Exhibit 2.5
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ASSET PURCHASE AGREEMENT
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Among
Huron and Eastern Railway Company, Inc.,
as Buyer
RailAmerica Transportation Corp.,
and
Central Michigan Railway Company
and
The Straits Corporation,
as Sellers
November 25, 2003
TABLE OF CONTENTS
Page
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ARTICLE I. - SALE AND PURCHASE OF ACQUIRED ASSETS.................................................................1
1.01 Sale and Purchase of Acquired Assets............................................................1
1.02 ▇▇▇▇▇▇▇ Money Deposit; Closing Instruction......................................................3
1.03 Payment for Acquired Assets.....................................................................3
1.04 Estimated Purchase Price Adjustment; Closing Balance Sheet; Disputes............................3
1.05 Allocation......................................................................................4
1.06 Additional Payment..............................................................................5
1.07 Excluded Assets.................................................................................5
ARTICLE II. - CLOSING.............................................................................................6
2.01 Closing.........................................................................................6
2.02 Deliveries by Sellers...........................................................................6
2.03 Deliveries by Buyer.............................................................................6
ARTICLE III. - REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY......................................6
3.01 Corporate Existence and Qualification...........................................................6
3.02 Authority, Approval and Enforceability..........................................................7
3.03 Corporate Records...............................................................................7
3.04 No Defaults or Consents.........................................................................7
3.05 No Proceedings..................................................................................7
3.06 Equipment Leases................................................................................7
3.07 Equipment And Other Tangible Property...........................................................8
3.08 Condition Of Personal Property Other Than Tracks................................................8
3.09 Condition Of Track And Bridges..................................................................8
3.10 Real Estate Owned...............................................................................8
3.11 Real Estate Leased..............................................................................9
3.12 Operating Agreements...........................................................................10
3.13 Labor and Employee Benefit Matters.............................................................10
3.14 Compliance with Laws...........................................................................10
3.15 Litigation.....................................................................................11
3.16 Commitments....................................................................................11
3.17 Insurance......................................................................................11
3.18 Intangible Personal Property Rights............................................................11
3.19 Environmental Matters..........................................................................12
3.20 Licenses and Permits...........................................................................12
3.21 Customers and Suppliers........................................................................12
3.22 Taxes..........................................................................................12
3.23 Accounts Receivable and Payable; Inventory.....................................................13
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BUYER............................................................13
4.01 Corporate Existence and Qualification..........................................................13
4.02 Authority, Approval and Enforceability.........................................................13
4.03 No Default or Consents.........................................................................14
4.04 No Proceedings.................................................................................14
ARTICLE V. - OBLIGATIONS PRIOR TO CLOSING........................................................................14
5.01 Buyer's Access to Information and Acquired Assets..............................................14
5.02 Company's Conduct of Business and Operations...................................................14
5.03 General Restrictions...........................................................................15
5.04 Notice Regarding Changes.......................................................................15
5.05 Ensure Conditions Met..........................................................................15
5.06 Employee Matters...............................................................................16
5.07 Surface Transportation Board...................................................................16
5.08 Payoff and Estoppel Letters....................................................................16
5.09 No Shop........................................................................................16
5.10 Labor Notice...................................................................................16
5.11 North Bay City Yard............................................................................17
ARTICLE VI. - CONDITIONS TO SELLERS' AND BUYER'S OBLIGATIONS.....................................................17
6.01 Conditions to Obligations of the Sellers.......................................................17
6.02 Conditions to Obligations of Buyer.............................................................17
ARTICLE VII. - POST-CLOSING OBLIGATIONS.........................................................................18
7.01 Survival of Representations and Warranties.....................................................18
7.02 Indemnification................................................................................18
7.03 Further Assurances.............................................................................20
7.04 Publicity......................................................................................20
7.05 Post-Closing Transfers.........................................................................20
7.06 Record Retention...............................................................................20
7.07 Post-Closing Cooperation.......................................................................20
7.08 Commercially Reasonable Efforts; Purchase of Uncollected Accounts Receivable...................21
7.09 Annual Railroad Property Tax Filing............................................................21
ARTICLE VIII. - CLOSING AND COORDINATION ISSUES..................................................................21
8.01. Proration......................................................................................21
8.02. Transfer of Operations.........................................................................21
8.03. Collection of Revenues.........................................................................21
8.04. Transfer of Liabilities; Payment of Charges....................................................21
8.05. Assignment of Freight Transportation Contracts.................................................22
ARTICLE IX. - I-75 BRIDGE ABANDONMENT PROCEEDING.................................................................22
ARTICLE X. - TERMINATION.........................................................................................22
10.01 Termination....................................................................................22
10.02 Effect of Termination..........................................................................23
ARTICLE XI. - MISCELLANEOUS......................................................................................23
11.01 Confidentiality................................................................................23
11.02 Risk of Loss...................................................................................24
11.03 Brokers........................................................................................24
11.04 Costs and Expenses.............................................................................24
11.05 Notices........................................................................................24
11.06 Governing Law; Arbitration.....................................................................25
11.07 Entire Agreement; Amendments and Waivers.......................................................26
11.08 Binding Effect and Assignment..................................................................26
11.09 Remedies.......................................................................................26
11.10 Exhibits and Schedules.........................................................................26
11.11 Multiple Counterparts..........................................................................27
11.12 References and Construction....................................................................27
11.13 Attorneys' Fees................................................................................27
11.14 Section 1031 Exchange..........................................................................27
ARTICLE XII. - DEFINITIONS.......................................................................................27
12.01 Affiliate......................................................................................27
12.02 Affiliated Group...............................................................................27
12.03 Code...........................................................................................27
12.04 Company........................................................................................27
12.05 Contracts......................................................................................27
12.06 Current Assets.................................................................................28
12.07 Current Liabilities............................................................................28
12.08 Customer/Employee Due Diligence................................................................28
12.09 Governmental Authority.........................................................................28
12.10 Hazardous Materials............................................................................28
12.11 Knowledge of the Company.......................................................................28
12.12 Legal Requirements.............................................................................28
12.13 Material.......................................................................................28
12.14 Material Adverse Change; Material Adverse Effect...............................................28
12.15 Permits........................................................................................28
12.16 Person.........................................................................................28
12.17 Properties.....................................................................................29
12.18 Related Agreements.............................................................................29
12.19 STB............................................................................................29
12.20 Subsidiary.....................................................................................29
12.21 Tax............................................................................................29
12.22 Tax Return.....................................................................................29
12.23 Track..........................................................................................29
12.24 Union Contract.................................................................................29
12.25 Used...........................................................................................29
TABLE OF CONTENTS
LIST OF SCHEDULES
Schedule A Map of Rail Lines
Schedule 1.01(a)(i) Rail Lines
Schedule 1.01(a)(v) Tangible Personal Property
Schedule 1.07 Excluded Assets
Schedule 1.07(III) Consumers Power Leases
Schedule 1.07(iv)(A) Location of Relocated Operating Easement for St. Mary's
Schedule 1.07(iv)(E) Location of Relocated Maintenance-of-Way Crew Facilities
for St. Mary's
Schedule 2.02(i) ▇▇▇▇ of Sale for Acquired Assets
Schedule 2.02(ii) Assignment and Assumption of Leases, Contracts and Permits
Schedule 2.02(iii) Covenant Deed for Real Estate
Schedule 3.04 Sellers' Required Consents
Schedule 3.06 Equipment Leases
Schedule 3.07 Liens on Owned Equipment
Schedule 3.08 Condition of Personal Property
Schedule 3.09 Condition of Track and Bridges (Inspection Reports)
Schedule 3.10 Owned Real Estate
Schedule 3.11 Leased Real Estate
Schedule 3.12 Operating Agreements
Schedule 3.13(a) List of Company Employees
Schedule 3.13(d) Employee Benefit Plans
Schedule 3.16 Commitments
Schedule 3.17 Insurance Policies
Schedule 3.18 Intangible Personal Property
Schedule 3.19(d) Bay City River Lot Description
Schedule 3.20 Permits
Schedule 3.23 Accounts Receivable and Payable
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 25th day of November, 2003, by and among Huron and Eastern
Railway Company, Inc., a Michigan corporation (the "Buyer"), RailAmerica
Transportation Corp., a Delaware corporation, the parent corporation of the
Buyer ("RATC"), Central Michigan Railway Company, a Michigan corporation (the
"Company"), and The Straits Corporation, a Michigan corporation and the sole
shareholder of the parent corporation of the Company ("Straits" and collectively
with the Company, the "Sellers"). Certain capitalized terms are defined in
Article XII hereof.
Recitals
A. The Company operates and provides rail freight and transportation
services for both on-line customers and other railroads that interchange traffic
with the Company and owns or has valid rights to use the operating assets
associated with such business (the "Business"). Such services primarily relate
to the transportation of products to and from the railroad interchanges at the
terminal points of the Company's rail lines, which are reflected on the map
attached as Schedule A.
B. Buyer desires to purchase substantially all of the rail line
segments used in the Business and certain other rights, obligations and assets
associated with the Business, as more fully described below, and the Company
desires to sell such assets and rights, upon the terms and subject to the
conditions set forth herein.
C. Simultaneously herewith, Straits Financial Services, L.L.C., a
Michigan limited liability company ("SFS"), is entering into a Locomotive
Purchase Agreement with Buyer pursuant to which it is agreeing to sell, and the
Buyer is agreeing to purchase, the Locomotives which are described in the
Locomotive Purchase Agreement between the Buyer and SFS (the "SFS Purchase
Agreement").
D. The Company has provided the due diligence information and
documentation requested of it, and Buyer has completed its due diligence
investigation of the Company and is satisfied with the results of this
investigation.
Agreement
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I. - SALE AND PURCHASE OF ACQUIRED ASSETS
1.01 SALE AND PURCHASE OF ACQUIRED ASSETS.
(a) On the terms and subject to the conditions of this
Agreement, at the Closing referred to in Section 2.01 hereof, the Company shall
sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase,
acquire and accept delivery of, the Business, including those operating assets
used by the Company in or otherwise associated with its Business (the "Acquired
Assets"), except as may be limited herein, free and clear of any and all liens,
mortgages, adverse claims, charges, security interests or encumbrances. The
Acquired Assets shall include all of the assets used by the Company in the
conduct of its Business, and include the following:
(i) The following rail line segments of the Company
(the "Rail Lines"):
Midland Sub 15.81 miles
▇▇▇▇▇▇▇ to ▇▇▇▇▇▇ 57.06 miles
Genesee to Paines 5.06 miles
I-75 to CSX Yard .86 miles
▇▇▇▇▇▇ to M21 11.83 ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Lead 2.19 miles
Owosso Industrial Track .65 miles
Marquette to Yard Board 1.56 miles
Essexville 3.16 miles
▇▇▇▇▇▇▇ to MDOT Ownership 1.69 miles
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TOTAL 99.87 miles
which Rail Lines are set forth in Schedule 1.01(a)(i) with line segment
endpoints, and together with Sellers' leasehold interests, easements,
rights of way, leases, minerals and water rights over, under, across,
and attributable to the Rail Lines;
(ii) All buildings, track improvements, facilities,
fixtures, and leasehold and other improvements located on the Rail
Lines;
(iii) The Business which the Company conducts on the
Rail Lines, subject to the terms and conditions set forth herein;
(iv) All of the Company's Track;
(v) All tangible personal property listed on Schedule
1.01(a)(v), with only such additions and deletions as may occur in the
ordinary and necessary conduct of the Business between the date hereof
and the Closing Date in connection with the replacement of any such
items (all items described in this provision being collectively
referred to as the "Tangible Personal Property");
(vi) All Leases and Equipment Leases utilized in the
Business, or otherwise, as listed on Schedules 3.06 and 3.11;
(vii) All agreements relating to the Business
including, without limitation, all operating agreements, joint facility
contracts, Michigan Department of Transportation contracts, freight
transportation contracts, licenses, other contracts, commitments and
understandings with governmental agencies, car leases, vehicle
financing agreements with GMAC, and customers relating to the Business
including, but not limited to, those agreements listed on Schedule 3.12
and the easement for the North Bay City Yard described in Section 5.11
below (collectively, the "Contracts");
(viii) All of the Company's trackage rights to
operate over and across any lines connecting with the Rail Lines, if
any;
(ix) All customer lists, technical information and
data, warranties and service contracts, trademarks (and any goodwill
related thereto), permits, licenses, authorizations and regulatory
approvals, and all other files, information and intangible rights
relating to the operation of the Business, including its goodwill and
going concern value relating to the operation of the Business
(collectively, the "Intangible Personal Property");
(x) Current Assets, as defined below;
(xi) Current Liabilities, as defined below;
(xii) All subsurface rights associated with the Rail
Lines, except as specifically excluded as part of the Excluded Assets
in Section 1.07 below;
(xiii) All operational safeguards associated with the
contracts and agreements specifically excluded as part of the Excluded
Assets in Section 1.07 below; and
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(xiv) All existing property records, tax and
assessment records, valuation maps, data and information related to
railroad operations, including, without limitation, inventory records,
vendor lists, customer lists and records (the "Records").
(b) To effect the transfers contemplated by Section 1.01(a),
at the Closing, Sellers shall deliver or cause to be delivered to Buyer, against
payment therefore in accordance with Section 1.03 hereof, Bills of Sale,
Assignments and Covenant Deeds for transfer to Buyer as outlined in Section 2.02
below.
1.02 ▇▇▇▇▇▇▇ MONEY DEPOSIT; CLOSING INSTRUCTION.
(a) Simultaneously with execution of this Agreement, Buyer
shall deposit with Stone, Biber & ▇'▇▇▇▇▇, P.L.L.C., as escrow agent (the
"Escrow Agent"), the sum of Five Hundred Thousand Dollars ($500,000.00) as an
▇▇▇▇▇▇▇ money deposit (the "▇▇▇▇▇▇▇ Money Deposit"), to be held in an interest
bearing account pending disbursement in accordance with the terms and conditions
of this Agreement and a certain Escrow Agreement of even date. Accrued interest
is to be paid to whichever party is ultimately entitled to receive such deposit.
(b) If such ▇▇▇▇▇▇▇ Money Deposit is to be paid to the Company
at the Closing of this transaction, the ▇▇▇▇▇▇▇ Money Deposit, and all accrued
interest earned thereon, shall be credited against the payment of the purchase
price by Buyer.
(c) If the Buyer shall fail to close on the transaction by
January 30, 2004 other than as a result of (i) the failure to obtain STB
approval, (ii) a Material Adverse Change in the Business or Acquired Assets,
(iii) the failure of one or more conditions to closing outlined in Section 6.02
which is not waived by the applicable party, or (iv) the Sellers'
non-performance of its obligations hereunder, the Escrow Agent shall release the
▇▇▇▇▇▇▇ Money Deposit and all interest accrued thereon to the Company, and the
Company shall have the right to retain the ▇▇▇▇▇▇▇ Money Deposit and accrued
interest earned thereon. The delivery of the ▇▇▇▇▇▇▇ Money Deposit to the
Company as a result of the Buyer's failure to close shall not be deemed to be
liquidated damages, and shall not otherwise limit the remedies available to the
Company as a result of the Buyer's breach.
(d) If the Agreement is terminated in accordance with one or
more of the provision outlined in Section 10.01 below, the Escrow Agent shall
deliver the ▇▇▇▇▇▇▇ Money Deposit and all interest accrued thereon to the Buyer.
1.03 PAYMENT FOR ACQUIRED ASSETS. As payment in full for the Acquired
Assets being acquired by the Buyer hereunder, Buyer shall pay, in the manner set
forth in this Section 1.03, the sum of (i) Twenty-Four Million Dollars
($24,000,000), plus (ii) the amount, if any, by which the Company's Current
Assets exceed the Company's Current Liabilities or minus the amount, if any, by
which the Company's Current Liabilities exceed the Company's Current Assets, in
each case as of the Closing (the "Purchase Price Adjustment"), subject to
further adjustment as provided in Sections 7.02 and 8.02 hereof (such sum, as so
adjusted from time to time, is herein referred to as the "Purchase Price"). On
the Closing Date, the Buyer shall make payment of the Purchase Price as follows:
(a) Subject to Section 1.06(a) hereof, Buyer shall deliver to
the Company, by wire transfer (to an account specified by Sellers in writing at
least three business days prior to Closing), of immediately available funds, the
sum of Twenty-Three Million Five Hundred Thousand Dollars ($23,500,000), less
the amount of accrued interest earned on the ▇▇▇▇▇▇▇ Money Deposit, and
increased or reduced by the Estimated Purchase Price Adjustment, as applicable,
in accordance with Section 1.04(a);
(b) The Escrow Agent shall deliver to the Company the ▇▇▇▇▇▇▇
Money Deposit and all accrued interest earned thereon.
1.04 ESTIMATED PURCHASE PRICE ADJUSTMENT; CLOSING BALANCE SHEET;
DISPUTES.
(a) Not later than two (2) business days prior to the
scheduled Closing Date, the Buyer and the Sellers shall jointly estimate the
Purchase Price Adjustment (the "Estimated Purchase Price Adjustment"). The
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Estimated Purchase Price Adjustment shall be deducted from or added to the
payment otherwise required to be made by Buyer to the Company pursuant to
Section 1.03(a) hereof.
(b) If the Purchase Price Adjustment reflected on the Closing
Date Balance Sheet is greater than the Estimated Purchase Price Adjustment, then
the Company shall pay to the Buyer an amount equal to the amount of such excess.
If the Purchase Price Adjustment reflected on the Closing Date Balance Sheet is
less than the Estimated Purchase Price Adjustment, then the Buyer shall pay to
the Company an amount equal to the amount of such shortfall. Any payments made
by the Buyer to the Company or by the Company to the Buyer pursuant to this
Section 1.04(b), shall be made by wire transfer of immediately available funds
to the account or accounts designated by the Sellers or the Buyer, as the case
may be, within ten (10) days after the date in which the Closing Date Balance
Sheet (defined below) is final and binding on the parties.
(c) As soon as practicable (and in no event later than 45 days
after the Closing Date), the Company shall cause to be prepared and delivered to
the Buyer (i) a balance sheet for the Company dated as of the Closing Date (the
"Closing Date Balance Sheet"), and (ii) a calculation of the Purchase Price
Adjustment, including such schedules and data as may be appropriate to support
such calculation. The Buyer and its accountants shall be entitled to review the
Closing Date Balance Sheet, the Company's calculations of the Purchase Price
Adjustment, and any working papers, trial balances and similar materials
relating to the Closing Date Balance Sheet prepared by the Company or its
accountants. The Company shall also provide Buyer and its accountants with
timely access, during the Company's normal business hours, to the Company's
personnel, properties, books and records to the extent related to the
determination of the Purchase Price Adjustment. The collection of accounts
receivable included in Current Assets is addressed in Section 7.08 below.
(d) The following clauses (i) and (ii) set forth the
procedures for resolving disputes among the parties with respect to the
determination of the Purchase Price Adjustment:
(i) Within thirty (30) days after delivery to the
Buyer of the Company's calculation of the Purchase Price Adjustment
pursuant to this Article I, the Buyer may deliver to the Company a
written report (the "Buyer's Report") prepared by the Buyer's
accountants (the "Buyer's Accountants") advising the Company that the
Buyer's Accountants deem that one or more adjustments to the Company's
calculation are required. The costs and expenses of the services of the
Buyer's Accountants shall be borne by the Buyer. If the Company shall
concur with the adjustments proposed by the Buyer's Accountants, or if
the Company shall not object thereto in a writing delivered to the
Buyer within thirty (30) days after the Company's receipt of the
Buyer's Report, the calculations of the Purchase Price Adjustment set
forth in such Buyer's Report shall become final and shall not be
subject to further review, challenge or adjustment absent fraud. If the
Buyer does not submit a Buyer's Report within the 30-day period
provided herein, then the Purchase Price Adjustment as calculated by
the Company shall become final and shall not be subject to further
review, challenge or adjustment absent fraud.
(ii) In the event that the Buyer submits a Buyer's
Report and the Company and the Buyer's Accountants are unable to
resolve the disagreements set forth in such report within (30) days
after the date of the Buyer's Report, then such disagreements shall be
referred to Deloitte & Touche (the "Settlement Accountants"), and the
determination of the Settlement Accountants shall be final and shall
not be subject to further review, challenge or adjustment absent fraud
or manifest error. The Settlement Accountants shall use their best
efforts to reach a determination not more than forty-five (45) days
after such referral. The costs and expenses of the services of the
Settlement Accountants shall be paid by the Company if (A) the
difference between (i) the Purchase Price Adjustment resulting from the
determinations of the Settlement Accountants, and (ii) the Purchase
Price Adjustment resulting from the determinations set forth in the
Buyer's Report, is less than (B) the difference between (i) the
Purchase Price Adjustment resulting from the determinations of the
Settlement Accountants, and (ii) the Purchase Price Adjustment
resulting from the Company's calculations as set forth in the
deliveries pursuant to this Section 1.04 hereof; otherwise, such costs
and expenses of the Settlement Accountants shall be paid by the Buyer.
1.05 ALLOCATION. The purchase price shall be allocated among the
Acquired Assets general as follows:
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Land, Rail Right-of-Way, Rail,
Ties, Ballast and Buildings $21,900,000.00
Equipment (non-locomotives) 2,100,000.00
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TOTAL $24,000,000.00
1.06 ADDITIONAL PAYMENT. In the event that on or before the fifteenth
(15th) anniversary of the Closing Date: (i) RATC or Buyer, or their Affiliates,
subsidiaries and/or their respective successors complete the acquisition of all
or a significant part of that specific line segment which is part of CSX
Corporation's rail system running parallel to the Company's current operation
from Bay City, Michigan to ▇▇▇▇▇▇, Michigan, (ii) RATC or Buyer, their
Affiliates, subsidiaries and/or their respective successors complete a
conveyance to CSX Corporation or its successor of all or a significant portion
of that specific line segment of the Company's rail system running parallel to
CSX Corporation's current operation from Bay City, Michigan to Flint, Michigan,
or (iii) another arrangement is completed whereby either the Buyer, CSX
Corporation or their respective successor(s) operates as the primary connecting
carrier for the current traffic on the lines described in (i) and (ii) above
(all of the foregoing collectively referred to as the "Plan"), then Buyer shall
within thirty (30) days of the completion of such transaction pay to Straits the
sum of Six Million Dollars ($6,000,000), in immediately available funds (the
"Additional Payment").. Notwithstanding the foregoing, the parties acknowledge
and agree that the amount of the Additional Payment is predicated upon the
combined rail system described above benefiting from the synergies and
increasing current operating revenues and/or reduced costs resulting from the
Company's rail freight business. In the event such a combination is primarily
motivated by significantly reduced (i) traffic volumes and/or (ii) aggregate
operating revenues on the parallel lines, then the Additional Payment shall be
reduced proportionately. Prior to Closing hereunder, the parties will discuss
the framework within which to pursue the Plan. The Buyer will keep the Sellers
generally informed of progress toward achieving the Plan.
1.07 EXCLUDED ASSETS. The parties acknowledge and agree that the
Company is selling, and the Buyer is purchasing, substantially all of the assets
associated or used in the Business, but the Company is retaining the following
assets which will be excluded from this transaction and not part of the Acquired
Assets at Closing: (i) approximately 1.77 miles of railroad, extending from
milepost 2.83 at the western end of the Company's railroad bridge over
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ to milepost 4.60, in Saginaw County, Michigan which was
the subject of STB Docket No. AB-308 (Sub-No. 3X) (the "I-75 Bridge") as
provided in Article IX below and any proceeds paid by the State of Michigan
either in the past or in the future to the Company for removal, relocation, or
purchase of the I-75 Bridge, (ii) certain real estate located in the State of
Florida, (iii) certain preferred membership interests in ▇▇▇▇▇ Industries,
L.L.C., a Michigan limited liability company, (iv) certain real property which
is under negotiation for sale to St. Mary's Hospital and/or the expected
proceeds from the transfer of this real estate to St. Mary's Hospital, but with
the understanding that (A) Buyer shall be granted a perpetual operating easement
to the existing right-of-way or, if applicable, the relocated right-of-way, (B)
the Company will have the right to relocate the easement at a later date to a
location described on Schedule 1.07(iv)(A) attached and which relocated easement
shall be for an area which is at least forty (40) feet wide and the centerline
of which will be not less than ten (10) feet from the outer limits of the
easement on either side of the centerline, (C) Sellers shall bear responsibility
for all expense associated with the sale and relocation of the track and
right-of-way, (D) the operating easement for the relocated right-of-way shall
(1) be consistent with customary railroad operating easements, (2) be subject to
the Buyer's approval, which approval will not be unreasonably withheld, and (3)
include a term providing if the Buyer or its successor(s) ceases to use this
right-of-way for railroad purposes and/or the right-of-way is abandoned, the
operating easement would extinguish and terminate upon such cessation or
abandonment, and (E) prior to Closing on this Agreement, the Company will
relocate the maintenance-of-way crew facilities now located on the subject
property to a lot bound by Sheridan and ▇▇▇▇▇▇ Road as reflected on Schedule
1.07(iv)(E) attached, (v) certain subsurface property rights which are described
on Schedule 1.07, provided the Company shall assign to Buyer any operational
safeguards associated with such subsurface rights, (vi) certain Consumers Power
leases described on Schedule 1.07 which are being replaced by an Easement with
Consumers Power, provided the Company shall assign to Buyer any operational
safeguards associated with such Consumers Power leases and/or easement, (vii)
Flushing parcel, (viii) the Central Michigan Railway Company name and any
derivations thereof used by the Company in its Business, and (ix) other
non-operating real estate situated at a remote location from the operating
right-of-way, the exclusion of which will have no Material Adverse Effect upon
rail operations, and/or any surface property rights (such as leases, easements,
licenses, crossings, etc.), or other rights, assets, or contract generating
non-operating revenues reflected on the Company's financial statements, as more
particularly described on Schedule 1.07. The foregoing described assets shall be
referred to as the "Excluded Assets."
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ARTICLE II. - CLOSING
2.01 CLOSING. Subject to the conditions stated in Article VI of this
Agreement, the closing of the transactions contemplated hereby (the "Closing")
shall be held at 10:00 a.m., Eastern Time, by January 30, 2004 or, if the
conditions set forth in Section 6.02 have not been satisfied or waived on such
date, on the second (2nd) business day after all such conditions shall have been
satisfied or waived, and provided Closing will occur on or before December 31,
2003 if the STB grants the waiver of the sixty (60) day labor notice provision
in accordance with Section 5.07 below to such earlier date and the conditions
set forth in Section 6.02 have been then satisfied or waived, at the offices of
RailAmerica, Inc. in Boca Raton, Florida, or at such other time and place as the
parties mutually agree but subject to the terms of Article X below. The date
upon which the Closing occurs is hereinafter referred to as the "Closing Date."
2.02 DELIVERIES BY SELLERS. At or prior to the Closing, the Sellers
shall deliver to Buyer:
(i) ▇▇▇▇ of Sale for the Acquired Assets, except as
provided in (ii) and (iii) below, in the form attached as Schedule
2.02(i);
(ii) Assignment and Assumption of Leases, Contracts
and Permits included in the Acquired Assets, in the form attached as
Schedule 2.02(ii);
(iii) Covenant Deeds for the Real Estate included in
the Acquired Assets, which will be in a form recordable with the
appropriate register of deeds for each of the counties in which the
Real Estate is located, in the form attached as Schedule 2.02(iii);
(iv) third party consents to assignment of all
Contracts and Permits which by their terms require the consent of the
third party(ies) to the assignment of the Contracts or Permits by the
Company which are described in Schedule 3.04;
(v) a certificate executed by the Sellers to the
effect that the conditions set forth in Section 6.02(a) have been
satisfied; and
(vi) subject to the record keeping provisions of
Section 7.06, possession of all Records within the possession of the
Sellers or any Affiliate of the Sellers pertaining to the Acquired
Assets; provided, however, that the Sellers may retain (1) copy of any
Records that the Sellers are reasonably likely to need for complying
with requirements of law.
2.03 DELIVERIES BY BUYER. At or prior to the Closing, Buyer shall
deliver to the Company:
(i) the amount and form of Purchase Price required to
be paid at Closing pursuant to Section 1.03(a) hereof;
(ii) Assignment and Assumptions of Leases, Contracts
and Permits included in the Acquired Assets; and
(iii) a certificate executed by an authorized officer
of the Buyer, on behalf of the Buyer, to the effect that the conditions
set forth in Section 6.01(a) have been satisfied.
ARTICLE III. - REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AND THE COMPANY
In order to induce the Buyer to consummate the transactions under this
Agreement, Straits and the Company hereby jointly and severally represent and
warrant to Buyer that the following are true and correct as of the date hereof
and as of the Closing Date:
3.01 CORPORATE EXISTENCE AND QUALIFICATION. Straits and the Company are
corporations duly organized, validly existing and in good standing under the
laws of the State of Michigan, and each has the corporate power to
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own, manage, lease and hold its Properties and to carry on its business as
presently conducted. The Company is not required to be qualified to do business
as a foreign corporation in any other jurisdiction.
3.02 AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by the Company and Straits, and each of Straits and
the Company has all requisite power and legal capacity to execute and deliver
this Agreement and all Related Agreements executed and delivered or to be
executed and delivered in connection with the transactions provided for hereby,
to consummate the transactions contemplated hereby and by the Related
Agreements, and to perform its obligations hereunder and under the Related
Agreements. This Agreement and each Related Agreement to which either of Straits
and/or the Company is a party constitutes, or upon execution and delivery will
constitute, the legal, valid and binding obligation of such party, enforceable
in accordance with its terms, except as such enforcement may be limited by
general equitable principles or by applicable bankruptcy, insolvency,
moratorium, or similar laws which affect creditors' rights generally.
3.03 CORPORATE RECORDS. The copies of the Articles of Incorporation and
Bylaws of the Company provided to Buyer are true, accurate and complete and
reflect all amendments made through the date of this Agreement.
3.04 NO DEFAULTS OR CONSENTS. Neither the execution and delivery of
this Agreement nor the consummation of any of the transactions contemplated
hereby (including but not limited to the assignment and assumption of the
Leases, Contracts and Permits) will:
(i) violate or conflict with any of the terms,
conditions or provisions of the Articles of Incorporation or bylaws of
the Sellers;
(ii) to the Knowledge of the Company, violate any
provision of law or any judgment, award or decree to which the Company
or Straits is a party, or by which the properties or assets of the
Company or Straits is bound or affected;
(iii) to the Knowledge of the Company, violate,
conflict with, result in a breach of, constitute a default under
(whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by,
or give any other party the right to terminate, any material indenture,
agreement or other instrument or Permit binding upon or applicable to
the Company or Straits;
(iv) result in the creation of any lien, charge or
other encumbrance on any Acquired Assets; or
(v) except as otherwise set forth in Schedule 3.04
attached hereto, require any of Straits or the Company to obtain or
make any waiver, consent, action, approval or authorization of, or
registration, declaration, notice or filing with, any third party or
any Governmental Authority.
3.05 NO PROCEEDINGS. No suit, action or other proceeding is pending or,
to the Knowledge of the Company, threatened before any Governmental Authority
seeking to restrain the Company or Straits or prohibit their entry into this
Agreement or prohibit the Closing, or seeking damages against either Straits,
the Company or their Properties as a result of the consummation of this
Agreement.
3.06 EQUIPMENT LEASES. Schedule 3.06 attached hereto contains an
accurate and complete list and description of all equipment or other tangible
personal property, including, without limitation, locomotives and railcars,
leased by the Company in regard to the Business, including the name of the
lessor, the expiration date of the lease, and the rent payable under each such
lease (the "Equipment Leases"). Except as set forth on Schedule 3.06, each such
Equipment Lease may be cancelled by the Company on not more than 90 days'
notice. True and complete copies of all such Equipment Leases have been
furnished to the Buyer. All such Equipment Leases are in full force and effect
and constitute legal, valid and binding obligations of the respective parties
thereto enforceable in accordance with their terms, and grant the leasehold
estates they purport to grant free and clear of all liens or other encumbrances
whatsoever, except as stated on Schedule 3.06. The Company is not in default
under any railcar
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or locomotive lease, and there is no fact which, with notice and/or passage of
time would constitute such a default, including, without limitation, the
consummation of the transactions contemplated by this Agreement. To the
Knowledge of the Company, except as described in Schedule 3.06, none of the
parties contracting with the Company is in default under any material provision
of such Equipment Leases.
3.07 EQUIPMENT AND OTHER TANGIBLE PROPERTY. The Company has good and
merchantable title to all of the railcars, vehicles, Track and railcar repair
equipment, radios, fixtures, equipment and other tangible personal property and
a valid lease for all locomotives which the Company uses in connection with its
Business and/or purports to own as reflected on its financial books and records,
including, without limitation those reflected on the Annual Financial Statements
and the Interim Financial Statements, or acquired after such date (other than
personal property sold or otherwise disposed of in the ordinary and usual course
of business subsequent to June 30, 2003), and, except as disclosed on Schedule
3.07 attached, are free and clear of all mortgages, liens, security interests
and encumbrances of any nature whatsoever except for Permitted Liens (as defined
in Section 3.10 below) and as described on Schedule 3.07 attached hereto. The
Company shall at Closing have an inventory of expendable material and supplies
(not including rails and ties) in amounts routinely maintained by it, including
diesel fuel, to allow for continued operation after Closing until such
expendable materials and supplies can be obtained in the ordinary course of
business.
The parties agree that the locomotives used by the Company will be
owned by SFS and conveyed by SFS to Buyer at Closing pursuant to the SFS
Purchase Agreement.
3.08 CONDITION OF PERSONAL PROPERTY OTHER THAN TRACKS. All tangible
personal property (other than Track and bridges) owned by the Company or used by
the Company in its Business is in all material respects and to the Knowledge of
the Company in good condition, normal wear and tear excepted, and is in good
operating order except as otherwise described on Schedule 3.08 attached. To the
Knowledge of the Company, all of the equipment owned or operated by the Company
is maintained and operated in material compliance with all federal, state and
local laws and regulations.
3.09 CONDITION OF TRACK AND BRIDGES. True and complete copies of all
periodic Track and bridge inspections and exemption reports in the possession or
under the control of the Company or any of its agents describing the condition
of all of the Track and bridges owned or operated by the Company have been
provided to the Buyer. To the Knowledge of the Company and except as otherwise
disclosed in the inspection reports listed on Schedule 3.09 attached hereto
conducted in accordance with (i) the Railroad Code of 1993, Public Act 354 of
1993 of the State of Michigan, and (ii) the Company's monthly inspection of lift
rails (connectors) required for moveable bridges in accordance with the U.S.
Department of Transportation, Federal Railroad Administration Office of Safety
Inspections, all of such Track and bridges are in good, safe operating order. To
the Knowledge of the Company, all of the Track and bridges owned or operated by
the Company are maintained and operated in Material compliance with all federal,
state and local laws and regulations, requirements of grants, loan documents or
any other agreements with third parties.
3.10 REAL ESTATE OWNED. Schedule 3.10 attached hereto provides a
summary description of all real estate assets and owned rights-of-way, including
easements, held by the Company and used in the Business (the "Real Estate"),
other than trackage rights held by the Company which are described in Schedule
3.12 hereof and the Excluded Assets. Except as set forth on Schedule 3.10, the
Company holds sufficient rights in and to all easements or other rights
necessary for perpetual access thereto, and owns outright all buildings and
other structures, improvements and fixtures thereon, free and clear of all
mortgages, liens or other encumbrances whatsoever, except for (i) liens for
taxes, assessments, levies, fees and other governmental charges which are not
due and payable or which may hereafter be paid without penalty, (ii) road
crossing agreements or similar rights of use with or by governmental authorities
or private parties; (iii) leases, pole and wire agreements, easements, licenses,
permits and similar agreements; (iv) matters of public record; (v) rights of
reverter that will not be violated as long as the affected real property is used
for rail freight operations; and (vi) rights reserved to or vested in any
governmental authority with respect to the properties or assets or their
regulation, including but not limited to the rights of the State of Michigan to
require crossing improvements (collectively, "Permitted Liens"), none of which
Permitted Liens, individually or in the aggregate, (x) materially interferes
with the ability of the Company to conduct rail freight operations substantially
as those operations are conducted by the Company as of the date of the
Agreement, or (y) secures any indebtedness of the Company. The Company is not in
receipt of any notice that any structures,
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improvements, fixtures and equipment on the Real Estate fail to conform in any
Material respect to any applicable state, federal and local laws, regulations,
zoning and building ordinances and health and safety ordinances. To the
Knowledge of the Company, the Real Estate is zoned for the various purposes for
which such real estate is currently being used. Except as set forth on Schedule
3.10, no notice from any governmental body has been served upon, or received by,
the Company or either of the Sellers claiming any violation of any such law,
regulation, code or ordinance, or requiring any substantial work, repairs,
construction, alterations or installation on or in connection with the Real
Estate which has not been complied with. Except as disclosed on Schedule 3.10,
there are no outstanding assessments or pending assessments to which the Real
Estate is subject. The physical condition of the Track, the Tangible Personal
Property and the Rail Lines, and the Company's title to same, will be sufficient
on the date of Closing to enable Buyer to conduct rail freight transportation
operations over all or any portion of the Rail Lines on the day following the
date of Closing, and the rail corridors described on Schedule 1.01(a)(i)
constitute continuous rail corridors between the endpoints of the Rail Lines.
The Rail Lines constitute a continuous rail corridor between the various end
points, and the Company has continuously conducted rail operations over and
across the Rail Lines during the period of the Company's ownership thereof.
3.11 REAL ESTATE LEASED.
(a) Schedule 3.11 attached hereto sets forth a list and
summary description of all real estate leased to or by the Company (including
leases for right-of-way, licenses and other right of access documents) ("Leased
Real Estate"), other than trackage rights held by the Company which are
described in Schedule 3.12 hereof and the Excluded Assets, and all leases,
subleases, licenses and other agreements by which the Leased Real Estate was
leased to or by the Company ("Leases") including the name of the landlord and
the name of the tenant. The Leased Real Estate and the Leases are separately
categorized and listed on Schedule 3.11 based upon whether the Company is
ultimately the landlord or tenant pursuant to the Leases. Accurate and complete
copies of all leases of Leased Real Estate shall be furnished to Buyer by or
before Closing.
All Leases are in full force and effect and constitute legal,
valid and binding obligations of the respective parties thereto enforceable in
accordance with their terms, except as such enforcement may be limited by
general equitable principles or by applicable bankruptcy, insolvency,
moratorium, or similar laws and judicial decisions from time to time in effect
which affect creditors' rights generally, and grant the leasehold estates they
purport to grant free and clear of all mortgages, liens or other encumbrances
whatsoever, except as stated on Schedule 3.11. To the Knowledge of the Company,
there is not under any of such instruments any existing or claimed default,
event of default or event which with notice or lapse of time or both would
constitute an event of default, including the consummation of the transactions
contemplated by this Agreement. The Company is not in receipt of any notice that
any structures, improvements, fixtures and equipment on the Leased Real Estate
fail to conform in any Material respect to any applicable state, federal and
local laws, regulations, zoning and building ordinances and health and safety
ordinances. To the Knowledge of the Company, the Leased Real Estate is zoned for
the various purposes for which such real estate is currently being used. Except
as set forth on Schedule 3.11, no notice from any governmental body has been
served upon, or received by, the Company or either of the Sellers claiming any
violation of any such law, regulation, code or ordinance, or requiring any
substantial work, repairs, construction, alterations or installation on or in
connection with the Leased Real Estate which has not been complied with. Except
as set forth on Schedule 3.11, rental and/or license payments owing under such
Leases have been collected by the Company in the ordinary course of business,
all rental or license payments owing to the Company as landlord under such
Leases have been collected by the Company in the ordinary course of business.
(b) Schedule 3.11 includes all licenses, crossing right
agreements and other agreements encumbering or affecting any of the Real Estate
or Leased Real Estate which is owned by the Company, granting access to third
parties from the Company. The rents or revenues derived from these licenses,
crossing right agreements, and other agreements are paid and current and listed
on Schedule 3.11, but no more than one installment is paid in advance and the
rents and revenues are consistent with those reflected on the Financial
Statements.
(c) The Company shall provide the Buyer with addresses and
contact information for all tenants and licensees and, if requested by Buyer,
the Company shall notify all such tenants and licensees of this transaction and
the need to forward future rents and revenues to the Buyer.
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3.12 OPERATING AGREEMENTS. Schedule 3.12 attached hereto contains an
accurate and complete list of all current operating agreements between the
Company and any third party (the "Operating Agreements"); provided, however, the
parties acknowledge that certain operating rights of the Company result from
agreements entered into by the Company's predecessors in interest and the
attached list is based upon the Company's commercially reasonable efforts to
locate all such operating agreements. Such Operating Agreements include trackage
rights agreements, interchange agreements, joint facility contracts, Michigan
Department of Transportation contracts, car hire agreements, contract switching
agreements and marketing agreements. All of such agreements are in full force
and effect and constitute legal, valid and binding obligations of the respective
parties thereto enforceable in accordance with their terms, except as such
enforcement may be limited by general equitable principles or by applicable
bankruptcy, insolvency, moratorium, or similar laws and judicial decisions from
time to time in effect which affect creditors' rights generally, and to the
Knowledge of the Company there is not under any of such instruments any existing
or claimed default or event which with notice or lapse of time or both would
constitute an event of default, including the consummation of the transactions
contemplated by this Agreement. Accurate and complete copies of all agreements
referred to in Schedule 3.12 have been furnished to Buyer.
3.13 LABOR AND EMPLOYEE BENEFIT MATTERS.
(a) Schedule 3.13(a) provides a list, as of the date of this
Agreement, showing the names of all employees of the Company associated with the
Business, their original dates of employment, job titles and salary rates of pay
for salaried employees and hourly rates for hourly compensation employees. The
Company is not indebted to nor a creditor of any employee of the Company,
except, for accrued wages and salaries payable by their employer.
(b) Except for employees represented by the Transportation
Communications International Union, no employees of the Company are represented
by any labor union or similar organization and there are no pending or, to the
Knowledge of the Company, threatened activities the purpose of which is to
achieve such representation of all or some of such employees.
(c) The Company is operating and has been operating in
compliance in all material respects with all Legal Requirements covering
employment and employment practices, terms and conditions of employment and
wages and hours; and (ii) there is no labor strike, dispute, slowdown or
stoppage pending or, to the Knowledge of the Company, threatened against or
affecting the Company, and the Company has not experienced any work stoppage or
other labor difficulty.
(d) Schedule 3.13(d) provides a description of each "employee
benefit plan" (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and each personnel policy, employee
manual or other written statements of rules or policies concerning employment,
stock option plan, collective bargaining agreement, bonus plan or arrangement,
which is sponsored, maintained or contributed to by the Sellers or the Company
for the benefit of the employees or agents of the Company, which has been so
sponsored, maintained or contributed to at any time during the Company's
existence or with respect to which the Company has or may have any actual or
contingent liability. True, correct and complete copies of each of the employee
benefit plans and all other agreements, policies or arrangements described on
Schedule 3.13(d), including all amendments thereto, have been furnished to
Buyer. There has also been furnished to Buyer, with respect to each employee
benefit plan required to file such report and description, the most recent
report on Form 5500 and the summary plan description. To the Knowledge of the
Company, all employee benefit plans listed or required to be listed on Schedule
3.13(d) have timely complied and currently comply, both as to form and
operation, with ERISA, the Code, and other applicable laws and with applicable
Statements of Financial Accounting Standards.
3.14 COMPLIANCE WITH LAWS. To the Knowledge of the Company, the Company
is and has been in compliance in all Material respects with any and all
applicable Legal Requirements governing or otherwise effecting the Acquired
Assets. The Company (x) has not received or entered into any citations,
complaints, consent orders, compliance schedules, or other similar enforcement
orders or received any written notice from any Governmental Authority or any
other written notice that would indicate that there is not currently compliance
with all such Legal Requirements governing or otherwise effecting the Acquired
Assets, and (y) is not in default under, and to the Knowledge of the Company, no
condition exists (whether covered by insurance or not) that with or without
notice or
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lapse of time or both would constitute a default under, or breach or violation
of, any Legal Requirement or Permit applicable to the Acquired Assets.
3.15 LITIGATION. There are no claims, actions, suits, investigations or
proceedings against the Company pending or, to the Knowledge of the Company,
threatened in any court or before or by any Governmental Authority, or before
any arbitrator, governing or otherwise effecting the Acquired Assets.
3.16 COMMITMENTS. Attached hereto as Schedule 3.16 is a list of all
written and oral contracts, commitments, leases and other agreements (including,
without limitation, promissory notes, loan agreements and other evidences of
indebtedness) to which the Acquired Assets are subject or bound and/or which
effect the Business, pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, in respect of any such
individual contracts, commitments, leases or other agreements during the term
thereof, $50,000 or greater or which are otherwise material to the Business of
the Company (including, without limitation, all mortgages, deeds of trust,
security agreements, pledge agreements and similar agreements and instruments
and all confidentiality agreements). Except as set forth on Schedule 3.16, the
Company is not, and, to the Knowledge of the Company, no other party thereto, is
in default (and no event has occurred which, with the passage of time or the
giving of notice or both, would constitute a default) under any such contracts,
commitments, leases or other agreements, and the Company has not waived any
right under any such contracts, commitments, leases or other agreements. Except
as set forth on Schedule 3.16, the Company has not guaranteed any obligations of
any other person nor entered into any contract or agreement, contingent or
otherwise, relating to any right to lease, operate, use, supply or purchase any
Material Company asset. If requested by the Buyer, the Company will cooperate
and join in a written communication to any or all customers consistent with the
terms outlined in Section 8.05 below.
3.17 INSURANCE. Attached hereto as Schedule 3.17 is a list of all
policies of fire, liability, business interruption and other forms of insurance
and all fidelity bonds held by or applicable to the Company at any time within
the past three years, which schedule sets forth in respect of each such policy
the policy name, policy number, carrier, term, type of coverage, deductible
amount or self-insured retention amount, limits of coverage and annual premium.
Except as disclosed on Schedule 3.17 attached hereto, there has been no material
change in the type of insurance coverage maintained by the Company during the
past three years that has resulted in any period during which the Company had no
insurance coverage. Excluding insurance policies which have expired and been
replaced, no insurance policy of the Company has been canceled within the last
three years and, to the Knowledge of the Company, no threat has been made to
cancel any insurance policy of the Company within such period.
3.18 INTANGIBLE PERSONAL PROPERTY RIGHTS. Schedule 3.18 sets forth all
Intangible Personal Property owned, licensed or otherwise used by the Company.
Except as set forth on Schedule 3.18:
(a) the Company owns, clear of any liens, mortgages, adverse
claims, charges, security interests or other encumbrances, or is licensed or
otherwise has the legally enforceable right to use, all Intangible Personal
Property (as hereinafter defined) used in or necessary for the conduct of its
Business as currently conducted;
(b) no claims are pending or, to the Knowledge of the Company,
threatened that the Company is infringing on or otherwise violating the rights
of any person with regard to any Intangible Personal Property used by, owned by
and/or licensed to the Company and, to the Knowledge of the Company, there are
no valid grounds for any such claims;
(c) to the Knowledge of the Company, no person is infringing
on or otherwise violating any right of the Company with respect to any
Intangible Personal Property owned by and/or licensed to the Company;
(d) to the Knowledge of the Company, there are no valid
grounds for any claim challenging the ownership or validity of any Intangible
Personal Property owned by the Company or challenging the Company's license or
legally enforceable right to use any Intangible Personal Property licensed by
it; and
(e) to the Knowledge of the Company, there are no patents,
registered trademarks, registered service marks or registered copyrights held by
the Company.
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3.19 Environmental Matters.
(a) Except as disclosed on the draft Environmental Review
prepared by ▇▇▇▇ & ▇▇▇▇▇▇▇, a professional corporation, dated October 9, 2003, H
& H Job No. RAI-009 ("H & H Environmental Report"), to the Knowledge of the
Company, the Company (i) has obtained all applicable permits, licenses and other
authorizations, which are required to be obtained under all Environmental Laws
applicable to the Company; (ii) is in compliance in all material respects with
all terms and conditions of such required permits, licenses and authorizations,
and also is in compliance with all other applicable limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in applicable Environmental Laws; (iii) as of the date
hereof, is not aware of nor has received notice of any uncured past or present
violations of Environmental Laws or any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with Environmental Laws or which
could give rise to any Material capital expenditure or common law or statutory
liability, or otherwise for the basis of any claim, action, suit or proceeding
against the Company under any Environmental Law.
(b) Except as disclosed on the H & H Environmental Report, to
the Knowledge of the Company, there are no uncured past or present violations of
any applicable federal, state or local laws or any applicable regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder relating to pollution or protection of the
environment ("Environmental Laws"), including laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials into ambient
air, surface water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes, including petroleum, by the Company (or its agents); and
(c) Except as disclosed on the H & H Environmental Report, the
Company has not entered into any agreement to undertake or pay for any response
action of any kind or nature or to pay any damages (including punitive damages),
costs, fines or penalties associated with any release or threatened release of
any pollutant, contaminant or hazardous or toxic material or waste, including
petroleum, at any location.
(d) Notwithstanding the foregoing representations, Sellers are
not making any environmental representations regarding the property commonly
known as the Bay City River Lot, which property is more fully described on
Schedule 3.19(d) attached (the "Bay City River Lot"), and Buyer is acquiring the
Bay City River Lot in an "as is, where is" condition as it relates to
environmental matters.
3.20 LICENSES AND PERMITS. Attached hereto as Schedule 3.20 is a list
of all Permits held or applied for by the Company relating to the Acquired
Assets and/or the operation of the Business. Except as set forth on Schedule
3.20 attached hereto, to the Knowledge of the Company, the Company has complied
in all material respects, and is in compliance in all material respects, with
the terms and conditions of all such licenses, certificates and permits and no
violation of any such licenses, certificates or permits or the laws or rules
governing the issuance or continued validity thereof has occurred. Except as set
forth on Schedule 3.20 attached hereto, no additional Permit is required from
any Governmental Authority in connection with the conduct of the Business of the
Company. Except as set forth on Schedule 3.20 attached hereto, no claim has been
made by any Governmental Authority (and, to the Knowledge of the Company, no
such claim is anticipated) to the effect that a Permit is necessary in respect
of the Business conducted by the Company.
3.21 CUSTOMERS AND SUPPLIERS. To the Knowledge of the Company, no
customer or supplier of the Company will, as a result of the transactions
contemplated hereby or otherwise, cease to do business with the Buyer, as
successor to the Company and its Business, after the consummation of the
transactions contemplated hereby in the same manner as previously conducted with
the Company. The Sellers have not received any notice of termination or of any
disruption (including delayed deliveries) of the services, materials or products
supplied by suppliers.
3.22 Taxes.
(a) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Company (whether or not shown on any Tax
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Return and whether or not any Tax Return was required) have been paid. No claim
has ever been made by a taxing authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no liens on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Tax, except for
liens for Taxes not yet due.
(b) All transfer, documentary, sales, use, stamp, registration
and other fees (including any penalties, interest and additions) incurred in
connection with this Agreement shall be paid by the Company when due.
(c) Year 2003 Michigan property taxes applicable to operating
Real Estate net of allowable credits shall be a zero amount due to the
availability of tax credits for maintenance of way and maintenance of equipment
expenses.
(d) If the Closing occurs on or after January 1, 2004, the
Company shall prepare and file the annual railroad property tax filing for tax
year 2003 to the State of Michigan, including documentation to allow maintenance
of way and maintenance of rolling stock tax credit. In such event, the Company
will provide advance copy of such filing to Buyer for review and will provide to
Buyer copies of all centrally assessed tax assessment notices and valuation
information for year 2003 within fifteen (15) days of receipt. If the Closing
occurs before January 1, 2004, the terms of Section 7.09 shall apply. Buyer
shall cooperate with the Company in providing any information or documentation
necessary to prepare such return.
3.23 ACCOUNTS RECEIVABLE AND PAYABLE; INVENTORY.
(a) Schedule 3.23 includes an aged account receivable list of
all accounts of the Company as at September 30, 2003. Except for interline
accounts receivable, none of such receivables by their terms are due more than
sixty (60) days after the date of service or sale giving rise to such
receivables.
(b) All trade and interline accounts payable of the Company
have originated in the ordinary course of the Company's Business. Schedule 3.23
includes an aged account payable list of all accounts of the Company as at
September 30, 2003.
(c) Except as otherwise set forth in Schedule 3.23, the
accounts receivable reflected on the September 30, 2003 balance sheet included
in the Financial Statements that have been provided to Buyer and all of the
Company's accounts receivable arising since September 30, 2003 arose from bona
fide transactions in the ordinary course of business and no further services are
required to be rendered in order to entitle the Company to collect the accounts
receivable in full. Except as set forth in Schedule 3.23, no such account has
been factored, assigned or pledged to any other person, firm or corporation, all
such accounts are owned by the Company, free and clear of any lien or
encumbrance and, except only to the extent fully reserved against as set forth
in the September 30, 2003 balance sheet included in such Financial Statements
that have been provided to Buyer, no defense or set-off to any such account has
been asserted by the account obligor or exists. The Company's inventory is
valued on the Company's books of account in accordance with GAAP (on an average
cost basis) at the lower of cost or market.
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BUYER
In order to induce the Sellers to consummate the transactions under
this Agreement, RATC and Buyer hereby jointly and severally represent and
warrant to the Sellers that as of the date hereof and as of the Closing Date:
4.01 CORPORATE EXISTENCE AND QUALIFICATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; has the corporate power to own, manage, lease and hold its properties
and to carry on its business as and where such properties are presently located
and such business is presently conducted; and is duly qualified to do business
and is in good standing as a foreign corporation in each of the jurisdictions
where the character of its properties or the nature of its business requires it
to be so qualified.
4.02 AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by Buyer, has been approved by the Board of
Directors of Buyer and Buyer has all requisite corporate power and legal
capacity to execute and deliver this Agreement and all Related Agreements
executed
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and delivered or to be executed and delivered by Buyer in connection with the
transactions provided for hereby, to consummate the transactions contemplated
hereby and by the Related Agreements, and to perform its obligations hereunder
and under the Related Agreements. This Agreement and each Related Agreement to
which Buyer is a party constitutes, or upon execution and delivery will
constitute, the legal, valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as such enforcement may be limited by general
equitable principles or by applicable bankruptcy, insolvency, moratorium, or
similar laws and judicial decisions from time to time in effect which affect
creditors' rights generally.
4.03 NO DEFAULT OR CONSENTS. Neither the execution and delivery of this
Agreement nor the carrying out of the transactions contemplated hereby will:
(iii) violate or conflict with any of the terms,
conditions or provisions of Buyer's Certificate of Incorporation or
bylaws;
(iv) violate any Legal Requirements applicable to
Buyer;
(v) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse
of time or both), or accelerate or permit the acceleration of the
performance required by, or give any other party the right to
terminate, any contract or Permit applicable to Buyer;
(vi) result in the creation of any lien, charge or
other encumbrance on any property of Buyer other than under the Buyer's
credit agreement with Bank of Nova Scotia as collateral agent (the
"Credit Agreement"); or
(vii) require Buyer to obtain or make any waiver,
consent, action, approval or authorization of, or registration,
declaration, notice or filing with, any private non-governmental third
party or any Governmental Authority other than the Surface
Transportation Board (the "STB") approvals as set forth in Section
5.07.
4.04 NO PROCEEDINGS. No suit, action or other proceeding is pending or,
to Buyer's knowledge, threatened before any Governmental Authority seeking to
restrain Buyer or prohibit its entry into this Agreement or prohibit the
Closing, or seeking damages against Buyer or its properties as a result of the
consummation of this Agreement.
ARTICLE V. - OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
5.01 BUYER'S ACCESS TO INFORMATION AND ACQUIRED ASSETS. The Company has
and shall continue to permit Buyer and its authorized employees, agents,
accountants, legal counsel and other representatives to have access to the
books, records, employees, counsel, accountants, and other representatives of
the Company at all times reasonably requested by Buyer for the purpose of
conducting an investigation of the Company's financial condition, corporate
status, operations, prospects, business and Acquired Assets. The Company has and
shall continue to make available to Buyer for examination and reproduction all
documents and data of every kind and character relating to the Company in
possession or control of, or subject to reasonable access by, the Company and/or
the Sellers, including, without limitation, all files, records, data and
information relating to the Acquired Assets (whether stored in paper, magnetic
or other storage media) and all agreements, instruments, contracts, assignments,
certificates, orders, and amendments thereto. Also, the Company has and shall
continue to allow Buyer access to, and the right to inspect, the Acquired
Assets, except to the extent that such Acquired Assets are operated by a
third-party operator, in which case the Company shall use its best efforts to
cause the operator of such Acquired Assets to allow Buyer access to, and the
right to inspect, such Acquired Assets.
5.02 COMPANY'S CONDUCT OF BUSINESS AND OPERATIONS. The Company and the
Sellers shall keep Buyer advised as to all material operations and proposed
material operations relating to the Company. The Company shall (a) conduct its
Business in the ordinary course, (b) keep available the services of present
employees, provided the
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parties understand that the Union Contract is scheduled to expire December 31,
2003, (c) maintain and operate the Acquired Assets in a good and workmanlike
manner, (d) pay or cause to be paid all costs and expenses (including but not
limited to insurance premiums) incurred in connection therewith in a timely
manner, (e) use reasonable efforts to keep all contracts listed or required to
be listed on Schedule 3.12 in full force and effect, (f) materially comply with
all of the covenants contained in the contracts listed on Schedule 3.12, and (g)
maintain in force until the Closing Date insurance policies equivalent to those
in effect on the date hereof. Except as otherwise contemplated in this
Agreement, the Company will use its best efforts to preserve the present
relationships of the Company with persons having significant business relations
therewith.
5.03 GENERAL RESTRICTIONS. Except as otherwise expressly permitted in
this Agreement, without the prior written consent of Buyer, the Company shall
not:
(i) create, incur, assume, guarantee or otherwise
become liable or obligated with respect to any indebtedness that would
cause there to be a lien upon the Acquired Assets which is not
removable with purchase price funds;
(ii) enter into, amend or terminate any material
agreement that would detrimentally effect the Company's Business or
Acquired Assets, except the parties acknowledge that the Union Contract
is scheduled to expire on December 31, 2003 and the Company shall not
be prohibited from pursuing the amendment of the Union Contract to
extend its term beyond that date if the transaction does not close by
December 31, 2003;
(iii) sell, transfer, lease, mortgage, encumber or
otherwise dispose of, or agree to sell, transfer, lease, mortgage,
encumber or otherwise dispose of, any Acquired Assets except (A) in the
ordinary course of business, (B) in regard to the transfer of any
Excluded Assets as described in Section 1.06 or (C) in regard to the
locomotives to be transferred to SFS as described in Section 3.07;
(iv) settle any material claim or litigation, or file
any material motions, orders, briefs or settlement agreements in any
proceeding before any Governmental Authority or any arbitrator that
would detrimentally effect the Company's Business or Acquired Assets;
(v) allow its levels of fuel inventory to vary in any
material respect from the levels customarily maintained if such actions
would detrimentally effect supplier relations;
(vi) enter into any transaction or make any
commitment which could result in any of the representations, warranties
or covenants of the Company and/or Sellers contained in this Agreement
not being true and correct after the occurrence of such transaction or
event; or
(vii) commit to do any of the foregoing.
5.04 NOTICE REGARDING CHANGES. The Company and Straits shall promptly
inform Buyer in writing of any material change in facts and circumstances that
could render any of the representations and warranties made herein by the
Company and/or the Sellers inaccurate or misleading if such representations and
warranties had been made upon the occurrence of the fact or circumstance in
question. The Buyer shall promptly inform the Company and Straits in writing of
any change in facts and circumstances that could render any of the
representations and warranties made herein by it inaccurate or misleading if
such representations and warranties had been made upon the occurrence of the
fact or circumstance in question.
5.05 ENSURE CONDITIONS MET. Subject to the terms and conditions of this
Agreement, each party hereto shall take or cause to be taken all actions and do
or cause to be done all things required under applicable Legal Requirements in
order to consummate the transactions contemplated hereby, including, without
limitation, (i) obtaining all Permits, authorizations, consents and approvals of
any Governmental Authority or other person which are required for or in
connection with the consummation of the transactions contemplated hereby and by
the Related Agreements, (ii) taking any and all actions necessary to satisfy all
of the conditions to each party's obligations
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hereunder as set forth in Article VI, and (iii) executing and delivering all
agreements and documents required by the terms hereof to be executed and
delivered by such party on or prior to the Closing.
5.06 EMPLOYEE MATTERS.
(a) The Company shall permit Buyer to contact and make
arrangements with the Company's employees who are involved in the Business for
the purpose of assuring their employment by the Buyer after the Closing, and the
Company agrees not to discourage any such employees from consulting with Buyer.
(b) The Company shall use its best efforts to keep available
the services of its present employees through the Closing Date.
5.07 SURFACE TRANSPORTATION BOARD. Pursuant to the provisions of 49
U.S.C. 10902 and the procedures set forth in 49 C.F.R. SubPart E, Buyer shall,
at its sole expense, prepare and file such documents which shall be in manner
satisfactory in form and substance to Sellers, as may be required to secure
approval, or an exemption from such approval, by the STB of this transaction. If
requested by the Company, Buyer shall also file with the STB a petition for
waiver asking for a waiver from the sixty (60) day labor notice provision of 49
C.F.R. 1150.42(e) which is addressed in Section 5.11 so as to allow the
transaction to be consummated and effective on or before December 31, 2003.
Buyer shall file the STB exemption within three (3) business days of the
execution date of this Agreement and agrees to undertake any and all good faith
efforts necessary to seek and obtain STB approval, or an exemption therefrom, in
an expeditious manner. Sellers agree to cooperate with the Buyer and provide the
Buyer in a timely fashion with all information necessary or desirable to include
in any such documents and shall be allowed to intervene in the STB proceeding in
any form or manner as necessary to insure STB approval by the Closing Date of
this transaction. In the event the STB imposes any labor protection conditions
in conjunction with its grant of approval, or exemption from approval, of this
transaction, Buyer agrees it will be responsible for the costs and expenses
associated with such labor protection conditions.
5.08 PAYOFF AND ESTOPPEL LETTERS. Prior to Closing, the Company shall
request payoff and estoppel letters with respect to all Company indebtedness
which creates a lien upon the Acquired Assets, which letters shall contain
payoff amounts, per diems, wire transfer instructions and an agreement to
deliver, upon full payment, UCC-3 termination statements and other appropriate
releases to the extent needed to release such liens at Closing. At or prior to
Closing, the Company shall satisfy all payoff amounts which are required by the
applicable lenders to be paid to release the liens in the Acquired Assets at
Closing.
5.09 NO SHOP. From the date hereof to the Closing, neither of Straits
nor the Company shall, or cause any agent on its behalf to, offer any of the
Acquired Assets or the Company (or a material part of its assets in one
transaction or a series of transactions) for sale or lease, or solicit offers to
buy or lease the Acquired Assets or the Company (or a material part of its
assets in one transaction or in a series of related transactions), or hold
discussions with any party (other than Buyer) looking toward such an offer or
solicitation or toward a merger, share exchange or consolidation of the Company
with or into another entity or any similar transaction. From the date hereof to
the Closing and except for the Excluded Assets, the Sellers, directly or
indirectly, shall not, and shall not allow the Company to, enter into any
agreement with any party other than Buyer with respect to the sale, lease or
other disposition of either the capital stock or the assets of the Company
(except for the sale of scrap rail which will not exceed Fifty Thousand Dollars
($50,000.00) in proceeds, to be shared equally between the Company and Buyer) or
with respect to any merger, share exchange, consolidation or similar transaction
involving the Company.
5.10 LABOR NOTICE. Prior to or simultaneous with the execution of this
Agreement, the Buyer shall comply with 49 C.F.R. 1150.42(e) by providing to the
Company a notice of its intent to consummate the transactions outlined in this
Agreement and having the Company post the notice at the Company's offices where
employees involved in the Business are employed, which consist of the main
Company facility in Bay City and field offices in ▇▇▇▇▇▇, Saginaw and Bay City,
and serving a copy of the notice on the National Office of the Transportation
Communications International Union, setting forth (i) the types and numbers of
jobs expected to be available, (ii) the terms of employment and principles of
employee selection, and (iii) the lines that are to be transferred, by virtue of
the Labor Notice and concurrent with the posting of the Labor Notice shall
certify to the STB that it has posted the Labor Notice accordingly.
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5.11 NORTH BAY CITY YARD. Straits will cause its second-tier subsidiary
Detroit & Mackinac Railway Company ("D & M") to execute and deliver to the
Company a non-exclusive easement for the North Bay City Yard to document the
rights of the Company to access the North Bay City Yard as necessary for the
Company to serve the Dow Docks, which rights are outlined in a certain Easement
Agreement dated March 27, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇ & ▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Railway Company.
This non-exclusive easement will be assigned by the Company to the Buyer at
Closing in accordance with Section 2.02(ii).
ARTICLE VI. - CONDITIONS TO SELLERS' AND BUYER'S OBLIGATIONS
6.01 CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to carry out the transactions contemplated by this Agreement are
subject, at the option of the Sellers, to the satisfaction or waiver of the
following conditions:
(a) All representations and warranties of Buyer contained in
this Agreement shall be true and correct at and as of the Closing, and Buyer
shall have performed and satisfied all covenants and agreements required by this
Agreement to be performed and satisfied by Buyer at or prior to the Closing.
Sellers shall have received a certificate, dated as of the Closing Date, signed
by the President or any Vice President of the Buyer certifying the foregoing.
(b) As of the Closing Date, no suit, action or other
proceeding shall be pending or threatened before any Governmental Authority for
the purpose or with the probable or reasonably likely effect of enjoining or
preventing the consummation of this Agreement or seeking damages on account
thereof.
(c) The Buyer shall have furnished Sellers with a certified
copy of all necessary corporate action on its behalf approving the Buyer's
execution, delivery and performance of this Agreement.
(d) Buyer shall have delivered such good standing
certificates, officers' certificates and similar documents and certificates as
counsel for the Sellers and the Company shall have reasonably requested prior to
the Closing Date.
(e) Sellers shall have received the opinion of RailAmerica,
Inc.'s General Counsel, dated as of the Closing Date, in form and substance
reasonably satisfactory to the Company, with respect to the matters contained in
Sections 4.01, 4.02 and 4.03(i). In rendering such opinion, such counsel may
rely on certificates of governmental officials.
(f) Buyer shall have simultaneously with the Closing of this
Agreement closed upon the SFS Purchase Agreement.
6.02 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
carry out the transactions contemplated by this Agreement are subject, at the
option of Buyer, to the satisfaction, or waiver by Buyer, of only the following
conditions and no others:
(a) All representations and warranties of the Sellers
contained in this Agreement shall be true and correct at and as of the Closing,
provided, however, changes in circumstances or facts occurring between the
execution date of this Agreement and the Closing which may cause a
representation or warranty to be incorrect at and as of the Closing, but which
change in circumstances or facts does not cause there to be a Material Adverse
Change to the Acquired Assets or Business, shall not be deemed to be a failure
of this condition precedent.
(b) As of the Closing Date, no suit, action, or other
proceeding shall be pending or threatened (i) against either Sellers or Buyer
before any Governmental Authority enjoining or which is reasonably likely to
enjoin the consummation of this Agreement, or (ii) against the Sellers which
could cause there to be either (A) a lien placed upon the Acquired Assets, or
(B) a Material Adverse Change to the Acquired Assets or Business.
(c) Each of the Sellers and the Company shall have furnished
Buyer with a certified copy of all necessary corporate action on its behalf
approving the execution, delivery and performance of this Agreement, including,
without limitation, any required approval by the shareholders of Straits.
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(d) All agreements, commitments and understandings between the
Company and any Affiliate which effect the Acquired Assets or Business thereof
shall have been terminated in all respects on terms satisfactory to Buyer, and
all obligations, claims or entitlements thereunder shall be unconditionally
waived and released by such Affiliates and written evidence thereof.
(e) In accordance with Sections 5.07 and 5.10, the STB shall
have approved or exempted the transaction contemplated hereby and such authority
shall be effective.
(f) Sellers and the Company shall have delivered such good
standing certificates, officers' certificates and similar documents and
certificates as counsel for the Buyer shall have reasonably requested prior to
the Closing Date.
(g) The Buyer shall have received copies of "payoff" or
"estoppel" letters or other evidence, reasonably satisfactory to it, of the
termination, at or prior to Closing, of all Liens that encumber the Acquired
Assets pursuant to Section 5.08 (except for Permitted Liens and the GMAC lien on
certain vehicles that will be assumed by the Buyer).
(h) The Buyer shall have received the opinion of Stone, Biber
& ▇'▇▇▇▇▇, P.L.L.C., counsel to the Company ("Company Counsel"), dated as of the
Closing Date, addressed to the Buyer and in form and substance reasonably
satisfactory to the Buyer, with respect to the matters contained in Sections
3.01, 3.02 and 3.04(i). In rendering such opinion, Company Counsel may rely as
to factual matters on certificates of officers, directors and shareholders of
the Company and on certificates of governmental officials.
(i) SFS shall have closed upon the SFS Purchase Agreement, or
otherwise be ready and able to close upon the SFS Purchase Agreement,
simultaneously with the Closing of this Agreement.
(j) The assignment of all Operating Agreements which require
the consent of third parties shall have been consented to by the applicable
third parties, and such consents shall have been delivered to the Buyer.
(k) Sellers shall have delivered all of the documents required
to be delivered by the Sellers pursuant to Section 2.02.
(l) Buyer will have appropriate evidence to confirm that the
deeds of conveyance for the Real Estate are in compliance with the Michigan Land
Division Act.
ARTICLE VII. - POST-CLOSING OBLIGATIONS
7.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by each party in this Agreement and in each Schedule shall
survive the Closing Date for a period of twelve (12) months after the Closing
notwithstanding any investigation at any time made by or on behalf of the other
party; provided, however, that the representations and warranties set forth in
Section 3.19 shall survive the Closing Date for a period of twenty-four (24)
months after the Closing and representations and warranties set forth in Section
3.22 and any intentional fraud shall survive until the expiration of the
applicable statute of limitations. All representations and warranties related to
any claim asserted in writing prior to the expiration of the applicable survival
period shall survive (but only with respect to such claim) until such claim
shall be resolved and payment in respect thereof, if any is owing, shall be
made.
7.02 INDEMNIFICATION.
(a) The Sellers shall, subject to the limitations set forth in
the last sentence of this Section 7.02(a), jointly and severally, indemnify and
defend and hold harmless the Buyer and its officers, directors, employees,
agents, representatives and affiliates against and with respect to any and all
damages, claims, losses, penalties, liabilities, actions, fines, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) (all of the foregoing hereinafter collectively referred to as a
"Loss"), after the Closing Date, arising from, in connection with or with
respect to the following items: (i) (A) any misrepresentation of a surviving
representation
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or breach of a surviving warranty by the Company or either of the Sellers under
Article III hereof, or (B) any failure to fulfill any agreement or covenant on
the part of the Company or either of the Sellers; and (ii) any and all actions,
suits, proceedings, judgments, settlements (to the extent approved or entered
into by the Sellers as hereinafter provided), costs, penalties and legal and
other expenses incident to any of the foregoing. The remedies provided in this
Section 7.02 shall be the exclusive remedies afforded to Buyer with respect to
breaches of the representations and warranties set forth in Article III.
Notwithstanding anything to the contrary contained in this Agreement, the
Sellers shall have no obligation to indemnify the Buyer pursuant to this Section
7.02 unless the aggregate amount of Losses incurred by the Buyer to which the
Buyer has the right to be indemnified under this Section 7.02 exceeds $100,000
at which point, the Sellers shall indemnify the Buyer for the full amount of
such Losses in excess of $100,000, and Sellers shall have no obligation to
indemnify the Buyer pursuant to this Section 7.02 for the aggregate amount of
Losses incurred by Buyer to which the Buyer has the right to be indemnified
under this Section 7.02 in excess of (i) $750,000 in regard to a Loss resulting
from a misrepresentation of the Sellers under Section 3.19 for which the Buyer
has the right to be indemnified under Section 7.02, or (ii) $400,000 in regard
to all other matters for which Buyer has the right to be indemnified under
Section 7.02. Further, the Sellers shall have no obligation to indemnify the
Buyer pursuant to this Section 7.02 for environmental claims or issues relating
to the Bay City River Lot.
(b) The Buyer and RATC shall jointly and severally, subject to
the limitations set forth in the last sentence of this Section 7.02(b),
indemnify and defend and hold harmless the Sellers against and with respect to
any and all Losses, regardless of whether an action has been filed or asserted
against the Sellers after the Closing Date, arising from, in connection with or
with respect to the following items: (i) any misrepresentation, breach of any
surviving warranty, or failure to fulfill any agreement or covenant on the part
of the Buyer under this Agreement, including any Contract or accounts payable
assumed by the Buyer as part of the Acquired Assets and (ii) any and all
actions, suits, proceedings, judgments, settlements (to the extent approved or
entered into by Buyer as hereinafter provided), costs, penalties and legal and
other expenses incident to any of the foregoing. The remedies provided in this
Section 7.02 shall be the exclusive remedies afforded to Sellers with respect to
breaches of the representations and warranties set forth in Article IV.
Notwithstanding anything to the contrary contained in this Agreement, the Buyer
shall have no obligation to indemnify the Sellers pursuant to this Section
7.02(b); unless the aggregate amount of Losses incurred by the Sellers to which
the Sellers have the right to be indemnified under this Section 7.02(b) exceeds
$100,000, at which point the Buyer shall indemnify the Sellers for the full
amount of such Losses in excess of $100,000, and Sellers shall have no
obligation to indemnify the Buyer pursuant to this Section 7.02 for the
aggregate amount of Losses incurred by Buyer to which the Buyer has the right to
be indemnified under this Section 7.02 in excess of $400,000.
(c) If any action or proceeding shall be commenced, or if any
claim, demand or assessment be asserted, in respect of which any party
("Indemnitee") proposes to hold any other party ("Indemnitor") liable under the
indemnity provisions of this Section 7.02 (a "Claim"), then if the Indemnitor
shall, at its option, acknowledge its indemnification obligation and notify
Indemnitee of its election to contest or defend any such Claim, such Indemnitor
shall be entitled, at its sole cost and expense, to contest or defend the same
with counsel of its own choosing, and Indemnitee shall not admit any liability
with respect thereto or settle, compromise, pay or discharge the same without
the prior written consent of the Indemnitor so long as any Indemnitor is
contesting or defending the same in good faith, and Indemnitee (and its
successors and assigns) shall cooperate with the Indemnitor in the contest or
defense thereof (and the Indemnitor shall reimburse Indemnitee for the
Indemnitee's reasonable actual out-of-pocket expenses incurred in connection
with such cooperation) and Indemnitee shall enter into any settlement with
respect thereto recommended by Indemnitor so long as the amount of such
settlement is paid by the Indemnitor and no obligation to perform or refrain
from performing any act shall be imposed upon Indemnitee by reason thereof and
such settlement otherwise is reasonable.
(d) Notwithstanding the foregoing, any Indemnitee shall be
entitled to conduct its own defense at the reasonable cost and expense of the
Indemnitor if not doing so could materially prejudice the Indemnitee due to the
nature of any claims or counterclaims presented or by virtue of a conflict
between the interest of the Indemnitee and the Indemnitor, and provided further
that in any event the Indemnitee may participate in such defense at its own
expense. If Indemnitee shall have given Indemnitor thirty (30) days written
notice that it intends to assume the defense of any Claim and if the Indemnitor
fails to assume the defense of such Claim as provided above by the end of such
thirty (30) day period or such later reasonable time (which shall be such period
of time as will not result in prejudice to the rights of the Indemnitee), then
the Indemnitee shall have the right to prosecute and
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conduct its own defense by counsel of its choice, and in connection therewith
shall have full right to conduct the defense thereof and to enter into any
compromise or settlement thereof with the consent of the Indemnitor (which shall
not unreasonably be withheld, conditioned or delayed). Such defense shall be at
the cost and expense of the Indemnitor if it is subsequently determined that the
Indemnitor was obligated to defend or indemnify the Indemnitee with respect to
such action, proceeding, claim, demand or assessment.
(e) Any indemnification payment by Sellers shall be considered
an adjustment to the Purchase Price.
7.03 FURTHER ASSURANCES. Following the Closing, the Company, the
Sellers and the Buyer shall execute and deliver such documents, and take such
other action, as shall be reasonably requested by any other party hereto to
carry out the transactions contemplated by this Agreement.
7.04 PUBLICITY. None of the parties hereto shall issue or make, or
cause to have issued or made, any public release or announcement concerning this
Agreement or the transactions contemplated hereby, without the advance approval
in writing of the form and substance thereof by each of the other parties,
except as required by law (in which case, so far as possible, there shall be
consultation among the parties prior to such announcement), and the parties
shall endeavor jointly to agree on the text of any announcement or circular so
approved or required. The parties have agreed to a press release to be issued
shortly after execution of this Agreement.
7.05 POST-CLOSING TRANSFERS.
(a) For a period of twenty-four (24) months following the
Closing Date, the Buyer agrees to effect such transfers of Excluded Assets as
reasonably requested by the Sellers, and the Buyer will not take any actions to
frustrate, burden, or interfere with Sellers' ability to use, sell, transfer, or
otherwise control the Excluded Assets. For a period of twenty-four (24) months
following the Closing, the Company agrees to effect such transfers of property
and assets, other than the Excluded Assets, as reasonably requested by the Buyer
in order to ensure that all property and assets used in the Business of the
Company are transferred to the Buyer or its assignee in accordance with the
terms of this Agreement and/or the SFS Purchase Agreement.
(b) For a period of twenty-four (24) months following the
Closing Date, the Company and Straits agree to effect such transfers of property
and assets, other than the Excluded Assets, as reasonably requested by the Buyer
in order to ensure that all property and assets used in the Business of the
Company are transferred to the Buyer.
(c) Any post-closing transfer and the corresponding deed of
conveyance requested to be delivered in accordance with the foregoing provisions
of this Section 7.05 shall comply with the terms of the Michigan Land Division
Act.
7.06 RECORD RETENTION. From and after the Closing Date, Buyer shall,
whenever reasonably requested by the Company, permit the Company to have
reasonable access to, and make copies at the Company's expense of, all business
records provided to Buyer in accordance with this Agreement. Buyer, at Buyer's
cost and expense, shall preserve and maintain the records relating to the
Business for at least three (3) years after the Closing Date. If requested by
the Company in writing during the third (3rd) year after the Closing Date, Buyer
shall offer such books and records to the Company.
7.07 POST-CLOSING COOPERATION. The Sellers agree to cooperate with the
Buyer post-closing to insure the prompt deliver to the Buyer of any
correspondence, invoices, or similar matters which are addressed to the Company
but which relate to the Acquired Assets and/or the Business. Further, the Buyer
agrees to cooperate with the Sellers post-closing to insure the prompt deliver
to the Sellers of any correspondence, invoices, or similar matters which are
addressed to the Buyer but which relate to assets or business of the Company not
being sold to Buyer hereunder.
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7.08 COMMERCIALLY REASONABLE EFFORTS; PURCHASE OF UNCOLLECTED ACCOUNTS
RECEIVABLE.
(a) The Buyer shall use commercially reasonable efforts
subsequent to Closing to collect the Company's accounts receivable included in
the Current Assets.
(b) The Company shall purchase from the Buyer at face value
any accounts receivable included in the Current Assets that are not collected by
the Buyer within one hundred twenty (120) days of the Closing Date.
7.09 ANNUAL RAILROAD PROPERTY TAX FILING. If the Closing occurs before
January 1, 2004, the Buyer shall prepare and file the annual railroad property
tax filing relating to the Business for tax year 2003 to the State of Michigan,
including documentation to allow maintenance of way and maintenance of rolling
stock tax credit. In such event, Buyer will provide advance copy of such filing
to the Company for review and will provide to the Company copies of all
centrally assessed tax assessment notices and valuation information for year
2003 within fifteen (15) days of receipt. The Company shall cooperate with the
Buyer in providing any information or documentation necessary to prepare such
return.
ARTICLE VIII. - CLOSING AND COORDINATION ISSUES
8.01. PRORATION. To extent not already covered in Current Assets or
Current Liabilities, Real Estate taxes attributable to the Acquired Assets
transferred to Buyer under the terms of this Agreement shall be prorated between
the Company and Buyer in such manner as to allocate to the Company all taxes
attributable to the Acquired Assets on or prior to the date of Closing, and to
allocate to Buyer all taxes and prepaid rentals attributable to the Acquired
Assets after the date of Closing, consistent with the custom in the applicable
county in which each parcel of Real Estate is located. To the extent
practicable, the Purchase Price paid by Buyer to the Company at Closing shall be
adjusted based upon this proration. To the extent that this proration cannot be
computed or completed as of Closing, settlement upon the remaining prorated
items shall be paid, in full, no later than sixty (60) days following the date
of Closing.
8.02. TRANSFER OF OPERATIONS. All Business shall be transferred from
Sellers to the Buyer at 12:01 a.m. on the day following the date of Closing.
8.03. COLLECTION OF REVENUES. The Company shall submit freight bills or
interline settlements for, and shall collect all revenues due for movements over
the Rail Lines of all shipments moved through the date of Closing; provided,
that Buyer shall be entitled to all revenue attributable to (i) all loaded
inbound cars that have not been delivered to the customers as of 12:01 a.m. on
the day after the date of Closing, and (ii) all loaded outbound cars that have
not be interchanged to a connecting carrier as of 12:01 a.m. on the day after
the date of Closing. Clerical services rendered shall be limited to functions
required for AAR reporting purposes (EDI transmissions, train movements), switch
lists, customer service functions (car orders, customer releases, demurrage
recording, car hire reporting) and invoicing. Sellers shall not be responsible
for collection of Buyer's accounts or any other party responsible for payments
to Buyer after Closing. Seller shall assess and collect all charges due for all
switching services performed on or before the date of Closing. Seller shall
assess and collect all demurrage and miscellaneous charges relating to car
supply and other services performed on or before the date of Closing. Buyer
shall assess and collect all demurrage and miscellaneous charges relating to any
car supply and other services performed after the date of Closing. Other
particulars involved in the transition of rail service operations shall be in
accordance with Schedule 8.02 attached hereto.
8.04. TRANSFER OF LIABILITIES; PAYMENT OF CHARGES. For the period
before and including the day of Closing, the Company shall be responsible for:
(a) all common carrier rail operations, including car supply, on the Rail Lines;
(b) subject to the provisions of Section 11.02, all car hire and car mileage
allowance payments relating to rail operations over the Rail Lines which are due
and owing on or before the Closing Date. At and after 12:01 a.m. on the day
following the date of Closing, Buyer shall be responsible for: (d) all common
carrier rail operations, including car supply, on the Rail Lines; (e) any
freight loss and damage claims attributable to rail operations over the Rail
Lines; and (f) all car accounting and all car hire and car mileage allowance
payments relating to rail operations over the Rail Lines.
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8.05. ASSIGNMENT OF FREIGHT TRANSPORTATION CONTRACTS. As of Closing,
the Company hereby assigns to the Buyer and Buyer shall assume, be responsible
for the payment of, and shall hold the Company harmless from and against, all of
the following freight transportation contracts: (a) those freight transportation
contracts that apply to traffic moving to or from facilities on or along the
Rail Lines; and (b) those freight transportation contracts with or involving
shippers or receivers that have facilities on or along the Rail Lines and which
would apply to one or more shipments to or from a facility on or along the Rail
Lines, in accordance with the Assignment and Assumption of Contracts. The
Company and Buyer agree to send on the date of Closing a joint notice to each
shipper (or consignee) , and each railroad, who is a party to any freight
transportation contract involving any existing or potential freight traffic
movement to or from any rail origin or destination on the Rail Lines, a Notice
of Assignment, advising those parties of the following: (i) the occurrence of
this sale; (ii) the fact that all rates and service (and in the case of other
railroads, revenue divisions) terms in each such contract will remain the same;
(iii) the fact that Buyer will replace the Company as the party responsible for
all rail service to be performed over all or any portion of the Rail Lines under
each such contract; and (iv) the fact that Buyer has purchased all of the
Current Assets and Current Liabilities of the Company and, accordingly, all
accounts receivable owing under these Contracts to the Company should be paid to
the Buyer and all accounts payable owing by the Company under the Contracts will
be paid by Buyer subsequent to Closing.
ARTICLE IX. - I-75 BRIDGE ABANDONMENT PROCEEDING
On October 31, 2003, the STB issued its decision in the Company's
abandonment exemption proceeding for the ▇-▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇▇-▇▇▇
(Sub-No. 3X) (the "STB ▇-▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇"). Pursuant to the STB I-75 Bridge
Order, the Company was ordered to establish a transload operation to handle
Plastatech Engineering Ltd. ("Plastatech") shipments as outlined in the October
16, 2003 report of the Company to the STB. The assets and operations required to
support and maintain such a transload operation are being sold to the Buyer
pursuant to this Agreement. Notwithstanding the fact that Buyer will own and
control the assets necessary to support and maintain such a transload operation,
the Company agrees to pay any construction costs that may be necessary to build
or establish a transload operation for the benefit of Plastatech in accordance
with the STB I-75 Bridge Order, which facility shall be located immediately
south of W. Genessee Street and east of the Company's main lines. In the event
of further action by the STB with respect to this Plastatech relationship,
Sellers shall defend and indemnify Buyer. However, other than construction costs
that may be necessary to establish such a transload operation, if any, and the
Company's obligation to pay to Plastatech $100,710 (less salvage value), which
obligations the Company shall retain, the Buyer agrees to assume the Company's
remaining obligations necessary to comply with the commitments made by the
Company in the October 16, 2003 report to the STB and as imposed by the STB in
the STB I-75 Bridge Order.
ARTICLE X. - TERMINATION
10.01 TERMINATION. This Agreement may be terminated:
(a) By mutual written consent of the Sellers and the Buyer.
(b) By the Sellers or Buyer if the Closing shall not have been
consummated by the date which is one hundred thirty-five (135) days after the
execution date of this Agreement; provided that the terminating party is not
then in material breach of any representation, warranty, covenant or agreement
contained herein.
(c) By the Buyer if Straits or the Company breaches any
representation, warranty, covenant or agreement in this Agreement and such
breach represents or causes there to be a Material Adverse Change to the
Acquired Assets and/or Business, which breach is not cured by the Sellers or the
Company within fourteen (14) days of notice of such breach; provided that the
Buyer is not then in breach of any representation, warranty, covenant or
agreement contained herein.
(d) By the Sellers if the Buyer materially breaches any
representation, warranty, covenant or agreement of this Agreement and such
breach is not cured by the Buyer within fourteen (14) days of notice of such
breach; provided that neither of the Sellers nor the Company is then in material
breach of any representation, warranty, covenant or agreement contained herein
(e) By the Sellers if the SFS Purchase Agreement is terminated
by the mutual agreement of the parties or by the Buyer.
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(f) By the Buyer if the SFS Purchase Agreement is terminated
by the mutual agreement of the parties or by the Seller.
10.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become of no further
force or effect and, except for a termination resulting from a breach by a party
of any of its material obligations under this Agreement, there shall be no
liability or obligation on the part of the Sellers, the Company, or the Buyer or
their respective officers or directors (except as set forth in Articles X and XI
hereof, which shall survive the termination). In the event of termination of
this Agreement by the Buyer other than on one of the grounds outlined above, the
Company shall instruct the Escrow Agent in writing to deliver the ▇▇▇▇▇▇▇ Money
Deposit and all accrued interest earned thereon held by the Escrow Agent to the
Company in accordance with Section 1.02(a), and the Escrow Agent shall comply
with such request. Notwithstanding the foregoing, nothing contained in this
Section 10.02 or Section 1.02(a) shall relieve any party from liability for
willful breach of this Agreement that results in termination of this Agreement.
Upon request therefor, each party shall redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, and all copies thereof, whether obtained before or after the execution
hereof, to the party furnishing same.
ARTICLE XI. - MISCELLANEOUS
11.01 CONFIDENTIALITY.
(a) Prior to the Closing and except (i) as necessary to
satisfy the Buyer's obligations under Sections 5.07 and 5.10, or (ii) to meet or
communicate with the Labor Union representatives, Company employees and
customers to discuss transition and/or post-closing issues, Buyer shall, and
shall cause its Affiliates and its and their employees, agents, accountants,
legal counsel and other representatives and advisers to, hold in strict
confidence all, and not divulge or disclose any, information of any kind
concerning the transactions contemplated by this Agreement, the Sellers, the
Company and their respective businesses; provided, however, that the foregoing
obligation of confidence shall not apply to (i) information that is or becomes
generally available to the public other than as a result of a disclosure by
Buyer or its Affiliates or any of its or their employees, agents, accountants,
legal counsel or other representatives or advisers, (ii) information that is or
becomes available to Buyer or its Affiliates or any of its or their employees,
agents, accountants, legal counsel or other representatives or advisers on a
nonconfidential basis prior to its disclosure by Buyer or its Affiliates or any
of its or their employees, agents, accountants, legal counsel or other
representatives or advisers and (iii) information that is required to be
disclosed by Buyer or its Affiliates or any of its or their employees, agents,
accountants, legal counsel or other representatives or advisers as a result of
any applicable law, rule or regulation of any Governmental Authority; and
provided further that Buyer promptly shall notify the Company of any disclosure
pursuant to clause (iii) of this Section 11.01(a); and, provided, further, that
the foregoing obligation of confidence shall not apply to the furnishing of
information by Buyer in bona fide discussions or negotiations with prospective
lenders who are advised of the confidentiality obligations relating to such
information and as necessary to coordinate Closing and transition issues.
(b) Prior to the Closing and except (i) as necessary to
cooperate with Buyer's activities necessary to satisfy the Buyer's obligations
under Sections 5.07 and 5.10, or (ii) to meet or communicate with the Labor
Union representatives, Company employees and customers to discuss transition
and/or post-closing issues, the Company and the Sellers shall, and shall cause
their Affiliates and their respective employees, agents, accountants, legal
counsel and other representatives and advisers to, hold in strict confidence
all, and not divulge or disclose any, information of any kind concerning the
transactions contemplated by this Agreement, the Company, Buyer or their
respective businesses; provided, however, that the foregoing obligation of
confidence shall not apply to (i) information that is or becomes generally
available to the public other than as a result of a disclosure by the Company,
the Sellers or their Affiliates or any of their respective employees, agents,
accountants, legal counsel or other representatives or advisers, (ii)
information that is or becomes available to the Company, the Sellers or their
Affiliates or any of their respective employees, agents, accountants, legal
counsel or other representatives or advisers after the Closing on a
nonconfidential basis prior to its disclosure by the Company, the Sellers or
their Affiliates or any of their respective employees, agents, accountants,
legal counsel or other representatives or advisers and (iii) information that is
required to be disclosed by the Company, the Sellers or their Affiliates or any
of their respective employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Authority; and provided further that the Company
shall promptly shall notify Buyer of any disclosure pursuant to clause (iii) of
this Section 11.01(b).
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11.02 RISK OF LOSS. Risk of loss to the Acquired Assets during the
pre-closing period will be borne by the Company. However, in the event of a loss
or casualty to any of the Acquired Assets which does not rise to the level of a
Material Adverse Change to the Acquired Assets or Business, Buyer shall accept
and receive the subject damaged Acquired Assets as part of the property to be
delivered at Closing, but will also receive the benefit of any insurance
proceeds payable to the Company pursuant to insurance policies maintained by the
Company and/or its Affiliates. The Company shall be responsible for the payment
of any deductibles associated therewith and shall reimburse the Buyer for any
inadequacy in the insurance coverage to the extent the insurance coverage
maintained by the Company was not commercially reasonable in the scope of its
coverage.
11.03 BROKERS. Regardless of whether the Closing shall occur, (i) the
Sellers shall jointly and severally indemnify and hold harmless Buyer from and
against any and all liability for any brokers or finders' fees arising with
respect to brokers or finders retained or engaged by the Company or either of
the Sellers in respect of the transactions contemplated by this Agreement, and
(ii) Buyer shall indemnify and hold harmless the Company and the Sellers from
and against any and all liability for any brokers' or finders' fees arising with
respect to brokers or finders retained or engaged by Buyer in respect of the
transactions contemplated by this Agreement.
11.04 COSTS AND EXPENSES. Each of the parties to this Agreement shall
bear his or its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and the transactions
contemplated hereby (the "Transaction Expenses"); provided, however, that
Sellers shall be responsible for and shall discharge all Transaction Expenses
incurred by or on behalf of the Sellers and/or the Company (it being the
parties' agreement that the Company shall not bear or otherwise be liable for
any such expenses).
11.05 NOTICES. Any notice, request, instruction, correspondence or
other document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or by telecopier, as follows:
IF TO BUYER: Huron and Eastern Railway Company
c/o RailAmerica, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇.▇.
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President, Corporate Development
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to
--------------
RailAmerica, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇.▇.
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department, General Counsel
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
IF TO RATC: RailAmerica Transportation Corp.
c/o RailAmerica, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇.▇.
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department, General Counsel
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
IF TO THE COMPANY
AND/OR THE SELLERS: The Straits Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ III, President
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to
--------------
Stone, Biber & ▇'▇▇▇▇▇, P.L.L.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, notices to any party hereto shall not
be deemed effective with respect to such party until such Notice would, but for
this sentence, be effective both as to such party and as to all other persons to
whom copies are provided above to be given.
11.06 GOVERNING LAW; ARBITRATION.
(a) CHOICE OF LAW. The provisions of this agreement and the
documents delivered pursuant hereto shall be governed by and construed in
accordance with the laws of the State of Michigan (excluding any conflict of law
rule or principle that would refer to the laws of another jurisdiction).
(b) ARBITRATION.
(i) Any dispute, controversy, or claim arising out of
or relating to this Agreement or relating to the breach, termination,
or invalidity of this Agreement, whether arising in contract, tort, or
otherwise, shall at the request of any party be resolved in binding
arbitration. This arbitration shall proceed in accordance with Title 9
of the United States Code, as it may be amended or recodified from time
to time ("Title 9"), and the current Commercial Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association ("AAA"),
to the extent that Title 9 and the Arbitration Rules do not conflict
with any provision of this Section 11.06.
(ii) No provision of or the exercise of any rights
under this Section 11.06 shall limit the right of any party to seek and
obtain provisional or ancillary remedies (such as injunctive relief,
attachment, or the appointment of a receiver) from any court having
jurisdiction before, during, or after the pendency of an arbitration
proceeding under this Section. The institution and maintenance of any
such action or proceeding shall not constitute a waiver of the right of
any party (including the party taking the action or instituting the
proceeding) to submit a dispute, controversy, or claim to arbitration
under this Section.
(iii) Any award, order, or judgment made pursuant to
arbitration shall be deemed final and may be entered in any court
having jurisdiction over the enforcement of the award, order, or
judgment. Each party agrees to submit to the jurisdiction of the courts
indicated in Section 11.06(c) for purposes of the enforcement of the
award, order, or judgment.
(iv) The arbitration shall be held before one
arbitrator knowledgeable in the general subject matter of the dispute,
controversy, or claim and selected by AAA in accordance with the
Arbitration Rules, except that any arbitration in which the disputed,
controverted, or claimed amount (as reflected on the demand for
arbitration, as the same may be amended) exceeds One Million Dollars
($1,000,000) shall be held before three arbitrators, one arbitrator
being selected by Buyer, one by Sellers, and the third by the other two
from a panel of persons identified by AAA who are knowledgeable in the
general subject matter of the dispute, controversy, or claim.
(v) The arbitration shall be held at the office of
AAA located in Southfield, Michigan (as the same may be from time to
time relocated), or at another place the parties agree on.
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(vi) In any arbitration proceeding under this Section
11.06, subject to the award of the arbitrator(s), each party shall pay
all its own expenses, an equal share of the fees and expenses of the
arbitrator, and, if applicable, the fees and expenses of its own
appointed arbitrator. The arbitrator(s) shall have the power to award
recovery of costs and fees (including reasonable attorney fees,
administrative and AAA fees, and arbitrators' fees) among the parties
as the arbitrators determine to be equitable under the circumstances.
(vii) The interpretation and construction of this
Section, including but not limited to its validity and enforceability,
shall be governed by Title 9 of the U.S. Code, notwithstanding the
choice of law set forth in Section 11.06(a) of this Agreement.
(c) Courts. In the event neither party requests arbitration of
a dispute, controversy or claim relating to this Agreement or relating to the
breach, termination or invalidity of this Agreement, then each party hereto
irrevocably submits to the jurisdiction of any Circuit Court of the State of
Michigan, or other Federal Courts in the State of Michigan with proper venue and
jurisdiction, in any action or proceeding arising out of or relating to this
Agreement or any of the Related Agreements, and each party hereby irrevocably
agrees that all claims in respect of any such action or proceeding must be
brought and/or defended in such court; provided, however, that matters which are
under the exclusive jurisdiction of the Federal courts shall be brought in the
Federal District Court for the Eastern District of Michigan. Each party hereto
consents to service of process by any means authorized by the applicable law of
the forum in any action brought under or arising out of this Agreement or any of
the Related Agreements, and each party irrevocably waives, to the fullest extent
each may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court. EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY
LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING
ARISING HEREUNDER.
11.07 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
together with the Related Agreements and all exhibits and schedules attached
hereto and thereto, constitutes the entire agreement between and among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof
except as set forth specifically herein or contemplated hereby. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (regardless of whether similar), nor shall any such waiver
constitute a continuing waiver unless otherwise expressly provided.
11.08 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
parties, provided, however, that nothing herein shall prohibit the assignment of
Buyer's rights and obligations to any direct or indirect subsidiary or prohibit
the assignment of Buyer's rights (but not obligations) to any lender.
Notwithstanding any such assignment by the Buyer, Buyer shall remain obligated
to the Sellers for its indemnification obligations pursuant to Article VII on
behalf of itself and its assignee. Nothing in this Agreement, express or
implied, is intended to confer upon any person or entity other than the parties
hereto and their respective permitted successors and assigns, any rights,
benefits or obligations hereunder.
11.09 REMEDIES. The rights and remedies provided by this Agreement are
cumulative, and the use of any one right or remedy by any party hereto shall not
preclude or constitute a waiver of its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights and remedies
a party may have by law, statute or otherwise.
11.10 EXHIBITS AND SCHEDULES. The exhibits and Schedules referred to
herein are attached hereto and incorporated herein by this reference. Disclosure
of a specific item in any one Schedule shall be deemed a disclosure for all
associated representations and warranties, notwithstanding that there may be no
explicit cross-reference to another Schedule.
-26-
11.11 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.12 References and Construction.
(a) Whenever required by the context, and is used in this
Agreement, the singular number shall include the plural and pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural, as the identification the person may require. References to
monetary amounts, specific named statutes and generally accepted accounting
principles are intended to be and shall be construed as references to United
States dollars, statutes of the United States of the stated name and United
States generally accepted accounting principles, respectively, unless the
context otherwise requires.
(b) The provisions of this Agreement shall be construed
according to their fair meaning and neither for nor against any party hereto
irrespective of which party caused such provisions to be drafted. Each of the
parties acknowledges that it has been represented by an attorney in connection
with the preparation and execution of this Agreement.
11.13 ATTORNEYS' FEES. In the event any suit or other legal proceeding
is brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
reasonable attorneys' fees (and sales taxes thereon, if any), including
attorneys' fees for any appeal, and costs incurred in bringing such suit or
proceeding.
11.14 SECTION 1031 EXCHANGE. The parties understand that the Company
may desire to transfer the Real Estate in a transaction qualifying as a like
kind exchange under Section 1031 of the Internal Revenue Code and the
Regulations thereunder. Accordingly, the Company may assign its rights hereunder
to a qualified intermediary and the Buyer hereby consents to said assignment.
The Buyer shall execute such documents and take such other actions as may
reasonably be requested by the Company, at no cost to Buyer, for the purpose of
so qualifying the transaction as a like kind exchange under Section 1031 and the
Regulations thereunder.
ARTICLE XII. - DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article XII or elsewhere in this Agreement.
12.01 AFFILIATE. The term "Affiliate" shall mean, with respect to any
person, any other person controlling, controlled by or under common control with
such person. The term "Control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the controlled
corporation and, with respect to any person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person.
12.02 AFFILIATED GROUP. The term "Affiliated Group" shall mean any
affiliated group within the meaning of Section 1504(a) of the Code (as defined
below) or any similar group defined under a similar provision of state, local,
foreign or other law.
12.03 CODE. The term "Code" shall mean the Internal Revenue Code of
1986, as amended.
12.04 COMPANY. The term "Company" shall mean the Company and/or any
corporation that at any time has been a subsidiary of the Company (or any
predecessor thereof).
12.05 CONTRACTS. The term "Contracts," when described as being those of
or applicable to any person, shall mean any and all contracts, agreements,
franchises, understandings, arrangements, leases, licenses, registrations,
authorizations, easements, servitudes, rights of way, mortgages, bonds, notes,
guaranties, liens,
-27-
indebtedness, approvals or other instruments or undertakings to which such
person is a party or to which or by which such person or the property of such
person is subject or bound, excluding any Permits.
12.06 CURRENT ASSETS. The term "Current Assets" shall mean accounts
receivable which are not aged more than sixty (60) days as of the Closing Date,
inventory, supplies and prepaid accounts resulting from or associated with the
Business.
12.07 CURRENT LIABILITIES. The term "Current Liabilities" shall mean
accounts payable and accrued liabilities resulting from or associated with the
Business.
12.08 CUSTOMER/EMPLOYEE DUE DILIGENCE. The term "Customer/Employee Due
Diligence" shall mean that period of time during which the Buyer may meet with
the Company's customers and employees in order to obtain the assurances and
confirmations that Buyer believes to be reasonable and necessary.
12.09 GOVERNMENTAL AUTHORITY. The term "Governmental Authority" shall
mean any nation or country (including but not limited to the United States) and
any state, commonwealth, territory or possession thereof and any political
subdivision of any of the foregoing, including but not limited to courts,
departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
12.10 HAZARDOUS MATERIALS. The term "Hazardous Materials" shall mean
pollutants, contaminants or hazardous or toxic material or wastes, including
petroleum.
12.11 KNOWLEDGE OF THE COMPANY. The term "Knowledge of the Company"
shall mean the actual knowledge of any of the directors, officers or managerial
personnel of either of the Sellers or the Company with respect to the matter in
question.
12.12 LEGAL REQUIREMENTS. The term "Legal Requirements," when described
as being applicable to any person, shall mean any and all laws (statutory,
judicial or otherwise), ordinances, regulations, judgments, orders, directives,
injunctions, writs, decrees or awards of, and any Contracts with, any
Governmental Authority, in each case as and to the extent applicable to such
person or such person's business, operations or properties.
12.13 MATERIAL. The term "Material," when used to modify any other term
herein (except it shall not apply to or otherwise limit the term "Material
Adverse Change" defined below), shall mean having a value or effect of at least
Seventy-Five Thousand Dollars ($75,000.00), individually or in the aggregate.
12.14 MATERIAL ADVERSE CHANGE; MATERIAL ADVERSE EFFECT. The term
"Material Adverse Change" or "Material Adverse Effect" shall mean any event,
occurrence, fact, condition, change or effect, or combination thereof, that is
so material and adverse to the Business of the Company that it threatens to
significantly impair the future of the Business and the Company, its operations,
prospects, results of operations, condition (financial or otherwise), properties
or assets, other than any change or effect to the extent it relates primarily to
(i) the macroeconomy and financial markets generally, and not specifically
relating to the Company and its customers, or (ii) the national railroad
industry, and not specifically to the Company's position or prospects within the
regional railroad industry in which it operates. Material Adverse Change or
Material Adverse Effect shall not include, for example and not as a limitation:
(i) a labor strike, (ii) termination of any revenue producing agreement or other
major loss of revenues not projected to exceed twenty percent (20%) of the
current trailing twelve (12) months revenue of the Company for the same period,
(iii) a property loss or casualty fully or substantially covered by insurance,
or (iv) employment disruptions.
12.15 PERMITS. The term "Permits" shall mean any and all permits,
rights, approvals, licenses, authorizations, legal status, orders, certificates
or Contracts under any Legal Requirement or otherwise granted by any
Governmental Authority.
12.16 PERSON. The term "Person" shall mean any individual, partnership,
joint venture, firm, corporation, association, limited liability company, trust
or other enterprise or any governmental or political subdivision or any agency,
department or instrumentality thereof.
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12.17 PROPERTIES. The term "Properties" shall mean any and all
properties and assets (real, personal or mixed, tangible or intangible) owned or
Used by the Company.
12.18 RELATED AGREEMENTS. The term "Related Agreements" shall mean any
or all of the exhibits to this Agreement and any and all other agreements,
instruments or documents required or expressly provided under this Agreement to
be executed and delivered in connection with the transactions contemplated by
this Agreement.
12.19 STB. The term "STB" shall mean the Surface Transportation Board
or successor agency.
12.20 SUBSIDIARY. The term "Subsidiary" shall mean any Person of which
a majority of the outstanding voting securities or other voting equity interests
are owned, directly or indirectly, by another Person.
12.21 TAX. The term "Tax" shall mean any Federal, state, local, foreign
or other income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
12.22 TAX RETURN. The term "Tax Return shall mean any return,
declaration, report, claim for refund or information return or statement
relating to Taxes, including any schedule or attachment thereto and including
any amendment thereof.
12.23 TRACK. The term "Track" shall be deemed to include all rails,
ties, tie plates, spikes, angle bars, bolts, other fasteners, switches, switch
control devices, ballast, signals and other support structures used in, included
in or located on the Business.
12.24 UNION CONTRACT. The term "Union Contract" shall mean the
Agreement between the Company and its Locomotive Engineers, Conductors,
Brakemen, Maintenance of Way Employees, Signalmen, Machinists and Helpers, and
▇▇▇▇▇▇ and Helpers Represented by Transportation Communications International
Union effective January 1, 1990, as amended and revised.
12.25 USED. The term "Used" shall mean, with respect to the Properties,
Contracts or Permits of the Company, those owned, leased, licensed or otherwise
held by the Company which were acquired for use or held for use by the Company
in connection with the Company's business and operations, whether or not
reflected on the Company's books of account.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of the date first written above.
BUYER:
Huron and Eastern Railway Company, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
RATC:
RailAmerica Transportation Corp.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
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SELLERS:
COMPANY:
Central Michigan Railway Company
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III
Title: President
STRAITS:
The Straits Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III
Title: President
Consented to by Escrow Agent as to
provisions relevant to Escrow Agent:
Stone, Biber & ▇'▇▇▇▇▇, P.L.L.C.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Member
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