STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT ("Agreement"), dated
this 29th. day of February, 1996, by and between PIONEER RAILCORP,
an Iowa corporation ("Pioneer"), and ▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual
whose principal place of business is at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇ ("Seller"); and KNRECO, INC., d/b/a KEOKUK JUNCTION
RAILWAY, an Iowa corporation ("KNRECO") and KEOKUK UNION DEPOT
COMPANY, an Iowa corporation ("KUD"); WITNESSETH THAT:
WHEREAS Seller is the owner of 126,380 shares of the common
stock of KNRECO, and said shares constitute 66.72% of the issued
and outstanding shares of KNRECO (there being a total of 189,430
shares issued and outstanding); and
WHEREAS Pioneer desires to buy and Seller desires to sell said
shares of stock; and
WHEREAS it is in the best interest of KNRECO and KUD to
cooperate with the contemplated transaction;
NOW, THEREFORE, Seller, KNRECO, KUD and Pioneer, hereby agree
as follows:
1. SALE AND TRANSFER OF SHARES. Subject to the terms and
conditions set forth in this Agreement, Seller will sell, transfer
and convey to Pioneer all 126,380 of the issued and outstanding
shares of KNRECO he owns, plus any and all other rights, options or
warrants Seller may have (the "Shares"), and Pioneer will purchase
said Shares (being the 126,380 shares outstanding, plus any and all
other rights or options Seller may have), for the consideration set
forth in Section 4, hereinbelow.
2. ACQUIRER. Pioneer is an owner of railroads and by reason
of its business and financial experience, and that of its officers
and directors, Pioneer represents and warrants to Seller that it
has the capacity to protect its own interest in the transaction,
and qualifies as an "accredited investor" as defined by the U.S.
Securities & Exchange Commission. Pioneer acknowledges that it has
been informed that the shares have not been registered under the
Securities Act of 1933, or under any state securities act. Pioneer
represents and warrants that it is purchasing the shares for its
own account and not with a view towards resale of the shares.
3. DESCRIPTION OF SHARES. The shares involved in this
transaction will be the common stock of KNRECO, being the only
class of securities issued by KNRECO, and representing 66.72% of
the outstanding shares.
Page 1 of 15.
4. TERMS OF PAYMENT. The Purchase Price ("Price") shall be
paid (less the $5,000 ▇▇▇▇▇▇▇ money downpayment) as follows:
(A) $16.50 per share in cash at Closing; or
(B) At the option of Seller, all or any portion of the
Purchase Price may be paid in shares of Pioneer Common Stock
(hereinafter the "Pioneer Stock"), at a rate of 1 share of Pioneer
Stock per $3.625 of the Purchase Price; to be tendered by
certificate(s) at Closing. Seller shall elect, in writing, not
less than five (5) days before Closing, how much of the Purchase
Price he will take in Pioneer Stock, if he wishes to avail himself
of this right; Provided, that if Seller exercises this right, he
hereby certifies that he recognizes the attributes of the stock
described in Section 5, hereinbelow, and is a resident of a state
that permits the sale without registration under its state
securities laws; and
(C) As a condition of Closing, Pioneer shall promptly upon
the execution of this Agreement make an offer to purchase all of
the issued and outstanding shares of KNRECO (but not the treasury
shares), for the purchase price specified in Section 4(A) and (B),
above. Seller and his counsel have reviewed and approved the
language of the offer to be submitted to the other shareholders of
KNRECO (the "Shareholders"), the form of which is attached hereto
as "Exhibit H". Pioneer shall then transmit said offer to the
Shareholders as expeditiously as possible, but by no means slower
than First Class United States Mail. Shareholders shall have a
deadline of not more than one business day prior to Closing to
return their executed election form, and up to forty-five days to
tender their original stock certificate(s). Pioneer shall accept
a faxed election form as timely, if the original is forwarded with
the stock certificate(s). Pioneer shall pay the cash Purchase
Price at Closing to all Shareholders who tender their stock
certificate(s) with their election form (and shall pay the Pioneer
Stock portion of the purchase price as expeditiously as possible
thereafter), and the remaining Shareholders shall be paid within
five business days of receipt of said certificate(s). Seller shall
assist Pioneer, as required, to enable it to make a prompt
distribution of the Purchase Price to Shareholders.
Notwithstanding the above-specified deadlines, any of the
Shareholders who are not present within the United States of
America or the Dominion of Canada during the time of the offer,
shall be given sixty (60) to return their election and their
original certificate(s) and such tender shall be considered timely;
and
(D) As a further condition of this Agreement, Pioneer shall
provide Seller at Closing with an agreement whereby it will defend,
indemnify and hold Seller harmless in the event that the United
States Small Business Administration (or its successor, designee or
Page 2 of 15.
agent) requires Seller individually to repay the $290,300 loan it
extended to KNRECO and more fully described in a loan agreement and
guaranty dated January 25, 1994.
5. PIONEER STOCK. The Pioneer Stock issued to Seller, as
provided in Section 4(B), above, will not be registered under the
Securities Act of 1933, or any state securities act. It will be
issued as a "private placement", and will be "restricted" as to
resale, pursuant to SEC Rule 144. Seller represents and warrants
to Pioneer that, by virtue of his business and financial
experience, and that of his attorneys and other advisors, he has
the capacity to protect his own interests in this transaction, and
that he qualifies as an "accredited investor" as defined by the
U.S. Securities & Exchange Commission. Seller acknowledges that he
has been informed that the Pioneer Stock has not been registered
under the Securities Act of 1933, or under any state securities
act, and he individually represents and warrants that he is
acquiring the Pioneer Stock for his own account and not with a view
towards resale, and that he will not sell, transfer, pledge or
otherwise dispose of the Pioneer Stock, except in accordance with
SEC Rule 144.
6. DELIVERY OF SHARES. At Closing, Seller shall deliver an
executed ▇▇▇▇ of Sale and Stock Power, in the form attached hereto
as "Exhibit E", along with the original stock certificates (No.
#_______________), and any other appropriate documents, pursuant to
Section 1, representing the total of 126,380 shares to be
transferred, and shall deliver said certificates to Pioneer. Upon
such delivery, Pioneer shall tender the purchase price (including
the cash portion thereof by cashier's or certified check).
7. STB APPROVAL. Pioneer will file (on or before March 1,
1996), and prosecute the appropriate filings with the U.S. Surface
Transportation Board ("STB") to transfer ownership and control of
KNRECO. Pioneer shall pay all costs and expenses incurred in such
proceedings (including the fees of any attorneys retained by
Pioneer), and this transaction is expressly conditioned upon the
parties obtaining such STB approval. Pioneer may terminate this
Agreement prior to Closing in the event of the imposition by the
STB of any term or condition on its approval which is unacceptable
to it, including such conditions as labor protection.
8. OTHER COVENANTS AND CONDITIONS PRECEDENT. In addition to
the STB approval condition contained in Section 7, Pioneer's
obligation to close this Agreement shall be subject to the
following other conditions and covenants:
(A) A due diligence review by Pioneer, including on-site
inspection of the property and equipment (subject to the
execution of Exhibit D), and a review of KNRECO's financial
and traffic information, contracts, agreements, and corporate
Page 3 of 15.
records. Seller, KNRECO and KUD agree to permit free access,
at all reasonable times, to Pioneer for the purpose of such
due diligence review, and agree to arrange a meeting between
Pioneer and KNRECO's customers, at a mutually convenient time
and place.
(B) KNRECO shall not sell, lease, transfer, pledge,
assign, grant any lien or security interest in, or otherwise
encumber or dispose of any asset (other than supplies and
materials in the ordinary course of business), after the date
of this Agreement, except as specifically provided herein.
(C) KUD shall not sell, lease, transfer, pledge, assign,
grant any lien or security interest in, or otherwise encumber
or dispose of any asset (other than supplies and materials in
the ordinary course of business), after the date of this
Agreement, except as specifically provided herein.
(D) Neither KNRECO nor KUD have, since December 31,1995,
nor shall either before closing, pay any dividends,
director fees, grant any bonuses, increases in salaries, wages
or benefits, or make or pay any other compensation, gift, or
remuneration to any shareholder, officer, director, employee,
agent, or other entity which is in excess of their usual or
ordinary wages, salary or benefits.
(E) All Shareholders and all issued and outstanding
shares of every class and series are listed on Exhibit F,
attached hereto, and KNRECO and KUD have not and will not, at
or prior to Closing issue any warrants, options, rights or
additional shares or other shares whatsoever, nor shall any
treasury shares be transferred or reissued; Provided, however,
that nothing contained herein shall prohibit the valid
transfer of existing issued and outstanding shares between
shareholders who have received Pioneer's offer to purchase, if
such transfer is disclosed in writing at least three business
days prior to Closing and the previous owner acknowledges in
writing that he received the offer and transferred such shares
voluntarily and with full knowledge of such offer.
(F) Any personal property present on the railroad
(except for foreign line railcars), or adjoining right-of-way,
shall be assumed to be owned by KNRECO, unless otherwise
disclosed in writing at the execution of this Agreement. All
owned and leased railcars, locomotives and other rolling stock
shall be listed on Exhibit A.
(G) All assets of KNRECO and all assets of KUD, shall,
at Closing, be owned (or leased, if so stated on Exhibit A) by
KNRECO, free and clear of any lien, security interest, or
other encumbrance or claim by any third party, except for
permitted encumbrances listed on Exhibit B.
Page 4 of 15.
(H) Seller and KNRECO covenant that KNRECO will not
enter into, conclude, or otherwise commit itself to any agreement
with Burlington Northern Santa Fe Railway ("BNSF"), or any entity
affiliated with BNSF, at or prior to Closing, pertaining to
crossings, industrial trackage, the "Moar" line, land or track use
or ownership, interchange arrangements, track maintenance,
liability, or similar issues, without the prior written consent of
Pioneer. Seller and KNRECO acknowledge that Pioneer desires to
review this matter and contact BNSF directly prior to entering into
any such agreement.
Seller shall sign a statement at Closing, certifying that the
covenants contained herein have been adhered to.
9. ENVIRONMENTAL DISCLOSURE AND INDEMNIFICATION. Seller and
KNRECO shall, at least five (5) days prior to Pioneer making the
offer to the Shareholders (pursuant to Section 4(C) and 18 herein),
furnish Pioneer a written and signed statement, disclosing any and
all material Environmental Problems known to Seller and/or KNRECO
and/or KUD. Seller warrants and represents that to the best of his
knowledge there are no "Environmental Problems" not so disclosed.
"Environmental Problem" means any claim, demand, request, inquiry,
action or proceeding (whether public or private, formal or
informal) brought under the federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended,
("CERCLA"), or any similar federal, state, or local statute,
ordinance, rule, regulation, order or mandate of whatever nature
which concerns environmental danger, damage, contamination, toxic
wastes, hazardous materials, or the like; or any condition which
could reasonably give rise to such claim or proceeding. Seller
shall assign to Pioneer, KNRECO and KUD, at closing, his rights, if
any, to indemnification from any other entity whose past acts or
omissions might have created latent Environmental Problems.
10. CATASTROPHIC LOSS. In the event KNRECO experiences a
major derailment or accident, natural disaster, or other
catastrophic loss of assets or value between the date of this
Agreement and Closing, Closing shall be extended until repairs are
made and service is restored. In the event that service cannot be
restored within sixty (60) days, either party shall have the right
and option to terminate this Agreement, and neither party shall
have any further liability hereunder.
11. SALE EXCLUSIVE. Seller agrees that Pioneer shall have
the exclusive right to purchase the stock of KNRECO from the date
of this Agreement through the date of Closing (or such later date
as Closing shall be set for pursuant to Section 22), and that he
will not sell, offer for sale, solicit or entertain offers to buy,
or otherwise attempt to market any or all of the stock of KNRECO to
any other party for that time period.
Page 5 of 15.
12. SELLER'S WARRANTY; DISCLOSURE AND INDEMNIFICATION.
(I) Except as disclosed in writing at least five (5) days
prior to Pioneer making the offer to other shareholders (pursuant
to Section 4(C) and 18, herein), Seller warrants and represents
that, having made all appropriate inquiries, he has no knowledge of
the existence of any of the following:
(A) Any outstanding orders, fines, code violations,
investigations or other actions by the Federal Railroad
Administration ("FRA"); the Environmental Protection Agency
("EPA"); the Occupational Safety & Health Administration
("OSHA"); or any other federal or state agency having safety
and/or health jurisdiction.
(B) Any outstanding notices, judgments, orders, suits, or
actions, or any unasserted claims (including any claims under
the Federal Employers' Liability Act ("FELA"), or any other
employment-related claims, such as employment discrimination,
sexual harassment, employee-benefit disputes, Railway Labor
Act proceedings, etc.), involving employees, former employees,
vendors, contractors, lessors, lessees, shippers, shipper
employees or others, including other railroads.
(C) Any correspondence from the City of Keokuk, the U.S. Army
Corps of Engineers, the U.S. Coast Guard, the State of Iowa,
the State of Illinois, or any other entity concerning the
Mississippi River Bridge at Keokuk (including the use,
maintenance, rehabilitation, or condition thereof) and/or any
plans to construct, change, move, modify or enlarge any
levees, flood walls or flood control facilities.
(D) Any default under any agreements, obligations, leases,
mortgages, notes, equipment leases, assignments and/or
security documents of any kind, by KNRECO, or has any event
occurred, or does any condition exist, that, but for the
passage of time and/or the giving of notice, would constitute
such a default.
(E) Any payroll, FICA, railroad retirement, unemployment,
income, real estate, personal property or other taxes or
assessments (including sales, use, excise, fuel or other
federal, state and local obligations), due and payable prior
to Closing and not, in fact, paid, including any unasserted
amounts, interest, fines and/or penalties.
(F) Any correspondence, notice, or communications from or by
any customer of KNRECO to the effect that such customer
intends, or is considering, ceasing or materially reducing its
rail usage (shipping or receiving).
Page 6 of 15.
(G) Any other action which adversely affects the good
standing of the KNRECO as a corporation in Iowa, and/or a
foreign corporation in Illinois.
(H) Any claims by any other railroad for unpaid car hire, car
repair or interline settlements, which amounts are not
included in the financial statements disclosed to Pioneer, or
included in the list provided for in Section 12(II) herein.
Seller represents and warrants that KNRECO is not currently a party
to any litigation, nor has it any outstanding fines, judgments or
other orders against it, nor has it received any notices of
material claims, defaults or liabilities which do not appear on the
financial statements disclosed to Pioneer, or included in the list
provided for in Section 12(II).
(II) Seller agrees to furnish Pioneer an itemized list, three
(3) days before Closing (and to update at Closing, if necessary),
of all payables not shown on the December 31, 1995 financial
statement, if the total amount due any entity is $1,000. or more.
Pioneer and Seller acknowledge that some of these accounts will be
estimates, Seller agrees such estimates will be made in good faith
and using his best judgment. Seller also agrees to furnish
Pioneer, at least three (3) days before Closing, with an itemized
list of all accounts payable and contingent liabilities (including
car hire, car repairs, freight damage claims, derailment expenses,
and the like) which appeared, or should have appeared, in the
December 31, 1995 financial statements, if the total amount due any
entity and not already paid, is in excess of $2,000.
(III) Seller warrants that KNRECO and/or KUD will not violate
any of the covenants contained in Section 8.
(IV) Seller agrees to, and shall, indemnify, protect, and
hold harmless, Pioneer, its officers, directors, employees, agents,
attorneys, insurers, successors and assigns, as well as KNRECO and
KUD, and their officers, directors, employees, agents, attorneys,
insurers, successors and assigns, from and against any and all
undisclosed liabilities, claims, demands, losses, penalties, fines,
judgments, costs and expenses (including court costs and attorney
fees and expenses) "Claims", arising out of, resulting from,
connected with, or based upon, the breach of any warranty, covenant
or representation made in herein, or any of the matters referred to
in Sections 8, 9, 12, 13, 14 and 23, which Seller knew or should
have known to be existing at or prior to Closing and not disclosed
to Pioneer in writing, in accordance with the terms of this
Agreement, prior to Closing. The parties agree that such
indemnification shall only apply to material breaches of Sections
9, 12(I) and (II) and 13, and stipulate that, as used herein
"material" shall be deemed to mean any breach involving Claims
aggregating $7,500 or more; any breach involving Claims aggregating
less than $7,500 shall be deemed not material.
Page 7 of 15.
13. INJURIES AND CROSSING ACCIDENTS. Seller warrants and
represents, to the best of his knowledge there have not been any
employee injuries or any crossing accidents, or motor vehicle
accidents involving the railroad, its trains or other equipment or
vehicles, within the three (3) years prior to the execution of this
Agreement (and that any occurring between the execution of this
Agreement and Closing will be fully disclosed in writing, prior to
Closing).
14. WARRANTIES OF SELLER. Seller represents and warrants to
Pioneer that KNRECO is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Iowa,
and is authorized to do business as a foreign corporation in the
State of Illinois; that Seller has the right, power, legal
capacity, and authority to enter into and perform his obligations
under this Agreement; and that KNRECO is not in default or breach
of any contract or obligation, nor has any event occurred nor does
any condition exist which, but for the passage of time, and/or the
giving of notice, would constitute such a default. KNRECO shall
provide its Secretary's Certificate of the incumbency of its
officers and directors at Closing.
Seller represents and warrants to Pioneer that KUD is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Iowa; and that KUD is not in default
or breach of any contract or obligation, nor has any event occurred
nor does any condition exist which, but for the passage of time,
and/or the giving of notice, would constitute such a default. KUD
shall provide its Secretary's Certificate of the incumbency of its
officers and directors at Closing.
15. WARRANTIES OF PIONEER. Pioneer represents and warrants
to Seller that it has the right, power and legal capacity to enter
into and perform its obligations under this Agreement; that its
Board of Directors, stockholders, and/or any other party having
power or authority to approve this transaction has done so (with
the exception of the STB). Pioneer shall provide its Secretary's
Certificate of the incumbency of its officers at Closing.
16. INSIDER LOANS. Seller, KNRECO, and KUD represent and
warrant that there are no notes or loans (or loan guarantees) to
officers, directors or employees of KNRECO or KUD, and that no such
loans or guarantees shall be created at or before Closing, except
for expense reimbursements due in the ordinary course of business
in an aggregate amount of not more than $1,000, which expenses
shall be documented by the persons involved and paid by KNRECO
prior to Closing.
17. C-CORPORATION STATUS. Seller and KNRECO represent that
KNRECO and KUD are "C-Corporations" under Internal Revenue Service
regulations.
Page 8 of 15.
18. APPROVAL BY KNRECO BOARD. Within five (5) days of the
execution of this Agreement, Pioneer and Seller shall advise the
Board of Directors of KNRECO and KUD of the contents of this
Agreement and the intent of Pioneer to offer to purchase all of the
issued and outstanding shares of KNRECO. If the Board votes to
recommend that the Shareholders of KNRECO accept Pioneer's offer,
the Board shall submit that recommendation to all of the
Shareholders. Pioneer's offer shall include the disclosures
required by Securities & Exchange Commission regulations, including
a copy of Pioneer's most recent Form 10-Q and Form 10-K.
19. OPTION OF PIONEER. In the event that insufficient
numbers of shareholders accept the offer to enable Pioneer to
purchase at least 80% of the issued and outstanding stock at
Closing, Pioneer shall have the option to withdraw from this
transaction; shall be entitled to the return of its ▇▇▇▇▇▇▇ money
deposit, and shall have no further liability hereunder.
20. EMPLOYMENT AGREEMENTS. Pioneer desires to receive the
services of Seller and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to assist in the transition
of KNRECO's operation to Pioneer ownership. Therefore, at Closing,
Pioneer, KNRECO and Seller will enter into an employment contract,
providing for Seller to serve as a management employee, in a
consulting capacity, for a period commencing at Closing, and
running through April 30, 1999, for a salary of $50,000 per year
(paid on a semi-monthly basis). Such services shall consist of
assistance in connection with the transition, advice and
information regarding operations, employees, customers, connecting
railroads, suppliers, and so forth, and assistance with on-going
issues (including accidents, injuries, etc.). Such services shall
be on a best-efforts basis by Seller and will not involve
substantial time commitments, and will generally be in the form of
telephone consultations. Pioneer and KNRECO agree that KNRECO will
also pay Seller's health insurance premiums (for Pioneer Railroad
Services Inc.'s group health coverage); the premiums for Seller's
non-qualified retirement plan insurance policy; and Seller's
clubhouse dues in the Keokuk Country Club.
In the event Pioneer also purchases the shares owned by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), Pioneer agrees that KNRECO will offer
▇▇▇▇▇▇, at Closing, an employment contract providing that he will
be employed as a management employee of KNRECO, in a consulting
capacity, for a period commencing at Closing, and running through
July 31, 1998, at an annual salary of $30,000 per year, payable
semi-monthly. KNRECO shall also pay the premiums on ▇▇▇▇▇▇'▇ ▇▇▇▇▇
insurance under the Pioneer group policy and the premiums on his
non-qualified retirement plan insurance policy; and KNRECO will
change the beneficiary on the life insurance benefit on such policy
to such person as ▇▇▇▇▇▇ may direct.
21. CLOSING. The transfer of the ownership of the shares
from Seller to Pioneer (herein "Closing") shall take place on
Page 9 of 15.
Tuesday, March 12, 1996, at 4:00 p.m. CST, at the offices of KNRECO
in Keokuk, Iowa. The certificates, ▇▇▇▇ of Sale and Stock Power,
consideration, and other documentation shall be physically
exchanged by the parties at Closing, as provided in Sections 4, 6,
8, 20, 24, 26 and 28 herein.
22. EXTENSION OF CLOSING. If, for any reason beyond the
control of the parties, Closing cannot take place as provided in
Section 21, either party shall have the right and option to extend
the date of Closing for up to thirty (30) days.
23. EMPLOYEE MATTERS. Seller, KNRECO and KUD hereby
represent and warrant that there are no contracts currently in
force with any officer, director, employee or independent
contractor of KNRECO or KUD with respect to continued employment or
severance pay, or which would otherwise inhibit KNRECO's or KUD's
right to terminate such person's employment or contractual
relationship, without cause or notice (other than the contracts
listed in Exhibit G), and Seller, KNRECO and KUD agree not to enter
into any such contract at or before Closing, except with the
written consent of Pioneer.
24. STATUS OF COMPANY AT CLOSING. Seller, KNRECO and KUD
shall deliver original, true and correct copies of any and all
deeds, abstracts of title, plats, leases, tariff and rate
agreements, interchange agreements, surcharge agreements, demurrage
and car hire agreements, and all other contracts and agreements;
track charts; valuation maps; blueprints; articles of
incorporation, by-laws, state corporation records, minutes of
shareholder and Board of Directors meetings, the Iowa Certificates
of Incorporation, the stock transfer books (including all canceled
stock certificates), the corporate seals; the original stock
certificates of the Keokuk Union Depot Company, and all other
subsidiaries of KNRECO; all keys to switch locks, the depot and any
other structures; and all accounting, financial, traffic,
maintenance, employee and other books and records of KNRECO and
KUD, to Pioneer at Closing. All existing contracts, leases and
agreements shall be left in force, including any railcar storage
agreements, and all insurance policies.
25. COOPERATION OF PARTIES. Seller, KNRECO and KUD agree to
cooperate with Pioneer in the transition of control of KNRECO and
KUD; to provide such information as Seller, KNRECO and KUD have on
any and all facets of the business, and to assist in any on-going
matters. The parties agree that, in addition to the documents
referred to hereinabove, each party will deliver such other or
additional documentation as is reasonably required by their
respective counsel. Pioneer and KNRECO agree to allow Seller
reasonable access to the books and records of KNRECO for the
purpose of preparing any taxes or other documents required or for
responding to any IRS inquiries or audits relating to periods prior
to Closing.
Page 10 of 15.
26. NON-COMPETITION. As part of this Agreement, and as part
of the consideration for the employment contracts provided for in
Section 20, Seller agrees that he will execute at Closing a non-competition
agreement, in the form attached hereto as "Exhibit C"
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall, as part of the consideration for his
employment contract, be required to execute at Closing, a non-competition
agreement, in substantially the same form.
27. BROKERS; ATTORNEYS. The parties jointly represent that
no broker procured this sale, and that no commission is due any
broker, sales agent, or other third party. The parties agree that
KNRECO shall be responsible for all legal fees incurred in
connection with the review, drafting, and negotiation of this
Agreement, up until the time it is executed, which fees shall not
exceed $6,100. All legal fees incurred in connection with this
transaction after execution of this Agreement, with the exception
of the preparation of appropriate filings for the approval of the
transaction by the STB, shall be the sole responsibility of Seller.
28. KNRECO OFFICERS AND DIRECTORS. All the then-current
officers, and directors of KNRECO and KUD will be required to
resign their positions, in writing, effective at Closing. Any
compensation, severance, or other consideration due any officer,
director or employee of KNRECO or KUD by reason of his service
prior to Closing, or his resignation, shall be paid by Seller or
forgiven.
29. WAIVER OF BREACH. The waiver by any party of the breach
of any condition, covenant or provision herein contained shall in
no way impair the right of the aggrieved party to avail itself of
any subsequent breach, whether of the same or similar nature, or
not, nor shall any failure or delay on the part of any party in
exercising any right, power or remedy hereunder preclude any
subsequent exercise thereof.
30. CHOICE OF LAW; CHOICE OF FORUM. This Agreement shall be
construed to have been executed in Peoria, Illinois, and it shall
be governed, construed and enforced in accordance with the laws of
the State of Illinois. Litigation arising out of or connected with
this Agreement may be instituted and maintained in the State Courts
of the State of Illinois, only, and the parties consent to
jurisdiction over their person and over the subject matter of any
such litigation in those courts, and consent to service of process
issued by such courts.
Prior to instituting litigation regarding any dispute
involving this Agreement, any party may request resolution of such
dispute by non-binding arbitration. The other party(ies) shall
respond to such request within a reasonable time; Provided,
however, that the parties shall not be obligated to request or
accept such arbitration.
Page 11 of 15.
31. BINDING EFFECT AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties, and their
respective officers, directors, employees, agents, attorneys,
insurers, heirs, personal representatives, successors and assigns;
Provided, however, that no party may assign any right or obligation
hereunder, except with the written approval of all other parties
hereto.
32. THIRD PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties hereto, and, where provided for, their
respective officers, directors, employees, shareholders, agents,
attorneys, insurers, successors and assigns. Nothing contained
herein shall be construed to confer any rights upon any third
party, with the exception of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and the other
Shareholders of KNRECO.
33. SEVERABILITY. If any clause or provision of this
Agreement shall be finally determined invalid, illegal or
unenforceable by a Court of competent jurisdiction, then that
clause or provision only shall be held inoperative, as though not
herein contained, and the remainder of this Agreement shall remain
operative and in full force and effect.
34. CONSTRUCTION OF AGREEMENT. This Agreement constitutes
the entire agreement between the parties and supersedes any and all
prior agreements, oral or written (except for the Letter of Intent
which this Agreement shall be read in conjunction with). No
waiver, modification or amendment of this Agreement shall be of any
force or effect unless made in writing and signed by the parties,
and specifying with particularity the nature and extent of such
waiver, modification or amendment. Unless otherwise expressly
provided or unless the context requires otherwise, words importing
the singular number shall mean and include the plural number, and
vice versa. Where the term "including" is used herein, it shall be
construed to mean "including, but not limited to,". Where any term
such as "his" or "him" is used herein, it shall be construed to
have been used for convenience only, and shall be construed to
include the masculine, feminine, and neuter genders, unless the
context requires otherwise.
Seller agrees that where references are made herein to the
best of his "knowledge", that Seller, as President and Chairman of
KNRECO and KUD, will be charged with having personal knowledge of
any and all knowledge possessed by any officer, director, employee,
insurer, or attorney of KNRECO and/or KUD; Provided, however, that
insofar as employee injuries (for purposes of Section 13, above),
the sole knowledge of the allegedly injured employee shall not be
charged to Seller merely because the allegedly injured person
is/was an employee.
35. SURVIVAL OF REMEDIES AND WARRANTIES. The
representations, covenants, warranties, indemnifications and
Page 12 of 15.
remedies contained in this Agreement shall survive the execution
and Closing of this Agreement, and shall be deemed to have been
reconfirmed by the parties at Closing.
36. NOTICES. All notices, demands, requests or other
communications which may be or are required to be given or sent by
any party pursuant to this Agreement shall be in writing and shall
be deemed to have been properly given if sent by certified mail to
the parties at the following addresses:
Seller: ▇▇▇▇ ▇▇▇▇▇▇▇▇ with copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Rea, Cross & ▇▇▇▇▇▇▇▇▇▇▇
Suite 420
1920 "N" Street, N.W.
Washington, D. C. 20036
Pioneer: Pioneer Railcorp
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
KNRECO: Keokuk Junction Railway
and
KUD: Keokuk Union Depot Company
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
or such other address as the parties may from time to time give
notice of.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first appearing above.
PIONEER RAILCORP ▇▇▇▇ ▇▇▇▇▇▇▇▇
By:__/s/ Guy L. Brenkman______ ___/s/ ▇▇▇▇ Warfield________
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CEO
KNRECO, INC. KEOKUK UNION DEPOT COMPANY
By:___/s/ ▇▇▇▇ Warfield_______ By:___/s/ ▇▇▇▇ Warfield______
Name: Name:
Its: Its:
Page 13 of 15.
CERTIFICATE OF EXECUTION
STATE OF IOWA )
) ss
COUNTY OF ▇▇▇ )
Before me the undersigned Notary Public personally appeared
▇▇▇▇ ▇▇▇▇▇▇▇▇, being personally well known to me, and under oath he
stated that he executed the foregoing Agreement voluntarily and
with full authority so to do.
________________________________
Notary Public
CERTIFICATE OF EXECUTION
STATE OF ILLINOIS )
) ss
COUNTY OF PEORIA )
Before me the undersigned Notary Public personally appeared
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, being personally well known to me, and under oath
he stated he was the duly elected President of Pioneer Railcorp
("Corporation"), and that he executed the foregoing Agreement with
full authority, and on behalf of the Corporation.
________________________________
Notary Public
Page 14 of 15.
CERTIFICATE OF EXECUTION
STATE OF IOWA )
) ss
COUNTY OF ▇▇▇ )
Before me the undersigned Notary Public personally appeared
___John Warfield________, being personally well known to me, and
under oath he stated he was the duly elected __________________ of
KNRECO, INC. ("Corporation"), and that he executed the foregoing
Agreement with full authority, and on behalf of the Corporation.
________________________________
Notary Public
CERTIFICATE OF EXECUTION
STATE OF IOWA )
) ss
COUNTY OF ▇▇▇ )
Before me the undersigned Notary Public personally appeared
___John Warfield________, being personally well known to me, and
under oath he stated he was the duly elected __________________ of
KEOKUK UNION DEPOT COMPANY ("Corporation"), and that he executed
the foregoing Agreement with full authority, and on behalf of the
Corporation.
________________________________
Notary Public
Page 15 of 15.
EXHIBIT INDEX
Exhibit Number Title
A Locomotives, Railcars & Rolling Stock
B Permitted Encumbrances
C Form of Non-Competition Agreements
D Inspection of Property
E ▇▇▇▇ of Sale and Stock Power
F Shareholder List
G Contracts
H Offer to other Shareholders
EXHIBIT A
LOCOMOTIVES, RAILCARS AND OTHER ROLLING STOCK
1. One (1) 1000 HP EMD Diesel Locomotive, KJRY #405
2. One (1) 1500 HP Cummmins Diesel Locomotive, KJRY #252
3. One (1) 1500 HP EMD GP-7 Diesel Locomotive, KJRY #488
4. One (1) 1750 HP EMD GP-10 Diesel Locomotive, KJRY #469
5. One (1) 1750 HP EMD GP-10 Diesel Locomotive, KJRY #471
6. Two (2) Trolly Cars
7. Railcars:
Two (2) 50 ft. Boxcars, KJRY #813 and KJRY #939
One (1) 60 ft. Boxcer, KJRY #222
Two (2) Flat Cars, KJRY #6 and KJRY #8
One (1) Open-Top ▇▇▇▇▇▇, KJRY #3
One (1) Caboose, KJRY #2
One (1) Open-platform obs. car, "Chief Keokuck"
One (1) Diner, KJRY #4
One (1) Sleeper, KJRY #5
One (1) Wooden Boxcar, KJRY #7
One (1) Baggage Car, KJRY #9
One (1) Steel Boxcar, KJRY #10
Fifteen (15) 4000 cu. ft. Covered Hoppers, KJRY #4000-4014
Five (5) 4427 cu. ft. Covered Hoppers, KJRY #4401-4405
Two (2) 4740 cu. ft. Covered Hoppers, KJRY #4740 and #4741
EXHIBIT B
PERMITTED ENCUMBRANCES PURSUANT TO SECTION 8(G)
Encumbrance Approximate Amount at March 11, 1996
State of Illinois $331,379.17
S.B.A. $246,611.21
Keokuk Savings Bank -0-
____________
TOTAL $577,990.38
The above balances are correct and complete to the best of my
knowledge as of March 11, 1996.
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CPA
EXHIBIT C
COVENANT NOT TO COMPETE
The undersigned, ▇▇▇▇ ▇▇▇▇▇▇▇▇ (herein "▇▇▇▇▇▇▇▇"), for and in
consideration of the rights, privileges and benefits conferred upon
him by the Stock Purchase and Sale Agreement (including, but not
limited to, the employment contract provided for therein) between
himself, Pioneer Railcorp, KNRECO, INC. and Keokuk Union Depot
Company, dated February ___, 1996 (the "Purchase Agreement"), the
sufficiency of such consideration ▇▇▇▇▇▇▇▇ hereby stipulates to,
▇▇▇▇▇▇▇▇ DOES HEREBY COVENANT AND AGREE THAT HE WILL NOT, without
the prior written consent of PIONEER RAILCORP (herein also
"Pioneer"), directly or indirectly, or through any other entity,
individually or in concert:
(A) own, manage, operate, acquire, control, negotiate to
acquire, or be connected in any manner with, any entity providing
rail service, rail car storage or railcar repair, over any line of
railroad in either ▇▇▇ County, Iowa or ▇▇▇▇▇▇▇ County, Illinois; or
(B) solicit, in competition with KNRECO, or its corporate
successor, or assisting others (except Pioneer) with same, the
business of any shipper or receiver of freight located on KNRECO,
or whose facility is located within 75 miles of Keokuk, Iowa, and
is served or sought to be served by KNRECO or its corporate
successor, with the exception of any shipper or receiver currently
located on the Cedar Rapids and Iowa City Railroad ("CRANDIC").
This agreement shall remain in force for a period commencing
at the Closing of said Purchase Agreement, on or about March 8,
1996, and continuing through January 1, 2010.
This Agreement covers employment in any capacity whatsoever;
provided, however, that nothing contained herein shall be construed
to prohibit ▇▇▇▇▇▇▇▇ from owning securities of any publicly-traded
Class I railroad. ▇▇▇▇▇▇▇▇ understands, acknowledges, and agrees
that this Agreement is a material consideration for the Employment
Contract referenced above.
Any waiver by Pioneer of any breach of this Agreement by
▇▇▇▇▇▇▇▇, shall not operate as or be construed to be a waiver of
any subsequent breach of the same or similar kind(s), nor shall any
waiver by Pioneer of any breach of a non-competition agreement by
anyone else constitute a waiver of any one or more provisions of
this Agreement.
In the event a Court of competent jurisdiction finally
determines that any of the restrictions contained in this Agreement
are illegal, invalid, or too broad to be enforced, such
provision(s) shall be considered severable, and/or the Court shall
be permitted to modify the provisions contained herein to the
extent necessary to permit their enforceability.
This agreement is personal and ▇▇▇▇▇▇▇▇ may not assign this
Agreement. Any attempt to so assign shall be absolutely void.
Subject thereto, this Agreement shall be binding upon and inure to
the benefit of the successors and assigns of ▇▇▇▇▇▇▇▇.
In the event of any breach, Pioneer shall be entitled to full
injunctive relief, which right shall be cumulative with and not
successive or exclusive of any other legal rights.
This Agreement shall be construed and enforced under the laws
of the State of Illinois, and the parties consent to jurisdiction
over their person and over the subject matter of any such
litigation in the courts of the State of Illinois only, and consent
to service of process issued by such courts.
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be executed as of the day and year stated below.
DATED:
__[Delivered at Closing]________________
▇▇▇▇ ▇▇▇▇▇▇▇▇
EXHIBIT D
INSPECTION OF PROPERTY
1. Between the date of execution of this Agreement and the
Closing Date, KNRECO shall provide Pioneer, including its officers,
employees, agents, and outside consultants, with access to all
properties, lines, equipment, facilities, and business records of
KNRECO and KUD in order to make such noninvasive physical and
environmental investigation and testing as Pioneer deems
appropriate; provided, however, that 1) such investigation shall
not unreasonably interfere with the operations on and use of the
KNRECO's property by Keokuk Junction Railway and Burlington
Northern Santa Fe Railway, 2) Pioneer shall not disclose to any
other party(ies) KNRECO's or Keokuk Junction Railway's confidential
traffic or business matters (other than the disclosures required to
be made as part of Pioneer's Securities & Exchange Commission
("SEC") reporting responsibilities, including, but not limited to
any 10-K, 8-K, or similar reports that may be filed during such
time period; and 3) Pioneer shall not disclose to anyone (other
than any party lending or providing it with financing for this
acquisition) the results of such investigation or testing (also,
with the exception of SEC reporting obligations).
2. KNRECO reserves the right to monitor and approve any
environmental assessments, tests, studies, procedures, measurements
or analyses performed by or for Pioneer in, on, to, or with respect
to KNRECO's property. Pioneer shall require any outside agent or
consultant it retains to do an Environmental Assessment to sign a
copy of this Agreement.
3. Upon receipt of any test results, Pioneer shall
immediately at its cost furnish KNRECO with a copy of all results,
assessments, reports and/or studies based upon the Environmental
Assessment.
4. If the Environmental Assessment reveals contamination of
the Subject Property in amount(s) and/or concentration(s) beyond
the minimum acceptable levels established by appropriate
governmental authorities, or if Pioneer is unwilling to accept the
environmental condition of KNRECO's property as revealed by the
Environmental Assessment, Pioneer's sole remedy shall be to
terminate this Agreement. Pioneer acknowledges that KNRECO is not
required to correct, remedy or cure any environmental conditions or
contamination of the Subject Property as a condition to Closing or
as an obligation with respect to performance required after
Closing.
5. If Pioneer elects not to undertake or contract for an
Environmental Assessment, or if Pioneer does not elect to terminate
-1-
this Agreement after receiving results of the Environmental
Assessment, Pioneer shall take the property "As Is, Where Is",
subject to the warranties and representations in the Purchase
Agreement that to the best of Seller's knowledge there are no
material Environmental Problems, and shall assume all risks of the
condition of the Property, regardless of the cause or date or
origin of any environmental condition, and shall release all rights
and/or claims against Seller for the costs of remediation or cure
of any such condition which Seller is not or has no reason to be
aware of at or prior to Closing.
6. Pioneer hereby agrees to indemnify, protect, defend and
hold harmless Seller from and against any and all liability, cost,
and expense arising out of or connected with the exercise by
Pioneer, its officers, agents, or employees, of the rights of
access and investigation herein granted, regardless or whether such
liability, cost and expense is caused in whole or in part by the
fault, failure, negligence, misconduct, nonfeasance or misfeasance
of Seller, except for instances of gross negligence or intentional
acts.
7. Pioneer acknowledges that Seller has made and will make
no representations, warranties, guaranties, statements or
information, express or implied, pertaining to the KNRECO's
property, the physical, environmental or condition thereof, or its
merchantability or suitability for any use or purpose whatsoever,
except for those made in the Purchase Agreement, or in documents or
disclosures produced or made pursuant to the provisions of the
Purchase Agreement.
Executed this _____ day of February 1996 by Pioneer Railcorp.
By:___/s/________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President.
EXHIBIT E
▇▇▇▇ OF SALE AND IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign, and
transfer to PIONEER RAILCORP, an Iowa corporation, all right, title
and interest the undersigned has to 126,380 shares of KNRECO, INC.
common stock (the "Shares"), along with any and all other shares,
options, warrant and stockholder rights in said KNRECO, INC. which
the undersigned may have any claim to or interest in whatsoever.
The undersigned represents and warrants that he is the sole legal
and beneficial owner of said Shares, and that he holds title to
said Shares free and clear of any liens, claims, demands,
encumbrances, privileges, security interests, or rights of any
other entity, and that he has the right to sell the same.
The undersigned further acknowledges that he has received all
dividends and distributions of whatever nature to which he is/was
entitled to as a shareholder, director or equity or rights holder
of KNRECO; and he further waives, releases, and quit-claims any
claim, demand or action he may have against KNRECO as a
shareholder, director or equity or rights holder of KNRECO,
pursuant to the Iowa Business Corporation Act; the United States
Securities Act of 1933; the Securities Exchange Act of 1934; any
state securities or corporation act; or any other legal or
equitable theory.
The undersigned does hereby irrevocably constitute and appoint
PIONEER RAILCORP, attorney to transfer said stock on the books of
said KNRECO, INC., with full power of substitution in the premises.
Dated:__________________, 1996.
[Delivered at Closing]
_________________________________
Signature of Owner.
[SIGNATURE GUARANTEE]
Exhibit F
Stockholders
Name Shares
▇▇▇▇▇▇, ▇▇▇▇▇ 1,700
Cllebracht, ▇▇▇ 1,500
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 1,250
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇. 5,700
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 300
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 1,000
▇▇▇▇▇▇▇, ▇▇▇▇ 2,000
▇▇▇▇▇▇▇, ▇▇▇▇▇ 3,525
▇▇▇▇-▇▇▇▇, ▇▇▇▇▇ 1,380
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 500
Mogytych, A. Jr. 487
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 2,100
▇▇▇▇▇▇▇▇, ▇▇▇▇ 50
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇. 1,000
▇▇▇▇▇▇, ▇.▇. 15,838
▇▇▇▇▇▇, ▇▇▇▇ 2,100
Wagenlease, Inc 1,000
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 12,000
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 126,380
▇▇▇▇▇, ▇▇▇▇▇▇▇ 7,000
▇▇▇▇▇, ▇▇▇▇▇▇ 2,320
Zweerts, Jan 300
EXHIBIT G
CONTRACTS DISCLOSED PURSUANT TO SECTION 23
NONE.
EXHIBIT H
February 29, 1996
To the Shareholders of KNRECO, INC.:
As you know, Pioneer Railcorp ("Pioneer") has entered into an
Agreement to purchase the shares of ▇▇▇▇ ▇▇▇▇▇▇▇▇, President,
Chairman, and majority shareholder of KNRECO, Inc. ("KNRECO"). A
copy of that Agreement is enclosed in this package for your
information.
Pioneer is now making that same offer to all of the Shareholders of
KNRECO.
Pioneer will purchase your KNRECO, Inc. stock for $16.50 per share,
in cash, or, if you elect, part or all of the payment can be made
in Pioneer Railcorp common stock. The price of Pioneer stock has
been set at one Pioneer share per $3.625 of the purchase price. If
you elect to take the entire purchase price in Pioneer Stock, that
amount will be rounded to the next highest full share.
Enclosed, for your review, are copies of Pioneer's most recent
annual report and proxy statement, and its most recent Form 10-KSB;
Form 10-QSB, and Form S-3, as filed with the Securities & Exchange
Commission, and the most recent financial statements of KNRECO,
Inc., as presented by its Board of Directors to Pioneer.
You have the opportunity to ask questions and receive answers
concerning the terms and conditions of the offer, by calling me at
(▇▇▇) ▇▇▇-▇▇▇▇.
You may also receive additional information from KNRECO.
If you elect to receive some or all of your purchase price in
Pioneer stock, you will receive Class A common stock, which is the
only class currently outstanding, and is listed on the Chicago
Stock Exchange under the symbol, "PRR"; However, the Pioneer stock
issued to sellers in this transaction will not be registered under
the Securities Act of 1933, or any state securities act, and will
be RESTRICTED as to transfer under Securities & Exchange Commission
Rule 144. It may not be sold, transferred, or pledged for a period
of two years after issuance, except for transfers by gift or
inheritance. The stock becomes tradeable after the expiration of
the two-year holding period. The restriction does not affect any
other rights. These shares will have the same voting rights,
dividend rights, and other rights that Pioneer Class A common
shares may have.
Offer to KNRECO Shareholders
Page 2 of 3.
Pioneer stock has been traded on the exchange since July, 1993.
Between July 1993 and June 1995, the stock traded in a range of
$2.00 to $9.00. In July, 1995 there was a 2 for 1 split. Since
then the stock has traded from a low of $2.25 a share, to a high of
$4.50. The Closing price yesterday, February 28, was $3.875 (or
$7.75 on a pre-split basis). Your price of $3.625 was set on the
date Pioneer entered into its letter of intent to make this offer.
In accepting one of the payment options involving Pioneer
shares,you represent and warrant that, by virtue of your business
and financial experience, and that of your professional advisors,
you have the capacity to protect your own interests in this
transaction, and that you qualify as an "accredited investor" as
defined by the U.S. Securities & Exchange Commission.
In order to accept the offer to purchase, you will be required to
fill out and sign the Form of Election, enclosed with this letter;
sign the ▇▇▇▇ of Sale and Stock Power; and deliver your original
KNRECO, Inc. stock certificates. The Form of Election specifies
the payment option you desire. By executing the ▇▇▇▇ of Sale and
Stock Power, you warrant that you are the sole owner of the number
of shares shown on your election form, and that you have no other
interest in, or claim upon, KNRECO, Inc., as a shareholder. If the
information contained on the Form of Election is incorrect, or if
your records show you are entitled to any other right or interest
in KNRECO, Inc. by reason of being a shareholder, contact me
immediately.
For United States residents, accepting the entire purchase price in
Pioneer stock would constitute a TAX-FREE TRANSACTION for the
shareholder. Your basis in your KNRECO stock would carry over to
the Pioneer stock, and you would not be liable for federal income
tax until you sold your Pioneer stock. If you accept all, or any
portion of the purchase price in cash, you will have to report that
as a sale of your KNRECO stock. For further information as to the
tax consequences of the transaction, you are urged to consult your
tax professional.
This offer will remain open until the 5:00 pm (CST) Monday, March
11, 1996. Those shareholders who sign and return the Form of
Election by that time will be deemed to have made a timely
election. If you return the executed ▇▇▇▇ of Sale and Stock Power
along with your original KNRECO, Inc. stock certificate(s) by that
date, payment will be made on March 12, 1996. If you cannot send
your certificates by that date, but have timely sent your Form of
Election, you will have forty-five (45) days to deliver your ▇▇▇▇
of Sale and Stock Power, along with your original stock
certificates. If those items are not delivered within that time
Offer to KNRECO Shareholders
Page 3 of 3.
period, your election will be deemed to have lapsed. Also, I will
offer, if any of you wish to have your canceled KNRECO
certificate(s) returned to you as a memento, please put a note to
that effect with it, and we will be glad to do that.
SPECIAL NOTE: Any KNRECO shareholder who is not present within the
United States of America or the Dominion of Canada during the time
of the offer (February 29 - March 11, 1996) will be permitted sixty
(60) days from the date of this letter to return the Form of
Election, ▇▇▇▇ of Sale and Stock Power, and original stock
certificate(s), and such election and delivery shall be deemed
timely.
Any shareholder who elects not to sell his/her stock, or who fails
to return the Form of Election, or deliver the ▇▇▇▇ of Sale and
Stock Power along with their original stock certificate(s) in a
timely manner, will be deemed to have rejected this offer, and
waived any rights they may have hereunder. You will remain a
shareholder of KNRECO. Pioneer and/or KNRECO reserve the right to
extend, renew or make another offer to purchase all or any portion
of the remaining shares of KNRECO, Inc., HOWEVER, neither Pioneer
nor KNRECO make any representations, expressed or implied, that any
offer to purchase KNRECO shares will be extended, renewed, or made
again. SUCH ACTION MAY OR MAY NOT BE TAKEN, TOTALLY AT THE
DISCRETION OF PIONEER and/or KNRECO, INC. Shareholders will assume
the risk that they will never have a market for their KNRECO, Inc.
shares.
I urge you to read the enclosed materials carefully before making
your decision. Again, please do not hesitate to contact us if you
have any questions about the transaction. We look forward to
receiving your response.
Sincerely yours,
/s/
▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chairman-CEO.
Enclosures.
FORM OF ELECTION
I,______________________________________("Seller"), being the
legal and beneficial owner of ____________ shares of KNRECO, Inc.
Common Stock, having received the offer to purchase said shares
from PIONEER RAILCORP, dated February 29, 1996, hereby elect as
follows:
A. [ ] I accept the offer, and wish to receive the purchase
price in:
1. [ ] Cash.
2. [ ] _____% Cash and _____% Pioneer Stock.
3. [ ] Pioneer Stock
If Seller checked payment option two or three, he/she
hereby represents and warrants that they have been informed that
the Pioneer Stock will be issued as a "private placement", and will
not be registered under the Securities Act of 1933, or any state
securities act. Seller understands it will be "restricted" as to
transfer, pursuant to SEC Rule 144. Seller represents and warrants
to Pioneer that, by virtue of his/her business and financial
experience, and that of their professional advisors, they have the
capacity to protect their own interests in this transaction, and
that they qualify as an "accredited investor" as defined by the
U.S. Securities & Exchange Commission. Seller further warrants
that he/she is acquiring the Pioneer Stock for their own account,
and not with a view towards resale (as an underwriter), and that
he/she will not sell, transfer, pledge or otherwise dispose of the
Pioneer Stock, except in accordance with SEC Rule 144. Seller
warrants that he/she is not a resident of a state which requires
registration of the transaction.
B. [ ] I decline the offer. I understand that by doing so I am
waiving any rights I may have under said offer, and that this offer
may not be extended, renewed or made again. I acknowledge that I
will remain a stockholder of KNRECO, Inc. and that there may never
be a market for my shares of KNRECO, Inc., and in declining the
offer, I accept that risk.
Please sign exactly as your name(s)
appear on your stock certificate(s):
________________________________
Dated:__________________, 1996.
________________________________
INSTRUCTIONS: After you have made your election, you should return
this form in the envelope provided. IF YOU MARKED ELECTION "A";
you must provide your Social Security Number (or tax identification
number) below, and, in order to receive your payment, you must sign
and return the ▇▇▇▇ of Sale and Stock Power along with your
original stock certificates.
Social Security Number (or tax ID
Number):_______________________________
PIONEER RESERVES THE RIGHT TO REJECT THIS FORM OF ELECTION IF IT IS
NOT EXECUTED AND RECEIVED BY 5:00 pm, CST, MONDAY MARCH 11, 1996.
IN ORDER TO RECEIVE PAYMENT YOU MUST BE RETURN YOUR EXECUTED ▇▇▇▇
OF SALE AND STOCK POWER AND YOUR ORIGINAL STOCK CERTIFICATE(S) BY
APRIL 26, 1996. PIONEER RESERVES THE RIGHT TO DECLARE THIS
ELECTION VOID AND LAPSED IF THE EXECUTED ▇▇▇▇ OF SALE AND STOCK
POWER AND THE CERTIFICATE(S) ARE NOT DELIVERED BY THAT DATE.