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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: December 18, 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 4430, 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 December 18, 1999, Teltran International Group, Ltd. (the "Company") acquired
all the shares of Internet Protocols Ltd. Internet Protocols Ltd., is based in
the United Kingdom and commenced operations in 1999 as a provider of equipment
and services to internet service providers. Internet Protocols Ltd. provides
Internet access services and other services to customers. It seeks to enter into
revenue-sharing arrangements with its customers for providing the use of
equipment. In connection with the acquisition Teltran issued 1,481,566 shares to
the existing shareholders in exchange for all the outstanding shares of Internet
Protocols Ltd. All of the shareholders were unaffiliated with the Company. The
Company has also purchased additional shares of Internet Protocols Ltd. directly
from the Company for approximately $3,000,000 payable in an initial installment
and further installments through August 2000. The cash consideration was paid
out of available funds of the Company. The ultimate purchase price for the
shares acquired from the former shareholders and the number of shares issued by
Teltran may be increased or decreased depending upon the valuation of Internet
Protocols Ltd. in November 2000 and other factors. One-half of the shares issued
to the former shareholder were deposited in escrow covering indemnification and
possible downward valuation. At the time of the acquisition, Teltran issued an
additional 83,886 shares in escrow, which may be used to satisfy approximately
$550,000 of indebtedness of Internet Protocols Ltd. to certain of its former
stockholders.
Item 7. Financial Statements, Pro-Forma Information and Exhibits
(a) and (b)
(c) Exhibits
10.16 Acquisition Agreement dated as of December 18, 1999 among
Internet Protocols Ltd. all the shareholders of Internet
Protocols Ltd. and Teltran International Group, Ltd.
o 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: January 3, 2000
TELTRAN INTERNATIONAL GROUP, LTD.
(Registrant)
By: /s/ Byron Lerner
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Byron Lerner, President
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ACQUISITION AGREEMENT made as of December 18, 1999, by and among TELTRAN
INTERNATIONAL GROUP, LTD., a Delaware Corporation ("Teltran") and INTERNET
PROTOCOLS LIMITED (the "Acquired Company") and the Shareholders of the Acquired
Company executing this Agreement (the "Shareholders").
INTRODUCTION
WHEREAS, Teltran is a corporation which is engaged in the telecommunication and
internet business;
WHEREAS, the Acquired Company is engaged in the internet business;
WHEREAS, the Shareholders own all the issued and outstanding ordinary shares one
pence each in the capital of the Acquired Company (the "Acquired Company
Shares");
WHEREAS, Teltran desires to acquire (the "Acquisition") a 100% interest in the
Acquired Company pursuant to which (i) Teltran will acquire all of the
outstanding Acquired Company Shares from the Shareholders in exchange for an
indeterminate number of shares of Teltran's common stock ("Teltran Shares") and
(ii) an additional number of shares ("New Shares") to be issued by the Acquired
Company to Teltran for cash with the result that Teltran will own all of the
Acquired Company Shares;
WHEREAS, the Shareholders desire to effect the aforesaid transaction;
WHEREAS, the parties intend by executing this Agreement, to adopt a tax free
transaction to the extent available under law.
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:
"Affiliate Indebtedness" shall refer to indebtedness due to
Shareholders or entities or persons related or controlled by them as
set forth in Exhibit C as provided for hereinafter.
"Balance Sheet" shall refer to the latest balance sheet of the
Acquired Company delivered to Teltran pursuant to Section 4.12.
"Balance Sheet Date" with respect to Acquired Company shall refer to
the date of the latest Balance Sheet.
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"Consents" shall refer to the consents or approval of any third party
including any governmental agency or registered securities
association or stock exchange 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
resulting from a change in beneficial ownership of the Acquired Company
required by or necessary to prevent any termination of a Material
Contract referred to in Section 4.8 all of which are listed in the
Acquired Company Disclosure Schedule.
"Contract" shall mean any agreement, contract, license, indenture,
lease, mortgage, plan, arrangement, commitment or instrument including
any note or other debt instrument (whether written or oral to the
extent any of the foregoing represent a binding obligation of a party).
"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 a escrow agent designated by
Shareholders to hold the Teltran Shares (pursuant to the "Escrow
Agreement").
"Escrow Agreement" shall refer to escrow agreement in the form of
Exhibit A between and among Teltran, the Shareholders and Escrow Agent
to hold a portion of the Teltran Shares from the closing of the
Acquisition until the later of December 31, 2001 or the resolution of
all indemnity claims as hereinafter provided.
"GAAP" shall refer to generally accepted accounting principles as
applicable in the United States or the United Kingdom as the case may
be.
"Investment Banker" shall mean a broker-dealer, bank or other
financial institution which (i) in the sole judgment of the party
selecting such firm, has experience in valuing companies substantially
similar to the Acquired Company and (ii) has no ongoing business
relationship with a party and is not affiliated or related to any
party.
"Investment Banker Valuation" shall refer to the valuation of the
Acquired Company determined in accordance with procedures set forth in
paragraph 2.6 hereof
"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. Save in respect of representations
and warranties given individually by a Shareholder, the knowledge of
any party making a representation for warranties hereunder shall be
attributable to all other parties making such representations for
warranties and knowledge of the Acquired Company shall mean the
knowledge of the Management Shareholders.
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"Laws" shall mean all laws, common laws, rules, regulations,
ordinances, codes, judgments, injunctions, orders, decrees, permits,
published policies and other requirements of the United States or
United Kingdom and other jurisdictions to which Teltran and an 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 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).
"Management Shareholders" shall refer to Roger Pellew, David Scanlan,
Sol Alan Saad, Nicholas Le Seelleur and James Muschette.
"Market Price" when referring to the Teltran shares on any particular
date shall be the average closing price on the electronic bulletin
board, NASDAQ market or stock exchange constituting the primary United
States trading market for the Teltran Shares as hereinafter defined
over the fifteen preceding trading days immediately prior to any such
date.
"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.
"Other Shareholders" shall refer to Shareholders other than the
Management Shareholders.
"Percentage Ownership" shall refer to the percent of Acquired Company
Shares owned by a Shareholder as of the date of Closing without giving
effect to New Shares to be issued at Closing by the Acquired Company to
Teltran.
"Person" shall mean any natural person, corporation, division of a
corporation, partnership, trust, joint venture, association, company,
estate, unincorporated organization or governmental entity.
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"Recognized Criteria" shall refer to valuation methods utilized to
value internet companies including but not limited to the (A)
"top-down" or Discounted P/E approach; (B) discounted cash flow and
(C) the Comparable Company Analysis and such other additional methods
as the parties may agree upon after good faith negotiations.
"Returns" shall mean all returns (including, without limitation,
information returns and other material information), reports and forms
relating to Taxes required by any Law to be filed with any tax
authority.
"Subsequent Delivery Date" shall refer the latter of the tenth
business day after completion of the Investment Banker Valuation or
December 20, 2001.
"Subsidiary" shall refer to any corporation or other entities in which
a Person has a majority interest or which is otherwise controlled by
such Person.
"Taxation Authority" shall means any taxing or other authority, whether
of the United Kingdom of elsewhere, competent to impose any liability
to Taxation
"Taxation" shall mean:
1. All taxes, duties, charges, levies, deductions or
withholdings wherever imposed and whether of the United
Kingdom or elsewhere including without limitation income tax,
(including income tax required to be deducted or withheld from
or accounted for in respect of any payment) capital gains tax,
inheritance tax, corporation tax, advance corporation tax,
liabilities in respect of the Pay As You Earn system, any
charge to tax arising pursuant to section 419 Income and
Corporation Taxes Act 1988, stamp duty, stamp duty reserve
tax, value added tax, customs duties, excise duties, other
import duties, withholding tax, national insurance, social
security and other similar contributions;
2. Any interest penalty, fine and surcharge related to or arising
in connection with any of the matters specified in the
preceding sub-paragraph.
"Teltran Share Value" shall equal the greater of the Market Price on
the last trading day immediately prior to the date upon which the
determination is to be made provided that Market Price at closing shall
not be less than $6.00 per share.
"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 Acquisition.
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ARTICLE II
THE INITIAL ACQUISITION
2.1 The Acquisition. On the "Closing Date" as provided in paragraph 2.3:-
(i) the Acquired Company shall issue twenty one thousand three
hundred forty eight (21,348) Acquired Company Shares ("New
Shares") for (pound)1,900,000 to be paid as follows:
(A) by applying the advance previously made by Teltran to
the Acquired Company of (pound)108,000 in partial
satisfaction of such payment of (pound)1,900,000;
and;
(B) (pound)500,000 as the Closing; and
(C) (pound)500,000 on February 15, 2000; and
(D) the balance of (pound)792,000 on August 15, 2000;
(ii) the Shareholders shall exchange an aggregate of one hundred
thousand (100,000) Acquired Company Shares for 1,481,556
Teltran Shares ("Initial Shares") having an aggregate Teltran
Share Value of(pound)8,900,000 and additional contingent
consideration as set forth in paragraph 2.6 hereof. Teltran
and the Acquired Company shall execute a subscription document
as may be customary under the Law of the United Kingdom to
evidence the purchase of Acquired Company Shares from the
Acquired Company as set forth above. Such subscription shall
contain such terms as may be usual in the circumstances
provided that the terms shall be consistent with the terms and
conditions of this Agreement.
Each Shareholder shall be entitled to his or its Percentage Ownership
of such Teltran Shares. At the Closing, Teltran shall deliver to each
of the Shareholders 50% of the Teltran Shares each Shareholder is
entitled to receive with the balance of the Teltran Shares to be
determined at closing to be held pursuant to the Escrow Agreement.
Except for (i) the provisions of the Escrow Agreement and this
Agreement and (ii) restrictions under United States securities law, the
Shares shall be issued free and clear of all liens encumbrance or
claims of third parties.
Each of the Shareholders waives all right of pre-emption or any other
rights (however obtained) as regards any and all issuance of or
transfer in respect of the Acquired Company Shares (whether hereby or
in any prior transaction).
2.2 Delivery of Teltran Shares. In addition to the restrictions herein, all
of the Teltran Shares to delivered pursuant to the Agreement shall be
unregistered under United States securities laws and may not be sold
except in accordance with United States securities laws. Certificates
for Teltran Shares shall contain a restrictive legend and a stop order
shall be placed against their transfer, No fractional shares shall be
issued.
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2.3 Closing. The closing of the Acquisition contemplated hereby (the
"Closing") shall be held simultaneously upon execution hereby. The date
upon which such Closing shall Occur shall be referred to as the
"Closing Date."
2.4 Disclosure Schedules. The parties have delivered a disclosure
schedules to each other. The "Acquired Company Disclosure Schedule"
relates to the Shareholders and the 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. The Acquired Company and the Shareholders jointly and
severally represent and warrant the truth and accuracy in all material
respects of the Acquired Company Disclosure Schedule and Teltran
represents the truth and accuracy of the Teltran Disclosure Schedule in
all material respects.
2.5 Teltran Subsidiary. At any time, Teltran may designate a wholly owned
subsidiary (the "Subsidiary") to acquire or own 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.
2.6 Contingent Purchase Price-Subsequent Deliveries.
(a) As of November 1, 2000 the parties shall cause the value of
the Acquired Company to be determined by independent
Investment Bankers utilizing recognized Criteria of Value.
(b) The Shareholders, acting through their Shareholder
Representative, and Teltran shall each on or prior to October
20, 2000 appoint an Investment Banker to value the Acquired
Company as of November 1, 2000 ("Valuation Date"). Each
Investment Banker shall submit to Teltran and Shareholders on
or prior to November 20, 2000 a written determination of the
value of the Acquired Company on such date setting forth
therein the basis of such determination. If the difference
between the two valuations is less than 20% of the lower
valuation then an average of such valuations shall control and
shall be deemed the value. If the difference between the two
valuation is greater than 20% of lower Valuation and the
Investment Bankers appointed by the parties are unable to
reconcile their differences by November 30, 2000 then both
parties (or such appointed Investment Bankers, subject to the
consent of the parties which will not be unreasonably
withheld) shall appoint a mutually agreeable third party
Investment Banker by December 7, 2000. Such third party
Investment Banker shall determine the value of the Acquired
Company and shall submit a written determination to Teltran
and Shareholders setting forth the basis of its determination.
If the determination of such third Investment Banker is either
more than 20% greater than the higher of the two valuations or
more than 20% lower than the lower of the two valuations, then
three Investment Bankers shall be required to
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confer and determine an agreed upon valuation (and if they do
so within 14 days of the commencement of such conferring such
agreed valuation shall be final and conclusive). In all other
instances, the valuation shall be the average of the three
valuations.
Teltran shall reimburse the costs of the Shareholders in
connection with the valuations hereunder up to a maximum of
$15,000.
The failure of any party to appoint an investment banker shall
operate as a forfeiture of such party's right with respect
thereto and the determination of the other Investment Banker
shall control and be conclusive.
(c) Teltran, after execution of a confidentiality agreement, shall
cause the Acquired Company to give any Investment Banker
appointed pursuant to this Section 2.6 such written available
information as such Investment Banker may request which
information shall be true and correct. Teltran will give such
Investment Bankers and their representatives reasonable access
during business hours to the Acquired Company's book and
records. In determining value of the Acquired Company the
Investment Banker shall not increase or decrease the Value of
the Acquired Company for force major and extraordinary
circumstances or for any event for which is the subject of a
payment claim for indemnity.
(d) (i) Each of the Shareholders shall receive additional
consideration ("Contingent Consideration") for the
Acquisition equal to their Percentage Ownership of
the excess of the value of the Acquired Company as
determined pursuant to paragraph 2.6(b) ("the Final
Value") over (pound)10,800,000 payable either in cash
or in Teltran Shares valued at the Teltran Share
Value as at November 1, 2000 or a combination thereof
at the option of Teltran.
(ii) If the Final Value is less than (pound)10,800,000
then, the Shareholders shall be obliged to pay to
Teltran in cash their Percentage Ownership of the
amount of the shortfall calculated as follows ("the
Adjusted Shortfall"):
Adjusted Shortfall= [Final Value] x(pound)8.9 million
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(pound) 10.8 million
Provided always that the amount of the Adjusted
Shortfall shall in no circumstances exceed
(pound)2,225,000. Any such payment shall first be
satisfied by the sale of Teltran Shares held under
the Escrow Agreement and the payment of the proceeds
of such sale to Teltran but in the event that the
Teltran Share Value at the date of determination of
the Final Value is less that $9.683, then the
Adjusted Shortfall shall be satisfied by delivery to
Teltran of such number of Teltran Shares as shall
have an aggregate Teltran Share Value at Closing
equal to the Adjusted Shortfall.
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(e) Oil the Subsequent Delivery Date Teltran shall deliver to each
Shareholder such Shareholder's Percentage Ownership of such
Contingent Consideration and Teltran Shares held in escrow
less shares to be retained as follows:
(i) The balance of the Initial Shares and Contingent
Consideration held by the Escrow Agent shall be
delivered to the Shareholders according to their
respective entitlements less cash or such number of
Teltran Shares having Teltran Share Value at the
Closing Date or Valuation Dates as the case may be
equal to the sum of (A) a reasonable estimate of the
maximum likely amount of any pending claim made by
Teltran for indemnity under Article X hereof plus (B)
(pound)450,000 all of which shall continue to be held
by the Escrow Agent.
(ii) Where the assets held by the Escrow Agent under the
Escrow Agreement ("the Escrow Fund") comprise cash
and Teltran Shares, then all cash shall first be
released from the Escrow Fund. Where any Teltran
Shares are retained in the Escrow Fund pursuant to
Section 6(e)(B), then such retention shall first be
satisfied to the extent possible by any Teltran
Shares issued as Contingent Consideration.
(iii) Where any assets are retained in the Escrow Fund pursuant to Section
6(e)(A) and any claim for which a retention has been so made is finally
agreed or determined with any Shareholder or withdrawn by Teltran, the
amount (or value of shares) so retained, to the extent it exceeds the
amount payable (if any) to Teltran in respect of that claim shall be
released to that Shareholder.
(iv) If for any reason any claim for indemnity made against a Shareholder
for a breach of an individual representation or warranty is satisfied
from the Escrow Fund, that Shareholder shall be liable to replace the
assets so removed from the Escrow Fund to satisfy such claim.
(v) If for any reason, any Teltran Shares may not be sold to satisfy an
indemnity claim or payment of an Adjusted Shortfall against or by any
Shareholder within 3 months after the later of the Subsequent Delivery
Date and the date of final determination of such claim, then Teltran
Shares having a Teltran Share Value at the Closing equal to the amount
of such claim (or the amount of the Adjusted Shortfall) due but not
paid shall be returned to Teltran from the assets of that Shareholder
in the Escrow Fund (or otherwise from that Shareholder).
(vi) Notwithstanding the foregoing provisions of this Section 2.6, if
Teltran sells all or a majority of the shares in, or substantially all
the assets of, the Acquired Company prior to November 2000 (other than
to an affiliated party), then the Final Value shall not in any event be
less than the value of the Acquired Company at the date of such sale by
reference to that sale price (as determined by the relevant Investment
Bankers appointed under section 2.6, in case of dispute between the
parties).
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(vii) If the Shareholder Representative objects to any claim for or
the amount thereof in respect of which Teltran intends or may
make any retention under Section 2.6 (c), Teltran shall
produce to the Shareholder Representative an opinion by a UK
barrister (acting as expert) selected and instructed by
Teltran in good faith (who shall be not less than 8 years'
call) to the effect that the amount of Teltran's claim is a
reasonable estimate of the maximum likely amount of that
claim. Once requested, such opinion shall be delivered to the
Shareholder Representative prior to the date on which the sums
are due to be released, unless the release of any sums held in
Escrow is due to occur less than 21 days after the date of
notice of the claim, in which case Teltran shall be entitled
retain in Escrow a sum equal to their bona fide estimate of
the value of the claim until it has obtained such an opinion
within 21 days of the request therefor. Failure to obtain and
deliver such opinion shall mean that Teltran shall not be
entitled to make any such retention or shall release any
amount already retained. The reasonable costs of obtaining
such an opinion shall be added to the amount of the claim and,
if Teltran recovers in respect of such cl aim in whole or in
part, shall be satisfied by the Shareholders in accordance
with the Agreement. Such opinion shall not be dispositive of
any claim.
(f) The amount of consideration retained pursuant to Section
2.6(e) shall be delivered to the Shareholders upon the
resolution of all indemnity claims under Article X provided
the adequacy of retention shall be reviewed every quarter
commencing December 1, 2001 and to the extent the value
retained exceeds the value of claims, such excess shall be
delivered to the Shareholder.
2.7 Payment of Affiliate Indebtedness. At the Closing Teltran shall issue
in the name of each person owed Affiliate Indebtedness additional
Teltran Shares ("Debt Shares") as may have a Teltran Share Value at
Closing equal to 150% of the Affiliate Indebtedness owed to such person
(excluding any such debt to be repaid in cash at Closing as specified
in Exhibit C). The Debt Shares shall be included in a registration
statement filed with The Securities & Exchange Commission within one
hundred twenty days (120) of the Closing and Teltran shall use all
reasonable best efforts to have the registration statement declared
effective. At the Closing each such creditor shall deliver a general
release of the Affiliated Indebtedness as well as stock powers and
transfer documents to the Acquired Company. The Debt Shares, stock
powers and release shall be held pursuant to a separate escrow
agreement ("Debt Shares Escrow Agreement"). Upon effectiveness of the
Registration Statement, Debt Shares having a Teltran Share Value at
that date equal to the Affiliate Indebtedness shall be delivered to the
creditor, the balance of Debt Shares returned to Teltran and the
release delivered to Teltran. If the Teltran Shares Value at that date
is less than the aggregate Affiliate Indebtedness, then the entire
amount of Debt Shares shall be delivered to the creditor and a release
delivered for the amount of Affiliated Indebtedness equal to the
Aggregate Teltran Share Value at that date. Unless the aggregate
Teltran Share Value at that date of Debt Shares delivered increases to
an amount equal to the Aggregate Affiliate Indebtedness prior thereto,
the balance of Affiliated Indebtedness shall be paid out of cash flow
of the Acquired Company. If the registration statement covering the
Debt Shares is not declared effective by June 30, 2000 the Affiliated
Indebtedness shall (if the creditor so elects) be paid out of cash flow
of the Acquired Company and Debt
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Shares allocated to him shall be returned to Teltran and cancelled.
Teltran shall procure that (pound) 59,000 owed to the Management
Shareholders (other than James Muschette) shall be repaid forthwith
after the Closing by the Acquired Company.
2.8 Transfer of Entities. At the Closing all the shares of Common Stock in
consideration Intothenet Organization Limited shall be transferred to
[the Acquired Company] which has no assets or liabilities.
2.9 Shareholder Representative. The Shareholders have appointed Nicholas Le
Seelleur to act as their representative ("Shareholder Representative").
Such appointment shall be deemed an irrevocable appointment of the
Shareholders Representative to make all decisions and execute all
documents on behalf of the Shareholders relating to the Transaction
including the Acquisition and to initiate, waive or compromise any
rights of Shareholders respecting the Transactions. Except as set forth
in Schedule 2.7, the Shareholder Representative shall receive all
notices on behalf of the Shareholders. Nothing herein shall prevent the
Shareholders from nominating a substitute Shareholder Representative.
2.10 Exchange Rate. When a determination is to be made with respect to
exchange rate of U.S. Dollars to Pound Sterling and visa versa such
rate shall be based upon the fifteen(15) business day average of the
London Spot Closing prices as quoted by Chase Bank prior to such date.
2.11 Release of Guarantees. Teltran shall use its best efforts to procure,
as soon as practicable after Closing, the guarantees included in the
Acquired Company Disclosure Schedule given by Ken Drury and the Number
Portability Company Ltd. ("the Guarantors"), and pending such release,
Teltran shall indemnify the Guarantors against all liabilities in
connection therewith.
2.12 Satisfaction of Teltran Advances. Upon the Closing, the advances
previously made by Teltran to the Acquired Company of (pound)108,000
shall be deemed satisfied and the guarantees and security arrangements
between any (A) Shareholders and (B) Teltran shall be deemed
terminated. Teltran shall receive in credit (pound)108,000 in respect
of the payment of the purchase price of the New Shares.
ARTICLE III
CLOSING DELIVERIES
3.1 Acquired Company and 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:
(1) Stock Certificates owned by the Shareholders representing all
of Acquired Company Shares duly transferred to Teltran in
accordance with applicable Law;
(2) Minute books and corporate records of the Acquired Company and
Intothenet.
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(3) Copies of all Consents;
(4) Opinion of Shareholder's Counsel referred to in paragraph 8;
(5) Certified copy of Resolutions of Corporate Company
Shareholders authorizing this transaction;
(6) Resignations of all officers and directors of the Acquired
Company;
(7) Certified resolutions of the board of directors of the
Acquired Company authorizing the transaction appointing
nominees of Teltran as directors as well as the managing
director and other officers of Acquired Company;
(8) Delivery of certificates for Teltran Shares to be delivered at
Closing with transfer documents to the Escrow Agreement to be
held pursuant to the terms herein and the Escrow Agreement;
(9) The Escrow Agreement executed by the Escrow Agent and each
Shareholder.
(10) Debt Shares Escrow Agreement executed by the Shareholders and
the deposit of the shares and documents Release referred to in
paragraph 2.7.
(11) A Release to the Acquired Company of all debts, obligations
and claims of Shareholders other than the Affiliated Debt.
(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 Acquired Company and Shareholders. At the
Closing, in addition to documents referred to elsewhere, Teltran shall
deliver to the Shareholders:
(1) A certified check or wire transfer to the Acquired Company
representing that portion of the purchase price to be paid at
Closing for the new shares to be purchased directly from the
Acquired Company. The balance less the amount of any advance
made by Teltran to Acquired Company shall be paid in
accordance with paragraph 2.1;
(2) Certificates registered in the names of the Shareholders
representing the Teltran Shares to be delivered at Closing in
accordance with their Percentage Interest to be delivered in
accordance with Paragraph 2.1 and 3.1(8).
(3) Resolutions of the Board of Directors of Teltran approving the
Acquisition;
(4) Subscription Documentation as may be required to evidence
Teltran's purchase of the new shares from the Acquired
Company.
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(5) The Escrow Agreements referred to in paragraph 3.1(9) and 3.1
(10) executed by Teltran and the escrow agent thereto;
(6) Such Other documents as the Acquired Company or Shareholders
or their counsel may reasonably request, All such documents
shall be satisfactory to Acquired Company and the Shareholders
and their counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
4 Except as set forth in the Acquired Company Disclosure Schedule in
addition to any other representations or warranties, the Acquired
Company and Shareholders jointly and severally make the following
representations and warranties to Teltran on the date hereof and on the
Closing Date with the knowledge and understanding that Teltran is
relying materially upon such representations and warranties.
Notwithstanding the foregoing, the representations made in paragraphs
4.3, 4.5, 4.6(a), 4.15 (in relation to Taxes for which a Shareholder is
primarily liable), 4.18 and 4.24 shall be made individually to the
extent such representation relates to such Shareholder's own personal
position and circumstances.
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 Certification of Incorporation, Memorandum of
Association and Articles of Association of 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. The Acquired Company Shares to be
exchanged hereunder constitutes all the issued and outstanding Shares
of the Acquired Company except as Schedule 4.2, 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 (not subject to further charge), and were not issued in
violation of the preemptive rights of any person. The Acquired Company
Shares to be issued to Teltran have been duly authorized, validly
issued fully paid, nonassessable not subject to any liens, claims,
restrictions or third party, including any pre-emption rights. 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
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other similar rights with respect to the capital stock of the Acquired
Company to which the Acquired Company is a party.
4.3 Share Ownership. Each Shareholder represents that 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 Acquisition,
Teltran shall receive marketable title to such Acquired Company Shares
free and clear of all Liens and encumbrances and claims of third
parties. Moreover, no prior holder of Acquired Company Shares may
assert any claim against the Acquired Company with respect to Acquired
Company Shares transferred hereby or with respect to or arising out of
any transaction under which any Shareholder acquired shares from any
former shareholder.
4.4 Subsidiaries. The Acquired Company' does not own any Subsidiary nor
does any Acquired Company have an interest in any other corporation,
partnership, joint venture or other entity.
4.5 Investment Intent. Each of the Shareholders hereby represents, warrants
and agrees that such Shareholder will be acquiring any Teltran Shares
to be issued in connection with Initial Acquisition and Affiliated
Indebtedness for investment, for its own account, and not with a view
to the distribution of the Teltran Shares. In such connection, each
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. Each 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,
each 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. Each
Shareholders consents to the placing of such legend on the certificates
for the Teltran Shares.
4.6 Authority. (a) This Agreement constitutes, when executed and delivered
by the Shareholders in accordance herewith, the valid and binding
obligations of each of the Shareholders, enforceable in accordance with
its respective terms, subject to the Enforceability Exceptions. (b) the
Acquired Company has all the requisite corporate power and authority to
execute and delivery and perform its obligations under this Agreement
and all related transactions as provided hereunder and upon execution
and delivery, the Agreement is a valid and binding agreement,
enforceable in accordance with its respective terms subject to the
Enforceability Exception.
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 on Schedule 4.7 hereto. No material
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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 Acquired Company
Shareholders' 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
4.8 Contracts. Schedule 4.8 consists of a true and complete list of all
Contracts, to which the Acquired Company ("Material Contracts") is a
party which requires payments or receipts in excess of (pound)10,000
per year or is not terminable by the Acquired Company on notice of
thirty (30) days or less without penalty or the Acquired Company being
liable for damages.
Except as set forth on Schedule 4.8 (i) each Material Contract is in
full force and effect and there is no default under any Material
Contract either by the Acquired Company or, to the knowledge of the
Shareholders and the Acquired Company, by any other party thereto, and
no event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder by the Acquired
Company or to the knowledge of the Acquired Company and Shareholders,
any other party of which could result in termination of a Material
Agreement or which alone or in the aggregate, would provide the basis
for a claim against the Acquired Company in excess of (pound) 10,000;
(ii) no party to any such Material Contract has given notice to the
Acquired Company of or made a claim against the Acquired Company with
respect to any breach or default thereunder; and (iii) neither the
Acquired Company, nor any Shareholder has received any payment from any
contracting party in connection with, or as an inducement for, entering
into any contract, agreement, commitment or instrument with the
Acquired Company except for payment for actual services rendered or to
be rendered by the Acquired Company, consistent with amounts
historically charged for such service.
Such schedule also lists all pending executed heads of agreements or
letters of intent. To the Knowledge of the Shareholders none of the
heads of agreement have been canceled or terminated.
4.9 Litigation There is no claim, action, proceeding, or investigation
pending or, to the Knowledge of the Shareholders or the Acquired
Company, 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. Neither the Acquired Company
nor any person for whose acts or defaults in the matter it may be
contractually or vicariously liable is involved in any civil criminal
or arbitration proceedings or reference of any dispute to any expert
and to the knowledge, information or belief of the Shareholders no such
proceeding is pending or threatened against the Acquired Company
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<PAGE>
or any such person and there are no facts likely to give rise to such
proceedings or reference.
4.10 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.
4.11 No Conflict. The execution and delivery of this Agreement by the
Acquired Company and the Shareholders does not, and the consummation by
the Acquired Company and the Shareholders of the transactions
contemplated hereby will not, violate, conflict with or result in a
breach of any provision of, or constitute a default (or in an event
which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
the Acquired Company under any of the terms, conditions or provisions
of (i) the Certificate of Incorporation or By-laws of the Acquired
Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to the Acquired Company or any of its
properties or assets, or (iii) except as set forth in Schedule 4.11,
any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation or
agreement of any kind to which the Acquired Company is now a party or
by which the Acquired Company or any of its or their properties or
assets may be bound or affected, excluding from the foregoing clauses
(ii) and (iii), such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a
Material Adverse Effect.
4.12 Financial Statements. The Acquired Company and the Shareholders have
delivered to Teltran true and complete copies of the Acquired Company's
financial statements listed in Schedule 4.12. These financial
statements (i) have been prepared from the books and records of the
Acquired Company in accordance with UK GAAP consistently applied with
prior periods, and (ii) are complete and correct and fairly reflect, in
each case 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 Acquired Company
Shareholders' Knowledge there have been no transactions involving the
Acquired Company that properly should have been set forth therein in
accordance with U.K. GAAP that have not been accurately so set forth.
Since the Balance Sheet Date there has been no Material Adverse Change
with respect to the Acquired Company.
4.13 Compliance With Law.
(a) The Acquired Company has complied and is presently complying,
in all material respects, with all U.K. Laws, including,
without limitation, all applicable laws
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<PAGE>
regulating the business of providing products and services to
internet service users and the Shareholders know of no pending
or anticipated changes to such Laws that could cause The
Acquired Company's current business practices to fall out of
compliance with such Laws. The Shareholders do not know of
any claim by any party that the Acquired Company is in
violation in any material respect of any such Laws with
respect to its operations or that the actions of any third
party has caused the Company to be in such violation and no
notice in that regard has been received by the Acquired
Company.
(b) The Acquired Company has all material UK governmental
licenses, permits, consents, authorizations and approvals
necessary for the conduct of its business as currently
conducted ("Government Licenses and Permits"). Schedule 4.13
includes a list of all Government Licenses and Permits and
such Government Licenses and Permits are attached thereto. All
Government Licenses and Permits are in full force and effect,
and no proceedings for the suspension or cancellation of any
thereof is pending or, to their knowledge, threatened.
Herewith the Shareholders in the Acquired Company still know
of no action, omission or policy which could form a reasonable
basis for the loss of any such Government License or Permit.
The Acquired Company is not in breach of the terms or
conditions of such licenses and there are no pending or
threatened proceedings which might in any way affect such
licenses and consents.
(c) The Acquired Company is not and will not be liable for any
damages, awards, penalties, costs, expenses or losses for
failure to register under the Data Protection Act.
4.14 Employee. There is no and there has never been any employee of the
Acquired Company and there is no and there has never been any claim or
demand by any employee and the Acquired Company is not and will not be
liable for any Taxation in respect of any employee for any period prior
to Closing whether such Taxation is due and/or payable on the date
hereof or becomes due and/or payable in the future.
4.15 Taxes. Except as set forth on Schedule 4.15 the representations and
warranties set forth in Exhibit B are true and correct.
4.16 Non Governmental Consents. Except with respect to the Consents listed
in Schedule 4.16 no consent of any third party is required by the
Acquired Company pursuant to any Material Contract or by any non
governmental third party to preserve any material right of the Acquired
Company upon the Acquisition.
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 incurred in connection with this
Transaction or (iii) Liabilities otherwise disclosed in this Agreement,
including the Acquired Company Disclosure Schedule.
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4.18 Governmental Approvals for Transactions. Except with respect to any
Consents listed in Schedule 4.18 no authorization, license, permit,
franchise, approval, order or consent of, and no registration,
declaration or filing by the Acquired Company or Shareholders in the
United Kingdom with any governmental authority, domestic or foreign,
federal, state or local, is required in connection with the Acquired
Company's execution, delivery and performance of this Agreement and
consummation of the Transaction.
4.19 Intellectual Property. Schedule 4.19 sets forth a complete and correct
list and summary description of all trademarks, trade names, service
marks, service names, brand names, know-how, copyrights, design, design
rights and patents, and all other intellectual property rights
whatsoever ("Intellectual Property") registrations thereof and
applications therefore, applicable to or used in the business of the
Acquired Company. To the best of the knowledge and belief of the
Shareholders and the Acquired Company, the Company owns or has the
right or licence to Intellectual Property necessary for the conduct of
its business as set forth in the Material Contracts and Heads of
Agreement under Schedule 4.8. A complete list of all licenses granted
by or to such entities with respect to any of the foregoing is set
forth as a Material Contract as Schedule 4.8. Except as otherwise set
forth in Schedule 4.19 all Intellectual Property is owned by the
Acquired Company as applicable, free and clear of all liens, claims,
security interests and encumbrances of any nature whatsoever. The
Acquired Company is currently not in receipt of any notice of any
violation or infringements of, and is not knowingly violating or
infringing, the rights of others with respect to Intellectual Property.
4.20 Accounts Receivable. Except as set forth in Schedule 4.20, all of the
accounts receivable of the Acquired Company included in the Balance
Sheet or otherwise reflect actual transactions, have arisen in the
ordinary course of business, to the knowledge of the Acquired Company
and Shareholders, (i) be subject to offset or deduction or other
defense and, (ii) except as reserved in the Balance Sheet or set forth
in 4.20 will be paid at the aggregate recorded amounts thereof net of
any reserves established in a manner consistent with past practices or
as reflected in the Balance Sheets. None of the accounts receivable of
the Acquired Company have been the subject of any factoring by the
Acquired Company and the Acquired Company is not entitled to the
benefit of any accounts receivable otherwise than as the original
creditor.
4.21 Real Property-Leases. Schedule 4.21 contains a list of all real
property leases, licenses and personal property leases under which the
Acquired Company is the lessee or licensee ("Leased Property") together
with (i) the location and nature of each of the Leased Properties
(including a legal description of all leased real property); (ii) the
termination date of each such lease or license; (iii) the name of the
lessor or licensor; and (iv) all rental and other payments made or
required to be made. All such leases and licenses are valid subsisting
and in full force and effect in accordance with their respective terms,
and there is not under any Leased Property lease or license, any
existing default or event of default (or event that, with notice or
passage of time, or both, would constitute a default). True and
complete copies of all Leased Property and licenses listed in Schedule
4.21 have been delivered to Teltran heretofore as well as any copies of
title reports, surveys or environmental reports or audits relating to
any leased property. Except as set forth in Schedule 4.21 no such lease
or license will require the consent of the lessor or licensor to
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or as a result of the consummation of the Transactions. Any such lease
or license shall be deemed a Material Contract and the representations
set forth in paragraph 4.8 shall apply. Except for the aforesaid
leases and licenses the Acquired Company has no interest in real
property.
4.22 Condition of Assets. All personal property used by the Acquired Company
(whether owned or held pursuant to leases) is to the knowledge of the
Shareholders and Acquired Company in good operating condition and
repair, subject only to ordinary wear and tear, has been operated,
serviced and maintained properly within the recommendation and
requirements of the manufacturer thereof (if any) or in accordance with
UK industry practice as necessary to maintain it in operation and is
suitable and appropriate for the use thereof made and proposed to be
made by the Acquired Company in its business operations. The personal
property pursuant to Schedule 4.22 comprises all of the personal
property used or capable of being used in, or necessary for the conduct
of the Acquired Company's business as presently conducted by it and as
contemplated pursuant to the Material Contract and the Heads of
Agreement with customers and prospective customers.
The Acquired Company has obtained manufacturer's warranties with
respect to such property and the Acquired Company has complied with all
material respects thereof and the manufacturer has not given any notice
that the Acquired Company has not complied with the terms of such
warranties.
4.23 No Foreseeable Adverse Changes. Except as set forth in Schedule 4.23
the Acquired Company and the Shareholders do not know of any
development including trends or changes in technology or industry
practice which would effect its business as presently conducted or
contemplated to be conducted by it or otherwise adversely effect the
business plan. Moreover, they know of no reasons why any customers of
or suppliers to or key executive of the Acquired Company will terminate
or substantially diminish any relationship with the Acquired Company.
4.24 Related Transactions. Schedule 4.24 lists all agreements, arrangements
or transactions involving or relating to any Shareholder, officer,
director of the Acquired Company or their affiliates on the one hand
and the Acquired Company in connection therewith. Save as so disclosed,
there is not outstanding:
(a) any loan, guarantee or indemnity given by the Acquired Company
in favor of any Shareholder, any past or present director of
the Acquired Company or any person who is connected with any
Shareholder or any such director (each an "Insider") or in
favor of any other person in respect of any liability of any
Insider;
(b) any loan, guarantee or indemnity given by any Insider in favor
of the Acquired Company or in favor of any other person in
respect of any liability of the Acquired Company; or
(c) any other contract to which the Acquired Company is or was a
party and in which any Insider is or was interested in any way
whatsoever;
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No Shareholder (nor any company owned or controlled by him, whether
alone or with any persons connected with him) has any interest, direct
or indirect, in any trade or business which competes or is likely to
compete the Acquired Company's business.
4.25 IntotheNet Organisation Limited has no assets or liabilities.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TELTRAN
5 Except as set forth in the Teltran Disclosure Schedule, Teltran
represents and warrants to, and agrees with, the Shareholders as
follows as of the date hereof and the Closing Date with the knowledge
and understanding that Shareholders are 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 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 Documents. Teltran has delivered a copy of its Form 10 SB and Form 10-Q
for the quarter ending September 30, 1999 and its Amended SB-2 all as
filed with the United States Securities and Exchange Commission in
November 1999. The aforesaid filed documents are true and correct in
all material respects at the time they were filed and there has been no
Material Adverse Change since the filing of such documents.
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 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.
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ARTICLE V1
NO PROVISION
ARTICLE V11
NO PROVISION
ARTICLE VIII
NO PROVISION
ARTICLE IX
NO PROVISION
ARTICLE X
INDEMNITY
10.1 Indemnity. The Shareholders shall indemnify, defend, and hold Teltran
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") resulting from or arising out of (i) the breach of any
representation or warranty of the Acquired Company or Shareholders set
forth in this Agreement (including the exhibits hereto) including a
failure to disclose any liability as required therein or in any
certificate or schedule, or other instrument delivered to Teltran
pursuant hereto; or (ii) the breach of any of the covenants of
Shareholders 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") or the Acquired Company, 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 be entitled to 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 fall, 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.
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10.3 Payment-Set Off. No Teltran Shares shall be delivered out of Escrow
until all claims have been settled. If the Shareholders disputes the
payment of any amount claimed hereunder in writing within fifteen (15)
days after demand 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. Interest on any improperly
withheld amount by either party shall accrue at prime rate.
If Teltran has any claim which is finally determined (whether by
agreement or a final nonappealable order of a court of competent
jurisdiction) against the Shareholders (whether individually or
collectively) under the Agreement entitling it indemnity in
satisfaction of such claim, then such claim should first be paid out
of the assets held by the Escrow Agent in or towards satisfaction of
such claim the Escrow Agent shall first pay any cash entitlement of
such Shareholder held by the Escrow Agent to Teltran and, if the claim
is not thereby satisfied in full it shall sell on the open market
sufficient number of such Shareholder or Shareholders' entitlement to
Teltran Shares as is required to satisfy such claim and shall upon
receipt of the proceeds thereof apply them in or towards satisfaction
of such claim.
10.4 Limitations.
(a) There shall be no claim for Indemnity until the amount of
such claims exceeds $50,000 and no isolated claim shall be
made for an amount of (pound)3,000 or less (unless such claim
is related to other claims).
(b) If any proceeds of Teltran Shares are to be utilized in
satisfaction of an indemnity claim, the Teltran Shares will
be sold on pro-rata basis.
(c) The liability of Other Shareholders shall be limited to the
then Teltran Shares or other consideration retained in escrow
including any proceeds of sale.
(d) The liability of the Management Shareholders shall be limited
to the value of consideration received by them.
(e) Notwithstanding the foregoing there shall be no limitation
with respect to the warranties made herein relating to taxes,
capitalization or with respect to the individual Share
ownership and authority to enter into the transaction.
(f) Each Shareholder shall only be liable for his Percentage
Ownership of the amount of any claim for Indemnity for breach
of any warranty or representation in this Agreement (save in
respect of those given individually) where that Shareholder
(and no other Shareholder) shall be responsible for the whole
amount of the liability.
(g) No claim shall be capable of being made against the
Shareholders under this Agreement unless written notice
thereof (specifying so far as practicable all material
details, to the extent available, of the breach or other
event to which the claim shall relate and Teltran's bona fide
estimate of the amount claimed) shall have been given to the
Shareholders not later than the second anniversary of
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Completion. Teltran shall provide to the Shareholders details
of any such claim or potential claim as soon as it becomes
aware that It may have a claim but a breach of this obligation
shall have no effect unless the Shareholders are adversely
affected.
(h) No liability shall attach to the Shareholders in respect of a
claim under this Agreement to the extent that the liability
giving rise to such claim would have been insured had Teltran
arranged insurance cover with effect from Closing which would
be equivalent to the policies currently in force in respect of
tile Acquired Company;
(i) In assessing the amount of any claim under this Agreement
there shall be taken into account any benefit to Teltran or
the Acquired Company as a consequence of the relevant breach.
(j) In the event that Teltran or the Acquired Company is entitled
to recover from a third party, including insurers, (whether by
payment, discount, credit, relief or otherwise howsoever) any
sum in relation to any loss, liability or damage which is the
subject of a claim under this Agreement, Teltran shall (or
shall procure that the Acquired Group Company shall):
(i) notify the Shareholders as soon as reasonably
practicable and provide such information and
assistance as they may reasonably require, including
making available all relevant books and documents,
relating to such entitlement or claim and the action
taken or proposed to be taken by Teltran or the
Acquired Company in respect of it;
(ii) subject to the Shareholders assuming responsibility
for and paying all costs and liabilities incurred by
Teltran or the Acquired Company, allow the
Shareholders conduct of any such claim and take such
reasonable steps or proceedings as the Shareholders
may reasonably require and shall keep the
Shareholders promptly informed of the progress of
any such steps, proceedings or actions and shall not
settle or compromise any such claim or make any
admission of liability without the prior consent of
the Shareholders.
(k) The amount of any claim shall be reduced by the proceeds
received by Teltran or Acquired Company with respect to such
specific claims pursuant to any insurance policy or any
recovery or payment from any other independent third party.
10.5 Brokers' Fees. Teltran and the Acquired Company and Shareholders 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. The provisions of paragraph 10.5
shall apply to any claim within the scope of the preceding sentence.
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ARTICLE XI
POST CLOSING MATTERS
11.1 Post Closing Operation. Teltran through November 1, 2000 shall
cause the Acquired Company to
(i) to continue operations of the Acquired Company consistent
with the development plans of the Acquired Company as
evidenced by reference to the attached expenditure schedule
and in accordance with reasonable business judgement
provided nothing herein shall require Teltran to finance the
operations of the Acquired Company (in excess of the
(pound)1.9 million share subscription monies) or shall
prevent Teltran or the Acquired Company from effecting
changes in the Acquired Company's operations (including
changes in expenditures) if revenues, cash flow and losses
or net income of the Acquired Company in its reasonable
judgement warrant a change;
(ii) maintain separate books and records of the Acquired
Company; and
(iii) not change accounting policy in a manner which would
adversely effect Value and ensure that accounting policies
are in accordance with UK GAAP;
(iv) only enter into transactions with affiliates on terms and
conditions as may be fair. A determination of an independent
Investment Banker of fairness shall be conclusive.
Notwithstanding the foregoing, nothing shall prevent Teltran
from its U.K. operations with IPL and or charging a nominal
amount for services as accounting services.
Notwithstanding the above, Teltran may cause the Acquired Company to
make acquisitions or issue shares in connection therewith provided
that the business of the Acquired Company shall continue to be
operated separately in accordance with the above and the value of the
Acquired Company to be determined in accordance with paragraph 2.6
shall not be effected whether adversely or beneficially.
11.2 Right to Rescind. If prior to March 31, 2001 Teltran files any type
of bankruptcy petition under the U.S. Bankruptcy Law or if a petition
is filed against it, and any such petition is not dismissed within 60
days the Shareholders have a right to elect within such time to
rescind their sale hereby returning all the Teltran Shares or other
consideration in exchange for all the Acquired Company Shares
exchanged hereby plus the repayment of the initial cash payment to
the Acquired Company.
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ARTICLE XII
MISCELLANEOUS
12.1 Franchises. Except as otherwise provided herein, the Acquired Company,
the Shareholders and Teltran shall each pay their 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. Notwithstanding
the foregoing, the Acquired Company may not incur more than $15,000
of expense to be paid by Teltran out of the initial cash payment for
its Acquired Company Shares.
12.2 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,
12.3 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 Company 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.
12.4 Accuracy of Documents. All documents delivered by the Acquired Company
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.
12.5 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, (iii) or with respect to
notices from United Kingdom sent by recorded delivery or (iv)
personally delivered by a nationally recognized express overnight
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):
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(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) (i) To Shareholder Representative
Nicholas Le Seelleur
At address set forth on the signature page
(ii) To Shareholder (if required)
At the address set forth below this name on the
signature page.
With a copy to:
Hewitson Becke + Shaw Solicitors
Attn: Mr. James Lawrence
Shakespeare House, 42 Newmarket Road
Cambridge, CB5 8EP
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 Postal Service, or (iii) the next business day
after shipment by such courier service.
12.6 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.
12.7 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.
12.8 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 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.
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12.9 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.
12.10 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.
12.11 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/ James Tubbs
----------------------------------
INTERNET PROTOCOLS LIMITED
By: /s/ David Scanlan
----------------------------------
Investors - Signature & Address Acquired Company Initial Shares
Shares
36,675 543,360
Name: /s/ Roger Pellew
--------------------------------
Name: ROGER PELLEW
Address: The Manor House
Coltishall
Norfolk NR12 7DU
26
<PAGE>
Signed by: /s/ David Scanlan 15,000 222,233
------------------------------
Name: VESEN HOLDINGS LIMITED
Address: Suite 4, 10th Floor
International Commercial Center
2a Main Street
Gibraltar
Signed by: /s/ David Scanlan 10,950 162,230
------------------------------
Name: DAVID SCANLAN
Address: 2 Thornhill Road
Barnham
Ipswich
Suffolk IP6 0BJ
Signed by: /s/ Nicholas le Seelleur 9,125 135,192
------------------------------
Name: NICHOLAS LE SEELLEUR
Address: 2 Stafford Terrace
London W8 7BH
Signed by: /s/ Nicholas le Seelleur 9,125 135,192
------------------------------
Name: SOL ALAN SAAD
Address: Five Oaks
12 Eaton Park Road
Cobham
Surrey KTII 2JH
Signed by: /s/ Roger Pellew 5,000 74,078
------------------------------
Name: MILLER BRAZIL MARKETING
CONSULTANTS LIMITED
Address: Acre House
11 - 15 William Road
London NW1 3ER
27
<PAGE>
Signed by: /s/ Nicholas le Seelleur 4,562.5 67,596
------------------------------
Name: JAMES MUSCHETTE
Address: 15 Park Lane
Hornchurch
Essex RMII 1BB
Signed by: /s/ Nicholas le Seelleur 4,562.5 67,596
------------------------------
Name: BARCLAY BRYDON LIMITED
Address: Enterprise House
15 Whitworth Street
Manchester MI 5WG
Signed by: /s/ David Scanlan 3,000 44,447
------------------------------
Name: THE NUMBER PORTABILITY
COMPANY LIMITED
Address: 20 Princes Street
Ipswich
Suffolk IPI 1QT
Signed by: /s/ David Scanlan 1,000 14,816
------------------------------
Name: JANET PHILOMENA MURPHY
Address: 3 Kenton Close
Merseyside L37 7EA
Signed by: /s/ David Scanlan 1,000 14,816
------------------------------
Name: LEAH VALJALO
Address: 33 Lynden Road
Boothstown
Worsley
Manchester M28 1JW
28
