UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
[|X|] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
September 30, 1999
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period
from _____________________ to _____________________
Commission File Number 34-022552
RAILTEX, INC.
-------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Texas 74-1948121
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4040 Broadway, Suite 200
San Antonio, Texas 78209
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (210) 841-7600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] YES [ ] NO
Indicate the number of shares outstanding of the Registrant's Common Stock as
of October 31, 1999: 9,293,314.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RAILTEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------ ------------------------
1999 1998 (1) 1999 1998 (1)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES.................................................... $ 44,125 $ 40,027 $134,449 $117,574
OPERATING EXPENSES:
Transportation..................................................... 13,910 13,560 44,544 40,775
General and administrative......................................... 9,943 7,506 26,291 19,979
Equipment.......................................................... 4,442 4,836 14,838 14,040
Maintenance of way................................................. 4,079 3,465 12,999 12,202
Depreciation and amortization...................................... 4,122 3,703 12,315 10,366
--------- --------- --------- ---------
Total operating expenses........................................ 36,496 33,070 110,987 97,362
--------- --------- -------- ---------
OPERATING INCOME...................................................... 7,629 6,957 23,462 20,212
INTEREST EXPENSE...................................................... (2,580) (2,959) (7,903) (8,316)
OTHER INCOME.......................................................... 1,149 1,033 2,168 1,580
---------- ---------- --------- ----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE............................................ 6,198 5,031 17,727 13,476
INCOME TAXES.......................................................... (2,505) (1,998) (7,173) (5,178)
--------- --------- --------- ---------
NET INCOME BEFORE CUMULATIVE EFFECT OF
A CHANGE IN ACCOUNTING PRINCIPLE................................... $ 3,693 $ 3,033 $ 10,554 $ 8,298
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE (NET OF INCOME TAXES)......................... -- -- -- (1,703)
-------- -------- -------- ---------
NET INCOME............................................................ $ 3,693 $ 3,033 $ 10,554 $ 6,595
========= ========= ========= =========
BASIC EARNINGS PER SHARE:
BEFORE CUMULATIVE EFFECT OF
A CHANGE IN ACCOUNTING PRINCIPLE................................ $ 0.40 $ 0.33 $ 1.15 $ 0.91
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE (NET OF INCOME TAXES)...................... -- -- -- (0.19)
-------- ------- ------- ----------
TOTAL.............................................................. $ 0.40 $ 0.33 $ 1.15 $ 0.72
========= ========= ========= ===========
WEIGHTED AVERAGE NUMBER OF
BASIC COMMON SHARES OUTSTANDING.................................... 9,216 9,204 9,206 9,188
DILUTED EARNINGS PER SHARE:
BEFORE CUMULATIVE EFFECT OF
A CHANGE IN ACCOUNTING PRINCIPLE................................ $ 0.39 $ 0.33 $ 1.13 $ 0.89
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE (NET OF INCOME TAXES)...................... -- -- -- (0.18)
---------- --------- --------- ------------
TOTAL.............................................................. $ 0.39 $ 0.33 $ 1.13 $ 0.71
========== ========= ========== ==========
WEIGHTED AVERAGE NUMBER OF
DILUTED COMMON SHARES OUTSTANDING.................................. 9,385 9,246 9,359 9,239
</TABLE>
(1) Restated to reflect adoption of SOP 98-5 as of January 1, 1998.
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE>
RAILTEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
----------- -----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................................. $ 2,701 $ 1,243
Accounts receivable, less doubtful receivables of $1,350; $844 in 1998.................... 34,067 33,866
Prepaid expenses and other current assets................................................. 4,839 4,848
Deferred tax assets, net.................................................................. 1,906 1,906
----------- -----------
Total current assets................................................................... 43,513 41,863
----------- -----------
PROPERTY AND EQUIPMENT, less accumulated depreciation of
$63,753; $54,194 in 1998.................................................................. 290,563 291,779
---------- ----------
OTHER ASSETS:
Investments in Brazilian railroad companies............................................... 21,090 19,994
Other, net................................................................................ 13,042 8,709
----------- -----------
Total other assets..................................................................... 34,132 28,703
----------- -----------
Total assets........................................................................... $ 368,208 $ 362,345
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term notes payable.................................................................. $ -- $ 215
Current portion of long-term debt......................................................... 1,068 8,568
Accounts payable.......................................................................... 20,952 20,574
Accrued liabilities....................................................................... 16,391 17,729
----------- -----------
Total current liabilities.............................................................. 38,411 47,086
DEFERRED INCOME TAXES, NET................................................................... 28,832 30,294
LONG-TERM DEBT, LESS CURRENT PORTION......................................................... 120,528 122,982
OTHER LIABILITIES............................................................................ 13,445 6,835
----------- -----------
Total liabilities...................................................................... 201,216 207,197
---------- ----------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN BRAZILIAN INVESTMENT.................................................... 11,560 11,000
---------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock; $1.00 par value; 10 million shares authorized;
no shares issued or outstanding........................................................ -- --
Common stock; $.10 par value; 30 million shares authorized; issued and
outstanding 9,293,314; 9,273,963 in 1998................................................ 930 927
Paid-in capital........................................................................... 85,314 85,115
Retained earnings......................................................................... 70,532 59,976
Deferred compensation..................................................................... (839) (948)
Accumulated other comprehensive income.................................................... (505) (922)
---------- ----------
Total shareholders' equity............................................................. 155,432 144,148
---------- ----------
Total liabilities and shareholders' equity............................................. $ 368,208 $ 362,345
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
RAILTEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
1999 1998 (1)
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income..................................................................................... $ 10,554 $ 6,595
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization............................................................... 12,315 10,366
Deferred income taxes....................................................................... (1,549) 3,916
Amortization of deferred financing costs.................................................... 338 291
Provision for losses on accounts receivable................................................. 471 13
Gain on sale of assets...................................................................... (2,752) (1,389)
Gain on sale of subsidiary.................................................................. (511) --
Cumulative effect of a change in accounting principle....................................... -- 2,747
Other....................................................................................... 148 54
Changes in working capital:
Accounts receivable....................................................................... (672) 4,044
Prepaid expenses.......................................................................... (248) (1,665)
Accounts payable and accrued liabilities.................................................. 181 (10,372)
--------- ---------
Net cash provided by operating activities................................................... 18,275 14,600
-------- ---------
INVESTING ACTIVITIES:
Purchase of investment in Central Properties, Inc.............................................. -- (13,096)
Purchase of property and equipment............................................................. (18,403) (24,701)
Proceeds from sale of property and equipment................................................... 12,074 1,523
Proceeds from sale of subsidiary............................................................... 675 --
Investment in Brazilian railroads.............................................................. (537) --
Decrease (increase) in other long-term assets.................................................. 712 (582)
----------- ------------
Net cash used in investing activities....................................................... (5,479) (36,856)
--------- ---------
FINANCING ACTIVITIES:
Payments of short-term notes payable, net...................................................... (215) (247)
Proceeds from long-term debt................................................................... 272 21,900
Principal payments on long-term debt........................................................... (3,227) (2,566)
Net (decrease) increase in working capital facility............................................ (7,555) 4,298
Issuance of common stock pursuant to stock options............................................. 76 247
Deferred financing costs....................................................................... (828) (3)
----------- ------------
Net cash (used in) provided by financing activities......................................... (11,477) 23,629
---------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH........................................................... 139 (11)
----------- ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS........................................................... 1,458 1,362
CASH AND CASH EQUIVALENTS, beginning of period.................................................... 1,243 570
---------- ----------
CASH AND CASH EQUIVALENTS, end of period.......................................................... $ 2,701 $ 1,932
========= ========
</TABLE>
(1) Restated to reflect adoption of SOP 98-5 as of January 1, 1998.
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
RAILTEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The interim consolidated financial statements presented herein include the
accounts of RailTex, Inc. and its wholly-owned subsidiaries. References to
"RailTex" or the "Company" mean RailTex, Inc. and, unless the context indicates
otherwise, its consolidated subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. These interim
consolidated financial statements have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). All adjustments have been made to the accompanying interim
consolidated financial statements which are, in the opinion of the Company's
management, necessary for a fair presentation of the Company's operating
results. All adjustments are of a normal recurring nature. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. It is recommended that these
interim consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. The
results of operations for any interim period are not necessarily indicative of
the results of operations for the entire year. Certain reclassifications have
been made in the prior period financial statements to conform with the current
period presentation.
2. RECENTLY ISSUED PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Initial application of this
statement should be as of the beginning of an entity's fiscal quarter. Earlier
application of this statement is encouraged, but it is permitted only as of the
beginning of any fiscal quarter that begins after the issuance of this
statement. In June 1999, FASB issued Statement of Financial Accounting Standards
No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133" ("SFAS 137"). SFAS 137
delays the effective date of SFAS 133 to June 15, 2000. The Company believes the
adoption of this statement will not have a material impact on the financial
condition or results of operations of the Company.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities"
("SOP 98-5"). SOP 98-5 requires costs associated with start-up activities to be
expensed as incurred. SOP 98-5 was effective for financial statements for fiscal
years beginning after December 15, 1998. The Company adopted SOP 98-5 for the
year ended December 31, 1998. This adoption resulted in the recognition of a
non-recurring charge of approximately $1,703,000 (net of income taxes) entitled,
"Cumulative effect of a change in accounting principle (net of income taxes)" in
the accompanying consolidated financial statements. Prior to the adoption of SOP
98-5, the Company capitalized the costs associated with start-up activities,
including the acquisition of new railroad properties, and amortized those costs
over five years. Prospectively, the Company's results of operations will reflect
higher costs associated with the acquisition of new railroad properties in the
period of acquisition.
5
<PAGE>
RAILTEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
3. EARNINGS PER SHARE
The following is a reconciliation of the numerators and the denominators
of the basic and diluted earnings per share computations (in thousands, except
per share amounts).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------- ------------------------
1999 1998 1999 1998
--------- -------- --------- --------
<S> <C> <C> <C> <C>
NUMERATOR:
Net income before cumulative effect of
a change in accounting principle.................................. $3,693 $3,033 $10,554 $8,298
Cumulative effect of a change in
accounting principle (net of income taxes)........................ -- -- -- (1,703)
--------- -------- --------- --------
Net income........................................................... $3,693 $3,033 $10,554 $6,595
====== ====== ======= ======
DENOMINATOR:
Weighted average number of basic shares of
common stock outstanding.......................................... 9,216 9,204 9,206 9,188
EFFECT OF DILUTIVE SECURITIES:
Stock options........................................................ 72 42 62 51
Restricted stock..................................................... 75 -- 75 --
Performance shares................................................... 22 -- 16 --
--------- --------- -------- --------
169 42 153 51
Weighted average number of diluted shares of
common stock outstanding.......................................... 9,385 9,246 9,359 9,239
======= ======= ======= =======
BASIC EARNINGS PER SHARE:
Before cumulative effect of
a change in accounting principle.................................. $ 0.40 $ 0.33 $ 1.15 $ 0.91
Cumulative effect of a change in
accounting principle (net of income taxes)........................ -- -- -- (0.19)
---------- ------- -------- --------
Total................................................................ $ 0.40 $ 0.33 $ 1.15 $ 0.72
======= ======= ======= =======
DILUTED EARNINGS PER SHARE:
Before cumulative effect of
a change in accounting principle.................................. $ 0.39 $ 0.33 $ 1.13 $ 0.89
Cumulative effect of a change in
accounting principle (net of income taxes)........................ -- -- -- (0.18)
--------- -------- -------- --------
Total................................................................ $ 0.39 $ 0.33 $ 1.13 $ 0.71
======= ======= ======= =======
</TABLE>
4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------
1999 1998
------------ ---------
<S> <C> <C>
Cash paid during the period for:
Interest....................................................................................... $ 10,259 $ 6,514
Income taxes................................................................................... 5,265 2,192
Non-cash investing and financing activities:
Capital leases................................................................................. 31 1,475
Grants......................................................................................... 5,751 184
Tax benefit from exercise of non-qualified stock options....................................... 65 76
Amortization of deferred compensation ......................................................... 312 22
</TABLE>
6
<PAGE>
RAILTEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
5. DERIVATIVE ACCOUNTING PRINCIPLES
The Company historically has hedged certain anticipated transactions.
Interest rate swaps and diesel fuel price collar contracts with third parties
are used to hedge interest rates and diesel fuel costs. Hedges of anticipated
transactions are accounted for under the deferral method with gains and losses
on these transactions recognized in interest expense and operating expenses when
the hedged transaction occurs. The Company does not currently hold or issue
financial instruments for trading purposes.
The Company is exposed to fluctuations in diesel fuel prices, as an
increase in the price of diesel fuel would result in lower earnings and
increased cash outflows. The Company has entered into a cap which fixes the
price of 725,000 gallons of diesel fuel per month for the period July 1999 to
June 2000 at $0.4500 per gallon. The cost of the cap was approximately $209,000,
which will be amortized over the period covered by the cap. The cap, which
expires in June 2000, hedges approximately 60% of the Company's estimated
monthly diesel fuel consumption.
6. DIVESTITURE
In September 1999, the Company sold 100% of the stock of the Salt Lake
City Southern Railroad ("SLCS") for $675,000.
7. RESTRICTED STOCK AWARDS
In 1998, the Company, under the 1993 Stock Plan, as amended ("Plan"),
granted 80,000 restricted shares, of which 5,000 vested and were issued in the
third quarter ended September 30, 1999, in the form of the Company's common
stock to several key executives. The restricted shares vest ratably over three
to five years or immediately in the event of a change in control, death,
disability or termination, other than for cause. The unvested portion of the
restricted shares forfeit if the key executives are terminated for cause during
the restriction period. The awards were recorded at the fair market value of the
Company's common stock on the date of grant as deferred compensation and will be
amortized over the restriction period. For the three and nine months ended
September 30, 1999, the Company recorded compensation expense of $62,579 and
$187,737, respectively. For the three and nine months ended September 30, 1998,
the Company recorded compensation expense of $11,979.
8. COMMITMENTS AND CONTINGENCIES
The Company has added railroad properties to its portfolio through the
purchase of track and roadbed, lease of such assets and contracts to operate
such assets under management agreements. These arrangements typically relate
only to the physical assets of the railroad property and, except for the
purchases of Central Properties, Inc. ("CPI") and Indiana & Ohio Rail Corp.
("IORC"), which were structured as acquisitions of stock, the Company typically
does not contractually assume any of the operations or liabilities of the
divesting carriers.
Rail properties operated by the Company under management agreements
typically have initial ten year terms followed by either a purchase option or
one or more renewal terms at the Company's option. These operating contracts
typically require that the Company assume all operating and financial
responsibilities for freight operations on the property, including maintenance,
payment of property taxes and regulatory compliance. Payments by the Company for
the right to conduct rail operations on these properties are typically
calculated as a percentage of revenues from the respective properties.
7
<PAGE>
RAILTEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
In August 1995, the Company entered into a ten year Information Technology
Services Agreement ("ITS Agreement") with Electronic Data Systems Corporation
("EDS"). Under the ITS Agreement, EDS is responsible for the management
information systems of the Company, including developing, obtaining licenses for
and maintaining new software for the Company, coordinating the acquisition and
maintenance of computers and related equipment and coordinating the maintenance
of the Company's existing software. The Company currently pays EDS $2.0 million
annually which is subject to annual escalation based on the Consumer Price
Index. The ITS Agreement is subject to earlier termination under certain limited
conditions.
In August 1999, SLCS received notice from the Utah Transit Authority
("UTA") that it had exercised its right to repurchase the operating easement for
approximately $5,000. In September 1999, the Company sold the stock of SLCS to
the Utah Railway Company. In connection with this sale, the UTA's right to
repurchase the line was withdrawn.
In October 1998, the UTA asserted a claim for contribution against SLCS
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") relating to certain pollution existing at one of UTA's rail yards
over which the SLCS had an operating easement. In September 1999, the Company
sold the stock of SLCS to the Utah Railway Company. As a result, this claim no
longer exists against a subsidiary of the Company.
The Company is currently subject to a number of claims and legal actions
that arose in the ordinary course of business, including Federal Employers'
Liability Act claims by its employees and personal injury claims (including
wrongful death claims) by third parties. The Company believes these claims,
taking into account reserves and applicable insurance, will not have a material
adverse effect on the Company. However, adverse judgments in these claims,
individually or in the aggregate, in excess of related reserves and applicable
insurance, could have a materially adverse effect on the Company's financial
condition and results of its operations.
9. COMPREHENSIVE INCOME
The Company has chosen to disclose comprehensive income in the
Consolidated Statements of Shareholders' Equity. For purposes of SFAS 130, the
Company's other comprehensive income or loss was comprised of net currency
translation adjustments. Paragraph 9(f) of Statement 109 "prohibits recognition
of a deferred tax liability or asset for differences related to assets and
liabilities that under FASB Statement No. 52, `Foreign Currency Translation,'
are remeasured from the local currency into the functional currency using
historical rates". Therefore, other comprehensive income is not being shown net
of tax.
8
<PAGE>
RAILTEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
10. SEGMENT INFORMATION
The following table presents information about the Company by geographic area
(in thousands).
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------
1999 1998
-------- --------
Total Revenues:
United States ....................... $119,057 $107,516
Canada .............................. 15,309 10,058
Other foreign ....................... 83 --
-------- --------
Total .......................... $134,449 $117,574
======== ========
Operating Income:
United States ....................... $ 19,488 $ 17,594
Canada .............................. 3,943 2,557
Other foreign ....................... 31 61
-------- --------
Total .......................... $ 23,462 $ 20,212
======== ========
Assets:
United States ....................... $292,082 $275,694
Canada .............................. 20,619 18,593
Other foreign ....................... 21,090 17,810
-------- --------
Total .......................... $333,791 $312,097
======== ========
11. SUBSEQUENT EVENTS
In November 1999, RailTex Global Investments, LLC ("LLC"), a limited
liability company in which the Company owns a 50.5% membership interest, entered
into a Memorandum of Understanding to sell all of its shares in Ferrovia
Centro-Atlantica, S.A. ("FCA") to existing FCA shareholders for R$10.93 million
(or approximately U.S.$5.6 million at prevailing exchange rates). Also in
November, RailTex International Holdings, Inc. ("RIHI"), a wholly-owned
subsidiary of RailTex, entered into a Purchase Agreement to sell all of its
membership interest in the LLC and, thus, indirectly the LLC's shares in America
Latina Logistica, S.A. ("ALL") to Global Environment Fund ("GEF") for U.S.
$3.375 million. RailTex will record an approximate U.S. $600,000 loss (or
U.S.$0.04 per share) on these transactions in the fourth quarter, depending on
the then prevailing exchange rate at the time of the FCA transaction and the
total expenses of the transactions. Concurrent with the sale of RailTex's ALL
shares to GEF, RailTex's obligation to repurchase the Brazilian interests
previously sold to GEF will terminate. Proceeds from the sales will be used to
reduce RailTex's senior credit facilities and for general corporate purposes.
The FCA transaction is subject, among other things, to the approval of the
Brazilian Ministry of Transportation and the negotiation and execution of
definitive agreements. RailTex anticipates the closing of the FCA transaction by
the end of the year. The ALL transaction is subject, among other things, to the
closing of the FCA transaction, the approval of the Brazilian Ministry of
Transportation and the approval of the Investment Committee of GEF. RailTex
anticipates the closing of the ALL transaction to occur shortly after the
closing of the FCA transaction. FCA is the exclusive concessionaire of the
former 4,400 mile Center-Eastern Network of the Brazilian federal railroad. ALL
is the parent corporation of Ferrovia Sul Atlantico, S.A. ("FSA"), the exclusive
concessionaire of the former 4,200 mile Southern Network of the Brazilian
federal railroad. After the closing of both of these transactions, RailTex will
not own any interests in any Brazilian company.
9
<PAGE>
RAILTEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
On October 14, 1999, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with RailAmerica, Inc., a Delaware corporation
("RailAmerica") and Cotton Acquisition Corp., a Texas corporation and a wholly-
owned subsidiary of RailAmerica ("Merger Sub"). Pursuant to the terms and
subject to the satisfaction of the conditions in the Merger Agreement, Merger
Sub will merge with and into the Company (the "Merger"), with the Company as the
surviving corporation, and RailAmerica will acquire all of the outstanding stock
of the Company for approximately $325 million, including the assumption of all
of the Company's outstanding long-term debt. As a result of the Merger, each
outstanding share of common stock of the Company will be converted into the
right to receive (i) $13.50 in cash, and (ii) 0.66666667 shares of common stock,
par value $0.001 per share ("RailAmerica Common Stock"), of RailAmerica. The
amount of cash consideration and stock consideration will be reallocated to
provide for less cash and more stock if the Company does not sell certain
specified assets for net proceeds of at least $9.0 million. The consummation of
the Merger, which is expected to occur in early 2000, is contingent upon the
approval of the Merger by the Company's shareholders, the approval of the
issuance of RailAmerica Common Stock in the Merger by RailAmerica's
shareholders, the receipt of any necessary regulatory approvals, including the
Surface Transportation Board, and other customary closing conditions.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE
IN THIS QUARTERLY REPORT ON FORM 10-Q.
This Form 10-Q contains certain "forward-looking" statements within the
meaning of The Private Securities Litigation Reform Act of 1995 and information
relating to RailTex, Inc. and its subsidiaries that are based on the beliefs of
the Company's management and that involve known and unknown risks and
uncertainties. When used in this report, the words "anticipate," "believe,"
"estimate," "expect" and "intend" and words or phrases of similar import, as
they relate to the Company or its subsidiaries or Company management, are
intended to identify forward-looking statements. Such statements reflect the
current risks, uncertainties and assumptions related to certain factors
including, without limitation, the merger of a wholly-owned subsidiary of
RailAmerica, Inc. ("RailAmerica") with and into the Company, currency risks,
competitive factors, industry performance, general economic conditions, customer
relations, relationships with vendors, changes in fuel prices, the interest rate
environment, legislative and/or regulatory developments, seasonality,
technological change, changes in industry practices, one time events, natural
events, such as floods and earthquakes, the effect of labor stoppages, the
impact of Year 2000 system problems, Class I congestion issues, environmental
investigations, other types of claims and litigation, and other factors
described herein and in other filings made by the Company with the Securities
and Exchange Commission. Based upon changing conditions, should any one or more
of these risks or uncertainties materialize, or should any underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected or intended. The
Company undertakes no obligation to update, and the Company does not have a
policy of updating or revising, these forward-looking statements.
GENERAL
The Company has added railroad properties to its portfolio primarily
through purchase of track and roadbed, lease of such assets, contracts to
operate such assets under management agreements and purchase of railroad company
common stock, depending upon the economic and strategic considerations of the
divesting carriers. These arrangements typically relate only to the physical
assets of the railroad property; the Company typically does not contractually
assume any of the operations or liabilities of the divesting carriers. After
acquiring the right to operate a railroad property, the Company must arrange for
the purchase or lease of operating equipment and hire the workforce necessary to
operate the railroad. Accordingly, for any railroad property, the historical
results of operations of the railroad property as previously operated are not
necessarily indicative of the results of operations for the property following
commencement of operations by the Company.
Because of variations in the structure, timing and size of portfolio
additions and differences in economics among the Company's portfolio railroads
resulting from the unique terms, rates and other provisions for each railroad's
operation established through negotiation between RailTex and each divesting
carrier, the Company's results of operations in any reporting period may not be
directly comparable to (i) its results of operations in other reporting periods
or (ii) the results of operations of other railroad companies. Therefore, care
should be taken when using traditional measurements of railroad operating
performance, such as freight revenues per carload, operating ratio and labor
ratio, in assessing or comparing the Company's operating results.
RECENT DEVELOPMENTS
In November 1999, RailTex Global Investments, LLC ("LLC"), a limited
liability company in which the Company owns a 50.5% membership interest, entered
into a Memorandum of Understanding to sell all of its shares in Ferrovia
Centro-Atlantica, S.A. ("FCA") to existing FCA shareholders for R$10.93 million
(or approximately U.S.$5.6 million at prevailing exchange rates). Also in
November, RailTex International Holdings, Inc. ("RIHI"), a wholly-owned
subsidiary of RailTex, entered into a Purchase Agreement to sell all of its
membership interest in the LLC and, thus, indirectly the LLC's shares in America
Latina Logistica, S.A. ("ALL") to Global Environment Fund ("GEF") for U.S.
$3.375 million. RailTex will record an approximate
11
<PAGE>
U.S. $600,000 loss (or U.S.$0.04 per share) on these transactions in the fourth
quarter, depending on the then prevailing exchange rate at the time of the FCA
transaction and the total expenses of the transactions. Concurrent with the sale
of RailTex's ALL shares to GEF, RailTex's obligation to repurchase the Brazilian
interests previously sold to GEF will terminate. Proceeds from the sales will be
used to reduce RailTex's senior credit facilities and for general corporate
purposes. The FCA transaction is subject, among other things, to the approval of
the Brazilian Ministry of Transportation and the negotiation and execution of
definitive agreements. RailTex anticipates the closing of the FCA transaction by
the end of the year. The ALL transaction is subject, among other things, to the
closing of the FCA transaction, the approval of the Brazilian Ministry of
Transportation and the approval of the Investment Committee of GEF. RailTex
anticipates the closing of the ALL transaction to occur shortly after the
closing of the FCA transaction. FCA is the exclusive concessionaire of the
former 4,400 mile Center-Eastern Network of the Brazilian federal railroad. ALL
is the parent corporation of Ferrovia Sul Atlantico, S.A. ("FSA"), the exclusive
concessionaire of the former 4,200 mile Southern Network of the Brazilian
federal railroad. After the closing of both of these transactions, RailTex will
not own any interests in any Brazilian Company.
On October 14, 1999, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with RailAmerica, Inc., a Delaware corporation
("RailAmerica") and Cotton Acquisition Corp., a Texas corporation and a wholly-
owned subsidiary of RailAmerica ("Merger Sub"). Pursuant to the terms and
subject to the satisfaction of the conditions in the Merger Agreement, Merger
Sub will merge with and into the Company (the "Merger"), with the Company as the
surviving corporation, and RailAmerica will acquire all of the outstanding stock
of the Company for approximately $325 million, including the assumption of all
of the Company's outstanding long-term debt. As a result of the Merger, each
outstanding share of common stock of the Company will be converted into the
right to receive (i) $13.50 in cash, and (ii) 0.66666667 shares of common stock,
par value $0.001 per share ("RailAmerica Common Stock"), of RailAmerica. The
amount of cash consideration and stock consideration will be reallocated to
provide for less cash and more stock if the Company does not sell certain
specified assets for net proceeds of at least $9.0 million. The consummation of
the Merger, which is expected to occur in early 2000, is contingent upon the
approval of the Merger by the Company's shareholders, the approval of the
issuance of RailAmerica Common Stock in the Merger by RailAmerica's
shareholders, the receipt of any necessary regulatory approvals, including the
Surface Transportation Board ("STB"), and other customary closing conditions.
During the third quarter, Hurricane Floyd damaged several of the Company's
railroads on the East Coast. The total property damage is expected to total
approximately $750,000. The Company maintains business interruption insurance
and property insurance subject to a self-insured retention of $150,000. The
Company believes the damages caused by the hurricane are covered by this
insurance. As a result, the damage caused by the hurricane did not have a
material adverse effect on the Company's financial position and results of
operations. In addition to the damage caused by the hurricane, the Company
believes that approximately $300,000 of freight revenue was delayed from the
third quarter of 1999 until the fourth quarter of 1999.
In September 1999, the Company sold 100% of the stock of the Salt Lake
City Southern Railroad ("SLCS") for $675,000.
In June 1999, CSX Transportation, Inc. ("CSX") and Norfolk Southern
Railway Company ("NS") acquired Consolidated Rail Corporation ("Conrail"). As a
result of the merger, both CSX and NS experienced traffic congestion beginning
in the late second quarter. The Company has felt the effects of this congestion
in Ohio, Michigan, New England, Pittsburgh and South Carolina resulting from car
supply issues and delivery delays. Traffic patterns at the properties have
improved. At this time, the Company does not expect the congestion issues caused
by the Conrail merger to have a material adverse effect on the Company's
financial condition or results of operations. However, the Company continues to
monitor the situation closely.
12
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
The Company's net income for the three months ended September 30, 1999
increased by approximately $660,000 to $3.7 million from $3.0 million in the
prior year period. Basic earnings per share increased to $0.40 per share from
$0.33 per share in the prior year period and diluted earnings per share
increased to $0.39 per share from $0.33 in the prior year period.
OPERATING REVENUES. Operating revenues for the three months ended
September 30, 1999 increased by $4.1 million, or 10.2%, to $44.1 million from
$40.0 million in the prior year period. Carloads transported increased by 17,421
carloads, or 12.7%, to 154,904 carloads from 137,483 carloads in the prior year
period.
Freight revenues for the three months ended September 30, 1999 increased
by $4.1 million, or 12.0%, to $38.6 million from $34.5 million in the prior year
period. The following table compares freight revenues, traffic volume (in
carloads) and average freight revenues per carload by commodity group for the
three months ended September 30, 1999 and 1998.
FREIGHT REVENUES AND CARLOADS COMPARISON BY COMMODITY GROUP
(DOLLARS IN THOUSANDS, EXCEPT PER CARLOAD AMOUNTS)
<TABLE>
<CAPTION>
AVERAGE FREIGHT
REVENUES PER
FREIGHT REVENUES CARLOADS CARLOAD (1)
------------------------------------- --------------------------------------- -----------------
1999 1998 1999 1998 1999 1998
----------------- ---------------- ------------------ ----------------- -------- -------
COMMODITY GROUP % OF % OF % OF % OF
DOLLARS TOTAL DOLLARS TOTAL NUMBER TOTAL NUMBER TOTAL
-------- ------- -------- ------- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lumber and forest products....... $ 7,362 19.1% $ 6,676 19.4% 18,588 12.0% 16,786 12.2% $396 $398
Coal............................. 4,910 12.7 4,379 12.7 26,880 17.4 24,231 17.6 183 181
Chemicals........................ 4,144 10.7 4,333 12.6 12,298 7.9 12,881 9.4 337 336
Scrap metal & metal products..... 3,370 8.7 2,728 7.9 12,612 8.1 10,042 7.3 267 272
Scrap paper & paper products..... 2,970 7.7 2,733 7.9 9,158 5.9 8,800 6.4 324 311
Farm products.................... 2,468 6.4 2,923 8.5 10,241 6.6 12,108 8.8 241 241
Railroad equipment............... 3,644 9.4 2,374 6.9 27,300 17.6 19,382 14.1 133 122
Food products.................... 1,921 5.0 1,685 4.9 7,357 4.7 6,367 4.6 261 265
Autos............................ 1,683 4.4 1,023 3.0 8,759 5.7 4,848 3.5 192 211
Non-metallic ores................ 1,874 4.9 1,757 5.1 9,519 6.1 10,130 7.4 197 173
Minerals & stone................. 1,709 4.4 1,723 5.0 4,729 3.1 4,796 3.5 361 359
Petroleum products............... 1,033 2.7 870 2.5 2,511 1.6 2,850 2.1 411 305
Other............................ 1,515 3.9 1,266 3.6 4,952 3.3 4,262 3.1 306 297
-------- ------- -------- ------- --------- ------- ------- -----
Total....................... $38,603 100.0% $34,470 100.0% 154,904 100.0% 137,483 100.0% $249 $251
====== ===== ====== ===== ======= ===== ======= =====
</TABLE>
(1) Calculated as freight revenues divided by carloads.
The increase in freight revenues and carloadings is primarily due to
increases in railroad equipment, lumber and forest products, autos, scrap metal
and metal products and coal. Railroad equipment and lumber and forest products
increased primarily due to new business, autos and coal increased primarily due
to increased business with existing customers, and scrap metal and metal
products increased primarily due to a higher revenue per car move in the current
quarter coupled with new business and increased business with existing
customers.
Non-freight revenues for the three months ended September 30, 1999
decreased by approximately $35,000, or 1.0%, to $5.5 million from $5.6 million
in the prior year period. Non-freight revenues include joint facilities,
switching, demurrage, car hire and car repair services performed for third
parties and lease income. These non-freight revenues contributed 12.5% and 13.9%
of operating revenues in the three months ended September 30, 1999 and 1998,
respectively. The decrease in non-freight revenues is primarily due to a
reduction in car hire income offset by the gain from the sale of one of the
Company's railroads.
13
<PAGE>
OPERATING EXPENSES. Operating expenses for the three months ended
September 30, 1999 increased by $3.4 million, or 10.4%, to $36.5 million from
$33.1 million in the prior year period. The Company's operating ratio (operating
expenses divided by operating revenues) increased slightly for the period to
82.7% from 82.6% in the prior year period, primarily a result of increases in
purchased services offset by decreases in equipment rents, materials, and
casualties and insurance as a percentage of operating revenues.
The following table sets forth a comparison of the Company's operating
expenses during the three month periods ended September 30, 1999 and 1998, in
dollars and as a percentage of operating revenues.
OPERATING EXPENSES COMPARISON
(dollars in thousands)
1999 1998
------------------ ------------------
% OF % OF
OPERATING OPERATING
DOLLARS REVENUES DOLLARS REVENUES
------- ----- ------- -----
Labor and benefits................. $14,053 31.8% $12,786 31.9%
Equipment rents.................... 4,379 9.9 4,217 10.5
Depreciation and amortization...... 4,122 9.3 3,703 9.3
Diesel fuel........................ 2,475 5.6 2,159 5.4
Purchased services................. 3,593 8.1 2,596 6.5
Casualties and insurance........... 1,525 3.5 1,562 3.9
Materials.......................... 1,513 3.4 1,601 4.0
Joint facilities................... 1,192 2.7 1,227 3.1
Other.............................. 3,644 8.4 3,219 8.0
------- ----- ------- -----
Total........................... $36,496 82.7% $33,070 82.6%
======= ==== ====== ====
Labor and benefits for the three months ended September 30, 1999 increased
by $1.3 million, or 9.9%, to $14.1 million from $12.8 million in the prior year
period. The increase in labor and benefits is primarily a result of the
acquisition of new properties and compensation expense recorded as a result of
restricted stock awards and performance shares.
Equipment rents for the three months ended September 30, 1999 increased by
approximately $162,000, or 3.8%, to $4.4 million from $4.2 million in the prior
year period. The increase in equipment rents is primarily attributable to an
increase in car hire expense due to new properties.
Depreciation and amortization for the three months ended September 30,
1999 increased by approximately $419,000, or 11.3%, to $4.1 million from $3.7
million in the prior year period. The increase in depreciation and amortization
is primarily a result of capital asset additions for locomotives, information
systems, track and roadbed, and vehicles.
Diesel fuel expense for the three months ended September 30, 1999
increased by approximately $316,000, or 14.6%, to $2.5 million from $2.2 million
in the prior year period. The increase in diesel fuel expense is primarily a
result of a $0.15 increase in the price per gallon coupled with an increase in
gallons offset by the receipt of approximately $179,000 from our diesel fuel
contract.
Purchased services for the three months ended September 30, 1999 increased
by approximately $997,000, or 38.4%, to $3.6 million from $2.6 million in the
prior year period. The increase in purchased services is primarily a result of
increased information technology expense coupled with an increase in contract
labor at one of the Company's new properties.
14
<PAGE>
Casualties and insurance expense for the three months ended September 30,
1999 decreased by approximately $37,000, or 2.4%, to $1.5 million from $1.6
million in the prior year period. The decrease in casualties and insurance
expense is a result of decreased derailment costs.
Materials expense for the three months ended September 30, 1999 decreased
by approximately $88,000, or 5.5%, to $1.5 million from $1.6 million in the
prior year period. The decrease in materials expense is primarily due to a
decrease in car repair materials.
Joint facilities expense for the three months ended September 30, 1999
decreased by approximately $35,000, or 2.9%, due primarily to a decrease in
switching charges at one of the Company's railroads.
Other expenses for the three months ended September 30, 1999 increased by
approximately $425,000, or 13.2%, to $3.6 million from $3.2 million in the prior
year period. The increase in other expenses is primarily attributable to
increases in property taxes and bad debt expenses.
INTEREST EXPENSE. Interest expense for the three months ended September
30, 1999 decreased by approximately $379,000, or 12.8%, to $2.6 million from
$3.0 million due to the Company's focus on improving cash flows and reducing
long-term debt.
OTHER INCOME. For the three months ended September 30, 1999, other income
was $1.1 million as compared to $1.0 million in the prior year period. The
slight increase is primarily due to higher income from the sale of non-operating
assets for the three months ended September 30, 1999.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
The Company's net income for the nine months ended September 30, 1999
increased by $4.0 million to $10.6 million from $6.6 million in the prior year
period. Basic earnings per share increased to $1.15 per share from $0.72 per
share in the prior year period and diluted earnings per share increased to $1.13
per share from $0.71 per share in the prior year period.
OPERATING REVENUES. Operating revenues for the nine months ended September
30, 1999 increased by $16.9 million, or 14.4%, to $134.4 million from $117.6
million in the prior year period. Carloads transported increased by 63,136
carloads, or 15.8%, to 462,146 carloads from 399,010 carloads in the prior year
period.
15
<PAGE>
Freight revenues for the nine months ended September 30, 1999 increased by
$14.2 million, or 14.0%, to $115.7 million from $101.4 million in the prior year
period. The following table compares freight revenues, traffic volume (in
carloads) and average freight revenues per carload by commodity group for the
nine months ended September 30, 1999 and 1998.
FREIGHT REVENUES AND CARLOADS COMPARISON BY COMMODITY GROUP
(DOLLARS IN THOUSANDS, EXCEPT PER CARLOAD AMOUNTS)
<TABLE>
<CAPTION>
AVERAGE FREIGHT
REVENUES PER
FREIGHT REVENUES CARLOADS CARLOAD (1)
------------------------------------ ------------------------------------- -----------------
1999 1998 1999 1998 1999 1998
--------------- ---------------- ---------------- ----------------- -------- ---
COMMODITY GROUP % OF % OF % OF % OF
DOLLARS TOTAL DOLLARS TOTAL NUMBER TOTAL NUMBER TOTAL
-------- ------- -------- ------- ---------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lumber and forest products....... $21,699 18.8% $20,539 20.2% 54,539 11.8% 51,540 12.9% $398 $399
Chemicals........................ 13,895 12.0 12,646 12.5 41,767 9.0 38,581 9.7 333 328
Coal............................. 14,531 12.6 13,324 13.1 79,565 17.2 73,458 18.4 183 181
Scrap paper & paper products..... 9,272 8.0 8,538 8.4 29,044 6.3 26,275 6.6 319 325
Scrap metal & metal products..... 9,763 8.4 8,576 8.5 35,072 7.6 31,310 7.8 278 274
Farm products.................... 8,831 7.6 7,995 7.9 38,230 8.3 32,237 8.1 231 248
Railroad equipment............... 9,176 7.9 5,232 5.2 69,450 15.0 43,030 10.8 132 122
Autos............................ 5,476 4.7 3,551 3.5 28,157 6.1 19,420 4.9 194 183
Food products.................... 5,570 4.8 5,179 5.1 20,904 4.5 19,488 4.9 266 266
Non-metallic ores................ 5,402 4.7 4,875 4.8 29,559 6.4 27,483 6.9 183 177
Minerals & stone................. 4,992 4.3 4,481 4.4 14,650 3.2 12,875 3.2 341 348
Petroleum products............... 3,305 2.9 3,159 3.1 8,546 1.8 9,415 2.4 387 336
Other............................ 3,769 3.3 3,353 3.3 12,663 2.8 13,898 3.4 298 241
-------- ------- -------- ------- ---------- ------- ----------- -------
Total...................... $115,681 100.0% $101,448 100.0% 462,146 100.0% 399,010 100.0% $250 $254
------- ----- ------- ----- ------- ----- ------- -----
</TABLE>
- --------------------
(1) Calculated as freight revenues divided by carloads.
The increase in freight revenues and carloadings is primarily due to
increases in railroad equipment, autos, chemicals, coal, scrap metal and metal
products, and lumber and forest products. Railroad equipment increased primarily
due to the benefit of a move that existed for a full nine months in 1999 versus
only a portion of the nine months in 1999 and new business. Autos increased
primarily due to new business as a result of new properties and increased
business with existing customers. Lumber and forest products, chemicals and coal
increased due to new business, partially due to new properties.
Non-freight revenues for the nine months ended September 30, 1999
increased by $2.6 million, or 16.4%, to $18.8 million from $16.1 million in the
prior year period. Non-freight revenues include joint facilities, switching,
demurrage, car hire and car repair services performed for third parties and
lease income. These non-freight revenues contributed 14.0% and 13.7% of
operating revenues in the nine months ended September 30, 1999 and 1998,
respectively. The increase in non-freight revenues is primarily due to gains on
the sale of three of the Company's railroads.
OPERATING EXPENSES. Operating expenses for the nine months ended September
30, 1999 increased by $13.6 million, or 14.0%, to $111.0 million from $97.4
million in the prior year period. The Company's operating ratio (operating
expenses divided by operating revenues) decreased for the period to 82.5% from
82.8% in the prior year period, primarily due to improvements in diesel fuel,
equipment rents and materials expense as a percentage of operating revenues
offset by an increase in purchased services.
16
<PAGE>
The following table sets forth a comparison of the Company's operating
expenses during the nine month periods ended September 30, 1999 and 1998, in
dollars and as a percentage of operating revenues.
OPERATING EXPENSES COMPARISON
(dollars in thousands)
1999 1998
------------------ ------------------
% OF % OF
OPERATING OPERATING
DOLLARS REVENUES DOLLARS REVENUES
-------- ----- -------- -----
Labor and benefits.............. $ 41,804 31.1% $36,674 31.2%
Equipment rents................. 14,304 10.6 13,008 11.1
Depreciation and amortization... 12,315 9.1 10,366 8.8
Diesel fuel..................... 7,334 5.5 7,263 6.2
Purchased services.............. 10,514 7.8 7,617 6.5
Casualties and insurance........ 5,465 4.1 4,945 4.2
Materials....................... 4,587 3.4 4,637 3.9
Joint facilities................ 3,656 2.7 3,563 3.0
Other........................... 11,008 8.2 9,289 7.9
-------- ----- -------- -----
Total........................ $110,987 82.5% $97,362 82.8%
======== ==== ====== ====
Labor and benefits for the nine months ended September 30, 1999 increased
by $5.1 million, or 14.0%, to $41.8 million from $36.7 million in the prior year
period. The increase in labor and benefits is primarily a result of compensation
expense recorded as a result of restricted stock awards and performance shares,
an increase in business, and the acquisition of new properties.
Equipment rents for the nine months ended September 30, 1999 increased by
$1.3 million, or 10.0%, to $14.3 million from $13.0 million in the prior year
period. The increase in equipment rents is primarily attributable to an increase
in car hire expense offset by a decrease in railcar lease expense.
Depreciation and amortization for the nine months ended September 30, 1999
increased by $1.9 million, or 18.8%, to $12.3 million from $10.4 million in the
prior year period. The increase in depreciation and amortization is primarily a
result of capital asset additions for locomotives, information systems, track
and roadbed, and vehicles.
Diesel fuel expense for the nine months ended September 30, 1999 increased
by approximately $71,000, or 1.0%, to $7.3 million. The increase in diesel fuel
expense is primarily a result of an increase in gallons used offset by the
receipt of approximately $263,000 from one of the Company's diesel fuel
contracts.
Purchased services for the nine months ended September 30, 1999 increased
by $2.9 million, or 38.0%, to $10.5 million from $7.6 million in the prior year
period. The increase in purchased services is primarily a result of increased
information technology expense, increased locomotive and equipment maintenance
expense, coupled with an increase in contract labor at one of the Company's new
properties.
Casualties and insurance expense for the nine months ended September 30,
1999 increased by approximately $520,000, or 10.5%, to $5.5 million from $4.9
million in the prior year period. The increase in casualties and insurance
expense is a result of increased derailment costs.
Materials expense for the nine months ended September 30, 1999 decreased
by approximately $50,000, or 1.1%, to $4.6 million. The decrease in materials
expense is primarily due to a decrease in car repair materials.
17
<PAGE>
Joint facilities expense for the nine months ended September 30, 1999
increased by approximately $93,000 or 2.6%, to $3.7 million from $3.6 million in
the prior year period, due primarily to new properties.
Other expenses for the nine months ended September 30, 1999 increased by
$1.7 million, or 18.5%, to $11.0 million from $9.3 million in the prior year
period. The increase in other expenses is primarily attributable to increases in
property taxes, bad debt expenses, and the addition of new properties.
INTEREST EXPENSE. Interest expense for the nine months ended September 30,
1999 decreased by approximately $413,000, or 5.0%, to $7.9 million from $8.3
million in the prior year period. The decrease is primarily a result of the
Company's focus on improving cash flows and reducing long-term debt.
OTHER INCOME. For the nine months ended September 30, 1999, other income
was $2.2 million as compared to $1.6 million in the prior year period primarily
due to higher gain from the sale of non-operating assets for the nine months
ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied primarily on cash generated from
operations to fund working capital and capital expenditure needs relating to
ongoing operations while relying on contributed capital and borrowed funds to
finance its acquisitions.
During the nine months ended September 30, 1999, the Company generated
cash from operations of $18.3 million which was primarily used to fund capital
expenditures as follows (in thousands):
Track.......................................... $ 12,391
Locomotives.................................... 4,227
Technology..................................... 545
Other.......................................... 1,240
---------
$ 18,403
=========
At September 30, 1999, the Company had long-term senior debt, capital
leases and senior subordinated debt outstanding totaling, in U.S. Dollars,
$121.6 million, which constituted 43.9% of its total capitalization. Comparable
figures at December 31, 1998 were $131.6 million and 47.7%, respectively.
At September 30, 1999, availability under the Company's $175.0 million
senior revolving credit facility was $162.0 million. The unused portion of all
of the Company's senior revolving credit facility is subject to a 0.30% to 0.50%
commitment fee based on certain financial ratios.
The Company currently anticipates that its total maintenance capital
expenditure requirements in 1999 for track, locomotives, technology and other
will be approximately $22.0 million, which includes the $18.4 million already
funded.
In September 1999, the Company sold 100% of the stock of the SLCS for
$675,000. Proceeds from this transaction were used to reduce long-term debt and
for general corporate purposes.
Covenants contained in the agreements evidencing the Company's senior
bank, senior unsecured and senior subordinated debt prohibit the Company from
paying dividends on its capital stock and limit its ability to incur additional
indebtedness, create liens on its assets, make capital expenditures and
repurchase shares of its capital stock or any outstanding options or other
rights to acquire stock of the Company. The Company is also limited in its
ability to make loans, investments or guarantees. Additionally, the Company is
required to maintain a minimum tangible net worth and certain ratios of leverage
and cash flow to interest. At September 30, 1999, the Company was in compliance
with all such covenants.
18
<PAGE>
The Company believes its cash flow from operations together with the amounts
available under its senior revolving credit facility will allow it to meet its
liquidity and capital expenditure requirements for railroads it currently
operates through the expiration of the facility in April 2002. As a result of
the anticipated closing of the Merger with RailAmerica in early 2000, all of the
Company's outstanding credit facilities and debt are expected to be refinanced.
INFLATION
In recent years, inflation has not had a significant impact on the
Company's operations. The Company's contracts with connecting carriers typically
include clauses that adjust the Company's per car fees based on the STB's cost
or inflation indices.
SEASONALITY
Except for revenue from shipment of farm products, which represent less
than 10.0% of revenues, the Company's operating revenues from existing
operations have not historically been subject to significant seasonal changes.
ACCOUNTING MATTERS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Initial application of this
statement should be as of the beginning of an entity's fiscal quarter. Earlier
application of this statement is encouraged, but it is permitted only as of the
beginning of any fiscal quarter that begins after the issuance of this
statement. In June 1999 FASB issued Statement of Financial Accounting Standards
No. 137 "Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133" ("SFAS 137"). SFAS 137 delays
the effective date of SFAS 133 to June 15, 2000. The Company believes the
adoption of this statement will not have a material impact on the financial
condition or results of operations of the Company.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5 "Reporting on the Costs of Start-up Activities" ("SOP
98-5"). SOP 98-5 requires costs associated with start-up activities to be
expensed as incurred. SOP 98-5 was effective for financial statements for fiscal
years beginning after December 15, 1998. The Company adopted SOP 98-5 for the
year ended December 31, 1998. This adoption resulted in the recognition of a
non-recurring charge of approximately $1,703,000 (net of income taxes) entitled,
"Cumulative effect of a change in accounting principle (net of income taxes)" in
the accompanying consolidated financial statements. Prior to the adoption of SOP
98-5, the Company capitalized the costs associated with start-up activities,
including the acquisition of new railroad properties, and amortized those costs
over five years. Prospectively, the Company's results of operations will reflect
higher costs associated with the acquisition of new railroad properties in the
period of acquisition.
YEAR 2000 COMPLIANCE
The Company has completed its assessment of its Year 2000 compliance. This
assessment included a review of all of the Company's information technology
systems. The Company currently believes that its largest information technology
applications are Year 2000 compliant. However, the Company has determined that
certain components of its information technology infrastructure are not Year
2000 compliant. These components include servers, components of its wide area
network and certain personal computer software packages. The Company plans to
upgrade all of these non-compliant components to make them Year 2000 compliant
by November 30,
19
<PAGE>
1999. The total estimated external cost associated with these upgrades are
approximately $300,000, of which approximately $275,000 has already been
incurred. Internal costs associated with these upgrades primarily consist of
payroll and related costs for Company employees and the portion of the EDS
information technology outsourcing fees allocated to Year 2000 remediation. Such
costs total approximately $650,000, of which about three-fourths has been
incurred.
The Company has also evaluated its non-information technology systems that
use micro controllers, such as locomotives, railroad crossing signals, telephone
systems, dispatching systems and other railroad equipment, that may be subject
to Year 2000 risk. The Company believes that its locomotives, railroad crossing
signals and the majority of its telephone systems, dispatching systems and other
railroad equipment are Year 2000 compliant. However, the Company has determined
that certain telephone systems, dispatching systems and other railroad equipment
are not Year 2000 compliant. The Company has replaced the non-compliant
telephone systems, dispatching systems and other railroad equipment at a total
estimated external cost of $150,000. Internal costs associated with these
upgrades have not been significant.
All affected systems of the Company are scheduled to be Year 2000
compliant, tested and verified by November 30, 1999; however, the Company cannot
guarantee that none of its systems will malfunction. As a precaution against
railroad crossing signals that may malfunction as a result of the Year 2000
problem, the first train or inspection vehicle through all railroad crossings on
RailTex tracks after December 31, 1999 will operate under a "Stop and Flag"
order. This order requires the train or inspection vehicle to stop at each
railroad crossing, determine if the railroad crossing signal is working and in
the event that it is not working, have a person control traffic through the
crossing with the use of flags. Any malfunctioning railroad crossing signals
that are discovered as a result of this process will be replaced or repaired.
As an additional part of its assessment, the Company has been
investigating the Year 2000 compliance status of its vendors and customers. The
Company has completed its assessment of the status of its product vendors and
the results of that compliance are included in the above disclosures. The
Company has determined that approximately 82% of its service vendors and 69% of
customers are or expect to become Year 2000 compliant by December 31, 1999. The
Company has been unable to determine the status of the remaining 18% and 31% of
its service vendors and customers, respectively, due to unresponsiveness.
However, the Company is continuing to contact the unresponsive service vendors
and customers in order to determine their Year 2000 compliance status. If any of
the Company's significant vendors or customers fail to successfully and timely
achieve Year 2000 compliance, the Company's business or operations may be
adversely affected.
The Company has prepared a Year 2000 Contingency Plan Template which will
be used by each of the Company's railroads. This document is currently being
reviewed and updated by each of the Company's railroads and is scheduled to be
completed by November 30, 1999.
The Company is a member of the American Association of Railroad's Rail
Industry Year 2000 Coordination Task Force, which was formed to share Year 2000
issues related to the railroad industry, to help test for Year 2000 compliance
and to help implement Year 2000 compliance changes. The Company, and the
railroad industry as a whole, are susceptible to increased risks, including
significant business interruption, should any of the Class I railroads fail to
timely achieve Year 2000 compliance. On October 10, 1999, the Federal Railroad
Administration reported that an independent firm concluded that the major Class
I railroads (Burlington Northern Santa Fe Railway Company, CSX Transportation,
Inc., Union Pacific Corporation, and Norfolk Southern Railway Company ) are Year
2000 ready and that they have worked with their short line partners to assure
Year 2000 readiness.
The above disclosure concerning the Company's Year 2000 compliance, and
that of its vendors and customers, contains "forward-looking" statements that
are based upon the beliefs of the Company's management and are subject to all of
the qualifications set forth at the beginning of "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
20
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The Company's earnings and cash flows are subject to fluctuations due to
changes in foreign currency exchange rates, interest rates and diesel fuel
prices. At September 30, 1999, the Company did not hold and had not issued
financial instruments for trading purposes.
FOREIGN CURRENCY
The Company's foreign currency risk arises from owning and operating
railroads in Canada and from its Brazilian railroad investments. At September
30, 1999, the Company had not entered into any transactions to manage this risk.
The financial position and results of operations of the Company's Canadian
subsidiaries are measured using the local currency as the functional currency.
Assets and liabilities are translated into U.S. dollars at exchange rates in
effect at year-end, while revenues and expenses are translated at average
exchange rates prevailing during the year. The resulting translation gains and
losses are charged directly to cumulative translation adjustment, a component of
shareholders' equity, and are not included in income until realized through the
sale or liquidation of the investment. At September 30, 1999, the Company's
cumulative translation adjustment totaled approximately $505,000, or less than
1% of total shareholders' equity. As such, the Company does not believe its
foreign currency risk arising from its Canadian operations is material to its
financial position.
The Company's Brazilian railroad investments are accounted for using the
cost method of accounting and are valued at the lower of cost or market. At
September 30, 1999, the Company owned approximately 5.0% and 1.7% of the
outstanding stock of FCA and ALL, respectively, for a total net investment
approximating $9.5 million. The Company believes its Brazilian railroad
investments were appropriately valued at that time.
INTEREST RATES
The Company's interest rate risk results from holding variable rate debt
obligations, as an increase in interest rates would result in lower earnings and
increased cash outflows. At September 30, 1999, the Company had not entered into
any transactions to manage this risk.
At September 30, 1999, the Company's variable rate debt totaled
approximately $13.0 million, or 11% of the Company's total debt obligation.
Assuming a 100 basis point increase in interest rates from the interest rates in
effect at September 30, 1999, the Company would incur approximately $130,000 in
additional interest expense, or 2.1% and 0.7% of its pre-tax net income for the
three and nine months ended September 30, 1999, respectively. As such, the
Company does not believe its interest rate risk arising from its variable rate
debt obligations is material to its results of operations.
DIESEL FUEL PRICES
The Company is exposed to fluctuations in diesel fuel prices, as an
increase in the price of diesel fuel would result in lower earnings and
increased cash outflows. At September 30, 1999, the Company has entered into a
cap which fixes the price of 725,000 gallons of diesel fuel per month for the
period July 1999 to June 2000 at $0.4500 per gallon. The cost of the cap was
approximately $209,000, which will be amortized over the period covered by the
cap. The cap which expires in June 2000 hedges approximately 60% of the
Company's estimated monthly diesel fuel consumption.
21
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A). EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
*10.58 Agreement and Plan of Merger, dated as of October 14, 1999, by
and among RailAmerica, Inc., Cotton Acquisition Corp., and
RailTex, Inc.
**10.59 Petition for Exemption, dated November 8, 1999, filed before
the Surface Transportation Board, Finance Docket No. 33813, by
RailAmerica, Inc. and RailTex, Inc.
10.60 Memorandum of Understanding, dated as of October 29, 1999,
providing for the sale by RailTex Global Investments, LLC of its
shares in Ferrovia Centro Atlantica, S.A. (English and Portuguese
language versions).
10.61 Purchase Agreement, dated as of November 10, 1999, by and
between RailTex International Holdings, Inc. and GEEMF II
Latin America, L.L.C.
27.1 Financial Data Schedule.
- ----------------
* This Exhibit is incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated October 14, 1999 and
filed October 19, 1999.
** This Exhibit is incorporated by reference to Exhibit 99.1 to the
Registrant's Current Report on Form 8-K dated November 8, 1999 and
filed November 10, 1999.
(B). REPORTS ON FORM 8-K:
On October 19, 1999, the Company filed a report on Form 8-K discussing the
Agreement and Plan of Merger, dated as of October 14, 1999, by and among
RailAmerica, Inc., Cotton Acquisition Corp. and the Company, as discussed in
Item 1. "Financial Information", Note 11. "Subsequent Events".
On November 10, 1999, the Company filed a report on Form 8-K disclosing
the filing of a petition by RailAmerica, Inc. and RailTex, Inc. before the
Surface Transportation Board ("STB") seeking an exemption from the STB approval
and authorization requirements in connection with the Merger contemplated in the
Agreement and Plan of Merger, dated as of October 14, 1999, by and among
RailAmerica, Inc., Cotton Acquisition Corp. and the Company, as discussed in
Item 1. "Financial Information", Note 11., "Subsequent Events".
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in San Antonio,
Texas.
RAILTEX, INC.
Date: November 12, 1999 By: /S/ JOSEPH P. JAHNKE
Name: JOSEPH P. JAHNKE
Title:Senior Vice President-Finance
and Chief Financial Officer
23
EXHIBIT 10.60
MEMORANDUM OF UNDERSTANDING
(ENGLISH TRANSLATION OF PORTUGUESE VERSION)
1. INTERFERREA S.A. SERVICOS FERROVIARIOS E INTERMODIAS, hereafter
INTERFERREA;
1(a) UNIAO TRANSPORTE INTERESTADUAL DE LUXO S/A, hereafter UTIL;
1(b) HOLDING BRASIL S/A, hereafter HB;
1(c) ITD - TRANSPORTES LTDA, hereafter ITD; and
1(d) SPOORNET DO BRASIL LTDA, hereafter SPOORNET;
1(a), 1(b), 1(c) and 1(d) here collectively identified as SHAREHOLDERS
OF INTERFERREA;
2. TUPINAMBARANA S.A., hereafter TUPINAMBARANA;
3. JUDORI ADMINISTRACAO, EMPREENDIMENTOS E PARTICIPACOES, S.A.
hereafter JUDORI;
4. RAILTEX GLOBAL INVESTMENTS L.L.C., INC. [sic], hereafter
RAILTEX;
5. LATIN AMERICAN GROWTH FUND N.V., hereafter LAGF;
6. RALPH PARTNERS I LTD., hereafter RALPH PARTNERS;
7. GRUCAI PARTICIPACOES S.A., hereafter GRUCAI;
8. TARCISIO SCHETTINO RIBEIRO, hereafter TSR,
Collectively here referred to as SELLING SHAREHOLDERS, and on the other hand,
1. KRJ PARTICIPACOES S.A., hereafter KRJ;
2. MINERACAO TACUMA LTDA., hereafter TACUMA; and
3. FUNDACAO VALE DO RIO DOCE DE SEGURIDADE SOCIAL-VALIA, hereafter VALIA.
together with other companies freely designated by TACUMA, BUYING
SHAREHOLDERS;
<PAGE>
and also, as INTERVENORS,
COMPANHIA SIDERURGICA NACIONAL, hereafter CSN,
FERROVIA CENTRO-ATLANTICA S.A., hereafter FCA, AND
ALL-AMERICA LATINA LOGISTICA DO BRASIL S.A., hereafter ALL.
Whereas the SELLING SHAREHOLDERS are owners of shares of FCA in the
proportion of the chart below,
NAME COMMON SHARES PREFERRED TOTAL SHARES
- ---- ------------- ------------ ------------
Judori 7,761,250 8,344,896 16,106,146
Interferrea 7,761,250 4,321,464 12,082,714
Tupinambarana 7,761,250 4,321,464 12,082,714
RailTex 7,761,250 5,578,639 13,339,889
LAGF 0 2,766,257 2,766,257
Ralph Partners 7,761,250 14,355,208 22,116,458
Grucai 7,761,250 0 7,761,250
TSR 320,666 320,666 641,332
TOTAL 46,888,166 40,008,594 86,896,760
Whereas the SHAREHOLDERS OF INTERFERREA must acquire from INTERFERREA shares of
FCA in the proportion shown in the chart below.
NAME COMMON SHARES PREFERRED TOTAL SHARES
- ---- ------------- --------- ------------
UTIL 2,962,933 1,649,762 4,612,695
ITD 272,299 151,616 423,915
HB 3,145,500 1,751,414 4,896,914
SPOORNET 1,380,518 768,672 2,149,190
TOTAL 7,761,250 4,321,464 12,082,714
Whereas the BUYING SHAREHOLDERS are interested in acquiring the Common Shares
and the Preferred Shares of FCA stated in the charts above, hereafter,
collectively, the SHARES,
Whereas the understandings reached between the SELLING SHAREHOLDERS and the
BUYING SHAREHOLDERS with a view to effecting the transfer of the SHARES,
THEY RESOLVE
To sign this Memorandum of Understanding, in order to establish the basic terms
and conditions in which the said transfer of the SHARES will be carried out,
agreeing the following clauses:
<PAGE>
1. SPEs - The BUYING SHAREHOLDERS will constitute or will acquire three
corporations (here referred to as the "SPE I", "SPE II," the latter domiciled in
Curitiba, Rua Sete de Setembro no. 2645 (part) and "SPE III") in the period of
seven days from the date of the occurrence of the last condition precedent
provided for in Clause 5th, whose capital shall be held in full by the BUYING
SHAREHOLDERS (or by other companies to be designated by them of their own free
will) in the proportion and structure established freely by them, each SPE
having to hold the following assets:
A) SPE I
(i) R$11,289,038.31
B) SPE II
(i) 20 locomotives model U20C (Namibia), GE manufacture,
with 2000 HP of power, identified in Schedule 1(B)(i);
(ii) 385 GFD cars, identified in Schedule 1(B)(ii); and
(iii) 10,500 tons of rails TR-45 and 4,000 tons of rails
TR-57 ordinary steel -carbon with [certificate?
ticket?] thermally treated.
C) SPE III
(i) R$1,599,992.66
1.1 The amounts indicated in items 1(A)(i) and 1(C)(i) above, as well as all the
monetary amounts indicated in this Memorandum of Understanding in Clause --5 and
in the others, shall be corrected by the variation of the IGP [General Price
Index]-M prepared by the Fundacao Getulio Vargas, from 24 September 1999 to the
date of the signing of the Definitive Contracts, the BUYING SHAREHOLDERS having,
as shareholders of SPE I and SPE III, to make contribution(s) of capital in an
amount sufficient to ensure the correction provided for in this article.
1.2 The locomotives referred to in 1(B)(i) above shall previously be object of
exchange for other locomotives owned by Companhia Vale do Rio Doce ("CVRD") and
must be presented in a state of functioning, maintenance and conservation
compatible with their normal and usual use, which the SELLING SHAREHOLDERS
declare having verified that it corresponds to their present condition in
accordance with an inspection made on this date, 10 having to be delivered in 45
days and 10 in 90 days, from the date of the signing of this Memorandum of
Understanding, but not before the date of the signing of the Definitive
Contracts, CVRD agreeing to make its best efforts to accelerate this delivery
schedule (which in any event will not begin before the date of the Definitive
Contracts).
1.3 The GFD cars referred to in 1(B)(ii), today leased to FCA, shall be
previously exchanged between CVRD and the Rede Ferroviaria Federal S.A., their
present owner and lessor, for the
<PAGE>
purpose of substituting the object of the lease, the cars referred to in 1(B)
(ii) having to be delivered "rolling," it being agreed of course that the cars
will have to be repaired by FCA, if necessary, so that they reach the condition
of "rolling", and delivered 120 in 30 days, 100 in 60 days, 90 in 90 days and 75
in 120 days from the date of the signing of the Memorandum of Understanding, but
not before the date of the signing of the Definitive Contracts, CVRD agreeing to
make its best efforts to accelerate this delivery schedule (which in any event
will not begin before the date of the Definitive Contracts).
1.3.1. The term "rolling," for purposes of the preceding item, when applied to
any of the cars mentioned in 1(B)(ii) above, means a car in condition to
circulate complying with the minimum specifications of safety appearing in
Schedule 1.3.1 and to reach on rails the Boavista station in the State of Sao
Paulo;
1.3.2 Notwithstanding the provisions of Clauses 1.2 and 1.3, the parties
undertake, in a period of up to 20 days from this date, to negotiate in good
faith and sign a contract by which the Locomotives and the Cars referred to in
items 1.2 and 1.3 above shall be made available to ALL, even before the
Definitive Contracts have been signed, in accordance with the following terms,
starting with the date of the signing of this MOU, but not before the date of
the signing of the said contract: (i) Locomotives: 45 days, and (ii) Cars: 120
in 30 days, 100 in 60 days, 90 in 90 days and 75 in 120 days. The contract
mentioned here must stipulate: (a) the amount free of taxes and operating and
maintenance costs, of R$700.00 per Car and R$24.00 per Locomotive, for each day
of use, to be paid by ALL from the date of their availability; and (b) the term
of 7 days for the return of the same in both cases, in the event of the
conditions precedent mentioned in Clause 6 not materializing, or of the
Definitive Contracts, for any reason, not being signed within 180 days from this
date. In this case, the cars must be returned in the same or better conditions
in which they were received, and in accordance with Schedule 1.3.1.
1.4 The rails referred to in 1(B)(iii) must be delivered in a state of
conservation compatible with their condition as new and shall be the object of a
purchase-sale contract for delivery in installments between TACUMA (or a company
indicated by it) and SPE II, setting the delivery of 50% of the total of the
rails by the 28th of February 2000, 25% by the 30th of September 2000 and 25% by
the 30th of September 2001, with the subsequent capitalization by TACUMA (or a
company indicated by it) in SPE II of the credit resulting from the said supply.
1.5 The cars mentioned in item 1(B)(ii) shall be inspected and approved by
representatives of the SELLING SHAREHOLDERS, as they are delivered, in the terms
of 1.3 above.
1.6 The locomotives mentioned in item 1(B)(i) above shall be inspected and
approved by representatives of the SELLING SHAREHOLDERS on the date of the
delivery of the locomotives. All the locomotives that are in the same conditions
of functioning, maintenance and conservation, according to inspection carried
out on this date by the SELLING SHAREHOLDERS, shall be considered approved.
<PAGE>
1.7 As a result of the operations referred to in items 1.2 to 1.4 above, SPE I ,
SPE II and SPE III shall be free of any liability, current or contingent, up to
the date of the operations referred to in the following items.
1.8 Any costs related to the transfer of the domicile of SPE II from Rio de
Janeiro to Curitiba, to the incorporation of SPE III, as well as those related
to the amendment of the Articles and By-Laws of the SPE's, in terms of the
stipulations of 5(h)e(i) below, shall be for the account of the SELLING
SHAREHOLDERS.
1.9 In the event any of the SPE's are incorporated for the account and at the
order of the SELLING SHAREHOLDERS and transferred to the BUYING SHAREHOLDERS in
order that the assets mentioned in this item 1 be transferred to them, the
declarations and guarantees of the BUYING SHAREHOLDERS will not include what is
mentioned in item 1.7 above, nor will they mention the inexistence of liens or
charges on the shares of the SPE's.
2. Exchange and Purchase-Sale - The conditions precedent referred to in item 6
having been satisfied, the SELLING SHAREHOLDERS and the BUYING SHAREHOLDERS will
sign a purchase-sale contract, and, in addition, part of the SELLING
SHAREHOLDERS will sign a contract of exchange of SHARES of FCA for all of the
shares of SPE I , SPE II and SPE III owned by the BUYING SHAREHOLDERS, in the
manner detailed in item --5 below. The purchase-sale contracts and the exchange
contracts mentioned herein are jointly defined as the "Definitive Contracts."
2.1 The Definitive Contracts must contain, on the part of the SELLING
SHAREHOLDERS, the following declarations and guarantees:
a) ownership of the SHARES, free and clear of any charges or
burdens,
b) absence of contracts between the SELLING SHAREHOLDERS (including
there corporations (or individuals, when the term is applicable),
that are controlling, controlled or subject to the common control of
the SELLING SHAREHOLDERS), on the one hand, and FCA and/or its
controlled companies, on the other hand, and/or of any other
obligations, current or future, actual or contingent, assumed by the
latter in relation to the former.
2.2 The definitive exchange contracts must contain, on the part of the BUYING
SHAREHOLDERS, the following declarations and guarantees:
a) ownership of the shares of SPE I , SPE II and SPE III, free and
clear of any charges or burdens;
b) absence of contracts between the BUYING SHAREHOLDERS (including
there corporations that are controlling, controlled or subject to
the common control of the BUYING SHAREHOLDERS), on the one hand, and
SPE I , SPE II and SPE III, on the other, and/or of any other
obligations, current or future, actual or
<PAGE>
contingent, assumed by the latter in relation to the former (except
the contract of purchase-sale of rails mentioned in 1(B)(iii)
above);
c) SPE I shall be the titleholder of the portion of assets in
the amount of R$11,289,038.31, in the form mentioned in 5(g)
below;
d) SPE II, by force of the operations mentioned in this Memorandum
of Understanding, shall be owner (or titleholder of rights to
purchase) of the goods mentioned in 1(B)(i) to 1(B)(iii), without
burdens, charges or encumbrances.
e) SPE III shall be the titleholder of the portion of assets in the
amount of R$1,599,992.66, in the form mentioned in 5(i) below.
2.3 At the time of the signing of the Definitive Contracts the directors of
FCA proposed by the
<PAGE>
SELLING SHAREHOLDERS (including the members of the Audit Committee) will present
their resignation.
2.4 The Definitive Contracts will have to contain provisions regulating the
obligation to indemnify, by the SELLING SHAREHOLDERS or the BUYING SHAREHOLDERS,
as the case may be, for any of the declarations appearing in items 2.1 and 2.2
that are proved incorrect or false.
3. Split of 331 Participacoes S.A. ("331") - FCA and ALL agree, until the date
of signing the Definitive Contracts, to advance the partial split of 331, with
[versao version? something is missing or wrong] the new company ("New Company")
resulting from the operation, of 99,895 preferred shares and 5,776,242 common
shares of Ferroban - Ferrovias Bandeirantes S.A., it being established, in the
manner of paragraph 5th of Article 229 of Law no. 6.404/76, that ALL will be the
sole shareholder of 331, stopping from being a shareholder of the New Company.
The deed of partial split will stipulate that the New Company will not be
responsible for any obligation of 331.
4. Exchange between TACUMA and VALIA---TACUMA and VALIA undertake, by the date
of signing of the Definitive Contracts, to exchange 4,321,464 preferred shares
of FCA owned by VALIA for 4,321,464 common shares of FCA owned by TACUMA.
4.1 The SELLING SHAREHOLDERS and CSN, from this time, renounce in favor of
VALIA, the right of first refusal in the acquisition of the common shares issued
by FCA, the object of the exchange that item 4 above deals with.
5. Structure of the Transaction - Having in mind the interest of the SELLING
SHAREHOLDERS in reducing the possible tax impact on the operation, the following
structures will be adopted in the Definitive Contracts in relation to each one
of the SELLING SHAREHOLDERS:
a) 11,945,606 SHARES owned by TUPINAMBARANA (7,624,142 common and
4,321,464 preferred) will be the object of direct purchase-sale for
the BUYING SHAREHOLDERS, with payment in cash corresponding to
R$1.6226151614 per share, totaling R$19,383,121.41;
b) 11,945,606 SHARES owned by INTERFERREA (7,624,142 common and
4,321,464 preferred) will have been previously transferred to the
SHAREHOLDERS OF INTERFERREA, through a split or reduction of capital
of that company, and will be the object of direct purchase-sale for
the BUYING SHAREHOLDERS, with payment in cash corresponding to
R$1.6226151614 per share, totaling R$19,383,121.40, divided as
follows: (i) 4,560,352 shares owned by UTIL (2,910,590 common and
1,649,762 preferred) in the amount of R$7,399,696.30; (ii) 4,841,347
shares owned by HB (3,089,933 common and 1,751,414 preferred) in the
amount of R$7,855,643.04; (iii) 419,105 shares owned by ITD (267,489
common and 151,616 preferred) in the amount of R$680,046.12;
<PAGE>
and (iv) 2,124,802 shares owned by SPOORNET (1,356,130 common and
768,672 preferred) in the amount of R$3,447,735.94; in the event
that the mentioned transfer is not carried out by the date of the
signing of the Definitive Contracts the purchase-sale shall be made
directly with INTERFERREA;
c) 634,055 SHARES owned by TSR (313,389 common and 320,666
preferred)
<PAGE>
will be the object of direct purchase-sale for the BUYING
SHAREHOLDERS, with payment in cash corresponding to R$1.6226151614
per share, totaling R$1,028,827.26;
d) 9,512,579 SHARES owned by RAILTEX (7,609,876 common and 1,902,703
preferred) shall be the object of direct purchase-sale for the
BUYING SHAREHOLDERS, with payment in cash corresponding to
R$1.6226151614 per share, totaling R$15,435,254.91;
e) 2,734,867 SHARES, all preferred, owned by LAGF shall be the
object of direct purchase-sale by the BUYING SHAREHOLDERS, with
payment in cash corresponding to R$1.6226151614 per share, totalling
R$4,437,636.66;
f) 11,366,224 SHARES (7,510,824 common and 3,855,940 preferred)
owned by RALPH PARTNERS shall be the object of direct purchase-sale
by the BUYING SHAREHOLDERS, with payment in cash corresponding to
R$1.6226151614 per share, totaling R$18,443,007.39;
g) 6,957,311 SHARES, all common, owned by JUDORI shall be exchanged
for 100% of the shares of SPE I, incorporated by the BUYING
SHAREHOLDERS, in the manner of item 1(A)(i) above, whose sole asset
will be represented by R$11,289,038.31 in cash;
h) The SHARES shown in the table below shall be exchanged for 100%
shares of SPE II, incorporated by the BUYING SHAREHOLDERS and formed
by the assets mentioned in 1(B)(i) to 1(B)(iii) above, it being up
to the SELLING SHAREHOLDERS to define freely among themselves the
respective participation in common and preferred shares of the
capital of SPE II and the capital structure of the latter.
SHARES OF FCA
OBJECT OF
EXCHANGE
- --------------
SHAREHOLDER COMMON PREFERRED TOTAL PARTICIPATION
- -------------- --------- ----------- ----------- -------------
RALPH PARTNERS 0 10,449,268 10,499,268 34.07%
GRUCAI 7,673,179 0 7,673,179 24.90%
JUDORI 621,175 8,344,896 8,966,071 29.10%
RAILTEX 0 3,675,936 3,675,936 11.93%
Total 8,294,354 22,520,100 30,814,454 100.00%
<PAGE>
i) The SHARES shown in the table below shall be exchanged for 100%
of the shares of SPE III, incorporated by the BUYING SHAREHOLDERS,
in the form of item 1(C)(i) above, whose sole asset shall be
represented by R$1,599,992.66 in cash; it being up to the SELLING
SHAREHOLDERS to define freely among themselves the respective
participation in common and preferred shares of the capital of SPE
III and the capital structure of the latter.
SHARES OF FCA
OBJECT OF
EXCHANGE
- -------------
SHAREHOLDER COMMON PREFERRED TOTAL PARTICIPATION
- ------------- --------- ---------- ------- -------------
TUPINAMBARANA 137,108 0 137,108 13.90%
UTIL 52,343 0 52,343 5.31%
HB 55,567 0 55,567 5.64%
ITD 4,810 0 4,810 0.49%
SPOORNET 24,388 0 24,388 2.47%
TSR 7,277 0 7,277 0.74%
RAILTEX 151,374 0 151,374 15.35%
LAGF 0 31,390 31,390 3.19%
RALPH PARTNERS 250,966 0 250,966 25.45%
GRUCAI 88,071 0 88,071 8.93%
JUDORI 182,764 0 182,764 18.53%
Total 954,668 31,390 986,058 100.00%
6. Conditions Precedent - The carrying out of the transfer of the SHARES is
subject to the following conditions precedent:
a) authorization of the RFFSA for the exchange of the cars to
which item 1(B)(ii) refers;
b) authorization of the Ministry of Transportation for the
carrying out of the exchange of the locomotives mentioned in
1(B)(i);
c) authorization of the Ministry of Transportation for the signing of
the Declaration of Transfer prescribed in the Concession Contract
signed on 28 of August 1996 (the "Concession Contract");
d) release of the SELLING SHAREHOLDERS from the obligations assumed
as Intervenors according to clause 9.3 of the Concession Contract;
e) authorization by the CVM [Securities and Exchange Commission] and by
the Central Bank for the transfer of the registration of the
investments made by RALPH PARTNERS and LAGF from the system named in
Schedule IV to the system of direct foreign investment (Law no.
4131/62);
<PAGE>
f) split of 331;
g) formation of SPEI , SPEII and SPEIII, in the manner of Clause 1;
and
h) amendment of THE Articles and By-Laws of SL, in the form of
Clause 14;
7. Prior Documents - This Memorandum of Understanding represents all the
understandings of the parties with regard to the matters here provided for,
replacing any prior documents.
8. Confidentiality - The Parties undertake to maintain confidentiality of the
understandings appearing in this Memorandum, excepting the reference or
exhibition thereof, to the extent strictly necessary for obtaining the
above-mentioned authorizations. The transfers of the SHARES of FCA object of the
Definitive Contracts may be the object of publication, in the manner required by
the regulatory bodies of public companies, in Brazil and abroad.
9. Successors - This Memorandum of Understanding obligates the successors of
the Parties, under whatever title.
10. Judicial Proceeding - On the date of the signing of the Definitive
Contracts, the parties will sign an accord and satisfaction instrument relating
to the judicial proceedings in progress today in the district court of Belo
Horizonte (MG), so that they will make no further claim in relation to the
subject matter thereof, each party shouldering their respective charges and
costs, including those related to their advisers.
11. Charges - Each party shall be responsible for the charges of its respective
advisers, including those necessary for the constitution of SPEs I , II and III,
it being understood that CSN shall not be responsible for any charges or costs
related to the said constitution of the SPEs.
12. Intervention of CSN - CSN appears as intervenor in order to, at once,
declare its renunciation of the right of preference provided for in the
Shareholder Agreements I and II of FCA in relation to the acquisition of the
SHARES by the BUYING SHAREHOLDERS.
13. Intervention of ALL - ALL appears in this instrument in order to obligate
itself to advance the split of 331, as specified in clause 3 above.
14. Transfer of Quotas of SL Servicos Logisticos Ltda. ("SL") - The SELLING
SHAREHOLDERS, except LAGF and TSR, undertake, until the date of the signing of
the Definitive Contracts, to execute an amendment of the Articles and By-laws of
SL, so as to transfer gratuitously to FCA, 1 (one) quota of which they are
holders of the capital of SL, withdrawing in that manner from the said company.
15. Novation - The tolerance or non-exercise by the parties of any rights
assured to them in this Memorandum of Understanding or in the law in general
will not amount to novation or renunciation of any of those rights, the parties
being able to exercise them at any time. Any
<PAGE>
amendment or addition to this Memorandum of Understanding will only be
considered valid if it bears the signature of the parties involved.
16 . Term - The Parties will make their efforts to the effect that the
Definitive Contracts are signed in the period of 30 days from this date.
17. Forum - Any dispute arising from this Memorandum of Understanding shall be
resolved in the district court of Rio de Janeiro (RJ), the parties renouncing
any other regardless of how special it is or may become.
17.1 Without prejudice to the provisions of item 17 above, the BUYING
SHAREHOLDERS, in their sole judgment, may bring judicial proceedings stemming
from this Memorandum of Understanding in the competent court of the domicile of
RAILTEX, LAGF, and RALPH PARTNERS.
17.2 RAILTEX appoints as its attorney-in-fact Joao Dodsworth Cordeiro Guerra,
with offices at Av. Presidente Antonio Carlos no. 51, 12th floor, Rio de Janerio
(RJ), granting him specific powers to receive service of process in Brazil
related to any demand arising from this Memorandum of Understanding.
17.3 LAGF and RALPH PARTNERS appoint as their attorney-in-fact Roberto Moses
Thompson Motta, with offices at Av. Brigadeiro Faria Lima no. 3729, 7th floor,
Sao Paulo (SP), granting him specific powers to receive service of process in
Brazil related to any demand arising from this Memorandum of Understanding.
17.4 The Definitive Contracts shall contain a clause of election of venue on
the same model of clauses 17 and 17.1.
And, being thus in agreement, they sign this instrument in 10 copies of equal
tenor and effect, in order that it may produce its proper and legal effects.
Rio de Janeiro, 29 of October 1999
INTERFERREA S.A. SERVICOS FERROVIARIOS E INTERMODIAS
UNIAO TRANSPORTE INTERESTADUAL DE LUXO S/A
HOLDING BRASIL S/A
ITD-TRANSPORTES LTDA
SPOORNET BRASIL LTDA.
TUPINAMBARANA S.A.
<PAGE>
JUDORI ADMINISTRACAO, EMPREENDIMENTOS E PARTICIPACOES LTDA.
RAILTEX GLOBAL INVESTMENTS L.L.C., INC. [sic]
LATIN AMERICAN GROWTH FUND N.V.
RALPH PARTNERS I, LTD.
GRUCAI PARTICIPACOES S.A.
TARCISIO SCHETTINO RIBEIRO
KRJ PARTICIPACOES S.A.
FUNDACAO VALE DO RIO DOCE DE SEGURIDADE SOCIAL - VALIA
MINERACAO TACUMA LTDA.
COMPANHIA SIDERURGICA NACIONAL
FERROVIA CENTRO-ATLANTICA S.A.
ALL-AMERICA LATINA LOGISTICA DO BRASIL S.A.
Witnesses:
1.
Name:
Identification number:
2.
Name:
Identification number:
<PAGE>
MEMORANDO DE ENTENDIMENTOS
1. INTERFERREA S.A. SERVICOS FERROVIARIOS E INTERMODAIS, com sede na cidade do
Rio de Janeiro, Estado do Rio de Janeiro, na Rua Lauro Muller, 116/1201
(parte), CNPJ sob o n(0) 00.629.976/0001-28, doravante denominada apenas
INTERFERREA;
1(a) UNIAO TRANSPORTE INTERESTADUAL DE LUXO S/A, com sede na Rua Antonio
Simao Firjam, n(0) 620, em Juiz de Fora, MG, Distrito Industrial, inscrita no
CNPJ/MF sob o n(0) - 33.337.007/0001-52, doravante denominada apenas UTIL;
1(b) HOLDING BRASIL S/A, com sede em Ribeirao das Neves, MG, na Rua
Petropolis, n(0) 450, bairro Olhos D'Agua, inscrita no CNPJ/MF sob o n(0)
38.582.904/0001-45, doravante denominada apenas HB;
1(c) ITD - TRANSPORTES LTDA., com sede em Osasco, Sao Paulo, na Rua Humberto
de Campos n(0) 271/455, inscrita no CNPJ/MF sob o n(0) 60.619.186/0001-93,
doravante denominada apenas ITD; e
1(d) SPOORNET DO BRASIL LTDA., com sede no Rio de Janeiro, RJ, na Praca
Mahatma Gandhi, n(0) 2, sala 602, parte, inscrita no CNPJ/MF sob o n(0)
01.972.285/0001-93, doravante denominada SPOORNET;
sendo 1(a), 1(b), 1(c) e 1(d) aqui identificados em conjunto como os
ACIONISTAS DA INTERFERREA;
2. TUPINAMBARANA S.A., com sede na cidade do Rio de Janeiro, Estado do Rio de
Janeiro, na Rua Sao Francisco Xavier, 603, inscrita no CNPJ sob o n(0)
01.158.851/0001-20, doravante denominada apenas TUPINAMBARANA;
3. JUDORI ADMINISTRACAO, EMPREENDIMENTOS E PARTICIPACOES S.A., com sede na
cidade de Sao Paulo, Estado de Sao Paulo, na Rua Paraguai, 21 (anexo), Jardim
Paulista, CNPJ sob o n(0) 01.089.464/0001-89, doravante denominada apenas
JUDORI;
4. RAILTEX GLOBAL INVESTMENTS L.L.C. INC., sociedade constituida sob as leis do
Estado de Delaware, Estados Unidos da America, com sede em 4040 Broadway, San
Antonio, Texas, doravante denominada apenas RAILTEX;
5. LATIN AMERICAN GROWTH FUND N.V., sociedade constituida de acordo com as leis
de Curacao, Netherlands Antilles, com sede em John B. Gorsiraweg 6, doravante
denominada apenas LAGF;
<PAGE>
6. RALPH PARTNERS I LTD., sociedade constituida e organizada de acordo com as
leis das Ilhas Cayman, com sede nos escritorios de Maples & Calder, Ugland
House, South Church Street, P.O.Box 309, Grand Cayman, Cayman Islands,
British West Indies, doravante designada RALPH PARTNERS;
7. GRUCAI PARTICIPACOES S.A., com sede na cidade de Sao Paulo, Estado de Sao
Paulo, a Av. Brigadeiro Faria Lima, 3729/7(0) andar, inscrita no CNPJ sob o
n(0) 01.258.945/0001-70, doravante denominada apenas GRUCAI;
8. TARCISIO SCHETTINO RIBEIRO, brasileiro, casado, administrador de empresas, RG
n(0) M-358.835 - SSP/MG, CPF sob o n(0) 140.699.546-00, residente e
domiciliado na cidade de Belo Horizonte, Estado de Minas Gerais, na Rua
Serranos, 88 - apto 1501 - Bairro Serra, doravante denominado apenas TSR,
Em conjunto aqui referidos como ACIONISTAS VENDEDORES, e de outro lado,
1. KRJ PARTICIPACOES S.A., com sede na cidade do Rio de Janeiro, Estado de
Rio de Janeiro, na Av. Marechal Camara, 160 - grupo 1709 - Parte, inscrita
no CNPJ sob o n(0) 03.370.943/0001-02, doravante denominada apenas KRJ;
2. MINERACAO TACUMA LTDA., com sede na cidade do Rio de Janeiro, Estado do
Rio de Janeiro, na Av. Presidente Wilson, 231/22(0) andar, inscrita no
CNPJ sob o n(0) 42.276.907/0001-28, doravante denominada apenas TACUMA; e
3. FUNDACAO VALE DO RIO DOCE DE SEGURIDADE SOCIAL - VALIA, fundacao privada
com sede na Av. Graca Aranha, 26 - 5(0) e 6(0) andares, inscrita no CNPJ
sob o n(0) 42.271.429/0001-63 doravante denominada apenas VALIA;
em conjunto com outras sociedades livremente indicadas por TACUMA, ACIONISTAS
COMPRADORES,
e ainda, como INTERVENIENTES,
COMPANHIA SIDERURGICA NACIONAL, com sede na cidade do Rio de Janeiro, Estado do
Rio de Janeiro, na Rua Lauro Muller, 116/36(0) andar e sala 3402, inscrita no
CNPJ sob o n(0) 33.042.730/0001-04, doravante denominada apenas CSN;
FERROVIA CENTRO-ATLANTICA S.A., companhia aberta com sede na Rua Sapucai no.
383, Belo Horizonte, inscrita no CNPJ sob o n(0) 00.924.429/0001-75, doravante
denominada apenas FCA; e
ALL-AMERICA LATINA LOGISTICA DO BRASIL S.A., com sede na cidade de Sao Paulo,
Estado de Sao Paulo, na Av. Brigadeiro Faria Lima n(0) 3729, inscrita no CNPJ
sob o n(0) 01.258.944/0001-26, doravante denominada ALL.
Considerando que os ACIONISTAS VENDEDORES sao titulares de acoes da FCA na
proporcao do quadro abaixo,
<PAGE>
NOME ACOES ORDINARIAS ACOES PREFERENCIAIS TOTAL DE ACOES
- ---- ---------------- ------------------- --------------
JUDORI 7.761.250 8.344.896 16.106.146
INTERFERREA 7.761.250 4.321.464 12.082.714
TUPINAMBARANA 7.761.250 4.321.464 12.082.714
RAILTEX 7.761.250 5.578.639 13.339.889
LAGF 0 2.766.257 2.766.257
RALPH PARTNERS 7.761.250 14.355.208 22.116.458
GRUCAI 7.761.250 0 7.761.250
TSR 320.666 320.666 641.332
TOTAL 46.888.166 40.008.594 86.896.760
Considerando que os ACIONISTAS DA INTERFERREA deverao adquirir de INTERFERREA
acoes da FCA conforme a proporcao constante do quadro abaixo.
NOME ACOES ORDINARIAS ACOES PREFERENCIAIS TOTAL DE ACOES
- ---- ---------------- ------------------- --------------
UTIL 2.962.933 1.649.762 4.612.695
ITD 272.299 151.616 423.915
HB 3.145.500 1.751.414 4.896.914
SPOORNET 1.380.518 768.672 2.149.190
TOTAL 7.761.250 4.321.464 12.082.714
Considerando que os ACIONISTAS COMPRADORES tem interesse em adquirir as Acoes
Ordinarias e as Acoes Preferenciais da FCA referidas nos quadros acima,
doravante denominadas apenas, em conjunto, as ACOES,
Considerando os entendimentos havidos entre os ACIONISTAS VENDEDORES e os
ACIONISTAS COMPRADORES com vistas a efetivar a transferencia das ACOES,
R E S O L V E M
Celebrar o presente Memorando de Entendimentos, com a finalidade de estabelecer
os termos e condicoes basicas em que se efetivara a referida transferencia das
ACOES, pactuando as clausulas que se seguem:
1. SPES - OS ACIONISTAS COMPRADORES farao constituir ou adquirirao tres
sociedades anonimas (aqui referidas como as "SPE I ", "SPE II", esta com sede em
Curitiba, na Rua Sete de Setembro no. 2645 (parte) e "SPE III") no prazo de sete
dias a contar da data da ocorrencia da ultima condicao precedente prevista na
Clausula 5(a), cujo capital sera detido integralmente pelos ACIONISTAS
COMPRADORES (ou por outras sociedades por eles livremente indicadas) na
proporcao e estrutura por eles estabelecidas livremente, devendo cada SPE deter
os seguintes:
<PAGE>
A) SPE I
(i) R$11.289.038,31 (onze milhoes duzentos e oitenta e nove mil e trinta e
oito reais e trinta e um centavos);
B) SPE II
(i) 20 locomotivas modelo U20C (Namibia), fabricacao GE, com 2000 HP de
potencia, identificadas no Anexo 1(B)(i);
(ii) 385 vagoes GFD, identificadas no Anexo 1(B)(ii); e
(iii) 10.500 toneladas de trilhos TR-45 e 4.000 toneladas de trilhos TR-57
aco-carbono comum com boleto tratado termicamente.
C) SPE III
(i) R$ 1.599.992,66 (hum milhao, quinhentos e noventa e nove mil,
novecentos e noventa e dois reais e sessenta e seis centavos);
1.1 Os valores indicados nos item 1A(i) e 1(C)(i) acima, bem como todos os
valores monetarios indicados neste Memorando de Entendimentos na Clausula 5 e
nas demais, serao corrigidos pela variacao do IGP-M apurado pela Fundacao
Getulio Vargas, desde 24 de setembro de 1999 ate a data da assinatura dos
Contratos Definitivos, devendo os ACIONISTAS COMPRADORES, como acionistas da SPE
I e SPE III, efetuar aporte(s) de capital em valor suficiente para assegurar a
correcao prevista neste item.
1.2 As locomotivas referidas em 1(B)(i) supra serao previamente objeto de
permuta por outras locomotivas de propriedade da Companhia Vale do Rio Doce
("CVRD") e deverao apresentar-se em estado de funcionamento, manutencao e
conservacao compativel com o seu uso normal e corrente, que os ACIONISTAS
VENDEDORES declaram haver verificado corresponder ao seu estado atual conforme
inspecao realizada nesta data, devendo ser entregues 10 em 45 dias e 10 em 90
dias, a partir da data da assinatura deste Memorando de Entendimentos, mas nao
antes da data da assinatura dos Contratos Definitivos, obrigando-se a CVRD a
fazer seus melhores esforcos no sentido de acelerar este cronograma de entrega
(que em qualquer caso nao se iniciara antes da data dos Contratos Definitivos).
1.3 Os vagoes GFD referidos em 1(B)(ii), hoje arrendados a FCA, serao
previamente permutados entre a CVRD e a Rede Ferroviaria Federal S.A., sua atual
proprietaria e arrendadora, com o objetivo de substituir o objeto do
arrendamento, devendo os vagoes referidos em 1(B)(ii) ser entregues "rodando",
ficando desde logo acertado que os vagoes deverao ser reparados pela FCA, se
necessario, para que adquiram a condicao de "rodando", e entregues 120 vagoes em
30 dias, 100 vagoes em 60 dias, 90 vagoes em 90 dias e 75 vagoes em 120 dias a
partir da data da assinatura deste Memorando de Entendimentos, mas nao antes da
data da assinatura dos Contratos Definitivos, obrigando-se a CVRD a fazer seus
melhores esforcos no sentido de acelerar este cronograma de entrega (que em
qualquer caso nao se iniciara antes da data dos Contratos Definitivos).
1.3.1 O termo "rodando", para os efeitos do item precedente, quando aplicado com
referencia a qualquer dos vagoes mencionados em 1(B)(ii) acima, significa um
vagao em
<PAGE>
condicoes de circular atendendo as especificacoes minimas de seguranca,
constantes do Anexo 1.3.1, e de chegar sobre trilhos a estacao Boavista no
Estado de Sao Paulo.
1.3.2 Nao obstante o disposto nas Clausulas 1.2 e 1.3, as partes se comprometem
a, no prazo de ate 20 dias a contar desta data, negociar de boa-fe e firmar um
contrato mediante o qual as Locomotivas e os Vagoes referidos nos itens 1.2 e
1.3 acima serao disponibilizados a ALL, mesmo antes de firmados os Contratos
Definitivos, de acordo com os seguintes prazos, contados a partir da data da
assinatura deste MOU, mas nao antes da data da assinatura do referido contrato:
(i) Locomotivas: 45 dias, e (ii) Vagoes: 120 em 30 dias, 100 em 60 dias, 90 em
90 dias e 75 em 120 dias. O contrato aqui referido devera estipular: (a) o
montante livre de impostos e custos de operacao e manutencao, de R$700,00 por
Vagao e R$24,00 por Locomotiva, para cada dia de uso, a serem pagos pela ALL
desde a data de sua disponibilizacao; e (b) o prazo de 7 dias para a devolucao
dos mesmos em ambos os casos, na hipotese das condicoes precedentes mencionadas
na clausula 6 nao se materializarem, ou dos Contratos Definitivos nao serem, por
qualquer razao, firmados dentro de 180 dias a contar desta data. Neste caso, os
vagoes deverao ser devolvidos nas mesmas ou em melhores condicoes do que
recebidos, e de acordo com o Anexo 1.3.1.
1.4 Os trilhos referidos em 1(B)(iii) deverao ser entregues em estado de
conservacao compativel com sua condicao de novos e serao objeto de contrato de
compra e venda para entrega a prazo, entre a TACUMA (ou empresa por esta
indicada) e a SPE II, estabelecendo a entrega de 50% do total dos trilhos ate 28
de fevereiro de 2000, 25% ate 30 de setembro de 2000 e 25% ate 30 de setembro de
2001, com a subsequente capitalizacao pela TACUMA (ou a empresa por ela
indicada) na SPE II do credito decorrente do citado fornecimento.
1.5 Os vagoes referidos no item 1(B)(ii) serao vistoriados e aprovados por
representantes dos ACIONISTAS VENDEDORES, a medida em que forem entregues, nos
termos do item 1.3 supra.
1.6 As locomotivas referidas no item 1(B)(i) acima serao vistoriadas e aprovadas
por representantes dos ACIONISTAS VENDEDORES na data da entrega das locomotivas.
Serao consideradas aprovadas todas as locomotivas que estiverem nas mesmas
condicoes de funcionamento, manutencao e conservacao, conforme inspecao
realizada nesta data pelos ACIONISTAS VENDEDORES.
1.7 Em decorrencia das operacoes referidas nos itens 1.2 a 1.4 supra, a SPE I, a
SPE II e a SPE III estarao livres de qualquer passivo, atual ou contingente, ate
a data das operacoes referidas nos itens seguintes.
1.8 Quaisquer custos referentes a transferencia da sede social da SPE II do Rio
de Janeiro para Curitiba, a constituicao da SPE III, bem como aqueles referentes
a alteracao do estatuto social das SPE's, em funcao do estipulado em 5(h) e (i)
abaixo, correrao por conta dos ACIONISTAS VENDEDORES.
1.9 Na hipotese de quaisquer das SPE's vir a ser constituida por conta e ordem
dos ACIONISTAS VENDEDORES e transferidas aos ACIONISTAS COMPRADORES a fim
<PAGE>
de que a elas sejam transferidos os ativos mencionados neste item 1 , as
declaracoes e garantias dos ACIONISTAS COMPRADORES nao incluirao o mencionado no
item 1.7 acima, nem mencionarao a inexistencia de onus ou encargos sobre as
acoes das SPE's.
2. PERMUTA E COMPRA E VENDA - Satisfeitas as condicoes precedentes referidas no
item 6, os ACIONISTAS VENDEDORES e os ACIONISTAS COMPRADORES celebrarao contrato
de compra e venda e, adicionalmente, parte dos ACIONISTAS VENDEDORES celebrara
contrato de permuta de ACOES da FCA pela totalidade das acoes das SPE I, SPE II
e SPE III de propriedade dos ACIONISTAS COMPRADORES, na forma detalhada no item
5 abaixo. Os contratos de compra e venda e os contratos de permuta aqui
mencionados sao em conjunto definidos como os "Contratos Definitivos".
2.1 Os Contratos Definitivos deverao conter, de parte dos ACIONISTAS VENDEDORES
as seguintes declaracoes e garantias:
a) propriedade das ACOES, livres e desembaracadas de quaisquer onus ou
encargos;
b) ausencia de contratos entre os ACIONISTAS VENDEDORES (incluindo ai
sociedades (ou pessoas fisicas, quando o termo for aplicavel)
controladoras, controladas ou sujeitas ao controle comum dos ACIONISTAS
VENDEDORES), de um lado, e a FCA e/ou suas controladas, de outro lado,
e/ou de quaisquer outras obrigacoes, atuais ou futuras, efetivas ou
contingentes, assumidas por estas em relacao aqueles.
2.2 Os contratos definitivos de permuta deverao conter, de parte dos ACIONISTAS
COMPRADORES, as seguintes declaracoes e garantias:
a) propriedade das acoes das SPE I, SPE II e SPE III, livres e
desembaracadas de quaisquer onus ou encargos;
b) ausencia de contratos entre os ACIONISTAS COMPRADORES (incluindo ai
sociedades controladoras, controladas ou sujeitas ao controle comum do
ACIONISTAS COMPRADORES), de um lado, e as SPE I, SPE II e SPE III, de
outro lado, e/ou de quaisquer outras obrigacoes, atuais ou futuras,
efetivas ou contingentes, assumidas por esta em relacao aqueles (exceto
o contrato de compra e venda de trilhos mencionado em 1(B)(iii) acima);
c) A SPE I sera titular da parcela de recursos no valor de
R$11.289.038,31, na forma referida em 5(g) abaixo;
d) a SPE II, por forca das operacoes referidas neste Memorando de
Entendimentos, sera proprietaria (ou titular dos direitos aquisitivos)
dos bens referidos em 1(B)(i) a 1(B)(iii), sem onus, encargos ou
gravames;
e) A SPE III sera titular da parcela de recursos no valor de
R$1.599.992,66, na forma referida em 5(i) abaixo;
<PAGE>
2.3 Na ocasiao da celebracao dos Contratos Definitivos os conselheiros da FCA
indicados pelos ACIONISTAS VENDEDORES (inclusive os membros do Conselho Fiscal)
apresentarao sua renuncia.
2.4 Os Contratos Definitivos deverao conter dispositivos regulando obrigacao de
indenizar, pelos ACIONISTAS VENDEDORES ou ACIONISTAS COMPRADORES, conforme o
caso, por quaisquer das declaracoes constantes dos itens 2.1 e 2.2 que se
provarem incorretas ou falsas.
3- CISAO DA 331 PARTICIPACOES S.A. ("331") - A FCA e ALL se comprometem a, ate a
data da assinatura dos Contratos Definitivos, promover a cisao parcial de 331,
com versao a nova sociedade ("Nova Sociedade") resultante da operacao, de 99.895
acoes preferred e 5.776.242 acoes common de Ferroban - Ferrovias Bandeirantes
S.A., ficando estabelecido, na forma do ss. 5(0) do art. 229 da Lei n(0)
6.404/76, que a ALL sera a unica acionista da 331, deixando de ser acionista da
Nova Sociedade. O ato de cisao parcial estipulara que a Nova Sociedade nao sera
responsavel por qualquer obrigacao de 331.
4- PERMUTA ENTRE TACUMA E VALIA - TACUMA e VALIA se comprometem a, ate a data de
assinatura dos Contratos Definitivos, permutar 4.321.464 acoes preferenciais da
FCA de titularidade da VALIA por 4.321.464 acoes ordinarias da FCA de
titularidade da TACUMA.
4.1 Os ACIONISTAS VENDEDORES e a CSN, desde ja, renunciam em favor da VALIA, ao
direito de preferencia na aquisicao das acoes ordinarias de emissao da FCA,
objeto da permuta de que trata o item 4 acima.
5- ESTRUTURA DA TRANSACAO - Tendo em vista o interesse dos ACIONISTAS VENDEDORES
em reduzir o eventual impacto fiscal sobre a, serao adotadas nos Contratos
Definitivos as seguintes estruturas em relacao a cada um dos ACIONISTAS
VENDEDORES:
a) 11.945.606 ACOES de propriedade da TUPINAMBARANA (sendo 7.624.142
ordinarias e 4.321.464 preferenciais) serao objeto de compra e venda
direta para os ACIONISTAS COMPRADORES, com pagamento em especie
correspondente a R$1,6226151614 por acao, totalizando R$ 19.383.121,41;
b) 11.945.606 ACOES de propriedade da INTERFERREA (sendo 7.624.142
ordinarias e 4.321.464 preferenciais) terao sido previamente
transferidas para os ACIONISTAS DA INTERFERREA, atraves de cisao ou
reducao de capital desta ultima sociedade, e serao objeto de compra e
venda direta para os ACIONISTAS COMPRADORES, com pagamento em especie
correspondente a R$1,6226151614 por acao, totalizando R$ 19.383.121,40,
dividido conforme segue: (i) 4.560.352 acoes de propriedade de UTIL
(sendo 2.910.590 ordinarias e 1.649.762 preferenciais) no valor de R$
7.399.696,30; (ii) 4.841.347 acoes de propriedade de HB (sendo
3.089.933 ordinarias e 1.751.414 preferenciais) no valor de R$
7.855.643,04; (iii) 419.105 acoes de propriedade de ITD (sendo
<PAGE>
267.489 ordinarias e 151.616 preferenciais) no valor de R$ 680.046,12;
e (iv) 2.124.802 acoes de propriedade da SPOORNET (sendo 1.356.130
ordinarias e 768.672 preferenciais), no valor de R$ 3.447.735,94; sendo
que na eventualidade de a referida transferencia nao se efetivar ate a
data da assinatura dos Contratos Definitivos a compra e venda sera
efetuada diretamente com a INTERFERREA;
c) 634.055 ACOES de propriedade de TSR (sendo 313.389 ordinarias e 320.666
preferenciais) serao objeto de compra e venda direta para os ACIONISTAS
COMPRADORES, com pagamento em especie correspondente a R$1,6226151614
por acao, totalizando R$ 1.028.827,26;
d) 9.512.579 ACOES de propriedade de RAILTEX (sendo 7.609.876 ordinarias e
1.902.703 preferenciais) serao objeto de compra e venda direta para os
ACIONISTAS COMPRADORES, com pagamento em especie correspondente a
R$1,6226151614 por acao, totalizando R$ 15.435.254,91;
e) 2.734.867 ACOE, todas preferenciais de propriedade de LAGF serao objeto
de compra e venda direta pelos ACIONISTAS COMPRADORES, com pagamento em
especie correspondente a R$1,6226151614 por acao, totalizando R$
4.437.636,66;
f) 11.366.224 ACOES (sendo 7.510.284 ordinarias e 3.855.940 preferenciais)
de propriedade de RALPH PARTNERS serao objeto de compra e venda direta
pelos ACIONISTAS COMPRADORES, com pagamento em especie correspondente a
R$1,6226151614 por acao, totalizando R$ 18.443.007,39;
g) 6.957.311 ACOES, todas ordinarias de propriedade de JUDORI serao
permutadas por 100% das acoes da SPE I constituida pelos ACIONISTAS
COMPRADORES, na forma do item 1(A)(i) supra, cujo unico ativo sera
representado por R$ 11.289.038,31 em especie;
h) As ACOES apresentadas na tabela abaixo serao permutadas por 100% das
acoes da SPE II constituida pelos ACIONISTAS COMPRADORES e formada
pelos ativos referidos em 1(B)(i) a 1(B)(iii) supra, cabendo aos
ACIONISTAS VENDEDORES definir livremente entre si a respectiva
participacao em acoes ordinarias e preferenciais do capital da SPE II e
a estrutura de capital desta ultima.
<PAGE>
ACOES DA FCA OBJETO DE PERMUTA
------------------------------------------------------------------
ACIONISTA ORDINARIAS PREFERENCIAIS TOTAL PARTICIPACAO
--------- ---------- ------------- ---------- -------------
RALPH PARTNERS 0 10.499.268 10.499.268 34,07%
GRUCAI 7.673.179 0 7.673.179 24,90%
JUDORI 621.175 8.344.896 8.966.071 29,10%
RAILTEX 0 3.675.936 3.675.936 11,93%
Total 8.294.354 22.520.100 30.814.454 100,00%
i)As ACOES apresentadas na tabela abaixo serao permutadas por 100%
acoes da SPE III constituida pelos ACIONISTAS COMPRADORES, na forma do
item 1(C)(i) supra, cujo unico ativo sera representado por R$
1.599.992,66 em especie, cabendo aos ACIONISTAS VENDEDORES definir
livremente entre si a respectiva participacao em acoes ordinarias e
preferenciais do capital da SPE III e a estrutura de capital desta
ultima.
ACOES DA FCA OBJETO DA PERMUTA
------------------------------------------------------------------
ACIONISTA ORDINARIAS PREFERENCIAIS TOTAL PARTICIPACAO
-------------- ---------- ------------- ------- --------------
TUPINAMBA-RANA 137.108 0 137.108 13,90%
UTIL 52.343 0 52.343 5,31%
HB 55.567 0 55.567 5,64%
ITD 4.810 0 4.810 0,49%
SPOORNET 24.388 0 24.388 2,47%
TSR 7.277 0 7.277 0,74%
RAILTEX 151.374 0 151.374 15,35%
LAGF 0 31.390 31.390 3,19%
RALPH PARTNERS 250.966 0 250.966 25,45%
GRUCAI 88.071 0 88.071 8,93%
JUDORI 182.764 0 182.764 18,53%
Total 954.668 31.390 986.058 100,00%
6. CONDICOES PRECEDENTES - A efetivacao da transferencia das ACOES esta sujeita
as seguintes condicoes precedentes:
a) autorizacao da RFFSA para a permuta dos vagoes a que se refere o item
1(B)(ii);
b) autorizacao do Ministerio dos Transportes para a efetivacao da permuta
das locomotivas referidas em 1(B)(i);
<PAGE>
c) autorizacao do Ministerio dos Transportes para a assinatura do Termo de
Transferencia previsto no Contrato de Concessao celebrado em 28 de
agosto de 1996 (o "Contrato de Concessao");
d) liberacao dos ACIONISTAS VENDEDORES das obrigacoes assumidas como
Intervenientes segundo a clausula 9.3 do Contrato de Concessao;
e) autorizacao pela CVM e pelo Banco Central para a transferencia do
registro dos investimentos efetuados por RALPH PARTNERS e LAGF do
regime denominado Anexo IV para o regime de investimento estrangeiro
direto (Lei n(0) 4131/62);
f) cisao da 331;
g) constituicao de SPE I, SPE II e SPE III, na forma da Clausula 1; e
h) alteracao do contrato social da SL, na forma da Clausula 14;
7. DOCUMENTOS ANTERIORES - O presente Memorando de Entendimentos representa a
totalidade dos entendimentos das partes a respeito das materias aqui previstas,
substituindo quaisquer documentos e tratativas anteriores.
8. CONFIDENCIALIDADE - Obrigam-se as partes a guardar confidencialidade sobre os
entendimentos constantes deste Memorando, ressalvadas a referencia ou exibicao
do mesmo, na medida estritamente necessaria para a obtencao das autorizacoes
acima referidas. As transferencias de ACOES da FCA objeto dos Contratos
Definitivos poderao ser objeto de divulgacao, na forma exigida pelos orgaos
reguladores das companhias abertas, no Brasil e no exterior.
9. SUCESSORES - O presente Memorando de Entendimentos obriga aos sucessores das
partes, a qualquer titulo.
10. PROCESSO JUDICIAL - Na data da celebracao dos Contratos Definitivos, as
partes celebrarao instrumento de transacao relativa aos processos judiciais hoje
em curso na comarca de Belo Horizonte (MG), para nada mais reclamarem em relacao
a materia objeto do mesmo, arcando cada parte com seus respectivos encargos e
custos, inclusive aqueles referentes a seus assessores.
11. ENCARGOS - Cada parte arcara com os encargos dos seus respectivos
assessores, inclusive aqueles necessarios para a constituicao das SPEs I, II e
III, ficando claro que a CSN nao sera atribuido quaisquer encargos ou custos
relativos a mencionada constituicao das SPEs.
12. INTERVENIENCIA DA CSN - A CSN comparece como interveniente para, desde ja,
manifestar sua renuncia ao direito de preferencia constante dos acordos de
acionistas I e II de FCA com relacao a aquisicao das ACOES pelos ACIONISTAS
COMPRADORES.
<PAGE>
13. INTERVENIENCIA DE ALL - A ALL comparece a este instrumento a fim de se
comprometer a promover a cisao da 331, conforme especificado na clausula 3
acima.
14- TRANSFERENCIA DE COTAS DA SL SERVICOS LOGISTICOS LTDA. ("SL") - Os
ACIONISTAS VENDEDORES, a excecao de LAGF e TSR, se comprometem a, ate a data da
assinatura dos Contratos Definitivos, assinar uma alteracao do Contrato Social
da SL, na forma a transferir a titulo gratuito para a FCA, 1 (uma) cota de que
sao detentores do capital social da SL, retirando-se, dessa forma da referida
empresa.
15- NOVACAO - A tolerancia ou o nao exercicio pelas partes de quaisquer direitos
a elas assegurados neste Memorando de Entendimentos ou na lei em geral nao
importara em novacao ou em renuncia a qualquer desses direitos, podendo as
partes exercita-los a qualquer tempo. Qualquer alteracao ou aditamento ao
presente Memorando de Entendimentos somente sera considerado valido se contar
com a assinatura das partes envolvidas.
16. PRAZO - As partes farao seus melhores esforcos no sentido de que os
Contratos Definitivos sejam assinados no prazo de 30 (trinta) dias a contar
desta data.
17. FORO - Qualquer divergencia oriunda deste Memorando de Entendimentos sera
solucionada no foro da comarca do Rio de Janeiro (RJ), renunciando as partes a
qualquer outro por mais privilegiado ou especial que seja ou venha a se tornar.
17.1. Sem prejuizo do disposto no item 17 acima, os ACIONISTAS COMPRADORES, a
seu exclusivo criterio, poderao promover acoes judiciais oriundas deste
Memorando de Entendimentos no foro competente do domicilio de RAILTEX, LAGF, e
RALPH PARTNERS.
17.2. RAILTEX constitui como seu procurador Joao Dodsworth Cordeiro Guerra, com
escritorio na Av. Presidente Antonio Carlos no. 51, 12o andar, Rio de Janeiro
(RJ), outorgando-lhes poderes especificos para receber citacao no Brasil
relacionada com qualquer demanda oriunda deste Memorando de Entendimentos.
17.3 LAGF e RALPH PARTNERS constituem como seu procurador Roberto Moses Thompson
Motta, com escritorio na Av. Brigadeiro Faria Lima no. 3729, 7o. andar, Sao
Paulo (SP), outorgando-lhes poderes especificos para receber citacao no Brasil
relacionada com qualquer demanda oriunda deste Memorando de Entendimentos
17.4. Os Contratos Definitivos conterao clausula de eleicao de foro nos mesmos
moldes das clausulas 17 e 17.1.
E, por estarem assim acordadas, assinam o presente em 10 (dez) vias de igual
teor e efeito, para que produza seus devidos e legais efeitos.
Rio de Janeiro, 29 de outubro de 1999
<PAGE>
INTERFERREA S.A. SERVICOS FERROVIARIOS E INTERMODAIS
UNIAO TRANSPORTE INTERESTADUAL DE LUXO S/A
HOLDING BRASIL S/A
ITD - TRANSPORTES LTDA
SPOORNET DO BRASIL LTDA,
TUPINAMBARANA S.A.
JUDORI ADMINISTRACAO, EMPREENDIMENTOS E PARTICIPACOES S.A..
RAILTEX GLOBAL INVESTMENTS L.L.C. INC
LATIN AMERICAN GROWTH FUND N.V
RALPH PARTNERS I LTD.
GRUCAI PARTICIPACOES S.A.
TARCISIO SCHETTINO RIBEIRO
KRJ PARTICIPACOES S.A.
FUNDACAO VALE DO RIO DOCE DE SEGURIDADE SOCIAL - VALIA
MINERACAO TACUMA LTDA.
COMPANHIA SIDERURGICA NACIONAL
<PAGE>
FERROVIA CENTRO-ATLANTICA S.A.
ALL - AMERICA LATINA LOGISTICA DO BRASIL S.A.
Testemunhas:
1. 2.
Nome: Nome:
CPF: CPF:
PURCHASE AGREEMENT
Dated as of November 10, 1999
by and between
RAILTEX INTERNATIONAL HOLDINGS, INC.,
and
GEEMF II LATIN AMERICA, L.L.C.
<PAGE>
PURCHASE AGREEMENT...........................................................1
RECITALS.....................................................................1
1. AGREEMENT TO PURCHASE AND SELL MEMBERSHIP INTEREST.....................1
1.1 AGREEMENT TO PURCHASE AND SELL...................................1
1.2 TRANSFER OF BOOKS, RECORDS, ETC..................................2
2. CLOSING................................................................2
2.1 THE CLOSING......................................................2
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER...........................2
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION....................2
3.2 DUE AUTHORIZATION................................................2
3.3 TITLE TO AND VALID ISSUANCE OF THE PURCHASED INTERESTS...........3
3.4 GOVERNMENTAL CONSENTS............................................3
3.5 LITIGATION.......................................................3
3.6 COMPLIANCE WITH LAW AND CHARTER DOCUMENTS........................4
3.7 DISCLOSURE.......................................................4
4. REPRESENTATIONS AND WARRANTIES OF INVESTOR.............................4
4.1 ORGANIZATION, GOOD STANDING......................................5
4.2 AUTHORIZATION....................................................5
4.3 LEGEND...........................................................5
4.4 LITIGATION.......................................................5
4.5 GOVERNMENTAL CONSENTS............................................5
4.6 COMPLIANCE WITH LAW AND CHARTER DOCUMENTS........................6
4.7 FUNDS AVAILABLE..................................................6
4.8 INVESTMENT.......................................................6
4.9 DISCLOSURE.......................................................6
i
<PAGE>
5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING........................7
5.1 REPRESENTATIONS AND WARRANTIES TRUE..............................7
5.2 PERFORMANCE......................................................7
5.3 COMPLIANCE CERTIFICATE...........................................7
5.4 PROCEEDINGS AND DOCUMENTS........................................7
(A) SECRETARY'S INCUMBENCY CERTIFICATE.........................7
(B) CORPORATE ACTIONS..........................................7
(C) GOOD STANDING CERTIFICATES.................................7
5.5 INVESTOR'S INVESTMENT COMMITTEE APPROVAL.........................8
5.6 GOVERNMENT APPROVAL..............................................8
5.7 SALE OF FCA......................................................8
5.8 COMPLIANCE WITH UNDERLYING DOCUMENTS; WAIVER OF RIGHT OF
FIRST REFUSAL....................................................8
5.9 BOARD MEMBERSHIP.................................................8
6. CONDITIONS TO THE SELLER'S OBLIGATIONS AT CLOSING......................8
6.1 REPRESENTATIONS AND WARRANTIES...................................8
6.2 PERFORMANCE AND PAYMENT OF PURCHASE PRICE........................8
6.3 COMPLIANCE CERTIFICATE...........................................9
6.4 PROCEEDINGS AND DOCUMENTS........................................9
6.5 GOVERNMENTAL APPROVAL............................................9
6.6 COMPLIANCE WITH UNDERLYING DOCUMENTS.............................9
6.7 SALE OF FCA......................................................9
6.8 PAYMENT OF REDUCTION AMOUNT......................................9
6.9 INVESTOR'S INVESTMENT COMMITTEE APPROVAL.........................9
7. AMENDMENTS TO THE OPERATING AGREEMENT..................................9
7.1 AUTHORITY TO EXECUTE, PERFORM AND CLOSE IN ACCORDANCE WITH
THE TERMS OF THIS PURCHASE AGREEMENT............................10
7.2 DISTRIBUTIONS OF FCA PROCEEDS FROM THE LLC .....................10
7.3 DISTRIBUTION OF REDUCTION AMOUNT FROM LLC.......................10
7.4 REMOVAL OF THE SELLER AS A PARTY TO THE OPERATING AGREEMENT.....10
8. MISCELLANEOUS.........................................................11
8.1 TO THE KNOWLEDGE OF WARRANTOR, ETC. ............................11
8.2 SURVIVAL OF WARRANTIES..........................................11
8.3 LIMITATION OF LIABILITIES.......................................12
ii
<PAGE>
8.4 LEGAL FEES FOR BRAZILIAN GOVERNMENT APPROVAL....................12
8.5 DISSOLUTION OF THE LLC..........................................13
8.6 SUCCESSORS AND ASSIGNS..........................................13
8.7 GOVERNING LAW...................................................13
8.8 COUNTERPARTS....................................................13
8.9 HEADINGS........................................................13
8.10 NOTICES.........................................................13
8.11 NO FINDER'S FEES................................................14
8.12 ATTORNEYS' FEES.................................................14
8.13 DISPUTE RESOLUTION..............................................14
8.14 AMENDMENTS AND WAIVERS..........................................15
8.15 SEVERABILITY....................................................15
8.16 ENTIRE AGREEMENT................................................15
8.17 FURTHER ASSURANCES..............................................16
iii
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT" or this "Purchase Agreement") is
made and entered into as of November 10, 1999, by and between RAILTEX
INTERNATIONAL HOLDINGS, INC. a Delaware corporation (the "COMPANY" or the
"SELLER") and GEEMF II LATIN AMERICA, L.L.C, a Delaware limited partnership,
(the "INVESTOR").
RECITALS
WHEREAS, the Company owns 50.5 percent of RailTex Global Investments
L.L.C. (the "LLC"); and the Investor owns 49.5 percent of the LLC.
WHEREAS, the LLC is the owner of minority interests in the Brazilian
consortia known as: Ferrovia Centro-Atlantica, S.A. ("FCA"), and is the owner
of minority interests in America Latina Logistica, S.A. ("ALL"), which owns
the interests in the Brazilian consortia known as Ferrovia Sul-Atlantico,
S.A. ("FSA") (FCA and FSA are collectively referred to as the "Brazilian
Investments").
WHEREAS, the Seller desires to sell to the Investor, and the Investor
desires to purchase from the Seller, the Seller's remaining membership interest
in the LLC on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound hereby agree as
follows:
1. AGREEMENT TO PURCHASE AND SELL MEMBERSHIP INTEREST.
1.1. AGREEMENT TO PURCHASE AND SELL. The Seller agrees to sell to
the Investor at the Closing, and the Investor agrees to purchase from the Seller
at the Closing, the Seller's remaining fifty and one-half percent (50.5%) of the
Membership Interests in the LLC, at a price of Three Million Three Hundred
Seventy-Five Thousand Dollars ($3,375,000.00) (the "Purchase Price"); provided,
however, if the LLC is required to sell any shares (or other interests) in ALL
before the Investor acquires the Seller's interest in the LLC, the Purchase
Price shall be reduced by the Reduction Amount and the Reduction Amount shall be
distributed by the LLC to the Seller. The Reduction Amount shall be an amount
equal to the Purchase Price multiplied by a fraction the numerator of which is
the number of shares (or other interests) of ALL owned directly by the LLC that
are attributable to the Seller's interest in the LLC and that are sold to any
person other than the Investor by the LLC and the denominator of which
410,172,237 (the number of
<PAGE>
ALL shares attributable to the Seller's interest in the LLC). The interests
purchased and sold pursuant to this Agreement (other than the ALL shares
purchased by someone other than the Investor) will be collectively referred to
as the "PURCHASED INTERESTS."
1.2. TRANSFER OF BOOKS, RECORDS, ETC. Within two weeks of the
Closing, the Seller agrees to transfer to the Investor all of the original books
and records of the LLC, all current through the date of Closing, copies and
certified copies, if any, of all business and tax filings, and financial
statements through the date of Closing.
2. CLOSING.
2.1. THE CLOSING. The purchase and sale of the Purchased Interests
will take place at a time and place mutually agreed upon by the parties as soon
as all the conditions to closing have been met, but in no event later than
February 29, 2000 (which time and place are referred to in this Agreement as the
"CLOSING"). At the Closing, the Seller will deliver to the Investor a Bill of
Sale (attached as EXHIBIT A) evidencing transfer of the Purchased Interests
against delivery to the Seller by Investor of the full purchase price of such
Purchased Interests, paid by (i) a check payable to the Seller's order, (ii)
wire transfer of funds to the Seller or (iii) any combination of the foregoing,
as determined by the Seller.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
(referred to as the "Warrantor"), hereby represents and warrants to Investor
that the statements in the following paragraphs of this SECTION 3 are all true
and correct.
3.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware. The Seller has all requisite company and corporate power and
authority to own its properties and assets and to carry on its business as now
conducted and as currently proposed to be conducted. The Seller is duly
qualified and in good standing to do business as a foreign corporation in each
jurisdiction where failure to be so qualified would have a material adverse
effect on its financial condition, business, prospects or operations.
3.2. DUE AUTHORIZATION. Except as set forth on SCHEDULE 3.2, all
action on the part of the Seller necessary for the authorization, execution,
delivery of, and the performance of all obligations of the Seller under this
Agreement, and for the authorization, issuance, and delivery of all of the
Purchased Interests being sold under this Agreement, has been taken or will be
taken prior to the Closing, and this Agreement constitutes the valid and legally
binding obligations of the Seller, enforceable in accordance with their
respective terms, except as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or others laws of general application relating to or
2
<PAGE>
affecting the enforcement of creditors' rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.
3.3. TITLE TO AND VALID ISSUANCE OF THE PURCHASED INTERESTS.
(a) At Closing, the Seller has and will transfer to the Investor
good, valid and marketable title to all of the Purchased Interests that are sold
hereunder, free and clear of all claims, liens, encumbrances, charges and
options. The Purchased Interests, when issued, sold and delivered in accordance
with the terms of this Agreement for the consideration provided for herein, will
be duly and validly issued, fully paid and nonassessable.
(b) The Purchased Interests will be issued in full compliance with
applicable exemptions of the U.S. Securities Act of 1933, as amended (the "1933
ACT"), and in compliance with applicable exemptions or the registration and
qualification requirements of all securities laws of those states of the United
States in which are located the addresses shown on EXHIBIT B or in full
compliance with the registration and prospectus delivery requirements of the
1933 ACT.
3.4 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or foreign governmental authority on the
part of the Warrantor or the Brazilian Investments is required in connection
with the consummation of the transactions contemplated by this Agreement, EXCEPT
FOR such qualifications or filings, if required, under the 1933 ACT and the
regulations thereunder and all other applicable securities laws of states of the
United States as may be required in connection with the transactions
contemplated by this Agreement and except as set forth on SCHEDULE 3.4. All such
qualifications and filings will, in the case of qualifications, be effective on
the Closing and will, in the case of filings, be made within the time prescribed
by law.
3.5 LITIGATION.
(a) Except as set forth on SCHEDULE 3.5(B), there is no action,
suit, proceeding, claim, arbitration or investigation ("ACTION") pending (or, to
the Warrantor's knowledge, currently threatened) against the LLC or the Seller,
their activities, properties or assets that would have a materially adverse
effect on the LLC or the Brazilian Investments or against any member, officer,
director or employee of the LLC or the Seller in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf of, the
LLC or the Seller. Except as set forth on SCHEDULE 3.5(B), to the knowledge of
the Warrantor, there is no factual or legal basis for any such Action that might
result, individually or in the aggregate, in any material adverse change in the
business, properties, assets, financial condition, affairs or prospects of the
LLC. Neither the LLC nor the Seller is a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality and there is no Action by the LLC currently pending or
which the LLC intends to initiate.
3
<PAGE>
(b) Except as set forth on SCHEDULE 3.5(B), to the knowledge of the
Warrantor, there is no Action pending or currently threatened against the
Brazilian Investments, their activities, properties or assets that would have a
materially adverse effect on the Brazilian Investments or, to the knowledge of
the Warrantor, against any officer, director, or employee of the Brazilian
Investments in connection with such officer's, director's or employee's
relationship with, or actions taken on behalf of the Brazilian Investments.
Except as set forth on SCHEDULE 3.5(B), to the knowledge of the Warrantor, there
is no factual or legal basis for any such Action that might result, individually
or in the aggregate, in any material adverse change in the business, properties,
assets, financial condition, affairs or prospects of the Brazilian Investments.
To the knowledge of the Warrantor, the Brazilian Investments are not a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality and there is no Action by
the Brazilian Investments currently pending, or which the Brazilian Investments
intend to initiate.
3.6 COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any violation or default, or
be in conflict with or constitute, with or without the passage of time or the
giving of notice or both, either a default under the Seller's Articles of
Incorporation, bylaws or similar organizational documents or any agreement or
contract of the Seller or, to the knowledge of the Seller, a violation of any
statutes, laws, regulations or orders.
3.7 DISCLOSURE. This Agreement and the Schedules and Exhibits hereto
(when read together) do NOT contain any untrue statement of a material fact and
do not omit to state a material fact necessary to make the statements therein or
herein not misleading. To the knowledge of the Seller, there has been no
material adverse change in the business, affairs, operations, properties, assets
or condition of the LLC not previously disclosed to the Investor in writing or
set forth on SCHEDULE 4.8 attached hereto, described in the ALL Shareholders
Agreements, described in SCHEDULE 5.7 attached hereto, or set forth in the LLC's
Balance Sheet as of September 30, 1999, or the LLC's 1998 Federal income tax
return previously provided to Investor; however, changes in the currency
exchanges, devaluations or other material changes in the Brazilian currency or
changes in the business, affairs, prospects, operations, properties, assets,
valuation or condition of ALL, FCA, FSA, or the Brazilian Investments shall not
be deemed to constitute a material adverse change. Notwithstanding anything else
in this Agreement to the contrary, the Seller makes no representation or
warranty as to the business, affairs, prospects, operations, properties, assets,
valuation or condition of ALL, FCA, FSA or the Brazilian Investments.
4. REPRESENTATIONS AND WARRANTIES OF INVESTOR. Investor hereby
represents and warrants to the Seller that:
4
<PAGE>
4.1 ORGANIZATION, GOOD STANDING. The Investor is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has all requisite power and authority to own it
properties and assets and to carry on its business as now conducted and as
presently proposed to be conducted. The Investor is duly qualified and in good
standing to do business as a foreign limited liability company in each
jurisdiction where failure to be so qualified would have a material adverse
effect on its financial condition, business, prospects or operations.
4.2 AUTHORIZATION. This Agreement constitutes the Investor's valid
and legally binding obligation, enforceable in accordance with its terms except
as may be limited by (i) applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies. The Investor represents that it has full
power and authority to enter into this Agreement.
4.3. LEGEND. It is understood that any evidence of the
Purchased Interests will bear the legend set forth below:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTOR SHOULD BE AWARE THAT IT MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
4.4. LITIGATION. There is no Action pending or, to the knowledge of
the Investor, threatened against the Investor, its activities, properties or
assets that would delay, prevent, hinder or materially adversely effect
Investor's consummation of the transactions contemplated in this Agreement.
4.5. GOVERNMENTAL CONSENTS. To the knowledge of the Investor, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state, local or foreign
governmental authority on the part of the Investor is required in connection
with the consummation of the transactions contemplated by this Agreement, except
for such qualifications or filings, if required, under the 1933 Act and the
regulations thereunder and all other applicable securities laws of the states of
the United States as may be required in connection with the transactions
contemplated by this Agreement, except as set forth on SCHEDULE 3.4. All
5
<PAGE>
such qualifications and filing required of the Investor will, in the case of
qualification, be effective on the Closing and will, in the case of filings, be
made within the time prescribed by law.
4.6 COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any violation or default, or
be in conflict with or constitute, with or without the passage of time or the
giving of notice or both, either a default under the Investor's Articles of
Organization, Operating Agreement or similar organizational documents or any
agreement or contract of the Investor or, to the knowledge of the Investor, a
violation of any statutes, laws, regulations or orders.
4.7 FUNDS AVAILABLE. The Investor has, or will have prior to the
Closing, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to make payment of the Purchase Price.
4.8 INVESTMENT. The Investor (i) understands that the Purchased
Interests have not been, and will not be, registered under the 1933 act and the
regulations thereunder or under any state securities laws, and that the
Purchased Interests are being offered and sold in reliance upon federal and
state exemptions for transactions not involving a public offering; (ii) is
acquiring the Purchased Interests solely for its own account and for investment
purposes, and not with a view to the distribution thereof, (iii) is a
sophisticated investor with knowledge and experience in business and financial
matters, (iv) has had the opportunity to obtain such information concerning the
LLC, the Seller, and the Brazilian Investments from the LLC, the Seller and the
Brazilian Investments as it desired to evaluate the risks of purchasing and
owning the Purchased Interests, including without limitation, any currency
exchange risks, (v) has received and had the opportunity to review the financial
and other information delivered at the October 21, 1999, ALL Board of Directors'
Meeting, a copy of which is attached hereto as SCHEDULE 4.8 (hereinafter
referred to collectively as the "ALL Financial Information"), (vi) has obtained
the advice of its own investment advisers, legal counsel and accountants in
determining whether to enter into this Agreement or to purchase the Purchased
Interests pursuant to this Agreement, (vii) is able to bear the economic risk
and the lack of liquidity inherent in owning and holding the Purchased
Interests, and (viii) has not received or relied upon any information, whether
written or oral, that would guarantee any return on the Investor's investment or
indicate that the Investor's investment does not involve a high degree of risk
or that the Investor may suffer a complete loss of its Investment.
4.9 DISCLOSURE. To the knowledge of Investor, this Agreement and the
Schedules and Exhibits hereto (when read together) do not contain any untrue
statement of material fact and do not omit to state a material fact necessary to
make the statements therein or herein not misleading.
6
<PAGE>
5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of the
Investor to the Company under SECTION 2 of this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions, the waiver of which shall not be effective against the Investor
without Investor's consent to such waiver, which consent may be given by
written, oral or telephone communication to the Company or its counsel:
5.1 REPRESENTATIONS AND WARRANTIES TRUE. Each of the
representations and warranties of the Seller contained in SECTION 3 shall be
true and correct in all material respect on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
the date of the Closing.
5.2 PERFORMANCE. The Seller shall have performed and complied in
all material respects with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or
before the Closing and shall have obtained all approvals, consents and
qualifications necessary to complete the purchase and sale described herein.
5.3 COMPLIANCE CERTIFICATE. The Seller shall have delivered to the
Investor at the Closing a certificate signed on its behalf by its President,
Chief Executive Officer, or Chief Financial Officer, as the case may be,
certifying that the conditions specified in SECTIONS 5.1 and 5.2 have been
fulfilled.
5.4 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor and to the counsel for Investor, and Investor shall
have received all such counterpart originals and certified or other copies of
such documents as may reasonably be requested. Such documents shall include (but
not be limited to) the following:
(a) SECRETARY'S INCUMBENCY CERTIFICATE. A certificate of the
Secretary or an Assistant Secretary or other officer of the Seller certifying
the names of the officers of the Seller authorized to sign this Agreement, and
the other documents, instruments or certificates to be delivered pursuant to
this Agreement by the Seller or any of its officers, together with the true
signatures of such officers.
(b) CORPORATE ACTIONS. A copy of the resolutions of the Board of
Directors and the shareholders of the Seller evidencing the approval of this
Agreement, the transfer of the Purchased Interests and the other matters
contemplated hereby, and a copy of the Bylaws of the Seller, certified by the
Secretary of the Seller to be true, complete and correct.
(c) GOOD STANDING CERTIFICATES. Good standing certificates for the
Seller issued by the appropriate government authority dated within five (5) days
of the Closing.
7
<PAGE>
5.5 INVESTOR'S INVESTMENT COMMITTEE APPROVAL. The Investor shall
have received from its Investment Committee at its December 15, 1999, meeting
(or at an earlier held meeting of the Investment Committee) approval of the
transactions contemplated by the terms of this Agreement.
5.6 GOVERNMENT APPROVAL. The Government of Brazil shall have
approved the sale of the Purchased Interests pursuant to this Agreement.
5.7 SALE OF FCA. The sale and closing of the FCA stock held by the
LLC (more particularly described in SCHEDULE 5.7 hereof) shall have occurred and
the distribution by the LLC of the proceeds of this sale as described in SECTION
7 hereof shall have occurred.
5.8 COMPLIANCE WITH UNDERLYING DOCUMENTS; WAIVER OF RIGHT OF FIRST
REFUSAL. The Investor is satisfied in its sole discretion that the transaction
contemplated by this Agreement or any action that is required or permitted by
this Agreement: (i) is not prohibited under any agreement or law pursuant to
which the Brazilian Investments were issued or subject, including, without
limitation, the related Shareholders' Agreements for ALL and the Brazilian
Investments Privatization Prospectuses (collectively the "Underlying Documents")
and (ii) that the right of first refusal contained in the ALL Shareholders'
Agreement in favor of the existing shareholders of ALL has been exercised, the
period for exercising such right of first refusal has expired, or such right of
first refusal has been waived or surrendered by the other parties to that
agreement.
5.9 BOARD MEMBERSHIP. The Investor shall have received assurances
satisfactory to it in its sole discretion that the LLC's right to serve on the
Board of Directors of ALL, as provided in the Underlying Documents, shall be
assigned to it after the Closing.
6. CONDITIONS TO THE SELLER'S OBLIGATIONS AT CLOSING. The obligations of
the Seller to the Investor under this Agreement are subject to the fulfillment
or waiver on or before the Closing of each of the following conditions by such
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of such Investor contained in SECTION 4 shall be true and correct on
the date of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
6.2 PERFORMANCE AND PAYMENT OF PURCHASE PRICE. The Investor shall
have delivered to the Company the purchase price in accordance with the
provisions of SECTION 2, and the Investor shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed
8
<PAGE>
or complied with by it on or before the Closing and shall have obtained all
approvals, consents and qualifications necessary to complete the purchase
described herein.
6.3 COMPLIANCE CERTIFICATE. The Investor shall have delivered to the
Seller at the Closing a certificate signed on its behalf by its President, Chief
Executive Officer or Chief Financial Officer, as the case may be, certifying
that the conditions specified in SECTIONS 6.1 and 6.2 have been fulfilled.
6.4 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Seller and to their counsel, and the Seller shall have received
all such counterpart originals and certified or other copies of such documents
as may reasonably be requested.
6.5 GOVERNMENTAL APPROVAL. The Government of Brazil shall have
approved the sale of the Purchased Interests pursuant to this Agreement.
6.6 COMPLIANCE WITH UNDERLYING DOCUMENTS. The Seller is satisfied in
its sole discretion that the transaction contemplated by this Agreement or any
action that is required or permitted by this Agreement: (i) is not prohibited
under any agreement or law pursuant to which the Brazilian Investments were
issued or subject, including, without limitation, the Underlying Documents or
(ii) if such transaction or action triggers a right of first refusal contained
in the ALL Shareholders' Agreement in favor of the existing shareholders of
ALL, such right of first refusal has been exercised, the period for exercising
such right of first refusal has expired, or such right of first refusal has
been waived or surrendered by the other parties to that agreement.
6.7 SALE OF FCA. The sale and closing of the FCA stock held by the
LLC (more particularly described in SCHEDULE 5.7 hereof) shall have occurred
and the distribution by the LLC of the proceeds of this sale as described in
SECTION 7 hereof shall have occurred.
6.8 PAYMENT OF REDUCTION AMOUNT. The Reduction Amount shall have
been distributed in full in cash to the Seller by the LLC.
6.9 INVESTOR'S INVESTMENT COMMITTEE APPROVAL. The Investor shall
have received from its Investment Committee at its December 15, 1999, meeting
(or at an earlier held meeting of the Investment Committee) approval of the
transactions contemplated by the terms of this Agreement. In the event such
approval is not obtained by December 15, 1999, the Seller may terminate this
Agreement by giving written notice to the Investor of such termination.
7. AMENDMENTS TO THE OPERATING AGREEMENT. The Seller and the Investor are
the sole members of the LLC and entered into an Operating Agreement dated
December 30, 1998 (the "Operating Agreement") that governs their
9
<PAGE>
relationship as members of the LLC. Notwithstanding any provision of the
Operating Agreement to the contrary the provisions of this Section 7 shall
govern and shall constitute an amendment to the Operating Agreement in
accordance with section 11.7 of the Operating Agreement.
7.1 AUTHORITY TO EXECUTE, PERFORM AND CLOSE IN ACCORDANCE WITH THE
TERMS OF THIS PURCHASE AGREEMENT. Any provision of the Operating Agreement that
could or might be construed to prevent the Seller and Investor from performing
under this Purchase Agreement is hereby amended to the extent necessary to allow
the Seller and Investor to execute this Purchase Agreement and to fully-perform
hereunder. This covenant shall survive the Closing.
7.2 DISTRIBUTIONS OF FCA PROCEEDS FROM THE LLC. The Closing of the
sale described in this Purchase Agreement is conditioned on the prior closing by
the LLC of the sale of its ownership interest in FCA. The Seller and Investor,
as the sole members of the LLC, hereby amend the Operating Agreement to provide
that the proceeds of the sale of the FCA stock shall be distributed as soon as
practicable by the LLC as follows: in accordance with its existing membership
interest (which is 50.5 percent), the Seller shall receive a distribution of its
share of the proceeds of the sale of the FCA stock solely in cash to the extent
the LLC receives sufficient cash from the sale of the FCA stock to distribute
solely cash to the Seller and, if not, the Seller shall receive a distribution
of its share of the proceeds from the FCA stock first, to the maximum extent
possible, all in cash and the remainder of its entitlement with the stock
received by the LLC form the FCA stock sale; the Investor shall receive a
distribution of its share (which is 49.5 percent) of the proceeds of the sale of
the FCA stock by having assigned to it all the stock received by the LLC from
the FCA stock sale and the remainder of its entitlement in cash, if any. The
Investor shall be permitted to require the LLC to delay its, but not the
Seller's, distribution of the FCA proceeds from the LLC in its sole discretion.
This Section shall survive the termination of this Purchase Agreement.
7.3 DISTRIBUTION OF REDUCTION AMOUNT FROM LLC. The Closing of the
sale described in this Purchase Agreement by the Seller is conditioned on the
prior distribution by the LLC of the Reduction Amount, in cash, to the Seller.
The Reduction Amount relates to the sale of ALL shares owned by the LLC that are
attributable to the Seller's interest in the LLC. It assumes that, if the LLC is
required to sell any shares (or other interests) in ALL before the Investor
acquires the Seller's interest in the LLC, the LLC will be required to sell only
those shares attributable to the Seller's interest in the LLC. If the LLC is
required to sell ALL shares attributable to the Investor's interest in the LLC,
such shares shall not be considered in determining the Reduction Amount nor
shall the proceeds from the sale of such shares be distributed by the LLC to the
Investor until and unless the Seller receives all distributions of cash it is
entitled to under this Purchase Agreement.
7.4 REMOVAL OF THE SELLER AS A PARTY TO THE OPERATING Agreement.
After the Closing of the sale described in this Purchase Agreement, neither
Seller nor
10
<PAGE>
RailTex, Inc. shall be deemed a party to, or have any obligations under, the
Operating Agreement, including, without limitation, any obligations set forth in
Sections 8.6 of the Operating Agreement. Notwithstanding the previous sentence,
(i) nothing in this Purchase Agreement relieves Seller of any liability Seller
has, or may have, as a result of being a member of the LLC, and (ii) nothing in
this Purchase Agreement shall modify or terminate Sections 10.1, 10.2, and 11.9
of the Operating Agreement, which shall continue to apply to Seller and the
Investor as if Seller and the Investor both remained members of the LLC.
8. MISCELLANEOUS.
8.1 TO THE KNOWLEDGE OF WARRANTOR, ETC. For purposes of this
Agreement, the phrase "to the knowledge of the Warrantor", "to the Warrantor's
knowledge", "to the knowledge of the Investor", or "to the Investor's knowledge"
or any similar phrase shall mean only, unless expressly indicated otherwise in
this Agreement, the actual knowledge of a particular fact or matter by an
individual who is serving as an executive officer of the Warrantor or the
Investor, as the case may be, without attribution to such executive officer or
the Warrantor or the Investor, as the case may be, of facts or matters within
the personal knowledge of any other person and without any obligation whatsoever
of inquiry or independent investigation by any of the executive officers or the
Warrantor or the Investor, as the case may be. No executive officer or the
Warrantor or the Investor shall have any liability to any party of this
Agreement as a result of any actual knowledge or the disclosure of such actual
knowledge herein. For purposes of this Agreement, executive officers of the
Warrantor shall mean those persons holding the following offices of RailTex,
Inc., or the Seller: Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, Vice President - Acquisition, Chairman of the Board, or any
other officer or person whose responsibilities include those customarily
associated with the foregoing offices or who would be deemed "officers" under
Section 16(b) of the Securities and Exchange Act of 1933. For purposes of this
Agreement, executive officers of the Investor shall mean those persons holding
the following offices of the Investor or the LLC: Chief Executive Officer, Chief
Financial Officer, Chief Operating Officer, Vice President - Acquisition,
Chairman of the Board, or any other officer or person whose responsibilities
include those customarily associated with the foregoing offices or who would be
deemed "officers" under Section 16(b) of the Securities and Exchange Act of
1933. The names of individuals who have held such offices or positions of the
Warrantors as of November 1, 1999, are set forth on SCHEDULE 8.1.
8.2 SURVIVAL OF WARRANTIES. The representations, warranties and
covenants of the Warrantor and the Investor contained in or made pursuant to
this Agreement (including, without limitation, any contained in any certificate
or other document delivered at the Closing) shall survive for two (2) years from
the execution and delivery of this Agreement and the Closing, but shall
thereafter terminate and be of no further force or effect except to the extent
they relate to claims made in writing prior to or
11
<PAGE>
on such date. EXCEPT AS SET FORTH IN THIS AGREEMENT, NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER ARE MADE BY ANY PARTY TO THIS AGREEMENT TO ANY OTHER PARTY
TO THIS AGREEMENT, AND ALL PARTIES TO THIS AGREEMENT DISCLAIM ALL LIABILITY AND
RESPONSIBILITY WITH RESPECT TO ANY REPRESENATION, WARRANTY, STATEMENT OR
INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO ANY OTHER PARTY TO
THIS AGREEMENT (INCLUDING, BUT NOT LIMITED TO, ANY OPINION, INFORMATION OR
ADVICE WHICH MAY HAVE BEEN PROVIDED TO ANY PARTY TO THIS AGREEMENT BY ANY
OFFICER, STOCKHOLDER, PARTNER, DIRECTOR, EMPLOYEE, AGENT, AFFILIATE, CONSULTANT,
TRUSTEE OR REPRESENTATIVE OF ANY OTHER PARTY).
8.3 LIMITATION OF LIABILITIES. Notwithstanding any other provision
in this Agreement, no party to this Agreement shall have any liability to any
other party to this Agreement for a breach of representation, warranty or
covenant after the Closing unless the party alleging a breach of a
representation, warranty or covenant (the "Injured Party") gives written notice
to the party who allegedly breached a representation, warranty or covenant (the
"Injuring Party") within two (2) years after the Closing; PROVIDED, HOWEVER, no
Injured Party may assert a claim against an Injuring Party unless and until the
Injured Party incurs actual Damages (as defined below), individually or in the
aggregate, in excess of $25,000 and PROVIDED FURTHER, no Injured Party may
assert a claim for Damages in any amount, individually or in the aggregate, in
excess of the Purchase Price. THE REMEDY SET FORTH IN THIS SECTION 8.3 IS THE
SOLE AND EXCLUSIVE REMEDY AVAILABLE TO AN INJURED PARTY FOR ANY CLAIM ARISING
UNDER THIS AGREEMENT AFTER THE CLOSING, including without limitation, any breach
or inaccuracy of any of the representations, warranties, covenants or agreements
set forth in this Agreement or in any exhibit, schedule or other document
delivered pursuant hereto, and ANY OTHER CLAIM OR REMEDY IS HEREBY WAIVED. For
purposes of this Agreement, "Damages" shall include, without limitation, all
losses, costs, liabilities, damages and expenses (including, without limitation,
attorneys' fees) that arise from all actions, suits, proceedings, demands and
judgments.
8.4 LEGAL FEES FOR BRAZILIAN GOVERNMENT APPROVAL. The ALL
Shareholders' Agreements, the Concession Agreement, the Brazilian Investments
Privatization Prospectus (the "Prospectus") and Brazilian law prohibit (i) any
shareholder from, directly or indirectly, owning more than twenty percent (20%)
of all of the voting capital of ALL and (ii) any shareholder from transferring,
directly or indirectly, the voting capital of ALL, unless authorized by the
Brazilian government. Accordingly, Brazilian governmental approval will be
sought for the sale of the Purchased Interests contemplated in this Agreement.
Investor and Seller will share the legal fees associated with obtaining the
Brazilian government approval, with Investor paying forty-nine and one-half
percent (49.5%) and Seller paying fifty and one-half percent (50.5%) of such
legal fees.
12
<PAGE>
8.5 DISSOLUTION OF THE LLC. After the Closing of the sale described
in this Purchase Agreement, the Investor contemplates, in conformance with
Delaware law, (i) dissolving, but is not required to dissolve, the LLC, and (ii)
distributing all of the LLC's assets and liabilities to itself. Prior to taking
any such actions, the Investor shall agree to be bound by, and shall become a
party to, the ALL Shareholders' Agreement.
8.6 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed
under the internal laws of the State of Texas, without reference to principles
of conflict of laws or choice of laws.
8.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 HEADINGS. The headings and captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
8.10 NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if deposited in the U.S. mail by registered or
certified mail, return receipt requested, postage prepaid, as follows:
IF TO INVESTOR, at
GEEMF II LATIN AMERICA, L.L.C.
1225 Eye Street, N.W.
Suite 900
Washington, D.C. 20005
Attention: Wendell W. Robinson
with a copy to
Jackson & Campbell, P.C.
1120-20th Street, N.W.
South Tower
Washington, D.C. 20036
13
<PAGE>
Attention: Robert E. Rider, Esquire
IF TO THE SELLER, at
RailTex, Inc.
4040 Broadway
Suite 200
San Antonio, TX 78209
Attention: General Counsel
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the mail in the manner set forth above.
8.11 NO FINDER'S FEES. Neither the Investor nor any officer,
director, or employee of the Seller (i) employed any broker or finder, or (ii)
incurred any liability whatsoever, for any brokerage fees, commissions, or
finders' fees in connection with the transactions contemplated hereby. The
Investor agrees to indemnify and to hold harmless the Seller from any liability
for any commission or compensation in the nature of a finders' or broker's fee
(and any asserted liability) for which the Investor or any of its officers,
partners, employees, or representatives is responsible. The Seller agree to
indemnify and hold harmless the Investor from any liability for any commission
or compensation in the nature of a finder's or broker's fee (and any asserted
liability) for which the Company or any of their officers, employees or
representatives is responsible.
8.12 ATTORNEYS' FEES. If any action at law or in equity, or
mediation is necessary to enforce or interpret the terms of this Agreement, the
Operating Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
8.13 DISPUTE RESOLUTION.
(a) In the event any dispute shall arise under this Agreement,
the party raising the dispute shall notify the other party in writing of the
dispute or disagreement and provide the other party with all pertinent
information and state its position on the matter. The parties shall then meet to
agree upon a mediator. The parties shall submit the dispute to the mediator so
chosen and mediation shall take place within thirty (30) days of the date of the
original notice. Unless the parties agree otherwise, if the dispute is not
resolved for any reason, including but not limited to failure to agree on the
choice of a mediator, within sixty (60) days from the date the original notice
of the dispute was sent, the parties shall submit the dispute to binding
arbitration in accordance with SECTIONS 8.13(B), (C) and (D) hereof.
14
<PAGE>
(b) Subject to the prior requirement of mediation pursuant to
SECTION 8.13(A), any claim or controversy arising out of or relating to this
Purchase Agreement or the breach of this Purchase Agreement shall be settled by
final and binding arbitration in New York, NY in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the date
of the event giving rise to the claim or controversy.
(c) All claims or controversies subject to arbitration shall
be submitted to arbitration within six (6) months from the date that a written
notice of a request for arbitration is effective. All claims or controversies
shall be resolved by a panel of three (3) arbitrators who are licensed to
practice law in the State of New York and who are experienced in the arbitration
of commercial matters. These arbitrators shall be selected in accordance with
the Commercial Arbitration rules of the American Arbitration Association in
effect at the time the claim or controversy arises. Either party may request
that the arbitration proceeding be stenographically recorded by a Certified
Shorthand Reporter. The arbitrators shall issue a written decision with respect
to all claims or controversies within thirty (30) days from the date the claims
or controversies are submitted to arbitration. The parties shall be entitled to
be represented by legal counsel at any arbitration proceedings. Each party to
the arbitration shall bear their PRO RATA cost of the arbitration proceeding,
and each party shall be responsible for paying its own attorneys' fees, if any,
unless the arbitrators determine otherwise.
(d) The arbitration provisions in this Purchase Agreement may
be specifically enforced by either party, and submission to arbitration
proceedings may be compelled by any court of competent jurisdiction. The
decision of the arbitrators may be specifically enforced by either party in any
court of competent jurisdiction.
8.14 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Seller and the Investor.
8.15 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
8.16 ENTIRE AGREEMENT. This Agreement, together with all exhibits
and schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
15
<PAGE>
8.17 FURTHER ASSURANCES. From and after the date of this Agreement,
upon the request of the Investor or the Seller, the Seller and the Investor
shall execute and deliver such instruments, documents or other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANY:
RAILTEX INTERNATIONAL HOLDINGS, INC.,
a Texas corporation
By: /s/ JOSEPH P. JAHNKE
Its: Vice President
ADDRESS: 4040 Broadway, Suite 200
San Antonio, Texas 78209
THE INVESTOR:
GEEMF II LATIN AMERICA. L.L.C.
a Delaware limited liability company
By: GEEMF II HOLDING, L.L.C., its
Managing Member
By: GLOBAL ENVIRONMENT EMERGING MARKETS
FUND, II, L.P., its Managing Member
16
<PAGE>
By: GLOBAL ENVIRONMENT INVESTMENT
MANAGEMENT COMPANY, L.L.C., its General
Partner
By: /s/ WENDELL W. ROBINSON
Wendell W. Robinson, Vice President
ADDRESS: Suite 900
1225 Eye Street, N.W.
Washington, DC 20005
For value received, the undersigned (or its successor or assign), who is the
sole shareholder of Seller, guarantees the payment to Investor (or its successor
or assign) of any damages or other amounts due Investor by Seller under this
Agreement (and only under this Agreement) in connection with Seller's breach of
this Agreement, including the breach of any representation or warranty made by
Seller under this Agreement. The undersigned shall not otherwise be deemed a
party to this Agreement. In addition, the undersigned shall have no liability in
excess of Seller's liability under this Agreement, and all such liability shall
be subject to all of the limitations on liability set forth in this Agreement,
including, without limitation, those limitations on liability set forth in
Sections 8.2 and 8.3 of this Agreement.
RAILTEX, INC.,
a Texas corporation
By: /s/ JOSEPH P. JAHNKE
Its: Vice President
ADDRESS: 4040 Broadway, Suite 200
San Antonio, Texas 78209
17
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 3.2 Due Authorization
Schedule 3.4 Governmental Consents
Schedule 3.5(b) Pending or Contingent Claims
Schedule 5.7 Description of the FCA Stock Sale
Schedule 6.7 Description of the FCA Stock Sale
Schedule 8.1 Executive Officers of the Warrantor
EXHIBITS
Exhibit A Bill of Sale
Exhibit B Investor's Ownership Interest in LLC acquired
pursuant to this Purchase Agreement
<PAGE>
SCHEDULE 3.2
The below summary assumes the sale of the LLC's FCA shares have been
concluded, and does not summarize the terms of the FCA Shareholders' Agreements:
The ALL Shareholders' Agreements, in general, prohibit the Company from,
directly or indirectly, selling, granting, transferring or disposing
(collectively, a "Transfer") of the ALL shares unless the other holders are
given a right of first refusal to purchase the ALL shares indirectly owned by
the Company. Any Transfer in violation of the ALL Shareholders' Agreements is
null and void and may entitle the other parties to specific performance and a
"fine" of five percent (5%) of the net worth of ALL, as damages.
The ALL Shareholders' Agreements, the Concession Agreement, the Brazilian
Investments Privatization Prospectus (the "Prospectus") and Brazilian law also
prohibit (i) any shareholder from, directly or indirectly, owning more than
twenty percent (20%) of all of the voting capital of ALL and (ii) any
shareholder from transferring, directly or indirectly, the voting capital of
ALL, unless authorized by the Brazilian government. Accordingly, Brazilian
governmental approval will be sought for the sale of the Purchased Interests
contemplated in this Agreement.
Copies of the ALL Shareholders' Agreements have been provided to the
Investor and English and Portuguese versions are attached as copies hereto. The
above constitutes only a summary of certain provisions of the ALL Shareholders'
Agreements and is based upon the English versions available to us. The entire
ALL Shareholders' Agreements are incorporated by reference. Copies of the
Prospectuses and the Concession Agreement have previously been provided or made
available to the Investor and are incorporated by reference.
<PAGE>
SCHEDULE 3.4
Schedule 3.2 is incorporated by reference.
<PAGE>
SCHEDULE 3.5(B)
Two lawsuits have been filed by CVRD and CSN against the other controlling
FCA shareholders (collectively, the "Other FCA Shareholders") as a result of the
FCA Board's approval of FCA entering into an operating agreement with FSA: a
writ of injunction (acao cautelar) and a main action (acao ordinaria). To the
knowledge of the Company, only the Company, not the LLC, has been served with
summons regarding the writ of injunction. (The Company was incorrectly named as
one of the Other FCA Shareholders.) In connection with the writ of injunction,
the lawyers for the Other FCA Shareholders have also filed an interlocutory
appeal (agravo de instrumento) against the preliminary order granted by the
Court, which preliminary order stayed the implementation of the operating
agreement. These lawsuits will be dismissed as part of the proposed purchase of
the Other FCA Shareholders' FCA shares, including the FCA shares owned by the
LLC. This transaction is described in more detail on SCHEDULE5.7.
<PAGE>
SCHEDULE 5.7
Over the past several months, the Other FCA Shareholders, including
the LLC, have negotiated the sale of all of their shares in FCA. It is
anticipated that a Memorandum of Understanding ("MOU") will be signed sometime
over the next several weeks providing for such sale. As a result of the sale, it
currently is contemplated that the LLC will receive (i) approximately
R$15,435,254.91 in exchange for 9,512,579 FCA shares owned by the LLC and (ii)
11.92% of the shares of SPE II in exchange for 3,675,936 FCA shares owned by the
LLC. The LLC will also pay approximately 15.35% of the R$1.6 million expenses
estimated to be incurred in connection with the transaction, including, without
limitation, expenses incurred to obtain governmental approval of the
transaction. (These amounts exclude the legal fees incurred by the LLC, the
Investor or the Seller to evaluate the draft MOUs or to accomplish the
transactions contemplated to be performed by each of them under the MOU.) The
sale is subject to, among other things, governmental approval, and is expected
to close within one or two months of the execution of the MOU. A copy of the
latest draft of the MOU (in English) is attached hereto and its provisions are
incorporated by reference.
<PAGE>
SHEDULE 6.7
Schedule 5.7 is incorporated by reference.
<PAGE>
SCHEDULE 8.1
EXECUTIVE OFFICERS OF THE WARRANTOR
RAILTEX, INC.
Ronald A. Rittenmeyer Chairman of the Board, Chief
Executive Officer and
President
John M. Houis Senior Vice President -
Operations
Thomas W. Arnst Senior Vice President,
General Counsel and Secretary
Joseph P. Jahnke Senior Vice President, Chief
Financial Officer
Mark A. Phariss Vice President, Associate
General Counsel
Julie B. Herbort Vice President, Controller
Bruce M. Flohr Founder, Chairman Emeritus
RAILTEX INTERNATIONAL HOLDINGS, INC.
Ronald A. Rittenmeyer President
Joseph P. Jahnke Vice President
Thomas W. Arnst Vice President, Secretary
Mark A. Phariss Vice President, Assistant
Secretary
Clement J. Wydrg Treasurer
Julie B. Herbort Vice President, Controller
<PAGE>
EXHIBIT A
BILL OF SALE
RailTex International Holdings, Inc., the owner of fifty and
one-half percent (50.5%) of the membership interest in RailTex Global
Investments LLC, in consideration of Three Million Three Hundred Seventy-Five
Thousand Dollars ($3,375,000) paid by GEEMF II Latin America, L.L.C., in cash,
the receipt of which is hereby acknowledged, has sold and hereby conveys to
GEEMF II Latin America, L.L.C., its entire membership interest in RailTex Global
Investments LLC, as set forth in EXHIBIT B to the Purchase Agreement between
RailTex International Holdings, Inc., and GEEMF II Latin America, L.L.C., dated
November 10, 1999, to have and to hold the same unto GEEMF II Latin America,
L.L.C., and its assigns forever, free and clear of all liens and encumbrances.
IN WITNESS WHEREOF, RailTex International Holdings, Inc., has signed and
delivered this bill of sale on ___________________________.
RAILTEX INTERNATIONAL HOLDINGS, INC.,
a Texas corporation
By: _______________________________
Its: _______________________________
ADDRESS: 4040 Broadway, Suite 200
San Antonio, Texas 78209
<PAGE>
EXHIBIT B
SCHEDULE OF INVESTOR
MEMBERSHIP INTEREST PURCHASE
INVESTOR PURCHASED PRICE
- -------- ------------------- ----------
GEEMF II Latin America, L.L.C. 50.5% $3,375,000
1225 Eye Street, N.W.
Suite 900
Washington, D.C. 2005
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
C0NSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,701
<SECURITIES> 0
<RECEIVABLES> 35,417
<ALLOWANCES> 1,350
<INVENTORY> 0
<CURRENT-ASSETS> 43,513
<PP&E> 354,316
<DEPRECIATION> 63,753
<TOTAL-ASSETS> 368,208
<CURRENT-LIABILITIES> 38,411
<BONDS> 121,596
0
0
<COMMON> 930
<OTHER-SE> 154,502
<TOTAL-LIABILITY-AND-EQUITY> 368,208
<SALES> 0
<TOTAL-REVENUES> 134,449
<CGS> 0
<TOTAL-COSTS> 110,987
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 471
<INTEREST-EXPENSE> 7,903
<INCOME-PRETAX> 17,727
<INCOME-TAX> 7,173
<INCOME-CONTINUING> 10,554
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,554
<EPS-BASIC> 1.15
<EPS-DILUTED> 1.13
</TABLE>
