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Delaware court holds TMM in contempt for violating October 'status quo' order, KCS says

Grupo TMM S.A. has violated the Delaware Court of Chancery's October 2003 order to abide by the terms and conditions of its TFM S.A. de C.V. acquisition agreement with Kansas City Southern pending arbitration of the companies' dispute over the transaction, according to a KCS statement released Jan. 6.

The court held TMM in contempt for revoking TFM's powers of attorney — which required the signature of a KCS representative for transactions exceeding $2.5 million — and granting new TFM powers of attorney to TMM directors José Serrano and Mario Mohar.

"The previous order of the court required TMM to conduct [TFM] business in accordance with past practices and not to directly or indirectly amend its organizational documents," KCS officials said.

The court ordered TMM to revoke the new powers of attorney, re-enact the original powers of attorney, and pay KCS' costs and attorney fees for filing the contempt motion. TMM officials did not comment on the ruling.

In April 2003, TMM agreed to sell its 38.4 percent TFM stake to KCS, but TMM shareholders — led by majority stockholders Serrano and TMM Chief Executive Officer Javier Segovia — rejected the deal in August.

In October, KCS initiated an arbitration proceeding after a 60-day informal negotiation period expired. The Delaware court granted KCS a preliminary injunction "to preserve the status quo" pending resolution of its dispute with TMM. The court also enjoined TMM from taking any action that would violate terms of the acquisition agreement until the dispute is resolved.

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More News from 1/7/2004