By: /s/ Jose Francisco Serrano Segovia --------------------------------- Name: Jose Francisco Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano --------------------------------- Name: Javier Segovia Serrano Title: Attorney in Fact EX-10 3 form8k_122004ex102.txt EXH. 10.2 INDEMNITY ESCROW NOTE Exhibit 10.2 INDEMNITY ESCROW NOTE US $20,745,800 December 15, 2004 WHEREAS, Kansas City Southern, a Delaware corporation ("Obligor"), pursuant to Section 1.2(a) of the Amended and Restated Acquisition Agreement among Obligor, MM (defined below), and the other parties named therein dated December 15, 2004 (the "Acquisition Agreement"), promises to deliver for the benefit of TMM Multimodal, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the United Mexican States ("MM"), the unsecured promissory debt obligation of Obligor in the principal amount of Twenty Million Seven Hundred Forty Five Thousand Eight Hundred U.S. Dollars (US $20,745,800) (this "Note"); WHEREAS, Obligor and MM each desire to evidence such debt obligation with the issuance of this Note upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the recitals (which are deemed to be a part of this Note) and agreements contained herein, the parties hereto agree as follows: I. PROMISE TO PAY. For value received and subject to reduction pursuant to Section II below, Obligor hereby promises to pay to the order of MM in immediately available funds on June 1, 2007, the principal sum of Twenty Million Seven Hundred Forty Five Thousand Eight Hundred U.S. Dollars (US $20,745,800), together with interest on any and all unpaid principal amounts from but not including the Closing Date to June 1, 2007, as determined in accordance with the terms below. Payment shall be made to such account as shall be designated by MM by at least ten days written notice to Obligor. Obligor may, at its sole option, convert all or any part of the principal amount of this Note and any interest accrued thereon to that number of shares of KCS Common Stock ("Shares") as, valued at the average trading price per Share on the New York Stock Exchange, as reported on Bloomberg (VAP function) for the twenty (20) consecutive trading days immediately preceding April 1, 2007, equal to the amount so converted, by delivery on or before April 1, 2007 of irrevocable written instructions to such effect to the Escrow Agent, simultaneously copied to TMM, and accompanied by one or more certificates representing such Shares. II. REDUCTION OF PRINCIPAL AMOUNT. All amounts due under this Note shall be subject to reduction in accordance with the terms and conditions of the Indemnity Escrow Agreement dated as of the date hereof by and among Obligor, Grupo TMM, S.A., and the Escrow Agent named therein. III. INTEREST RATE/PAYMENT. Commencing on the Closing Date, the outstanding principal amount of this Note shall bear interest at a rate per annum equal to five percent (5%). Interest shall be payable upon payment of any principal amounts hereunder. IV. PREPAYMENT. Obligor shall have the right to prepay the indebtedness evidenced by this Note, including principal and any accrued interest thereon, in cash or KCS Common Stock, in whole or in part, without premium or penalty, upon not less than thirty (30) days notice to the holder thereof. V. ASSIGNMENT. MM's rights under this Note may not be negotiated or assigned. VI. OBLIGATIONS OF OTHERS. Obligor's obligations under this Note will also be binding on Obligor's successors and assigns and shall only be assigned, transferred or otherwise conveyed to a person or entity that consents in writing to be so bound. No such assignment, transfer or conveyance shall release Obligor of its obligations hereunder. VII. WAIVER; GOVERNING LAW. Obligor hereby waives notice presentment for payment, demand, notice of dishonor and protest of this Note, and further agrees that this Note shall be deemed to have been made under and shall be governed by the laws of the State of Delaware without giving effect to the choice of law principles of that state, in all respects, including matters of construction, validity and performance, and that none of its terms or provisions may be waived, altered, modified or amended except as may be consented to in a duly signed writing by MM. IN WITNESS WHEREOF, Obligor has executed and delivered this Note as of the date first above written. Kansas City Southern By: ------------------------------------ Name: Robert B. Terry Title: Senior Vice President and General Counsel SCHEDULE A [REDUCTIONS TO PRINCIPAL AMOUNT] EX-10 4 form8k_122004ex103.txt EXH. 10.3 STOCKHOLDERS' AGREEMENT Exhibit 10.3 STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT dated as of December 15, 2004, but to become effective as herein provided, by and among Kansas City Southern, a Delaware corporation ("KCS"), Grupo TMM, S.A., a SOCIEDAD ANONIMA organized under the laws of the United Mexican States ("UMS") ("TMM"), TMM Holdings, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS and a subsidiary of TMM ("TMMH"), TMM Multimodal, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS and a subsidiary of TMMH) ("MM"), and the stockholders of TMM who have executed this Stockholders' Agreement (collectively, the "Principal Stockholders"). RECITALS A. Pursuant to an Amended and Restated Acquisition Agreement (the "Acquisition Agreement") dated the date hereof among KCS, certain subsidiaries of KCS, TMM, TMMH, and MM, KCS will acquire from MM all of the issued and outstanding capital stock of Grupo Transportacion Ferroviaria Mexicana, S.A. de CV., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS ("GTFM"), held by MM and MM will receive from KCS shares of Common Stock of KCS; B. Upon completion of the transactions contemplated by the Acquisition Agreement and the Ancillary Agreements, MM will become a significant stockholder of KCS, each of TMM, TMMH, MM and the Principal Stockholders will thereby obtain the opportunity to derive substantial economic benefits and one or more of the Principal Stockholders may become significant stockholders of KCS, and C. The parties hereto (each, a "Party," and collectively, the "Parties") desire to set forth herein certain of their rights and duties arising out of and in connection with the Acquisition Agreement and the transactions contemplated thereby. NOW, THEREFORE, in consideration of the recitals (which are deemed to be part of this Stockholders' Agreement), the mutual covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: ARTICLE I. REPRESENTATIONS AND WARRANTIES 1.1 REPRESENTATIONS AND WARRANTIES OF KCS. KCS represents and warrants to TMM, TMMH, MM and the Principal Stockholders that as of the Effective Date: (a) The execution, delivery and performance by KCS of this Stockholders' Agreement and the performance by KCS of its obligations hereunder are within its corporate powers and have been duly authorized by all necessary corporate action on its part. This Stockholders' Agreement constitutes a legal, valid and binding agreement of KCS enforceable against KCS in accordance with its terms (i) except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity); and (b) The execution, delivery and performance of this Stockholders' Agreement by KCS does not (i) violate, conflict with or result in any breach of any provision of the charter or by-laws of KCS, (ii) violate, conflict with or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under, or permit the termination of, or require any notice under, or require the consent of any other party to, or result in the acceleration of, or entitle any party to accelerate (whether as a result of a change in control of KCS or otherwise) any obligation or agreement, or result in the loss of any benefit or the imposition of any fee or penalty, or give rise to the creation of any lien or encumbrance upon any of the properties or assets of KCS, under any of the terms, conditions or provisions of any debt, note, bond, mortgage, indenture, deed of trust, license, lease, permit, agreement or other instrument or obligation to which KCS is a party or by which KCS or any of its respective properties or assets may be bound or affected, or (iii) violate any Rules (including foreign, federal and state securities laws) of any Governmental Authority applicable to KCS or any of its properties, assets or operations. 1.2 REPRESENTATIONS AND WARRANTIES OF TMM, TMMH AND MM. TMM, TMMH, and MM, each represents and warrants, jointly and severally, to KCS that as of the Effective Date: (a) The execution, delivery and performance by each of TMM, TMMH and MM of this Stockholders' Agreement and the performance by TMM, TMMH and MM of its obligations hereunder are within its corporate powers and have been duly authorized by all necessary corporate action on its part. This Stockholders' Agreement constitutes a legal, valid and binding agreement of TMM, TMMH and MM enforceable against TMM, TMMH and MM in accordance with its terms (i) except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity); (b) The execution, delivery and performance of this Stockholders' Agreement by TMM, TMMH and MM does not (i) violate, conflict with or result in any breach of any provision of the respective charters or by-laws of TMM, TMMH or MM, (ii) violate, conflict with or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under, or permit the termination of, or require any notice under, or require the consent of any other party to, or result in the acceleration of, or entitle any party to accelerate (whether as a result of a change in control of MM or otherwise) any obligation or agreement, or result in the loss of any benefit or the imposition of any fee or penalty, or give rise to the creation of any lien or encumbrance upon any of the properties or assets of TMM, TMMH or MM under any of the terms, conditions or provisions of any debt, note, bond, mortgage, indenture, deed of trust, license, lease, permit, agreement or other instrument or obligation to which MM or any of its subsidiaries is a party or by which TMM, TMMH, MM or any of their respective subsidiaries or any of their respective properties or assets may be bound or affected, or (iii) violate any Rules (including foreign, federal and state securities laws) of any Governmental Authority applicable to TMM, TMMH, MM or any of their respective subsidiaries, or any of their respective properties, assets or operations. (c) Except for shares of Common Stock issuable pursuant to the Acquisition Agreement, neither TMM, TMMH, MM nor any of their respective controlled Affiliates is the beneficial owner of any Voting Securities of KCS. (d) No insolvency proceedings against TMM or any of its Subsidiaries are pending. 1.3 REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDERS. Each of the Principal Stockholders represents and warrants, severally, to KCS as follows as of the Effective Date: (a) Such Principal Stockholder is either (i) an entity that is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, with full power and authority to enter into, execute and deliver this Stockholders' Agreement and to perform and observe fully its obligations hereunder and to perform the transactions contemplated hereby, or (ii) a natural person who has the legal capacity to enter into this Stockholders' Agreement and to consummate the transactions contemplated hereby. Such Principal Stockholder has taken all action required by law, such Person's organizational or governing documents (if applicable), or otherwise to authorize the execution, delivery and performance of this Stockholders' Agreement and the consummation by such Principal Stockholder of the transactions contemplated hereby. This Stockholders' Agreement has been duly and validly executed and delivered by such Principal Stockholder and, assuming due authorization, execution and delivery by KCS, constitutes valid and binding legal obligations of such Principal Stockholder, enforceable against such Principal Stockholder in accordance with its terms (i) except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity). (b) The execution, delivery and performance of this Stockholders' Agreement by such Principal Stockholder does not (i) violate, conflict with or result in any breach of any provision of the organizational or governing documents of any of such Principal Stockholder (if applicable), (ii) violate, conflict with or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under, or permit the termination of, or require any notice under, or require the consent of any other party to, or result in the acceleration of, or entitle any party to accelerate any obligation or agreement, or result in the loss of any benefit or the imposition of any fee or penalty, or give rise to the creation of any lien or encumbrance upon any of the respective properties or assets of TMM, TMMH or MM or any of their respective Affiliates or any of the Principal Stockholders, in each case under any of the terms, conditions or provisions of any debt, note, bond, mortgage, indenture, deed of trust, license, lease, permit, agreement or other instrument or obligation to which such Principal Stockholder is a party or by which they or any of their respective properties or assets may be bound or affected or (c) violate any Rules (including foreign, federal and state securities laws) of any Governmental Authority applicable to such Principal Stockholder or any of their respective properties, assets or operations; and (c) Except for shares of Common Stock issuable pursuant to the Acquisition Agreement, neither such Principal Stockholder nor any controlled Affiliate of such Principal Stockholder is the beneficial owner of any Voting Securities of KCS. (d) To the best of their knowledge, no insolvency proceedings against TMM or any of its Subsidiaries are pending. ARTICLE II. STANDSTILL PROVISIONS 2.1 STANDSTILL PROVISIONS. (a) TMM, TMMH, MM and each of the Principal Stockholders covenants to and agrees with KCS that, unless it is specifically invited in writing to do so by the Board of Directors, during the Standstill Period such Person will not, and will cause each of its Affiliates not to, directly or indirectly, alone, as part of a Group or in concert with others: (i) acquire or agree to acquire (other than pursuant to the Acquisition Agreement, the Consulting Agreement, or this Agreement) beneficial ownership of any Voting Securities (or any direct or indirect rights or options to acquire (through purchase, exchange, conversion or otherwise) beneficial ownership of any Voting Securities), if after any such acquisition, such Person and its Affiliates, or such Group would beneficially own aggregate outstanding Voting Securities representing more than 20% of the Total Voting Power; (ii) make any public announcement with respect to any acquisition or proposal by any TMM Holder, or any Group of which any TMM Holder is a member or acting in concert with, for the acquisition of Voting Securities with respect to any merger, consolidation or business combination involving KCS or its Affiliates or for or with respect to any purchase of a substantial portion of the assets of KCS or its Affiliates, whether or not such proposal might require the making of a public announcement by KCS; (iii) solicit, initiate, make, or in any way participate in, any "solicitation" of "proxies" to vote any Voting Securities or become a "participant" in any "election contest" (as such terms are defined or used in Regulation 14A under the Exchange Act, as such Regulation is currently in effect, disregarding clause (iv) of Rule 14a-1(1)(2) and including any exempt solicitation pursuant to Rule 14a-2(b)(1)); (iv) except as approved by the Board of Directors, call, or vote in favor of a call for, any special meeting of stockholders of KCS; (v) initiate or propose any matter for submission to a vote of stockholders of KCS or participate in the making of, or solicit stockholders for the approval of, any stockholder proposal; (vi) grant any proxy with respect to any Voting Securities to any Person not approved in writing by KCS, except for proxies granted to representatives of KCS in connection with the voting of shares at an annual or special meeting of stockholders or to a pledgee pursuant to a pledge that complies with Section 3.6 of this Agreement; (vii) take any action which would be reasonably likely to require KCS to make a public announcement regarding any of the matters specified in this Section 2.1(a)(i)-(xi); or (viii) initiate or participate in any negotiations or arrangements with any third party with respect to any of the foregoing, or provide any information or take any action designed to advise, assist, encourage or act in concert with any third party in connection with any of the foregoing; (ix) disclose publicly any intention, plan or arrangement inconsistent with the foregoing; (x) make any request in a public manner or that would require public disclosure, that KCS (or any of its officers, directors, representatives, employees, attorneys, advisors, agents or Affiliates) to waive, amend or modify any provisions of Section 2.1(a)(i)-(xi); or (xi) otherwise act, alone or in concert with others, to seek to control or influence materially the management, Board of Directors or policies of KCS. (b) TMM, TMMH, MM and each of the Principal Stockholders covenants to and agrees with KCS that such Person will promptly notify the Board of Directors of any serious inquiry from any third party regarding any of the matters specified in Section 2.1(a)(i)-(xi) (which notification shall include the identity of each such third party and the material terms and conditions of each such inquiry). The Parties acknowledge that any such inquiry made by a Competitor or a representative of a Competitor shall be regarded as a serious inquiry. 2.2 EFFECT OF VIOLATIONS. If TMM, TMMH, MM, the Principal Stockholders or any of their respective Affiliates owns or acquires beneficial ownership of any Voting Securities of KCS in violation of Section 2.1(a)(i), none of TMM, TMMH, MM, the Principal Stockholders, nor any of their Affiliates shall be entitled to vote, or cause to be voted, any Voting Securities in excess of the greater of (i) the level owned immediately prior to the acquisition of Voting Securities that resulted in the violation and (ii) the level permitted to be owned by Section 2.1(a)(i), for any purposes (including, without limitation, with respect to a transaction of any type or for the election of directors) and shall be deemed thereby to have granted to any Person designated by the Board of Directors an irrevocable proxy to vote such securities in proportion to the votes cast by all other holders of Voting Securities of KCS on such matter; PROVIDED, that the right to vote such securities shall be reinstated, and such proxy shall be deemed to be revoked, upon the earlier of (i) any transfer of such securities other than to an Affiliate of the transferor and that is not otherwise in violation of this Stockholders' Agreement and (ii) the first date on which the beneficial ownership of Voting Securities is reduced to the greater of (x) the level owned immediately prior to the acquisition of Voting Securities that resulted in the violation and (y) the level permitted by Section 2.1(a)(i). KCS shall (as specified in Section 9.11) be entitled to enforce specifically the terms of this Section 2.2 and may also pursue any other available remedy to which it may be entitled as a result of any violation of this Stockholders' Agreement. 2.3 TERMINATION. The rights and obligations under this Article II shall immediately and irrevocably terminate upon the earliest to occur of (i) a Change of Control of KCS, or (ii) the first date the TMM Holders beneficially own in the aggregate less than 15% of the outstanding Voting Securities of KCS for at least 30 consecutive days. 2.4 SECTION 203, DELAWARE GENERAL CORPORATION LAW. The acquisition of Voting Securities of KCS by any of the TMM Holders pursuant to this Agreement, the Acquisition Agreement or the Consulting Agreement shall not be subject to Section 203 of the Delaware General Corporation Law ("Section 203"), but Section 203 shall remain applicable to any other acquisitions of Voting Securities by any of the TMM Holders. ARTICLE III. RESTRICTIONS ON TRANSFER 3.1 GENERAL RESTRICTIONS ON TRANSFERS. The TMM Holders shall not, directly or indirectly, alone or in concert with others, sell, assign, transfer, pledge, hypothecate, otherwise subject to any lien, grant any option with respect to or otherwise dispose of any interest in (or enter into an agreement or understanding with respect to the foregoing) any Voting Securities beneficially owned by them (a "Disposition"), except in accordance with the terms of this Stockholders' Agreement. 3.2 DISPOSITIONS TO COMPETITORS. (a) For a period of seven years after the Effective Date, the TMM Holders shall not, directly or indirectly, alone or in concert with others, effect a Disposition to a Competitor; provided that no Disposition pursuant to a Public Offering or a Rule 144 Transaction will be deemed to violate this prohibition if the selling TMM Holder(s) invoke and follow or require participating underwriters or brokers to invoke and follow, appropriate and reasonable procedures (subject to the prior approval of KCS, which shall not be unreasonably withheld) designed to prevent the sale of such Voting Securities to any Competitor. The Parties agree that a written representation from the purchaser or a representative of the purchaser shall satisfy the requirements of appropriate and reasonable procedures set forth in this Section 3.2(a) provided such representation authorizes reliance thereon by KCS and KCS has no reasonable grounds to believe that such representation cannot be relied upon to satisfy such requirements. (b) After the earliest of (i) seven years following the Effective Date, or (ii) the first date on which the TMM Holders have beneficially owned in the aggregate, directly or indirectly and alone or as part of a Group, less than 15% of the outstanding Voting Securities of KCS for at least 30 consecutive days (such earlier time being referred to herein as the "ROFR Commencement Date"), any TMM Holder may sell Voting Securities to a Competitor so long as the procedures set forth in this Section 3.2(b) are followed. If after the ROFR Commencement Date the selling TMM Holder proposes to sell Voting Securities to a Competitor (it being agreed that no Disposition pursuant to a Public Offering or a Rule 144 Transaction will be deemed to give rise to this right of first refusal), then KCS shall have a right of first refusal. If such a Disposition to a Competitor is proposed, the selling TMM Holder shall deliver a written notice to KCS advising KCS of the number of Voting Securities such holder desires to sell and the bona fide terms, including price, of any such proposed transaction. KCS shall have the right (but not the obligation) to purchase, in whole but not in part, such Voting Securities at a per share cash purchase price equal to the cash purchase price, or on such other terms as provided, in the agreement between the selling TMM Holder and a Competitor. In order to exercise its purchase rights hereunder, KCS must deliver a written notice to the seller to such effect within 10 business days after receipt of written notice of the proposed sale. If KCS timely elects to purchase the Voting Securities specified in the notice, it shall complete the purchase within 60 days from the delivery of such notice, unless a longer time is required to secure any regulatory approvals, in which case the purchase shall occur on the second business day after the receipt of any such required approvals, which approvals shall be obtained as soon as practicable. Unless KCS exercises its right of first refusal by delivering written notice to the selling TMM Holder prior to the expiration of the offering period described above, the selling TMM Holder shall be entitled to sell such Voting Securities which KCS has not elected to purchase during the 120 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to KCS. Any Voting Securities not so sold by the selling TMM Holder during such 120 day period may not thereafter be sold unless again offered to KCS pursuant to the terms of this provision. This purchase right shall be assignable, in whole or in part, by KCS to any other Person, but no such assignment shall relieve KCS of its obligation to assure payment of the purchase price for any Voting Securities as to which a notice of election to exercise the right of first refusal is made by KCS or any such assignee. 3.3 DISPOSITIONS TO AFFILIATES. For a period of seven years after the Effective Date, each of the TMM Holders shall not, directly or indirectly, alone or in concert with others, effect a Disposition of Voting Securities to any Affiliate of TMM, TMMH, or MM or any Affiliate of any Principal Stockholders unless such Affiliate agrees in writing to be bound by the terms of this Stockholders' Agreement and provided that the TMM Holders shall remain responsible, jointly and severally, for any breaches of this Stockholders' Agreement by such Affiliate (provided that any TMM Holder which is a Principal Stockholder shall be severally responsible only for breaches by an Affiliate of the Principal Stockholder to which such Principal Stockholder effects a Disposition). 3.4 DISPOSITIONS TO CERTAIN HOLDERS. Subject to the provisions of Sections 3.2 and 3.3, the TMM Holders may make a Disposition of any or all Voting Securities beneficially owned by such Person, provided that: (a) No Disposition (whether in a single transaction or series of transactions) that in the aggregate represents 5% or more of the outstanding Voting Securities shall be made to any Person (other than a Permitted Underwriter or an Affiliate pursuant to and in accordance with Section 3.3) other than a Person who is eligible to file reports pursuant to Rule 13d-1 under the Exchange Act (a "13G Filer"), unless such Person would not be so eligible with respect to the Voting Securities acquired from the Disposition; and (b) No Disposition (whether in a single transaction or series of transactions) of Voting Securities that in the aggregate represents 5% or more of the outstanding Voting Securities shall be made to any 13G Filer unless: (i) such 13G Filer would continue to be eligible to file reports pursuant to Section 13(g) under the Exchange Act with respect to the Voting Securities after giving effect to the proposed acquisition of such Voting Securities; and (ii) the selling TMM Holder shall have delivered a written notice to KCS advising KCS of the number of Voting Securities the seller desires to sell and the terms, including price, of the proposed transaction and KCS has been provided the right (but not the obligation) to purchase, in whole or in part, such Voting Securities at a per share cash purchase price equal to the purchase price, or upon such other terms as provided, in the proposed transaction. In order to exercise its purchase rights hereunder, KCS must deliver a written notice to the seller to such effect within five business days after receipt of written notice of the proposed sale. Upon the expiration of the offering period described above, the selling TMM Holder shall be entitled to sell such Voting Securities which KCS has not elected to purchase during the 120 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to KCS. Any Voting Securities not so sold by the selling TMM Holder during such 120 day period may not thereafter be sold unless again offered to KCS pursuant to the terms of this provision. This purchase right shall be assignable, in whole or in part, by KCS to any other Person, but no such assignment shall relieve KCS of its obligation to assure payment of the purchase price for any Voting Securities as to which KCS has delivered such a written notice. (c) Notwithstanding the provisions of Section 3.4(a) and (b), no Disposition (whether in a single transaction or a series of transactions) shall be made to any Person or Group that would, together with such Person's Affiliates and Associates and after giving effect to the acquisition of such Voting Securities, beneficially own or have the right to acquire more than 15% of the Total Voting Power. 3.5 DISPOSITIONS OF HOLDERS OF VOTING SECURITIES. For a period of seven years after the Effective Date, no TMM Holder shall, directly or indirectly, alone or in concert with others, sell, assign, transfer, pledge, hypothecate, otherwise subject to any lien, grant any option with respect to or otherwise dispose of any interest in (or enter into an agreement or understanding with respect to the foregoing) any capital stock or Voting Securities or control of any Person that, directly or indirectly, beneficially owns any Voting Securities of KCS to a Competitor, except as permitted by Section 3.3. 3.6 PLEDGES. Subject to the provisions contained herein, a TMM Holder may pledge or hypothecate as security for any indebtedness or other obligations any or all Voting Securities beneficially owned by such Person provided that such TMM Holder obtains prior to such pledge or hypothecation written consent from the pledgee that upon the occurrence of an event which gives the pledgee the right to foreclose on the pledged Voting Securities ("Foreclosure Event") such pledgee shall provide to KCS prompt written notice of such Foreclosure Event and provide KCS the right to purchase such Voting Securities at a cash purchase price equal to the average closing price of KCS's Common Stock on the New York Stock Exchange over the five consecutive trading days preceding the date of receipt of the notice of the pending foreclosure sale. In order to exercise its purchase rights hereunder, KCS must deliver a written notice to the pledgee to such effect within five business days after receipt of written notice of the Foreclosure Event and complete such purchase within 60 days from the delivery of such notice unless a longer time is required to secure any regulatory approvals, in which case the purchase shall occur on the second business day after the receipt of any such required approvals. This purchase right shall be assignable, in whole or in part, by KCS to any other Person, but no such assignment shall relieve KCS of its obligation to assure payment of the purchase price for any Voting Securities as to which KCS has delivered such a written notice. 3.7 EFFECT OF NON-COMPLIANCE. Any attempted Disposition of any Voting Securities in violation of any provision of this Stockholders' Agreement shall be void, and KCS shall not record such Disposition on its books or treat any purported transferee of such Voting Securities as the owner of such shares for any purpose, including without limitation, voting, receiving dividends or other distributions and being entitled to any of the benefits of this Stockholders' Agreement. 3.8 PERMITTED DISPOSITIONS IN CONNECTION WITH CERTAIN TRANSACTIONS. Notwithstanding the provisions of this Article III, the TMM Holders shall be permitted to make a Disposition in connection with any tender or exchange offer made by an unaffiliated third party to acquire KCS Common Stock so long as the following conditions are satisfied (i) the TMM Holders are in compliance with the provisions of Section 2.1(a) with respect to such tender or exchange offer; (ii) such tender or exchange offer must be for all of the outstanding Voting Securities; (iii) the offeror shall have made a commitment to effect a merger after the completion of the tender or exchange offer to provide the same consideration being provided to the holders of the securities tendered in the tender offer; (iv) the holders of a majority of the Voting Securities of KCS, other than the Voting Securities beneficially owned by the TMM Holders, shall have tendered their Voting Securities pursuant to such tender or exchange offer and such Voting Securities shall not have been withdrawn; (v) such tender or exchange offer shall not be subject to any financing condition; and (vi) the TMM Holders may not tender, or publicly disclose their intention to tender, prior to the business day immediately preceding the scheduled expiration of the tender or exchange offer. 3.9 TERMINATION. Except for Section 3.2(b) (which shall survive indefinitely), the rights and obligations under this Article III shall immediately and irrevocably terminate: (i) on the first date the TMM Holders beneficially own in the aggregate less than 15% of the outstanding Voting Securities of KCS for at least 30 consecutive days; or (ii) a Change of Control of KCS. ARTICLE IV. PRE-EMPTIVE RIGHTS 4.1 PRE-EMPTIVE RIGHTS. (a) Subject to Section 4.1(d) below, except for issuances of Common Stock (including for this purpose, options, warrants and other securities convertible into or exercisable for Common Stock) issued: (i) to KCS's employees, directors, consultants, agents, independent contractors or other service providers in connection with a Plan existing on the date hereof or a Plan approved by the Board of Directors and adopted by KCS after the date hereof; (ii) upon the exercise of any options, warrants, convertible or exchangeable securities which are outstanding as of the date hereof; (iii) in connection with the acquisition (by merger, consolidation, acquisition of assets or equity interests or otherwise) of the equity interests or assets of another Person; or (iv) issued pursuant to the Acquisition Agreement, the Ancillary Agreements, or the Consulting Agreement; if KCS authorizes the issuance or sale of any shares of Common Stock or any securities containing options or rights to acquire any shares of Common Stock (other than as a dividend on the outstanding Common Stock), KCS shall first notify TMM Holders of such proposed transaction and offer to sell to each such Person a number of shares of Common Stock (or, as applicable, options, warrants or other securities convertible into or exercisable for Common Stock) equal to the product obtained by multiplying the number of shares of Common Stock or securities containing options or rights to acquire Common Stock authorized to be sold by KCS by a fraction, (1) the numerator of which is the number of shares of Common Stock owned by such Person and (2) the denominator of which is the total of all then-outstanding Voting Securities. Each TMM Holder shall be entitled to purchase such Common Stock (or, as applicable, options, warrants or other securities convertible into or exercisable for Common Stock) at the same price and on the same terms and conditions as such Common Stock (or, as applicable, options, warrants or other securities convertible into or exercisable for Common Stock) are to be offered to any other Persons. To the extent that any TMM Holder elects not to participate in such pre-emptive rights, each of the other TMM Holders shall have a prorata right to purchase at the same price and on the same terms and conditions the Voting Securities which such non-participating TMM Holder had the right but elected not to purchase; provided that the exercise of such right does not extend the time for written notice set forth in Section 4.1(b). The purchase price for all stock and securities offered to such TMM Holders shall be payable in cash or, to the extent that other payment is to be made by the other Persons to whom stock or securities are so offered, on such other payment terms. (b) In order to exercise its purchase rights hereunder, a TMM Holder must deliver a written notice to KCS to such effect within ten business days after receipt of written notice from KCS describing in reasonable detail the stock or securities being offered, the purchase price thereof, the payment terms, such holder's percentage allotment, and the number of shares of Common Stock (or, as applicable, options, warrants or other securities convertible into or exercisable for Common Stock) such holder has the right to purchase hereunder. (c) Upon the expiration of the offering period described above, KCS shall be entitled to sell such stock or securities which such TMM Holders have not elected to purchase during the 120 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to such TMM Holders. Any stock or securities not so sold by KCS during such 120 day period may not thereafter be sold unless again offered to the TMM Holders pursuant to the terms of this Article IV. (d) The rights of the TMM Holders under this Article IV shall immediately and irrevocably terminate on the earlier to occur of (i) the date that the TMM Holders do not beneficially own in the aggregate at least 40% of the Voting Securities initially acquired by MM pursuant to the Acquisition Agreement; or (ii) the date that is three (3) years following the date hereof. ARTICLE V. VOTING AGREEMENT 5.1 VOTING AGREEMENT. From and after the Effective Date and until the provisions of this Article V cease to be effective, each TMM Holder shall vote all of the Voting Securities beneficially owned by such Person and entitled to vote in the election of directors (i) in favor of all Persons nominated by the Nominating Committee for election as a member of the Board of Directors by the holders of Common Stock; and (ii) against any proposal to remove any director nominated by the Nominating Committee and elected to the Board of Directors by the holders of Common Stock; and each such holder shall take all other reasonably necessary or desirable actions within its control (including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings) to cause such actions to be taken. ARTICLE VI. EFFECTIVE DATE 6.1 This Stockholders' Agreement shall become effective on and as of the Closing Date provided for in the Acquisition Agreement ("Effective Date"). ARTICLE VII. TERMINATION 7.1 TERMINATION. Subject to Section 7.2, this Stockholders' Agreement, except to the extent earlier termination is expressly provided for herein, shall terminate on the earliest to occur of: (a) the first date the TMM Holders and their Affiliates shall have, for at least 30 consecutive days, beneficially owned in the aggregate less than 40% of the Voting Securities initially acquired by MM pursuant to the Merger contemplated by the Acquisition Agreement; and (b) the termination of this Stockholders' Agreement in a writing signed by each of the parties hereto and approved by the Board of Directors. 7.2 EFFECT OF TERMINATION. If this Stockholders' Agreement is terminated in accordance with Section 7.1, hereof, this Stockholders' Agreement shall become null and void and of no further force and effect, except that (a) the terms and provisions of this Section 7.2, Section 2.2, and Sections 3.2(b), 3.7, and 3.8 shall remain in full force and effect, and as long as such Sections remain in effect Articles 8 and 9 shall remain in full force and effect, and (b) any termination of this Stockholders' Agreement shall not relieve any Party hereto from any liability for any breach of its obligations hereunder, regardless of whether such Party terminated this Stockholders' Agreement. ARTICLE VIII. DEFINITIONS 8.1 DEFINED TERMS. As used in this Stockholders' Agreement, the following terms shall have the following meanings (unless indicated otherwise, all Article and Section references are to Articles and Sections of this Stockholders' Agreement): "13G Filer " shall have the meaning assigned to such term in Section 3.4(d) of this Stockholders' Agreement. "Acquisition Agreement" shall have the meaning set forth in Recital A of this Stockholders' Agreement. "Affiliate" shall mean, with respect to any Person, (i) any other Person directly or indirectly through one or more intermediaries controlling or controlled by, or under direct or indirect common control with, such specified Person; (ii) any other Person that owns, directly or indirectly, ten percent or more of such Person's capital stock or other equity interests or any officer or director of any such Person or other Person or, (iii) with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin; PROVIDED, HOWEVER, that for the purposes of this Stockholders' Agreement, (w) KCS and its subsidiaries and Affiliates shall not be deemed Affiliates of TMM, TMMH, MM or any of their respective subsidiaries and (x) TMM, TMMH, MM and any of their respective subsidiaries and Affiliates shall not be deemed Affiliates of KCS and its subsidiaries. For purposes hereof, (y) a "subsidiary" of a Person shall mean any other Person more than 50% of the outstanding Voting Securities of which are owned, directly or indirectly, by such Person and (z) "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have correlative meanings. "Ancillary Agreements" shall have the meaning assigned to such term in the Acquisition Agreement. "Applicable Law" shall mean any Law applicable to KCS, TMM, TMMH, MM or any of their respective Affiliates, properties, assets, officers, directors, employees or agents, as the case may be. "Arbitration Costs" shall have the meaning assigned to such term in Section 9.12(d)(iii) of this Stockholders' Agreement. "Arbitrators" shall have the meaning assigned to such term in Section 9.12(d)(i) of this Stockholders' Agreement. "Associate" shall have the meaning set forth in Rule 12b-2 under the Exchange Act. "beneficial ownership" shall be determined pursuant to Rule 13d-3 of the Exchange Act or, if Rule 13d-3 shall be rescinded and there shall be no successor rule or statutory provision thereto, pursuant to Rule 13d-3 as in effect on the date hereof; provided, that Voting Securities issued or issuable pursuant to the Consulting Agreement shall not be counted for purposes of Section 2.1(a)(i). "Board of Directors" shall mean the board of directors of KCS. "Change of Control" shall mean, with respect to such Person, the occurrence of any of the following: (a) any Person or Group, other than a subsidiary or any employee benefit plan (or any related trust) of such Person or a subsidiary of such Person, becomes the beneficial owner of 20% or more of the Voting Securities representing 20% or more of the combined Total Voting Power of all Voting Securities of such Person, except that (1) no such Person or Group shall be deemed to beneficially own any securities held by such Person or a subsidiary or any employee benefit plan (or any related trust) of such Person or a subsidiary, or (2) no Person who or which, together with all Affiliates of such Person, was the beneficial owner of Voting Securities representing 20% or more of the combined Total Voting Power of all Voting Securities of such Person issued and outstanding as of the Effective Time of the Merger, as defined in the Acquisition Agreement shall be deemed as a result thereof to have caused a Change of Control of such Person hereunder; provided, however, that if such Person or any of its Affiliates, after the Effective Time, as defined in the Acquisition Agreement, of the Merger (A) acquires, in one or more transactions, beneficial ownership of an additional number of Voting Securities which exceeds 5% of the then-outstanding Voting Securities or Total Voting Power and (B) beneficially owns after such acquisition Voting Securities representing 20% or more of the combined Total Voting Power of all Voting Securities of such Person, then such Person shall be deemed to have caused a Change of Control hereunder; or (b) within a period of 24 months or less, the individuals who, as of any date, constitute the board of directors of such Person (the "Incumbent Directors") cease for any reason to constitute at least 75% of the members of such board of directors unless at the end of such period, at least 75% of the individuals then constituting such board of directors were either Incumbent Directors or nominated upon the recommendation of at least 75% of the Incumbent Directors or other directors so nominated; or (c) approval by the stockholders of such Person of any of the following: (1) a merger, reorganization or consolidation ("Acquisition") with respect to which the individuals and entities who were the respective beneficial owners of the stock and Voting Securities of the Person immediately before such Acquisition do not, after such Acquisition, beneficially own, directly or indirectly, more than 80% of, respectively, the common stock and the combined voting power of the Voting Securities of the Person resulting from such Acquisition in substantially the same proportion as their ownership immediately before such Acquisition, (2) a liquidation or dissolution of such Person, or (3) the sale or other disposition of all or substantially all of the assets of such Person. "Closing Date" shall have the meaning assigned to such term in the Acquisition Agreement. "Common Stock" shall mean the common stock, par value $.01 per share, of KCS, as set forth in the Restated Certificate of Incorporation of KCS. "Competitor" shall mean Canadian National Railway, Canadian Pacific Railway Company, Union Pacific Corporation, Burlington Northern Santa Fe Corporation, CSX Corporation, Norfolk Southern Corp., Ferrocarril Mexicano, S.A. de C.V., Ferrocarril del Sureste, S.A. de C.V., Grupo Mexico, S.A. de C.V., the Anschutz Corporation, Carlos Slim Helu, and any other Person who operates a railroad in the United States, Mexico or Canada after the date hereof which, if operated in the United States would be regarded as a Class I railroad, and any of their respective successors or Affiliates. "Consulting Agreement" shall mean the agreement between KCS and Consulting Firm referred to in the Acquisition Agreement. "Disposition" shall have the meaning assigned to such term in Section 3.1 of this Stockholders' Agreement. "Dispute Notice" shall have the meaning assigned to such term in Section 9.12(c) of this Stockholders' Agreement. "Dispute Party" and "Dispute Parties" shall have the meaning assigned to such terms in Section 9.12(a) of this Stockholders' Agreement. "Disputes" shall have the meaning assigned to such term in Section 9.12(a) of this Stockholders' Agreement. "Effective Date" shall have the meaning assigned to such term in Section 6.1 of this Stockholders' Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder. "Foreclosure Event" shall have the meaning assigned to such term in Section 3.6 of this Stockholders' Agreement. "Governmental Authority" shall mean any United States, Mexican or foreign government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the SEC or any other United States, Mexican or foreign government authority, agency, department, board, commission or instrumentality of the United States, any state of the United States or any political subdivision thereof or any foreign jurisdiction, and any court, tribunal or arbitrator(s) of competent jurisdiction, and any United States, Mexican or foreign governmental or non-governmental self-regulatory organization, agency or authority (including the New York Stock Exchange). "Group" shall have the meaning specified in Section 13(d)(3) of the Exchange Act. "Law" shall mean any U.S., Mexican or foreign federal, state or local statute, law (whether statutory or common law), ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment, decree, policy, guideline or other requirement or arbitration award or finding (including, without limitation, those of the New York Stock Exchange or any other applicable self-regulatory organization). "Merger" shall have the meaning assigned to such term in the Acquisition Agreement. "Nominating Committee" shall mean the Nominating Committee of the Board of Directors. "Parties" and "Party" shall have the meaning assigned to such term in Recital C of this Stockholders' Agreement. "Permitted Underwriter" shall mean any underwriter who is in the business of underwriting securities and who, in the ordinary course of its business as an underwriter, acquires Voting Securities in connection with a public offering with the bona fide intention of reselling all of the Voting Securities so acquired pursuant to such public offering. "Person" shall mean any individual, firm, corporation, partnership (limited or general) limited liability company, joint venture organization, or other entity and shall include any group comprised of any Person and any other Person with whom such Person or an Affiliate of such Person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of any shares of Voting Securities. "Plan" shall mean each bonus, pension, stock option, stock purchase, stock bonus, benefit, profit sharing, retirement, severance, incentive, deferred compensation and other similar employee benefit plans, funds, programs or arrangements, all employment contracts or executive compensation agreements, written or oral, and all collective bargaining agreements, each other "employee benefit plan" (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended) and each other superannuation and similar schemes, in each of the foregoing cases which cover, are maintained for the benefit of, or relate to any or all employees (regardless whether such employees' regular place of employment is within or without the United States) or terminated employees of KCS or any subsidiary or Affiliate. "Public Offering" shall mean an underwritten public offering of securities of KCS pursuant to an effective registration statement under the Securities Act or such other public offering pursuant to an effective registration statement under the Securities Act effecting a broad distribution of the Voting Securities offered. "Registration Rights Agreement" shall mean the Registration Rights Agreement, dated the date hereof, by and among KCS, TMM, TMMH, MM and the Principal Stockholders. "Rights Agreement" shall have the meaning assigned to such term in Section 2.3 of this Stockholders' Agreement. "ROFR Commencement Date" shall have the meaning assigned to such term in Section 3.2(b) of this Stockholders' Agreement. "Rules" shall mean any federal, state, local or foreign statute, law, code, ordinance, rule, regulation, judgment, writ, decree, injunction, order, concession, grant, franchise, permit or license or other governmental or regulatory authorization, consent or approval applicable to TMM, TMMH, MM or any of the Principal Stockholders or any of their respective assets, properties, operations or Plans, in each case as applicable. "Rule 144 Transaction" shall mean sale(s) of Common Stock made in accordance with the provisions of Rule 144 under the Securities Act, as currently in effect, including the brokers' transaction, volume and manner of sale provisions thereof. "SEC" shall mean the United States Securities and Exchange Commission and any successor thereto. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder. "Standstill Period" shall mean the period commencing on the Effective Date and ending on the date seven years after the Effective Date. "TFM" shall mean TFM, S.A. de C.V. "TMM Holders" shall mean, at any date, each of TMM, TMMH, MM, the Principal Stockholders, and any of their respective Affiliates who are then holders of Common Stock. "Total Voting Power" shall mean, at any date, the total number of votes that may be cast in the election of directors of KCS (including all outstanding shares of Common Stock) at any meeting of stockholders of KCS held on such date assuming all Voting Securities then entitled to vote at such meeting were present and voted at such meeting, other than votes that may be cast only upon the happening of a contingency. "Voting Securities" shall mean any securities of KCS (unless the context specifically contemplates another issuer) which are entitled to vote generally in the election of directors without regard to any event or occurrence (including, without limitation, the Common Stock), and any other securities by their terms convertible into or exercisable or exchangeable for such securities (whether or not any event or occurrence required to occur prior to such conversion, exercise or exchange shall have occurred). ARTICLE IX. MISCELLANEOUS 9.1 AMENDMENTS; WAIVER. This Stockholders' Agreement may not be amended, altered or modified except by written instrument executed by KCS and TMM. KCS and TMM may amend this Stockholders' Agreement without notice to or the consent of any third party. Any agreement on the part of KCS and TMM to waive (i) any inaccuracies in any representation and warranty contained herein or in any document, certificate or writing delivered pursuant hereto, or (ii) compliance with any of the agreements, covenants or conditions contained herein, shall be valid only if set forth in an instrument in writing signed on behalf of the Party against whom the waiver is to be effective. No such waiver shall constitute a waiver of, or estoppel with respect to, any subsequent or other inaccuracy, breach or failure to strictly comply with the provisions of this Stockholders' Agreement. Any delay or omission on the part of KCS or TMM to exercise any right hereunder shall not in any manner impair the exercise of any right accruing to it hereafter. 9.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the Parties, except as provided herein, and supersedes all prior agreements and understandings, written and oral, among the Parties with respect to the subject matter hereof. 9.3 INTERPRETATION. This Stockholders' Agreement is in the English language. The Parties waive any rights they may have under Applicable Law to have this Stockholders' Agreement made in any language other than English; provided to the extent that any such waiver shall not be valid under Applicable Law, the Parties agree that in case of any ambiguity or contradiction between the English language version of this Stockholders' Agreement and any translation into any other language, that the English language version shall control. 9.4 SEVERABILITY. Any term or provision of this Stockholders' Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Stockholders' Agreement or affecting the validity or enforceability of any of the terms or provisions of this Stockholders' Agreement in any other jurisdiction. If any provision of this Stockholders' Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 9.5 NOTICES. Unless otherwise provided herein, all notices and other communications hereunder shall be in writing and shall be deemed given if (a) delivered in person, (b) transmitted by facsimile (with written confirmation), (c) mailed by certified or registered mail (return receipt requested) (in which case such notice shall be deemed given on the third day after such mailing) or (d) delivered by an express courier (with written confirmation) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice): If to TMM, TMMH, MM or the Principal Stockholders: Grupo TMM, S.A. Avenida de la Cuspide, No. 4755 Colonia Parques del Pedregal 14010 Mexico, D.F. CT Corporation 1209 Orange Street Wilmington, Delaware 19801 With a copy (which shall not constitute notice) to: Milbank, Tweed, Hadley & McCloy LLP 1 Chase Manhattan Plaza New York, New York 10005 Attention: Thomas C. Janson If to KCS: Kansas City Southern P.O. Box 219335 427 West 12th Street Kansas City, MO 64121-9335 Attention: President With a copy (which shall not constitute notice) to: Sonnenschein Nath & Rosenthal LLP 4520 Main Street, Suite 1100 Kansas City, MO 64111 Attention: John F. Marvin, Esq. Any Party hereto may from time to time change its address for notices under this Section 9.5 by giving at least 10 days' notice of such changed address to the other Parties hereto. 9.6 HEADINGS. The headings herein are for convenience only, do not constitute a part of this Stockholders' Agreement and shall not be deemed to limit or affect any of the provisions of this Stockholders' Agreement. 9.7 BINDING EFFECT; PERSONS BENEFITING; NO ASSIGNMENT. This Stockholders' Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and assigns (including transferees of Voting Securities). No provision of this Stockholders' Agreement is intended or shall be construed to confer upon any entity or Person other than the Parties and their respective successors and permitted assigns any right, remedy or claim under or by reason of this Stockholders' Agreement or any part hereof. This Stockholders' Agreement may not be assigned by any of the Parties without the prior written consent of the other Parties. 9.8 RESTRICTIVE LEGEND. A copy of this Stockholders' Agreement shall be filed with the Secretary of KCS and kept with the records of KCS. Upon original issuance thereof and until such time as the same is no longer required hereunder or under any Applicable Law, any certificate issued representing any shares of Common Stock issued to any of the TMM Holders and all certificates issued upon transfer (except for transfers in accordance with Section 3.3) or in exchange or substitution therefor in accordance with this Stockholders' Agreement shall bear the following restrictive legend: THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF ("TRANSFERRED") UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNLESS SUCH TRANSFER IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE SECURITIES ACT. THE TRANSFER OF THE SHARES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE RESTRICTIONS ON TRANSFER PROVIDED FOR IN THE STOCKHOLDERS' AGREEMENT, DATED DECEMBER 15, 2004, BETWEEN KCS AND CERTAIN STOCKHOLDERS, AS FROM TIME TO TIME IN EFFECT, A COPY OF WHICH IS ON FILE AT THE EXECUTIVE OFFICES OF KCS AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH SHARES UPON WRITTEN REQUEST TO KCS. NO SUCH TRANSFER WILL BE EFFECTIVE UNLESS AND UNTIL THE TERMS AND CONDITIONS OF SUCH STOCKHOLDERS' AGREEMENT HAVE BEEN COMPLIED WITH IN FULL AND NO PERSON MAY REQUEST KCS TO RECORD THE TRANSFER OF ANY SHARES IF SUCH TRANSFER IS IN VIOLATION OF SUCH STOCKHOLDERS' AGREEMENT. THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON VOTING PROVIDED FOR IN THE STOCKHOLDERS' AGREEMENT AND NO VOTE OF SUCH SHARES THAT CONTRAVENES SUCH AGREEMENT SHALL BE EFFECTIVE. The certificates representing Voting Securities beneficially owned by the TMM Holders (including, without limitation, all certificates issued upon transfer or in exchange thereof or substitution therefor in accordance with this Stockholders' Agreement) shall also bear any legend required under any other applicable laws, including state securities or blue sky laws. KCS may make a notation on its records or give instructions to any transfer agents or registrars for such shares in order to implement the restrictions on transfer set forth in this Stockholders' Agreement. KCS shall not incur any liability for any refusal or delay in recognizing any transfer of Voting Securities if KCS in good faith reasonably believes that such transfer may have been or would be in violation of the provisions of applicable law or this Stockholders' Agreement. 9.9 NO THIRD PARTY BENEFICIARIES. This Stockholders' Agreement is intended for the benefit of the Parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision of this Stockholders' Agreement be enforced by, any other Person. 9.10 COUNTERPARTS. This Stockholders' Agreement may be executed in two or more counterparts, each original or facsimile of which shall be deemed an original, but all of which taken together shall constitute one and the same agreement, it being understood that all of the Parties need not sign the same counterpart. 9.11 SPECIFIC ENFORCEMENT. The Parties hereto acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Stockholders' Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each of the Parties hereto shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Stockholders' Agreement by the other and to enforce specifically the terms and provisions of this Stockholders' Agreement, this being in addition to any other remedy to which they may be entitled by law or equity. 9.12 GOVERNING LAW; DISPUTE RESOLUTION. (a) Resolution of any and all disputes between KCS, on the one hand, and one or more of TMM, TMMH, MM, the Principal Stockholders, and any of their respective Affiliates on the other hand, (each of KCS, on the one hand, and TMM, TMMH, MM, the Principal Stockholders, or any of their respective Affiliates, on the other hand, a "Dispute Party" and, both of KCS, on the one hand, and TMM, TMMH, MM, the Principal Stockholders, or any of their respective Affiliates, on the other hand, the "Dispute Parties") arising from or in connection with this Stockholders' Agreement or any transactions contemplated by this Stockholders' Agreement, whether based on contract, tort, common law, equity, statute, regulation, order or otherwise, ("Disputes"), including Disputes arising in connection with claims by third Persons, shall be exclusively governed by and settled in accordance with the provisions of this Section 9.12; provided, that the foregoing shall not preclude equitable or other judicial relief to enforce the provisions hereof or to preserve the status quo pending resolution of Disputes hereunder. (b) THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN THE PARTIES HERETO AND THE ADJUDICATION AND ENFORCEMENT THEREOF, SHALL BE GOVERNED BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE AND THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS. (c) As to any Dispute which is not resolved in the ordinary course of business, the Dispute Parties shall first attempt in good faith to promptly resolve any Dispute by negotiations between executives. Either of the Dispute Parties may initiate this procedure by delivery of written notice of the Dispute (the "Dispute Notice") to the other. Not later than 20 days after delivery of the Dispute Notice, one executive of one of the Dispute Parties with authority to settle the Dispute shall meet with one executive of the other Dispute Party with authority to settle the Dispute at a reasonably acceptable time and place, and thereafter as such executives shall deem reasonably necessary. The executives shall exchange relevant information and endeavor to resolve the Dispute. Prior to any such meeting, each Dispute Party's executive shall advise the other as to any individuals who will attend such meeting with the executive. All negotiations pursuant to this Section 9.12(c) shall be confidential and shall be treated as compromise negotiations for purposes of Rule 408 of the Federal Rules of Evidence and similarly under other local or foreign rules of evidence. (d) Each Dispute Party hereby agrees to submit all Disputes not resolved pursuant to Section 9.12(c) hereof to final and binding arbitration in New York, New York. Either Dispute Party may initiate such arbitration by delivery of a demand therefor (the "Arbitration Demand") to the other Dispute Party not sooner than 60 days after the date of delivery of the Dispute Notice but promptly thereafter; provided, that if a Dispute Party rejects participation in the procedures provided under Section 9.12(c), the other Dispute Party may initiate arbitration at such earlier time as such rejection shall become reasonably apparent, and, whenever arbitration is initiated, may seek recovery of any damages or expenses arising from such rejection, including attorney's fees and expenses, and Arbitration Costs (as defined below) in connection with arbitration hereunder. (i) Three Arbitrators shall be appointed (the "Arbitrators"), one of whom shall be appointed by KCS, one by TMM, and the third of whom, who shall act as the chairman of the arbitral tribunal, shall be appointed by the first two Arbitrators within 10 business days of the first two Arbitrators confirmation by the American Arbitration Association. Each Party agrees that the TMM Holders shall be considered jointly as one side for the purposes of constitution of the arbitration tribunal hereunder. If either Dispute Party fails to appoint an Arbitrator within 10 business days of a request in writing by the other Dispute Party to do so or if the first two Arbitrators cannot agree on the appointment of the third Arbitrator within 10 business days of their confirmation by the American Arbitration Association, then such Arbitrator shall be appointed by the American Arbitration Association in accordance with its Commercial Arbitration Rules. As soon as the arbitration tribunal has been convened, a hearing date shall be set within 15 days thereafter; provided, that the Arbitrators may extend the date of the hearing upon request of any Dispute Party to the extent necessary to insure that such Dispute Party is given a reasonable period of time to prepare for the hearing. Written submittals in the English language shall be presented and exchanged by both Dispute Parties five business days before the hearing date. At such time the Dispute Parties shall also exchange copies of all documentary evidence upon which they will rely at the arbitration hearing and a list of the witnesses whom they intend to call to testify at the hearing. The Arbitrators shall make their determination as promptly as practicable after conclusion of the hearing. (ii) The arbitration shall be conducted in the English language pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Notwithstanding the foregoing, (A) each Dispute Party shall have the right to audit the books and records of the other Dispute Party that are reasonably related to the Dispute; (B) each Dispute Party shall provide to the other, reasonably in advance of any hearing, copies of all documents which a Dispute Party intends to present in such hearing; (C) all hearings shall be conducted on an expedited schedule; and (D) all proceedings shall be confidential, except that either Dispute Party may at its expense make a stenographic record thereof. (iii) The Arbitrators shall endeavor to complete all hearings not later than 120 days after their tribunal has been convened, and shall make a final award as promptly as practicable thereafter. Such award shall be communicated, in writing, by the Arbitrators to the Dispute Parties, and shall contain specific findings of fact and conclusions of law in accordance with the governing law set forth in Section 9.12(b) of this Agreement. Any award of such Arbitrators shall be final and binding upon the Parties to this Agreement and shall not be attacked by any of the Parties to this Agreement in any court of law and may be enforced in any court having jurisdiction, including expressly the courts of the State of New York, United States of America, and the courts of the Federal District of Mexico. The Arbitrators shall apportion all costs and expenses of the arbitration, including the Arbitrators' fees and expenses, fees and expenses of experts and fees and expenses of translators ("Arbitration Costs") between the prevailing and non-prevailing Dispute Party as the Arbitrators shall deem fair and reasonable. In circumstances where (A) a Dispute has been asserted or defended against on grounds that the Arbitrators deem manifestly unreasonable, or (B) the non-prevailing Dispute Party has rejected participation in procedures under Section 9.12(c), the Arbitrators may assess all Arbitration Costs against the non-prevailing Dispute Party and may include in the award the prevailing Dispute Party's attorney's fees and expenses in connection with any and all proceedings under this Section 9.12. Notwithstanding the foregoing, in no event may the arbitrator award multiple or punitive damages. (e) Pursuant to an agreement of the Parties hereto or a judicial determination that a Dispute is not subject to final and binding arbitration as set forth in Section 9.12(d), KCS, TMM, TMMH, MM and the Principal Stockholders each irrevocably agrees that any legal action or proceeding against it with respect to this Stockholders' Agreement and any transaction contemplated by this Stockholders' Agreement shall be brought only in the courts of the State of New York, or of Federal courts of the United States of America sitting in New York, and by execution and delivery of this Stockholders' Agreement, KCS and each of TMM Holders irrevocably submits to the venue and jurisdiction of each such court and irrevocably waives any objection or defense such Party may have to venue or personal jurisdiction in any such court for the purpose of resolving any claim, dispute, cause of action arising out of or related to this Stockholders' Agreement (including any claim that the suit or action has been brought in an inconvenient forum and any right to which it may become entitled on account of place of residence or domicile), the alleged breach of this Stockholders' Agreement, the enforcement of the terms of this Stockholders' Agreement, the Acquisition Agreement, the Ancillary Agreements and the other terms contemplated hereby and thereby. A final judgment in any suit, action or proceeding shall be conclusive and may be enforced in any court where jurisdiction over the Parties may be had or in which the Parties are subject to service of process. (f) Each of the Parties hereto irrevocably appoints CT Corporation (the "Process Agent"), at 1209 Orange Street, Wilmington, Delaware, 19801 (telephone 302-658-7581) as its agent and true and lawful attorney-in-fact in its name, place and stead to accept on behalf of each of the parties and their respective properties and revenues, service of copies of the summons and complaint and any other process which may be served in any such suit, action or proceeding brought in the State of New York, and each of the Parties hereto agrees that failure of the Process Agent to give any notice of any such service of process to any of the Parties hereto shall not impair or affect the validity of such service or the enforcement of any judgment based thereon. 9.13 ANNOUNCEMENTS. KCS and TMM shall consult with each other before issuing, and provide each other the opportunity to review, comment on and concur with, any press release or other public statement with respect to this Stockholders' Agreement, except as KCS or TMM may determine is otherwise required by Applicable Law, judicial or administrative action or any requirement of the Mexican Stock Exchange, the New York Stock Exchange or any other applicable self-regulatory organization. 9.14 COOPERATION ON TMM DISTRIBUTION. KCS acknowledges that holders may desire to effect a distribution of the shares of Common Stock to the stockholders of TMM in a tax efficient manner (a "Spin-Off"). In the event that TMM determines to effect a Spin-Off, KCS will, and will cause its subsidiaries to, take commercially reasonable efforts to cooperate with TMM in the consummation of the Spin-Off. Without limiting the generality of the foregoing, if requested by TMM, KCS agrees to use its commercially reasonable efforts to effect the Spin-Off Merger (as defined below) as promptly as practicable after receipt from TMM of notice of its intention to effect such Spin-Off Merger. TMM shall cooperate fully with KCS, and shall reimburse KCS, for any out-of-pocket expenses that KCS incurs in connection with the Spin-Off Merger, including the reasonable fees and expenses of KCS's counsel (other than any such expenses that constitute Registration Expenses (as defined in the Registration Rights Agreement) in the event that the Spin-Off Merger requires registration under the Securities Act (in which case such registration shall reduce by one (1) the number of registrations required to be effected by KCS under Section 2 of the Registration Rights Agreement)) and shall indemnify and hold KCS harmless from and against all costs and expenses of any nature whatsoever (including taxes in connection therewith) resulting from, arising out of, or due to, directly or indirectly, the Spin-Off Merger (other than with respect to matters as to which KCS is obligated to provide indemnification under the Registration Rights Agreement). For purposes of this Agreement, the term "Spin-Off Merger" shall mean a transaction occurring prior to that date which shall be one year following the Effective Time (as defined in the Acquisition Agreement) in which (i) a newly-formed entity organized under the laws of the UMS whose assets consist solely of the shares of Common Stock ("Holdco") and the stock of which is distributed to the holders of capital stock of TMM is merged with and into a wholly-owned subsidiary of KCS and, in such merger, the outstanding shares of capital stock of Holdco are converted into the right to receive, in the aggregate, a number of shares of Common Stock equal to the number of shares of Common Stock held by Holdco; (ii) Holdco shall not have any indebtedness or other obligations (other than any obligations related solely to its organization and the holding of the shares of Common Stock, which obligations TMM shall agree to indemnify KCS against pursuant to an indemnity agreement satisfactory in form and substance to KCS and TMM); (iii) KCS and its subsidiaries shall not be required to assume or become liable for any other liabilities as a result of the Spin-Off Merger (other than any obligations or liabilities resulting from the registration of the shares of Common Stock issuable pursuant to the Spin-Off Merger); and (iv) KCS shall be reasonably satisfied that the transaction will not affect adversely in any material way any rights of KCS or any of its Affiliates under the Acquisition Agreement or any of the Ancillary Agreements, including without limitation, rights to receive any indemnification determined to be due thereunder. IN WITNESS WHEREOF, the parties hereto have caused this Stockholders' Agreement to be duly executed by their respective authorized officers as of the date hereof. KANSAS CITY SOUTHERN By: /s/Michael R. Haverty -------------------------------- Name: Michael R. Haverty Title: Chairman, President & CEO GRUPO TMM, S.A. By: /s/ Jose F. Serrano Segovia -------------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact By: /s/ Javier Sergovia Serrano -------------------------------- Name: Javier Sergovia Serrano Title: Attorney in Fact TMM HOLDINGS, S.A. de C.V. By: /s/ Jose F. Serrano Segovia -------------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact By: /s/ Javier Sergovia Serrano -------------------------------- Name: Javier Sergovia Serrano Title: Attorney in Fact TMM MULTIMODAL, S.A. de C.V. By: /s/ Jose F. Serrano Segovia -------------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact By: /s/ Javier Sergovia Serrano -------------------------------- Name: Javier Sergovia Serrano Title: Attorney in Fact PRINCIPAL STOCKHOLDERS /s/ Jose F. Serrano Segovia ------------------------------------ Jose F. Serrano Segovia /a/ Ramon Serrano Segovia ------------------------------------ Ramon Serrano Segovia /s/ Teresa Serramp Segovia ------------------------------------ Teresa Serrano Segovia SERVICIOS DIRECTIVOS SERVIA, S.A. DE C.V. By: /s/ Jose F. Serrano Segovia -------------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact By: /s/ Javier Sergovia Serrano -------------------------------- Name: Javier Sergovia Serrano Title: Attorney in Fact PROMOTORA SERVIA, S.A. de C.V. By: /s/ Jose F. Serrano Segovia -------------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact By: /s/ Javier Sergovia Serrano -------------------------------- Name: Javier Sergovia Serrano Title: Attorney in Fact EX-10 5 form8k_122004ex104.txt EXH. 10.4 REGISTRATION RIGHTS AGREEMENT Exhibit 10.4 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of December 15, 2004, but to become effective as herein provided ("Registration Rights Agreement"), by and between Kansas City Southern, a Delaware corporation ("KCS"), and Grupo TMM, S.A., a SOCIEDAD ANONIMA organized under the laws of the United Mexican States ("UMS") ("TMM"), TMM Multimodal, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS, and the Principal Stockholders of TMM who have executed this Registration Rights Agreement ("Principal Stockholders") (collectively, the "Parties"). RECITALS A. Pursuant to an Amended and Restated Acquisition Agreement (the "Acquisition Agreement") dated the date hereof among certain of the Parties and others, KCS will acquire from MM all of the issued and outstanding capital stock of Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS ("GTFM") held by MM and MM will receive from KCS shares of Common Stock (as defined below). B. As a condition to the consummation of the transactions contemplated by the Acquisition Agreement, the Parties have entered into this Registration Rights Agreement to provide TMM, MM and the Principal Stockholders with certain registration rights with respect to the shares of Registrable Stock (as defined below). AGREEMENTS In consideration of the recitals (which are incorporated herein by reference), the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Terms initially capitalized but not otherwise defined herein shall have the meanings given such terms in the Acquisition Agreement, except for the following: "CLOSING DATE" shall have the meaning assigned to such term in the Acquisition Agreement. "COMMON STOCK" shall mean the common stock, par value $.01 per share, of KCS. f "EFFECTIVE DATE" shall have the meaning set for in Section 16 hereof. "HOLDERS" means TMM, MM and the Principal Stockholders and, to the extent designated by TMM, MM or the Principal Stockholders as a "Holder," any Permitted Transferee who acquires shares of Registrable Stock from a Holder and agrees to be bound by the terms and conditions of this Registration Rights Agreement. The term "Holder" shall mean any one of the Holders. "PERMITTED TRANSFEREE" shall mean those persons to whom TMM, MM and the Principal Stockholders can transfer Registrable Stock in accordance with the terms of the Stockholders' Agreement. "PROSPECTUS" shall mean any prospectus which is a part of a Registration Statement, together with all amendments or supplements thereto, including any document incorporated, or deemed to be incorporated, by reference therein. "REGISTRABLE STOCK" shall consist of the shares of Common Stock (a) issued by KCS pursuant to the Acquisition Agreement; (b) issued pursuant to the Consulting Agreement; or (c) otherwise acquired by a Holder upon exercise of pre-emptive rights in compliance with the Stockholders' Agreement; PROVIDED, HOWEVER, that Registrable Stock shall not be deemed to include (i) any shares after such shares have been registered for resale under the Securities Act and sold pursuant to such registration, (ii) any shares that have been sold without registration under the Securities Act in compliance with Rule 144, or pursuant to any other exemption from registration under the Securities Act, and (iii) any shares which are eligible to be sold without registration under the Securities Act pursuant to subsection (k) of Rule 144 or a comparable exemption from registration that enables the sale of all shares held by a Holder without registration under the Securities Act and without restriction as to the manner of sale. "REGISTRATION EXPENSES" shall means all expenses, except Selling Expenses, incurred by KCS in complying with Sections 2 and 3, including all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for KCS and blue sky fees and expenses. "REGISTRATION STATEMENT" shall mean any registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act, together with all amendments (including any post-effective amendments) or supplements thereto and any documents incorporated, or deemed to be incorporated, by reference therein. For purposes of this Registration Rights Agreement, references to "amend," "amendment" or "supplement," when used in relation to the Registration Statement or any Prospectus, shall include the filing of any document that is, or is deemed to be, incorporated by reference therein. "REQUEST" shall have the meaning set forth in Section 2(A) hereof. "RULE 144" shall mean Rule 144 promulgated under the Securities Act. "RULE 415" shall mean Rule 415 promulgated under the Securities Act. "SECURITIES" shall mean any debt or equity securities of KCS, whether now or hereafter authorized, and any instrument convertible into or exchangeable for Securities or a Security. The term "Security" shall mean any one of the Securities. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended prior to or after the Effective Date of this Registration Rights Agreement, or any federal statute or statutes which shall be enacted to take the place of such Act, together with all rules and regulations promulgated thereunder. "SECURITIES AND EXCHANGE COMMISSION" shall mean the United States Securities and Exchange Commission or any successor to the functions of such agency. "SELLER" shall mean each Holder of Registrable Stock as to which KCS could be required to file a Registration Statement or which could be registered under the Securities Act at the request of such Holder pursuant to any of the provisions of this Registration Rights Agreement. "SELLING EXPENSES" shall mean all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of the Registrable Stock and expenses of all marketing and promotional efforts of the underwriters in connection with an underwritten offering of Registrable Stock in a transaction covered by a Registration Statement effected pursuant to Section 2. 2. REQUIRED REGISTRATIONS. (A) Subject to the terms of this Registration Rights Agreement, upon the written request (the "Request") to register any number of shares of Registrable Stock under the Securities Act made at any time prior to the five year anniversary of the Effective Date of this Registration Rights Agreement by Holders of not less than 10% of the shares of Registrable Stock specifying the intended method of disposition thereof, KCS will use commercially reasonable efforts to effect the registration of Registrable Stock under the Securities Act for disposition in accordance with the intended method of disposition stated in the Request, to the extent requisite to permit the disposition (in accordance with the intended method set forth in the Request) of the Registrable Stock to be so registered, but only to the extent provided for in the following provisions of this Registration Rights Agreement. Whenever KCS shall, pursuant to this Section 2(A), be requested to effect the registration of any Registrable Stock under the Securities Act, KCS shall, within ten (10) Business Days after receipt of the Request, give written notice of such proposed registration to all Holders of Registrable Stock, stating that such Holders have the right to request that any or all of the Registrable Stock owned by them be included in such registration and specifying the intended filing date of the Registration Statement relating to such Request (which date shall be at least ten (10) Business Days after the date such notice is sent to the Holders). KCS shall include in such registration all Registrable Stock with respect to which KCS receives written requests from the Holders thereof for inclusion therein (stating the intended method of disposition of such Registrable Stock) within the ten (10) Business Days prior to the filing of the Registration Statement relating to such request. KCS will use commercially reasonable efforts to file the Registration Statement relating to the Request to permit the disposition of all Registrable Stock as to which KCS has received notices from Holders in accordance with the intended methods of disposition set forth in such notices not later than thirty (30) Business Days after receipt by KCS of the initial Request; provided that KCS shall not be required to file a Registration Statement prior to the 180th day after the consummation of the Acquisition (it being understood that if a Request is made prior to such time the filing of such Registration Statement shall be deferred until such 180th day). Thereafter, KCS shall use its commercially reasonable efforts to have the Registration Statement declared effective at the earliest practicable time and shall use its commercially reasonable efforts to keep such Registration Statement effective for the period of time required to effect the disposition by such Holders in accordance with the intended method of disposition described in the requests of such Holders, all to the extent requisite to permit such sale or other disposition by such Holders of the Registrable Stock so registered. So long as KCS is eligible to use Form S-3 (or any successor form) under the Securities Act, any Request may specify that the Registration Statement be a "shelf registration" permitting the offering of Registrable Stock registered thereby on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (or any successor rule), in which case, KCS shall use its commercially reasonable efforts to maintain such Registration Statement continuously effective and usable for sales thereunder for a period of not more than one year; provided that KCS shall not be required hereunder to file more than one "shelf registration". (B) The foregoing registration rights of Holders of Registrable Stock shall be deemed satisfied by KCS when six Registration Statements covering shares of Registrable Stock which KCS has been requested to register pursuant to Section 2(A) hereof shall have been filed by KCS with and made effective by the Securities and Exchange Commission under the Securities Act. To the extent an underwritten public offering is the intended method of distribution of Registrable Stock with respect to any Request submitted, the Holders participating in such offering shall have the right to select the investment banker or bankers who shall serve as the manager and/or co-managers for the offering of Securities covered by such Registration Statement, subject to the approval by KCS of such selection, which approval shall not be unreasonably withheld. (C) Any registration under this Section 2 shall be on such appropriate registration form of the Securities and Exchange Commission (i) as shall be selected by KCS and (ii) as shall permit the disposition of the Registrable Stock in accordance with the intended method or methods of disposition specified in Holders' requests for such registration. (D) Notwithstanding the foregoing, KCS shall be permitted to delay the filing of any Registration Statement pursuant to this Section 2: (i) if KCS is not eligible to use Form S-3 (or a comparable or successor form) to effect such registration; (ii) if KCS, within ten (10) days of the receipt of the Request, gives notice to the Holders of its bona fide intention to effect the filing of a Registration Statement with the Securities and Exchange Commission within thirty (30) days of receipt of the Request (other than a Registration Statement on Form S-8), in which case KCS's obligation to file the Registration Statement pursuant to this Section 2 shall be deferred for a period not to exceed ninety (90) days from the date of the Request; or (iii) if KCS shall furnish to Holders a resolution adopted by the Board of Directors of KCS to the effect that in the good faith judgment of KCS it would be seriously detrimental to KCS for a Registration Statement to be filed at that time, specifying with particularity the basis therefor (subject to the Holders entering into appropriate non-disclosure agreements) in which case KCS's obligation to file a Registration Statement shall be deferred for a period not to exceed sixty (60) days from the receipt of the Request. KCS shall not be required to effect any registration pursuant to this Section 2 once it has effected six (6) registrations in accordance with Section 2. (E) In determining the number of registrations effected pursuant to this Section 2, such registrations shall not include any registration if (i) the Registration Statement did not become effective or remain in effect as required by this Section 2; or (ii) the Registration Statement is withdrawn at the request of the Holders and the Holders agree to pay the Registration Expenses associated with such Registration Statement. (F) KCS shall not permit any securities of any other person to be included in any Registration Statement filed pursuant to this Section 2, other than securities sold for the account of KCS, without the consent of the Holders whose Registrable Stock is included in such Registration Statement, which consent shall not be unreasonably withheld. (G) KCS shall use its commercially reasonable efforts to qualify for eligibility to use Form S-3 with respect to registrations requested pursuant to this Section 2. 3. INCIDENTAL REGISTRATION. (A) If KCS, at any time after the 180 days following the date of consummation of the transactions contemplated by the Acquisition Agreement, proposes or is required to file a registration statement under the Securities Act related to the offer or sale of shares of Common Stock on a form which permits inclusion of the Registrable Stock (other than a registration on Form S-4 or S-8 or any successor or similar forms), it will give written notice to all Holders of then existing Registrable Stock of its intention so to do. Upon the written request of any such Holder given to KCS within fifteen Business Days after receipt of any such notice, KCS will, subject to the provisions of this Registration Rights Agreement, use commercially reasonable efforts to cause all such Registrable Stock which such Holders shall have requested be registered to be registered under the Securities Act, to the extent required to permit the disposition by such Holders of the Registrable Stock so registered. Registrations of Registrable Stock under this Section 3 shall not constitute a registration effected pursuant to Section 2. To the extent an underwritten public offering is the intended method of distribution of Registrable Stock included in a registration pursuant to this Section 3, KCS shall have the right, in its sole discretion, to select the investment banker or bankers who shall serve as the manager and/or co-managers for all registrations of offerings of Registrable Stock under this Section 3. (B) Except as provided in Sections 2 and 3 hereof, KCS shall have no obligation to register any Securities held by any Holder under the Securities Act or under any foreign, state or other securities laws. 4. REGISTRATION PROCEDURES. Whenever KCS is required by the provisions of this Registration Rights Agreement to use its commercially reasonable efforts to effect the registration of any Registrable Stock under the Securities Act, KCS will: (A) Prepare and file (within the period required by Section 2 for all registrations pursuant to such Section) with the Securities and Exchange Commission a Registration Statement with respect to such Registrable Stock and use commercially reasonable efforts to cause such Registration Statement to become and remain continuously effective for a period necessary to effect the sale of the Registrable Stock in accordance with the intended method of disposition and the requirements of this Registration Rights Agreement, provided that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, KCS will furnish to counsel for the Holders of Registrable Stock included in such Registration Statement copies of all such documents proposed to be filed, which documents (other than the documents incorporated by reference therein) will be subject to the review of such counsel. KCS's obligations under this Section 4 shall be subject to the following: (i) If, prior to the effectiveness of a Registration Statement relating to Registrable Stock, KCS shall furnish to the Holders a resolution of its Board of Directors stating that KCS has determined in its good faith judgment that the sale of Registrable Stock by such Holders pursuant to the Registration Statement would require disclosure of material non-public information, the current disclosure of which would, in the sole judgment of the Board of Directors of KCS, be materially detrimental to KCS (an "Information Blackout"), then KCS's obligation to file the Registration Statement and to use its commercially reasonable efforts to have such Registration Statement declared effective shall be deferred for a period not to exceed the earlier of (x) the date upon which such material information is disclosed to the public or (y) sixty (60) days after the Board of Directors of KCS makes such good faith determination (such period being the "Information Blackout Period"). (ii) If prior to the effectiveness of a Registration Statement relating to Registrable Stock, KCS shall furnish to the Holders a certificate stating that the Board of Directors of KCS has determined in its good faith judgment that KCS is required to file financial statements with the Securities and Exchange Commission in connection with a material acquisition or other event (a "Financial Statement Blackout"), then KCS's obligation to file the Registration Statement and to use its commercially reasonable efforts to have such Registration Statement declared effective shall be deferred for a period not to exceed the earlier of (x) the date upon which such financial statements are filed with the Securities and Exchange Commission (it being understood that KCS shall use its commercially reasonable efforts to file such financial statements as soon as practicable, or (y) sixty (60) days after KCS makes such good faith determination (such period being the "Financial Statement Blackout Period"). Any such determination shall be accompanied by a certificate or letter from KCS's independent auditors to the effect that such auditors agree that such financial statements are required to be included or incorporated by reference in such Registration Statement to permit such Registration Statement to become effective under the Securities Act or to permit continued sales thereunder, as the case may be. (iii) If a Registration Statement relating to Registrable Stock is effective, upon written notice of an Information Blackout or Financial Statement Blackout from KCS to the Holders, KCS may request suspension of and the Holders shall suspend sales of Registrable Stock by Holders pursuant to such Registration Statement for the Information Blackout Period or the Financial Statement Blackout Period. (iv) KCS shall use commercially reasonable efforts to ensure that the aggregate number of days in any period of twelve consecutive months in which an Information Blackout or Financial Statement Blackout or a deferral pursuant to Section 2(D) is in effect shall not be more than ninety (90). (B) Prepare and file with the Securities and Exchange Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for a period necessary to effect the sale of the Registrable Stock thereunder, which shall in no event exceed 120 days (or the period specified in Section 2 in the case of a shelf registration) and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Stock covered by such Registration Statement during such period in accordance with the intended method or methods of disposition by the Sellers thereof set forth in such Registration Statement; (C) Furnish to each Seller such number of copies of such Registration Statement and the exhibits thereto, each amendment and supplement thereto, the Prospectus included in the Registration Statement (including each preliminary Prospectus), all documents incorporated by reference or deemed to be incorporated by reference in the Registration Statement or the Prospectus, and such other documents, as such Seller may reasonably request in order to facilitate the disposition of the Registrable Stock owned by such Seller covered by the Registration Statement in accordance with the intended method of disposition; (D) Use commercially reasonable efforts to register or qualify the Registrable Stock covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions in the United States of America as each Seller shall reasonably request, to keep such registrations or qualifications in effect for so long as such Registration Statement remains in effect, and do any and all other acts and things which may be necessary under such securities or blue sky laws to enable such Seller to consummate the disposition in such jurisdictions of the Registrable Stock owned by such Seller covered by such Registration Statement (provided, however, that KCS will not be required to (i) in the case of a registration pursuant to Section 3, register or qualify such Seller's Registrable Stock in any jurisdiction where shares to be sold by KCS or any other Person initiating such registration are not to be registered or qualified, (ii) qualify generally to do business as a foreign corporation in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (iii) subject itself to taxation in any jurisdiction or (iv) consent to general service of process in any jurisdiction); (E) Notify each Seller, at any time when a Prospectus relating to the Registrable Stock of such Seller covered by such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of any such Seller, promptly prepare a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of the Registrable Stock covered by such Registration Statement, such Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances then existing; (F) Cause all Registrable Stock covered by such Registration Statement to be listed on the principal securities exchange on which Securities of the same class are then listed; (G) Make available for inspection by any Seller, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by Sellers holding at least a majority of the Registrable Stock included in such registration pursuant to the provisions of this Registration Rights Agreement such financial and other records, pertinent corporate documents and properties of KCS as may be reasonably requested by such party in connection with such Registration Statement solely for the purpose of effecting sales of Registrable Stock included in such registration; and (H) In connection with any underwritten offering pursuant to Section 2, Sellers shall (i) enter into an underwriting agreement in customary form with the underwriters participating in the offering; and (ii) provide reasonable cooperation to the underwriters and the Holders in marketing the Registrable Stock; provided, that not more than one KCS officer (the chief financial officer or other appropriate officer) shall be required to participate in any "road show" or similar presentation in connection with such offering and any such participation shall be subject to such officer's availability, shall be at the Holders' expense and shall be limited to offerings with an aggregate offering price of at least $100 million. In connection with any registration hereunder, each Seller shall furnish KCS such information regarding such Seller, the Registrable Stock and the intended plan of distribution thereof as KCS may from time to time reasonably request in writing and, if any Seller does not furnish such information prior to the filing of the Registration Statement, KCS may exclude the Registrable Stock of such Holder from such Registration Statement. Each Seller shall be deemed to have agreed by acquisition of the Registrable Stock that, upon receipt of any notice from KCS of the occurrence of any event of the kind described in Subsection (E) of this Section 4, such Seller will forthwith discontinue its disposition of the Registrable Stock pursuant to the Registration Statement relating thereto until Seller's receipt of the copies of the supplemented or amended Prospectus contemplated by Subsection (E) of this Section 4 and, if so directed by KCS, will deliver to KCS (at KCS's expense) all copies, other than permanent file copies, then in Seller's possession of the Prospectus relating to the Registrable Stock current at the time of receipt of such notice. 5. EXPENSES. With respect to the first four registrations effected pursuant to the provisions of Section 2 and registrations which include Registrable Stock pursuant to Section 3, KCS shall pay all Registration Expenses. With respect to any registrations effected pursuant to Section 2 beyond the first four registrations, the Holders whose shares of Registrable Stock are included in the applicable registration shall pay all Registration Expenses. 6. INDEMNIFICATION. (A) In the event of a registration of any Registrable Stock pursuant to this Registration Rights Agreement, KCS shall indemnify and hold harmless each Seller, each underwriter (in the case of any underwritten offering) and each person, if any, who controls such Seller or underwriter within the meaning of the Securities Act, and each officer, director, employee and advisor of each of the foregoing (each a "Seller Indemnitee"), against any expenses, losses, claims, damages or liabilities, joint or several, to which such Seller Indemnitee may become subject under the Securities Act, any state securities law or otherwise, including any of the foregoing incurred in settlement of any litigation, commenced or threatened, insofar as such expenses, losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such shares are registered under the Securities Act, any preliminary Prospectus or final Prospectus contained therein, any summary Prospectus used in connection with any securities being registered, or any amendment or supplement thereto; or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (iii) any violation by KCS of the Securities Act or rules of the Securities and Exchange Commission thereunder or any blue sky laws or any rules promulgated thereunder, and shall reimburse each such Seller Indemnitee for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that KCS shall not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, said preliminary Prospectus or said Prospectus or summary Prospectus or said amendment or supplement in reliance upon and in conformity with written information furnished to KCS by or on behalf of the Seller or any underwriter specifically for use in the preparation thereof; and PROVIDED, FURTHER, that if any expenses, losses, claims, damages or liabilities arise out of or are based upon an untrue statement, alleged untrue statement, omission or alleged omission contained in any preliminary Prospectus which did not appear in the final Prospectus, KCS shall not have any liability with respect thereto to any Seller Indemnitee if any Seller Indemnitee delivered a copy of the preliminary Prospectus to the person alleging such expenses, losses, claims, damages or liabilities and failed to deliver a copy of the final Prospectus as amended or supplemented if it has been amended or supplemented, to such person at or prior to the written confirmation of the sale to such person. (B) In the event of a registration of any Registrable Stock pursuant to this Registration Rights Agreement, each Holder shall, jointly and severally, indemnify and hold harmless KCS and each person, if any, who controls KCS within the meaning of the Securities Act, each officer of KCS who signs the Registration Statement, each director of KCS and each underwriter and each person who controls any underwriter within the meaning of the Securities Act (each a "Company Indemnitee"), against any and all such expenses, losses, claims, damages or liabilities referred to in Section 6(A) if the statement, alleged statement, omission or alleged omission in respect of which such expense, loss, claim, damage or liability is asserted was made in reliance upon and in conformity with information furnished in writing to KCS by or on behalf of a Holder of Registrable Stock specifically for use in connection with the preparation of such registration Statement, preliminary Prospectus, Prospectus, summary Prospectus, amendment or supplement. (C) Promptly after receipt by an indemnified party of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Article 6 or to the extent that it has not been prejudiced as a proximate result of such failure. In case any such action shall be brought against any indemnified party, and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select one separate counsel to assert such legal defenses (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party or parties). Upon the permitted assumption by the indemnifying party of the defense of such action, the indemnifying party shall not be liable to such indemnified party under this Article 6 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof (other than reasonable costs of investigation) unless (i) the indemnified party shall have employed one separate counsel (together with any local counsel) in connection with the assertion of legal defenses in accordance with the proviso to the preceding sentence, (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time, (iii) the indemnifying party and its counsel do not actively and vigorously pursue the defense of such action or (iv) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. 7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may participate in any underwritten registration hereunder unless such Holder (i) agrees to sell such Holder's Registrable Stock on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; PROVIDED, HOWEVER, that no Holder of Registrable Stock shall be required to make any representations or warranties or to provide information in the Registration Statement relating to such registration except, in either case, with respect to itself and its intended method of disposition of Registrable Stock. 8. UNDERWRITING CUT-BACKS. (A) If (1) any Holder of Registrable Stock is entitled and wishes to register any Registrable Stock in a registration made pursuant to Section 2 hereof, and (2) the offering proposed to be made by the Holder or Holders for whom such registration is to be made is to be an underwritten public offering, and (3) KCS wishes to register Securities in such registration, and (4) the managing underwriters of such public offering furnish a written opinion that the total amount of Securities to be included in such offering would exceed the maximum amount of Securities (as specified in such opinion) which can be marketed at a price reasonably related to the then current market value of such Securities and without otherwise materially and adversely affecting such offering, then the relative rights to participate in such offering of the Holders of Registrable Stock, the holders of other Securities having the right to include such Securities in such registration, and KCS shall be in the following order of priority: First: The Holders of Registrable Stock shall be entitled to participate in accordance with the number of shares of Registrable Stock which each such Holder shall request to be registered, such participation to be pro rata in accordance with the number of shares which each such Holder shall request be registered if, pursuant to clause 4 of this Subsection (A), the total amount of Securities to be included in the offering will be less than the number of shares of Registrable Stock that all of such Holders shall request be registered; and then Second: KCS shall be entitled to participate; and then Third: All holders of other Securities having the right to include such Securities in such registration shall be entitled to participate in accordance with the relative priorities, if any, as shall exist among them. (B) If (1) any Holder of Registrable Stock entitled to do so requests registration of Registrable Stock under Section 3 hereof, and (2) the offering proposed to be made is to be an underwritten public offering, and (3) the managing underwriters of such public offering furnish a written opinion that the total amount of Securities to be included in such offering would exceed the maximum amount of Securities (as specified in such opinion) which can be marketed at a price reasonably related to the then current market value of such Securities and without materially and adversely affecting such offering, then the relative rights to participate in such offering of the Holders of Registrable Stock, the holders of other Securities having the right to include such Securities in such registration, and KCS shall be in the following order of priority: First: KCS or the persons requesting such registration (if other than KCS) shall be entitled to participate in accordance with the relative priorities, if any, as shall exist among them; and then Second: All other holders of Securities having the right to include such Securities in such registration (including the Holders of the Registrable Stock) shall be entitled to participate pro rata in accordance with the number of shares requested by such holders to be included in such registration. 9. MARKET STANDOFF. Each Holder hereby agrees that, during the 10 days prior to, and during the period of duration (up to, but not exceeding, 90 days) specified by KCS and an underwriter of Common Stock or Securities of KCS convertible into Common Stock, following the effective date of a Registration Statement (or, to the extent applicable, a Prospectus filed pursuant to Rule 424(b)) covering Common Stock or Securities of KCS convertible into Common Stock that are being offered solely for the account of KCS, the Holder shall not, to the extent requested by KCS and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, short sale), enter into any put equivalent position (as defined by Rule 16a-1), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any Registrable Stock, or in any economic interest therein, held by the Holder at any time during such period except Registrable Stock covered by such Registration Statement; provided, that (i) no Holder shall be subject to such restriction to the extent that KCS or any of its officers or directors are not subject to any such restriction and (ii) if KCS, any of its officers or directors or any other person subject to any such restriction is released from any such restriction then such restriction shall expire with respect to all of the Registrable Stock held by the Holders. In order to enforce the foregoing covenant, KCS may impose stop-transfer instructions with respect to the Registrable Stock of each Holder until the end of such period, and each Holder agrees that, if so requested, such Holder will execute an agreement in the form provided by the underwriter containing terms which are essentially consistent with the provisions of this Section 9. 10. CONFIDENTIAL INFORMATION. Each Holder of Registrable Stock agrees that any information obtained pursuant to this Registration Rights Agreement which is, or would reasonably be perceived to be, proprietary to KCS or otherwise confidential will not be disclosed without the prior written consent of KCS, unless required to be included, and until such inclusion, in any Registration Statement being filed pursuant to this Registration Rights Agreement. Notwithstanding the foregoing, each Holder of Registrable Stock may disclose such information, on a need to know basis, to their employees, accountants or attorneys (so long as each such person to whom confidential information is disclosed agrees to keep such information confidential) or in compliance with a court order. Each Holder of Registrable Stock further acknowledges, understands and agrees that any confidential information will not be utilized (a) in connection with purchases and/or sales of KCS's Securities except in compliance with applicable state and federal antifraud statutes or (b) for any other purpose. 11. NOTICE OF PROPOSED TRANSFERS. The Holder of each certificate representing Registrable Stock by acceptance thereof agrees to comply in all respects with the provisions of this Section 11. Each certificate evidencing the Registrable Stock transferred as above provided shall bear the appropriate restrictive legend set forth in Section 9.9 of the Stockholders' Agreement, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for such Holder and counsel for KCS such legend is not required in order to establish compliance with any provision of the Securities Act. 12. SUCCESSORS AND ASSIGNS. This Registration Rights Agreement shall inure to the benefit of and be binding upon the successors of any of the parties hereto; PROVIDED, HOWEVER, the rights and benefits of TMM, MM and the Principal Stockholders with respect to their ability to cause the Registrable Stock to be covered by a Registration Statement pursuant to Section 2 and Section 3 hereof may be assigned only to transferees who are Permitted Transferees; PROVIDED, HOWEVER that such assignee shall be entitled to such rights and benefits only upon becoming party to this Registration Rights Agreement as to any Registrable Stock held by such Permitted Transferee, with all the rights and obligations of its assignor under this Registration Rights Agreement, by delivering an executed joinder to the other parties to this Registration Rights Agreement in a form satisfactory to the parties thereto. 13. SEVERABILITY. Whenever possible, each provision of this Registration Rights Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Registration Rights Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Registration Rights Agreement. 14. DESCRIPTIVE HEADINGS. The descriptive headings of this Registration Rights Agreement are inserted for convenience only and do not constitute a part of this Registration Rights Agreement. 15. NOTICES. All communications provided for hereunder shall be in writing and delivered by hand, by facsimile or by a recognized overnight delivery service to the following addresses, or such other addresses as shall be given by notice delivered hereunder, and shall be deemed to have been received on the day of personal delivery thereof if by hand, upon transmission if sent by facsimile (with request of assurance of receipt in a manner customary for communication of such type) or on the next Business Day after deposit if sent by a recognized overnight delivery service: If to any Holders of Registrable Stock, addressed to such Holders at their addresses as shown on the books of KCS or its transfer agent; With a copy (which shall not constitute notice) to: Milbank, Tweed, Hadley & McCloy LLP 601 South Figueroa Street, 30th Floor Los Angeles, CA 90017 Attention: Thomas Janson, Esq. CT Corporation 1209 Orange Street Wilmington, Delaware 19801 If to KCS, to: Kansas City Southern P.O. Box 219335 427 West 12th Street Kansas City, MO 64121-9335 Attention: President Fax: (816) 816-983-1297 with a copy (which shall not constitute notice ) to: Sonnenschein Nath & Rosenthal LLP 4520 Main Street, Suite 1100 Kansas City, Missouri 64111 Attention: John Marvin, Esq. Fax: 816-531-7545 or, as to KCS, to such other persons or at such other addresses as shall be furnished by KCS by like notice to the other parties. 16. EFFECTIVE DATE. This Registration Rights Agreement shall become effective on and as of the Closing Date provided for in the Acquisition Agreement (the "Effective Date"). 17. TERMINATION. All rights under this Registration Rights Agreement shall terminate as to any Holder on the earliest to occur of (i) the date which is five (5) years after the Effective Date hereof and (ii) at such time as such Holder is free to sell all shares of Registrable Stock held by such Holder pursuant to Rule 144(k) under the Securities Act or a comparable exemption from registration that enables the Holder to sell all shares of Registrable Stock held by such Holder without registration under the Securities Act and without restriction as to the manner of sale. Notwithstanding the foregoing, the provisions of Section 6 hereof and the rights and obligations thereunder shall survive the termination of this Registration Rights Agreement. 18. COUNTERPARTS. This Registration Rights Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same document. 19. ENTIRE AGREEMENT. This Registration Rights Agreement constitutes the entire agreement by and among the parties hereto with respect to the subject matter hereof. There are no promises, warranties or undertakings, other than those set forth herein, with respect to the registration rights granted by KCS with respect to the Registrable Stock. This Registration Rights Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof; provided that, in the event of any conflict between this Registration Rights Agreement and the Stockholders' Agreement or the Acquisition Agreement, the provisions of those other agreements shall control. 20. AMENDMENTS, GOVERNING LAW, JURISDICTION AND VENUE. This Registration Rights Agreement may be amended, modified or supplemented only by a written instrument executed by KCS and Holders of not less than a majority of the then existing shares of Registrable Stock. Any term, covenant, agreement or condition in this Registration Rights Agreement may be waived (either generally or in particular instances and either retroactively or prospectively) by written instruments signed by KCS and Holders of not less than a majority of the existing shares of Registrable Stock. Any such waiver shall be limited to its express terms and shall not be termed a waiver of any other term, covenant, agreement or condition. This Registration Rights Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in that state without giving any effect to any choice or conflict of law provision or rule (whether in the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Each party hereto hereby agrees that any proceeding relating to this Registration Rights Agreement shall be brought in a state court of New York or a federal court located in New York. Each party hereto hereby consents to personal jurisdiction in any such action brought in any such New York state or federal court, consents to service of process by registered mail made upon such party and such party's agent and waives any objection to venue in any such New York state or federal court and any claim that any such New York state or federal court is an inconvenient forum. 21. SERVICE OF PROCESS. Each of the parties hereto irrevocably appoints CT Corporation (the "Process Agent"), at 111 Eighth Avenue, New York, New York 10011 (212-894-8940) as its agent and true and lawful attorney-in-fact in its name, place and stead to accept on behalf of each of the parties and their respective properties and revenues, service of copies of the summons and complaint and any other process which may be served in any such action or proceeding brought in the State of New York, and each of the parties hereto agrees that failure of the Process Agent to give any notice of any such service of process to any of the parties hereto shall not impair or affect the validity of such service or the enforcement of any judgment based thereon. IN WITNESS WHEREOF, each of the parties hereto has executed this Registration Rights Agreement as of the day and year first written above. GRUPO TMM, S.A. KANSAS CITY SOUTHERN By: /s/ Jose F. Serrano Segovia By: /s/ Michael R. Haverty ----------------------------- ---------------------------- Name: Jose F. Serrano Segovia Name: Michael R. Haverty Title: Attorney in Fact Title: Chairman, President & CEO By: /s/ Javier Sergovia Serrano PRINCIPAL STOCKHOLDERS ----------------------------- Name: Javier Sergovia Serrano Title: Attorney in Fact /s/ Jose F. Serrano Segovia -------------------------------- TMM MULTIMODAL, S.A. de C.V. Jose F. Serrano Segovia By: /s/ Jose F. Serrano Segovia /s/ Ramon Serrano Segovia ----------------------------- -------------------------------- Name: Jose F. Serrano Segovia Ramon Serrano Segovia Title: Attorney in Fact By: /s/ Javier Sergovia Serrano /s/ Terese Serrano Segovia ----------------------------- -------------------------------- Name: Javier Sergovia Serrano Teresa Serrano Segovia Title: Attorney in Fact SERVICIONS DIRECTIVOS SERVIA, PROMOTORA SERVIA, S.A. DE C.V. S.A. de C.V. By: /s/ Jose F. Serrano Segovia By: /s/ Jose F. Serrano Segovia ----------------------------- ---------------------------- Name: Jose F. Serrano Segovia Name: Jose F. Serrano Segovia Title: Attorney in Fact Title: Attorney in Fact By: /s/ Javier Sergovia Serrano By: /s/ Javier Sergovia Serrano ----------------------------- ---------------------------- Name: Javier Sergovia Serrano Name: Javier Sergovia Serrano Title: Attorney in Fact Title Attorney in Fact EX-10 6 form8k_122004ex105.txt EXH. 10.5 CONSULTING AGREEMENT Exhibit 10.5 CONSULTING AGREEMENT BETWEEN KANSAS CITY SOUTHERN AND JOSE F. SERRANO INTERNATIONAL BUSINESS, S.A. DE C.V. TABLE OF CONTENTS PAGE 1. Construction.............................................................1 2. Engagement...............................................................2 3. Duties...................................................................3 4. Term.....................................................................4 5. Consulting Services Fees and Escrow......................................4 6. VAT Claim and Put Advisory Fee...........................................5 7. Restrictions on Transfer of Consulting Firm Stock........................5 8. Termination..............................................................5 9. Non-Disclosure...........................................................7 10. Duties Upon Termination; Survival........................................8 11. Compliance with Laws.....................................................8 12. Indemnification..........................................................9 13. Notice..................................................................10 14. Amendment...............................................................11 15. Successors in Interest..................................................11 16. Severability............................................................11 17. Governing Law; Dispute Resolution.......................................11 18. Entire Agreement; Effective Time........................................14 TABLE OF DEFINITIONS "ACQUISITION" shall have the meaning set forth in the Recitals to this Agreement. "ACQUISITION AGREEMENT" shall have the meaning set forth in the Recitals to this Agreement. "AFFILIATE" shall mean, with respect to a specified person, (i) any person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified person, and (ii) any person that is an officer, director, trustee, member or general member of, or serves in a similar capacity with respect to, the specified person, or of which the specified person is an officer, director, trustee, member or general member, or with respect to which the specified person serves in a similar capacity. For purposes of this definition, the term "control" when used with respect to a person (including entities incorporated or organized in the UMS) means (a) the beneficial ownership of 10% or more of the voting interests in such person, or (b) the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" shall have the meaning set forth in the preamble of this Agreement. "ANNUAL FEE" shall have the meaning set forth in SECTION 5(A) of this Agreement. "ARBITRATION COSTS" shall have the meaning set forth in SECTION 17(E)(II) of this Agreement. "ARBITRATION DEMAND" shall have the meaning set forth in SECTION 17(D) of this Agreement. "ARBITRATORS" shall have the meaning set forth in SECTION 18(E) of this Agreement. "BOARD" shall mean the Board of Directors of Company. "BUSINESS" shall have the meaning set forth in the Recitals to this Agreement. "BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the U.S. or the UMS. "COMPANY" shall have the meaning set forth in the preamble of this Agreement. "COMPANY TRADE SECRET" shall have the meaning set forth in SECTION 9 of this Agreement. "CONSOLIDATED FEE" shall have the meaning set forth in SECTION 5(A) of this Agreement. "CONSULTING COMPENSATION ESCROW" shall have the meaning set forth in SECTION 5(A) of this Agreement. "CONSULTING COMPENSATION ESCROW AGENT" shall have the meaning set forth in SECTION 5(A) of this Agreement. "CONSULTING COMPENSATION ESCROW AGREEMENT" shall have the meaning set forth in SECTION 5(A) of this Agreement. "CONSULTING FIRM" shall have the meaning set forth in the preamble of this Agreement. "CONSULTING FIRM STOCK" shall have the meaning set forth in SECTION 5(C) of this Agreement. "CONSULTING SERVICES" shall have the meaning set forth in SECTION 3(A) of this Agreement. "DISABILITY" shall have the meaning set forth in SECTION 8(B) of this Agreement. "DISPUTES" shall have the meaning set forth in SECTION 17(A) of this Agreement. "DISPUTE NOTICE" shall have the meaning set forth in SECTION 17(C) of this Agreement. "DOLLARS" or "$" shall have the meaning set forth in SECTION 1(A)(IX) of this Agreement. "EFFECTIVE TIME" shall mean the time of the occurrence of the Closing of the Acquisition Agreement. "EXCHANGE ACT" shall have the meaning set forth in SECTION 5(C) of this Agreement. "FOR CAUSE" shall have the meaning set forth in SECTION 8(E) of this Agreement. "GTFM" shall mean Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS. "INCLUDING" shall have the meaning set forth in SECTION 1(A)(V) of this Agreement. "IRS" shall mean Internal Revenue Service of the U.S. "JSS" shall have the meaning set forth in the Recitals to this Agreement. "LABOR LAWSUIT" shall have the meaning set forth in SECTION 8(E)(VIII) of this Agreement. "LOSSES" shall have the meaning set forth in SECTION 12 of this Agreement. "MM" shall mean TMM Multimodal S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS. "NON-MANAGEMENT DIRECTORS" shall have the meaning set forth in SECTION 5(B) of this Agreement. "PARTY" or "PARTIES" shall have the meaning set forth in the preamble of this Agreement. "PAYMENT CONDITIONS" shall have the meaning set forth in SECTION 5(B) of this Agreement. "PAYMENT DATE" shall have the meaning set forth in SECTION 5(A) of this Agreement. "PAYMENT DATE PERIOD" shall have the meaning set forth in SECTION 5(B) of this Agreement. "PERSON" shall have the meaning set forth in SECTION 1(A)(VI) of this Agreement. "PROCESS AGENT" shall have the meaning set forth in SECTION 17(G) of this Agreement. "RECORDS" shall have the meaning set forth in SECTION 11(E) of this Agreement. "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights Agreement, dated as of the date of this Agreement, among Company, TMM, TMMH, MM and certain stockholders of TMM. "SHALL" shall have the meaning set forth in SECTION 1(A)(VIII) of this Agreement. "STOCKHOLDERS' AGREEMENT" shall mean the Stockholders' Agreement, dated as of the date of this Agreement, among Company, Grupo TMM, S.A. and certain subsidiaries and stockholders of Grupo TMM, S.A. "TERM" shall have the meaning set forth in SECTION 4 of this Agreement. "TFM" shall mean TFM, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS. "TMM" shall mean Grupo TMM S.A., a SOCIEDAD ANONIMA organized under the laws of the UMS. "TMMH" shall mean TMM Holdings S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS and a subsidiary of GTMM. "TRANSFER" shall have the meaning set forth in SECTION 7 of this Agreement. "UMS" shall mean the United Mexican States. "U.S." shall mean the United States of America. "U.S. LAWS" shall have the meaning set forth in SECTION 11(B) of this Agreement. "VAT CLAIM AND PUT ADVISORY FEE" shall have the meaning set forth in SECTION 6(A) of this Agreement. "VOLUME WEIGHTED PRICE" means the average trading price per share of Company Common Stock on the New York Stock Exchange for the twenty (20) consecutive trading days immediately preceding the announcement of the Final Resolution of the VAT and Put (excluding for this purpose the 180 day period for claims and appeals), as reported on Bloomberg (VAP function). CONSULTING AGREEMENT THIS CONSULTING AGREEMENT (this "AGREEMENT"), made and entered into as of this 15th day of December, 2004, but to become effective as hereinafter provided, by and between Kansas City Southern, a Delaware corporation ("COMPANY"), and Jose F. Serrano International Business, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS, organized under the laws of the UMS ("CONSULTING FIRM") (individually, a "PARTY"; collectively, the "PARTIES"). Unless otherwise specified herein, all capitalized terms used and not defined in this Agreement shall have the meanings ascribed to them in the Acquisition Agreement (defined below). RECITALS WHEREAS, Company, along with its Affiliates, owns and operates a North American rail network which connects key commercial and industrial markets in the central U.S. with major industrial cities in the UMS (the "BUSINESS"); WHEREAS, Company, TMM, MM, TMMH and others have entered into an amended and restated acquisition agreement dated as of December 15, 2004 (the "ACQUISITION AGREEMENT"), pursuant to which, among other things, all of the shares of stock of GTFM owned by MM are to be acquired by subsidiaries of Company (the "ACQUISITION"), resulting in an increase in the Company's interest in and need for support of the operations of the Business in the UMS; WHEREAS, Jose F. Serrano Segovia ("JSS"), as Chairman of the Board of Directors of GTFM, has knowledge and experience regarding Mexican governmental relationships relevant to the Business; WHEREAS, JSS has established Consulting Firm to provide certain consulting services; and WHEREAS, as a condition to its willingness to enter into the Acquisition Agreement, Company desires that Consulting Firm agree to provide to the Company certain consulting services, and Consulting Firm is willing to make such services available to Company, all on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, it is agreed by and between Company and Consulting Firm as follows: 1. CONSTRUCTION. (a) REFERENCES. (i) The Recitals to this Agreement shall be incorporated by reference into, and deemed part of, this Agreement and all references to this Agreement shall include the Recitals. (ii) References to any law, legislative act, rule or regulation shall mean references to such law, legislative act, rule or regulation in changed or supplemented form or to a newly adopted law, legislative act, rule or regulation replacing a previous law, legislative act, rule or regulation. (iii)References to a number of days shall mean calendar days, unless expressly indicated otherwise. (iv) References to an Exhibit, Schedule, Section or Article shall be to such Exhibit, Schedule, Section or Article of this Agreement, unless otherwise provided herein. (v) References to the word "INCLUDING" shall mean "including, without limitation." (vi) The word "PERSON" includes, where appropriate, firms, associations, companies, partnerships, trusts, corporations and other legal entities, including public bodies, as well as natural persons. (vii)Words importing the singular import the plural, and vice versa, and words importing one gender import the other gender. (viii) The word "SHALL" when used in this Agreement or any Schedules hereto is a word of mandate, construed as "must." (ix) References to "DOLLARS" and "$" in this Agreement shall mean Dollars of the U.S. (b) HEADINGS. The Article, Section, Schedule and Exhibit headings of, and the Table of Contents to, this Agreement are for reference and convenience only and shall not be considered in the interpretation of this Agreement. (c) DEFINITIONS. Defined terms used in this Agreement shall have the meanings specified in the Table of Definitions set forth immediately prior to the preamble. 2. ENGAGEMENT. (a) Company hereby agrees to engage Consulting Firm as of the Effective Time during the Term to provide the Consulting Services, and Consulting Firm hereby accepts such engagement and agrees to perform the Consulting Services, upon the terms and conditions of this Agreement. Consulting Firm represents and warrants that it has full authority to enter into this Agreement and that it is not restricted in any manner whatsoever from performing services hereunder. (b) The relationship hereby created between Company and Consulting Firm shall be that of an independent contractor and shall not be considered as creating the relationship of employer-employee/laborer, partnership, principal-agent, joint venture or association of any other kind. Consulting Firm acknowledges that there does not exist between one or more of Consulting Firm, JSS or any employee or representative of Consulting Firm, on the one side, and one or more of Company or its Affiliates, on the other side, the relationship of employer-employee/laborer, partnership, principal-agent or joint venture. (c) Notwithstanding any other provision of this Agreement, unless Consulting Firm is or becomes subject to taxation in the U.S. as a result of actions other than those of Company set forth below, Company agrees that it will not during the Term or thereafter: (i) take any action that would subject Consulting Firm or JSS to federal income taxation in the U.S. of any payments or benefits received by Consulting Firm under this Agreement; (ii) take any tax position inconsistent with Consulting Firm or JSS being an independent contractor or not being subject to federal income taxation in the U.S. in connection with its performance under this Agreement (unless and until there is a final non-appealable judgment of a court of competent jurisdiction that requires Company to do otherwise); or (iii)require Consulting Firm to perform any Consulting Services that Consulting Firm's counsel advises Company would reasonably be expected to subject Consulting Firm or JSS to taxation in the U.S. 3. DUTIES. (a) PROVISION OF CONSULTING SERVICES. Consulting Firm shall provide such consulting services as may be reasonably requested in writing by the Board of the Company related to the maintenance, fostering and promotion of a positive relationship between the Company and/or its Affiliates and high-ranking officials of those branches of the Mexican government that have an impact on the Mexican railroad industry or the Business (the "CONSULTING SERVICES"). Consulting Firm shall faithfully perform its duties under this Agreement to the best of its ability, utilizing all of its skills and experience, and shall devote all business time necessary for the performance of the Consulting Services hereunder. Company acknowledges that Consulting Firm will render the Consulting Services in Mexico and in no event in the U.S. (b) PARTICIPATION OF JSS. Consulting Firm represents and warrants that (i) JSS is an officer of the Consulting Firm, serving as the legal representative, and (ii) JSS personally is actively engaged in the provision of Consulting Services to Company. Company acknowledges that JSS is employed full-time as the Chief Executive Officer of another corporation and may during the Term have other or additional business activities or interests, including managing other enterprises and managing his and his family's investments and business activities. Nothing herein shall be interpreted to require that JSS devote his full time and full attention to providing the Consulting Services, provided that during the Term (whether or not this Agreement has been terminated) JSS shall not be employed by or provide any advice or service to any Competitor, as defined in the Stockholders' Agreement. 4. TERM. The term of this Agreement shall be for a period of three (3) years, commencing on the first Business Day following the Effective Time and terminating on the third anniversary thereof, unless terminated earlier in accordance with SECTION 8 (the "TERM"). 5. CONSULTING SERVICES FEES AND ESCROW. (a) Subject to the limitations in this Agreement, Company shall pay Consulting Firm during the Term as consideration for providing the Consulting Services an annual fee of $3,000,000 (three million Dollars) in cash (the "ANNUAL FEE"), which Annual Fee shall be paid no later than the last day of the month following the first, second and third anniversary of the date of this Agreement (the "PAYMENT DATE"). At Closing (as defined in the Acquisition Agreement), Company shall deposit the total amount of the Annual Fee for each of the years comprising the three (3) year Term equal to $9,000,000 (nine million Dollars) (the "CONSOLIDATED FEE") in an escrow account (the "CONSULTING COMPENSATION ESCROW"). The Consolidated Fee deposited in the Consulting Compensation Escrow shall be held and released by an escrow agent (the "CONSULTING COMPENSATION ESCROW AGENT") in accordance with the terms and conditions of this Agreement and the escrow agreement in the form attached hereto as Exhibit A (the "CONSULTING COMPENSATION ESCROW AGREEMENT"). (b) Notwithstanding any other provision of this Agreement, the Annual Fee payable with respect to each successive one-year period within the Term shall not be paid on the respective Payment Date if the members of the Board who are independent directors of the Company, as defined under the applicable rules of the New York Stock Exchange (the "NON-MANAGEMENT DIRECTORS"), shall have reasonably determined in good faith prior to the applicable Payment Date that, during such one-year period (the "PAYMENT DATE PERIOD"), Consulting Firm or JSS has failed to comply in one or more material respects with the terms of this Agreement, which failure was not remedied within ten (10) Business Days after written notice from the Non-Management Directors setting forth in reasonable detail the actions which the Non-Management Directors believe constitute such failure (collectively, the "PAYMENT CONDITIONS"). In the event that the Non-Management Directors determine that Consulting Firm or JSS has not satisfied the Payment Conditions, the Non-Management Directors shall, prior to the relevant Payment Date, provide written notice to Consulting Firm specifically identifying the manner in which the Non-Management Directors believe that Consulting Firm or JSS has failed to satisfy the Payment Conditions during such period and the Annual Fee which would have been paid pursuant to Section 5(a) shall be forfeited. In such case, the Company shall provide written notice to the Consulting Compensation Escrow Agent prior to the relevant Payment Date that the Payment Conditions have not been satisfied. If the Consulting Compensation Escrow Agent has not received such written notice prior to the relevant Payment Date, the Consulting Compensation Escrow Agent shall transfer the Annual Fee for such period to Consulting Firm pursuant to SECTION 5(A). For purposes of this Agreement, the determination of a majority of the Non-Management Directors shall be deemed the determination of the Non-Management Directors. (c) As of the date of execution of the Consulting Compensation Escrow Agreement, Consulting Firm shall control all investment decisions of the amounts held in escrow by the Consulting Compensation Escrow Agent. Subject to the Stockholders' Agreement and in a manner that complies with the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and other applicable U.S. Laws and regulations, if so instructed by Consulting Firm, the Consulting Compensation Escrow Agent may acquire shares representing the capital stock of Company ("CONSULTING FIRM STOCK"). 6. VAT CLAIM AND PUT ADVISORY FEE. On the later of (i) the Effective Date and (ii) the Final Resolution of the VAT Claim and Put (as defined in the Acquisition Agreement), Company shall pay to Consulting Firm $9,000,000 (nine million Dollars), which at the Company's election upon ten (10) days notice to Consulting Firm may be paid in cash or common stock of the Company, valued at the Volume Weighted Price (the "VAT CLAIM AND PUT ADVISORY Fee") as consideration for Consulting Firm's services to Company in connection with the resolution of the VAT Claim and Put advisory services to Company. The Parties acknowledge that the Final Resolution may occur prior to the Effective Time, which shall not affect the Company's obligation to make payment of the VAT Claim and Put Advisory Fee pursuant to this Section 6. 7. RESTRICTIONS ON TRANSFER OF CONSULTING FIRM STOCK. Consulting Firm shall not sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) ("TRANSFER") any interest in any shares of Consulting Firm Stock, except in accordance with the terms of the Stockholders' Agreement. 8. TERMINATION. (a) EXPIRATION. This Agreement shall terminate automatically upon the expiration of the Term, except for the provisions of Section 6, which shall survive such termination. (b) DEATH OR DISABILITY OF JSS. This Agreement and Consulting Firm's engagement hereunder shall terminate automatically on the death or disability of JSS. For purposes of this Agreement, "DISABILITY" shall mean the inability, in the reasonable good faith judgment of the Board, of JSS personally to be actively engaged in the day-to-day management, business and operations of Consulting Firm or personally to be actively engaged in the provision of Consulting Services to Company on account of physical or mental illness or incapacity, which illness or incapacity continues uninterruptedly for a period of six (6) consecutive months or continues with interruptions for an aggregate period of six (6) months within any given twelve (12) month period. In the event that this Agreement is terminated as a result of JSS's death or disability, Consulting Firm shall be entitled only to (i) any unpaid Annual Fee due for any Payment Date that occured prior to such termination, (ii) a pro rata portion of the applicable Annual Fee for the period from the last Payment Date to the date of death or disability and, (iii) if the Final Resolution of the VAT Claim and Put (excluding for this purpose the one hundred eighty (180) day period for claims and appeals) has occurred, or occurs within six (6) months of the date of death or disability, the VAT Claim and Put Advisory Fee, if not previously paid, and such fee shall be payable at the date of the Final Resolution of the VAT Claim and Put. The payments required by clause (i) and (ii) of the preceding sentence shall be made in a lump sum within five (5) business days of the termination. (c) DISSOLUTION OR BANKRUPTCY OF CONSULTING FIRM. This Agreement and Consulting Firm's engagement hereunder shall terminate automatically upon the commencement in any court of competent jurisdiction of a proceeding or case seeking (i) Consulting Firm's reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) appointment of a receiver, custodian, trustee, examiner, liquidator or the like of Consulting Firm or of all or any substantial part of its property or assets or (iii) similar relief in respect of Consulting Firm under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts; or upon an order for relief against Consulting Firm entered in an involuntary case under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts. In the event that this Agreement is terminated in accordance with the preceding sentence, Consulting Firm shall be entitled only to (i) any unpaid Annual Fee due for any Payment Date that occured prior to such termination, and (ii) a pro rata portion of the applicable Annual Fee for the period from the last Payment Date to the date of termination. The payments required by clause (i) and (ii) of the preceding sentence shall be made in a lump sum within five (5) business days of the termination. (d) TERMINATION BY CONSULTING FIRM. Consulting Firm may terminate this Agreement and its engagement hereunder (i) at any time without reason by the giving of at least thirty (30) days' advance written notice to Company, and (ii) in the event of any material breach of this Agreement by Company, upon Company's failure to cure the same within ten (10) days of receipt of Consulting Firm's written notice thereof. In the event that this Agreement is terminated by Consulting Firm (x) pursuant to clause (i) of the preceding sentence, Consulting Firm shall be entitled only to (i) any unpaid Annual Fee due for any Payment Date that occured prior to such termination, (ii) a pro rata portion of the applicable Annual Fee for the period from the last Payment Date to the date of termination or (y) pursuant to clause (ii) of the preceding sentence, Consulting Firm shall be entitled only to (i) any unpaid Annual Fees due for any Payment Date that occurred prior to such termination, (ii) all remaining Annual Fees payable during the remainder of the Term (assuming the Agreement had not been terminated and the Payment Condition had been met), and (iii) if the Final Resolution of the VAT Claim and Put (excluding for this purpose the one hundred eighty (180) day period for claims and appeals) has occurred, or occurs thereafter, the VAT Claim or Put Advisory Fee, if not previously paid, shall be payable at the date of the Final Resolution of the VAT Claim and Put. The payments required by clause (x)(i) and (ii) or (y)(i) and (ii) of the preceding sentence, as the case may be, shall be made in a lump sum within five (5) business days of the termination. (e) TERMINATION BY COMPANY FOR CAUSE. Company may terminate this Agreement and Consulting Firm's engagement hereunder "FOR CAUSE" immediately upon notice to Consulting Firm. In the event that this Agreement is terminated by the Company for Cause, Consulting Firm shall be entitled only to (i) any unpaid Annual Fee due for any Payment Date that occured prior to such termination, (ii) a pro rata portion of the applicable Annual Fee for the period from the last Payment Date to the date of termination. The payments required by clause (i) and (ii) of the preceding sentence shall be made in a lump sum within five (5) business days of the termination. For purposes of this Agreement, termination "FOR CAUSE" shall mean termination based upon any one or more of the following occurring after the Effective Date: (i) Any material breach of this Agreement by Consulting Firm which is not cured within ten (10) days after Consulting Firm receives from the Board written notice of the breach which identifies in reasonable detail the actions which are alleged to constitute a material breach of this Agreement; (ii) Material dishonesty of Consulting Firm (including that of JSS or one or more of Consulting Firm's directors, officers or employees) involving Company or any Affiliate of Company; (iii)Gross negligence or willful misconduct in the performance of Consulting Firm's duties as determined in good faith by the Non-Management Directors which continues after written notice to the Consulting Firm from the Non-Management Directors identifying in reasonable detail the manner in which the Non-Management Directors believe that the Consulting Firm's conduct constitutes gross negligence or willful misconduct; (iv) Willful failure by Consulting Firm to provide Consulting Services as reasonably required from time to time by the Board or the Chief Executive Officer of the Company, which continues after written notice to the Consulting Firm from the Non-Management Directors identifying in reasonable detail the manner in which the Non-Management Directors believe that the Consulting Firm has not provided such Consulting Services (other than any such failure due to JSS's disability); (v) The indictment for, conviction of, or plea of NOLO CONTENDRE to, a felony involving moral turpitude by Consulting Firm (including one or more of Consulting Firm's directors or officers); (vi) Embezzlement or misappropriation by Consulting Firm (including one or more of Consulting Firm's directors, officers or employees) involving the Company or its Affiliates; (vii)The failure of JSS to be an officer and (x) legal representative, or (y) actively engaged in the provision of the Consulting Services to Company (other than as a result of JSS's death or disability); or (viii) The commencement of a lawsuit by or on behalf of one or more of Consulting Firm or any director, officer or employee of Consulting Firm, including JSS, on the one side, against one or more of Company or any of its Affiliates, on the other side, claiming, in violation of SECTION 2(B), that there exists a relationship, other than an independent contractor relationship, between any director, officer or employee of Consulting Firm, including JSS, on the one side, and one or more of Company or its Affiliates, on the other side, including an employer-employee/laborer relationship, a partnership relationship, a principal-agent relationship, a joint venture relationship or an association of any other kind (a "LABOR LAWSUIT"). (f) TERMINATION BY COMPANY OTHER THAN FOR CAUSE. Company may terminate this Agreement and Consulting Firm's engagement hereunder other than for Cause at any time by written notice to Consulting Firm. In the event that this Agreement is terminated by the Company other than for Cause, Consulting Firm shall be entitled only to (i) any unpaid Annual Fee due for any Payment Date that occured prior to such termination, (ii) all remaining Annual Fees payable during the remainder of the Term (assuming the Agreement had not been terminated and the Payment Condition had been met) and, (iii) if the Final Resolution of the VAT Claim and Put (excluding for this purpose the one hundred eighty (180) day period for claims and appeals) has occurred, or occurs thereafter, the VAT Claim or Put Advisory Fee, if not previously paid, shall be paid at the date of the Final Resolution of the VAT Claim and Put. The payments required by clause (i) and (ii) of the preceding sentence shall be made in a lump sum within five (5) business days of the termination. 9. NON-DISCLOSURE. During the Term and at all times after any termination of this Agreement, Consulting Firm, its employees (including JSS), officers, directors, Affiliates and agents shall not, either directly or indirectly, use or disclose any Company trade secret, except to the extent necessary for Consulting Firm to perform its duties hereunder. For purposes of this Agreement, the term "COMPANY TRADE SECRET" shall mean any information regarding the business or activities of Company or any subsidiary or Affiliate, including any formula, pattern, compilation, program, device, method, technique, process, customer list, technical information or other confidential or proprietary information, that (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (b) is the subject of efforts of Company or its subsidiary or Affiliate that are reasonable under the circumstances to maintain its secrecy. Notwithstanding the foregoing, Consulting Firm shall be entitled to make such disclosures as are required by applicable law or by the requirements of any governmental or judicial agency or body. In the event of any breach of this SECTION 9 by Consulting Firm, notwithstanding the requirement pursuant to SECTION 8(F) that Company pay to Consulting Firm all remaining unpaid portions of the Consolidated Fee, Company shall not be required to pay to Consulting Firm any remaining unpaid portions of the Consolidated Fee and shall be entitled to pursue such other legal and equitable remedies as may be available. 10. DUTIES UPON TERMINATION; SURVIVAL. (a) DUTIES. Upon termination of this Agreement, whether by Company, Consulting Firm or automatically, for any or no reason whatsoever, Consulting Firm shall immediately return to Company all Company trade secrets which exist in tangible form (including those in the possession of Consulting Firm's officers, directors or employees). (b) SURVIVAL. The provisions of SECTIONS 8, 9, 10, 11, 12 and 17 shall survive any termination of this Agreement by Company or Consulting Firm. 11. COMPLIANCE WITH LAWS. (a) In performing its obligations hereunder, and with regard to any funds, assets, or records relating thereto, Consulting Firm shall, and shall use its commercially reasonable efforts to cause each of its employees and agents to, comply in all material respects with all applicable laws and/or regulations which are applicable to Consulting Firm, the violation of which would reasonably be expected to adversely affect the Company. (b) Consulting Firm hereby acknowledges that it is the policy of Company to refrain from engaging in any act which may violate any federal, state, local or other laws of the U.S., including the Foreign Corrupt Practices Act ("U.S. LAWS"), or any foreign laws, including foreign anti-bribery laws, which are applicable to Consulting Firm. Consulting Firm shall, and shall use its best efforts to cause its officers, directors, employees and agents to, comply with this policy. (c) In performing its obligations under this Agreement, Consulting Firm shall not, and shall use its best efforts to cause each of its employees and agents not to, directly or indirectly pay, offer, give or promise to pay or give, or authorize the payment or gift of any, monies or other things of value, to (a) an official, employee or agent of any government, (b) an official, employee or agent of any agency or instrumentality of any government, (c) a candidate for political office in any country, (d) a political party or party official in any country to influence any acts or decisions of such political party or party official, or (e) any other person, individual or entity at the suggestion, request or direction or for the benefit of any of the persons described in items (a) through (d) of this SECTION 11(C), in any such case in material violation of any laws and/or regulations applicable to Consulting Firm where it would reasonably be expected that such violation would constitute a violation by Company or by Consulting Firm as a result of its engagement hereunder. (d) Consulting Firm agrees promptly and completely to respond to Company's reasonable requests for information necessary for Company to determine if any particular transaction can be conducted in compliance with U.S. Laws which are applicable to one or more of Consulting Firm, Company or any of Company's Affiliates. Consulting Firm shall, and shall use its best efforts to cause each of its employees and agents to, execute all certifications and provide all information as Company may reasonably request for Company to comply with such applicable laws, regulations and orders. Consulting Firm agrees promptly to report to Company all violations of this SECTION 11 that Consulting Firm becomes aware of. (e) Consulting Firm shall, and shall use commercially reasonable efforts to cause each of its employees and agents to, maintain and keep in a safe place, for a period of five (5) years from the date of their origination, books, records and accounts in any media which adequately reflect the recipient, nature and terms of every payment, expenditure or other disbursement made directly or indirectly in connection with the sale and/or resale by Company of the services of Company or its employees (collectively, "RECORDS"), and, upon judicial or arbitral order, shall make such Records available at Consulting Firm's premises for inspection. Consulting Firm shall certify in writing that such Records at the time of such judicial or arbitral order, accurately and completely reflect the recipient, nature and terms of such payments, expenditures or disbursements. Immediately upon judicial or arbitral order, Consulting Firm shall provide to the issuing court or arbitration tribunal such supplementary information and explanation as is requested by such courts or arbitration tribunals (whether requested of Consulting Firm or of Company or its Affiliates) to fully understand the material contained in the Records and trace the application and use of every payment, expenditure or other disbursement made in connection with the sale of the services of Company or its Affiliates. (f) Consulting Firm represents and warrants that, to the best knowledge of its president, as of the date hereof, except as disclosed to Company, none of the officers, employees or agents of Consulting Firm, and none of their respective spouses, children (including step-children), siblings, parents (including step-parents), parents-in-law (including step-parents-in-law), uncles and aunts, is an employee, officer or representative of any government or agency or instrumentality of any government, or of a political party or is a candidate for political office. Consulting Firm agrees promptly to notify Company of any change in the status of the officers, employees or agents of Consulting Firm, or their respective family members specified above of which it becomes aware after the date hereof, which would make the representations or warranties set forth in this paragraph inaccurate. (g) Company shall withhold from any payment under this Agreement any amount required to be withheld by Company under applicable law. 12. INDEMNIFICATION. Consulting Firm shall indemnify and hold Company and each of its Affiliates, and each of their respective officers, directors, employees, members, stockholders, agents and representatives, harmless from and against all losses, damages, liabilities, claims, demands, obligations, deficiencies, payments, judgments, settlements, costs and expenses of any nature whatsoever (including the costs and expenses of any and all investigations, actions, suits, proceedings, demands, assessments, judgments, orders, settlements and compromises relating thereto, and reasonable attorneys', accountants', experts' and other fees and expenses in connection therewith) ("LOSSES") resulting from, arising out of, or due to, directly or indirectly, the filing of a Labor Lawsuit by or on behalf of Consulting Firm or any director, officer or employee of Consulting Firm, including JSS. The indemnification set forth in the preceding sentence shall be in addition to any other remedy to which Company may be entitled by law or equity. All indemnification payments of Consulting Firm hereunder shall be in Dollars. The indemnification obligations of Consulting Firm set forth in this SECTION 12 shall survive the termination or expiration of this Agreement. In addition to any other remedy, Company shall be entitled, but shall not be obligated, to offset all Losses against any obligations of Company to Consulting Firm, now or hereafter existing, including payments of the Annual Fee. 13. NOTICE. Notices and all other communications to either Party pursuant to this Agreement shall be in writing and shall be deemed to have been given when personally delivered, sent via express courier such as UPS or DHL (as high priority) or delivered by facsimile (but only to the extent that a copy of such facsimile is sent via express courier such as UPS or DHL (as high priority) promptly thereafter), addressed as follows, or to such other address as a Party shall designate by notice to the other Party: (a) in the case of Company, to: Kansas City Southern 427 West 12th Street Kansas City, Missouri 64105 Attention: Senior Vice President and General Counsel With a copy (which shall not constitute notice) to: Sonnenschein Nath & Rosenthal LLP 4520 Main Street, Suite 1100 Kansas City, MO 64111 Attention: John F. Marvin and White & Case, S.C. Blvd. Manuel Avila Camacho 24, PH Colonia Lomas de Chapultepec, 11000 Mexico, D.F., Mexico Attention: Jose Vicente Corta Fernandez and/or Iker I. Arriola Penalosa (b) in the case of Consulting Firm, to: Jose F. Serrano International Business, S.A. de C.V. [ ] ------------------------------ [ ] ------------------------------ [ ] ------------------------------ Attention: Jose Francisco Serrano Segovia With a copy (which shall not constitute notice) to: Milbank, Tweed, Hadley & McCloy LLP 1 Chase Manhattan Plaza New York, New York 10005, U.S.A. Attention: Thomas C. Janson and Martinez, Algaba, Estrella, De Haro y Galvan Duque, S.C. Paseo de los Tamarindos [*] Colonia Bosques de las Lomas [*] Mexico, D.F., Mexico Attention: Carlos Galvan Duque 14. AMENDMENT. No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing, signed by Consulting Firm, the Chairman of the Board and a duly authorized member of the Board. No waiver by either Party at any time of any breach by the other Party of, or compliance with, any condition or provision of this Agreement to be performed by such other Party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. 15. SUCCESSORS IN INTEREST. The rights and obligations of Company under this Agreement shall inure to the benefit of and be binding in each and every respect upon the direct and indirect successors and assigns of Company, regardless of the manner in which such successors or assigns shall succeed to the interest of Company hereunder, and this Agreement shall not be terminated by the voluntary or involuntary dissolution of Company or by any merger or consolidation or acquisition involving Company, or upon any transfer of all or substantially all of Company's assets, or terminated otherwise than in accordance with its terms. In the event of any such merger or consolidation or transfer of assets, the provisions of this Agreement shall be binding upon and shall inure to the benefit of the surviving corporation or the corporation or other person to which such assets shall be transferred. Neither this Agreement nor any of the payments or benefits hereunder may be pledged, assigned or transferred by Consulting Firm either in whole or in part in any manner, without the prior written consent of Company. 16. SEVERABILITY. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 17. GOVERNING LAW; DISPUTE RESOLUTION. (a) Resolution of any and all disputes between the Parties arising from or in connection with this Agreement or any transactions contemplated by this Agreement, whether based on contract, tort, common law, equity, statute, regulation, order or otherwise, ("DISPUTES") including Disputes arising in connection with claims by third persons, shall be exclusively governed by and settled in accordance with the provisions of this SECTION 17; provided, that the foregoing shall not preclude equitable or other judicial relief to enforce the provisions hereof or to preserve the status quo pending resolution of Disputes hereunder. (b) THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN THE PARTIES AND THE ADJUDICATION AND ENFORCEMENT THEREOF SHALL BE GOVERNED BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE, UNITED STATES OF AMERICA AND THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS THEREOF. (c) As to any Dispute which is not resolved in the ordinary course of business, the Parties shall first attempt in good faith to promptly resolve any Dispute by negotiations between executives. Either of the Parties may initiate this procedure by delivery of written notice of the Dispute (the "DISPUTE NOTICE") to the other. Not later than 20 days after delivery of the Dispute Notice, one executive of one of the Parties with authority to settle the Dispute shall meet with one executive of the other Party with authority to settle the Dispute at a reasonably acceptable time and place, and thereafter as such executives shall deem reasonably necessary. The executives shall exchange relevant information and endeavor to resolve the Dispute. Prior to any such meeting, each Party's executive shall advise the other as to any individuals who will attend such meeting with the executive. All negotiations pursuant to this SECTION 17(C) shall be confidential and shall be treated as compromise negotiations for purposes of Rule 408 of the Federal Rules of Evidence and similarly under other local or foreign rules of evidence. (d) Each Party hereby agrees to submit all Disputes not resolved pursuant to SECTION 17(C) to final and binding arbitration in New York, New York, U.S. Either Party may initiate such arbitration by delivery of a demand therefor (the "ARBITRATION DEMAND") to the other Party not sooner than 60 days after the date of delivery of the Dispute Notice but promptly thereafter; provided, that if a Party rejects participation in the procedures provided under SECTION 17(C), the other Party may initiate arbitration at such earlier time as such rejection shall become reasonably apparent, and, whenever arbitration is initiated, may seek recovery of any damages or expenses arising from such rejection, including attorneys' fees and expenses, and Arbitration Costs (as defined below) in connection with arbitration hereunder. (e) Three Arbitrators shall be appointed (the "ARBITRATORS"), one of whom shall be appointed by Company, one by Consulting Firm, and the third of whom, who shall act as the chairman of the arbitral tribunal, shall be appointed by the first two Arbitrators within ten (10) Business Days of the first two Arbitrators' confirmation by the American Arbitration Association. If either Party fails to appoint an Arbitrator within ten (10) Business Days of a request in writing by the other Party to do so or if the first two Arbitrators cannot agree on the appointment of the third Arbitrator within ten (10) Business Days of their confirmation by the American Arbitration Association, then such Arbitrator shall be appointed by the American Arbitration Association in accordance with its Commercial Arbitration Rules. As soon as the arbitration tribunal has been convened, a hearing date shall be set within fifteen (15) days thereafter; provided, that the Arbitrators may extend the date of the hearing upon request of any Party to the extent necessary to insure that such Party is given a reasonable period of time to prepare for the hearing. Written submittals in the English language shall be presented and exchanged by both Parties five Business Days before the hearing date. At such time the Parties shall also exchange copies of all documentary evidence upon which they will rely at the arbitration hearing and a list of the witnesses whom they intend to call to testify at the hearing. The Arbitrators shall make their determination as promptly as practicable after conclusion of the hearing. (i) The arbitration shall be conducted in the English language pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Notwithstanding the foregoing, (A) each Party shall have the right to audit the books and records of the other Party that are reasonably related to the Dispute; (B) each Party shall provide to the other, reasonably in advance of any hearing, copies of all documents which a Party intends to present at such hearing; (C) all hearings shall be conducted on an expedited schedule; and (D) all proceedings shall be confidential, except that either Party may at its expense make a stenographic record thereof. (ii) The Arbitrators shall endeavor to complete all hearings not later than 120 days after their tribunal has been convened, and shall make a final award as promptly as practicable thereafter. Such award shall be communicated, in writing, by the Arbitrators to the Parties, and shall contain specific findings of fact and conclusions of law in accordance with the governing law set forth in SECTION 17(B). Any award of such Arbitrators shall be final and binding upon the Parties to this Agreement and shall not be attacked by any of the Parties to this Agreement in any court of law and may be enforced in any court having jurisdiction, including expressly the courts of the State of New York, U.S., and the courts of the Federal District of Mexico. The Arbitrators shall apportion all costs and expenses of the arbitration, including the Arbitrators' fees and expenses, fees and expenses of experts and fees and expenses of translators ("ARBITRATION COSTS") between the prevailing and non-prevailing Party as the Arbitrators shall deem fair and reasonable. In circumstances where (A) a Dispute has been asserted or defended against on grounds that the Arbitrators deem manifestly unreasonable, or (B) the non-prevailing Party has rejected participation in procedures under SECTION 17(C), the Arbitrators may assess all Arbitration Costs against the non-prevailing Party and may include in the award the prevailing Party's attorneys' fees and expenses in connection with any and all proceedings under this SECTION 17. Notwithstanding the foregoing, in no event may the Arbitrators award multiple or punitive damages. (f) Pursuant to an agreement of the Parties or a judicial determination that a Dispute is not subject to final and binding arbitration as set forth in SECTION 17, each Party irrevocably agrees that any legal action or proceeding against it with respect to this Agreement and any transaction contemplated by this Agreement shall be brought only in the courts of the State of New York, or of Federal courts of the U.S. sitting in New York, and by execution and delivery of this Agreement, each Party irrevocably submits to the venue and jurisdiction of each such court and irrevocably waives any objection or defense such party may have to venue or personal jurisdiction in any such court for the purpose of resolving any claim, dispute, cause of action arising out of or related to this Agreement (including any claim that the suit or action has been brought in an inconvenient forum and any right to which it may become entitled on account of place of residence or domicile), the alleged breach of this Agreement, the enforcement of the terms of this Agreement and the other terms contemplated hereby. A final judgment in any suit, action or proceeding shall be conclusive and may be enforced in any court where jurisdiction over the Parties may be had or in which the Parties are subject to service of process. (g) Each of the Parties irrevocably appoints CT Corporation (the "PROCESS AGENT"), at 111 Eighth Avenue, New York, New York 10011 (212-894-8940), respectively as its agent and true and lawful attorney-in-fact in its name, place and stead to accept on behalf of each of the Parties and their respective properties and revenues, service of copies of the summons and complaint and any other process which may be served in any such suit, action or proceeding brought in the State of New York, and each of the Parties agrees that failure of the Process Agent to give any notice of any such service of process to any of the Parties shall not impair or affect the validity of such service or the enforcement of any judgment based thereon. 18. ENTIRE AGREEMENT; EFFECTIVE TIME. This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and terminates and supersedes all other prior agreements and understandings, both written and oral, between the Parties with respect to the terms of Consulting Firm's engagement or severance arrangements. This Agreement shall become effective at the Effective Time. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. KANSAS CITY SOUTHERN By: /s/ Michael R. Haverty ----------------------------------- Name: Michael R. Haverty Title: Chairman, President & CEO Jose F. Serrano International Business, S.A. DE C.V. By: /s/ Jose Francisco Serrano Segovia ----------------------------------- Name: Jose Francisco Serrano Segovia Unless otherwise specified herein, all capitalized terms used and not defined in the following Guaranty (as defined below) shall have the meanings ascribed to them in the above Consulting Agreement. JSS hereby, unconditionally and irrevocably, personally guarantees (the "GUARANTY"), by way of an independent obligation to Company, the obligation of Consulting Firm pursuant to SECTION 12 of the Agreement to indemnify and hold Company and each of its Affiliates, and each of their respective officers, directors, employees, members, stockholders, agents and representatives harmless from and against all Losses (as such term is defined in SECTION 12 of the Agreement) resulting from, arising out of, or due to, directly or indirectly, the filing of a Labor Lawsuit by Consulting Firm or any director, officer or employee of Consulting Firm, including JSS ("GUARANTEED OBLIGATION"). This is a guaranty of payment and not of collection only. If for any reason whatsoever Consulting Firm shall fail or be unable promptly to comply with the Guaranteed Obligation, JSS will promptly upon receipt of notice thereof from Company, pay or cause to be paid in lawful money of the U.S. the unpaid Guaranteed Obligation then due and payable to Company (in the amounts and to the extent required of Consulting Firm under the Agreement). JSS waives any and all notice of the creation, renewal, extension or accrual of the Guaranteed Obligation and notice of or proof of reliance by Company upon this Guaranty or acceptance of this Guaranty; the Guaranteed Obligation shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guaranty; and all dealings between Company and Consulting Firm shall be conclusively presumed to have been had or consummated in reliance upon this Guaranty. Guarantor agrees that (i) any notice provided in the manner required under the Agreement shall be deemed to constitute notice to JSS for purposes hereof and (ii) any knowledge of Consulting Firm shall be deemed knowledge of JSS for purposes hereof. The liability of the undersigned under this Guaranty shall not be affected or excused by (x) any lack of enforceability against Consulting Firm of the Guaranteed Obligation for any reason whatsoever and (y) any other circumstance which might otherwise constitute a discharge of a guarantor. JSS waives promptness, diligence and notices with respect to the Guaranteed Obligation and this Guaranty and any requirement that Company exhaust any right or take any action against Consulting Firm. Any term or provision of this paragraph which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this paragraph or affecting the validity or enforceability of any of the terms or provisions of this paragraph in any other jurisdiction. If any provision of this paragraph is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. This Guaranty is strictly limited to the Guaranteed Obligations. AGREED AND ACCEPTED AS OF THE DATE OF THE ABOVE CONSULTING AGREEMENT JOSE FRANCISCO SERRANO SEGOVIA /s/ Jose Francisco Serrano Segovia --------------------------------------- EX-10 7 form8k_122004ex106.txt EXH. 10.6 MARKETING AND SERVICES AGMT Exhibit 10.6 MARKETING AND SERVICES AGREEMENT This MARKETING AND SERVICES AGREEMENT (the "Agreement") dated as of December 15, 2004, but to become effective as hereinafter provided, is made by and among TMM LOGISTICS, S.A. DE C.V. (the "Parent" and, together with its Subsidiaries (as defined herein), Affiliates (as defined herein) and joint venture companies, the "Parent Group"), TFM, S.A. DE C.V., (the "Operating Company") and THE KANSAS CITY SOUTHERN RAILWAY COMPANY ("KCS") and, together with its Subsidiaries (including the Operating Company and its Subsidiaries) and Affiliates, the "KCS Group") (the Parent Group and the KCS Group are collectively referred to as the "Parties;" and each individually, a "Party"). WHEREAS, Parent and KCS are stockholders of Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. ("GTFM"), which is the parent company of the Operating Company; WHEREAS, the Parent Group is engaged in certain operations, including the provision of logistics services, the operation of intermodal facilities, the operation of port facilities, the operation of maritime services and, through the Operating Company, the operation of rail services in Mexico connecting with US and other Mexican rail service providers and certain of these services are provided by members of the Parent Group to the Operating Company and its Subsidiaries; WHEREAS, Parent and KCS have entered into the Amended and Restated Acquisition Agreement, dated as of [ ], 2004 (the "Acquisition Agreement"), pursuant to which KCS will acquire all of the interest of Parent and its Subsidiaries in GTFM; and WHEREAS, this Agreement is one of the Ancillary Agreements (as defined in the AAA) referred to in the AAA. NOW THEREFORE, in consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I DEFINITIONS "Affiliate" means, with respect to any person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such person. For purposes of this Agreement, "control" means the power or ability, to control or direct the affairs of any person, whether through the ownership of voting securities, or by contract, and the terms "controlled by" and "common control" shall have correlative meanings. "Competitor" shall mean Canadian National Railway, Canadian Pacific Railway Company, Union Pacific Corporation, Burlington Northern Santa Fe Corporation, CSX Corporation, Norfolk Southern Corp., Ferrocarril Mexicano, S.A. de C.V., Ferrocarril del Sureste, S.A. de C.V., Grupo Mexico, S.A. de C.V., the Anschutz Corporation and any other Person who operates a railroad in the United States, Mexico or Canada after the date hereof which, if operated in the United States would be regarded as a Class 1 railroad, Hub Group, Inc., Pacer International, Inc. and any of the respective successors or Affiliates of any of the foregoing. "Improper Conduct" shall mean any act which has resulted in harm to the assets or business of the Operating Company or the KCS Group or which involved the receipt of a material improper benefit by any person. "Logistics Companies" shall mean a third party company or fourth party company that (i) is not a rail carrier or shipper and (ii) which, as the majority of its business, arranges for the transportation of goods, manages the supply chain (including, but not limited to, inventory management, warehousing, packaging of goods, consolidating and de-consolidating of products, line feeding, pick-up and delivery of goods and all kind of transportation) of goods for others. "MFN Services" shall mean any intermodal services (including, without limitation, Trailer on Flat Car (TOFC), Container on Flat Car (COFC), and Road-Railer services) that originate or terminate in Mexico or are ramped or de-ramped at the border of the United States and the United Mexican States ("UMS") and intermodal services relating to the transportation of automobiles that originate and terminate within Mexico. "Subsidiary" of any person shall mean (i) in the case of a corporation, any other person who owns more than 50% of the voting securities of which is, directly or indirectly, beneficially owned by such person (ii) in the case of a partnership or a limited liability company, any person in which such person is a general partner or managing member, as the case may be, or owns more than 50% of the ownership interests therein, and (iii) in the case of any other person, any other person in which such person owns more than 50% of the voting or controlling equity interests in such person. Terms used but not defined herein shall have the meanings ascribed to them in the AAA. ARTICLE II MOST FAVORED NATIONS PROVISIONS Pursuant to the terms, conditions and provisions of this Agreement, the Parties shall, as the case may be, perform the following marketing and related services and/or enjoy the following rights pertaining to the following prescribed services (the "Services and Rights"): Section 2.1 MOST FAVORED NATIONS ARRANGEMENT. (a) During the Term, the KCS Group shall, upon the request of any member of the Parent Group, provide to any member of the Parent Group any of the MFN Services, as defined in Section 2.2 hereof, that the KCS Group or the Operating Company is presently providing or hereafter provides within, to or from Mexico on terms which are no less favorable than the terms for like volumes and services on which such MFN Services are at the time provided to Logistics Companies. The terms of this Agreement shall not apply to any traffic to which an Most Favored Nations clause which was entered into prior to the time KCS acquires control of TFM applies. (b) The rights of the Parent Group under this Section 2.1 may not be, in whole or in part, directly or indirectly sold, transferred, assigned or otherwise conveyed by the Parent Group or any member thereof to any other Person other than to any Affiliate of the Parent Group who has agreed in writing to be bound by all of the provisions of this Agreement and a copy of such writing has been delivered to Operating Company. For purposes of this Agreement a merger of Parent or another member of the Parent Group with another person will constitute an indirect transfer unless, after such merger: (1) such other person is an Affiliate of the Parent Group or (2) persons who in the aggregate control a majority of the voting stock of Parent or an Affiliate of Parent controls a majority of the voting stock of such other person. (c) Notwithstanding subsection (a) of this Section 2.1 or any other provision of this Agreement to the contrary, in the event that the KCS Group determines that there is an economic benefit to any member of the KCS Group from not complying with Section 2.1(a) with regard to any specific shipper, then, upon written notice to the Parent Group expressly referencing this Section 2.1(c) and stating that KCS Group will not comply with Section 2.1(a) with respect to said shipper, such non-compliance shall be excused with respect to said shipper for the term of this Agreement and the Operating Company's and KCS Group's failure to comply with Section 2.1 shall not be deemed to be a breach of this Agreement. In the event that KCS Group gives such a written notice to the Parent Group more than three times during the Initial Term of this Agreement, then the written notice must be accompanied by a payment in the amount of Fifty Thousand Dollars (US$50,000.00) for the written notice to be effective to excuse performance under Section 2.1(a). Section 2.2. EXCLUSIVE RIGHT TO PROVIDE ROAD-RAILER SERVICES. During the Term of this Agreement, the Parent Group shall have the right to be the exclusive provider of Road-Railer freight services over the Operating Company's rail system within Mexico, including the Nuevo Laredo-Mexico City corridor. The KCS Group agrees that it will not sell, market or otherwise provide such services either directly or indirectly through any other person over the Operating Company's rail system within Mexico, including the Nuevo Laredo-Mexico City corridor. All of the prices charged to customers by Operating Company for such services shall be determined from time to time by the Operating Company. Parent Group agrees not to: (i) permit any third party, directly or indirectly to use all or any part of the rights granted in this section under the guise of doing its own business or (ii) to make any agreement to handle as its own Road-Railer equipment of any other third party which in the normal course of business would not be considered the equipment of Parent Group. Section 2.3. INTERMODAL SERVICES. To the extent that the Operating Company determines to utilize a third party to operate its intermodal terminals within Mexico or to provide other services of the type which are the subject of this Agreement (including, without limitation, inspection, pre-trip, repair of cars, chassises, trailers and containers, finished vehicles yard management, loading and unloading of cars from railcars) at any time during the Term of this Agreement, the Parent Group, to the extent that the members of the Parent Group actually perform such services with their own employees, shall be preferred to operate such intermodal terminals or to provide such services over any unrelated third party, provided, in the Operating Company's sole judgement, reasonably exercised, that the standards of service and performance offered by the Parent Group are at least as high as those offered by such unrelated third party and that the parent Group shall have offered to provide such services on terms and conditions at least as favorable to the Operating Company as those offered by the unrelated third party. Notwithstanding the foregoing, the KCS Group shall have the sole right at any time and from time to time to determine whether it shall operate any such intermodal terminals or provide such services in the United States or Mexico directly or through its Subsidiaries. Section 2.4. ADDITIONAL TRANSPORTATION RELATED SERVICES. If the Operating Company and its Subsidiaries and Affiliates determine at any time during the Term to have transportation logistics services provided by any unaffiliated third party in Mexico which are at the time provided by any member of the Parent Group within Mexico or the United States through its own employees, then the Parent Group shall have the right to make a bid for the provision of such services. In order to allow the Parent Group an adequate opportunity to make a bid for the provision of such services, the Operating Company and its Subsidiaries and Affiliates shall invite the Parent Group at the time it seeks bids for such services from any unaffiliated third party, providing the Parent Group with at least the same notice that is provided to any unaffiliated third party. Such services shall include, but are not limited to: (a) Drayage from intermodal terminals to intermodal final destination and vice versa; (b) Logistic coordination for intermodal traffic when provided to a third party; and (c) Cross-dock and warehousing operations when provided to third parties. ARTICLE III COVENANTS OF THE PARTIES Section 3.1. COMPLIANCE WITH LAW. Each Party shall perform all of its activities, obligations and responsibilities contemplated under this Agreement in compliance with all Applicable Laws. Section 3.2. COOPERATION. Each Party shall cooperate and work in good faith with the other Party or Parties, as the case may be, to perform and maintain the services described in this Agreement as promptly as possible. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARTIES As of the date of this Agreement, and throughout the Term, each Party hereby represents and warrants to the other Parties the following: Section 4.1. DUE ORGANIZATION AND GOOD STANDING. Each Party is a corporation, duly organized, validly existing, and is qualified and authorized to transact business in, and is in good standing under the laws of, the jurisdiction of its organization and each jurisdiction in which it performs or will perform its obligations under this Agreement, or is otherwise doing business or is otherwise exempt under Applicable Law from such qualification. Section 4.2. AUTHORITY AND CAPACITY. Each Party represents that the person executing this Agreement has the power, authority and capacity to execute, deliver, and perform its obligations under this Agreement, and has been duly authorized by all necessary corporate action. This Agreement constitutes a valid and legally binding agreement enforceable in accordance with its terms, subject to bankruptcy laws and other similar laws of general application in either the United States or the UMS, as the case may be, affecting rights of creditors and subject to the application of the rules of equity of the United States or the UMS, as the case may be, including those respecting the availability of specific performance. Section 4.3. CONSENT; LITIGATION. No consent or approval of any other Party or any court or governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. There is no pending claim, cause of action, governmental action or litigation that, if determined adversely, would affect the representing Party's ability to perform its obligations hereunder. This Agreement will not result in a default under any other agreement to which the Parties are bound. ARTICLE V CUSTOMER PRIVACY AND CONFIDENTIALITY OF INFORMATION Section 5.1. CONFIDENTIAL INFORMATION. Every Party and their respective affiliates, directors, officers, employees, authorized representatives, agents and advisors (including without limitation, attorneys, accountants, consultants, bankers and financial advisors) shall keep confidential all information concerning the proprietary business procedures, products, rates services, operations, marketing materials, fees, policies or plans of the other Party or Parties, as the case may be, and all "Nonpublic Information" of the other Party or Parties, as the case may be, that is received or obtained during the negotiation or performance of this Agreement, whether such information is oral or written, and whether or not labeled as confidential by such party (collectively "Confidential Information"). "Nonpublic Information" shall include all personally identifiable financial information and any list, description or other grouping of consumers, and publicly available information pertaining to them, that is derived using any personally identifiable financial information that is not publicly available, and shall further include all "nonpublic personal information" as defined by federal regulations implementing the Gramm-Leach-Bliley Act, as amended from time to time. "Personally identifiable financial information" means any information a consumer provides to a party in order to obtain a financial product or service, any information a party otherwise obtains about a consumer in connection with providing a financial product or service to that consumer, and any information about a consumer resulting from any transaction involving a financial product or service between a party and a consumer. Personally identifiable information may include, without limitation, a consumer's first and last name, physical address, zip code, email address, phone number, social security number, birth date, and any other information that itself identifies or when tied to the above information, may identify a consumer. Section 5.2. USE OF CONFIDENTIAL INFORMATION. For as long as Confidential Information is in possession of a Party, such Party shall take reasonable steps, at least substantially equivalent to the steps it takes to protect its own proprietary information, to prevent the use, duplication or disclosure of Confidential Information, other than, by or to its employees or agents who are directly involved in negotiating or performing this Agreement and who are apprised of their obligations under this Section and directed by the receiving Party to treat such information confidentially, or except as required by law or by a supervising regulatory agency of a receiving Party (with information as to the amount of, and manner of calculating the Purchase Price redacted where permitted). Neither Party shall disclose, share, rent, sell or transfer to any third Party any Confidential Information of the other Party or Parties, as the case may be. The Parties shall use Confidential Information only as necessary to perform this Agreement. Section 5.3 EXCEPTIONS. Notwithstanding anything herein to the contrary, no obligation or liability shall accrue hereunder with respect to any of the information to the extent that such information: (a) Is or becomes publicly available other than as a result of acts by a Party or by its representatives or agents in violation of this Agreement; or (b) Is in the possession of the Party or of its representatives or agents prior to disclosure; or (c) Is or becomes available to a Party from a source that, to the Party's knowledge, is not bound by a confidentiality agreement with the prohibiting such disclosure; or (d) Is, on the advice of counsel, required to be disclosed by law, regulation, judicial order or by other legal process. If so advised by counsel, the Party that is required to make the disclosure shall give prompt written notice to the other Party, shall seek the entry of a protective order or otherwise protect the confidentiality of the Confidential Information being disclosed, and, if a protective order cannot be obtained, the disclosing Party shall only disclose that portion of such Confidential Information as it is legally required to disclose. ARTICLE VI TERM AND TERMINATION Section 6.1. TERM; TERMINATION. The initial term of this Agreement (the "Initial Term") shall be the period commencing on the Effective Date (as defined in the AAA) of the Acquisition and terminating on the fifth anniversary of the Effective Date; provided, that thereafter this Agreement shall be automatically renewed for periods of one (1) year unless either party gives written notice of intent to terminate to the other parties not less than sixty (60) days prior to expiration of the initial or any subsequent term. (The Initial Term as extended, the "Term.") Notwithstanding the foregoing, this Agreement shall terminate automatically in the event that (i) TMM Logistics files any voluntary proceeding under any bankruptcy laws, or if TMM Logistics has filed against it any involuntary proceeding under any bankruptcy law which is not dismissed or stayed within 30 days, in either case seeking the adjudication of TMM Logistics as bankrupt or seeking the appointment of a receiver for its assets, or (ii) a Change of Control of the Parent Group occurs and the party effecting such Change of Control is a Competitor, as defined in the AAA. This Agreement may also be terminated by the Operating Company or the KCS Group in the event that the Parent Group or TMM Logisitics, or any officer, director or controlling shareholder of any of the Parent Group or TMM Logistics, has engaged in Improper Conduct. ARTICLE VII INDEMNIFICATION Section 7.1 MUTUAL INDEMNITY. Every Party (in such capacity, referred to as "Indemnitor") shall indemnify and hold the other Party or Parties, as the case may be, and their respective shareholders, directors, officers, employees, representatives, agents, servants, successors, and assigns (collectively "Indemnitees") harmless from and shall reimburse Indemnitees for any losses, damages, deficiencies, claims, causes of action or expenses of any nature (including reasonable attorneys' fees and expenses) incurred by Indemnitees arising out of or resulting from any breach of any warranty, representation covenant or obligation of Indemnitor under this Agreement. Section 7.2 INDEMNIFICATION PROCEDURES. After any Party obtains knowledge of any claim, action, suit or proceeding (collectively a "Claim") for which it believes it is entitled to indemnification under this Agreement, it shall promptly notify the other Party or Parties, as the case may be, of such Claim in writing within ten (10) days after such knowledge. Every Party shall cooperate with the other Party or Parties, as the case may be, in every reasonable manner (at the Indemnitor's sole expense) to facilitate the defense of any Claim subject to indemnification hereunder. Indemnitees' failure to promptly notify Indemnitor of a Claim shall not relieve the Indemnitor from any liability under this Section to the extent that Indemnitor is not materially adversely affected by such delay. With respect to each such notice, the Indemnitor shall, at the Indemnitees' option, immediately take all reasonable action necessary to minimize any risk or loss to the Indemnitees, including retaining counsel satisfactory to the Indemnitees and taking such other actions as are necessary to defend the Indemnitees or to discharge the indemnity obligations under this Section. If the Indemnitor does not timely and adequately conduct such defense, the Indemnitees may, at their option and at Indemnitor's expense, conduct such defense, contest, litigate or settle the Claim using counsel of their own choice without prejudice to their right of indemnification under this Section. The Indemnitor shall pay on demand any liability incurred by the Indemnitees under this Section. The Indemnitor shall not settle any claim in which the Indemnitees are named without the prior written consent of the Indemnitees, which consent shall not be unreasonably withheld. The Indemnitees shall have the right to be represented by counsel at their own expense in any contest, defense, litigation or settlement conducted by the Indemnitor pursuant to this Section. ARTICLE VIII MISCELLANEOUS Section 8.1 RELATIONSHIP. The relationships among the Parties shall be those of independent contractors and no Party shall be or represent itself to be an agent, employee, or joint venturer of the other, nor shall any Party have or represent itself to have any power or authority to act for, bind or commit the other Party or Parties, as the case may be. Section 8.2 SURVIVAL. The provision of Sections 5, 7 and 8 shall survive termination of this Agreement. Section 8.3 WAIVER OF DAMAGES. NO PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY ACTUAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT, PUNITIVE, SPECIAL OR OTHER DAMAGES RELATED IN ANY WAY TO THE PARTIES' OBLIGATIONS UNDER THIS AGREEMENT. OTHER THAN THE LIQUIDATED DAMAGES ON THE TERMS EXPRESSLY PROVIDED FOR IN SECTION 2.1(c), THE PARTIES AGREE THAT THE ONLY REMEDY AVAILABLE TO EITHER PARTY UNDER THIS AGREEMENT IS THE SPECIFIC ENFORCEMENT OF THE TERMS OF THIS AGREEMENT. Section 8.4 NO WAIVER OF DEFAULTS. Any waiver of breach or default pursuant to this Agreement will not be a waiver of any other subsequent default. Failure or delay by any Party to enforce any term or condition of this Agreement will not constitute a waiver of such term or condition. Section 8.5 SEVERABILITY. To the extent that any provision of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable, that provision notwithstanding, the remaining provisions of this Agreement will remain in full force and effect and such invalid or unenforceable provision will be deleted. Section 8.6 ASSIGNMENT. No Party or its Affiliate may assign any rights or delegate any duties under this Agreement other than to an Affiliate, subject to restrictions on assignment by the Parent Group, as provided in Section 2.1 b, without the prior written consent of the other Parties, as the case may be, and any attempt to do so without that consent will be void. The rights granted under this Agreement shall terminate as to any Affiliate at the time any such entity ceases to be an affiliate. Section 8.7 NOTICES. All notices required or permitted under this Agreement must be in writing and shall be deemed effectively given: upon personal delivery, when delivered to the address provided below or; when sent by certified mail, postage prepaid and return receipt requested; upon transmission, when transmitted by telecopier, facsimile, telex or other electronic transmission method including E-mail, provided that receipt is confirmed and notice is sent by certified mail, postage prepaid and return receipt requested; or when sent by Federal Express or other nationally recognized overnight delivery service. Any such notice shall be sent to the Party to whom notice is intended to be given at its address as shown below: if to TMML, to: Avenida de la Cupside 4755 Col. Parques del Pedregal C.P. 14010, Mexico, D.F. Attention: Geraldo Primo if to TFM, to: Larry Lawrence The Kansas City Southern Railway Company By Courrier Delivery: 427 W. 12th Kansas City, Missouri 64105 By Regular Mail Delivery: P. O. Box 219335 Kansas City, MO 64121-9335 if to KCS, to: Larry Lawrence The Kansas City Southern Railway Company By Courrier Delivery: 427 W. 12th Kansas City, Missouri 64105 By Regular Mail Delivery: P. O. Box 219335 Kansas City, MO 64121-9335 If any of the parties changes its address, it will notify the other parties in writing of such change in the manner established in this Clause, otherwise the notices and communications will be effective when sent to last address established pursuant to this Clause. Section 8.8 AMENDMENT. No alteration, waiver, cancellation, or any other change or modification in any term or condition of this Agreement will be valid or binding on any Party unless made in writing and signed by duly authorized representatives of all Parties. Section 8.9 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its conflicts of law provisions. Each party hereto hereby consents to personal jurisdiction in any such action brought in any New York state or federal court, consents to service of process by registered mail made upon such party and such party's agent and waives any objection to venue in any such New York state or federal court and any claim that any such New York state or federal court is an inconvenient forum. Section 8.10 ENTIRE AGREEMENT. The terms and conditions herein contained, including all Exhibits hereto, constitute the entire agreement among the Parties with respect to the subject matter of this Agreement and supersede any previous and contemporaneous agreements and understandings, whether oral or written, among the Parties hereto with respect to the subject matter hereof. There are no other agreements, understandings, representations, or promises among the Parties with respect to the subject matter of this Agreement which are not included herein or in the AAA. Section 8.11 COUNTERPARTS. This Agreement may be executed in one or more counterparts, including facsimiles, each of which will be deemed to be a duplicate original, but all of which, taken together, will be deemed to constitute a single instrument. IN WITNESS WHEREOF, this Agreement has been entered into by the Parties as of the day of December, 2004. - -- TFM, S.A. DE C.V., By: /s/ Carlos Aguilar ----------------------------- Name: Carlos Aguilar ------------------------ Title: Attorney in Fact ----------------------- By: ----------------------------- Name: ------------------------ Title: ----------------------- THE KANSAS CITY SOUTHERN RAILWAY COMPANY By: /s/ Michael R. Haverty ----------------------------- Name: Michael R. Haverty ------------------------ Title: Chairman, President and CEO ----------------------- TMM LOGISTICS, S.A. DE C.V. By: /s/ Horacio Reyes ----------------------------- Name: Horacio Reyes ------------------------ Title: Attorney in Fact ----------------------- By: ----------------------------- Name: ------------------------ Title: ----------------------- EX-10 8 form8k_122004ex107.txt EXH. 10.7 FORM OF VAT ESCROW NOTE VAT NOTE US $40,000,000 New York, New York Effective as of , 2005 ----------------- WHEREAS, Kansas City Southern, a Delaware corporation ("Obligor") as contemplated by the Amended and Restated Acquisition Agreement among Obligor, MM (defined below), and the other parties named therein dated December 15, 2004 (the "Acquisition Agreement"), promises to pay to the order of TMM Multimodal, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the United Mexican States ("MM"), an unsecured promissory debt obligation in the principal amount of Forty Million U.S. Dollars (US $40,000,000) (this "Note"); WHEREAS, Obligor and MM each desire to evidence such debt obligation with the issuance of this Note upon the terms and conditions set forth herein; and WHEREAS, capitalized terms used but not defined herein shall have the meaning assigned to them in the Acquisition Agreement. NOW, THEREFORE, in consideration of the recitals (which are deemed to be a part of this Note) and agreements contained herein, the parties hereto agree as follows: I. PROMISE TO PAY. For value received and subject to reduction pursuant to Section II below, Obligor hereby promises to pay to the order of MM in the manner set forth in Section III below, on the date that is five (5) years following the date hereof or upon such earlier date following the date that is two (2) years following the date hereof as may be determined by KCS in its sole discretion (the "Payment Date"), the principal sum of Forty Million U.S. Dollars (USD $40,000,000). II. REDUCTION OF PRINCIPAL AMOUNT. The principal amount of this Note shall be subject to reduction in accordance with the terms and conditions of the VAT Escrow Agreement dated as of the date hereof, by and among by and among Obligor, Kara Sub, Inc., KCS Investment I, Ltd., KCS Acquisition Subsidiary, Inc., Caymex Transportation, Inc., Grupo MM, S.A., MM Holdings, S.A. de C.V., MM Multimodal, S.A. de C.V. and the Escrow Agent named therein (the "VAT Escrow Agreement"). III. PAYMENT, CONVERSION INTO SHARES. On the Payment Date, this Note shall automatically be converted into the right to receive that number of shares of KCS Common Stock as, valued at the Volume Weighted Price, shall equal the remaining principal amount of this Note as of the Payment Date. IV. INTEREST RATE/PAYMENT. This Note shall bear no interest. V. PREPAYMENT. Obligor shall have the right to prepay the indebtedness evidenced by this Note, in whole or in part, without premium or penalty, upon not less than thirty (30) days notice to the holder thereof. VI. ASSIGNMENT. MM's rights under this Note may not be negotiated or assigned. VII. OBLIGATIONS OF OTHERS. Obligor's obligations under this Note will also be binding on Obligor's successors and assigns and shall only be assigned, transferred or otherwise conveyed to a person or entity that consents in writing to be so bound. VIII. WAIVER; GOVERNING LAW. Obligor hereby waives notice presentment for payment, demand, notice of dishonor and protest of this Note, and further agrees that this Note shall be deemed to have been made under and shall be governed by the laws of the State of Delaware without giving effect to the choice of law principles of that state, in all respects, including matters of construction, validity and performance, and that none of its terms or provisions may be waived, altered, modified or amended except as may be consented to in a duly signed writing by MM. VIII. CANCELLATION OF NOTE. This Note shall be automatically cancelled upon the delivery by Obligor of the shares of KCS Common Stock in accordance with Section 5(b) of the VAT Escrow Agreement. IN WITNESS WHEREOF, Obligor has executed and delivered this Note as of the date first above written. Kansas City Southern By: ------------------------------------- Name: Robert B. Terry Title: Senior Vice President and General Counsel EX-10 9 form8k_122004ex108.txt EXH. 10.8 CLOSING ESCROW AGREEMENT Exhibit 10.8 CLOSING ESCROW AGREEMENT This CLOSING ESCROW AGREEMENT (this "Agreement") is entered into and effective as of this 15th day of December, 2004, by and among KANSAS CITY SOUTHERN, a Delaware corporation ("KCS"), Kara Sub, Inc., a Delaware corporation, KCS Investment I, Ltd., a Delaware corporation, KCS Acquisition Subsidiary, Inc., a Delaware corporation, Caymex Transportation, Inc., a Delaware corporation, Grupo TMM, S.A., a SOCIEDAD ANONIMA organized under the laws of the United Mexican States ("UMS") ("TMM"), TMM Holdings, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS and a subsidiary of TMM ("TMMH") and TMM Multimodal, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS and a subsidiary of TMMH ("MM") (collectively, the "Parties") and The Bank of Nova Scotia Trust Company of New York (the "Escrow Agent"). WHEREAS, the Parties are parties to the Amended and Restated Acquisition Agreement among the Parties and Grupo Transportacion Ferroviara Mexicana, S.A. de C.V. ("GTFM"), dated as of the date hereof (the "Acquisition Agreement"); WHEREAS, pursuant to the Acquisition Agreement, certain funds, securities, documents and other property are to be deposited in escrow pending the closing of the transactions described in the Acquisition Agreement; and WHEREAS, the Parties desire to appoint the Escrow Agent to hold such funds, securities, documents and other property on the terms and subject to the conditions set forth in this Agreement and the Escrow Agent is willing to serve in such capacity; NOW, THEREFORE, in consideration of the premises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, it is hereby agreed by and among the Parties and the Escrow Agent as follows: 1. APPOINTMENT AND DEPOSIT INTO ESCROW. (a) The Parties hereby appoint the Escrow Agent to serve as escrow agent hereunder. In accordance with and subject to the terms and provisions hereof, the Escrow Agent accepts such appointment and agrees to hold and distribute the cash, securities, documents and other property listed in sub-sections 1(b) and (c) below (collectively, the "Escrow Fund"), in accordance with the terms hereof. (b) Simultaneously with the execution hereof, the Parties, as required by the Acquisition Agreement, have deposited (or in the case of (ii) below, shall deposit) with the Escrow Agent, to be held by the Escrow Agent in a non-interest bearing escrow account and released only pursuant to the terms and conditions of this Agreement, the following: (i) US $100,000,000, by wire transfer to Account No. ; -------- (ii) US $100,000,000, within five (5) days after the date of this Agreement, by wire transfer to Account No. ; --------- (iii) a subordinated promissory note of KCS Acquisition Subsidiary, Inc. ("KCS Sub") in the principal amount of MXP $2,440,228,860 payable to MM (the "KCS Sub Note"), a copy of which is attached as Exhibit F hereto; (iv) a stock certificate representing 100 shares of the common stock of KCS Sub (the "KCS Sub Shares") issued in the name of MM; (v) two originally executed copies of the Subscription Agreement by and between KCS Sub and MM for the purchase by MM of the KCS Sub Shares, dated as of the date hereof (the "Subscription Agreement"), a copy of which is attached as Exhibit G hereto; (vi) the form of a certificate of merger (the "Certificate of Merger"), regarding the merger of KCS Sub with and into KCS under the Delaware G.C.L., a copy of which is attached as Exhibit H hereto; (vii) a stock certificate representing 18,000,000 shares of the common stock of KCS (the "KCS Shares") registered in the name of MM, which KCS Shares, although registered in the name of MM shall not be deemed issued or delivered by KCS, notwithstanding any other provision of this Agreement, until the issuance thereof has been approved by the stockholders of KCS, and the KCS Shares have been listed for trading on the New York Stock Exchange, in accordance with the requirements of that exchange, and such KCS Shares shall not be deemed issued or outstanding until so delivered; (viii) the Releases relating to the Acquisition Agreement Claims, of the persons listed on Exhibit A hereto, the form of which is attached as Exhibit I hereto; (ix) the Releases relating to the Management Claims, of the persons listed on Exhibit B, the form of which is attached as Exhibit J hereto; (x) the Releases relating to the Authority Litigation, of the persons listed on Exhibit C hereto, the form of which is attached as Exhibit K hereto; (xi) the Release of Jose Joaquin de Teresa y Polignac, the form of which is attached as Exhibit P hereto; (xii) the Release Resolutions, the form of which is attached as Exhibit D hereto; (xiii) the documents to effect dismissals of the Acquisition Agreement Claims, the Management Claims, and the Authority Litigation Claims, listed on Exhibit E hereto, the forms of which are attached as Exhibit L hereto (the "Dismissal Documents"); (xiv) Stock Certificate No. 1 representing 25,500 shares of Series "A" Fixed Capital Stock of GTFM (the "GTFM Fixed Shares") issued in the name of MM, with executed stock powers attached; (xv) Stock Certificate No. 1 representing 3,842,901 shares of Series "A" Variable Capital Stock of GTFM (the "GTFM Variable Shares") issued in the name of MM, and together with the GTFM Fixed Shares, the "GTFM Shares"), with executed stock powers attached; (xvi) a subordinated promissory note of GTFM in the principal amount of MXP $2,440,228,860 payable to MM, duly endorsed for transfer (the "GTFM Note"), a copy of which is attached as Exhibit M hereto; (xvii) resolutions adopted by the Board of Directors of GTFM effecting the Capital Reduction, a copy of which is attached as Exhibit N hereto; and (xviii) revoked Powers of Attorney and new Powers of Attorney listed on Exhibit O hereto (the "Powers of Attorney"). The Escrow Agent, upon receipt of written advice from both KCS and TMM (evidenced in each case by a writing signed by their respective Presidents ("Advice") that the Closing has occurred under the Acquisition Agreement (specifying the "Closing Date") and prior to release of the Escrow Fund in accordance with Section 3 below, shall date all undated documents deposited in the Escrow Fund as of the Closing Date. The Escrow Fund shall be held for the exclusive benefit of the Parties, their successors and assigns and no other person or entity shall have any right, title or interest therein, except as provided in Section 5(b). 2. (a) All funds deposited in escrow hereunder shall be invested by the Escrow Agent in accordance with the instructions set forth in Appendix A hereto. All interest, gains, income and other distributions (collectively, "Interest") received on or with respect to the funds and any other assets, held pursuant to this Agreement (except for the GTFM Shares) shall be received for the benefit and distributed upon the written instructions, of KCS. (b) The Escrow Agent shall have no liability for any loss on investments made pursuant to this Agreement, including any loss on any investment required to be liquidated prior to maturity in order to make a payment required hereunder. Investments by the Escrow Agent pursuant to this Agreement shall be subject to availability. In no event shall the Escrow Agent be required to provide investment advice of any kind. Absent its receipt of any written investment instructions from KCS, the Escrow Agent shall have no obligation or duty to invest any funds held by it under this Agreement. All Interest shall be held by the Escrow Agent. The parties agree that, for tax reporting purposes, all Interest shall be reported as allocated to KCS. (c) KCS agrees to provide the Escrow Agent, upon execution and delivery of this Agreement, with a Form W-9 or Form W8-BEN, as the case may be. (d) The Escrow Agent is hereby authorized, in making or disposing of any investment permitted by this Agreement, to deal with itself (in its individual capacity) or with any one or more of its affiliates. 3. Promptly following receipt by the Escrow Agent of Advice from both KCS and TMM that the Closing has occurred under the Acquisition Agreement (specifying the Closing Date) or upon receipt of a final order, decree or judgment of a court, or an arbitration tribunal, of competent jurisdiction that distribution is otherwise ordered (and in the case of an arbitration tribunal, accompanied by a certificate signed by the President or a Vice-President (each, an "Appropriate Officer") of KCS and TMM stating that such arbitration was undertaken in accordance with Section 12.11 of the Acquisition Agreement), and accompanied by an opinion of counsel that such decree, order or judgment is final, the Escrow Agent shall take the actions specified in this Section 3; provided that such actions are not contrary to the terms of any such order, decree or judgment: (a) Deliver to MM the sum of $200,000,000, less the amount of the Documented Expenses (defined below) by wire transfer to an account that will be designated by MM to the Escrow Agent not less than 2 Business Days (defined below)prior to such transfer. As used herein, the term "Business Day" shall mean a day of the year on which national banks in New York, New York, are not required or permitted to be closed; (b) Deliver to KCS all Interest received on or with respect to the funds and any other assets held pursuant to this Agreement (c) Deliver to MM the KCS Sub Note; (d) Deliver to MM the certificate representing the KCS Sub Shares; (e) Deliver to each of KCS and TMM an executed copy of the Subscription Agreement; (f) Deliver to counsel designated by KCS the Certificate of Merger for execution and filing with the Secretary of State of Delaware, at such address as shall be provided to the Escrow Agent; (g) Deliver to MM the certificate representing the KCS Shares; (h) Deliver to KCS all of the certificates representing the GTFM Shares, with the executed stock powers attached; (i) Deliver to KCS Sub the GTFM Note; (j) Deliver to the parties identified in written instructions delivered from each of KCS and TMM to the Escrow Agent not less than 2 Business Days prior to the Closing the Releases, Dismissal Documents, Powers of Attorney, and Release Resolutions referenced above; and (k) Deliver to each of (i) JP Morgan Securities, (ii) Elek, Moreno-Valle y Asociados, S.A. de C.V., (iii) Martinez, Algaba, Estrella, de Haro y Galvan-Duque S.C., and (iv) Milbank, Tweed, Hadley & McCloy LLP, the amounts specified in their respective invoices for fees and expenses with respect to the Acquisition and related matters that have been received by the Escrow Agent not later than the second Business Day immediately prior to the Closing Date (the "Documented Expenses"), in each case by wire transfer to the accounts specified by such firms to the Escrow Agent not later than the second Business Day prior to the Closing Date. 4. Promptly following receipt of Advice or a final order, decree or judgment of a court or an arbitration tribunal of competent jurisdiction (and in the case of an arbitration tribunal, accompanied by a certificate signed by the President or a Vice-President (each, an "Appropriate Officer") of KCS and TMM stating that such arbitration was undertaken in accordance with Section 12.11 of the Acquisition Agreement), and accompanied by an opinion of counsel that such order, decree or judgment is final, that the Acquisition Agreement has been terminated or that this Agreement is to be terminated, or, if no such Advice or order in accordance with Section 3 shall have been received the Escrow Agent by December 31, 2005, the Escrow Agent shall: (a) Deliver to KCS all funds then held pursuant to this Agreement, together with any Interest received on or with respect to the funds and with respect to any other assets held pursuant to this Agreement; (b) Deliver to KCS the KCS Sub Note; (c) Deliver to KCS all certificates representing the KCS Shares then held pursuant to this Agreement; (d) Deliver to KCS all certificates representing the KCS Sub Shares then held pursuant to this Agreement; (e) Destroy the executed copies held by it of the Subscription Agreement; (f) Deliver to KCS the Certificate of Merger; (g) Deliver to MM all certificates representing the GTFM Shares then held pursuant to this Agreement; (h) Deliver to MM the GTFM Note; (i) Deliver to KCS the Releases, Dismissal Documents, and Release Resolutions executed or prepared by it or its affiliates; (j) Deliver to MM the Releases, Dismissal Documents, Release Resolutions, and Powers of Attorney executed or prepared by it or its affiliates; and (k) Destroy the GTFM resolutions referenced in sub-section 1(b)(xvi) above. 5. a) The Escrow Agent may act or refrain from acting in reliance upon any instructions, notice, certification, demand, consent, authorization, receipt, power of attorney or other writing delivered to it by any other party and believed by the Escrow Agent to be genuine without being required to determine the authenticity or validity thereof or the correctness of any facts stated therein. The Escrow Agent may act or refrain from acting in reliance upon any signature believed by it to be genuine, and may assume that any such person has been properly authorized to do so. (b) KCS and TMM, jointly and severally, agree to reimburse the Escrow Agent on demand for, and to indemnify and hold the Escrow Agent harmless against and with respect to, any and all loss, liability, damage or expense (including, without limitation, reasonable attorneys' fees, costs and disbursements) that the Escrow Agent may suffer or incur in connection with this Escrow Agreement in its performance hereunder or in connection herewith, except to the extent such loss, liability, damage or expense arises in the Escrow Agent's willful misconduct or gross negligence as adjudicated by a court of competent jurisdiction. The Escrow Agent shall have the right to apply the assets held by it in escrow hereunder, and any proceeds thereof, to the payment of any amounts owing to it by TMM or KCS hereunder upon one (1) Business Days' notice to TMM and KCS. (c) As between themselves, KCS and TMM agree that In the event that the Escrow Agent exercises its right to apply funds from the Escrow Fund to the payment of any amounts owing to it hereunder ("Escrow Agent Receivable") as a result of the failure of one of KCS or TMM to make payment in full of 50% of the Escrow Agent Receivable in accordance with Section 11 hereof, such non-paying Party shall promptly transfer to the account of the other Party in accordance with such other Party's instructions in immediately available funds an amount equal to the difference between 50% of the Escrow Agent Receivable and the amount, if any, actually paid by the non-paying Party to the Escrow Agent in respect of the Escrow Agent Receivable. In the event that the Escrow Agent exercises its right to apply funds from the Escrow Fund to the payment of the Escrow Agent Receivable as a result of the failure of both of KCS and TMM to make payment in full of 50% of the Escrow Agent Receivable in accordance with Section 11 hereof, each such non-paying Party shall promptly transfer to the account of the other Party in accordance with such other Party's instructions in immediately available funds an amount equal to the difference between 50% of the Escrow Agent Receivable and the amount, if any, actually paid by the non-paying Party to the Escrow Agent in respect of the Escrow Agent Receivable. 6. (a) The Escrow Agent may consult legal counsel of its selection in the event of any dispute or question as to the meaning or construction of any of the provisions of this Agreement or its duties hereunder, including, without limitation, the validity of any order of any court or arbitration tribunal, and it shall incur no liability and shall be fully protected in acting or refraining from acting in accordance with the opinion and instructions of such counsel. (b) Each of the Parties acknowledges and agrees that the Escrow Agent (i) shall not be deemed to have knowledge of the terms of, or be responsible for, any of the agreements referred to or described herein (including, without limitation, the Acquisition Agreement, but excluding this Agreement) or for determining compliance therewith and shall not otherwise be bound thereby and (ii) shall be obligated only for the performance of such duties as are specifically set forth in this Agreement on its part to be performed and no implied duties or obligations of any kind shall be read into this Agreement against the Escrow Agent. 7. In the event of any disagreement between any of the Parties to this Agreement, any adverse claims or demands being made in connection with the subject matter of the escrow, or in the event that the Escrow Agent, in good faith, is in doubt as to what action it should take hereunder, the Escrow Agent may, at its sole option, refuse to comply with any claims and demands on it and retain in its possession without liability to anyone all or any of the property held by it hereunder, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists. The Escrow Agent shall not become liable in any way or to any person for its failure or refusal to act in such event, and the Escrow Agent shall be entitled to continue to refrain from acting until (i) the rights of all parties shall have been fully and finally adjudicated by a court of competent jurisdiction or arbitration tribunal of competent jurisdiction (and in the case of an arbitration tribunal, accompanied by a certificate signed by an Appropriate Officer of KCS and TMM stating that such arbitration was undertaken in accordance with Section 12.11 of the Acquisition Agreement), accompanied by an opinion of counsel that such order, decree or judgment is final, or (ii) all differences shall have been resolved by agreement among all the interested persons, and Escrow Agent shall have been notified thereof in writing signed by all such persons. Escrow Agent shall have the option, after thirty (30) calendar days notice to the Parties, of its intention to do so, to file an action in interpleader requiring the Parties to answer and litigate any claims and rights among themselves. The rights of the Escrow Agent under this paragraph are cumulative of all other rights which it may have by law or otherwise. 8. Notice to the Parties shall be given as provided below. Whenever under the terms hereof the time for giving a notice or performing an act falls upon a Saturday, a Sunday or a banking holiday in New York, such time shall be extended to the next day on which the Escrow Agent is open for business. 9. The Escrow Agent may, in its sole discretion, resign and terminate its position hereunder at any time following thirty (30) calendar days written notice to the other Parties to the Escrow Agreement. Prior to the effective date of resignation specified in such notice, the Parties will jointly appoint a successor escrow agent. On the effective date of such appointment, the Escrow Agent shall deliver this Escrow Agreement together with any and all related instruments or documents and all of the funds, securities, documents and other assets held in escrow hereunder to any successor escrow agent selected in writing by Parties to this Agreement. If a successor escrow agent has not been appointed prior to the expiration of thirty (30) calendar days following the date of notice of such resignation, then (i) the Escrow Agent's sole responsibility after that time shall be to safekeep the property held in escrow by it hereunder until receipt by it of designation of a successor escrow agent and (ii) the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent, or other appropriate relief. Any such resulting appointment shall be binding upon all the Parties to this Agreement. 10. The Parties to this Agreement may by mutual written agreement with a copy of such agreement forwarded to the Escrow Agent at any time substitute a new escrow agent by giving ten (10) days notice thereof to the Escrow Agent and paying all fees and expenses due to the Escrow Agent. Any such substitution shall terminate all obligations and duties of the Escrow Agent hereunder. On the effective date of such substitution, the Escrow Agent shall deliver this Agreement together with any and all related instruments or documents and all of the funds, securities, documents and other assets held in escrow hereunder to a successor escrow agent that the Parties have selected in writing. 11. The Escrow Agent shall receive the fees provided in Appendix B hereto. Except as set forth in Section 5(b) above, the Escrow Agent shall not be permitted to utilize the Escrow Fund to cover any of its fees or expenses. As between themselves, KCS and TMM agree that all fees and expenses of the Escrow Agent shall be paid equally (50% by KCS and 50% by TMM). 12. Any modification of this Agreement or any additional obligations assumed by any party hereto shall be binding only if evidenced by a writing signed by each of the parties hereto. Upon distribution in full of the Escrow Fund, this Agreement shall be thereupon terminated and of no further force or effect; provided that the provisions of Section 5(b) and 11 (for the period prior to such termination, resignation or substitution) shall survive the termination of this Agreement and the resignation or substitution of the Escrow Agent. 13. This Agreement shall be governed by the laws of the state of New York in all respects. The Parties hereto irrevocably and unconditionally submit to the jurisdiction of a federal or state court located in New York, New York in connection with any proceedings commenced regarding this Agreement including but not limited to a interpleader proceeding or a proceeding for the employment of a successor escrow agent. The Parties irrevocably submit to the jurisdiction of such courts for the determination of all issues in such proceedings, without regard to any principles of conflicts of laws, and irrevocably waive any objection to venue or inconvenient forum. 14. This Agreement may be executed in one or more counterparts, each of which counterpart shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same Agreement. 15. Unless otherwise provided herein, all notices and other communications hereunder shall be in writing and shall be deemed given if (a) delivered in person, (b) transmitted by facsimile (with written confirmation), (c) mailed by certified or registered mail (return receipt requested) (in which case such notice shall be deemed given on the third day after such mailing) or (d) delivered by an express courier (with written confirmation) to the Parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to Grupo TMM: Grupo TMM, S.A. Avenida de la Cuspide, No. 4755 Colonia Parques del Pedregal 14010 Mexico, D.F. Attention: Corporate Secretary CT Corporation 1209 Orange Street Wilmington, Delaware 19801 With a copy (which shall not constitute notice) to: Milbank, Tweed, Hadley & McCloy LLP One Chase Manhattan Plaza New York, New York 10005 Attention: Thomas C. Janson, Esq. If to KCS: By U.S. Mail: Kansas City Southern P.O. Box 219335 Kansas City, MO 64121-9335 Attention: Senior Vice President and General Counsel By Delivery Service: Kansas City Southern 427 West 12th Street Kansas City, MO 64105 Attention: Senior Vice President and General Counsel With a copy (which shall not constitute notice) to: Sonnenschein Nath & Rosenthal LLP 4520 Main Street, Suite 1100 Kansas City, MO 64111 Attention: John F. Marvin, Esq. If to the Escrow Agent: The Bank of Nova Scotia Trust Company of New York One Liberty Plaza New York, NY 10006 Attention John Neylan With a copy to (which shall not constitute notice) to: Shearman & Sterling LLP 599 Lexington Avenue New York, NY 10022 Attention: Helen Doo Any Party hereto may from time to time change its address for notices under this Section 15 giving at least ten (10) days' notice of such changed address to the other Parties hereto. WITNESS WHEREOF, the Parties and the Escrow Agent have executed this Agreement as of the date first above written. KANSAS CITY SOUTHERN By: /s/ Robert B. Terry ------------------------------------------ Name: Robert B. Terry Title: Senior Vice President & General Counsel KARA SUB, INC. By: /s/ Ronald G. Russ ------------------------------------------ Name: Ronald G. Russ Title: Vice President KCS INVESTMENT I, LTD. By: /s/ Ronald G. Russ ------------------------------------------ Name: Ronald G. Russ Title: Vice President KCS ACQUISITION SUBSIDIARY, INC. By: /s/ Ronald G. Russ ------------------------------------------ Name: Ronald G. Russ Title: Vice President CAYMEX TRANSPORTATION, INC. By: /s/ Jay M. Nadlman ------------------------------------------ Name: Jay M. Nadlman Title: Vice President & Secretary GRUPO TMM, S.A. By: /s/ Jose F. Serrano Segovia ------------------------------------------ Name: Jose Francisco Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano ------------------------------------------ Name: Javier Segovia Serrano Title: Attorney in Fact TMM HOLDINGS, S.A. de C.V. By: /s/ Jose F. Serrano Segovia ------------------------------------------ Name: Jose Francisco Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano ------------------------------------------ Name: Javier Segovia Serrano Title: Attorney in Fact TMM MULTIMODAL, S.A. de C.V. By: /s/ Jose F. Serrano Segovia ------------------------------------------ Name: Jose Francisco Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano ------------------------------------------ Name: Javier Segovia Serrano Title: Attorney in Fact The Bank of Nova Scotia Trust Company of New York By: /s/ Andrew Bicker ------------------------------------------ Name: Andrew Bicker Title: Associate Director APPENDIX A [INSTRUCTIONS TO ESCROW AGENT] APPENDIX B [FEES] EXHIBIT A [RELEASED PERSONS (ACQUISITION AGREEMENT CLAIMS)] EXHIBIT B [RELEASED PERSONS (MANAGEMENT CLAIMS)] EXHIBIT C [RELEASED PERSONS (AUTHORITY AGREEMENT CLAIMS)] EXHIBIT D [RELEASE RESOLUTIONS] EXHIBIT E [CLAIMS TO BE DISMISSED] EXHIBIT F [FORM OF KCS SUB NOTE] EXHIBIT G [FORM OF SUBSCRIPTION AGREEMENT] EXHIBIT H [FORM OF CERTIFICATE OF MERGER] EXHIBIT I [FORM OF ACQUISITION AGREEMENT CLAIMS RELEASE] EXHIBIT J [FORM OF MANAGEMENT CLAIMS RELEASE] EXHIBIT K [FORM OF AUTHORITY LITIGATION CLAIMS RELEASE] EXHIBIT L [FORM OF DISMISSAL DOCUMENTS] EXHIBIT M [FORM OF GTFM SUB NOTE] EXHIBIT N [FORM OF GTFM RESOLUTIONS] EXHIBIT O [POWERS OF ATTORNEY] EXHIBIT P [FORM OF DE TERESA RELEASE] EX-10 10 form8k_122004ex109.txt EXH. 10.9 INDEMNITY ESCROW AGREEMENT Exhibit 10.9 INDEMNITY ESCROW AGREEMENT This INDEMNITY ESCROW AGREEMENT (this "Agreement") is entered into and effective as of this 15th day of December, 2004, by and among KANSAS CITY SOUTHERN, a Delaware corporation ("KCS"), Caymex Transportation, Inc., a Delaware corporation "Caymex"), KARA Sub, Inc., a Delaware corporation ("KARA"), KCS Investment I, Ltd., a Delaware corporation ("KCS Investment") (KCS, Caymex, KARA, and KCS Investment are sometimes collectively referred to herein as the "KCS Purchasers"), GRUPO TMM, S.A., a SOCIEDAD ANONIMA organized under the laws of the United Mexican States ("UMS") and TMM Multimodal, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS ("MM") (MM and TMM, collectively with the KCS Purchasers, are collectively referred to herein as the "Parties") and The Bank of Nova Scotia Trust Company of New York (the "Escrow Agent"). WHEREAS, the Parties are parties to the Amended and Restated Acquisition Agreement dated as of the date hereof among the KCS Purchasers, TMM, and the other parties named therein (the "Acquisition Agreement"), pursuant to which the TMM Parties will sell and the KCS Purchasers will purchase substantially all of MM's interest in Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. upon the terms and conditions set forth in the Acquisition Agreement; WHEREAS, a portion of the consideration for the Acquisition is to be delivered to the Escrow Agent to be held in escrow pursuant to the terms of this Agreement (the "Indemnity Escrow"), which escrow is being established to provide available funds to satisfy the indemnity claims as provided herein; WHEREAS, at the Closing (as defined in the Acquisition Agreement) the KCS Purchasers will deposit with the Escrow Agent one or more promissory notes of KCS in the aggregate principal amount of Forty-Seven Million Dollars ($47,000,000) (the "Indemnity Escrow Notes") to be held in the Indemnity Escrow, and released only pursuant to the terms and conditions of this Agreement; and WHEREAS, the Parties desire to appoint the Escrow Agent to hold the Indemnity Escrow Notes on the terms and conditions set forth in this Agreement and the Escrow Agent is willing to serve in that capacity. NOW, THEREFORE, in consideration of the premises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, it is hereby agreed by and among the Parties and the Escrow Agent as follows: 1. The Parties hereby appoint the Escrow Agent to serve as escrow agent hereunder. In accordance with and subject to the terms and provisions hereof, the Escrow Agent hereby accepts such appointment and agrees to hold, reduce the principal amount of, and deliver the Indemnity Escrow Notes in accordance with the terms hereof. 2. (a) At the Closing, the KCS Purchasers shall deposit with the Escrow Agent the Indemnity Escrow Notes to be held by the Escrow Agent in the Indemnity Escrow and reduced and delivered only pursuant to the terms and conditions of this Agreement. (b) In the event that KCS exercises its option to convert any portion of the Indemnity Escrow Notes to shares of KCS Common Stock ("Shares") in accordance with the terms thereof, KCS shall deliver one or more certificates representing such Shares to the Escrow Agent to be held by the Escrow Agent in the Indemnity Escrow and delivered only pursuant to the terms and conditions of this Agreement. In the event that the number of Shares to be delivered to MM is reduced in accordance with Section 3 hereof after delivery of such certificate or certificates, KCS shall substitute one or more certificates representing the appropriate number of Shares to be delivered on the Payment Date. 3. The principal amount of the Indemnity Escrow Notes, or number of Shares held in the Indemnity Escrow, shall be reduced only upon the occurrence of any of the following: (a) If the Escrow Agent receives joint written instructions from KCS and TMM to make such reduction, specifying the amount thereof; (b) If the Escrow Agent receives written instructions from KCS to make such reduction, specifying the amount thereof, simultaneously copied and sent by same means to TMM, and the Escrow Agent does not receive written objection from TMM to such instructions within ten (10) Business Days (defined below) of the date of such instructions are received by the Escrow Agent. As used herein, the term "Business Day" shall mean a day of the year on which national banks in New York, New York, are not required or permitted to be closed; or (c) If the Escrow Agent receives a final order, decree or judgment of a court of competent jurisdiction or arbitration tribunal (and in the case of an arbitration tribunal, accompanied by a certificate signed by the President or a Vice-President (each, an "Appropriate Officer") of KCS and TMM stating that such arbitration was undertaken in accordance with Section 12.11 of the Acquisition Agreement), accompanied by an opinion of counsel that such order, decree or judgment is final. The Escrow Agent shall mark on Schedule A to each of the Indemnity Escrow Notes the amount of each reduction in the principal amount thereof as provided in this Section 3. 4. The Parties agree that any dispute between the Parties arising under this Agreement shall be resolved in accordance with the dispute resolution procedures set forth in Sections 10.5(e) or 12.11, as appropriate, of the Acquisition Agreement. 5. On June 1, 2007 (the "Payment Date"), the Escrow Agent shall deliver to MM the Indemnity Escrow Notes, as reduced pursuant to Section 3 hereof, and, if any part of the Indemnity Escrow Notes have been converted to Shares, any such Shares then held by it in the Indemnity Escrow. In the event that there is an unresolved objection from TMM pursuant to Section 3(b) with respect to any claim for reduction of the principal amount of the Indemnity Escrow Notes (or Shares) on the Payment Date, the Escrow Agent shall deliver that portion of the Indemnity Escrow Notes (or Shares) to MM which is not subject to such unresolved objection, if any, and shall deliver the balance of such Indemnity Escrow Notes or Shares, as the case may be, as directed by joint written instructions from KCS and TMM, or a final order, decree, or judgment of a court or arbitration tribunal of competent jurisdiction (and in the case of an arbitration tribunal, accompanied by a certificate signed by an Appropriate Officer of KCS and TMM stating that such arbitration was undertaken in accordance with Section 12.11 of the Acquisition Agreement), accompanied by an opinion of counsel that such order, decree or judgment is final. KCS shall provide to the Escrow Agent one or more Indemnity Escrow Notes or stock certificates in the appropriate denominations for delivery pursuant to this Section 5. 6. (a) The Escrow Agent may act or refrain from acting in reliance upon any instructions, notice, certification, demand, consent, authorization, receipt, power of attorney or other writing delivered to it by any other party and believed by the Escrow Agent to be genuine without being required to determine the authenticity or validity thereof or the correctness of any facts stated therein. The Escrow Agent may act or refrain from acting in reliance upon any signature believed by it to be genuine, and may assume that any such person has been properly authorized to do so. (b) KCS and TMM, jointly and severally, agree to reimburse the Escrow Agent on demand for, and to indemnify and hold the Escrow Agent harmless against and with respect to, any and all loss, liability, damage or expense (including, without limitation, reasonable attorneys' fees, costs and disbursements) that the Escrow Agent may suffer or incur in connection with this Escrow Agreement in its performance hereunder or in connection herewith, except to the extent such loss, liability, damage or expense arises in the Escrow Agent's willful misconduct or gross negligence as adjudicated by a court of competent jurisdiction. The Escrow Agent shall have the right to apply the Indemnity Escrow Notes or Shares held by it in escrow hereunder, and any proceeds thereof, to the payment of any amounts owing to it by TMM or KCS hereunder upon one (1) business days' notice to TMM and KCS. (c) As between themselves, TMM and KCS agree that in the event that the Escrow Agent exercises its right to apply funds from the Indemnity Escrow Notes or Shares to the payment of any amounts owing to it hereunder ("Escrow Agent Receivable") as a result of the failure of one of KCS or TMM to make payment in full of 50% of the Escrow Agent Receivable in accordance with Section 11 hereof, such non-paying Party shall promptly transfer to the account of the other Party in accordance with such other Party's instructions in immediately available funds an amount equal to the difference between 50% of the Escrow Agent Receivable and the amount, if any, actually paid by the non-paying Party to the Escrow Agent in respect of the Escrow Agent Receivable. In the event that the Escrow Agent exercises its right to apply funds from the Indemnity Escrow Notes or Shares to the payment of the Escrow Agent Receivable as a result of the failure of both of KCS and TMM to make payment in full of 50% of the Escrow Agent Receivable in accordance with Section 11 hereof, each such non-paying Party shall promptly transfer to the account of the other Party in accordance with such other Party's instructions in immediately available funds an amount equal to the difference between 50% of the Escrow Agent Receivable and the amount, if any, actually paid by the non-paying Party to the Escrow Agent in respect of the Escrow Agent Receivable. 7. (a) The Escrow Agent may consult legal counsel of its selection in the event of any dispute or question as to the meaning or construction of any of the provisions of this Agreement or its duties hereunder, including, without limitation, the validity of any order of any court or arbitration tribunal, and it shall incur no liability and shall be fully protected in acting or refraining from acting in accordance with the opinion and instructions of such counsel. (b) Each of the Parties acknowledges and agrees that the Escrow Agent (i) shall not be deemed to have knowledge of the terms of, or be responsible for, any of the agreements referred to or described herein (including, without limitation, the Acquisition Agreement, but excluding this Agreement) or for determining compliance therewith and shall not otherwise be bound thereby and (ii) shall be obligated only for the performance of such duties as are specifically set forth in this Agreement on its part to be performed and no implied duties or obligations of any kind shall be read into this Agreement against the Escrow Agent. 8. In the event of any disagreement between any of the Parties to this Agreement, any adverse claims or demands being made in connection with the subject matter of the escrow, or in the event that the Escrow Agent, in good faith, is in doubt as to what action it should take hereunder, the Escrow Agent may, at its sole option, refuse to comply with any claims and demands on it and retain in its possession without liability to anyone all or any of the property held by it hereunder, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists. The Escrow Agent shall not become liable in any way or to any person for its failure or refusal to act in such event, and the Escrow Agent shall be entitled to continue to refrain from acting until (i) the rights of all parties shall have been fully and finally adjudicated by a court of competent jurisdiction or arbitration tribunal of competent jurisdiction (and in the case of an arbitration tribunal, accompanied by a certificate signed by an Appropriate Officer of KCS and TMM stating that such arbitration was undertaken in accordance with Section 12.11 of the Acquisition Agreement), accompanied by an opinion of counsel that such order, decree or judgment is final, or (ii) all differences shall have been resolved by agreement among all the interested persons, and Escrow Agent shall have been notified thereof in writing signed by all such persons. Escrow Agent shall have the option, after thirty (30) calendar days notice to the Parties, of its intention to do so, to file an action in interpleader requiring the Parties to answer and litigate any claims and rights among themselves. The rights of the Escrow Agent under this paragraph are cumulative of all other rights which it may have by law or otherwise. 9. Notice to the Parties and to the Escrow Agents shall be given as provided below. Whenever under the terms hereof the time for giving a notice or performing an act falls upon a Saturday, a Sunday or a banking holiday in New York, such time shall be extended to the next day on which the Escrow Agent is open for business. 10. The Escrow Agent may, in its sole discretion, resign and terminate its position hereunder at any time following thirty (30) calendar days written notice to the other Parties to the Escrow Agreement. Prior to the effective date of resignation specified in such notice, the Parties will jointly appoint a successor escrow agent. On the effective date of such appointment, the Escrow Agent shall deliver this Escrow Agreement together with any and all related instruments or documents and all of the funds, securities, documents and other assets held in escrow hereunder to any successor escrow agent selected in writing by Parties to this Agreement. If a successor escrow agent has not been appointed prior to the expiration of thirty (30) calendar days following the date of notice of such resignation, then (i) the Escrow Agent's sole responsibility after that time shall be to safekeep the property held in escrow by it hereunder until receipt by it of designation of a successor escrow agent and (ii) the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent, or other appropriate relief. Any such resulting appointment shall be binding upon all the Parties to this Agreement. 11. The Parties to this Agreement may by mutual written agreement, with a copy of such agreement forwarded to the Escrow Agent, at any time substitute a new escrow agent by giving ten (10) days notice thereof to the Escrow Agent and paying all fees and expenses due to the Escrow Agent. Any such substitution shall terminate all obligations and duties of the Escrow Agent hereunder. On the effective date of such substitution, the Escrow Agent shall deliver this Agreement together with any and all related instruments or documents and all of the funds, securities, documents and other assets held in escrow hereunder to a successor escrow agent that the Parties have selected in writing. 12. The Escrow Agent shall receive the fees provided in Appendix A hereto. Except as provided in Section 6(b), the Escrow Agent shall not be permitted to utilize the Escrow Fund to cover any of its fees or expenses. TMM and KCS agree that as between themselves, all fees and expenses of the Escrow Agent shall be paid equally (50% by KCS and 50% by TMM). 13. Any modification of this Agreement or any additional obligations assumed by any party hereto shall be binding only if evidenced by a writing signed by each of the parties hereto. Upon the earlier to occur of (i) the reduction of the Indemnity Escrow Notes in full principal amount, or (ii) the delivery of the Indemnity Escrow Notes or Shares to MM, this Agreement shall be thereupon terminated and of no further force or effect; provided that the provisions of Sections 6(b) and 12 (for the period prior to such termination, resignation or substitution) shall survive the termination of this Agreement and the resignation or substitution of the Escrow Agent. 14. This Agreement shall be governed by the laws of the state of New York in all respects. The Parties hereto irrevocably and unconditionally submit to the jurisdiction of a federal or state court located in New York, New York in connection with any proceedings commenced regarding this Agreement including but not limited to a interpleader proceeding or a proceeding for the employment of a successor escrow agent. The Parties irrevocably submit to the jurisdiction of such courts for the determination of all issues in such proceedings, without regard to any principles of conflicts of laws, and irrevocably waive any objection to venue or inconvenient forum. 15. This Agreement may be executed in one or more counterparts, each of which counterpart shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same Agreement. 16. Unless otherwise provided herein, all notices and other communications hereunder shall be in writing and shall be deemed given if (a) delivered in person, (b) transmitted by facsimile (with written confirmation), (c) mailed by certified or registered mail (return receipt requested) (in which case such notice shall be deemed given on the third day after such mailing) or (d) delivered by an express courier (with written confirmation) to the Parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to Grupo TMM: Grupo TMM, S.A. Avenida de la Cuspide, No. 4755 Colonia Parques del Pedregal 14010 Mexico, D.F. Attention: Corporate Secretary CT Corporation 1209 Orange Street Wilmington, Delaware 19801 With a copy (which shall not constitute notice) to: Milbank, Tweed, Hadley & McCloy LLP One Chase Manhattan Plaza New York, New York 10005 Attention: Thomas C. Janson, Esq. If to the KCS Purchasers: By U.S. Mail: Kansas City Southern P.O. Box 219335 Kansas City, MO 64121-9335 Attention: Senior Vice President and General Counsel By Delivery Service: Kansas City Southern 427 West 12th Street Kansas City, MO 64105 Attention: Senior Vice President and General Counsel With a copy (which shall not constitute notice) to: Sonnenschein Nath & Rosenthal LLP 4520 Main Street, Suite 1100 Kansas City, MO 64111 Attention: John F. Marvin, Esq. If to the Escrow Agent: The Bank of Nova Scotia Trust Company of New York One Liberty Plaza New York, NY 10006 Attention John Neylan With a copy to (which shall not constitute notice) to: Shearman & Sterling LLP 599 Lexington Avenue New York, NY 10022 Attention: Helen Doo Any party hereto may from time to time change its address for notices under this Section 16 giving at least ten (10) days' notice of such changed address to the other parties hereto. SIGNATURE PAGES FOLLOWING IN WITNESS WHEREOF, the Parties and the Escrow Agent have executed this Agreement as of the date first above written. KANSAS CITY SOUTHERN By: /s/ Michael R. Haverty -------------------------------------- Name: Michael R. Haverty Title: Chairman, President & CEO Caymex Transportation, Inc. By: /s/ Jay M. Nadlman -------------------------------------- Name: Jay M. Nadlman Title: Vice President & Secretary KARA Sub, Inc. By: /s/ Ronald G. Russ -------------------------------------- Name: Ronald G. Russ Title: Vice President KCS Investment I, Ltd. By: /s/ Ronald G. Russ -------------------------------------- Name: Ronald G. Russ Title: Vice President GRUPO TMM, S.A. By: /s/ Jose F. Serrano Segovia -------------------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact By: Javier Segovia Serrano -------------------------------------- Name: Javier Segovia Serrano Title: Attorney in Fact The Bank of Nova Scotia Trust Company of New York By: /s/ Andrew Bicker -------------------------------------- Name: Andrew Bicker Title: Associate Director APPENDIX A [FEES] EX-10 11 form8k_122004ex1010.txt EXH. 10.10 VAT ESCROW AGREEMENT Exhibit 10.10 VAT ESCROW AGREEMENT This VAT ESCROW AGREEMENT (this "Agreement") is entered into and effective as of this 15th day of December, 2004, by and among KANSAS CITY SOUTHERN, a Delaware corporation ("KCS"), KARA SUB, INC., a Delaware corporation, KCS INVESTMENT I, LTD., a Delaware corporation, KCS ACQUISITION SUBSIDIARY, INC., a Delaware corporation, CAYMEX TRANSPORTATION, INC., a Delaware corporation, GRUPO TMM, S.A., a SOCIEDAD ANONIMA organized under the laws of the United Mexican States ("TMM"), TMM HOLDINGS, S.A. de C.V., and TMM MULTIMODAL, S.A. de C.V., and a subsidiary of TMMH ("MM") (collectively, the "Parties") and The Bank of Nova Scotia Trust Company of New York (the "Escrow Agent). WHEREAS, pursuant to Section 7.13 of the Amended and Restated Acquisition Agreement dated as of the date hereof among the Parties and the other parties named therein (the "Acquisition Agreement") certain funds, in the form of a promissory note, are to be deposited in escrow (the "VAT Escrow"); and WHEREAS, the Parties desire to appoint the Escrow Agent to hold the VAT Escrow (defined below) on the terms and conditions set forth in this Escrow Agreement and the Escrow Agent is willing to serve in that capacity. NOW, THEREFORE, in consideration of the premises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, it is hereby agreed by and among the Parties and the Escrow Agent as follows: 1. APPOINTMENT AND DEPOSIT INTO ESCROW. (a) The Parties hereby appoint the Escrow Agent to serve as escrow agent hereunder. In accordance with and subject to the terms and provision hereof, the Escrow Agent accepts such appointment and agrees to hold and distribute the VAT Escrow in accordance with the terms hereof. (b) On the later to occur (the "Deposit Date") of (i) the Closing Date, or (ii) the Final Resolution of the VAT Claim and Put (as those terms are defined in the Acquisition Agreement), KCS shall deliver to the Escrow Agent, to be held by the Escrow Agent in the VAT Escrow, and reduced and released only pursuant to the terms and conditions of this VAT Escrow Agreement, a promissory note of KCS in the principal amount of $40 million (the "VAT Escrow Note"). (c) The principal amount of VAT Escrow Note shall be reduced only upon the occurrence of any of the following: (i) If the Escrow Agent receives joint written instructions from KCS and TMM to make such reduction, specifying the amount thereof; (ii) If the Escrow Agent receives written instructions from KCS to make such reduction, specifying the amount thereof, simultaneously copied and sent by same means to TMM, and the Escrow Agent does not receive written objection from TMM within ten (10) Business Days (defined below) of the date such instructions are received by the Escrow Agent. As used herein, the term "Business Day" shall mean a day of the year on which national banks in New York, New York, are not required or permitted to be closed; or (iii) If the Escrow Agent receives a final order, decree or judgment of a court of competent jurisdiction or arbitration tribunal (and in the case of an arbitration tribunal, accompanied by a certificate signed by the President or a Vice-President (each, an "Appropriate Officer") of KCS and TMM stating that such arbitration was undertaken in accordance with Section 12.11 or 10.5 of the Acquisition Agreement), and accompanied by an opinion of counsel that such order, decree or judgment is final. The Escrow Agent shall mark on Schedule A to the VAT Escrow Note the amount of each reduction in the principal amount thereof as provided in this Section 3. 2. The VAT Escrow shall be held for the exclusive benefit of the Parties, their successors and assigns and no other person or entity shall have any right, title or interest therein, except as provided in Section 5. 3. The Parties agree that any dispute between the Parties arising under this Agreement shall be resolved in accordance with the dispute resolution procedures set forth in Section 10.5(e) or 12.11, as appropriate, of the Acquisition Agreement. 4. On the earliest to occur (the "Release Date") of (i) the fifth anniversary of the Deposit Date (provided there is no unresolved objection from TMM pursuant to Section 2(c)(ii)), (ii) the receipt by the Escrow Agent of written instructions from KCS (provided there is no unresolved objection from TMM pursuant to Section 2(c)(ii)), or (iii) receipt by the Escrow Agent of an order of a final order, decree or judgment of a court or an arbitration tribunal (and in the case of an arbitration tribunal of competent jurisdiction, accompanied by a certificate signed by an Appropriate Officer of KCS and TMM stating that such arbitration was undertaken in accordance with Section 12.11 of the Acquisition Agreement), accompanied by an opinion of counsel that such order, decree or judgment is final (a "Final Resolution"), that release of the VAT Escrow Note is otherwise ordered, (a) the VAT Escrow Note, as reduced in accordance with Section 1(c) hereof, shall automatically be converted into the right to receive that number of shares of KCS Common Stock (the "Shares") as provided for in the VAT Escrow Note; and (b) KCS shall issue and deliver to MM one or more stock certificates representing the Shares referenced in sub-section 4(a) and the VAT Escrow Note shall be returned by the Escrow Agent to KCS. (c) In the event that there is an unresolved objection from TMM pursuant to Section 2(c)(ii) with respect to any claim for reduction of the principal amount of the VAT Escrow Note on the Release Date, (i) KCS shall deliver to MM that number of Shares as equal the portion of the VAT Escrow Note which is not subject to such dispute, if any, and shall deliver the balance, if any, upon agreement of the Parties or a Final Resolution of such dispute, and (ii) the Escrow Agent shall continue to hold the VAT Escrow Note, as reduced by any partial payment thereof in accordance with this Section 4(c), in accordance with the terms of this Agreement, and shall deliver the VAT Escrow Note to KCS upon receipt of written instructions signed by both TMM and KCS as to the disposition of the VAT Escrow Note, or a Final Resolution of such dispute. 5. (a) The Escrow Agent may act or refrain from acting in reliance upon any instructions, notice, certification, demand, consent, authorization, receipt, power of attorney or other writing delivered to it by any other party and believed by the Escrow Agent to be genuine without being required to determine the authenticity or validity thereof or the correctness of any facts stated therein. The Escrow Agent may act or refrain from acting in reliance upon any signature believed by it to be genuine, and may assume that any such person has been properly authorized to do so. (b) The Parties hereto, jointly and severally, agree to reimburse the Escrow Agent on demand for, and to indemnify and hold the Escrow Agent harmless against and with respect to, any and all loss, liability, damage or expense (including, without limitation, reasonable attorneys' fees, costs and disbursements) that the Escrow Agent may suffer or incur in connection with this Agreement in its performance hereunder or in connection herewith, except to the extent such loss, liability, damage or expense is caused by the Escrow Agent's willful misconduct or gross negligence as adjudicated by a court of competent jurisdiction. The Escrow Agent shall have the right to apply the VAT Escrow held by it in escrow hereunder, and any proceeds thereof, to the payment of any amounts owing to it by TMM or KCS hereunder upon one (1) Business Days' notice to TMM and KCS. (c) As between themselves, KCS and TMM agree that in the event that the Escrow Agent exercises its right to apply funds from the VAT Escrow Note to the payment of any amounts owing to it hereunder ("Escrow Agent Receivable") as a result of the failure of one of KCS or TMM to make payment in full of 50% of the Escrow Agent Receivable in accordance with Section 11 hereof, such non-paying Party shall promptly transfer to the account of the other Party in accordance with such other Party's instructions in immediately available funds an amount equal to the difference between 50% of the Escrow Agent Receivable and the amount, if any, actually paid by the non-paying Party to the Escrow Agent in respect of the Escrow Agent Receivable. In the event that the Escrow Agent exercises its right to apply funds from the VAT Escrow Note to the payment of the Escrow Agent Receivable as a result of the failure of both of KCS and TMM to make payment in full of 50% of the Escrow Agent Receivable in accordance with Section 11 hereof, each such non-paying Party shall promptly transfer to the account of the other Party in accordance with such other Party's instructions in immediately available funds an amount equal to the difference between 50% of the Escrow Agent Receivable and the amount, if any, actually paid by the non-paying Party to the Escrow Agent in respect of the Escrow Agent Receivable. 6. (a) The Escrow Agent may consult legal counsel of its selection in the event of any dispute or question as to the meaning or construction of any of the provisions of this Agreement or its duties hereunder, including, without limitation, the validity of any order of any court or arbitration tribunal, and it shall incur no liability and shall be fully protected in acting or refraining from acting in accordance with the opinion and instructions of such counsel (b) Each of the Parties acknowledges and agrees that the Escrow Agent (i) shall not be deemed to have knowledge of the terms of, or be responsible for, any of the agreements referred to or described herein (including, without limitation, the Acquisition Agreement, but excluding this Agreement) or for determining compliance therewith and shall not otherwise be bound thereby and (ii) shall be obligated only for the performance of such duties as are specifically set forth in this Agreement on its part to be performed and no implied duties or obligations of any kind shall be read into this Agreement against the Escrow Agent. 7. In the event of any disagreement between any of the Parties to this Agreement, any adverse claims or demands being made in connection with the subject matter of the escrow, or in the event that the Escrow Agent, in good faith, is in doubt as to what action it should take hereunder, the Escrow Agent may, at its option, refuse to comply with any claims and demands on it and retain in its possession without liability to anyone all or any of the property held by it hereunder, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists. The Escrow Agent shall not become liable in any way or to any person for its failure or refusal to act in such event, and the Escrow Agent shall be entitled to continue to refrain from acting until (i) the rights of all parties shall have been fully and finally adjudicated by a final order, decree, or judgment of a court or arbitration tribunal of competent jurisdiction (and in the case of an arbitration tribunal, accompanied by a certificate signed by an Appropriate Officer of KCS and TMM stating that such arbitration was undertaken in accordance with Section 12.11 or 10.5 of the Acquisition Agreement), accompanied by an opinion of counsel that such order, decree or judgment is final, or (ii) all differences shall have been resolved by agreement among all the interested persons, and Escrow Agent shall have been notified thereof in writing signed by all such persons. Escrow Agent shall have the option, after thirty (30) calendar days notice to the Parties, of its intention to do so, to file an action in interpleader requiring the Parties to answer and litigate any claims and rights among themselves. The rights of the Escrow Agent under this paragraph are cumulative of all other rights which it may have by law or otherwise. 8. Notice to the Parties shall be given as provided below. Whenever under the terms hereof the time for giving a notice or performing an act falls upon a Saturday, a Sunday or a banking holiday in New York, such time shall be extended to the next day on which the Escrow Agent is open for business. 9. The Escrow Agent may, in its sole discretion, resign and terminate its position hereunder at any time following thirty (30) calendar days written notice to the other Parties to the Escrow Agreement. Prior to the effective date of resignation specified in such notice, the Parties will jointly appoint a successor escrow agent. On the effective date of such appointment, the Escrow Agent shall deliver this Escrow Agreement together with any and all related instruments or documents and all of the funds, securities, documents and other assets held in escrow hereunder to any successor escrow agent selected in writing by Parties to this Agreement. If a successor escrow agent has not been appointed prior to the expiration of thirty (30) calendar days following the date of notice of such resignation, then (i) the Escrow Agent's sole responsibility after that time shall be to safekeep the property held in escrow by it hereunder until receipt by it of designation of a successor escrow agent and (ii) the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent, or other appropriate relief. Any such resulting appointment shall be binding upon all the Parties to this Agreement. 10. The Parties to this Agreement may by mutual written agreement, with a copy of such agreement forwarded to the Escrow Agent, at any time substitute a new escrow agent by giving ten (10) days notice thereof to the Escrow Agent and paying all fees and expenses due to the Escrow Agent. Any such substitution shall terminate all obligations and duties of the Escrow Agent hereunder. On the effective date of such substitution, the Escrow Agent shall deliver this Agreement together with any and all related instruments or documents and all of the funds, securities, documents and other assets held in escrow hereunder to a successor escrow agent that the Parties have selected in writing. 11. The Escrow Agent shall receive the fees provided in Appendix B hereto. Except as provided in Section 5(b), the Escrow Agent shall not be permitted to utilize the Escrow Fund to cover any of its fees or expenses. TMM and KCS agree as between themselves that all fees and expenses of the Escrow Agent shall be paid equally (50% by KCS and 50% by TMM). 12. Any modification of this Agreement or any additional obligations assumed by any party hereto shall be binding only if evidenced by a writing signed by each of the parties hereto. Upon the earlier to occur of (i) the reduction of the VAT Escrow Note in full principal amount, or (ii) the delivery of the VAT Escrow Note to KCS, this Agreement shall be thereupon terminated and of no further force or effect; provided that the provisions of Section 5(b) and 11 (for the period prior to such termination, resignation or substitution) shall survive the termination of this Agreement and the resignation or substitution of the Escrow Agent. 13. This Agreement shall be governed by the laws of the state of New York in all respects. The Parties hereto irrevocably and unconditionally submit to the jurisdiction of a federal or state court located in New York, New York in connection with any proceedings commenced regarding this Agreement including but not limited to a interpleader proceeding or a proceeding for the employment of a successor escrow agent. The Parties irrevocably submit to the jurisdiction of such courts for the determination of all issues in such proceedings, without regard to any principles of conflicts of laws, and irrevocably waive any objection to venue or inconvenient forum. 14. This Agreement may be executed in one or more counterparts, each of which counterpart shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same Agreement. 15. Unless otherwise provided herein, all notices and other communications hereunder shall be in writing and shall be deemed given if (a) delivered in person, (b) transmitted by facsimile (with written confirmation), (c) mailed by certified or registered mail (return receipt requested) (in which case such notice shall be deemed given on the third day after such mailing) or (d) delivered by an express courier (with written confirmation) to the Parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to Grupo TMM: Grupo TMM, S.A. Avenida de la Cuspide, No. 4755 Colonia Parques del Pedregal 14010 Mexico, D.F. Attention: Corporate Secretary CT Corporation 1209 Orange Street Wilmington, Delaware 19801 With a copy (which shall not constitute notice) to: Milbank, Tweed, Hadley & McCloy LLP One Chase Manhattan Plaza New York, New York 10005 Attention: Thomas C. Janson, Esq. If to KCS: By U.S. Mail: Kansas City Southern P.O. Box 219335 Kansas City, MO 64121-9335 Attention: Senior Vice President and General Counsel By Delivery Service: Kansas City Southern 427 West 12th Street Kansas City, MO 64105 Attention: Senior Vice President and General Counsel With a copy (which shall not constitute notice) to: Sonnenschein Nath & Rosenthal LLP 4520 Main Street, Suite 1100 Kansas City, MO 64111 Attention: John F. Marvin, Esq. If to the Escrow Agent: The Bank of Nova Scotia Trust Company of New York One Liberty Plaza New York, NY 10006 Attention John Neylan With a copy to (which shall not constitute notice) to: Shearman & Sterling LLP 599 Lexington Avenue New York, NY 10022 Attention: Helen Doo Any Party hereto may from time to time change its address for notices under this Section 16 giving at least ten (10) days' notice of such changed address to the other Parties hereto. SIGNATURE PAGES FOLLOWING IN WITNESS WHEREOF, the Parties and the Escrow Agent have executed this Agreement as of the date first above written. KANSAS CITY SOUTHERN By: /s/ Michael R. Haverty ----------------------------- Name: Michael R. Haverty Title: Chairman, President & CEO KARA SUB, INC. By: /s/ Ronald G. Russ ----------------------------- Name: Ronald G. Russ Title: Vice President KCS INVESTMENT I, LTD. By: /s/ Ronald G. Russ ----------------------------- Name: Ronald G. Russ Title: Vice President KCS ACQUISITION SUBSIDIARY, INC. By: /s/ Ronald G. Russ ----------------------------- Name: Ronald G. Russ Title: Vice President CAYMEX TRANSPORTATION, INC. By: /s/ Jay M. Nadlman ----------------------------- Name: Jay M. Nadlman Title: Vice President & Secretary GRUPO TMM, S.A. By: /s/ Jose F. Serrano Segovia ----------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano ----------------------------- Name: Javier Segovia Serrano Title: Attorney in Fact TMM HOLDINGS, S.A. de C.V. By: /s/ Jose F. Serrano Segovia ----------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano ----------------------------- Name: Javier Segovia Serrano Title: Attorney in Fact TMM MULTIMODAL, S.A. de C.V. By: /s/ Jose F. Serrano Segovia ----------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact By: /s/ Javier Segovia Serrano ----------------------------- Name: Javier Segovia Serrano Title: Attorney in Fact The Bank of Nova Scotia Trust Company of New York By: /s/ Andrew Bicker ----------------------------- Name: Andrew Bicker Title: Associate Director APPENDIX A [INSTRUCTIONS TO ESCROW AGENT] APPENDIX B [FEES] EX-10 12 form8k_122004ex1011.txt EXH. 10.11 CONSULTING COMP ESCROW AGRMT Exhibit 10.11 CONSULTING COMPENSATION ESCROW AGREEMENT This CONSULTING COMPENSATION ESCROW AGREEMENT (this "Agreement") is entered into and effective as of this 15th day of December, 2004, by and among KANSAS CITY SOUTHERN, a Delaware corporation ("KCS") and Jose F. Serrano International Business, S.A. de C.V., a a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the UMS organized under the laws of the UMS ("Consulting Firm") (collectively, the "Parties"), and The Bank of Nova Scotia Trust Company of New York (the "Escrow Agent"). WHEREAS, the Parties are parties to the Consulting Agreement dated as of the date hereof by and between KCS and the Consulting Firm (the "Consulting Agreement"), pursuant to which, among other things, the Consulting Firm shall provide to KCS the Consulting Services in exchange for the payment by KCS of the Annual Fee (defined below); and WHEREAS, pursuant to Section 5 of the Consulting Agreement, an amount equal to the total amount of the Annual Fee for each of the years comprising the three (3) year terms of the Consulting Agreement, which equals, in the aggregate, Nine Million US Dollars ($9,000,000), (as increased by Interest (defined below) and reduced by Losses (defined below) or amounts released pursuant to Section 3 below, the "Escrow Fund") is to be deposited in escrow; and WHEREAS, the Parties desire to appoint the Escrow Agent to hold the Escrow Fund on the terms and subject to the conditions set forth in this Agreement, and the Escrow Agent is willing to serve in that capacity. NOW, THEREFORE, in consideration of the premises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, it is hereby agreed by and among the Parties and the Escrow Agent as follows: 1. APPOINTMENT AND DEPOSIT INTO ESCROW. (a) The Parties hereby appoint the Escrow Agent to serve as escrow agent hereunder. In accordance with and subject to the terms and provisions hereof, the Escrow Agent accepts such appointment and agrees to hold, invest and distribute the Escrow Fund, in accordance with the terms hereof. (b) On the Effective Date of the Consulting Agreement (as that term is defined therein), KCS will deposit an amount equal to US $9,000,000 with the Escrow Agent in a non-interest bearing escrow account, to be held by the Escrow Agent and released only pursuant to the terms and conditions of this Escrow Agreement. (c) The Escrow Fund shall be held for the exclusive benefit of the Parties, their successors and assigns and no other person or entity shall have any right, title or interest therein, except as provided in Section 4(b). 2. (a) The Escrow Fund deposited in escrow hereunder shall be invested by the Escrow Agent in accordance with the written instructions provided by the Consulting Firm. All interest, gains, income and other distributions (collectively, "Interest") received on or with respect to the Escrow Fund shall be received for the benefit of the Consulting Firm. All Interest shall become part of the Escrow Fund and any costs of investments and losses on such investments ("Losses") shall reduce the Escrow Fund. The parties agree that, for tax reporting purposes, all Interest and Losses shall be reported as allocated to the Consulting Firm. (b) The Escrow Agent shall have no liability for any loss on investments made pursuant to this Agreement, including any loss on any investment required to be liquidated prior to maturity in order to make a payment required hereunder. Investments by the Escrow Agent pursuant to this Agreement shall be subject to availability. In no event shall the Escrow Agent be required to provide investment advice of any kind. Absent its receipt of any written investment instructions from Consulting Firm, the Escrow Agent shall have no obligation or duty to invest any funds held by it under this Agreement. (c) The Consulting Firm agrees that, if necessary, it shall provide the Escrow Agent with a Form W-9 or Form W8-BEN, as the case may be. (d) The Escrow Agent is hereby authorized, in making or disposing of any investment permitted by this Agreement, to deal with itself (in its individual capacity) or with any one or more of its affiliates. 3. The Escrow Agent shall release the Escrow Fund and any Interest which becomes part of the Escrow Fund only in accordance with the following: (a) On the last day of the month, or if such day falls upon a Saturday, a Sunday or a banking holiday in New York, the next day on which the Escrow Agent is open for business, following each of the first, second, and third anniversary hereof (each such one-year period, a "Payment Period"), the Escrow Agent shall transfer to the Consulting Firm an amount from the Escrow Fund equal to $3,000,000 (the "Annual Fee"), (i) plus any Interest received on the Escrow Fund during such Payment Period, and (ii) less the amount of any Losses incurred during such Payment Period; provided, that if the Losses for any Payment Period exceed the amount of the Annual Fee, no amount shall be transferred by the Escrow Agent to the Consulting Firm for such Payment Period, and the Annual Fee for the subsequent Payment Period shall be reduced by the amount such Losses for the previous Payment Period exceeded the Annual Fee for such Payment Period. (b) Notwithstanding the foregoing, the Escrow Agent shall not transfer any amount of the Escrow Fund to the Consulting Firm in respect of an Annual Fee for a Payment Period if the Escrow Agent receives written notice (a "Payment Determination Notice") signed by the President or a Vice-President (each, an "Appropriate Officer") of KCS , which Payment Determination Notice shall be simultaneously copied to the Consulting Firm stating that the Consulting Firm is not entitled to payment for services rendered during such Payment Period, which Payment Determination Notice shall be received by the Escrow Agent and the Consulting Firm not later than ten (10) Business Days (defined below) prior to the expiration of such Payment Period and shall be accompanied by a certificate signed by an Appropriate Officer of KCS stating that the procedures for such determination, as set forth in Section 5(b) of the Consulting Agreement, have been fully complied with (a "Determination Certificate"). As used herein, the term "Business Day" shall mean a day of the year on which national banks in New York, New York, are not required or permitted to be closed. (c) Fifteen Business Days following receipt by the Escrow Agent of a Payment Determination Notice and Determination Certificate in accordance with sub-section 3(b) above, the Escrow Agent shall promptly (i) transfer to KCS an amount from the Escrow Fund equal to the Annual Fee for such Payment Period in accordance with the instructions set forth in the Payment Determination Notice, and (ii) transfer to the Consulting Firm the Interest received by the Escrow Agent on the Escrow Fund during such Payment Period, provided, however, that in the event that Consulting Firm shall dispute such Payment Determination Notice or Determination Certificate by delivering written notice to the Escrow Agent pursuant to Section 15 hereof, simultaneously copied to KCS, within ten (10) Business Days of the Escrow Agent's receipt of such Payment Determination Notice or Determination Certificate, then no amounts shall be transferred to KCS pursuant to this Section 4(c) until such dispute has been finally resolved in accordance with the terms of Section 17 of the Consulting Agreement. (d) If the Consulting Agreement is terminated prior to the stated expiration date set forth therein (the "Expiration Date"), then any remaining amounts held in the Escrow Fund as of the date of such termination shall be released as follows: (i) After receipt by the Escrow Agent of written notice signed by an Appropriate Officer of KCS and Consulting Firm (an "Early Termination Notice") stating that the Consulting Agreement has been terminated prior to the Expiration Date due to the death or disability of Jose F. Serrano Segovia, the Escrow Agent shall release the amount remaining in the Escrow Fund as of the date of such termination, if any, to the Consulting Firm in accordance with the instructions set forth in the Early Termination Notice. (ii) After receipt by the Escrow Agent of an Early Termination Notice stating that the Consulting Agreement has been terminated prior to the Expiration Date due to the occurrence of an event set forth in Section 8(c) of the Consulting Agreement with respect to the Consulting Firm, which Early Termination Notice shall include a reasonably detailed calculation of the amount owed to the Consulting Firm in consideration of any Annual Fee or portion thereof which has accrued as of the effective date of such termination, if any, the Escrow Agent shall (y) transfer to the Consulting Firm the amount set forth in the Early Termination Notice, together with any Interest received and not paid by the Escrow Agent as of the effective date of such termination, and (z) transfer to KCS the amount remaining in the Escrow Fund after such payment to the Consulting Firm. (iii) After receipt of an Early Termination Notice stating that the Consulting Agreement has been terminated without reason by the Consulting Firm prior to the Expiration Date pursuant to Section 8(d) thereof, or by KCS for Cause pursuant to Section 8(e) thereof, then the Escrow Agent shall (y) transfer to KCS the principal amount remaining in the Escrow Fund as of the effective date of such termination, and (z) transfer to the Consulting Firm any Interest received and not paid by the Escrow Agent as of the effective date of such termination. (iv) After receipt of an Early Termination Notice stating that the Consulting Agreement has been terminated by the Consulting Firm prior to the Expiration Date due to a material breach thereof by KCS, or has been terminated by KCS other than for Cause, the Escrow Agent shall transfer to the Consulting Firm the amount remaining in the Escrow Fund, including Interest received and not paid by the Escrow Agent, as of the effective date of such termination. (e) The Parties agree that any dispute between the Parties, including but not limited to disputes relating to an Early Termination Notice, shall be settled in accordance with Section 17 of the Consulting Agreement. 4. (a) The Escrow Agent may act or refrain from acting in reliance upon any instructions, notice, certification, demand, consent, authorization, receipt, power of attorney or other writing delivered to it by any other party and believed by the Escrow Agent to be genuine without being required to determine the authenticity or validity thereof or the correctness of any facts stated therein. The Escrow Agent may act or refrain from acting in reliance upon any signature believed by it to be genuine, and may assume that any such person has been properly authorized to do so. (b) The Parties hereto, jointly and severally, agree to reimburse the Escrow Agent on demand for, and to indemnify and hold the Escrow Agent harmless against and with respect to, any and all loss, liability, damage or expense (including, without limitation, reasonable attorneys' fees, costs and disbursements) that the Escrow Agent may suffer or incur in connection with this Agreement in its performance hereunder or in connection herewith, except to the extent such loss, liability, damage or expense is caused by the Escrow Agent's willful misconduct or gross negligence as adjudicated by a court of competent jurisdiction. The Escrow Agent shall have the right to apply the Escrow Fund held by it in escrow hereunder, and any proceeds thereof, to the payment of any amounts owing to it by Consulting Firm or KCS hereunder upon one (1) Business Days' notice to Consulting Firm and KCS. (c) As between themselves, KCS and the Consulting Firm agree that in the event that the Escrow Agent exercises its right to apply funds from the Escrow Fund to the payment of any amounts owing to it hereunder ("Escrow Agent Receivable") as a result of the failure of one of KCS or Consulting Firm to make payment in full of 50% of the Escrow Agent Receivable in accordance with Section 11 hereof, such non-paying Party shall promptly transfer to the account of the other Party in accordance with such other Party's instructions in immediately available funds an amount equal to the difference between 50% of the Escrow Agent Receivable and the amount, if any, actually paid by the non-paying Party to the Escrow Agent in respect of the Escrow Agent Receivable. In the event that the Escrow Agent exercises its right to apply funds from the Escrow Fund to the payment of the Escrow Agent Receivable as a result of the failure of both of KCS and the Consulting Firm to make payment in full of 50% of the Escrow Agent Receivable in accordance with Section 11 hereof, each such non-paying Party shall promptly transfer to the account of the other Party in accordance with such other Party's instructions in immediately available funds an amount equal to the difference between 50% of the Escrow Agent Receivable and the amount, if any, actually paid by the non-paying Party to the Escrow Agent in respect of the Escrow Agent Receivable. 5. (a) The Escrow Agent may consult legal counsel of its selection in the event of any dispute or question as to the meaning or construction of any of the provisions of this Agreement or its duties hereunder, including, without limitation, the validity of any order of any court or arbitration tribunal, and it shall incur no liability and shall be fully protected in acting or refraining from acting in accordance with the opinion and instructions of such counsel. (b) Each of the Parties acknowledges and agrees that the Escrow Agent (i) shall not be deemed to have knowledge of the terms of, or be responsible for, any of the agreements referred to or described herein (including, without limitation, the Acquisition Agreement, but excluding this Agreement) or for determining compliance therewith and shall not otherwise be bound thereby and (ii) shall be obligated only for the performance of such duties as are specifically set forth in this Agreement on its part to be performed and no implied duties or obligations of any kind shall be read into this Agreement against the Escrow Agent. 6. In the event of any disagreement between any of the Parties to this Agreement, any adverse claims or demands being made in connection with the subject matter of the escrow, or in the event that the Escrow Agent, in good faith, is in doubt as to what action it should take hereunder, the Escrow Agent may, at its sole option, refuse to comply with any claims and demands on it and retain in its possession without liability to anyone all or any of the property held by it hereunder, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists. The Escrow Agent shall not become liable in any way or to any person for its failure or refusal to act in such event, and the Escrow Agent shall be entitled to continue to refrain from acting until (i) the rights of all parties shall have been fully and finally adjudicated by a final order, decree, or judgment of a court or arbitration tribunal of competent jurisdiction (and in the case of an arbitration tribunal, accompanied by a certificate signed by an Appropriate Officer of KCS and Consulting Firm stating that such arbitration was undertaken in accordance with Section 17 of the Consulting Agreement), accompanied by an opinion of counsel that such order, decree or judgment is final, or (ii) all differences shall have been resolved by agreement among all the interested persons, and Escrow Agent shall have been notified thereof in writing signed by all such persons. Escrow Agent shall have the option, after thirty (30) calendar days notice to the Parties, of its intention to do so, to file an action in interpleader requiring the Parties to answer and litigate any claims and rights among themselves. The rights of the Escrow Agent under this paragraph are cumulative of all other rights which it may have by law or otherwise. Notwithstanding any provision to the contrary in this Agreement, in no case shall the Escrow Agent be required or obligated to distribute any property held in escrow by it hereunder sooner than two (2) Business Days after it has received instructions to do so and the applicable documents required under this Agreement. 7. Notwithstanding any provision to the contrary in this Agreement, in no case shall the Escrow Agent be required or obligate to distribute any property held in escrow by it hereunder sooner than two (2) Business Days after it has received instructions to do so and the applicable documents required under this Agreement. 8. Notice to the Parties shall be given as provided below. Whenever under the terms hereof the time for giving a notice or performing an act falls upon a Saturday, a Sunday or a banking holiday in New York, such time shall be extended to the next day on which the Escrow Agent is open for business. 9. The Escrow Agent may, in its sole discretion, resign and terminate its position hereunder at any time following thirty (30) calendar days written notice to the other Parties to the Escrow Agreement. Prior to the effective date of resignation specified in such notice, the Parties will jointly appoint a successor escrow agent. On the effective date of such appointment, the Escrow Agent shall deliver this Escrow Agreement together with any and all related instruments or documents and all of the funds, securities, documents and other assets held in escrow hereunder to any successor escrow agent selected in writing by Parties to this Agreement. If a successor escrow agent has not been appointed prior to the expiration of thirty (30) calendar days following the date of notice of such resignation, then (i) the Escrow Agent's sole responsibility after that time shall be to safekeep the property held in escrow by it hereunder until receipt by it of designation of a successor escrow agent and (ii) the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent, or other appropriate relief. Any such resulting appointment shall be binding upon all the Parties to this Agreement. 10. The Parties to this Agreement may by mutual written agreement, with a copy of such agreement forwarded to the Escrow Agent, at any time substitute a new escrow agent by giving ten (10) days notice thereof to the Escrow Agent and paying all fees and expenses due to the Escrow Agent. Any such substitution shall terminate all obligations and duties of the Escrow Agent hereunder. On the effective date of such substitution, the Escrow Agent shall deliver this Agreement together with any and all related instruments or documents and all of the funds, securities, documents and other assets held in escrow hereunder to a successor escrow agent that the Parties have selected in writing. 11. The Escrow Agent shall receive the fees provided in Appendix B hereto. Except as provided in Section 4(b), the Escrow Agent shall not be permitted to utilize the Escrow Fund to cover any of its fees or expenses. The Consulting Firm and KCS agree as between themselves that all fees and expenses of the Escrow Agent shall be paid equally (50% by KCS and 50% by the Consulting Firm). 12. Any modification of this Agreement or any additional obligations assumed by any party hereto shall be binding only if evidenced by a writing signed by each of the parties hereto. Upon distribution in full of the Escrow Fund and all Interest earned thereon, this Agreement shall be thereupon terminated and of no further force or effect; provided that the provisions of Sections 4(b) and 11 (for the period prior to such termination, resignation or substitution) shall survive the termination of this Agreement and the resignation or substitution of the Escrow Agent. 13. This Agreement shall be governed by the laws of the state of New York in all respects. The Parties hereto irrevocably and unconditionally submit to the jurisdiction of a federal or state court located in New York, New York in connection with any proceedings commenced regarding this Agreement including but not limited to a interpleader proceeding or a proceeding for the employment of a successor escrow agent. The Parties irrevocably submit to the jurisdiction of such courts for the determination of all issues in such proceedings, without regard to any principles of conflicts of laws, and irrevocably waive any objection to venue or inconvenient forum. 14. This Agreement may be executed in one or more counterparts, each of which counterpart shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same Agreement. 15. Unless otherwise provided herein, all notices and other communications hereunder shall be in writing and shall be deemed given if (a) delivered in person, (b) transmitted by facsimile (with written confirmation), (c) mailed by certified or registered mail (return receipt requested) (in which case such notice shall be deemed given on the third day after such mailing) or (d) delivered by an express courier (with written confirmation) to the Parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to the Consulting Firm: Jose F. Serrano International Business, S.A. de C.V. Paseo de la Reforma #610 Colonia Lomas de Chapultepec 11000 Mexico, D.F. Attention: Jose Francisco Serrano Segovia With a copy (which shall not constitute notice) to: Milbank, Tweed, Hadley & McCloy LLP One Chase Manhattan Plaza New York, New York 10005 Attention: Thomas C. Janson, Esq. And Martinez, Algaba, Estrella, De Haro y Galvan, S.C. Paseo de lost Tamarindos Colonia Bosquest de las Lomas Mexico, D.F., Mexico Attention: Carlos Galvan Duque If to KCS: Kansas City Southern 427 West 12th Street Kansas City, MO 64105 Attention: Senior Vice President and General Counsel With a copy (which shall not constitute notice) to: Sonnenschein Nath & Rosenthal LLP 4520 Main Street, Suite 1100 Kansas City, MO 64111 Attention: John F. Marvin, Esq. and White & Case, S.C. Blvd Manual Avila Camacho 24, PH Colonia Lomas de Chapultepec, 11000 Mexico, D.F., Mexico Attention Jose Vicente Corta Fernandez and/or Iker I. Arriola Penalosa If to the Escrow Agent: The Bank of Nova Scotia Trust Company of New York One Liberty Plaza New York, NY 10006 Attention John Neylan With a copy to (which shall not constitute notice) to: Shearman & Sterling LLP 599 Lexington Avenue New York, NY 10022 Attention: Helen Doo Any Party hereto may from time to time change its address for notices under this Section 14 giving at least ten (10) days' notice of such changed address to the other Parties hereto. SIGNATURE PAGE ON NEXT PAGE IN WITNESS WHEREOF, the Parties and the Escrow Agent have executed this Agreement as of the date first above written. KANSAS CITY SOUTHERN By: /s/ Robert B. Terry ----------------------------------- Name: Robert B. Terry Title: Senior Vice President & General Counsel Jose F. Serrano International Business, S.A., de C.V. By: /s/ Jose F. Serrano Segovia ----------------------------------- Name: Jose F. Serrano Segovia Title: Attorney in Fact The Bank of Nova Scotia Trust Company of New York By: /s/ Andrew Bicker ----------------------------------- Name: Andrew Bicker Title: Associate Director APPENDIX A [INSTRUCTIONS TO ESCROW AGENT] APPENDIX B [FEES] EX-10 13 form8k_122004ex1012.txt EXH. 10.12 AGMT OF ASSIGNMENT AND ASSUMPTION Exhibit 10.12 Execution Copy AGREEMENT OF ASSIGNMENT AND ASSUMPTION OF RIGHTS, AND AGENCY AGREEMENT WITH UNDISCLOSED PRINCIPAL, DUTIES AND OBLIGATIONS, DATED AS OF December 15, 2004 AMONG THE FOLLOWING PARTIES: I. Grupo TMM, S.A., a SOCIEDAD ANONIMA organized under the laws of the United Mexican States ("GTMM"), as successor in interest to Transportacion Maritima Mexicana, S.A. de C.V., represented in this act by its Chairman and attorney-in-fact Ing. Jose Francisco Serrano Segovia and its CEO and attorney-in-fact Lic. Javier Segovia Serrano; II. Kansas City Southern, a Delaware corporation ("KCS"), represented in this act by its Chairman, President and CEO, Mr. Michael R. Haverty; and III. Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V., a SOCIEDAD ANONIMA DE CAPITAL VARIABLE organized under the laws of the United Mexican States ("GTFM"), formerly known as Transportacion Ferroviaria Mexicana, S. de R.L. de C. V., represented in this act by Lic. Mario Mohar Ponce and Mr. Michael R. Haverty. In consideration of and in conformity with the following recitals and agreements: RECITALS 1. On January 31, 1997, the Federal Government of the United Mexican States (the "GOVERNMENT") and GTFM entered into an agreement (the "PURCHASE AGREEMENT") for the purchase of 80% of the capital stock of the Ferrocarril del Noreste, S.A. de C.V., currently known as TFM, S.A. de C.V. ("TFM"); 2. Pursuant to the Purchase Agreement, the Government retained 20% of the capital stock of TFM, represented by Class III limited voting shares, with the Government retaining the option under the Purchase Agreement to all or a portion of those shares to the public, and in accordance with the terms of the Purchase Agreement to sell any shares not sold to the public prior to the date fixed in the Purchase Agreement to GTFM at a price determined by the formula stated in the Purchase Agreement (the "PUT Shares"); 3. On June 9, 1997, the Government, GTFM, GTMM and KCS entered into an amendment of the Purchase Agreement (hereinafter, the "PUT AGREEMENT"), through which, among other matters, the term during which the Government may sell the Put Shares to the public and require GTFM to acquire the Put Shares was extended, and GTMM and KCS jointly and severally agreed with the Government in Section 3.02 of the Put Agreement that in the event that GTFM did not acquire the Put Shares in accordance with the terms of the Put Agreement, GTMM and KCS would be jointly and severally obligated to acquire the Put Shares; 4. In May 1997, GTMM and KCS, and certain of their affiliates and subsidiaries, entered into a Shareholders Agreement ("SHAREHOLDERS AGREEMENT") that included, among other provisions, Section 7, Indemnification, which created rights, duties and obligations of indemnification between GTMM and KCS with respect to the Put Shares; 5. On October 31, 2003, the Ministry of Communications and Transportation (the "SCT") purported through official letter 4.620 to notify TFM of the existence of the obligation to purchase the Put Shares, and GTFM, TMM and KCS were advised of that purported notification; 6. As GTFM and TFM believe that the Government has not satisfied its obligations under the Purchase Agreement and the Put Agreement, and that the purported notification by the SCT of TFM of the obligation to purchase the Put Shares was defective, GTFM and TFM filed on October 16, 2003 a lawsuit, case number 166/2003-V (the "PUT LAWSUIT"), naming the Treasury of the Mexican Federation, the SCT, the General Attorney of the United Mexican States as necessary parties, and seeking a judicial interpretation of GTFM's and TFM's obligations under the Purchase Agreement and the Put Agreement. TMM and KCS, among others, were called to the Put Lawsuit as interested third parties; 7. GTFM and TFM filed on November 26, 2003 a constitutional appeal (AMPARO, the "AMPARO"), case number 1628/2003, against the Treasury of the Federation, the SCT, and the General Attorney of the United Mexican States with respect to official letter 4.620 of October 31, 2003, which resulted in an injunction being issued against the defendants; 8. The Government has indicated that it may file additional proceedings against GTFM, TFM, GTMM and KCS related to the Put Agreement and the VAT Claim; 9. GTMM and KCS have entered into the Amended and Restated Acquisition Agreement by and among KCS, KARA Sub, Inc., a Delaware corporation, GTMM and certain other parties (the "ACQUISITION AGREEMENT"); and 10. Pursuant to the Acquisition Agreement, the Shareholders Agreement and all rights, duties and obligations arising from the Shareholders Agreement, including Section 7 thereof, shall terminate and shall be of no further force and effect as of the Closing (as defined in the Acquisition Agreement). AGREEMENTS For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1) ASSIGNMENT AND ASSUMPTION OF PUT OBLIGATION. GTMM hereby irrevocably assigns and transfers to KCS, and KCS hereby irrevocably accepts and assumes, all of GTMM's rights, duties and obligations with respect to the purchase of the Put Shares under the Put Agreement, effective upon the Closing of the Acquisition. 2) PURCHASE RIGHT. In the event that following Closing of the Acquisition GTFM or GTMM are required to purchase the Put Shares held by the Government (or any person to which the Government delegates, transfers or assigns any such Put Shares and/or the Put Option), including upon final determination that either of them is required to purchase the Put Shares pursuant to the Put Agreement, KCS or its designee shall purchase, in accordance with the terms of the Put Agreement all of the Put Shares that GTMM would have been required to purchase pursuant to the Put Agreement.. KCS shall have the right to cause any KCS subsidiary to purchase the Put Shares or it may designate another party to be the purchaser of the Put Shares, but no such designation shall relieve KCS of its obligation to pay the purchase price for such Put Shares or to indemnify any person under Section 5 hereof. 3) PAYMENT OF PURCHASE PRICE; NON-ASSIGNABLE OBLIGATIONS; AGENCY WITH UNDISCLOSED PRINCIPAL AGREEMENT. In the event that, notwithstanding the provisions of Section 2, GTMM is legally required following Closing of the Acquisition to purchase the Put Shares then KCS shall provide GTMM with immediately available funds sufficient to purchase the Put Shares and to pay all costs and expenses associated with such purchase (including any taxes that may become payable in connection with such purchase) not later than three (3) business days prior to the date of such purchase, and GTMM shall purchase such Put Shares on behalf of KCS, but in its own name, pursuant to Articles 2560 and 2561 of the Federal Civil Code of the United Mexican States. Transfer of such amount shall not affect KCS' obligations under Section 6 of this Agreement. Once GTMM acquires the PUT Shares on behalf of KCS, but in its own name, it shall immediately endorse in property the relevant certificates in favor of KCS or its designee. Pursuant to Article 2596 of the Federal Civil Code of the United Mexican States, GTMM hereby irrevocably agrees not to renounce the obligations assumed in this Section 3, to act as undisclosed agent (MANDATARIO SIN REPRESENTACION) of KCS. 4) CONTROL AND MANAGEMENT OF LITIGATION. Following the Closing under the Acquisition Agreement, KCS shall have the sole and exclusive right to control any and all litigation related to the Put Agreement, including without limitation the Put Lawsuit and the Amparo. For such purposes, GTMM hereby agrees to grant, within 10 (ten) business days after the Closing under the Acquisition Agreement, an irrevocable power of attorney in favor of KCS for lawsuits and collections (PLEITOS Y COBRANZAS) limited to (i) the Put Lawsuit, (ii) the Amparo, in the form attached hereto as Exhibit "A", and (iii) and any other litigation related to or derived from this litigation. 5) INDEMNIFICATION. KCS shall following Closing of the Acquisition indemnify, defend and hold harmless GTMM and its Affiliates, and their respective officers, directors, employees and shareholders, from and against any and all losses, damages, liabilities, claims, demands, obligations, deficiencies, payments, judgments, settlements, costs and expenses of any nature whatsoever (including the costs and expenses of any and all investigations, actions, suits, proceedings, demands, assessments, judgments, orders, settlements and compromises relating thereto), and reasonable attorneys', accountants', experts' and other fees and expenses in connection therewith ("LOSSES") resulting from, arising out of or due directly to KCS' failure to fully discharge the obligations of GTMM and KCS under the Put Agreement, including, without limitation, KCS' failure to purchase, when required by the Government to do so in accordance with the Put Agreement, the Put Shares or any requirement to fund amounts to GTFM to permit GTFM to purchase the Put Shares; provided that KCS may set off against and reduce the amount of any indemnification obligation under this paragraph by the amount of any indemnification obligation of GTMM pursuant to Article 10 of the Acquisition Agreement, except with respect to any indemnification obligations of GTFM under Sections 10.2(a)(i) or (a)(ii), which amounts may not be offset. 6) REMEDIES. Subject to the provisions contemplated in this Agreement: (a) in the event that one party materially fails to perform its obligations pursuant to this Agreement, the other party may bring any action, proceeding or court action seeking (i) specific performance of the obligations of the party in default hereunder, which the parties hereto agree shall be available to the extent permitted by applicable law, (ii) damages as a result of any such failure to perform pursuant to this Agreement, with the parties hereto agreeing that damages to the damaged party arising as a result of any material breach by the part in default of its obligations hereunder shall be recoverable by them in any such action, and/or (iii) any other remedy available under applicable law; and (b) to the extent permitted by applicable law, all of the remedies set forth herein and or the Acquisition Agreement or at law shall be equally available to each of the parties hereto. 7) NOTIFICATION. GTMM shall promptly, and in any event within 24 hours, notify KCS of any notifications given to GTMM under or concerning the Put Agreement. 8) INCORPORATION OF PARTS OF THE AGREEMENT. Article 12 of the Acquisition Agreement is hereby incorporated MUTATIS MUTANDIS into and made a part of this Agreement. Defined terms used in this Agreement not defined herein, shall have the meanings ascribed to those terms in the Acquisition Agreement. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their authorized representatives of the date first above written. GRUPO TMM, S.A. By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: GRUPO TRANSPORTACION FERROVIARIA MEXICANA, S.A. DE C.V. By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: KANSAS CITY SOUTHERN By: -------------------------------- Name: Title: EXHIBIT "A" FORM OF IRREVOCABLE POWER OF ATTORNEY IRREVOCABLE SPECIAL POWER OF ATTORNEY The Undersigned, Mr. [*], appearing on behalf of Grupo TMM, S.A. de C.V. (hereinafter the "PRINCIPAL"), does hereby grant and confer a IRREVOCABLE SPECIAL POWER OF ATTORNEY, in favor of Kansas City Southern, (hereinafter "KCS"), in order to act on behalf of the Principal as its representative in connection with any present or future controversies related or derived from the joint and several obligation of the Principal to purchase all of the shares owned by the Federal Government in TFM, S.A. de C.V. ("TFM"), including, without limitation: (i) Case number 166/2003-V, initiated by Grupo Transportacion Ferroviaria [Spanish Mexicana, S.A. de C.V. ("GTFM"), and TFM, on October 16, language 2003, naming the Treasury of the Mexican Federation, the version of Ministry of Communications and Transportation (SECRETARIA Irrevocable DE COMUNICACIONES Y TRANSPORTES or "SCT"), the General Power of Attorney of the Mexican Republic as necessary parties; and Attorney] (ii) the constitutional appeal (AMPARO) initiated by GTFM and TFM filed on November 26, 2003, case number 1628/2003, against the Treasury of the Federation, the SCT, and the General Attorney of the Mexican Republic with respect to official letter 4.620 of October 31, 2003. To carry out the above, the Principal grants to KCS, within the specialty of this mandate, a power of attorney for Lawsuits and Collections with all the powers referred to in the last paragraph of Article 2554 of the Federal Civil Code and its corresponding provisions in all of the civil codes of the Federal District and the Federal Entities of the United Mexican States. This special power of attorney is irrevocable, since it is granted as a means to comply with a previously acquired obligation by the Principal, pursuant to the provisions of Article 2596 of the Federal Civil Code and its corresponding provisions in all of the civil codes of the Federal District and the Federal Entities of the United Mexican States. FOR THE PURPOSE OF COMPLYING WITH CERTAIN REQUIREMENTS OF MEXICAN LAW, I HEREBY TRANSCRIBE AD VERBATIM, THAT WHICH THE GRANTOR HEREOF HAS REPRESENTED TO ME, TO BE ARTICLE 2554 OF THE FEDERAL CIVIL CODE OF THE UNITED MEXICAN STATES: "ARTICLE 2554. IN ALL GENERAL POWERS-OF-ATTORNEY FOR LAW-SUITS AND COLLECTIONS, IT SHALL BE SUFFICIENT TO SAY THAT THE POWER IS GRANTED WITH ALL THE GENERAL POWERS AND WITH THE SPECIAL POWERS WHICH REQUIRE A SPECIAL CLAUSE PURSUANT TO THE LAW, IN ORDER THAT THEY MAY BE CONSIDERED AS CONFERRED WITHOUT ANY LIMITATION. IN GENERAL POWERS-OF-ATTORNEY TO ADMINISTER PROPERTY, IT SHALL BE SUFFICIENT TO STATE THAT THEY ARE GIVEN WITH THAT CHARACTER IN ORDER THAT THE ATTORNEY-IN-FACT MAY HAVE ALL MANNER OF ADMINISTRATIVE POWERS IN GENERAL POWERS-OF-ATTORNEY TO EXERCISE ACTS OF OWNERSHIP, IT SHALL BE SUFFICIENT THAT THEY ARE GIVEN WITH THAT CHARACTER IN ORDER THAT THE ATTORNEY-IN-FACT MAY HAVE ALL POWERS OF AN OWNER, BOTH WITH RESPECT TO PROPERTY and IN ORDER TO TAKE ALL MANNER OF STEPS TO DEFEND IT. IN ANY OF THE THREE CASES ABOVE-MENTIONED, IF IT IS DESIRED TO LIMIT THE POWERS OF THE ATTORNEYS-IN-FACT, THE LIMITATIONS SHALL BE SET OUT OR THE POWER-OF-ATTORNEY SHALL BE A SPECIAL POWER-OF-ATTORNEY. NOTARIES SHALL INSERT, THIS ARTICLE IN THE NOTARIAL COPIES OF THE POWERS-OF-ATTORNEY WHICH THEY EXECUTE." ------------------------------- GRUPO TMM, S.A. DE C.V. By/Por: [o] Position/Cargo: [o] EX-99 14 form8k_122004ex991.txt EXH. 99.1 PRESS RELEASE Exhibit 99.1 [GRAPHIC OMITTED] [GRAPHIC OMITTED] GRUPO TMM COMPANY CONTACTS: KANSAS CITY SOUTHERN CONTACTS: Brad Skinner MEDIA & INVESTORS Investor Relations William H. Galligan 011-525-55-629-8725 or 203-247-2420 Assistant Vice President Investor BRAD.SKINNER@TMM.COM.MX Relations 816-983-1551 WILLIAM.H.GALLIGAN@KCSR.COM PROA/STRUCTURA Marco Provencio MEXICO Media Relations Gabriel Guerra 011-525-55-629-8708 and Media Relations 011-525-55-442-4948 011-525-55-273-5359 MP@PROA.STRUCTURA.COM.MX GGUERRA@GCYA.NET AT DRESNER CORPORATE SERVICES: Kristine Walczak (general investors, analysts and media) 312-726-3600 KWALCZAK@DRESNERCO.COM THE BOARDS OF DIRECTORS OF KCS AND TMM APPROVE AMENDED ACQUISITION AGREEMENT Kansas City, MO and Mexico City, Mexico, December 15, 2004 - Kansas City Southern (NYSE: KSU) ("KCS") and Grupo TMM, S.A. (NYSE: TMM and BMV: TMM A) ("TMM") announced today that the companies have entered into an amended acquisition agreement whereby TMM will sell its 51 percent voting interest in Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. ("Grupo TFM") to KCS for $200 million in cash, 18 million shares of KCS common stock, $47 million in a two-year promissory note, and up to $110 million payable in a combination of cash and KCS common stock upon successful resolution of the current proceedings related to the VAT Claim and the Put with the Mexican Government. The $47 million promissory note and a portion of the $110 million contingent payment will be subject to certain escrow arrangements to cover potential indemnification claims. The boards of directors of both companies have approved the transaction. As part of the transaction, KCS will also enter into a three-year consulting contract with a consulting firm controlled by Jose Serrano Segovia. KCS and TMM have also agreed that upon completion of the transaction all litigation between the two companies will be dismissed. Consummation of the transaction remains subject to the satisfaction of certain conditions, including KCS shareholder approval. TMM's controlling shareholders have entered into a voting trust providing for approval of the transaction. Both the Mexican Foreign Investment Commission and the Mexican Federal Competition Commission have approved acquisition of the controlling interest in TFM by KCS. Although KCS and TMM previously satisfied the requirements of the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, that authorization has expired and the parties have agreed to file the required information promptly with the U.S. Department of Justice. This authorization is required prior to consummation of the transaction. "We are very pleased to have entered into this amended agreement with TMM, and believe it will enhance rail competition and give shippers in the NAFTA trade corridor a strong transportation alternative in this important and growing trade corridor," said Michael R. Haverty, chairman, president and chief executive officer of KCS. "This transaction, along with our recently approved control of The Texas Mexican Railway Company, offers our shareholders greater value through operating efficiencies and opportunities that will come from common ownership and control. Our customers, both north and south of the border, will benefit from these efficiencies as well." Jose Serrano, chairman and CEO of TMM said, "We're very pleased with the outcome of the transaction. It creates significant value for all shareholders. The combination of KCS and TFM creates an efficient shipping route between the U.S. and Mexico. TMM shareholders will continue to benefit from significant ownership in this valuable franchise. The net cash proceeds of this transaction will be used by TMM to reduce its debt obligations. This transaction is truly in the best interests of TMM shareholders and will ensure long term growth and flexibility at TMM." Javier Segovia, president of TMM said, "We are extremely pleased to become a significant shareholder in KCS, a strong rail alternative between the U.S. and Mexico. TMM and TFM will continue to work closely, and they have entered into a marketing agreement to further our shared goals of providing end-to-end transportation for our customers. In addition, the sale of TFM to KCS puts TMM on a superior financial footing". TFM, S.A. de C.V., the operating subsidiary of Grupo TFM, and KCSR will continue as separate corporations, all under the common control of KCS. Following consummation of the transaction, KCS will continue to operate under the KCS name and will maintain its headquarters in Kansas City, Missouri. Grupo TFM and TFM will remain Mexican corporations, with their corporate headquarters located in Mexico City. TFM holds the concession to operate Mexico's Northeast Rail Lines through June 2047, and has the option to extend the concession for an additional 50 years. The TFM rail network consists of more than 2,600 miles of mainline track. The combined system will exceed 5,300 miles of mainline track. Morgan Stanley acted as exclusive financial advisor to KCS on the transaction. J.P. Morgan Securities Inc. and Elek Moreno Valle y Asociados S.A. acted as exclusive financial advisors to TMM on the transaction. Headquartered in Mexico City, TMM is a Latin American multimodal transportation company. Through its branch offices and network of subsidiary companies, TMM provides a dynamic combination of ocean and land transportation services. Visit TMM's web site at http://www.grupotmm.com and TFM's web site at http://www.tfm.com.mx. Both sites offer Spanish/English language options. Grupo TMM is listed on the New York Stock Exchange under the symbol "TMM" and Mexico's Bolsa Mexicana de Valores under the symbol "TMM A." KCS is a transportation holding company that has railroad investments in the United States, Mexico and Panama. Its primary holding in the United States is The Kansas City Southern Railway Company. KCS owns 51% of The Texas Mexican Railway Company, which connects The Kansas City Southern Railway Company and TFM. Headquartered in Kansas City, Missouri, KCS serves customers in the central and south central regions of the United States. KCS' rail holdings and investments are primary components of a NAFTA Railway system that links the commercial and industrial centers of the United States and Mexico. KCS' web site is WWW.KCSI.COM. MEDIA/ANALYSTS CONFERENCE CALL NOTICE: THERE WILL BE A 1:00 P.M. CENTRAL STANDARD TIME (2:00 P.M. EASTERN STANDARD TIME) CONFERENCE CALL TODAY, DECEMBER 15, DISCUSSING THE AMENDED ACQUISITION AGREEMENT HOSTED BY MICHAEL HAVERTY, GERALD DAVIES, RONALD RUSS AND VICENTE CORTA. A DISCUSSION OF THE AMENDED ACQUISITION AGREEMENT WILL BE AVAILABLE FROM A LINK ON THE HOME PAGE OF WWW.KCSI.COM. THOSE INTERESTED IN PARTICIPATING ARE INVITED TO CALL 1-800-955-1795 (U.S. AND CANADA) OR 1-706-643-0096 (INTERNATIONAL). A REPLAY WILL BE AVAILABLE THROUGH DECEMBER 22 AND CAN BE ACCESSED BY CALLING 1-800-642-1687 (U.S. AND CANADA) OR 1-706-645-9291 (INTERNATIONAL) AND PROVIDING THE CONFERENCE ID 2857442. INCLUDED IN THIS PRESS RELEASE ARE CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF TMM'S AND KCS' MANAGEMENT AS WELL AS ON ASSUMPTIONS MADE. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE INCLUDED IN SUCH FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTY. FOR ADDITIONAL INFORMATION RELATING TO SUCH RISKS AND UNCERTAINTIES, READERS ARE URGED TO REVIEW TMM'S AND KCS' RESPECTIVE FILINGS AND SUBMISSIONS WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. IN CONNECTION WITH THE PROPOSED TRANSACTION, KCS WILL FILE RELEVANT MATERIALS WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC"), INCLUDING AN AMENDED PROXY STATEMENT SOLICITING STOCKHOLDER APPROVAL OF CERTAIN ACTIONS IN CONNECTION WITH THE TRANSACTION. STOCKHOLDERS ARE URGED TO READ THE AMENDED PROXY STATEMENT, AS WELL AS ANY AMENDMENTS AND SUPPLEMENTS TO THE PROXY STATEMENT (IF AND WHEN THEY BECOME AVAILABLE) AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION. STOCKHOLDERS AND INVESTORS MAY OBTAIN THE AMENDED PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FREE OF CHARGE AT THE SEC'S INTERNET WEB SITE AT www.sec.gov. STOCKHOLDERS MAY ALSO OBTAIN FREE OF CHARGE THE AMENDED PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS BY CONTACTING THE OFFICE OF THE CORPORATE SECRETARY AT KCS' PRINCIPAL EXECUTIVE OFFICES AT (816) 983-1538. WRITTEN REQUESTS SHOULD BE MAILED TO P.O. BOX 219335, KANSAS CITY, MISSOURI 64121-9335 (OR IF BY UNITED PARCEL SERVICE OR OTHER FORM OF EXPRESS DELIVERY TO 427 WEST 12TH STREET, KANSAS CITY, MISSOURI 64105). SUCH AMENDED PROXY STATEMENT IS NOT CURRENTLY AVAILABLE. KCS AND ITS DIRECTORS AND EXECUTIVE OFFICERS MAY BE DEEMED TO BE PARTICIPANTS IN THE SOLICITATION OF PROXIES FROM KCS STOCKHOLDERS WITH RESPECT TO APPROVAL OF CERTAIN ACTIONS IN CONNECTION WITH THE TRANSACTION. INFORMATION REGARDING THESE DIRECTORS AND EXECUTIVE OFFICERS AND THEIR BENEFICIAL OWNERSHIP INTERESTS IN KCS CAN BE FOUND IN KCS' PROXY STATEMENT ON SCHEDULE 14A, FILED WITH THE SEC ON APRIL 5, 2004, IN CONNECTION WITH THE 2004 ANNUAL MEETING OF KCS STOCKHOLDERS. INVESTORS MAY OBTAIN ADDITIONAL INFORMATION REGARDING THE INTERESTS OF SUCH PARTICIPANTS BY READING THE AMENDED PROXY STATEMENT FILED IN CONNECTION WITH THE TRANSACTION WHEN IT BECOMES AVAILABLE. # # # -----END PRIVACY-ENHANCED MESSAGE-----