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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 19, 1999
LEAP WIRELESS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
0-29752 33-0811062
(Commission file number) (I.R.S. Employer
Identification No.)
10307 PACIFIC CENTER COURT, SAN DIEGO, CA 92121
(Address of Principal Executive Offices) (Zip Code)
(619) 882-6000
(Registrant's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OF ASSETS
On April 19, 1999, a wholly-owned subsidiary of Leap Wireless International,
Inc. (the "Company") acquired all of the shares of Chilesat Telefonia Personal,
S.A. ("Chilesat PCS") that it did not already own from Telex-Chile S.A. and its
operating affiliate, Chilesat S.A. (collectively "Telex-Chile"). Chilesat PCS, a
Chilean corporation that holds a license to offer wireless telephone services,
has deployed and is operating a nationwide wireless telephone system in Chile.
Prior to the acquisition, the Company's wholly-owned subsidiary, Inversiones
Leap Wireless Chile S.A. ("Leap Chile") owned 50% of the shares of Chilesat PCS.
The remaining 50% of the shares of Chilesat PCS were owned by Telex-Chile.
Leap Chile acquired the shares from Telex-Chile for (1) a cash payment of $28
million, and (2) the issuance of a $22 million, non-interest bearing note
payable to Telex-Chile on April 19, 2002.
The terms of the purchase, including the purchase price, were established
through arms-length negotiations between the Company, Telex-Chile S.A. and
Chilesat S.A. The Company obtained $28 million for the cash payment to
Telex-Chile through a loan under the Company's $265 million revolving credit
agreement with QUALCOMM Incorporated.
The Company intends that Chilesat PCS continue to operate its wireless telephone
system in Chile and work to expand its network capacity and increase its
business.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(a) Financial Statements of Business Acquired:
The following financial statements and report of independent accountants
are incorporated by reference to pages F-21 through F-41 of registrant's
Form 10-K/A (Amendment No. 1), filed March 31, 1999.
CHILESAT TELEFONIA PERSONAL S.A. (COMPANY IN THE DEVELOPMENT STAGE)
Financial Statements:
Report of Independent Accountants
Balance Sheets at December 31, 1998 and 1997
Statement of Income and Comprehensive Income for the year ended
December 31, 1998 and for the period from inception (March
3, 1997) to December 31, 1998 and 1997
Statement of Cash Flows for the year ended December 31, 1998 and for
the period from Inception (March 3, 1997) to December 31, 1998
and 1997
Statement of Shareholders' Equity for the period from inception
(March 3, 1997) to December 31, 1998
Notes to the Financial Statements
(b) Pro Forma Financial Information
Unaudited Pro Forma Financial Information will be filed by amendment no
later than 60 days after the date of this report.
2
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(c) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.21.1 Stock Purchase Agreement, dated April 12, 1999, by and amount
Inversiones Leap Wireless Chile S.A., Telex-Chile S.A., and
Chilesat S.A.
10.21.2 Novation and Assumption of Payment Obligation Agreement, dated
April 19, 1999, executed by Chilesat Telefonia Personal S.A.
23.1 Consent of Independent Accountants
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 4th day of May,
1999.
Leap Wireless International, Inc.
By: /s/ JAMES E. HOFFMANN
------------------------------------
James E. Hoffmann
Senior Vice President and General Counsel
3
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EXHIBIT 10.21.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
INVERSIONES LEAP WIRELESS CHILE S.A.,
TELEX -- CHILE S.A.,
AND
CHILESAT S.A.
DATED
APRIL 12, 1999
Fax No. 011-562-382-5185
THIS STOCK PURCHASE AGREEMENT (the "Purchase Agreement"), dated April 12, 1999,
by and among INVERSIONES LEAP WIRELESS CHILE S.A. ("Buyer" or "LEAP CHILE"), a
corporation organized and existing under the laws of Chile, domiciled at
Tenderini 153, Santiago, Chile, and TELEX - CHILE S.A. ( "TELEX"), and CHILESAT
S.A. ( "CHILESAT" and, jointly with TELEX, "Sellers"), each a corporation
organized and existing under the laws of Chile and domiciled at Rinconada El
Salto 202, Huechuraba, Santiago, Chile.
RECITALS
WHEREAS, CHILESAT TELEFONIA PERSONAL S.A. ("CHILESAT PCS" or the
"Company"), a Chilean corporation with its principal office located at Rinconada
El Salto 202, Huechuraba, Santiago, Chile, is engaged in the business of
providing wireless telecommunications services in Chile (the "Business") and
holds a public service telecommunications concession for the installation,
operation and development of a mobile digital telecommunications service in the
1900 MHz band (PCS) (the "Concession");
WHEREAS, Sellers own a total of 8,400,000 series B ordinary shares of
CHILESAT PCS, which currently represent 50% of the issued share property of
CHILESAT PCS, and LEAP CHILE owns 8,399,999 series A preferred shares of
CHILESAT PCS, which represent 49.99% of the issued and outstanding capital stock
of CHILESAT PCS. The remaining share, a series A preferred share, belongs to an
individual Person (the "Minority Shareholder"); and
WHEREAS, Buyer desires to purchase, and Sellers desire to sell to Buyer,
all of the issued and outstanding shares of capital stock of the Company not
already owned by Buyer, including any and all rights, contractual, legal,
hypothetical or otherwise to
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subscribe new shares of the Company (except for the share held by the Minority
Shareholder, the "Shares"), on and subject to the terms and conditions and for
the consideration set forth in this Purchase Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants expressed herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
DEFINITIONS
As used in this agreement, the following terms shall have the respective
meanings set forth below or set forth in the provision referenced following such
term:
AFFILIATES: means, with respect to any Person, each other Person which, directly
or indirectly, controls, is controlled by, or is under common control with, such
other Person (excluding any trustee under or any committee with responsibility
for administering, any pension plan or employee benefit plan). A Person shall be
deemed to be "controlled by" another Person if such other Person possesses,
directly or indirectly, power (i) to vote 25% or more of the securities (on a
fully diluted basis) having ordinary voting power for the election of directors,
managing general partners or managing members or (ii) to direct or cause the
direction of the management and policies of such person, whether by contract or
otherwise;
BACKHAUL: as defined in Section 4.2.1.;
BREACH: as defined in Section 4.1.(a);
BUSINESS: as defined in the Recitals hereto;
BUYER: as defined in the preamble hereof;
CHILESAT: as defined in the preamble hereof;
CHILESAT PCS: as defined in the Recitals hereto;
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CLAIM: as defined in Section 4.5.;
CLAIMANT: as defined in Section 4.5.;
CLOSING: as defined in Section 2.1;
CLOSING DATE: as defined in Section 2.1;
COMPANY: as defined in the Recitals hereto;
CONCESSION: as defined in the Recitals hereto;
CONTRACTS: as defined in Section 3.1.15;
CONTROLLING SHAREHOLDERS: means Juan Eduardo Ibanez W., Francisco Ibanez W., and
Daska Radic Dewar;
DISCLOSURE SCHEDULE: as defined in Section 3.1.;
ENVIRONMENTAL LAWS: means any Chilean state or local law, statute, ordinance,
rule or regulation, as amended, or any permit, order, judgment or decree issued
pursuant to any of the foregoing, which governs or regulates any of the
following: (i) the emission, discharge or release of any substance into the air,
water, soil or substrata or into the workplace; or (ii) the generation,
treatment, processing, storage, disposal, transport, labeling or other
management of any solid, liquid or gaseous waste, or the cleanup thereof; or
(iii) the protection of human health and/or the environment; or (iv) the
protection of worker or workplace health and safety;
EXPIRATION DATE: as defined in Section 2.1.;
FINANCIAL STATEMENTS: as defined in Section 3.1.4.(a);
INDEMNITOR: as defined in Section 4.5.;
INDEMNITY CUT-OFF: as defined in Section 4.3.;
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INTELLECTUAL PROPERTY: as defined in Section 3.1.9.(a);
LEAP CHILE: as defined in the preamble hereof;
LIENS: as defined in Section 3.1.18(a);
LOSSES: as defined in Section 4.1.;
MARKETABLE TECHNOLOGY: as defined in Section 3.1.9.(a);
MATERIAL ADVERSE EFFECT: means a material adverse change or effect upon the
financial condition, results of operations, assets, properties, business and
condition (financial or otherwise) or prospects of CHILESAT PCS or the Business;
MINORITY SHAREHOLDER: as defined in the Recitals hereto;
NOVATION: as defined in Section 1.2.(c);
PERSON: means an individual, a corporation, a partnership, a trust or an
unincorporated organization;
PERSONAL PROPERTY: as defined in Section 3.1.8.;
PURCHASE AGREEMENT: as defined in the Recitals hereto;
REASONABLE INVESTIGATION: means (i) all information known by any management
employee, officer or director of a Seller and (ii) a process of inquiry limited
to interviews regarding the matters covered in the representations and
warranties contained herein of the following persons: the Company's CEO (Mr.
Sutherland), CFO (Mr. Cooper), CAO (Mr. Infante) and COO (Mr. Oelckers) and
review of data provided by them. Such interviews and review if diligently
carried out, shall be deemed to satisfy the requirement of a Reasonable
Investigation;
RECEIVABLES: as defined in Section 3.1.6.(b);
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RESTRICTED BUSINESS: as defined in Section 5.2.;
RESTRICTED ENTITIES: as defined in Section 5.2;
RIGHTS TO ACQUIRE: as defined in Section 3.1.18.(a);
SATISFACTION OF TOTAL PURCHASE PRICE OR SATISFY THE TOTAL PURCHASE PRICE: means
the payment to the Sellers of the amounts specified under Section 1.2. (a) and
(b) and the delivery to CHILESAT of the Novation, in accordance to Section 1.2.
(c);
SELLERS: as defined in the headings hereto;
SHARE CERTIFICATES: as defined in Section 1.1.(a);
SHARES: as defined in the Recitals hereto;
TAX AUTHORITIES: as defined in Section 3.1.5.;
TAX RETURNS: as defined in Section 3.1.5.;
TAXES: as defined in Section 3.1.5.;
TELEX : as defined in the headings hereto;
TOTAL PURCHASE PRICE: means US$50,000,000 (fifty million U.S. dollars) of which
US$28,000,000 (twenty-eight million U.S. dollars) is payable in cash at Closing
and US$22,000,000 (twenty-two million U.S. dollars) is satisfied by delivery of
the Novation to Chilesat;
TRANSFER OF SHARES: as defined in Section 2.5.
AGREEMENTS
ARTICLE 1. SALE AND PURCHASE OF STOCK
1.1. Sale and Purchase.
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(a) Sellers represent and warrant to Buyer that on the Closing Date the
capital stock of the Company is divided into 16,000,000 series B ordinary shares
without par value, and 8,400,000 series A Preferred shares without par value, of
which the Sellers collectively own 8,400,000 series B shares. Of these, TELEX
owns 83,920 series B shares, as represented by share certificate No. 10, and
CHILESAT owns 8,316,080 series B shares, as represented by share certificate No.
09 (together, the "Share Certificates").
(b) Subject to the Satisfaction of the Total Purchase Price and upon
satisfaction of the conditions set forth in Section 2.2. hereof, TELEX and
CHILESAT hereby agree to sell, transfer, assign and deliver to Buyer 83,920
series B shares and 8,316,080 series B shares, respectively, together with and
as represented in the Share Certificates, and Buyer hereby agrees to purchase
and accept delivery of the Shares and the Share Certificates. The Share
Certificates and Transfer of Shares shall be furnished by Sellers to Buyer at
the time of Closing.
1.2. Purchase Price. The Total Purchase Price shall be satisfied in the
following manner:
(a) By payment to TELEX at Closing, of the amount of US$499,524 (four
hundred ninety nine thousand five hundred twenty four U.S. dollars), in cash, in
its equivalent in Chilean pesos at the exchange rate obtained with the
commercial bank where the sale of U.S. dollars is performed by Leap Wireless
International, Inc., at the Closing Date, in compliance with the terms of Decree
Law 600, Foreign Investment Statute.
(b) By paying to CHILESAT at Closing, of the amount of US$27,500,476
(twenty-seven million five hundred thousand four hundred seventy six U.S.
dollars) in cash, in its equivalent in Chilean pesos at the exchange rate
obtained with the commercial bank where the sale of U.S. dollars is performed by
Leap Wireless International, Inc., at the Closing Date, in compliance with the
terms of Decree Law 600, Foreign Investment Statute.
(c) By payment to Chilesat, on the date three years after the date hereof,
of US$22,000,000 subject to reduction in accordance with the right of set-off
provided herein. It is hereby acknowledged and agreed that this payment
obligation shall be transferred to and assumed by the Company pursuant to a
Novation and Assumption of Obligation Agreement (the "Novation"), substantially
in the form attached hereto as EXHIBIT A, on the
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terms and conditions set forth therein. Upon the execution and delivery of the
Novation and Assumption of Obligation Agreement by the parties thereto, the
obligations of Buyer under this paragraph shall be deemed to have been fully
satisfied.
1.3. Cross-receipt. On the Closing Date, upon delivery of the Share
Certificates by the Sellers and Satisfaction of the Total Purchase Price by
Buyer, Buyer and Sellers shall execute a cross-receipt acknowledging the receipt
of the Share Certificates and satisfaction of the Total Purchase Price,
respectively.
1.4. Transfer and forfeit of participation rights.
(a) Sellers state that they do not own shares of the capital stock of or
any other interest in CHILESAT PCS, other than the Shares.
(b) Notwithstanding, on June 24, 1998, the shareholders of CHILESAT PCS,
in the sixth general shareholders' meeting, agreed to increase the capital of
the Company through the issuance of 7,600,000 new series B shares, with which
the capital of CHILESAT PCS came to be represented by 8,400,000 series A
preferred shares and by 16,000,000 series B ordinary shares. As of the date
hereof, 7,600,000 of the series B ordinary shares had not been issued by
CHILESAT PCS, and therefore have also not been subscribed.
(c) Notwithstanding, on December 30, 1998, shareholders of CHILESAT PCS
unanimously agreed to increase the capital of the Company, divided in 8,400,000
series A shares and 16,000,000 series B shares, through the issuance of
32,987,013 ordinary series B shares. The terms of placement of such shares have
not yet been approved by the Board of CHILESAT PCS. Legalization of the minutes
of the extraordinary shareholder's meeting which agreed the increase in capital
has also not occurred to this date.
(d) Subject to Closing, Sellers acknowledge and agree that the sale of
Shares contemplated hereby, includes the sale, forfeiture and transfer in favor
of Buyer, of each and every right, actual or contingent, contractual, legal,
eventual, hypothetical or otherwise, which Sellers have or may have in relation
to the capital increases of CHILESAT PCS referred to in this Section 1.4.
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ARTICLE 2. CLOSING
2.1. Closing. Except for Articles 5, 6, 7 and 8 which are effective as of the
date hereof, rights and obligations stemming from this contract will come into
effect upon satisfaction or waiver of the conditions set forth in Section 2.2
hereof (such date, the "Closing Date" or the "Closing"). In any event, all
conditions precedent set forth in Section 2.2 hereof must be satisfied or waived
no later than April 16, 1999, or such later date that the parties agree to in
writing (the "Expiration Date").
2.2. Conditions to Closing. The Closing shall be subject to the satisfaction or
waiver, in accordance with Section 2.3 hereof, of the following conditions
precedent:
2.2.1. The parties hereto shall have provided to each other respective copies of
the minutes containing the resolutions of the boards of directors of TELEX and
CHILESAT, as Sellers, and LEAP CHILE, as Buyer. Such minutes shall expressly
authorize delegation of a special power of attorney for the signatories of this
Purchase Agreement.
2.2.2. No later than three (3) business days before closing, Sellers and Buyer
shall have received, substantially in the form of EXHIBIT B hereto, copies of
written approval to the sale of the Shares contemplated hereby by financial
creditors representing all or substantially all of the outstanding financial
debt of Sellers, but necessarily including approvals from Banco Bhif, Banco
Sudamericano, Dresdner Bank, Banco del Estado, Banco de A.
Edwards, Bank of America and Pacific Mutual.
2.2.3. The general manager of CHILESAT PCS shall have furnished to Buyer at
Closing, a certificate, substantially in the form of EXHIBIT C hereto, which
indicates that the Shares are duly registered in the share registry of CHILESAT
PCS in the name of Sellers on the Closing Date, free of all liens, encumbrances,
restrictions, charges and claims, free of real or personal rights which restrict
or limit property, possession or tenancy of Shares, or any of its rights as
shareholders of CHILESAT PCS, with the exception of the pledge granted over the
shares owned by TELEX as indicated in Section 2.2.4.
2.2.4. TELEX shall have furnished to Buyer, at Closing, a copy of the public
deed, substantially in the form of EXHIBIT D, signed by QUALCOMM Incorporated,
releasing its commercial pledge over stock over the Shares held directly or
indirectly by TELEX.
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2.2.5. The contracts and amendments to the contracts listed in EXHIBIT E hereto
which govern the relationship between CHILESAT PCS and Sellers shall have been
executed and delivered by the parties thereto and shall be satisfactory to the
Buyer.
2.2.6. QUALCOMM Incorporated shall have executed a release, substantially in the
form of EXHIBIT F hereto, releasing TELEX from any and all obligations assumed
pursuant to the Second Amended and Restated Guaranty, dated June 24, 1998.
2.2.7. Sellers and their officers, directors and controlling shareholders on the
one hand, and QUALCOMM Incorporated, and SERVICIOS QUALCOMM CHILE S.A., on the
other hand, shall have executed releases, substantially in the form of EXHIBIT G
hereto..
2.2.8. CHILESAT PCS shall pay to Sellers and their Affiliates the receivables
referred to in EXHIBIT H immediately following the delivery by Sellers of the
Share Certificates as described in Section 1.1. The parties state that the
invoices referred to in Exhibit H have been approved by parties and are
considered to be the invoices owed and to be owed to Sellers and Affiliates, up
to March 31, 1999, based on agreements (giving rise to such receivables)
approved by the board of directors of CHILESAT PCS, in accordance with the terms
of the Subscription and Shareholder's Agreement, as amended, dated February 27,
1997, between TELEX, CHILESAT and LEAP WIRELESS INTERNATIONAL INC., as successor
in interest of QUALCOMM Incorporated.
2.2.9. The Controlling Shareholders and Buyer shall have executed a
non-competition agreement substantially in the form in EXHIBIT I hereto.
2.2.10. The Releases, substantially in the form of EXHIBIT J hereto, shall have
been executed and delivered by the parties thereto.
2.2.11. Sellers shall cause the directors of CHILESAT PCS, principal and
alternates, appointed by Sellers, to resign as directors thereof.
2.2.12. Sellers and Buyer shall have received copies of written approval of the
sale of shares in a form reasonably satisfactory to Sellers and Buyer from the
"sindico" designated in connection with the proposal for preventative judicial
agreements submitted by Sellers before civil court No. 18 of Santiago, files No.
2,606-98 and No. 2,607-98 for Telex and Chilesat respectively.
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2.3. Waiver of Conditions. The conditions set forth in Sections 2.2.3, 2.2.9 and
2.2.11 are solely for the benefit of Buyer and therefore can be waived by Buyer
at any time but not later than the Expiration Date. The conditions set forth in
Sections 2.2.6. and 2.2.8. are solely for the benefit of Sellers and therefore
can be waived by Sellers at any time but not later than the Expiration Date as
long as Sellers act jointly. All other conditions are for the benefit of the
Buyer and the Sellers and thus any waiver requires the written consent of all
parties not later than the Expiration Date.
2.4 Operations and Actions Prior to and Upon Closing. At all times prior to the
Closing, LEAP CHILE and Sellers shall use their commercially reasonable best
efforts to cause CHILESAT PCS to keep and maintain the licenses and the business
and assets of CHILESAT PCS in good operating condition and repair, and shall not
allow CHILESAT PCS to sell, lease, transfer or otherwise dispose of, or mortgage
or pledge or otherwise encumber its licenses or assets (except as required by
existing contracts with QUALCOMM Incorporated and/or Buyer). Furthermore,
Sellers shall not take or agree to take any other action inconsistent with the
consummation of the transaction contemplated by the parties. Except for actions
relating to enforcing and/or converting its loans to equity of CHILESAT PCS
(including issuing notices of default, involuntary bankruptcy and/or similar
types of actions), Buyer shall not take or agree to take any other action
inconsistent with the consummation of the transaction contemplated herein by the
parties. No such actions relating to enforcing and/or converting its loans to
equity shall have the effect of excusing Buyer from its obligations undertaken
in this Purchase Agreement. The parties shall use their commercially reasonable
best efforts to satisfy, or cause to be satisfied, the conditions set forth in
Section 2.2 hereof; provided, that under no circumstances shall this sentence be
understood or interpreted so as to impose any obligation to accept performance
of the conditions set forth in Section 2.2 that is less than specified therein
unless the lesser satisfaction is fully satisfactory to Buyer and Sellers,
respectively, as the case may be.
2.5 Actions at Closing. At Closing, upon satisfaction or waiver of the
conditions set forth in Section 2.2., (i) Sellers shall deliver to Buyer the
Share Certificates and a Transfer of Shares duly executed substantially in the
form of EXHIBIT K hereto, (the "Transfer of Shares"), and (ii) Buyer shall
Satisfy the Total Purchase Price and (iii) the Shares shall be registered in the
name of Buyer in shareholder's registry of CHILESAT PCS; and (iv) new share
certificates shall be issued in favor of Buyer.
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2.6 Actions following Closing. Following the Closing, Buyer and Sellers agree
to, and Buyer agrees to cause the Company to, enter into a Spanish language
version of the Novation and Assumption of Obligation Agreement which shall be a
faithful translation of the English language original of the Novation and
Assumption of Obligation Agreement, subject to the reasonable agreement of the
parties thereto to the accuracy of the translated text. The Spanish version of
the Novation and Assumption of Obligation Agreement shall, upon execution,
supersede the English version thereof, and be raised to an "escritura publica".
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
3.1. (a) Attached hereto is EXHIBIT L (the "Disclosure Schedule"), which
specifically references the Sections of this Purchase Agreement to which such
disclosure relates.
(b) Except as set forth in the Disclosure Schedule, the Sellers jointly
and severally represent and warrant to Buyer as of the date hereof as follows:
3.1.1. Organization, Good Standing, etc
(a) Except as set forth in the Disclosure Schedule, each of the Sellers
and CHILESAT PCS is a corporation duly organized and validly existing and in
good standing under the laws of Chile and has all requisite corporate power and
authority to own its properties and conduct its business as currently conducted
and to enter into and perform its obligations under this Purchase Agreement and
each other agreement, document or instrument to which it is a party relating to
or delivered in connection with this Purchase Agreement or the transactions
contemplated herein (except as to the Novation as to which the representation
and warranty is made to the best of Seller's knowledge, following Reasonable
Investigation);
(b) Except as set forth in the Disclosure Schedule, Sellers represent and
warrant to Buyer that CHILESAT PCS is the sole owner of the Concession without
restrictions or obligations, and that the Concession is not subject to liens or
encumbrances, and that the Concession and the provisional authorization allow
the Company to conduct the mobile digital telecommunications business under the
CDMA technology as currently
<PAGE> 12
conducted, and that Sellers are unaware of any event that could reasonably be
expected to result in the loss or forfeiture of the Concession.
3.1.2. Authorization of Purchase Agreement; Enforceability; No Violation or
Breach.
(a) Except as set forth in the Disclosure Schedule, the execution,
delivery and performance of this Purchase Agreement by Sellers and the
consummation of the transactions contemplated hereby by Sellers have been duly
and validly authorized by all requisite corporate proceedings of each of
Sellers.
(b) Except as set forth in the Disclosure Schedule, this Purchase
Agreement has been duly and validly executed and delivered by Sellers.
(c) Except as set forth in the Disclosure Schedule, this Purchase
Agreement constitutes the legal, valid and binding obligations of each of the
Sellers, enforceable against each of the Sellers in accordance with its terms
and, upon Satisfaction of the Total Purchase Price and the recordation of the
transfer in the share registry of CHILESAT PCS and the conveyance and delivery
of the Share Certificates, is effective to transfer the Shares to Buyer.
(d) Except as set forth in the Disclosure Schedule, neither the execution,
delivery or performance of this Purchase Agreement nor the consummation of the
transactions contemplated hereby will as of the date hereof or with the giving
of any notice or the expiration of any period of time: (i) violate any provision
of the by-laws or any charter documents of any of CHILESAT PCS, the Sellers and
/ or Controlling Shareholders and Affiliates, (ii) result in a violation or
breach of or otherwise conflict with, or permit any third party to modify or
rescind any term or provision of, or constitute a default or event of default
under, or require a payment under, any indenture, note, mortgage, deed of trust,
lease, contract, commitment, license or other agreement to which any of CHILESAT
PCS and/or Controlling Shareholders and Affiliates is a party or by which any of
them is bound, or (iii) violate any statute, order, writ, injunction, judgment,
decree, rule or regulation applicable to CHILESAT PCS and/or Controlling
Shareholders and Affiliates or the Business.
(e) Representatives of Sellers signing Purchase Agreement are duly
empowered and authorized to sign Purchase Agreement.
<PAGE> 13
3.1.3. Litigation.
(a) Except as disclosed in the Disclosure Schedule, to the best of the
knowledge of Sellers following Reasonable Investigation, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries pending
or threatened before any court or governmental body or agency or any private
arbitration tribunal of any nature against the Shares or which could reasonably
be expected to be material, against CHILESAT PCS, the Business or the Shares or
which could reasonably be expected to have a Material Adverse Effect on CHILESAT
PCS, the Business or the Shares.
(b) To the best of the knowledge of Sellers following Reasonable
Investigation, there is not in existence any judgment, order, writ, injunction,
or decree of any court, governmental body or administrative agency (i) affecting
the Shares or materially affecting CHILESAT PCS, the Business, this Purchase
Agreement or the transactions contemplated hereby, or (ii) enjoining or
requiring any of the Sellers or CHILESAT PCS to take action of any kind with
respect to the Shares or the Business.
3.1.4. Financial Statements.
(a) CHILESAT PCS has delivered to Buyer the (i) audited balance sheet of
the Company as of December 31, 1998, and the related audited statements of
income, retained earnings, and changes in financial position of the Company for
the year ending December 31, 1998, audited by independent certified public
accountants, and (ii) the unaudited balance sheets of the Company as of February
28, 1999, and the related unaudited statements of income, retained earnings, and
changes in financial position for the two-month period then ended,
(collectively, the "Financial Statements"). The Sellers represent and warrant,
that, to the best of their knowledge following Reasonable Investigation, the
Financial Statements have been prepared from the books and records of the
Company and are complete in all material respects, and present fairly the
financial position, results of operations, cash flows and changes in
shareholders' equity of Company at the respective dates and for the respective
periods indicated therein in accordance with Chilean generally accepted
accounting principles applied on a consistent basis, subject, in the case of any
such statement for a period of less than a full fiscal year, or as of a date
other than a fiscal year-end, to normal year-end adjustments which are not
material in amount, individually or in the aggregate. Except as expressly
disclosed in the Financial Statements, the Company has no liabilities or
<PAGE> 14
obligations, whether contingent or otherwise, other than liabilities incurred by
Company since the date of the most recent Financial Statements in the ordinary
course of operation of the Business as historically conducted. Due to the
illiquidity experienced by the Company during February and March of 1999, the
Company has delayed payment of certain financial and trade creditors. The
Company has made and kept books, records and accounts which, in reasonable
detail, accurately and fairly reflect the financial condition and results of
operations of the Company except for the events referred to in the preceding
sentence.
(b) Sellers represent and warrant, that, to the best of their knowledge
following Reasonable Investigation, and except as set forth in the Disclosure
Schedule since December 31, 1998 there has been no Material Adverse Change in
the financial condition, results of operations, properties, business or
prospects of the Company or the Business, individually or in the aggregate,
including without limitation any change that decreases the consolidated net
worth of Company, provided, that due to the illiquidity experienced by the
Company during February and March of 1999, the Company has delayed payment of
certain financial and trade creditors; and (ii) the Sellers are not aware of any
instance where the Company and the Business have not been maintained and
operated other than in the ordinary course consistent with past practice.
3.1.5. Taxes. Sellers represent and warrant, that, to the best of their
knowledge following Reasonable Investigation, the Company filed or caused to be
filed all returns, reports or information returns or statements, including
amendments thereto ("Tax Returns"), relating to all state, local, provincial,
foreign and other taxes, assessments, or governmental charges of any kind
whatsoever, including without limitation income, franchise, capital stock,
excise, property, sales, use, service, service use, leasing, leasing use, gross
receipts, value added, single business, alternative or add-on minimum,
occupation, real and personal property, stamp, workers' compensation, severance,
environmental, transfer, payroll, withholding, employment, and social security
taxes, or other taxes of the same or similar nature, together with any interest,
penalties or additions thereon and estimated payments thereof, whether disputed
or not ("Taxes") with the appropriate Chilean and foreign, state, provincial and
local department, agency or official with whom Tax Returns are required to be
filed ("Tax Authorities") relating to the Company, the Subsidiaries or their
operations, and have paid all Taxes shown thereon as owing. To the best of
Sellers' knowledge and except as set forth in the Disclosure Schedule, the
Company has not requested or been granted an extension of time to file any Tax
Return that has not been filed; all Taxes which were required to have been paid
as of the date hereof, have been paid by Company; no
<PAGE> 15
deficiency for unpaid Taxes has been asserted against Company by any Tax
Authority which relates to the Company or the Business; no Tax Return of Company
is currently under audit by any Tax Authority; there are no liens for Taxes
(other than for current taxes not yet due and payable) on the assets of the
Company; and no Tax Authority has proposed in writing any adjustment to any such
Tax Return.
3.1.6. Receivables. The Sellers represent and warrant, that, to the best of
their knowledge following Reasonable Investigation, substantially all of the
accounts receivable of the Company ("Receivables") (i) represent bona fide
indebtedness incurred by the applicable account debtors, (ii) have arisen in the
ordinary course of the conduct of the Business and (iii) do not reflect
work-in-progress or goods or services not yet delivered, except as may arise in
accordance with the Company's revenue recognition principles that have been
consistently applied.
3.1.7. Real Property. Except as disclosed in the Disclosure Schedule, Sellers
represent and warrant, that, to the best of their knowledge following Reasonable
Investigation the real property owned by Company, and real property held under
lease, comprise all of the real property used or needed to operate the Business
as currently conducted. The Sellers represent and warrant, that, to the best of
their knowledge following Reasonable Investigation and except as set forth in
the Disclosure Schedule:
(a) Each lease is in full force and effect and is enforceable in
accordance with its terms. The Company is not in default of its obligations
under any lease and there has not occurred any event which, with the passage of
time or giving of notice or both, constitutes a default under such lease.
(b) The ownership interest in each real property owned by Company or any
lease or a valid memorandum thereof has been duly recorded with the real estate
records of the appropriate governmental filing officer of the jurisdiction in
which the property is located. The Company has good, valid and marketable title
to the property owned by it and has good, valid and marketable leasehold title
to the property demised to it by any lease.
(c) Neither the real properties owned or leased by the Company nor the
conduct of the Business at such real properties are in conflict with current
zoning laws applicable to such properties, except where such conflict would not
adversely affect such properties or the conduct of the Business.
<PAGE> 16
(d) The transactions contemplated by this Agreement will not constitute a
default under, or require any notice to or consent of any Person, under any
lease, any non-disturbance agreement affecting any lease, or any agreement or
instrument securing the performance of the Company's obligations under any
lease.
(e) The Company has not exercised any option, nor given any notice of
election to exercise any option, under any lease, except as has been duly
memorialized by the Company and the Landlord by means of a duly executed lease
or an amendment, modification or supplement to such lease.
3.1.8. Personal Property. Sellers represent and warrant, that, to the best of
their knowledge following Reasonable Investigation, all tangible personal
property used by the Company in the conduct of the Business as currently
conducted ("Personal Property") is located on the owned or leased real property
of Company or the Subsidiaries. The Sellers represent and warrant, that, to the
best of their knowledge following Reasonable Investigation, except as disclosed
in the Disclosure Schedule, (a) the Company owns good and valid title to all the
Personal Property and (b) all of the Personal Property with a net book value in
excess of Ch $20,000,000 is in good working condition and repair, ordinary wear
and tear excepted, and is suitable for its current use.
3.1.9. Trademarks, Intellectual Property.
(a) Sellers represent and warrant, that, to the best of their knowledge
following Reasonable Investigation, and, except as set forth in the Disclosure
Schedule, the Company has good title to and has all necessary rights to use all
trademarks, trade names, service marks, trademark and service mark registration
used in connection with the Business as currently operated, together with all
licenses and agreements in connection therewith (the "Intellectual Property"),
and the technology used in the Business or incorporated into marketed or
marketable products or services of the Business (the "Marketable Technology")
free and clear of all liens, charges, royalties, encumbrances, or third party
claims or interests of any kind. All licenses of Intellectual Property to
Company are enforceable obligations of the parties thereto and the Company is
not in default thereof nor does any of the Sellers know of any default thereof
by any other party to such licenses.
<PAGE> 17
(b) Sellers represent and warrant, that, to the best of their knowledge
following Reasonable Investigation, the conduct of the Business does not,
without appropriate authorization or license, infringe upon or conflict with the
patents, copyrights, marks or other intellectual property rights of others. To
the knowledge of Sellers following Reasonable Investigation, no use of
Intellectual Property has been or is being made, except by Company in the
conduct of the Business. Each of the Sellers has no knowledge of any claim or
reason to believe that any Intellectual Property of which the Company is the
licensee is not the valid and enforceable property of its purported owner and
that the licensor is duly authorized to license such Intellectual Property.
3.1.10. Employee Matters. Except as set forth in the Disclosure Schedule,
Sellers represent and warrant, that, to the best of their knowledge following
Reasonable Investigation:
(a) Except as set forth in the Disclosure Schedule, the Company is not
indebted to any shareholder, director, officer, employee or agent of Company in
relation to labor matters.
(b) There is not now nor has there been any labor strike, threat of labor
strike, organizational attempt, boycott, or informational or direct picketing or
leafleting with regard to labor matters directed against Company. There are no
unions and no collective bargaining agreements binding upon the Company.
3.1.11. Consents. Except as set forth in the Disclosure Schedule, to the
knowledge of the Sellers, there is no consent, approval, order, or authorization
of, or registration, declaration or filing with, or payment to, any governmental
authority of or within Chile or any other third party required to be made or
obtained by the Company in order for the Company to establish the valid
execution, delivery and performance by the Company of this Purchase Agreement
and the consummation of the transactions contemplated herein by the Company.
3.1.12. Compliance with Laws. Except as set forth in the Disclosure Schedule,
the Sellers represent and warrant, that, to the best of their knowledge
following Reasonable Investigation, the Company has complied and is in
compliance with all applicable laws, statutes, orders, rules, regulations and
requirements promulgated by governmental or other authorities, and no claims
have been made by any governmental regulatory agency or other person or entity
to the contrary except for those which individually or in the aggregate
<PAGE> 18
could not reasonably be expected to have a Material Adverse Effect. Except as
set forth in the Disclosure Schedule, Sellers represent and warrant, that, to
the best of their knowledge after Reasonable Investigation, the Company
maintains all permits, licenses, certificates, approvals and authorizations of
and registrations with and under all state, local and foreign laws, authorities
and agencies as are required for the operation of the Business, and (i) each
such permit is in full force and effect, (ii) there is no violation of any such
permit which could reasonably be expected to have a Material Adverse Effect and
(iii) no proceeding is pending or threatened seeking the revocation or
limitation of any such permit.
3.1.13. Transactions with Related Parties. Except as set forth in the Disclosure
Schedule, the Sellers represent and warrant, that, to the best of their
knowledge following Reasonable Investigation, neither the Company or any of the
Sellers nor any officer, director or employee of the Company or a Seller or any
affiliate of any of the foregoing (a) owns, directly or indirectly, on an
individual or joint basis, any interest in (other than incidental ownership), or
serves as an officer, director or employee of, any landlord, competitor or
supplier of Company, or any corporation, partnership, trust or other entity or
organization which has any contract or arrangement with the Company or (b) has
entered into transactions with the Company other than transactions entered into
in the ordinary course of business or otherwise expressly authorized by the
Board of Directors of the Company.
3.1.14. Environmental Matters. Except as set forth in the Disclosure Schedule,
Sellers represent and warrant, that, to the best of their knowledge following
Reasonable Investigation, the Company (i) is in material compliance with
Environmental Laws applicable to the owned and leased real property of the
Company or activities conducted thereon or to the Business; (ii) has obtained
and has operated in material compliance with all permits required by
Environmental Laws for the operation of the owned and leased real property and
the Business and no other permits are required for operation of the Business;
(iii) has not received or otherwise been threatened with any notice of material
violation, liability, suit or other material claim based on the violation of the
Environmental Laws; (iv) is not aware of any investigation, review, finding of
violation, liability, suit, or other claim asserted or threatened, or the
existence of the basis for any of the foregoing against the Company under
Environmental Laws; and (v) the Company does not have any plans to make
significant capital expenditures for pollution control equipment or otherwise to
address environmental or workplace health and safety conditions.
<PAGE> 19
3.1.15. Contracts. Except as set forth in the Disclosure Schedule, Sellers
represent and warrant, that, to the best of their knowledge following Reasonable
Investigation, each material contract, agreement, and lease, whether written or
oral, to which the Company is a party or by which any of the assets of the
Company are bound or which relate to the Business (the "Contracts") (i) is in
full force and effect and enforceable in accordance with its terms, and (ii) has
no provision that permits termination thereof or requires a payment or other
action in connection with a change of control or a change greater than 10%
capital ownership of the Company. Except as set forth in the Disclosure
Schedule, Sellers represent and warrant, that, to the best of their knowledge
following Reasonable Investigation, the Company, in regards to such Contracts
have performed in all material respects all obligations required to be performed
by them to date and the Company is not in default in any material respect
thereunder nor has there occurred any other event which, with the passage of
time or giving of notice or both, would constitute a default thereunder that
would constitute a Material Adverse Effect.
3.1.16. Insurance. Except as set forth in the Disclosure Schedule, Sellers
represent and warrant, that, to the best of their knowledge following Reasonable
Investigation, all policies of insurance to which the Company is a party are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the date hereof have been paid, and no notice of cancellation
has been received with respect to any such policy. Except as set forth in the
Disclosure Schedule, Sellers represent and warrant, that, to the best of their
knowledge following Reasonable Investigation, the Company has not received any
notice that material changes are required in the conduct of the Business as a
condition to the continuation of coverage or the renewal of any such policy.
3.1.17. Brokers. Except as set forth in the Disclosure Schedule, to the best of
Seller's knowledge following Reasonable Investigation, no agent, broker,
investment banker, or other person acting under the authority of the Company or
the Sellers is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly from the Company or Buyer as a
result of this Purchase Agreement; provided, that the Sellers makes no
representation and warranty and shall have no liability if the broker's or
finder's fee arises out of any agreement of the broker of finder with Buyer or
its affiliates.
3.1.18. Company Capitalization.
<PAGE> 20
(a) Upon the execution and delivery of this Purchase Agreement by the
parties and at the Closing, Buyer shall receive good and marketable title to the
Shares free and clear of all liens, encumbrances, restrictions, charges and
claims whatsoever (collectively, "Liens"). The Sellers have full power, right
and authority to sell and convey such Shares to the Buyer without rights of
first refusal or other restrictions on such conveyance. Except as specified in
Section 1.3 hereinabove and as specified in the Disclosure Schedule, there is no
subscription, option, warrant, call right, agreement or commitment relating to
the issuance, sale, delivery or transfer (collectively, "Rights to Acquire") by
the Company of shares of capital stock of the Company or of any other
securities, or instruments convertible to securities. To the best of Sellers'
knowledge following Reasonable Investigation, the Company does not have any
agreement or understanding with respect to the registration with any
governmental authority of shares of capital stock of Company for sale to the
public.
(b) The Sellers represent and warrant, that, to the best of their
knowledge following Reasonable Investigation and except as set forth in the
Disclosure Schedule, the Company does not directly or indirectly have an equity
ownership interest in any corporation or other entity.
3.1.19. Disclosure of All Material Information. To the best of their knowledge,
the Sellers have disclosed to Buyer all information and documents known to them
following a Reasonable Investigation that relate to any facts, set of
circumstances or conditions that could reasonably be expected to have a Material
Adverse Effect or would otherwise be material to Buyer's purchase of the Shares.
To the best of their knowledge following Reasonable Investigation, the
Disclosure Schedule is true and complete in all material respects and does not
make any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading.
3.2. Buyer represents and warrants to the Sellers as of the date hereof as
follows:
3.2.1. Organization, Standing, etc.. Buyer is a corporation ("sociedad anonima
cerrada") duly organized, validly existing and in good standing under the laws
of Chile and has all requisite corporate power and authority to enter into and
perform its obligations under this Purchase Agreement.
<PAGE> 21
3.2.2. Authorization and Enforceability
(a) The execution, delivery and performance of this Purchase Agreement by
Buyer and the consummation of the transactions contemplated hereby by Buyer,
have been duly and validly authorized by all necessary corporate proceedings of
the Buyer. This Purchase Agreement has been duly and validly executed by Buyer.
This Purchase Agreement constitutes the valid and binding obligations of the
Buyer, enforceable against Buyer in accordance with its terms. Representatives
of Buyer signing this Purchase Agreement and the Novation are duly empowered and
authorized to so sign.
(b) The execution, delivery and performance of the Novation by the Company
have been duly and validly authorized by all requisite corporate proceedings of
the Company. When delivered at the Closing, the Novation shall be duly and
validly executed by the Company. The Novation, upon execution, shall constitute
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms. Representatives of the Company signing the
Novation are duly empowered and authorized to so sign.
3.2.3. Brokers. No agent, broker, investment banker or other person acting under
the authority of the Buyer is or will be entitled to any broker's or finder's
fee or any other commission or similar fee directly or indirectly from any
Seller or any of their Affiliates as a result of the negotiations or execution
of this Purchase Agreement.
3.2.4 No Breach or Conflict. Neither the execution, delivery or performance of
this Purchase Agreement nor the consummation of the transactions contemplated
hereby will as of the date hereof or with the giving of any notice or the
expiration of any period of time: (i) violate any provision of the By Laws or
any charter documents of Buyer, or (ii) violate any statute, order, writ,
injunction, judgment, decree, rule or regulation applicable to Buyer.
ARTICLE 4. INDEMNIFICATION
4.1. Indemnity by Sellers. Subject to Section 4.4. of this Agreement, Sellers
agree jointly and severally to indemnify, hold harmless and defend Buyer, the
Company and their respective Affiliates and related corporations, and their
respective directors, officers, partners, employees, agents, successors and
assigns from and against any and all claims, causes of action, liabilities,
damages, losses, judgments, and the costs and expenses
<PAGE> 22
incidental to any of the foregoing (including, but not limited, to reasonable
legal, accounting, consulting, engineering and other expenses, costs of
investigations and costs of providing any bonds or taking other actions
necessary to stay any judgments or perfect any appeals (collectively, "Losses")
which may be imposed upon, incurred by, or assessed against any Person seeking
indemnification hereunder arising out of, in connection with, or relating to:
(a) any material or knowing breach or Inaccuracy ("Breach") of any
representation or warranty made by Sellers in this Purchase Agreement; or
(b) any breach of any existing contracts where any or both of the Sellers
or any of their Affiliates and the Company are a party to, whether as listed in
EXHIBIT M or otherwise.
4.1.1. Any Breach of any representation or warranty shall only be subject to
indemnification pursuant to this Section 4.1 if such Breach gives rise to Losses
(i) over and above US$50,000 per event or per incident and (ii) the aggregate of
all such Breaches is in excess of US$250,000.
4.1.2. Except as provided in Section 4.1.3., indemnity claims pursuant to
Section 4.1 (a) in the case of a Breach of a representation or warranty is
limited to an aggregate amount of US$5,000,000.
4.1.3. None of the limits for indemnity claims stated in Section 4.1.1. and/or
4.1.2. are applicable to any Breach of any representation or warranty which is
caused by an intention and knowing breach or an intent to defraud.
4.1.4. Seller shall under no circumstances be liable for any Breach of which
Buyer has actual knowledge as of the date hereof.
4.1.5. In calculating the amount of Loss from any Breach of a representation or
warranty, the thresholds set forth in Section 4.1.1. shall be initial thresholds
but any recovery of Loss once it has exceeded those thresholds shall include
Losses from the first dollar of Loss.
<PAGE> 23
4.2. Right to Offset. In addition to all other rights and remedies available to
Buyer hereunder, Buyer and/or the Company shall have the right and option, but
no obligation, to reduce the amount of the payment obligation referred to in the
Novation by setting off against such amount the indemnity claims permitted under
Section 4.1. hereinabove. This right shall be available to Buyer and/or the
Company, as long as the obligation to pay all or part of the Novation is also
pending, including in cases of interruption or suspension of such obligation to
pay. There shall be no right of set-off for indemnified Losses that are
otherwise paid by Sellers or their Affiliates before such offset. No right of
offset shall be applied to any Breach of a representation or warranty set forth
in Section 3.1 if, at the time of selling, making such representation or
warranty, Buyer had actual knowledge that the representation and warranty was
untrue when made.
4.2.1. Notwithstanding the foregoing, in the case of the contract regarding the
granting of a right of use of the optic fiber and provision of services (listed
in Exhibit M), a disruption of such services that (i) arises in the ordinary
course of business of the service provider (CHILESAT) which is not related to
failure of Sellers or their affiliates to preserve their rights in such optic
fiber or related assets (the "Backhaul") and (ii) is consistent with reasonable
expectations of parties to contracts for the provision of backhaul services,
shall not give rise to a right to offset on the payment obligation referred to
in the Novation.
4.3. The rights to indemnity hereunder shall survive the Closing and shall
terminate on the first anniversary date with respect to claims under Section
4.1(a) and on the third anniversary to the Closing Date with respect to claims
under Section 4.1; provided that such rights to indemnity will be extended for
the duration of the suspension or interruption of the obligation to pay the
outstanding part of the price contemplated in Section 1.2.(c) hereinabove (the
"Indemnity Cut-Off").
4.4. No Modification of Existing Contracts. The terms of this Section 4 are not
intended to modify, supplement, add to or amend the terms of the existing
contracts between the Company and Sellers, nor to create, amend and/or terminate
any rights or obligations thereunder. In any event, the Indemnity Cut-Off shall
not increase, reduce or modify the obligations of the Sellers, or any of them,
or their Affiliates, under any agreements with the Company, including, but not
limited to, those listed in Exhibit M.
4.5. Notice of Claim. If any indemnified Person under Article 4 (the "Claimant")
desires to make a claim (a "Claim") against any indemnifying Person under such
provisions (the
<PAGE> 24
"Indemnitor"), the Claimant shall give written and prompt notice to the
Indemnitor setting forth the amount, nature and circumstances of the Claim. The
failure to give such prompt notice shall relieve the Indemnitor of its
indemnification obligations contained herein only to the extent that failure to
give such notice actually prejudices the rights or materially increases the
liabilities or obligations of Indemnitor. Upon receipt of such notice,
Indemnitor shall acknowledge in writing the Claim (it being understood that the
failure of Indemnitor to provide such writing will not affect its liability for
Losses). Upon acknowledging in writing its obligation to indemnify Claimant with
respect to a Claim, Indemnitor, if the case were to permit this, may elect in
writing to assume the defense of such Claim at its own expense, subject to the
right of Claimant to participate in the defense of any such matter at its own
expense and with counsel of its own choice. Even if the Indemnitor does not
exercise its right to assume the defense of the Claim, Indemnitor must assume
the defense of the Claim if so requested by Claimant, subject to the right of
Claimant to participate in the defense of any such matter at its own expense and
with counsel of its own choice. The Indemnitor shall not have the right to
settle any Claim without the consent of Claimant if such settlement would result
in a liability or cost to Claimant or, when Buyer is Claimant, and would
adversely affect the operation of the Business or affect Buyer's interest in or
other rights of ownership in the Shares. Even though Indemnitor were to not
assume the defense, case permitting and having been notified to do so, he must
abide by the results of the Claim. If the Claim were to not permit that the
Indemnitor assume the defense of Claimants interest due to a conflict of
interest, Indemnitor must indemnify Claimant directly.
ARTICLE 5: EXCLUSIVITY AND NON COMPETITION.
5.1 Exclusivity. Sellers and their Affiliates and their respective officers,
directors and agents shall not, directly or indirectly, consult or negotiate
with or seek or entertain proposals from any person or entity with respect to
selling or otherwise directly or indirectly transferring Shares. Such obligation
shall expire on the earlier of (a) such time as Leap Chile fails to acquire
Shares by reason of a breach of this Purchase Agreement; (b) the Expiration
Date, as extended, or (c) at Closing Date.
5.2 Limitation on Competition.
(a) Sellers shall not, and shall not cause or permit any of its
Controlling Shareholders, Affiliates or related persons or entities,
("Restricted Entities"), directly or indirectly, to compete directly or
<PAGE> 25
indirectly with Chilesat PCS in the provision of mobile wireless
telecommunications services (or services which are capable of being used and are
actually used or marketed for use, in a mobile operation) ("Restricted
Business") in the Republic of Chile for a period of two years, provided that
this covenant not to compete shall expire with respect to any party which is
acquired in whole or material part (more than twenty-five percent (25%)) by an
entity which, prior to the date of such acquisition, is a wireless service
provider.
(b) Acquisitions by an unrelated wireless service provider of less than
25% of the equity or voting power of any of the Restricted Entities or
acquisitions by a non-wireless service provider of any percentage of the shares,
equity or voting power of any of the Restricted Entities, shall not rescind the
non-compete restrictions applicable to such Restricted Entity.
(c) Minority holdings by all Restricted Entities of less than 5%, in the
aggregate, in a competing wireless service provider shall not violate this
provision.
(d) The covenant not to compete includes, but is not limited to, any of
the following conducts: (i) engage or attempt to engage (including without
limitation by means of direct or indirect ownership of an interest in any third
party) or encourage any other person or entity to begin a Restricted Business;
or (ii) solicit for employment or employ or assist another to solicit for
employment or employ, any individual who is employed by the Company.
(e) The parties acknowledge that because a remedy of law for any breach of
the provisions of this Section 5.2. will be inadequate, in addition to all other
remedies available, Buyer shall have the remedies of a restraining order,
injunction or other equitable relief to enforce the provisions of this Section
5.2.. This remedy shall be in addition to, and not in lieu of, any other remedy
available to Buyer, including monetary damages.
(f) The invalidity, ineffectiveness or unenforceability of any one or more
phrases, sentences, clauses, paragraphs or subsections of this Section 5.2.
shall not affect the validity or enforceability of the remaining portions of
this Section 5.2. or any part thereof. If any provision of this Section 5.2. is
finally determined to be invalid judicially, ineffective or unenforceable, the
determination will apply only in the jurisdiction in which such final
adjudication is made, and such provision shall be deemed severed from this
<PAGE> 26
Purchase Agreement for purposes of such jurisdiction only, but every other
provision of this Section 5.2. shall remain in full force and effect, and there
shall be substituted for any such provision held invalid, ineffective or
unenforceable, a provision of similar import reflecting the original intent of
the parties to the extent permissible under applicable law.
ARTICLE 6: RESOLUTION OF DISPUTES AND GOVERNING LAW.
All disputes, controversies or claims arising out of or relating to this
Purchase Agreement, or for the breach, termination or invalidity thereof, shall
be settled by arbitration pursuant to the Rules of Procedure of the
International Chamber of Commerce in effect on the date of this Agreement by an
arbitrator chosen by agreement of the parties or, if the parties shall fail to
agree upon such arbitrator within fifteen (15) days after one party shall
request the other to do so or if the person chosen shall fail or refuse to act
as an arbitrator, then by an arbitrator appointed in accordance with such Rules.
The arbitration shall be conducted in the English language at Miami, Florida,
United States of America. The arbitration shall be based on the English version
of the Purchase Agreement approved and executed by the parties on the date
hereof. The parties to the arbitration shall have a right to conduct discovery.
Judgment upon any award rendered may be entered in any court having jurisdiction
or application may be made to such court for a judicial acceptance of the award
or an order of enforcement, as the case may be. During the period of any
arbitration, the parties agree to continue to perform their respective
obligations hereunder to the extent that the performance of such obligations is
not the subject of dispute or otherwise has not been submitted to arbitration.
Each of the parties hereto waives for now and forever any immunity, sovereign or
otherwise, that it may have from the jurisdiction of the court in which an
arbitral judgment is sought to be enforced.
ARTICLE 7: PUBLICITY, CONFIDENTIALITY.
7.1. The parties hereto recognize that the contemplated transaction and all
discussions related thereto are strictly confidential and shall not disclose to
any third party the existence of negotiations between the parties, the
relationship of the parties under this Purchase Agreement, nor any confidential
information received in connection therewith, nor release any information
regarding matters relating to the transactions contemplated hereby, including,
without limitation, any press release or statement in any communications media
except (i) as may be required in order to comply with applicable law or
regulations, provided the party required to make such disclosure will, to the
extent possible, promptly
<PAGE> 27
inform the other parties so as to permit them to make known any objections that
they may have to such disclosure, (ii) or as may be necessary to fulfill the
conditions contemplated herein, or (iii) with the prior written consent of the
other parties, which shall not be unreasonably withheld or delayed.
7.2. Buyer, Sellers and the Company shall coordinate with each other the
disclosure of the transactions contemplated by this Agreement to employees,
customers and suppliers to the extent both parties agree that such disclosure is
advisable.
7.3. Notwithstanding Section 7.1, the parties may disclose the existence of this
Purchase Agreement and related information (i) to financial creditors of
Sellers, including, without limitation, as represented through the "comite de
licitacion," "comite de acreedores", "comite de control" and "junta de
acreedores financieros," created or existing pursuant to the Agreement
Proposals, (ii) to secured creditors of the Company such as QUALCOMM
Incorporated, (iii) to the "sindico," and (iv) as legally required, including
but not limited to disclosure to the judge overseeing the matter of the
Agreement Proposals, in each case as may be necessary or advisable to receive
the approvals set forth in Section 2.2.2.
7.4. LEAP CHILE agrees that it shall not disclose the contents of this Purchase
Agreement or otherwise carry out discussions relating to the transactions
contemplated hereby with the persons described in clauses (i), (iii) or (iv) of
Section 7.3. without prior consultation with the Sellers and without providing
Sellers with a reasonable opportunity to participate in any such communication
meeting or conference call.
7.5. On the date of execution hereof and on Closing Date and at each other time
as Buyer may request before Closing, Sellers shall fully and completely inform
LEAP CHILE of the process and content of its conversations which may be relevant
to the transactions contemplated hereby with the persons described in clauses
(i) or (iii) of Section 7.3.
7.6. The parties acknowledge that as public corporations, Leap Wireless
International Inc. (LEAP CHILE's parent company) and TELEX shall each be
obligated to make a public announcement of Purchase Agreement in accordance with
the disclosure standards for public corporations in the United Stated and in the
case of TELEX, in Chile and the United States and to file the Purchase Agreement
as a public document with the Securities and Exchange Commission. The parties
agree to coordinate such announcements.
<PAGE> 28
ARTICLE 8: MISCELLANEOUS
8.1. Waiver. No purported waiver by either party of any default by the other
party of any term or provision contained herein shall be deemed to be a waiver
of such term or provision unless the waiver is in writing and signed by the
waiving party. No such waiver shall in any event be deemed a waiver of any
subsequent default under the same or any other term or provision contained
herein. No right or remedy conferred by this Purchase Agreement or legally
available is intended to be exclusive of any other right or remedy, and each
such right or remedy is cumulative and in addition to every other such right or
remedy.
8.2. Entire Agreement. This Purchase Agreement sets forth the entire
understanding between the parties concerning the subject matter of this Purchase
Agreement and incorporates all prior negotiations and understandings. There are
no covenants, promises, agreements, conditions or understandings, either oral or
written, between them, relating to the subject matter of this Purchase
Agreement, other than those set forth herein or in the contracts contemplated
herein. No representation or warranty has been made by or on behalf of either
party to this Purchase Agreement (or any officer, director, employee or agent
thereof) to induce the other party to enter into this Purchase Agreement or to
abide by or consummate any transactions contemplated by any terms of this
Purchase Agreement, except representations and warranties expressly set forth
herein. No alteration, amendment, change or addition to this Purchase Agreement
shall be binding upon either party unless in writing and signed by the party to
be charged.
8.3. Joint Preparation. This Agreement is to be deemed to have been prepared
jointly by the parties hereto and any uncertainty or ambiguity existing herein,
if any, shall not be interpreted against either party, but shall be interpreted
according to the application of the rules of interpretation for arms length
agreements.
8.4. No Partnership. Nothing contained in this Purchase Agreement shall be
deemed or construed by the parties hereto or by any third person, corporation or
other entity to create the relationship of principal and agent or of partnership
or of joint venture.
8.5. Successor. Each and all of the provisions of this Purchase Agreement shall
be binding upon and inure to the benefit of the parties hereto, and except as
otherwise specifically provided in this Purchase Agreement, their respective
successors and assigns; provided however, that, with the exception of Buyer's
obligations pursuant to Section 1.2.(c) which
<PAGE> 29
shall be assigned pursuant to the Novation and may thereafter be assigned by
Sellers, no party hereto may assign this Purchase Agreement or any rights
hereunder without the written consent of the other. Notwithstanding the
foregoing, Buyer may assign this Purchase Agreement, in whole or in part, to any
parent corporation, subsidiary or other affiliate of the Buyer without the
consent of the Sellers or the Company.
8.6. Notices. Any consent, waiver, notice, demand, request or other instrument
required or permitted to be given under this Purchase Agreement shall be in
writing and in the English language and be deemed to have been properly given
when (a) delivered in person, (b) three business days after sent by a reputable
international prepaid overnight delivery service, or (c) upon receipt of
confirmation of delivery if delivered by telecopy or other facsimile
transmission (followed with hard copy sent by international prepaid overnight
delivery service), addressed:
If to TELEX CHILE: TELEX-CHILE S.A.
Rinconada El Salto 202
Huechuraba
Santiago
CHILE
Attention: Gerente General
Fax No. 011-562-382-5185
If to CHILESAT: CHILESAT S.A.
Rinconada El Salto 202
Huechuraba
Santiago
CHILE
Attention: Gerente General
Fax No. 011-562-382-5185
If to LEAP CHILE: Inversiones Leap Wireless Chile S.A.
Tenderini 153, Santiago, Chile
At: General Manager
Fax No. 562 6331886
<PAGE> 30
With copy to:
LEAP WIRELESS INTERNATIONAL, INC.
10307 Pacific Center Court
San Diego, CA
USA
Attention: General Counsel
Fax No. 1-619-882-6040
or to such Persons or at such other addresses as any party hereto shall have
designated by proper notice in writing to the other parties. Notice of change of
address will be effective only upon receipt.
8.7. Captions. The captions and Section numbers appearing in this Agreement are
inserted only as a matter of convenience and do not define, limit, construe or
describe the scope or intent of the provisions of this Purchase Agreement.
8.8. Partial Invalidity. If any term or provision of this Purchase Agreement or
the application thereof to any Person or circumstance, shall be invalid or
unenforceable, the remainder of this Purchase Agreement, or the application of
such term or provision to other Persons, other than those as to which it is held
invalid, shall not be affected thereby and each term or provision of this
Purchase Agreement shall be valid and enforceable to the fullest extent
permitted by law and the parties shall agree to substitute for such term or
provision other terms and provisions which to the extent permitted by law will
permit the parties to obtain the benefit of the term or provision so held
invalid or unenforceable.
8.9. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute one and the same instrument.
8.10. Third Parties. Nothing herein, expressed or implied, is intended or shall
be construed to confer upon or give any Person other than the parties hereto and
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
<PAGE> 31
8.11. Expenses. Each party hereto shall pay its own expenses, including
attorneys and accounting fees, incurred in connection with the transaction
described herein.
8.12. Further Assurances. If at any time either of the parties hereto shall
consider or be advised that any further assignments, conveyances, notations or
assurances are necessary or desirable to carry out the provisions hereof and the
transactions contemplated herein, the appropriate parties hereto shall execute
and deliver, or cause to be executed and delivered, any and all proper deeds,
assignments and assurances, and do or cause to be done all things necessary or
proper to carry out fully the provisions hereof.
8.13. MOU. The memorandum of understanding granted by and among them on March 2,
1999, is terminated and without further force or effect.
8.14. Governing Law. This Purchase Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to the
conflict of law principles thereof.
8.15. Joint and Several Liability. Each Seller hereby agrees that, by signing
below, Sellers will be jointly and severally liable for the obligations and
liabilities of the Sellers under this Agreement
IN WITNESS WHEREOF, the parties have caused this Purchase Agreement to be
executed as of the date first above written.
TELEX CHILE S.A. INVERSIONES LEAP WIRELESS
CHILE S.A.
By: /s/ JUAN EDUARDO IBANEZ By: /s/ OCTAVIO BOFILL
--------------------------------- -----------------------------------
Print Name: JUAN EDUARDO IBANEZ Print Name: OCTAVIO BOFILL
Title: PRESIDENT Title: GENERAL MANAGER
CHILESAT S.A.
By: /s/ RAMON VALDIVIESO
Print Name: RAMON VALDIVIESO
Title: GENERAL MANAGER
<PAGE> 1
EXHIBIT 10.21.2
NOVATION AND ASSUMPTION
OF PAYMENT OBLIGATION AGREEMENT
U.S.$22,000,000 Dated: April 19, 1999
FOR VALUE RECEIVED, the undersigned, Chilesat Telefonia Personal S.A., a
corporation organized under the laws of the Republic of Chile (the "Debtor"),
HEREBY PROMISES TO PAY to the order of Chilesat S.A., a corporation organized
under the laws of the Republic of Chile or its assigns (the "Holder") the
principal amount of TWENTY-TWO MILLION UNITED STATES DOLLARS (U.S.$22,000,000)
on April 19, 2002 payable in Chilean Pesos at the Observed Exchange Rate on the
day preceding the date of payment.
THIS NOVATION AND ASSUMPTION OF PAYMENT OBLIGATION AGREEMENT (this
"Agreement") is dated as of April 19, 1999 and is entered into by and among (i)
the Debtor, as assignee and obligor hereunder, (ii) Inversiones Leap Wireless
Chile S.A., a corporation organized under the laws of Chile, as assignor of the
payment obligations hereunder ( "Leap Chile"), and (iii) the Holder, as holder
of this Obligation and in order to consent to the assignment and assumption of
the payment obligations.
DEFINITIONS
Defined Terms As used in this Agreement, the terms listed below shall have
the respective meanings set forth below.
"Acquisition" means the acquisition on the date hereof by Leap Chile or its
designee of all of the shares of common stock of the Debtor held by Telex-Chile
and Chilesat S.A.
"Additional Shares of Capital Stock" shall mean all shares of capital stock
(whether common or preferred) of the Debtor issued or sold (or, pursuant to
Section 2.04 (b), deemed to be issued) by the Debtor after the date hereof.
"Affiliate" means, with respect to any Person, (i) each other Person of
which an economic interest of more than twenty-five percent (25%) is held by
such Person, directly or indirectly, whether by ownership of capital stock,
contract or otherwise and (ii) each other Person which, directly or indirectly,
controls, is controlled by, or is under common control with, such Person
(excluding any trustee under, or any committee with responsibility for
administering, any pension plan or employee benefit plan). A Person shall be
deemed to be "controlled by" another Person if such other Person possesses,
directly or indirectly, power (i) to vote more than twenty-five percent (25%) or
more of the securities (on a fully diluted basis) having ordinary voting power
for the election of directors, managing general partners or managing members or
(ii) to direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.
<PAGE> 2
"Base Price" shall have the meaning set forth in Section 2.03 (d).
"Business Day" means any day other than a Saturday or a Sunday or other day
on which commercial banks in New York City or Santiago, Chile are authorized or
required by law to close.
"Chilean GAAP" means generally accepted accounting principles in Chile as
in effect from time to time.
"Chilesat S.A." means Chilesat S.A., a corporation organized under the laws
of Chile.
"Debtor" shall have the meaning set forth in the headings hereto.
"Deferred Payment Agreement" means the Amended and Restated Deferred
Payment Agreement, dated June 24, 1998, among the Debtor, Telex-Chile, QUALCOMM
Incorporated and Leap Wireless (as assignee of Qualcomm Incorporated), as
amended, modified or supplemented from time to time.
"Dollar," "Dollars" and "$" shall mean dollars in lawful currency of the
United States of America.
"Event of Default" means any of the events specified in Section 5.01,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Financial Statements" means, with respect to any accounting period for a
Person, statements of income and cash flows of said Person for such period, and
balance sheets of said Person as of the end of such period, setting forth in
each case in comparative form figures for the corresponding period in the
preceding fiscal year if such period is less than a full fiscal year or, if such
period is a full fiscal year, corresponding figures from the preceding annual
audit, all prepared in reasonable detail and in accordance with Chilean GAAP
consistently applied and which shall fairly present the financial condition of
such Person.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Holder" shall have the meaning set forth in the headings hereto.
"Indebtedness" means as to any Person, (a) indebtedness of such Person for
borrowed money, (b) all capitalized leases of such Person, (c) all obligations
of such Person for the deferred purchase price of property or services (other
than trade or other accounts payable in the ordinary course of business in
accordance with customary industry terms).
<PAGE> 3
"Leap Chile" means Inversiones Leap Wireless Chile S.A., a corporation
organized under the laws of Chile.
"Leap Credit Agreement" means the Loan Agreement dated June 24, 1998, among
the Debtor, Telex-Chile and Leap Chile, as amended, modified or supplemented
from time to time.
"Leap Wireless" means Leap Wireless International, Inc., a corporation
organized under the laws of Delaware.
"Libor" applicable to any calendar month means the rate per annum (rounded
upward, if necessary, to the next higher 1/16 of 1%) equal to the rate reported
on the Telerate Screen, page 3750, as the rate at which deposits in Dollars are
offered by major banks in the London interbank market at approximately 11:00
a.m. (London time) two London Business Days before the first day of such
calendar month in an amount approximately equal to the aggregate principal
amount of the outstanding principal due under this Agreement and subject to such
Interest and for a one month period. Libor so determined shall apply to all
principal outstanding under this Agreement and in default during the applicable
calendar month regardless of changes in the Libor occurring during such month.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement or preferential
agreement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, or any financing lease
having substantially the same economic effect as any of the foregoing).
"Material Adverse Effect" shall mean (a) a material adverse change in, or a
material adverse effect upon, the operations, business, assets, properties,
condition (financial or otherwise) or prospects of the Debtor and its
Subsidiaries taken as a whole that results in a material impairment of the
ability of the Debtor to perform its obligations hereunder; or (b) a material
adverse effect upon the legality, validity, binding effect or enforceability
against the Debtor of this Agreement.
"Observed Exchange Rate" means, at any date of determination, the rate of
exchange of U.S. dollars and Chilean pesos calculated with reference to the
"dolar observado," as published for such date by the Central Bank of Chile in
accordance with paragraph 6 of Chapter I of Title 1 of the Compendium of Foreign
Exchange Rules of the Central Bank of Chile, or if no such rate is published by
the Central Bank or reported in Chile, then published or announced rate of
Citibank (of if Citibank does not publish or announce such rate, the rate
published or announced by Bank of America) or if neither such bank announces or
publishes a rate than to the foreign exchange spot mid-rates for such day
reported in The Wall Street Journal, or, if not so reported, to the mid-market
foreign exchange spot closing rates for such day reported in the Financial
Times, or, if not so reported, to
<PAGE> 4
spot foreign exchange mid-market rates for trading among banks in amounts of
US$1,000,000 or more.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture, limited
liability company, Governmental Authority or other entity of whatever nature.
"Requirements of Law" means, as to any Person, the articles of
incorporation, bylaws, estatutos sociales or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Restricted Payment" shall mean (i) any payment of a dividend or
distribution (whether in cash, securities or other property) with respect to any
shares of any class of capital stock of the Debtor, or (ii) any payment (whether
in cash, securities or other property), on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any such shares of
capital stock of the Debtor, or (iii) any payment with respect to any option,
warrant or other right to acquire any such shares of capital stock of the
Debtor.
"Stock Purchase Agreement" means the Stock Purchase Agreement, dated April
12, 1999, among Leap Chile, as Purchaser, and Telex-Chile and Chilesat S.A., as
Sellers.
"Subsidiary" means, as to any Person, an entity of which fifty percent
(50%) of the shares of stock (or similar equity interests) having ordinary
voting power (other than stock having such power only by reason of the
occurrence of a contingency) are at the time owned or controlled, directly or
indirectly, through one or more intermediaries, or both, by such Person.
"Telex-Chile" means Telex-Chile S.A., a corporation organized under the
laws of Chile.
ARTICLE I
NOVATION OF PAYMENT OBLIGATION
SECTION 1.01. Novation. Leap Chile hereby sells, transfers, conveys and
sets over unto the Debtor its payment obligations pursuant to Section 1.2(c) of
the Stock Purchase Agreement. The Debtor for valuable consideration as effected
by Section 1.02 hereof, the receipt of which is hereby acknowledged, does hereby
irrevocably and unconditionally assume such payment obligations, as evidenced by
this Agreement, subject to the terms and conditions set forth herein. The
assignment and assumption set forth in this section shall constitute a novation
of Leap Chile's payment obligations under Section 1.2(c) of the Stock Purchase
Agreement and shall release the Seller from any and all further liability
thereunder.
<PAGE> 5
The Debtor agrees that it shall not challenge the validity or enforceability of
this Agreement.
SECTION 1.02. Value Given. In order to induce the Debtor to enter into and
issue this Agreement, Leap Chile hereby agrees to cause Leap Wireless to reduce
by U.S.$10,000,000 the Debtor's obligations pursuant to the Deferred Payment
Agreement.
SECTION 1.03. Consent and Acknowledgment. The Holder hereby consents to and
acknowledges the novation effected pursuant to this Article. Leap Chile and the
Debtor acknowledge and agree that the unconditional and irrevocable assumption
of this Agreement by the Debtor is an essential element of the Holder's
agreement to the Acquisition.
ARTICLE II
TERMS OF PAYMENT
SECTION 2.01. Interest. All sums payable hereunder shall be without
interest, except for default interest in accordance with Section 2.06.
SECTION 2.02. Optional Prepayments. The Debtor may at any time prepay this
Agreement in whole or in part.
SECTION 2.03. Mandatory Prepayments (a) If the Debtor shall (i) make any
Restricted Payment to Leap Chile, Leap Wireless or any of their respective
Subsidiaries or (ii) make any Restricted Payment to a Person other than Leap
Chile, Leap Wireless or any of their respective Subsidiaries, successors or
assigns except out of retained earnings or profits, the Debtor shall on the date
of such Restricted Payment first prepay this Agreement in full.
(b) If the Debtor shall make a payment, repurchase, or redemption of any
principal due under any Indebtedness of the Debtor held by Leap Chile, Leap
Wireless, their respective Subsidiaries or, in the case of Indebtedness
outstanding as of March 29, 1999, to Leap Chile and/or to Leap Wireless or to
any of their respective successors, assigns or transferees, the Debtor shall on
the date of such payment first prepay this Agreement in full.
(c) After the Debtor shall have issued any Additional Shares of Capital
Stock or incurred any Indebtedness and received net proceeds (whether in cash,
securities, other property, but not including forgiveness of Indebtedness) in an
aggregate amount (in combination with all issuances of capital stock or
incurrences of Indebtedness from the date hereof) in excess of U.S.$200,000,000,
the Debtor shall apply on the date of each such issuance or incurrence an amount
equal to 50% of the net proceeds thereof in excess of the amount of
U.S.$200,000,000 toward the prepayment of this Agreement.
<PAGE> 6
(d) If at any time on or before March 19, 2000 the Debtor or Leap Chile
sells capital stock (whether common or preferred) of the Debtor to any Person
for more than the Base Price per share (as defined and adjusted from time to
time as provided in Section 2.04 (the "Base Price")), the Debtor shall, on the
date of such sale, (i) if the sale occurs on or before June 30, 1999, apply an
amount equal to 50% of the excess net proceeds over the Base Price per share
realized in such sale multiplied by the number of shares sold toward the
prepayment of this Agreement and (ii) if the sale occurs after June 30, 1999 and
on or before March 19, 2000, apply an amount equal to 25% of the excess net
proceeds over the Base Price per share realized in such sale multiplied by the
number of shares sold toward the prepayment of this Agreement. Any sale of
shares of a holding company of Debtor established between Leap Chile and Debtor
which does not have material assets and/or liabilities other than the shares of
Debtor shall be treated as a sale of the underlying shares of Debtor (with
appropriate proportional adjustments to the applicable Base Price to reflect any
differences in the number of shares outstanding in such holding company and the
number of shares outstanding in Debtor (e.g. if the applicable Base Price is
$5.00 per share and Debtor has 20 Million shares outstanding before the sale and
the holding company has 10 Million shares outstanding before such sale, the Base
Price applicable to the holding company shall be $10 per share)).
(e) Notwithstanding anything to the contrary in this Section 2.03, the
conversion of the loans under the Leap Credit Agreement or the Deferred Payment
Agreement into equity of the Debtor shall not under any circumstances require
the Debtor to prepay this Agreement or affect the Base Price.
SECTION 2.04 Adjustment of Base Price. (a) On the date of this Agreement,
the Base Price for common shares shall be U.S.$5.00 per share and the Base Price
for preferred shares shall be U.S.$5.00 plus such sum as determined by the board
of directors of the Debtor in good faith to be the amount of the increased value
of the preferred shares over common shares as a result of the rights,
preferences and privileges of the preferred shares. Thereafter, in case the
Debtor at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Capital
Stock deemed to be issued pursuant to Section 2.04 (b)) for a consideration per
share less than the Base Price in effect immediately prior to such issue or
sale, then, and in each such case, such Base Price shall be adjusted,
concurrently with such issue or sale to a price per share (calculated to the
nearest .001 of a cent) determined by multiplying such Base Price by a fraction
(i) the numerator of which shall be (A) the number of shares of capital
stock of the Debtor outstanding immediately prior to such issue or sale, plus
(B) the number of shares of capital stock of the Debtor which the aggregate
consideration received by the Debtor for the total number of such Additional
Shares of Capital Stock so issued or sold would purchase at such Base Price,
plus (c) the number of shares of capital stock of the Debtor sold to a Person
other than Leap Chile, Leap Wireless or any of their respective Affiliates, and
<PAGE> 7
(ii) the denominator of which shall be the number of shares of capital
stock of the Debtor outstanding immediately after such issue or sale, provided
that, for purposes of this Section 2.04, (X) immediately after any Additional
Shares of Capital Stock are deemed to have been issued pursuant to Section
2.04(b), such Additional Shares shall be deemed to be outstanding, and (Y)
treasury shares shall not be deemed to be outstanding.
(b) In case the Debtor at any time or from time to time after the date
hereof shall declare or pay any dividend on its capital stock payable in capital
stock, or shall effect a subdivision of the outstanding shares of its capital
stock into a greater number of shares of capital stock (by reclassification or
otherwise than by payment of a dividend in capital stock), then, and in each
such case, Additional Shares of Capital Stock shall be deemed to have been
issued (i) in the case of any such dividend, immediately after the close of
business on the record date for the determination of holders of any class of
securities entitled to receive such dividend, or (ii) in the case of any such
subdivision, at the close of business on the day immediately prior to the day
upon which such corporate action becomes effective.
(c) For the purposes of this Section 2.04,
(i) the consideration for the issue or sale of any Additional Shares of
Capital Stock shall, irrespective of the accounting treatment of such
consideration,
(A) insofar as it consists of cash, be computed at the net amount of
cash received by the Debtor,
(B) insofar as it consists of property (including securities) other
than cash, be computed at the fair market value thereof at the time of such
issue or sale, as determined in good faith by the Board of Directors of the
Debtor, and
(C) in case Additional Shares of Capital Stock are issued or sold
together with other stock or securities or other assets for consideration which
covers both, be the portion of such consideration so received, computed as
provided in clauses (A) and (B) above, allocable to such Additional Shares of
Capital Stock, all as determined in good faith by the Board of Directors of the
Debtor; and
(ii) Additional Shares of Capital Stock deemed to have been issued pursuant
to Section 2.04(b), relating to stock dividends, stock splits, etc., shall be
deemed to have been issued for no consideration.
SECTION 2.05. Payments and Computations(a) The Debtor shall make each
payment hereunder not later than 12:00 Noon (Santiago time) on the day when due
in the amount of Chilean Pesos (equivalent to the U.S. dollars due converted at
the Observed Exchange Rate on the day before the date of payment) in same day
funds to the Holder at its address referred to in Section 6.02 or to the account
of the Holder designated in writhing by the Holder.
<PAGE> 8
(b) Whenever any payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day.
SECTION 2.06. Default Interest. Any overdue principal or other amount
payable under this Agreement shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to Libor (as defined below) plus five
percent (5%) on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest is payable.
SECTION 2.07. The Debtor is hereby authorized, to the fullest extent
permitted by law, to set off and apply any amounts payable by Telex-Chile or
Chilesat S.A. to the Debtor and/or Leap Chile on account of the indemnities set
forth in the Stock Purchase Agreement against any and all of the obligations of
the Debtor under this Agreement; provided, however, that if a right of set off
is claimed in bad faith, damages shall be payable to Holder equivalent to fifty
percent (50%) of the amount of the set off that is so asserted. Any such damages
shall be in addition to any costs and expenses payable pursuant to Section 6.04
hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Debtor. The Debtor
represents and warrants as follows:
(a) Corporate Existence. The Debtor (i) is a corporation duly incorporated
and validly existing under the laws of Chile and (ii) has the corporate power
and authority to own its property and carry on its business as now being
conducted.
(b) Corporate Power; Authorization. The execution, delivery and performance
by the Debtor of this Agreement are within its corporate powers, have been duly
authorized by all necessary corporate action, and do not (i) contravene the
Debtor's estatutos sociales, (ii) violate any law or any contractual restriction
binding on or affecting the Debtor, except where such violation may not
reasonably be expected to have a Material Adverse Effect, or (iii) result in or
require the creation of any Lien, security interest or other charge or
encumbrance upon or with respect to any of its properties.
(c) Approvals. To the Debtor's best knowledge following consultation with
Grasty, Quintana, Majlis y Cia, no consent, order, authorization or approval or
other action by, and no notice to or filing with, any Governmental Authority or
regulatory body is required for (i) the due execution, delivery and performance
by the Debtor of this Agreement, or (ii) the legality, validity, binding effect
or enforceability hereof.
<PAGE> 9
(d) Enforceability. This Agreement is the legal, valid and binding
obligation of the Debtor, enforceable against the Debtor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
relating to or affecting the enforcement of creditors' rights generally and by
equitable principles.
ARTICLE IV
COVENANTS OF THE DEBTOR
SECTION 4.01. Affirmative Covenants. So long as any amount under this
Agreement shall remain unpaid, the Debtor shall, unless the Holder shall
otherwise consent in writing:
(a) Reporting Requirements. Furnish to the Holder copies of each of the
following:
(i) as prepared in the ordinary course of business (A) quarterly
Financial Statements of the Debtor and (B) audited annual Financial Statements
of the Debtor and each of its Subsidiaries accompanied, in the case of (B) by an
audit opinion letter by an accounting firm of recognized international standing;
(ii) at the time of delivery of audited annual Financial Statements
Debtor shall deliver to Holder (x) a certificate from the Chief Financial
Officer of the Debtor certifying (A) that the Financial Statements attached were
prepared in accordance with Chilean GAAP and fairly present the financial
condition of such Person, and (B) that such officer is familiar with the terms
of this Agreement and that no Event of Default has occurred and is continuing
under this Agreement, or if such an Event of Default has occurred and is
continuing, containing a statement as to the nature thereof and the steps being
taken with respect thereto, and (y) a certificate of accountants of the Debtor
stating that in making the examination necessary for their certification they
have obtained no knowledge of any Event of Default which has occurred and is
continuing, or if, in the opinion of such accountants, an Event of Default has
occurred and is continuing, a statement as to the nature thereof; and
(iii) promptly after the sending or filing thereof, copies of all
reports which the Debtor and its Subsidiaries send to any of their securities
holders and any and all press releases issued by the Debtor and each of its
Subsidiaries.
(b) Insurance. Maintain, and cause each Subsidiary to maintain, insurance
with such insurance companies and associations, in such amounts and covering
such risks as may be determined in good faith by the board of directors of the
Debtor to be commercially reasonable. The Holder agrees that continuing existing
insurance coverage shall be commercially reasonable.
<PAGE> 10
(c) Financial Records. Keep and maintain, and cause each of its
Subsidiaries to keep and maintain, accurate books and records of account in
accordance with Chilean GAAP consistently applied. Upon reasonable request and
with the consent of the Debtor, which consent will not be unreasonably withheld,
the Holder may request a certificate of accountants of Debtor stating that they
have made a reasonable examination necessary for their certificate and that they
have obtained no knowledge of an event of default which has occurred and is
continuing or, if in the opinion of such accountants, an event of default has
occurred and is continuing, a statement as to the nature thereof. Upon receipt
of such request, the Debtor, may at its option, either (i) provide such
certificate of the Debtor or (ii) permit the Holder or its representatives
during customary business hours to inspect and examine the Debtor's books and
records and to discuss its affairs, finances and accounts with its principal
officers. If the Debtor elects to provide the certificate as described in
Subparagraph (i) above, and the auditors certify that no event of default has
occurred which has not previously been disclosed to the Holder, the Holder shall
pay all costs and expenses associated with providing such certificate.
SECTION 4.02. Negative Covenants. So long as any amount under this
Agreement shall remain unpaid, the Debtor shall not, without the written consent
of the Holder enter into any transaction, including without limitation, the
purchase, sale, lease or exchange of property, the rendering of any service or
the payment of any management, advisory or similar fees, with any Affiliates,
unless such transaction is (i) in the ordinary course, and (ii) upon fair and
reasonable terms comparable to those obtainable in an arm's-length transaction
with a Person not an Affiliate.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01. Events of Default. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) The Debtor shall fail to pay the principal amount of this Agreement
when the same becomes due and payable or shall fail to pay any other amounts
payable under this Agreement when the same become due and payable and any such
failure shall continue for five (5) Business Days; or
(b) A representation or warranty made by the Debtor under or in connection
with this Agreement shall prove to have been incorrect in any material respect
when made; or
(c) The Debtor shall fail to perform or observe (i) any term, covenant or
agreement contained in Section 4.02, or (ii) any other term, covenant or
agreement contained in this Agreement on its part to be performed or observed
and such failure shall continue for ten (10) Business Days after the Debtor has
notice of such failure from Holder; or
<PAGE> 11
(d) The Debtor shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of its
creditors, (iii) be dissolved or liquidated in full or in part, (iv) commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or consent to any such relief or to
the appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it; or
(e) Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Debtor or of all or a substantial part of its properties, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Debtor, under any bankruptcy, insolvency or
other similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
ninety (90) days after commencement thereof; or
(f) The Debtor and its Subsidiaries shall sell all or substantially all its
assets or property or shall otherwise cease to engage in a wireless
telecommunication business.
SECTION 5.02. Remedies. Upon the occurrence and continuance of any Event of
Default, the Holder may, upon the expiration of any applicable grace period,
exercise all rights and remedies granted to it by this Agreement or by
applicable law, in equity or otherwise.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Debtor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Holder and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 6.02. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telegraphic and facsimile
communication) and sent by reliable courier, telegraphed, facsimiled or
delivered, and addressed to the Debtor or the Holder at its address shown below,
or at such other address as such party may, by written notice received by the
other party, have designated as its address for such purposes.
<PAGE> 12
Debtor: CHILESAT TELEFONIA PERSONAL S.A.
Rinconada El Salto 202
Huechuraba
Santiago
CHILE
Attention: Chief Financial Officer
Fax No. 011-562-382-5142
With copy to:
LEAP WIRELESS INTERNATIONAL, INC.
10307 Pacific Center Court
San Diego, CA
USA
Attention: General Counsel
Fax No. 1-619-882-6040
Holder: TELEX-CHILE S.A.
Rinconada El Salto 202
Huechuraba
Santiago
CHILE
Attention: Gerente General
Fax No. 011-562-382-
With Copy to: General Counsel
All such notices and communications shall, when sent via courier, telexed,
telegraphed or facsimiled, be effective, if sent via courier, five Business Days
after delivery to the courier, if sent by telex, upon confirmation of receipt,
if telegraphed, upon delivery by the telegraph company, or if facsimiled, upon
being telecopied, with receipt telephonically confirmed by sender, respectively,
addressed as aforesaid.
SECTION 6.03. No Waiver; Remedies. No failure on the part of the Holder to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies provided in this Agreement are cumulative and not exclusive
of any remedies provided by law.
SECTION 6.04. Costs and Expenses. The Debtor agrees to pay the Holder on
demand all reasonable costs and expenses, if any (including, without limitation,
reasonable attorneys' fees and expenses) incurred by the Holder in connection
with the enforcement of this Agreement.
<PAGE> 13
SECTION 6.05. Binding Effect; Assignments; Governing Law
(a) This Agreement shall be binding upon and inure to the benefit of the
Debtor, the Holder and their respective successors and assigns. The Debtor shall
remain primarily liable under this Agreement notwithstanding any assignment or
transfer of its assets or any purported delegation of duties under this
Agreement.
(b) The Debtor and the Holder hereby agree that the Holder shall be
entitled to sell, transfer or assign, through the sale of participation
interests or otherwise, all or any part of its rights, obligations and interests
that arise under this Agreement, in addition to this Agreement itself, without
any limitation whatsoever. The Debtor hereby grants its unconditional
authorization to the Holder to execute any such assignment, and agrees that it
shall be sufficient that there exist only an agreement between the Holder and
its assignee. The Holder shall notify the Debtor of the assignment in writing,
pursuant to the provisions of Section 6.02. The Debtor and the Holder hereby
agree that in the event of any such assignment, the rights and interests in and
to the Debtor's payment and performance of its obligations under this Agreement
shall be assigned in favor of the one or several assignees, to be shared jointly
with the Holder or such other assignees if the assignment is in part. The Holder
may disclose the Agreement and any financial or other information relating to
Debtor to any potential assignee or participant provided that such potential
assignee or participant agrees not to disclose the Agreement and such
information to other third parties except (i) to its Affiliates and to those
Persons with which a confidential relationship is maintained (including
regulators, legal counsel, accountants, or designated agent(s); (ii) where
required by law, regulation or legal process, provided that to the extent
practicable such potential assignee or participant shall give the Holder and
Debtor prior notice of any such legally required disclosure; (iii).with respect
to any such information that has become generally available other than through
any breach of this Agreement; or (iv) with the prior written consent of the
Holder and the Debtor.
(c) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE REPUBLIC OF CHILE WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
SECTION 6.06. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 6.07. Resolution of Disputes; Submission to Arbitration. The
parties hereto hereby agree that any legal action or proceeding brought by the
Holder with respect to this Agreement may be brought, at the Holder's sole and
exclusive option, in the ordinary courts of Chile, sitting in the Comuna de
Santiago, or, in the form of arbitration, before the Camara de Comercio de
Santiago. By
<PAGE> 14
execution hereof, the Debtor accepts and consents to, for itself and with
respect to its property, generally and unconditionally, the non-exclusive
jurisdiction of such courts and submission to such arbitral proceeding and form;
provided, however, that upon the commencement and pendency of an arbitral
proceeding pursuant to Article 6 of the Stock Purchase Agreement, the Debtor's
payment obligations hereunder shall be suspended in an amount up to such amount
as shall be contended in good faith in such arbitral proceeding by the Debtor or
Assignor as subject to reduction in accordance with the right of set-off granted
pursuant to Section 2.07 herein and Section 4.2 in the Stock Purchase Agreement.
Subject to the right of set-off, all amounts owing shall be reinstated upon the
resolution or termination of any such arbitral proceeding commenced pursuant to
the Stock Purchase Agreement.
SECTION 6.08. Right of Suspension. If, following the closing of the
Acquisition, the validity of the Acquisition is challenged in any litigation,
arbitration or other legal proceeding, by a party other than Leap Chile, Leap
Wireless or any of their respective Affiliates, then until such proceeding is
finally resolved or settled, the Debtor shall be entitled to suspend payments
under this Agreement, and the due dates of any such payments shall be deferred
accordingly until the date on which such proceeding is finally resolved or
settled. All parties hereto agree not to take any action or position in any such
proceeding contrary to the validity of the Acquisition or this Agreement and
agree to cooperate in any such proceeding in order to resolve the matters
contested therein in favor of the validity of the Acquisition and this
Agreement.
SECTION 6.9. Headings. Headings in this Agreement are for convenience of
reference only and are not part of the substance hereof.
SECTION 6.10. Joint Preparation. This Agreement is to be deemed to have
been prepared jointly by the Debtor and the Holder and any uncertainty or
ambiguity existing herein, if any, shall not be interpreted against either
party, but shall be interpreted according to the application of the rules of
interpretation for arm's length agreements.
SECTION 6.11. Survival. All indemnities herein shall survive the execution
and delivery of this Agreement and the repayment of the principal amount
thereof.
SECTION 6.12. Effectiveness. This Agreement shall become effective on the
date on which the Debtor shall have signed a copy hereof.
<PAGE> 15
IN WITNESS WHEREOF, the Debtor has caused this Agreement to be executed by
its duly authorized officer as of the date first above written.
As Debtor of this Agreement and assignee of the Payment Obligations:
CHILESAT TELEFONIA PERSONAL S.A.
By: /s/ OCTAVIO BOFILL
-------------------------------
Print Name: OCTAVIO BOFILL
Title: REPRESENTATIVE
By: /s/ RICHARD A. SUTHERLAND
-------------------------------
Print Name: RICHARD A. SUTHERLAND
Title: GENERAL MANAGER
As Holder: As Assignor:
CHILESAT S.A. INV. LEAP WIRELESS CHILE S.A.
By: /s/ JUAN EDUARDO IBANEZ By: /s/ OCTAVIO BOFILL
------------------------------- -------------------------------
Print Name: JUAN EDUARDO IBANEZ Print Name: OCTAVIO BOFILL
Title: PRESIDENT Title: GENERAL MANAGER
By: /s/ RAMON VALDIVIESO
-------------------------------
Name: RAMON VALDIVIESO
Title: GENERAL MANAGER
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS...............................................1
SECTION 1.01. Defined Terms.............................................1
ARTICLE II TERMS OF PAYMENT..........................................4
SECTION 2.02. Optional Prepayments......................................4
SECTION 2.03. (a) Mandatory Prepayments.................................4
SECTION 2.04. Adjustment of Base Price..................................5
SECTION 2.05. Payments and Computations.................................6
SECTION 2.06. Default Interest..........................................7
SECTION 2.07.............................................................7
Right of Set-off.......................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES............................7
SECTION 3.01. Representations and Warranties of the Debtor..............7
ARTICLE IV COVENANTS OF THE DEBTOR...................................8
SECTION 4.01. Affirmative Covenants.....................................8
(a) Compliance With Laws, Etc....................................8
(a) Transactions With Affiliates................................10
(b) Dividends; Distributions....................................10
(c) Prepayments of Certain Indebtedness.........................11
(d) Limitation on Modifications.................................11
ARTICLE V EVENTS OF DEFAULT........................................11
SECTION 5.01. Events of Default........................................11
SECTION 5.02. Remedies.................................................12
ARTICLE VI MISCELLANEOUS............................................12
SECTION 6.01. Amendments, Etc..........................................12
SECTION 6.02. Notices, Etc.............................................12
SECTION 6.03. No Waiver; Remedies......................................13
SECTION 6.04. Costs and Expenses.......................................14
SECTION 6.05. Binding Effect; Assignments; Governing Law...............14
SECTION 6.06. Severability.............................................14
SECTION 6.07. Resolution of Disputes; Submission to Arbitration. .....14
SECTION 6.08. Waiver of Immunities.....................................15
SECTION 6.09. Judgment Currency........................................15
SECTION 6.10. Right of Suspension......................................15
SECTION 6.11. WAIVERS OF JURY TRIAL....................................15
SECTION 6.12. Headings.................................................16
SECTION 6.13. .........................................................16
SECTION 6.14. Survival.................................................16
SECTION 6.15. Effectiveness............................................16
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-63823) of Leap Wireless International, Inc. of
our report dated February 25, 1999 except as to Note 14 b) which is as of March
16, 1999, which appears incorporated by reference in this Current Report on Form
8-K of Leap Wireless International, Inc. dated May 4, 1999.
PRICE WATERHOUSE
Santiago, Chile
May 4, 1999
