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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 16, 1999
TELTRAN INTERNATIONAL GROUP, LTD.
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(Exact name of Registrant as specified in charter)
Delaware 0-25641 11-3172507
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(State or Other (Commission File No.) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
One Penn Plaza, Suite 4632, New York, New York 10119
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 643-1283
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Item 2. Acquisition or Disposition of Assets
On August 16, 1999 the Company acquired all the outstanding shares of
Channelnet Ltd. ("Channelnet"). Channelnet is a corporation formed in May 1999
under the Laws of England and Wales and located in Manchester in the United
Kingdom. Channelnet is engaged in the telecommunications business in the United
Kingdom providing premium rate services to various clients. Premium rate
services is the United Kingdom equivalent to 900 number services in the United
States. Channelnet has also recently been advised that it will be appointed an
affiliate of OzEmail Interline Pty., Limited for its internet voice telephony
system in several countries.
The Company has issued 94,500 shares of its common stock and is
obligated to issue an indeterminate number of additional shares based upon the
earning of Channelnet over an eighteen month period. As part of the transaction
the Company entered into an agreement to acquire, for no additional
consideration, an entity engaged in the telecommunications business and owned by
Channelnet's former shareholder. The Company and Channelnet also entered into an
employment agreement with the key employee of Channelnet which provides for the
issuance of additional shares based on future earnings of Channelnet over a
three year period. At the closing, the Company entered into a purchase agreement
with the stockholder of Channelnet to acquire equipment . While Channelnet will
utilize the equipment in its operations the Company will not acquire title to
the equipment until completion of installment payments of the purchase price of
(pound)370,000 payable through February 2001.
Item 7. Financial Statements, Pro-Forma Information and Exhibits
(a) and (b)*
(c) Exhibits
10.9 (i) Exchange Agreement dated as of July 15, 1999 between Barclay
Brydon Limited and Teltran International Group, Ltd., as
amended by the Closing Memorandum dated August 16, 1999.
(ii) Memorandum of Closing between and among Barclay Brydon
Limited and Teltran International Group, Ltd., dated August
16, 1999.
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* Registrant's filing of financial and pro-forma information relating to the
Exchange Agreement within fifteen (15) days after the exchange, is
impracticable. Registrant will file such financial information by amendment
hereto no later than sixty (60) days after the filing of this report.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: August 30, 1999
TELTRAN INTERNATIONAL GROUP, LTD
(Registrant)
By: /s/ Byron Lerner
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Byron Lerner, President
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EXCHANGE AGREEMENT made as of July 15, 1999, by and among TELTRAN INTERNATIONAL
GROUP, LTD., a Delaware corporation ("Teltran") and BARCLAY BRYDON LIMITED (the
"Shareholder"), owning all of the issued and outstanding shares of CHANNELNET,
LTD. referred to herein as the "Acquired Company".
INTRODUCTION
WHEREAS, Teltran is a corporation which is engaged in the
telecommunication business;
WHEREAS, the Acquired Company was formed to engage in the
telecommunication business and shall be a party to an affiliation agreement with
OzEmail Interline Pty., Limited ("Affiliation Agreement") and other agreements;
WHEREAS, the Shareholder owns all the issued and outstanding shares of
common stock of the Acquired Company (the "Acquired Company Shares");
WHEREAS, the Shareholder as of June 1, 1999 desires to exchange (the
"Exchange") its Acquired Company Shares for an indeterminate number of shares of
Teltran's common stock ("Teltran Shares") as calculated herein with the result
that the Acquired Company will become a wholly owned subsidiary of Teltran (or
of a subsidiary of Teltran) and Teltran desires to effect the Exchange; and
WHEREAS, the parties intend by executing this Agreement, to adopt a tax
free transaction.
WHEREAS, the parties are executing this Agreement with the
understanding that Teltran has not completed its due diligence.
WHEREAS, the Exchange for accounting purposes shall be deemed completed
as of June 1, 1999.
NOW, THEREFORE, in consideration of the premises, the parties hereto do
mutually agree as follows:
ARTICLE I
DEFINITIONS, DISCLOSURE SCHEDULE
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings indicated below:
"Atlantic" shall refer to Atlantic Communications Corporation Limited.
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"Balance Sheet" shall refer to the latest Balance Sheet of the Acquired
Company delivered to Teltran pursuant to Section 4.13 .
"Balance Sheet Date" with respect to the Acquired Company shall refer
to date of the latest Balance Sheet.
"Contract" shall mean any agreement, contract, license, indenture,
lease, mortgage, license, plan, arrangement, commitment or instrument including
any note or other debt instrument (whether written or oral).
"Consents" shall refer to the consents or approval of any third party
including any governmental agency required in connection with the Transactions
including, but not limited to, any consent required in connection with the
transfer of the Acquired Company Shares or change in beneficial ownership of the
Acquired Company or required by or necessary to prevent any termination of a
Material Contract referred to in Schedule 4.8.
"Enforceability Exceptions" shall mean the extent to which
enforceability of an obligation may be limited by applicable bankruptcy,
insolvency, re-organization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies.
"Escrow Agent" shall refer to Parker Duryee Rosoff & Haft.
"Escrow Agreement" shall refer to the Agreement attached hereto as
Exhibit A between Escrow Agent, Teltran and Shareholder.
"GAAP" shall refer to generally accepted accounting principles as
applicable in the United States or the United Kingdom as the case may be.
"Knowledge" shall mean with respect to a party's awareness of the
presence or absence of a fact, event or condition (a) actual knowledge plus, if
different, (b) the knowledge that would be obtained if such party conducted
itself faithfully and exercised a sound discretion in the management of his own
affairs.
"Laws" shall mean all laws, common laws, rules, regulations,
ordinances, codes, judgments, injunctions, orders, decrees, permits, policies
and other requirements of the United States or United Kingdom and other
jurisdictions to which Teltran and the Acquired Company, as applicable, are
subject, including all foreign and local governments and all agencies and
instrumentalities thereof, including any administrative agencies or
administrative body created by any such government..
"Liabilities" shall mean any indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise, whether or not of a kind required by
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generally accepted accounting principles to be set forth on a financial
statement including the notes thereto.
"Lien" means any mortgage, pledge, lien, encumbrance, charge, adverse
claim or restriction of any kind affecting title or resulting in an encumbrance
against property, real or personal, tangible or intangible, or a security
interest of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any third party option or other
agreement to sell and any filing of or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statute of any
jurisdiction).
"Material Adverse Effect" or "Material Adverse Change" with respect to
a party means a change which would in the aggregate have material adverse effect
on the assets, liabilities (whether absolute, accrued, contingent or otherwise),
condition (financial or otherwise), results of operations, business or future
business or financial condition on a consolidated or combined basis of such
party.
"Person" shall mean any natural person, corporation, division of a
corporation, partnership, trust, joint venture, association, company, estate,
unincorporated organization or governmental entity.
"Returns" shall mean all returns (including, without limitation,
information returns and other material information), reports and forms relating
to Taxes.
"Stevens Guaranty" shall refer to a written guaranty to be executed by
John Stevens guaranteeing the accuracy of the representation and warranties
herein and the performance of the covenants herein as if he were a party and
primarily liable therefor. The guaranty shall provide that Mr. Stevens shall be
subject to the indemnity provisions set forth in Article X hereof and such
guaranty shall be acceptable to counsel for Teltran and the solicitors for
Stevens.
"Subsidiary" shall refer to any corporations or other entities in which
a Person has a majority interest or which is otherwise controlled by such
Person.
"Taxes" shall mean any income, alternative or add-on minimum, business,
employment, franchise, occupancy, payroll, property, sales, transfer, use, value
added, withholding or other tax, levy, impost, fee, imposition, assessment or
similar charge together with any related addition to tax, interest, penalty or
fine thereon.
"Transactions" shall mean, in respect of any party, all transactions
set forth in or contemplated by this Agreement that involve, relate to or affect
such party, including, without limitation, the Exchange.
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ARTICLE II
THE EXCHANGE
2.1 The Exchange. On the "Closing Date" as provided in Section 2.3 all
the Acquired Company Shares and all rights to receive such shares shall be
exchanged solely for the Teltran Shares as is set forth in Section 2.2. The
Shareholder shall not have any right to receive fractional shares but any
fractional share shall be rounded to the nearest whole share.
2.2 Delivery of Teltran Shares. It is contemplated that the aggregate
purchase of the Acquired Companies shall be payable in Teltran Shares as
follows:
(A) At Closing 94,500 shares of Teltran Stock
(B) On the fifteenth day of Teltran Stock having a then market
the seventh full calendar value of $547,000 provided average
month following the clos- monthly Net Income is (pound)5,000
ing of the for the three calendar month period
Acquisition preceding such date.
(C) On the fifteenth day of the Teltran Stock having a then market
thirteenth full calendar value of $547,000 provided average
month following the clos- monthly Net Income are (pound)
ing of the Acquisition 13,000 during the six month period
beginning on the seventh full
calendar month after closing and
ending on the twelfth calendar
month after closing.
(D) On the fifteenth day of Teltran Stock having a then market
the nineteenth full calendar value of $547,000 provided average
month following the clos- monthly Net Revenues are
ing of the Acquisition (pound)16,000 during the six month
period beginning on the thirteenth
full calendar month after closing
and ending on the eighteenth
calendar month after closing.
As used herein "Net Income" shall refer to the pre-tax net
income of the Acquired Company determined by Teltran's independent public
accountants' in accordance with GAAP. Net Income shall be based upon the pre-tax
net income of the Acquired Company. For the purpose of this calculation the
payments made under 6.11 shall be disregarded and included in pre-tax net
income.
If the Net Income is less then the required average month Net
Income in any of the above periods then the consideration payable shall
nevertheless be payable on a pro-rata basis.
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Excess Net Income shall not be cumulative provided that if there is a short fall
in Net Income prior to the final period, Teltran shall pay consideration with
respect to such short fall if the minimum average monthly Net Income for the
prior period exceeds 200% of the amount of such short fall. At the closing the
Company shall deposit 800,000 shares in escrow with its counsel to insure
delivery of such shares as provided above. If such number of shares of Teltran
stock held by the Escrow Agent are insufficient to insure delivery of the full
amount of the purchase price to Shareholder then Teltran shall deposit
additional Teltran stock as reasonably required.
At the option of Teltran, an installment of consideration may
be payable in cash, in the event the number of Teltran Shares issued and
delivered to Shareholder exceeds nine and nine tens (9.9%) percent of the
outstanding shares of Teltran at the time pursuant to this Section 2.2 and any
Service Agreement referred to in Section 8.4.
In addition to the restrictions herein, all of the shares
shall be unregistered and may not be sold except in accordance with United
States securities laws.
2.3 Closing. The Exchange contemplated hereby (the "Closing") shall be
held two business days after all conditions set forth in Articles VII and VIII
have been fulfilled or waived or such earlier date as the parties may agree but
no later than August 10, 1999. The Closing shall be held at such place and at
such time as the parties may mutually agree. The date upon which such Closing
shall occur shall be referred to as the "Closing Date."
2.4 Disclosure Schedules. No later than ten (10) days after the date of
the execution of this Agreement the Shareholder shall deliver the Acquired
Company Disclosure Schedule except for the financial statements which shall be
delivered no later than August 5, 1999. The "Acquired Company Disclosure
Schedule" relates to the Shareholder and Acquired Company while the "Teltran
Disclosure Schedule" relates to Teltran. The Teltran Disclosure Schedule and the
Acquired Company Disclosure Schedule shall be referred to as the "Disclosure
Schedules." The Disclosure Schedules shall set forth the matters required or
permitted to be set forth therein as described elsewhere in this Agreement and
shall be deemed to be part of this Agreement.
2.5 Subsidiary. On or prior to the Closing Dates, Teltran may designate
a wholly owned subsidiary (the "Subsidiary") to acquire the Acquired Company
Shares. Unless otherwise indicated by the context, references herein to Teltran
shall include the Subsidiary. Teltran shall remain primarily liable, however,
for all obligations herein.
ARTICLE III
CLOSING DELIVERIES
3.1 Shareholder's Closing Deliveries. At the Closing, in addition to
documents referred to elsewhere herein, the Shareholders shall execute and
deliver, or cause to be delivered from the Acquired Company or other third
parties to Teltran:
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(1) Stock Certificates owned by the Shareholder representing
all the Acquired Company Shares duly transferred to Teltran in accordance with
applicable law;
(2) Minute books and corporate records of the Acquired
Company;
(3) Copies of all Consents;
(4) Certificate of Shareholder and officers of Acquired
Company affirming the accuracy of representations, as of the Closing Date;
(5) Opinion of Shareholder's Counsel in the form of Exhibit B;
(6) An Executed copy of the Service Agreement to be executed
pursuant to paragraph 8.4;
(7) An executed copy of the Escrow Agreement;
(8) Certified copy of Resolutions of the Shareholder
authorizing this transaction;
(9) Certified resolutions of the board of directors of the
Acquired Company appointing nominees of Teltran as directors and shall appoint
John Stevens as Chief Executive Officer of the Acquired Company;
(10) An executed copy of the Stevens Guaranty;
(11) An executed copy of the Channelnet Deferred Purchase
Agreement referred to in paragraph 6.11; and
(12) Such other documents as Teltran or its counsel may
reasonably request.
All such documents shall be reasonably satisfactory to Teltran and its counsel.
3.2 Closing Deliveries to the Shareholder. At the Closing, in addition
to documents referred to elsewhere, Teltran shall deliver to the Shareholder or
the Escrow Agent:
(1) Certificates representing the Teltran Shares to be
delivered upon consummation of the Exchange of which 94,500 shares shall be
delivered to the Shareholder and 800,000 shares to the Escrow Agent pursuant to
the Escrow Agreement;
(2) Resolutions of the Board of Directors of Teltran approving
the Transactions;
(3) Certificate of officers of Teltran affirming the accuracy
of representations as of the Closing Date;
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(4) Such other documents as the Shareholder or its counsel may
reasonably request;
(5) An executed copy of the Service Agreement to be executed
pursuant to paragraph 8.4;
(6) An executed copy of the Channelnet Deferred Purchase
Agreement referred to in paragraph 6.11;
(7) An executed copy of the Escrow Agreement; and
(8) An executed copy of the Atlantic Asset Acquisition
Agreement.
All such documents shall be satisfactory to the Shareholder and its counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
Except as set forth in the Acquired Company Disclosure
Schedule, the Shareholder makes the following representations and warranties to
Teltran on the date hereof with the knowledge and understanding that Teltran is
relying materially upon such representations and warranties.
4.1 Organization and Standing of Acquired Company. The Acquired Company
is a corporation duly organized, validly existing and in good standing under the
corporate laws of England and Wales. The Acquired Company has the corporate
power to carry on its business as now conducted and to own its assets and is
duly qualified to transact business as a foreign corporation in each
jurisdiction where such qualification is necessary except where the failure to
qualify will not have a Material Adverse Effect. The copies of the Certificate
of Incorporation, Memorandum of Association and Articles of Association of the
Acquired Company as amended to date, and made available to Teltran, are true and
complete copies of those documents as now in effect.
4.2 Capitalization. The authorized capital stock of the Acquired
Company, is set forth in Schedule 4.2. Except as set forth above, the shares of
common stock of the Acquired Company that are issued and outstanding are duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
were not issued in violation of the preemptive rights of any person. There are
no outstanding (a) options, warrants or rights to purchase or subscribe for any
equity securities, or other ownership interests of the Acquired Company, (b)
obligations of the Acquired Company, whether absolute or contingent, to issue
any shares of equity securities or other ownership interests, (c) debt or equity
securities directly or indirectly convertible into any equity securities of the
Acquired Company or (d) any shareholder agreements, options, rights of first
refusal or other similar rights with respect to the capital stock of the
Acquired Company.
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4.3 Share Ownership. The Shareholder is the record and beneficial owner
of the number of Acquired Company Shares listed in Schedule 4.3 free and clear
of all liens and encumbrances and claims of any kind. Upon execution of this
Agreement and deliveries at closing of the certificates for Acquired Company
Shares and transfer of the Teltran Shares pursuant to the Exchange, Teltran
shall receive marketable title to such Acquired Company Shares free and clear of
all Liens and encumbrances and claims of third parties.
4.4 Subsidiaries. The Acquired Company does not own a Subsidiary nor
does the Acquired Company have an interest in any other corporation,
partnership, joint venture or other entity.
4.5 Investment Intent. The Shareholder hereby represents, warrants and
agrees that the Shareholder will be acquiring the Teltran Shares for investment,
for its own account, and not with a view to the distribution of the Teltran
Shares. In such connection, the Shareholder further represents and warrants that
they understand that Teltran is issuing the Teltran Shares to such Shareholder
in reliance upon an exemption from the registration requirements pursuant to
Section 5 of the Securities Act of 1933, as amended (the "Act") and the rules
and regulations thereunder. The Shareholder agrees that the Teltran Shares may
not be sold, transferred, pledged, hypothecated, assigned or otherwise disposed
of by such Shareholder unless Teltran shall have been supplied with evidence
satisfactory to it and its counsel that such transfer is not in violation of the
Act. Furthermore, the Shareholder understands that the certificates for the
Teltran Shares shall bear an appropriate restrictive legend to reflect the
foregoing restrictions and that stop transfer instructions will be placed
against the Teltran Shares with respect thereto. The Shareholder consents to the
placing of such legend on the certificates for the Teltran Shares.
4.6 Authority. This Agreement constitutes, when executed and delivered
by the Shareholder in accordance herewith, the valid and binding obligations of
the Shareholder, enforceable in accordance with its respective terms, subject to
the Enforceability Exceptions.
4.7 Assets. The Acquired Company has good and marketable title to or
lease or licenses to all of the assets and properties which it purports to own
as reflected on the Acquired Company Balance Sheet or thereafter acquired or
leased as set forth on Schedule 4.7 of the Acquired Company Disclosure Schedule
hereto or pursuant to paragraph 6.11 hereof. The Acquired Company has a valid
leasehold interest in all material properties of which it is the lessee and each
such lease is valid, binding and enforceable against the Acquired Company
subject to the Enforceability Exceptions, as applicable, and to the
shareholder's Knowledge, and the other parties thereto in accordance with its
terms. No material portion of the assets of the Acquired Company is subject to
any lien or any governmental decree or other to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefore, nor, to the shareholder's Knowledge, has any such
condemnation, expropriation or taking been proposed. None of the material assets
of the Acquired Company is subject to any restriction which would prevent
continuation of the use currently made thereof or materially adversely affect
the value thereof.
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Shareholder leases the premises at which Acquired Company
conducts its operations. The use of the Premises by the Acquired Company is
permitted under the terms of the lease.
4.8 Contracts. Schedule 4.5 of the Acquired Company Disclosure consists
of a true and complete list of all Contracts to which the Acquired Company is a
party or by which it is bound including but not limited to the Affiliate
Agreement other than agreements requiring payments or receipts less than
(pound)30,000 per year or (ii) made in the ordinary course of business and
terminable by the Acquired Company on notice of sixty (60) days or more without
penalty or the Acquired Company being liable for damages. The Schedule lists
pending contracts to be entered into or assigned to it including the Affiliate
Agreement which Teltran deems to be material ("Pending Material Contracts"). All
such contracts shall hereinafter be referred to as "Material Contracts").
All of the Material Contracts including the Pending Material
Contracts will be valid and binding upon the respective Acquired Company and, to
the knowledge of the Shareholder, and are in full force and effect and
enforceable in accordance with their terms, even after giving effect to the
Exchange hereby. The Acquired Company has not breached any such Material
Contract and the Shareholder has no knowledge that any other party to such
Material Contract has breached by any provision thereof. To the knowledge of the
Shareholder, no event has occurred which, with the lapse of time or action by a
third party, could result in a default under the terms thereof which, alone or
in the aggregate would form the basis for termination or defense to non
performance of any such Material Contract or would provide the basis for a claim
against an Acquired Company.
4.9 Litigation. There is no claim, action, proceeding, or investigation
pending or, to their Knowledge, threatened against or affecting the Acquired
Company before or by any court, arbitrator or governmental agency or authority
which, in their reasonable judgment, could have a Material Adverse Effect on the
Acquired Company. There are no decrees, injunctions or orders of any court,
governmental department, agency or arbitration outstanding against the Acquired
Company and with respect to any action or claim covered by insurance, the
Acquired Company has complied with all requirements of any such policy which are
conditions to the defense and continued defense of such claim or action.
4.10 Taxes. The Acquired Company has duly filed all Returns required to
be filed by it. To the Knowledge of the shareholders all such Returns were, when
filed, and are, accurate and complete in all material respects and were prepared
in conformity with applicable laws and regulations. The Acquired Company has
paid or will pay in full or has adequately reserved against all Taxes otherwise
assessed against it through the Closing Date.
The Company is not a party to any pending action or proceeding
by any governmental authority for the assessment of any Tax, and, to the
Knowledge of the Shareholders no claim for assessment or collection of any Tax
related to the Acquired Company has been asserted against the Acquired Company
that has not been paid. There are no Tax liens upon the assets (other than the
lien of property taxes not yet due and payable) of the Acquired Company. There
is no valid basis, to the Knowledge of the Shareholders, except as set forth in
the Acquired Company Disclosure
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Schedule, for any assessment, deficiency, notice, or similar intention to assess
any Tax to be issued to the Acquired Company by any governmental authority. The
Shareholder with the delivery of the Acquired Company Disclosure Schedule shall
make such additional tax representations as may be customary in the United
Kingdom.
4.11 Insurance. The Acquired Company has in force insurance policies,
or renewals thereof, as identified and described in the Disclosure Schedule,
reasonably adequate to cover the Assets and the Business against loss, damage
and liability and will maintain such insurance up to and including the Closing
Date.
4.12 No Conflict. The execution and performance of this Agreement and
any other agreements contemplated hereby will not (i) conflict with or violate
the Certificate of Incorporation or Memorandum of Association and Articles of
Association the Acquired Company, (ii) violate in any material respect any laws,
ordinances, rules, or regulations, or any order, writ, injunction or decree to
which the Acquired Company is a party or by which any of its material assets,
businesses, or operations may be bound or affected or (iii) result in any breach
or termination of, or constitute a default under, or constitute an event which,
with notice or lapse of time, or both, would become a default under, or result
in the creation of any encumbrance upon any material asset under, or create any
rights of termination, cancellation or acceleration in any person under, any
Material Contract.
4.13 Financial Statements. The Shareholder will deliver to Teltran true
and complete copies of the Acquired Company's financial statements described in
paragraph 6.10 not listed in Schedule 4.13 of the Acquired Company Disclosure
Statement. These financial statements (i) will be prepared from the books and
records of the Acquired Company in accordance with GAAP consistently applied
with prior periods, and (ii) will be complete and correct and fairly reflect, in
all material respects, the financial condition and results of operations of the
Acquired Company as of the dates and for the periods indicated thereon, and
(iii) reflect all assets at the lower of their cost or net realizable value. The
books and accounts of the Acquired Company have been maintained in all material
respects in accordance with sound business practices, and to the Shareholders'
Knowledge there have been no transactions involving the Acquired Company that
properly should have been set forth therein in accordance with GAAP that have
not been accurately so set forth.
4.14 Compliance With Law and Regulation. The Acquired Company has
complied and is presently complying, in all material respects, with all Laws
applicable to it in all jurisdictions where the business of each such entity is
conducted or to which each such entity is subject and has obtained all licenses
and permits required by any governmental authority. The Shareholder does not
know of any (i) pending or anticipated changes to such Laws that could cause any
Acquired Company's current business practices to fall out of compliance with
such Laws; or (ii) assertion by any party that an Acquired Company is in
violation in any material respect of any such Laws, and no notice in that regard
has been received.
4.15 Employee Benefit Plans; Employee Liability. Except as set forth on
Schedule 4.15, the Acquired Company has never maintained or contributed to any
employee benefit plan, or any
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stock purchase plan, stock option plan, fringe benefit plan, bonus plan or any
other deferred compensation agreement, plan or funding arrangement, whether or
not such plan has been terminated and whether or not such plan is of legally
binding nature in the form of an informal understanding. With respect to the
plans, the laws as applicable, have been fulfilled in all material respects and
no event has occurred nor does any condition exist which would subject an
Acquired Company to any material penalty, excise tax or liability.
The Acquired Company has complied with all labor and employee
relations laws and has no liability with respect thereto.
4.16 Consents. Except with respect to the Consents, no authorization,
license, franchise, approval, order or consent of, and no registration,
declaration or filing by the Acquired Company with, any governmental authority,
domestic or foreign, federal, state or local, is required in connection with the
execution, delivery and performance of this Agreement, and consummation of the
Transaction, the continuation of the business of the Acquired Company as now
conducted after the transfer of the Acquired Company Shares to Teltran.
4.17 Liabilities. The Acquired Company does not have any material
Liabilities other than (i) Liabilities fully and adequately reflected or
reserved against on the Balance Sheet, (ii) Liabilities incurred since the
Balance Sheet Date in the ordinary course of the business of the Acquired
Company or to be insured in connection with this transaction and any related
transaction, or (iii) Liabilities otherwise disclosed in this Agreement,
including the Acquired Company Disclosure Schedule.
4.18 Accuracy of Representations. None of the representations or
warranties contained in this Agreement, including the Acquired Company
Disclosure Schedule, contains, or will contain at the Closing Date, any false or
misleading statement, or omits, or will omit at the Closing Date, any fact or
statement necessary to make the other statements or facts set forth herein or
therein not false or misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TELTRAN
Except as set forth in the Teltran Disclosure Schedule,
Teltran represents and warrants to, and agrees with, the Shareholder as follows
as of the date hereof and the Closing Date with the knowledge and understanding
that the Shareholder is relying materially upon such representations and
warranties:
5.1 Organization and Standing of Teltran. Teltran is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to carry on its business as now conducted
and to own its assets and is duly qualified to transact business as a foreign
corporation in each state where such qualification is necessary except
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where the failure to qualify will not have a Material Adverse Effect. The copies
of the Articles of Incorporation and By-laws of Teltran and delivered to the
Shareholders, are true and complete copies of those documents as now in effect.
5.2 Subsidiaries. Except as set forth in the Teltran Disclosure
Schedule, Teltran has no Subsidiaries and no interest in any other corporation,
partnership, joint venture or other entity.
5.3 Governmental Approval; Consents. No authorization, license, permit,
franchise, approval, order or consent of, and no registration, declaration or
filing by Teltran with, any governmental authority, domestic or foreign,
federal, state or local, is required in connection with Teltran's execution,
delivery and performance of this Agreement and consummation of the transaction.
No Consents of any other parties are required to be received by or on the part
of Teltran to enable Teltran to enter into and carry out this Agreement.
5.4 Authority. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by Teltran in
accordance herewith, the valid and binding obligations of Teltran enforceable in
accordance with their respective terms, subject to the Enforceability
Exceptions.
5.5 Teltran's SEC Reports. Teltran has previously delivered to The
Acquired Company true and complete copies, of its Registration Statements on
Form 10 SB filed March 1999 and Registration Statements on Form SB filed April
1999 made by Teltran and amended July 14 and July 15, 1999 respectively
(collectively, "Teltran's SEC Statements"). Teltran's SEC Statement did not
contain at the time of filing any untrue statement of a material fact, or fail
to state any material fact required to be stated therein or necessary to make
the statements made therein not materially misleading and the financial
statements therein fairly present the financial position and results of
operations of Teltran on a consolidated or combined basis as of the dates and
for the periods indicated.
5.6 Adverse Developments. Since March 31, 1998 there have been no
materially adverse changes in the assets, properties, operations, financial
condition or future operation of Teltran and its subsidiaries considered as one
enterprise, and no event has occurred other than in the ordinary and usual
course of business or as set forth in Teltran's SEC Reports which could be
reasonably expected to have a materially adverse effect upon Teltran and its
subsidiaries considered as one enterprise, and Teltran does not know of any
development or threatened development of a nature that will, or which could be
reasonably expected to, have a materially adverse effect upon Teltran and its
subsidiaries considered as one enterprise.
5.7 No Breaches. The making and performance of this Agreement and any
other agreements contemplated hereby will not (i) conflict with or violate the
Articles of Incorporation or the by-laws of Teltran, (ii) violate in any
material respect any laws, ordinances, rules, or regulations, or any order,
writ, injunction or decree to which Teltran is a party or by which any of its
material assets, businesses, or operations may be bound or affected or (iii)
result in any breach or termination
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of, or constitute a default under, or constitute an event which, with notice or
lapse of time, or both, would become a default under, or result in the creation
of any encumbrance upon any material asset.
5.8 Accuracy of Representations. None of the representations or
warranties contained in this Agreement, including the Teltran Disclosure
Schedule, contains, or will contain at the Closing Date, any false or misleading
statement, or omits, or will omit at the Closing Date, any fact or statement
necessary to make the other statements or facts set forth herein or therein not
false or misleading.
ARTICLE VI
COVENANTS PENDING CLOSING
During the period between the date hereof and the earlier of
the Closing Date or Termination.
6.1 Access for Teltran. The Shareholder shall cause the Acquired
Company to give to Teltran and its counsel, accountants and other
representatives full and reasonable access, during normal business hours
throughout the period prior to the Closing Date, to all of the entity's
properties, books, contracts, commitments, reimbursement and accounting records
relating to the assets, and all aspects of the entities business. In addition
the Shareholder shall cause the Acquired Company to furnish to Teltran, during
such period, all information concerning the assets and the business that Teltran
may reasonably request. Any such investigation or inspection by any party shall
not be deemed a waiver of, or otherwise limit, the representations, warranties
and covenants of other party or parties contained herein.
6.2 Conduct of Business or Status. The Shareholder shall cause the
business to be operated by Acquired Company solely in the usual and ordinary
course and in compliance with the terms of this Agreement. Without limiting the
generality of the foregoing, the Shareholder will cause the Acquired Company to
use its best efforts to preserve the business and its organization so as to (i)
keep available the services of the present employees and agents of the Acquired
Company; (ii) complete or maintain all of the material Contracts in full force
and effect in accordance with their existing terms, unimpaired by litigation;
(iii) maintain the integrity of all confidential information regarding the
business presently conducted by it; (iv) maintain in full force and effect the
insurance policies (or policies providing substantially the same coverage; and
(v) preserve the goodwill of, and the business and contractual relationship
with, suppliers, customers and others having relations with the business.
6.3 Certain Prohibitions. The Shareholder shall not and shall cause
each of the Acquired Companies not to and Teltran shall not do anything that
would result in a breach of any representations or warranties Teltran or the
Acquired Company contained herein.
6.4 Consents and Notices. Each of the Shareholder, Teltran and each
Acquired Company shall, on or prior to the Closing Date, at its own expense,
obtain all Consents.
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6.5 Mutual Cooperation. The parties hereto will cooperate with each
other, and will use all reasonable efforts to cause the fulfillment of the
conditions to the parties' obligations hereunder and to obtain as promptly as
possible all Consents, authorizations, orders or approvals from each and every
third party, whether private or governmental, required in connection with the
transactions contemplated by this Agreement.
6.6 Changes in Representations and Warranties. Between the date of this
Agreement and the Closing Date, neither the Shareholder or the Acquired Company
or Teltran shall directly or indirectly enter into any transaction, take any
action, or by inaction permit an event to occur, which would result in any of
its or his representations and warranties herein contained not being true and
correct at and as of the Closing Date. Each party shall promptly give written
notice to the other upon becoming aware of (A) any fact which, if known on the
date hereof, would have been required to be set forth or disclosed pursuant to
this Agreement and (B) any threatened breach in any material respect of any of
their respective representations and warranties contained in this Agreement and
with respect to the latter shall use all reasonable efforts to remedy same.
6.7 Nondisclosure. The Shareholder will not at any time after the date
of this Agreement divulge, furnish to or make accessible to anyone any Knowledge
or information with respect to confidential or secret processes, inventions,
discoveries, improvements, formulae, plans, material, devices or ideas or
know-how, whether patentable or not, with respect to any confidential or secret
aspects of the business (including, without limitation, customer lists, supplier
lists and pricing arrangements with customers or suppliers) ("confidential
information"); provided such undertaking shall lapse if the Closing of this
Agreement does not take place as provided herein. In the event that the
transactions contemplated hereby are not consummated, Teltran will not
thereafter divulge, furnish to or make accessible to anyone any confidential
information and all copies of all such information in Teltran's possession shall
be returned by Teltran to The Acquired Company.
Any information, which (i) at or prior to the time of
disclosure by the Acquired Company or Teltran was generally available to the
public through no breach of this covenant, (ii) was available to the public on a
nonconfidential basis prior to its disclosure by an Acquired Company or Teltran
or (iii) was made available to the public from a third party provided that such
third party did not obtain or disseminate such information in breach of any
legal obligation of an Acquired Company or Teltran, shall not be deemed
confidential information for purposes hereof, and the undertakings in this
covenant with respect to confidential information shall not apply thereto.
6.8 Exclusivity to Teltran. Shareholder agrees that, from and after the
date hereof until the termination of this letter, neither the shareholder or the
Acquired Company nor any of its respective directors, officers, shareholder,
partners, agents, investment bankers, or other representatives, shall, directly
or indirectly, (a) solicit, initiate or encourage submission of proposals or
offers from any person relating to any acquisition or purchase of all or a
material part of the stock or assets of, or a merger, consolidation or business
combination with, the Acquired Company or agreement to sell shares of common
stock of the Acquired Company other than as contemplated by this letter (an
"Acquisition Proposal"), or (b) participate in any discussions or negotiations
regarding or furnish to any other person any information with respect to or
otherwise cooperate in any way,
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assist, facilitate or encourage Acquisition Proposal by any other person. If
Shareholder or Acquired Company shall receive any Acquisition Proposal or any
inquiry regarding any such proposal from a third party, the recipient shall
promptly inform Teltran of the Acquisition Proposal. This restriction shall
lapse if the Closing shall not have occurred by August 31, 1999.
6.9 Public Announcement. Neither party shall make a public announcement
of this transaction which includes the name of Teltran or any Acquired Company
without the prior approval of the other party. In the case of Teltran such
approval shall not be unreasonably or delayed and shall be given promptly
consistent with Teltran's position as a public corporation.
6.10 Delivery of Financial Statements. On or prior to August 5, 1999
the Shareholder shall deliver to Teltran as part of the Acquired Company's
Disclosure Schedule audited financial statements of the Acquired Company as
described below. Such statements shall be prepared in accordance with GAAP and
be suitable for filing with the Securities and Exchange Commission. The
statements shall consist of a balance sheet as of June 30, 1999, statements of
operations, cash flow and shareholder's equity from inception to such date. The
representations and warranties contained in paragraph 4.13 of this Agreement
shall be applicable to such financial statements.
6.11 Channelnet Deferred Purchase Agreement. Conditional upon the
closing, Shareholder and certain related parties shall enter into a Purchase
Agreement with Teltran for all the equipment owned by Shareholder and such
related parties and utilized by the Acquired Company for its business. The
purchase price shall be (pound)300,000 payable in eighteen equal monthly
installments. Such agreement shall be acceptable to Channelnet for both parties.
6.12 Atlantic Acquisition. Teltran and Shareholder shall enter into an
additional Exchange Agreement providing for the acquisition of Atlantic by
Teltran upon substantially the same terms as this Agreement. The Agreement shall
provide a mutually agreeable closing date subsequent to the Closing Date and
assignment of agents to the Acquired Company if the exchange is not completed.
6.13 Additional Comfort. Teltran shall be provided with such additional
documents and execution of such additional agreements as it may reasonably
require to complete its due diligence and to make certain among other things (i)
it will continue to be able to utilize the premises currently occupied by the
Acquired Company and (ii) the continuation of all telecommunication business now
conducted by the Acquired Company and its affiliates. The Service Agreement
referred to in ___________ will be modified to comply with the laws of the
United Kingdom.
ARTICLE VII
CONDITIONS TO SHAREHOLDER'S OBLIGATIONS
In addition to the deliveries provided for in Article III the
Shareholders' obligation to consummate the Closing is subject to the following
conditions:
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7.1 Compliance by Teltran. Teltran shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by Teltran prior to or on the Closing Date.
7.2 Accuracy of Teltran's Representations. Teltran's representations
and warranties contained in this Agreement (including any exhibit hereto and the
Teltran Disclosure Schedule) or any schedule, certificate, or other instrument
delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true in all material respects at and
as of the Closing Date.
7.3 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or threatened.
7.4 Consents. The Consents have been shall be obtained.
7.5 Documents. All documents and instruments to be delivered by Teltran
to the Shareholders at the Closing pursuant to Section 3.2 shall have been
delivered in accordance with such section.
ARTICLE VIII
CONDITIONS TO TELTRAN'S OBLIGATIONS
In addition to the deliveries provided for in Article III,
Teltran's obligation to consummate the Closing is subject to the following
conditions:
8.1 Compliance by the Shareholders. The Shareholders shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by the Acquired Company or the
Shareholders prior to or on the Closing Date.
8.2 Accuracy of The Shareholder's Representations. The representations
and warranties of the Shareholders contained in this Agreement (including the
exhibits hereto and the Disclosure Schedule) or any schedule, certificate, or
other instrument delivered pursuant to the provisions hereof or in connection
with the transactions contemplated hereby shall be true in all material respects
on the date of closing as if made on such date, including but not limited to the
representations made in Paragraph 4.8.
8.3 Material Adverse Change. Except as set forth in a Disclosure
Schedule, no material adverse change shall have occurred subsequent to the date
hereof in the financial position, results of operations, liabilities of the
business or the assets of the Acquired Company, nor shall any event or
circumstance have occurred or which is likely to occur in the foreseeable future
which would result in a material adverse change in the financial position,
results of operations, liabilities, of the business or the assets of the
Acquired Company.
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8.4 Service Agreement. The Acquired Company shall enter into a Service
Agreement with John Stevens in the Form of Exhibit C attached hereto.
8.5 Completion of Transactions. The Acquired Company shall enter into
or have assigned to it the Pending Material Contracts referred to in Schedule
4.8.
8.6 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or to Teltran's Knowledge be threatened.
8.7 Consents. The Consents shall have been obtained.
8.8 Documents. All documents and instruments to be delivered to Teltran
by the Shareholders at the Closing shall have been delivered pursuant to Section
3.1 and in accordance with such section.
ARTICLE IX
TERMINATION
9.1 Termination Prior to Closing.
(a) Teltran may terminate the Agreement without liability any
time prior to or on the fifth (5th) business day after receipt of the complete
Acquired Company Disclosure Schedule as set forth in paragraph 2.4.
(b) If the Closing has not occurred by August 10, 1999, with
respect to Teltran and August 30, 1999 with respect to Shareholder then the
respective party may after the applicable date terminate this Agreement at any
time thereafter by giving written notice of termination to the other party;
provided, however, that no party may terminate this Agreement if such party has
willfully and materially breached any of the terms and conditions hereof.
(c) Either the Stockholder or Teltran may terminate this
Agreement following the insolvency or bankruptcy of the other, or if one of the
conditions to Closing set forth in Article VII or Article VIII shall become
incapable of fulfillment and shall not have been waived by the party for whose
benefit the condition was established, then The Acquired Company (in the case of
a condition specified in Article VII) or Teltran (in the case of a condition
specified in Article VIII) may terminate this Agreement.
9.2 Consequences of Termination. Upon termination of this Agreement
pursuant to this Agreement, the parties shall be relieved of any further
obligation to the other parties hereto except as specified in Section 6.7
provided, however, that no termination of this Agreement, pursuant to Section
9.1(b) or the second clause of paragraph 9(c) hereof or under any other express
17
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right of termination provided elsewhere in this Agreement, shall operate to
release any party from any liability to any other party incurred before the date
of such termination or from any liability resulting from any willful
misrepresentation made in connection with this Agreement or willful breach
hereof.
ARTICLE X
INDEMNITY
10.1 Indemnity. The Shareholder shall indemnify, defend, and hold
Teltran and the Acquired Company harmless from and against any and all losses,
costs, liabilities, damages, and expenses (including reasonable legal and other
expenses incident thereto) of every kind, nature, and description, including any
unassumed liabilities, and any undisclosed liabilities (collectively "Losses")
that result from or arise out of (i) the breach of any representation or
warranty of the Shareholder set forth in this Agreement (including the exhibits
hereto) or in any certificate or schedule, or other instrument delivered to
Teltran pursuant hereto; (ii) the breach of any of the covenants of Shareholder
contained in this Agreement.
10.2 Claims Procedure. Should any claim covered by Section 10.1 be
asserted against a party entitled to indemnification under this Article X (the
"Indemnitee"), the Indemnitee shall promptly notify the party obligated to make
indemnification (the "Indemnitor"), provided that any delay or failure in
notifying the Indemnitor shall not affect the Indemnitor's liability under this
Article X if such delay or failure was not prejudicial to the Indemnitor. The
Indemnitor upon receipt of such notice shall assume the defense thereof with
counsel reasonably satisfactory to the Indemnitee and the Indemnitee shall
extend reasonable cooperation to the Indemnitor in connection with such defense.
No settlement of any such claim shall be made without the consent of the
Indemnitor, such consent not to be unreasonably withheld, nor shall any such
settlement be made by the Indemnitor which does not provide for the absolute,
complete, and unconditional release of the Indemnitee from such claim. In the
event that the Indemnitor shall fail, within a reasonable time, to defend a
claim, the Indemnitee shall have the right to assume the defense thereof without
prejudice to its rights to indemnification hereunder.
10.3 Payment-Set Off. All amounts due hereunder shall be paid upon
demand. Teltran may set off against the delivery of any Teltran Shares to be
delivered to Shareholder hereunder any amounts unpaid hereunder and undisputed.
If Shareholder disputes the payment of any amount claimed hereunder in writing
within ten (10) days after demand then, in addition to any other remedies,
Teltran shall cause the Escrow Agent by notice to withhold delivery of any such
Shares until resolution of any dispute. The parties shall promptly proceed to
resolve such dispute. In the event any dispute herein is litigated, the losing
party shall bear all costs of litigation including reasonable attorneys' fees,
and costs of experts.
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10.4 Brokers' Fees. Teltran and The Acquired Company shall save and
hold the other harmless from any claims made against the other on account of
their acts or alleged acts from any person for any other agent's, broker's or
finder's fee or commission incurred in connection with the transactions
contemplated by this Agreement. The provisions of this Section 10.4 shall apply
to any claim within the scope of the preceding sentence.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Except as otherwise provided herein, the Shareholders
and Teltran shall each pay its own expenses incident to the negotiation,
preparation, and carrying out of this Agreement, including all fees and expenses
of its counsel and accountants for all activities of such counsel and
accountants undertaken pursuant to this Agreement, irrespective of whether or
not the transactions contemplated hereby are consummated.
11.2 Survival of Representations, Warranties and Covenants. All
statements contained in this Agreement or in any certificate delivered by or on
behalf of the Shareholders or Teltran pursuant hereto, or in connection with the
transactions contemplated hereby shall be deemed representations, warranties and
covenants by the Shareholders or Teltran, as the case may be, hereunder. All
representations, warranties, and covenants made by the Shareholders or Teltran
in this Agreement, or pursuant hereto, shall survive the Closing, but shall
terminate two years from the Closing Date.
11.3 Succession and Assignments; Third Party Beneficiaries. This
Agreement may not be assigned (either voluntarily or involuntarily) by any party
hereto without the express written consent of the other party. Any attempted
assignment in violation of this Section shall be void and ineffective for all
purposes. In the event of an assignment permitted by this Section, this
Agreement shall be binding upon the heirs, successors and assigns of the parties
hereto. Except as expressly set forth in this Section, there shall be no third
party beneficiaries of this Agreement.
The provisions of this Section shall not apply to the
acquisition of the Acquired Companies by a wholly owned subsidiary corporation
of Teltran. Without limiting the generality of the preceding sentence,
references to Teltran herein shall be deemed to include references to the
Subsidiary.
11.4 Accuracy of Documents. All documents delivered by the Shareholder
to Teltran, and by Teltran to the Acquired Company, as photocopies faithfully
reproduce the originals thereof, and such originals are authentic and were, to
the extent execution was required, duly executed.
11.5 Notices. All notices, requests, demands, or other communications
with respect to this Agreement shall be in writing and shall be (i) sent by
facsimile transmission, (ii) or with respect of notices from the United States
sent by the United States Postal Service, registered or certified mail, return
receipt requested, or (iii) personally delivered by a nationally recognized
express overnight
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courier service, charges prepaid, to the following addresses (or such other
addresses as the parties may specify from time to time in accordance with this
Section):
(a) Teltran International Group, Inc.
One Penn Plaza, Suite 3632
New York, New York 10119
With a copy to:
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Attn: Michael DiGiovanna, Esq.
Fax No.: (212) 972-9487
(b) To Shareholder
Barclay Brydon Limited
Enterprise House
Monsons Solicitors
15 Whitworth Street West
Manchester M1 5WG
With a copy to:
Michael Thompson, Esq.
All such notices shall, when sent in accordance with the preceding sentence, be
deemed to have been given and received on the earliest of (i) the day delivered
to such address or sent by facsimile transmission, (ii) the fifth business day
following the date deposited with the United States or United Kingdom Postal
Service, or (iii) the next business day after shipment by such courier service.
11.5 Construction. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of New York (US) without giving
effect to the principles of conflicts of law thereof.
11.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
11.7 No Implied Waiver; Remedies. No failure or delay on the part of
the parties hereto to exercise any right, power, or privilege hereunder or under
any instrument executed pursuant hereto
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shall operate as a waiver nor shall any single or partial exercise of any right,
power, or privilege preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. All rights, powers, and
privileges granted herein shall be in addition to other rights and remedies to
which the parties may be entitled at law or in equity.
11.8 Entire Agreement. This Agreement, including any exhibits and
Disclosure Schedules attached hereto, sets forth the entire understandings of
the parties with respect to the subject matter hereof, and it incorporates and
merges any and all previous communications, understandings, oral or written as
to the subject matter hereof, and cannot be amended, waived or changed except in
writing, signed by the party to be bound thereby.
11.9 Headings. The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.
11.10 Severability. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted hereof and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date hereof.
TELTRAN INTERNATIONAL GROUP LTD.
By: /s/
----------------------
BARCLAY BRYDON LIMITED
By: /s/
----------------------
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Memorandum of Closing
Memorandum of Closing between and among Barclay Brydon Limited ("BBL")
and Teltran International Group, Ltd. ("Teltran") dated August 16, 1999.
BBL and Teltran have entered into an Exchange Agreement as of July 15,
1999 for the acquisition of the shares of Channelnet Ltd. ("Channelnet") which
Agreement is hereby affirmed. The Parties hereby have completed the Exchange.
In connection with this Closing, the parties have modified the Exchange
Agreement and have come to the understandings as set forth below and the
Exchange Agreement shall be deemed amended.
1. Notwithstanding the provision ov Article X of the Exchange Agreement the
obligations of BBL shall be limited as set forth below:
(a) As used herein "Excluded Liabilities" shall be any liability
arising from a claim of a third party that such third party has any interest or
rights to the shares with Channelnet exchanged hereby, the assets of Channelnet
or the agreements or contracts or business of Channelnet.
(b) Except for Excluded Liabilities, BBL shall have no liability for an
amount exceeding the sum of (i) the aggregate purchase price for the Channelnet
Shares, (ii) amounts to
<PAGE>
be paid or to be paid pursuant to the Deferred Purchase Agreement, and (iii) the
aggregate amount of the Bonus in stock to be paid to John Stevens pursuant to
the Service Agreement referred to in the aforementioned Exchange Agreement.
(c) Other than the amounts of Excluded Liabilities and any damages
arising directly or indirectly from BBL's failure to perform paragraph 5 hereof.
BBL shall have no liability pursuant to Article X unless the amount exceeds
(pound)70,000 pounds.
(d) Nothing herein shall operate to exclude any amount as a deduction
for purposes of calculating Channelnet's Net Income as defined in the Exchange
Agreement and Service Agreement for purposes of determining additional shares in
connection with the purchase price or the bonus pursuant to the Service
Agreement.
2. The parties agree to the following provisions relating to the operation of
Channelnet during the period in which a determination is to be made for the
calculation of Net Income as defined in the Service Agreement.
(a) The representative of Teltran and BBL shall in good faith establish
a budget consistent with projections previously presented (no representation is
made with respect to such projections). Teltran shall cause Channelnet to adhere
to the budget. (Nothing herein shall require Teltran to advance any sums.)
<PAGE>
(b) Teltran shall at all times operate Channelnet as a separate entity
(together with its sister entity Atlantic Communications Corporation Ltd.
("Atlantic") if acquired by Teltran which may be combined with Channelnet.
Notwithstanding the foregoing Teltran may reorganize or merge Channelnet with
other entities it controls as long as Teltran continues to operate Channelnet as
a separate entity and maintains separate books and records.
(c) Any transaction between Channelnet and Teltran or its affiliates
shall have terms and conditions as if they were negotiated with an independent
third party.
(d) Teltran shall cause Channelnet to operate consistent with its past
operations subject to the aforesaid Budget, the law and efficiencies Teltran may
effect for Channelnet.
3. BBL makes no other representations excepts as set forth in such agreement or
any other agreement or document executed hereby.
4. The last sentence of paragraph 4.10 of the Exchange Agreement shall be
deleted.
(a) The financial statements to be delivered separately this date to
Teltran by the Acquired Company shall contribute the financial statements
referred to in paragraph 4.13 of the Exchange Agreement.
5. BBL hereby covenants and undertakes to procure the consent of the Landlord
(as defined in the Lease) to the assignment of the Lease to Teltran or such
other person as it directs for the
<PAGE>
premises at Enterprise House, 15 Whitworth Street West, Manchester between
Jeremy Rubens and BBL dated 12 August, 1999.
6. The parties have this date executed an Exchange Agreement with respect to
Atlantic. The provisions set forth above paragraphs 1 through 5 shall apply to
Atlantic in the same manner, except references to Channelnet shall refer to
Atlantic and vice versa.
7. Notwithstanding any of the foregoing, the documents shall be deemed revised
and amended to reflect the comments of Todd M. Brinberg as set forth in
paragraphs 1 through 6 and paragraphs 8, 9, 10 and 13 of Mr. Brinberg's fax
memorandum of August 15, 1999 to Michael D. DiGiovanna (which is attached
hereto) except that paragraph 5 of the same shall be deemed modified by
paragraph 2 thereof.
BARCLAY BRYDON LIMITED
By: /s/
-----------------------------
Michael Thompson
TELTRAN INTERNATIONAL GROUP, LTD.
By: /s/
-----------------------------
