<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------------------
Date of Report (Date of earliest event reported): September 24, 1997
INTERAMERICAS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 0-25194 87-0464860
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1221 Brickell Avenue
Miami, Florida 33131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 305/377-6790
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
THE ACQUISITION OF IUSATEL CHILE S.A.
(a) On September 9, 1997, the Registrant entered into an
agreement (the "Iusatel Agreement") with Inversiones Druma S.A. to acquire 99.9%
of the issued and outstanding shares of Common Stock of Iusatel Chile S.A.
("Iusatel"). The Iusatel Agreement provides for the purchase by the Registrant
of 99.9% of the issued and outstanding capital stock of Iusatel for $5,250,000
in cash (the "Iusatel Purchase Price"). The Iusatel Purchase Price may be
reduced, dollar-for-dollar, to the extent that the net worth of Iusatel as of
June 30, 1997 is less than $1,582,000, as determined pursuant to an audited
balance sheet. The Iusatel Purchase Price may be increased by up to maximum of
$2,000,000 based upon Iusatel's earnings before interest, taxes, depreciation
and amortization for the four month period commencing on September 1, 1997 and
ending December 31, 1997. Under the Iusatel Agreement, Hernan Streeter, the
principal shareholder of Druma, General Manager of Iusatel and the former
Chairman and Chief Executive Officer and a current shareholder of the
Registrant, will remain as Iusatel's General Manager until December 31, 1997.
The Iusatel Agreement is subject to a number of conditions, many of which,
including (i) governmental consent, (ii) purchase of shares from certain
stockholders, (iii) waiver of preferential rights to subscribe for additional
shares from certain other stockholders of Iusatel and (iv) securing adequate
financing, are beyond the Registrant's control. There can be no assurance that
the Iusatel Acquisition will be consummated on the terms described herein or
at all.
(b) Iusatel currently provides domestic and international long distance
services in Chile through its own gateway switch and satellite earth station, as
well as through interconnections with other Chilean long distance carriers. The
Registrant believes that the acquisition of Iusatel will enable the Registrant
to: (i) provide long distance services to its existing corporate customers; (ii)
bundle a variety of service offerings, including long distance and data
services, to attract additional customers; and (iii) access the approximately
$178.2 million Chilean international long distance market.
ITEM 5. OTHER EVENTS.
<PAGE> 3
Press Release
On September 10, 1997, the Registrant issued a press release
in connection with the execution of the Iusatel Agreement. The
consummation of the transactions contemplated under the
Iusatel Agreement is subject to a number of conditions many of
which, including (i) governmental consent, (ii) purchase of
shares from certain stockholders, (iii) obtaining a waiver of
preferential rights to subscribe for additional shares from
certain other stockholders of Iusatel and (iv) securing
adequate financing, are beyond the Registrant's control.
Therefore, there can be no assurance that the Iusatel
Acquisition will be consummated on the terms set forth in the
Iusatel Agreement or at all.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
Financial Statements of Iusatel Chile S.A. as of and for the year ended
December 31, 1996 (audited) and June 30, 1997 (unaudited)
(b) Pro Forma Financial Information
1. InterAmericas Communications Corporation pro forma
condensed consolidated balance sheet as of June 30, 1997 (Audited) to be filed
within 60 days of the date of this filing.
2
<PAGE> 4
2. InterAmericas Communications Corporation pro forma
condensed consolidated statement of income for the year ended December 31, 1996
(Audited) to be filed within 60 days of the date of this filing.
(c) Exhibits:
Exhibit
Number Description of Exhibit
10.1 Stock Purchase Agreement by and between the
Registrant and Inversiones Druma S.A.
20.1 Press Release dated September 10, 1997 in
connection with the execution of the Stock
Purchase Agreement dated September 9, 1997
between the Registrant and Inversiones Druma
S.A. for the purchase of 99.9% of the issued
and outstanding shares of Common Stock of
Iusatel Chile S.A.
27 Financial Data Schedule with respect to the
financial statements of Iusatel Chile S.A.
3
<PAGE> 5
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERAMERICAS COMMUNICATIONS CORPORATION
Date: September 24, 1997 /s/ Douglas G. Geib II
-----------------------------------
Douglas G. Geib II
Chief Financial Officer
4
<PAGE> 6
INDEX TO FINANCIAL STATEMENTS
IUSATEL CHILE S.A.
Page
----
Report of Independent Accountants ..................................... F-1
Balance Sheet at December 31, 1995, and 1996
and June 30, 1997.................................................... F-2
Statements of Income for each of the two years ended
December 31, 1995 and 1996 and the six month periods
ended June 30, 1996 and 1997......................................... F-3
Statements of Changes in Financial Position for each
of the two years ended December 31, 1996 and the
six month period ended June 30, 1997................................. F-4
Statements of Cash Flows for each of the two years ended
December 31, 1995 and 1996 and the six month period
ended June 30, 1996 and 1997......................................... F-5
Notes to Financial Statements.......................................... F-6
Ch$ = Chilean pesos
ThCh$ = Thousands of Chilean pesos
US$ = United States dollars
ThUS$ = Thousands of United States dollars
U.F. = The Unidad de Fomento, or U.F., is an inflation-indexed,
peso denominated monetary unit used in Chile. The U.F. rate
is set daily in advance based on the change in the Chilean
Price Index of the previous month.
<PAGE> 7
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Iusatel Chile S.A.:
We have audited the accompanying balance sheets of Iusatel Chile S.A. (the
"Company") as of December 31, 1995 and 1996, and the related statements of
income and changes in financial position for each of the two years ended
December 31, 1996, and the statement of cash flows for the year ended December
31, 1996, all expressed in thousands of constant Chilean pesos. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We have conducted our audits in accordance with generally accepted auditing
standards in Chile, which are substantially the same as those followed in the
United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Iusatel Chile S.A. at
December 31, 1995 and 1996, and the results of their operations and changes in
their financial position for each of the two years ended December 31, 1996, and
its cash flows for the year ended December 31, 1996, in conformity with
generally accepted accounting principles in Chile.
The accompanying financial statements have been prepared assuming that
Iusatel Chile S.A. continues as a going concern. Iusatel Chile S.A. has shown
recurring operating losses and shows negative working capital and shareholders'
equity that raise substantial doubt about its ability to continue as a going
concern. Management's actions regarding these situations are described in Note
27. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
As described in Note 3, the financial statements of the Company for the
year ended December 31, 1996, includes a statement of cash flows in accordance
with generally accepted accounting principles in Chile and a statement of
changes in financial position in compliance with the regulations set forth by
the Superintendency of Securities and Insurance Companies.
Accounting principles generally accepted in Chile vary in certain
significant respects from accounting principles generally accepted in the United
States of America. The application of the latter would have affected the
determination of net income for each of the two years in the period ended
December 31, 1996 and the determination of shareholders' equity as of December
31, 1995 and 1996 to the extent summarized in Note 28 to the financial
statements.
JUAN PABLO HESS LANGTON CLARKE
COOPERS & LYBRAND
Santiago, February 7, 1997
(except with respect to the matters discussed
in Notes 27 and 28, for which the date is
August 11, 1997)
F-1
<PAGE> 8
IUSATEL CHILE S.A.
BALANCE SHEETS
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$) (NOTES 2(C) & 2(L))
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTH PERIOD
DECEMBER 31, ENDED JUNE 30,
------------------------------------- -------------------------
1995 1996 1996 1997 1997
THCH$ THCH$ THUS$ THCH$ THUS$
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................ 55,907 23,758 57 36,932 89
Time deposits....................................... 16,168 -- 0 -- 0
Trade accounts receivable, net (Note 5)............. 479,047 902,217 2,166 725,405 1,742
Notes receivable.................................... 7,494 72,248 173 51,324 123
Sundry accounts receivable (Note 6)................. 37,369 130,305 313 33,425 80
Inventories......................................... 627 5,318 13 5,453 13
Taxes recoverable (Note 7).......................... 222,116 206,904 497 145,094 348
Prepaid expenses (Note 8)........................... 187,642 157,605 378 99,103 238
Other............................................... -- 638 2 3,358 8
---------- ---------- ------- ---------- -------
Total current assets.......................... 1,006,370 1,498,993 3,599 1,100,094 2,641
---------- ---------- ------- ---------- -------
FIXED ASSETS: (Note 9)
Land................................................ 31,132 31,132 75 31,942 77
Machinery & equipment............................... 1,373,753 1,543,272 3,706 1,639,262 3,936
Other fixed assets.................................. 203,351 609,110 1,462 325,204 781
Accumulated depreciation............................ (161,343) (381,085) (915) (406,987) (977)
---------- ---------- ------- ---------- -------
Total fixed assets............................ 1,446,893 1,802,429 4,328 1,589,421 3,817
---------- ---------- ------- ---------- -------
OTHER ASSETS: (Note 10)
Intangibles......................................... 746 4,010 10 4,094 10
Other............................................... 37,748 37,530 90 8,267 20
---------- ---------- ------- ---------- -------
Total other assets............................ 38,494 41,540 100 12,361 30
---------- ---------- ------- ---------- -------
Total assets.............................. 2,491,757 3,342,962 8,027 2,701,876 6,488
========== ========== ======= ========== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank liabilities (Note 11)............... 3,385,197 3,353,913 8,053 5,353 13
Current portion of lease obligations (Note 12)...... 108,308 114,386 275 100,713 242
Accounts payable (Note 13).......................... 326,863 716,825 1,721 717,990 1,724
Notes payable (Note 14)............................. 156,182 280,143 673 290,485 697
Sundry creditors.................................... -- 2,656 6 2,310 6
Amounts payable to related companies (Note 15)...... 39,697 167,587 402 497,463 1,194
Accrued liabilities (Note 16)....................... 313,643 189,517 455 313,314 752
Withholding taxes (Note 17)......................... 25,380 38,291 92 60,691 146
Income taxes payable................................ -- 3,222 8 0 0
---------- ---------- ------- ---------- -------
Total current liabilities..................... 4,355,270 4,866,540 11,685 1,988,319 4,774
---------- ---------- ------- ---------- -------
LONG-TERM LIABILITIES:
Long-term portion of lease obligations (Note 12).... 165,972 91,306 219 39,169 94
Notes payable (Note 14)............................. 1,212 245,961 591 -- --
Amounts payable to related companies (Note 15)...... 660,193 2,328,098 5,590 -- 0
Other (Note 18)..................................... 14,531 21,986 53 15,773 38
---------- ---------- ------- ---------- -------
Total long-term liabilities................... 841,908 2,687,351 6,453 54,942 132
---------- ---------- ------- ---------- -------
SHAREHOLDERS' EQUITY: (Note 20)
Paid-in capital..................................... 760,529 760,529 1,826 6,646,496 15,959
Accumulated losses.................................. (885,720) (3,465,950) (8,322) (5,100,716) (12,247)
Loss for the year................................... (2,580,230) (1,505,508) (3,615) (887,165) (2,130)
---------- ---------- ------- ---------- -------
Total shareholders' equity.................... (2,705,421) (4,210,929) (10,111) 658,615 1,582
---------- ---------- ------- ---------- -------
Total liabilities & shareholders'
equity.................................. 2,491,757 3,342,962 8,027 2,701,876 6,488
========== ========== ======= ========== =======
</TABLE>
The accompanying notes 1 to 28 form an integral part of these financial
statements
F-2
<PAGE> 9
IUSATEL CHILE S.A.
STATEMENTS OF INCOME
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$) (NOTES 2(C) & 2(L))
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIODS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------- ---------------------------------------
1995 1996 1996 1996 1997 1997
THCH THCH$ THUS$ THCH$ THCH$ THUS$
---------- ---------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Operating revenues..................... 1,134,550 3,377,825 8,111 1,736,032 1,840,555 4,419
Operating expenses excluding
depreciation......................... (1,111,790) (2,008,635) (4,824) (935,769) (1,306,405) (3,137)
Operating depreciation................. (69,502) (189,227) (454) (69,184) (70,184) (168)
---------- ---------- ------ ---------- ---------- ------
Operating margin................. (46,742) 1,179,963 2,833 731,079 436,966 1,114
Administrative and selling expenses
excluding depreciation............... (2,190,360) (2,178,427) (5,230) (1,040,157) (1,080,884) (2,595)
General and administrative
depreciation......................... (92,700) (34,052) (82) (39,016) (37,452) (90)
---------- ---------- ------ ---------- ---------- ------
Operating loss................... (2,329,802) (1,032,516) (2,479) (348,094) (654,370) (1,571)
NON-OPERATING RESULTS:
Financial income....................... 909 3,969 10 0 22,971 55
Financial expenses..................... (483,033) (587,189) (1,410) (291,910) (65,078) (156)
Other non-operating expenses........... (8,654) (107,749) (259) (25,429) (215,168) (517)
Price-level restatement (Note 4)....... 240,350 217,977 523 133,785 24,480 59
---------- ---------- ------ ---------- ---------- ------
Non-operating income............. (250,428) (472,992) (1,136) (183,554) (232,795) (559)
---------- ---------- ------ ---------- ---------- ------
Loss before income taxes............... (2,580,230) (1,505,508) (3,615) (531,648) (887,165) (2,130)
Income taxes........................... -- -- -- -- -- --
---------- ---------- ------ ---------- ---------- ------
Net loss......................... (2,580,230) (1,505,508) (3,615) (531,648) (887,165) (2,130)
========== ========== ====== ========== ========== ======
</TABLE>
The accompanying notes 1 to 28 form an integral part of these financial
statements
F-3
<PAGE> 10
IUSATEL CHILE S.A.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$) (NOTES 2(C) & 2(L))
<TABLE>
<CAPTION>
FOR THE SIX
MONTH PERIOD
FOR THE YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
--------------------------------------- ------------
1995 1996 1996 1996
THCH$ THCH$ THUS$ THCH$
---------- ---------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FUNDS FROM OPERATIONS:
Net Loss...................................... (2,580,230) (1,505,508) (3,615) (531,648)
Depreciation.................................. 162,203 223,279 536 108,281
Profit on sale of fixed assets................ (203) -- 0 0
Net price-level restatement of non-current
items....................................... (3,603) (3,536) (8) 1,917
---------- ---------- ------ ----------
Total funds from operations............ (2,421,833) (1,285,765) (3,087) (421,450)
---------- ---------- ------ ----------
OTHER SOURCES OF FUNDS:
Sale of fixed assets.......................... 940 -- 0 0
Increase in long-term liabilities............. 180,503 244,749 588 12,389
Increase in long-term payable to related
companies................................... 660,193 1,667,905 4,004 1,066,898
---------- ---------- ------ ----------
Total funds from other sources......... 841,636 1,912,654 4,592 1,079,286
---------- ---------- ------ ----------
Total sources of funds................. (1,580,197) 626,889 1,505 657,836
---------- ---------- ------ ----------
APPLICATION OF FUNDS:
Additions to fixed assets..................... 549,955 575,279 1,382 121,017
Decrease in long-term liabilities............. 9,272 67,211 161 44,226
Other......................................... 32,627 3,046 7 0
---------- ---------- ------ ----------
Total applications of funds............ 591,854 645,536 1,550 165,243
---------- ---------- ------ ----------
Decrease in working capital.......... (2,172,051) (18,647) (45) 492,593
========== ========== ====== ==========
CHANGES IN WORKING CAPITAL:
CURRENT ASSETS -- INCREASES (DECREASES):
Cash and time deposits...................... 71,378 (48,317) (116) (16,682)
Trade accounts receivable, notes receivable
and sundry accounts receivable............ 507,591 580,860 1,395 542,878
Inventories................................. 627 4,691 11 2,320
Other....................................... 203,096 (44,611) (107) 3,659
---------- ---------- ------ ----------
Net changes in current assets.......... 782,692 492,623 1,183 532,175
---------- ---------- ------ ----------
CURRENT LIABILITIES -- (DECREASES) INCREASES:
Short-term bank liabilities................. (2,236,641) 31,284 75 (101,229)
Current portion of long-term liabilities.... (108,308) (6,078) (15) 111,050
Accounts and notes payable.................. (279,909) (513,923) (1,234) (127,031)
Amounts payable to related companies........ (39,697) (127,890) (307) (37,415)
Accruals and withholding taxes.............. (298,889) 111,215 267 115,163
Other....................................... 8,701 (5,878) (14) (120)
---------- ---------- ------ ----------
Total changes in current liabilities... (2,954,743) (511,270) (1,228) (39,582)
---------- ---------- ------ ----------
Decrease in working capital.......... (2,172,051) (18,647) (45) 492,593
========== ========== ====== ==========
</TABLE>
The accompanying notes 1 to 28 form an integral part of these financial
statements
F-4
<PAGE> 11
IUSATEL CHILE S.A.
STATEMENTS OF CASH FLOWS
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$) (NOTES 2(C) & 2(L))
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTH PERIOD
DECEMBER 31, ENDED JUNE 30,
----------------------- ---------------------------------------
1996 1996 1996 1997 1997
THCH$ THUS$ THCH$ THCH$ THUS$
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss............................................ (1,505,508) (3,615) (531,648) (887,165) (2,130)
ITEMS NOT AFFECTING CASH:
Depreciation........................................ 223,279 536 108,281 107,636 258
Write-offs and accrued liabilities.................. 421,997 1,013 77,318 656,751 1,577
Net price-level restatement......................... (217,977) (523) (11,518) 24,480 59
Unrealized foreign exchange loss.................... 0
CHANGES IN ASSETS AFFECTING CASH FLOW:
Increase in accounts receivable..................... (1,050,024) (2,521) (629,534) (21,929) (53)
Increase in inventories............................. (4,935) (12)
Increase others..................................... 0
CHANGE IN LIABILITIES AFFECTING CASH FLOW:
Increase in accounts payable relating to operating
results........................................... 435,978 1,046 64,924 54,930 132
Net increase in income taxes payable................ 3,222 8
Decrease in interest payable........................ 12,292 30 (279,657) 7,000 17
Net increase in VAT and other similar payables...... 16,568 40 20,331 2,804 7
---------- ---------- ---------- -------- ------
Net cash flow (used) provided by operating
activities.................................. (1,665,108) (3,998) (1,181,503) (55,493) (133)
---------- ---------- ---------- -------- ------
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings from banks and others.................... 186,772 448
Other financing activities.......................... 1,587,062 3,811 1,306,590 108,302 260
---------- ---------- ---------- -------- ------
Net cash flow provided by financing
activities.................................. 1,773,834 4,259 1,306,590 108,302 260
---------- ---------- ---------- -------- ------
CASH FLOW FROM INVESTING ACTIVITIES:
Fixed assets acquired............................... (159,169) (382) (140,869) (40,416) (97)
---------- ---------- ---------- -------- ------
Net cash flow used by investing activities.......... (159,169) (382) (140,869) (40,416) (97)
---------- ---------- ---------- -------- ------
Total net (decrease) increase in cash and cash
equivalents................................. (50,443) (121) (15,782) 12,393 30
---------- ---------- ---------- -------- ------
EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS...... 2,126 5 1,737 163 0
---------- ---------- ---------- -------- ------
NET CHANGE IN CASH AND CASH EQUIVALENTS............... (48,317) (116) (14,045) 12,556 30
---------- ---------- ---------- -------- ------
CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR........ 72,075 173 71,264 24,376 59
---------- ---------- ---------- -------- ------
CASH AND CASH EQUIVALENTS -- END OF YEAR.............. 23,758 57 57,219 36,932 89
========== ========== ========== ======== ======
</TABLE>
The accompanying notes 1 to 28 form an integral part of these financial
statements
F-5
<PAGE> 12
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
1. NATURE OF OPERATIONS AND BACKGROUND OF THE COMPANY:
(a) Name and registration in the Securities Register:
Iusatel Chile S.A. (the "Company") was originally incorporated under the
name of TDI S.A. under public deed dated March 3, 1992.
On May 19, 1994, the minutes of the first extraordinary shareholders
meeting held on May 5, 1994 were recorded under public deed. This meeting
approved the change of the Company's name to Telecomunicaciones Digitales
Internacionales S.A. and a capital increase, whereby Grupo Iusacell S.A. de
C.V. ("Iusacell") purchased 51% of the share capital.
On August 1, 1994, the minutes of the second extraordinary shareholders
meeting held on July 28, 1994 were recorded under public deed. This meeting
approved the change of the Company's name to Iusatel Chile S.A., the
expansion of the Company's objectives and the related change in its bylaws.
From that date, the Company began the final phase of its start-up,
principally characterized by investment in its infrastructure.
The Company is majority owned by Iusacell; however, its operations are
independently and separately managed. As a result, during the periods
presented Iusacell did not incur any general or corporate expenses on
behalf of the Company. It is management's belief that the financial results
presented herein would not have been materially different had the Company
operated as a separate entity for the periods presented.
The principle objective of the Company is to engage in business within the
telecommunications industry.
The Company is registered under No. 494 in the Securities Register and is
therefore subject to the regulatory authority of the Chilean
Superintendency of Securities and Insurance (the "Superintendency").
(b) Start-up period:
The Company began its normal operations on January 1, 1995, concluding its
development and start-up period.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Presentation:
The financial statements have been prepared in accordance with generally
accepted accounting principles in Chile ("Chilean GAAP") and the
regulations established by the Superintendency. The Company is also subject
to specific provisions contained in Corporations Law 18,046 and its related
regulations.
(b) Comparative financial statements:
For comparative purposes, the financial statements and the amounts
disclosed in the related notes for the year ended December 31, 1995 have
been restated in terms of Chilean pesos of December 31, 1996 purchasing
power. In accordance with Chilean regulations and accounting practices, the
restatement was calculated based on the Official Consumer Price Index of
the National Institute of Statistics, which was 6.6% for the year ended
November 30, 1996. The index is based on the "prior month rule", pursuant
to which the inflation adjustments are based on the Consumer Price Index at
the close of the month preceding the close of the respective period or
transaction. This index is considered by the business community, the
accounting profession and the Chilean government to be the index which most
closely complies with the technical requirement to reflect the variation in
the general level of prices in the country and, consequently, is widely
used for financial reporting purposes in Chile.
F-6
<PAGE> 13
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
(b) Comparative financial statements, continued:
The interim June 30, 1996 and 1997 financial statements have also been
restated for general price-level changes, but are expressed in constant
Chilean pesos of June 30, 1997. The effect of not updating the December 31,
1995 and 1996 financial statements to June 30, 1997 constant pesos is not
significant because the change in the inflation index applicable for the
restatement of financial statements for the six month period ended June 30,
1997 was only 2.6%. Additionally, if the updating by the 2.6% increase had
been made, it would have been applied to all amounts and disclosures shown
in the December 31, 1995 and 1996 financial statements and accordingly,
there would be no changes in the relationships among the amounts and
disclosures in those financial statements.
(c) Price-level restatement:
The financial statements, which are expressed in Chilean pesos, have been
restated to reflect the effects of variations in the purchasing power of
the local currency during each year. For this purpose, and in conformity
with current Chilean regulations, non-monetary assets and liabilities,
equity accounts and income and expense accounts have been restated each
year in terms of year-end constant pesos. The resulting net charge or
credit to income arises as a result of the gain or loss in purchasing power
from the holding of monetary assets and liabilities exposed to the effects
of inflation.
The above-mentioned price-level restatements do not purport to present
appraised or replacement values and are only intended to restate all
non-monetary financial statement components in terms of local currency of
similar purchasing power and to include in the net result for each year the
gain or loss in purchasing power arising from the holding of monetary
assets and liabilities exposed to the effects of inflation.
Certain assets and liabilities are denominated in U.F. units (Unidades de
Fomento). A U.F. is a Chilean inflation-indexed peso denominated monetary
unit which is set daily in advance based on changes in the Consumer Price
Index. The adjustments to the closing balance of U.F.-denominated assets
and liabilities are included in the Price-level restatement account in the
Statement of Income. Each U.F. was equivalent to Ch$ 12,482.81 and Ch$
13,280.43 at December 31, 1995 and 1996, respectively.
(d) Assets and liabilities in US dollars:
Balances in foreign currency included in the balance sheet have been
translated into Chilean pesos at the "Observed Exchange Rate" determined by
the Cental Bank of Chile in effect at each year end using the following
exchange rates:
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
US Dollar ("observed" rate).......... 424.87 406.91
</TABLE>
(e) Fixed assets:
Fixed assets are shown at restated acquisition or import cost, including,
in the latter case, deferred customs duties. Assets received under lease
contracts are shown at the present value of the contract.
F-7
<PAGE> 14
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
(e) Fixed assets, continued:
Depreciation is calculated using the straight-line method on the restated
value of the assets over the related useful lives. Depreciation expense
amounted to ThCh$ 162,203 and ThCh$ 223,279 for the years ended December
31, 1995 and 1996, respectively.
(f) Staff severance indemnities:
The Company has no obligation for the payment of staff severance
indemnities as employee severance benefits are neither legally required nor
included under the terms and conditions of employee contracts.
(g) Staff vacations:
The Company has recorded the cost of staff vacations on an accrued basis as
the vacations are earned by the employees in accordance with Technical
Bulletins Nos. 47 and 48 of the Chilean College of Accountants A.G.
(h) Income tax:
The Company has made no provision for first category income tax as it has
incurred tax losses. The Company has provided for Article 21 Tax under the
Income Tax Law.
(i) Allowance for doubtful accounts and long-distance revenue recognition
criteria
(i) The allowance for doubtful accounts is calculated based upon an
aging of account receivable balances using historical rates of
collection by type of account balance.
No provision has been recorded against un-billed traffic.
Given the significant collection risk associated with the
"audio-text" (data transmission) receivables, the Company has
recorded a 100% provision against the related receivable balance in
the amount of ThCh$ 298,642. As of December 31, 1996, these
services are no longer being provided by the Company.
(ii) Long-distance traffic:
The Company recognizes long-distance traffic revenues during the
period in which the services are provided. Revenues are generated
through contracts with customers and through local telephone
companies that perform dialing services.
(j) Statement of cash flows:
Cash flows generated from operating activities include all core business
related cash flows, interest paid, investment income and all other cash
flows not included in investing or financing activities.
(k) Reclassifications:
Certain reclassifications have been made to the December 31, 1995 figures
to enhance the comparability of the financial statements as of December 31,
1996.
F-8
<PAGE> 15
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
(l) Convenience translation to US dollars (unaudited):
The Company maintains its accounting records and prepares its financial
statements in Chilean pesos. The United States dollar amounts disclosed in
the accompanying financial statements as of December 31, 1996 and June 30,
1997 are presented solely for the convenience of the reader at the June 30,
1997 exchange rate of Ch$ 416.47 per US$ 1. This translation should not be
construed as representing that the Chilean peso amounts actually represent
or have been, or could be, converted into United States dollars.
(m) Interim financial data:
In management's opinion the accompanying interim amounts included in these
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of results for
such interim periods. Certain interim information and note disclosures have
been omitted; however, the Company believes that the interim disclosures
made are adequate and that the information presented is not misleading.
3. ACCOUNTING CHANGES:
Effective January 1, 1996, Technical Bulletin No. 50 of the Chilean College
of Accountants A.G. requires the presentation of a statement of cash flows.
Superintendency Circular No. 00238 dated January 17, 1997, requires that
the Company continue to present the statement of changes in financial
position. Consequently, the financial statements for the year ended
December 31, 1996, include both of the above mentioned statements, however
for subsequent periods it will not be necessary to continue to present the
statement of changes in financial position.
4. PRICE-LEVEL RESTATEMENT:
Price-level restatement is summarized as follows:
<TABLE>
<CAPTION>
(CHARGE)/CREDIT TO INCOME
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996
THCH$ THCH$
--------- ---------
<S> <C> <C>
Current assets.............................................. 13,391 6,087
Fixed assets................................................ 92,438 98,144
Other assets................................................ (92) 240
Non-monetary assets......................................... 672 (89,966)
Shareholders' equity........................................ 9,487 167,503
------- -------
Balance of price-level restatements account................. 115,896 182,008
Income statement accounts (net)............................. 124,454 35,969
------- -------
Price-level restatement................................... 240,350 217,977
======= =======
</TABLE>
F-9
<PAGE> 16
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
5. TRADE ACCOUNTANTS RECEIVABLE:
Net trade accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1996
THCH$ THCH$
------- ---------
<S> <C> <C>
Billed accounts receivable.................................. 279,319 896,058
Accrued accounts receivable................................. 245,150 485,495
------- ---------
Total trade receivables..................................... 524,469 1,381,553
Allowance for doubtful accounts............................. (45,422) (479,336)
------- ---------
Total..................................................... 479,047 902,217
======= =========
</TABLE>
6. SUNDRY ACCOUNTS RECEIVABLE:
Sundry accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1996
THCH$ THCH$
------- ---------
<S> <C> <C>
Current accounts............................................ 5,371 5,507
Advances to suppliers....................................... 31,998 2,882
Accounts receivable under Reciprocal carrier agreements..... -- 110,955
Other....................................................... -- 10,961
------- ---------
Totals.................................................... 37,369 130,305
======= =========
</TABLE>
7. TAXES RECOVERABLE:
Taxes recoverable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1996
THCH$ THCH$
------- ---------
<S> <C> <C>
VAT fiscal credit........................................... 218,191 201,614
Training expense credits.................................... 3,925 5,290
------- ---------
Total..................................................... 222,116 206,904
======= =========
</TABLE>
8. PREPAID EXPENSES:
Prepaid expenses are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1996
THCH$ THCH$
------- ---------
<S> <C> <C>
Legal....................................................... 18,669 --
Insurance................................................... 5,616 4,479
Prepaid advertising......................................... 93,900 100,189
Deferred interest on leasing................................ 17,408 16,353
Prepaid interest............................................ -- 6,703
Prepaid taxes............................................... 9,325 6,448
Software.................................................... 9,784 --
Other....................................................... 8,194 2,833
Commissions................................................. 24,746 20,600
------- ---------
Total..................................................... 187,642 157,605
======= =========
</TABLE>
F-10
<PAGE> 17
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
9. FIXED ASSETS:
Fixed assets are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1995 1996
THCH$ THCH$
--------- ---------
<S> <C> <C>
Land:....................................................... 31,132 31,132
Machinery & equipment:
Earth station............................................. 675,458 681,001
Miscellaneous machinery & equipment....................... 11,264 12,530
International switch...................................... 290,779 406,967
Network................................................... 9,187 9,187
Internal communications equipment......................... 54,312 6,788
Call-back switch.......................................... -- 51,414
Furniture & installations................................. 160,389 180,542
Vehicles.................................................. 21,046 6,064
Office equipment.......................................... 118,975 170,577
Customer equipment........................................ 32,343 18,202
--------- ---------
Subtotal.......................................... 1,373,753 1,543,272
--------- ---------
Other fixed assets:
Leased assets............................................. 191,220 312,938
Telephone trunk lines..................................... 11,413 11,413
Imported equipment in transit............................. -- 282,026
Other..................................................... 718 2,733
--------- ---------
Subtotal.......................................... 203,351 609,110
--------- ---------
Total fixed assets (gross)........................ 1,608,236 2,183,514
--------- ---------
Less:
Accumulated depreciation for the period................... (161,343) (381,085)
--------- ---------
Total fixed assets (net).......................... 1,446,893 1,802,429
========= =========
</TABLE>
10. OTHER ASSETS:
Other assets are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Telephone lines............................................. 746 4,010
Long-term deferred interest................................. 29,385 7,322
Long-term time deposits..................................... -- 21,720
Other....................................................... 8,363 8,488
------- -------
Total............................................. 38,494 41,540
======= =======
</TABLE>
F-11
<PAGE> 18
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
11. SHORT-TERM BANK LIABILITIES:
Short-term bank liabilities are summarized as follows:
<TABLE>
<CAPTION>
MONTHLY
INTEREST ACCRUED TOTAL
RATE AMOUNT AMOUNT INTEREST 1996
BANK (%) IN U.F. IN THCH$ THCH$ THCH$
- ---- -------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Sud Americano................................... 1.0655 249,361 3,311,621 12,292 3,323,913
Sud Americano................................... 1.0500 -- 30,000 -- 30,000
------- --------- ------ ---------
Total 249,361 3,341,621 12,292 3,353,913
======= ========= ====== =========
</TABLE>
<TABLE>
<CAPTION>
ANNUAL
INTEREST ACCRUED TOTAL
RATE AMOUNT AMOUNT INTEREST 1995
BANK (%) IN U.F. IN THCH$ THCH$ THCH$
- ---- -------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Sud Americano................................... 8.48 143,184 1,905,303 7,181 1,912,484
Citibank........................................ 8.56 106,169 1,412,756 6,383 1,419,139
Citibank........................................ 8.56 -- 53,300 274 53,574
------- --------- ------ ---------
Total 249,353 3,371,359 13,838 3,385,197
======= ========= ====== =========
</TABLE>
12. LEASING OBLIGATIONS:
At December 31, 1995 and 1996, the Company had fixed asset lease contracts
outstanding with financial institutions and others, whose installments have the
following maturities:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Short term.................................................. 108,308 114,386
Long term................................................... 165,972 91,306
------- -------
Total....................................................... 274,280 205,692
======= =======
</TABLE>
13. ACCOUNTS PAYABLE:
Accounts payable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Domestic suppliers.......................................... 226,945 550,073
Sundry accounts............................................. 4,974 10,548
Total domestic suppliers.................................... 231,919 560,621
Foreign suppliers........................................... 94,944 156,204
------- -------
Total accounts payable...................................... 326,863 716,825
======= =======
</TABLE>
F-12
<PAGE> 19
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
14. NOTES PAYABLE:
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Short-term.................................................. 156,182 280,143
Long-term................................................... 1,212 245,961
------- -------
Total....................................................... 157,394 526,104
======= =======
</TABLE>
15. AMOUNTS PAYABLE TO RELATED COMPANIES:
(a) Short-term:
Short-term amounts payable to related companies at December 31, 1995 and
1996 represent amounts payable of ThCh$ 39,697 and ThCh$ 167,587,
respectively, to Satelitron S.A., Mexico, a company related to Iusacell,
for satellite space rentals.
(b) Long-term:
Long-term amounts payable to related parties represent capital
contributions of ThCh$ 660,193 and ThCh$ 2,328,098, at December 31, 1995
and 1996 respectively, from Iusacell S.A. These capital contributions were
legally formalized in January of 1997 upon approval by the Superintendency,
subsequent to the balance sheet date.
16. ACCRUED LIABILITIES:
Accrued liabilities are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Vacations (Note 2(g))....................................... 40,070 40,978
Pending Invoices............................................ 263,075 84,529
Other....................................................... 10,498 64,010
------- -------
Total..................................................... 313,643 189,517
======= =======
</TABLE>
17. WITHHOLDING TAXES:
Withholding taxes relate to remunerations, taxes and social security
deductions for the month of December, amounting to ThCh$ 25,380 and ThCh$
38,291 at December 31, 1995 and 1996, respectively.
F-13
<PAGE> 20
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
18. OTHER LONG-TERM LIABILITIES:
As of December 31, 1995 and 1996, this account balance included deferred
customs duties, in accordance with Law 18,634, as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------
1995 1996
THCH$ THCH$
------ ------
<S> <C> <C>
Total deferred customs duties............................... 14,531 21,986
====== ======
</TABLE>
19. INCOME TAXES:
No provision was made for first category income tax at December 31, 1995
and 1996, as there were tax losses amounting to approximately Ch$ 3,451
million, and Ch$ 4,726 million, respectively. These losses may be applied
against future profits for an indefinite period of time.
20. SHAREHOLDERS' EQUITY:
(a) The movements in shareholders' equity for the years ended December 31,
1995 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
FULLY PAID FULLY PAID
AND AND
OUTSTANDING OUTSTANDING
SERIES A SERIES B PAID-IN ACCUMULATED NET LOSS FOR
COMMON COMMON CAPITAL DEFICIT THE PERIOD TOTAL
SHARES SHARES THCH$ THCH$ THCH$ THCH$
----------- ----------- ------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balances as of December 31, 1994... 22,350 23,263 659,372 (767,913) -- (108,541)
Equity price-level restatement..... -- -- 54,070 (62,969) -- (8,899)
Loss for the year.................. -- -- -- -- (2,420,478) (2,420,478)
------ ------ ------- ---------- ---------- ----------
Balances as of December 31, 1995... 22,350 23,263 713,442 (830,882) (2,420,478) (2,537,918)
------ ------ ------- ---------- ---------- ----------
Price-level restated balance as of
December 31, 1995................ 22,350 23,263 760,529 (885,720) (2,580,230) (2,705,421)
------ ------ ------- ---------- ---------- ----------
Balances as of December 31, 1995... 22,350 23,263 713,442 (830,882) (2,420,478) (2,537,918)
Transfer of previous year's
results.......................... -- -- -- (2,420,478) 2,420,478 --
Equity price-level restatement..... -- -- 47,087 (214,590) -- (167,503)
Loss for the year.................. -- -- -- -- (1,505,508) (1,505,508)
------ ------ ------- ---------- ---------- ----------
Balances at December 31, 1996...... 22,350 23,263 760,529 (3,465,950) (1,505,508) (4,210,929)
====== ====== ======= ========== ========== ==========
</TABLE>
F-14
<PAGE> 21
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
20. SHAREHOLDERS' EQUITY, CONTINUED:
(b) Shareholders' Equity:
The Company's subscribed and paid-in capital at December 31, 1996, amounts
to ThCh$ 760,529, (price-level restated) comprised of 22,350 Series A and
23,263 Series B shares, neither of which have par value.
(c) Share ownership:
<TABLE>
<CAPTION>
1995 1996
------------------------- -------------------------
NO. NO.
TYPE OF SHAREHOLDER SHAREHOLDERS PERCENTAGE SHAREHOLDERS PERCENTAGE
------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Holding of 10% or more...................... 3 100 3 100
Less than 10% holding but investment of U.F.
200 or more............................... -- -- -- --
Less than 10% holding but investment less
than U.F. 200............................. -- -- -- --
--------- --------- --------- ---------
Total....................................... 3 100 3 100
========= ========= ========= =========
Control of the Company...................... 1 51 1 51
========= ========= ========= =========
</TABLE>
On December 27, 1996 Iusacell contractually agreed with Inversiones Druma
to increase its interest in Iusatel from 51% to 99.9% of all outstanding
shares in order to sell, cede or transfer these shares to Inversiones Druma
free of any liens or pledges.
(d)
The "UNAUDITED" movements in shareholders' equity for the six months ended
June 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
FULLY PAID FULLY PAID
AND AND
OUTSTANDING OUTSTANDING NET LOSS
SERIES A SERIES B NEW PAID-IN ACCUMULATED FOR THE
COMMON COMMON SHARE CAPITAL DEFICIT PERIOD TOTAL
SHARES SHARES ISSUANCE THCH$ THCH$ THCH$ THCH$
----------- ----------- ----------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995...... 22,350 23,263 -- 713,442 (3,251,360) -- (2,537,918)
Equity price-level restatement.... -- -- -- 26,397 (120,300) -- (93,903)
Loss for the six month period..... -- -- -- -- -- (504,410) (504,410)
------- ------- ----------- --------- ---------- -------- ----------
Balance as of June 30, 1996....... 22,350 22,350 -- 739,839 (3,371,660) (504,410) (3,136,231)
======= ======= =========== ========= ========== ======== ==========
Price-level restated balance as of
June 30, 1997................... -- -- -- 779,791 (3,553,729) (531,648) (3,305,587)
======= ======= =========== ========= ========== ======== ==========
Balance as of December 31, 1996... 22,350 23,263 -- 760,529 (4,971,458) -- (4,210,929)
Capital increase January 24,
1996............................ (22,350) (23,263) 574,060,412 5,739,915 -- -- 5,739,915
Equity price-level restatement.... -- -- -- 146,052 (129,258) -- 16,794
Loss for the six month period..... -- -- -- -- -- (887,165) (887,165)
------- ------- ----------- --------- ---------- -------- ----------
Balance as of June 30, 1997....... -- -- 574,060,412 6,646,496 (5,100,716) (887,165) 658,615
======= ======= =========== ========= ========== ======== ==========
</TABLE>
21. INTERMEDIATE SERVICE CONCESSION:
The Company carries out its business on the basis of Decree Law No. 188 of
the Undersecretary of Telecommunications dated September 17, 1993, whereby
TDI S.A. was granted a concession for intermediate telecommunications
services.
F-15
<PAGE> 22
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
21. INTERMEDIATE SERVICE CONCESSION, CONTINUED:
Under public deed dated September 24, 1994, the name TDI S.A. was changed
to Telecomunicaciones Digitales Internacionales S.A. with a capital
increase to permit Iusacell to purchase a controlling interest in the
Company. On August 3, 1994, the bylaws of the Company were amended and its
name was changed to Iusatel Chile S.A.
22. DIRECTORS' REMUNERATION:
No payments were made to directors for attending meetings during the years
ended December 31, 1995 and 1996.
23. GUARANTEES:
(a) Domestic:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1995 1996
THCH$ THCH$
------- ------
<S> <C> <C>
Guarantee in favor of VTR Telecomunicaciones................ -- 21,244
Performance bond D No. 176588 in favor of Santiago Fourth
Civil Court............................................... 15,000 --
Promissory note in favor of Banco Sud Americano to cover a
current account overdraft contract for an amount at
December 31, 1995......................................... 160,000 --
------- ------
Total domestic guarantees................................... 175,000 21,244
======= ======
</TABLE>
(b) International:
Stand-by letter of credit in the amount of ThUS$ 8,000 at December 31, 1995
and 1996, given by its majority shareholder, Iusacell, in favor of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------
1995 1996
THUS$ THUS$
------ ------
<S> <C> <C>
Banco Sud Americano (Bank of Nova Scotia N.Y.) 4,500 8,000
Citibank N.A. (N.Y.)........................................ 3,500 --
----- -----
8,000 8,000
===== =====
</TABLE>
24. CONTINGENCIES AND COMMITMENTS:
The Company is unaware of any significant contingencies or commitments
affecting the financial statements.
25. RELEVANT FACTS:
1. On November 29, 1995, the minority shareholders, Inversiones y Servicios
Santa Teresa Ltda. and Sergio Munoz ("Minority Shareholders"), filed a
claim for compensatory damages against Iusacell, in an attempt to
prevent Iusacell from increasing its ownership interest in the Company,
through the capitalization of the amounts advanced to Iusatel, as
described in Note 15(b). This decision was appealed and on May 20, 1996,
and was subsequently rejected by the Chilean Supreme Court.
F-16
<PAGE> 23
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
25. RELEVANT FACTS, CONTINUED:
2. An extraordinary meeting of the board of directors held on June 27,
1996, agreed to accept the resignation of then, general manager of the
Company, Gaston Pereira, and appointed Luis Alberto Reyes as interim
general manager and Alberto Herrerias as executive director of the
Company.
26. STATEMENT OF CASH FLOWS:
(a) Other sources of financing for the year ended December 31, 1996 is
summarized as follows:
<TABLE>
<CAPTION>
1996
THCH$
---------
<S> <C>
Iusacell capital contribution (Note 15(b)).................. 1,708,780
=========
</TABLE>
(b) The following financing activities did not result in cash outflows
during the current year but commit future cash flows:
<TABLE>
<CAPTION>
1996
THCH$
-------
<S> <C>
Purchase of Switch (Siemens)................................ 282,611
PCS call processing platform machine........................ 51,414
-------
Total....................................................... 334,025
=======
</TABLE>
27. SUBSEQUENT EVENTS:
At the extraordinary shareholders meeting held on January 24, 1997, the
following resolutions, among others were adopted:
(a) The 45,613 Series A and B shares were eliminated and were replaced by a
single series of shares.
(b) The paid-in capital, amounting to Ch$ 713,441,959 at December 31, 1996,
and being subscribed and paid, was agreed to be increased to a total
amount of Ch$ 11,968,177,959, representing 1,125,519,213 shares with no
par value, through the issuance of 1,125,473,600 new shares.
(c) Iusacell subscribed and paid for 573,991,536 shares, representing 51%
of the agreed capital increase, in the following manner:
* Ch$ 3,411,817,157 representing the Company's bank liability to
Banco Sud Americano which Iusacell paid on behalf of the Company on
January 4, 1997.
* Ch$ 2,328,098,143 representing the capitalization of long-term
amounts payable to related companies restated at December 31, 1996,
comprising contributions made previously by Iusacell for future
capital increases.
The remaining 49% of the above mentioned agreed capital increase was
left available for subscription for a period of three years. These
capital increases are subject to the approval of the Superintendency.
In addition to the above share issuance that has substantially improved
liquidity, the Company has been involved in continuous efforts to formulate
a restructuring plan to improve future operations. Such efforts
F-17
<PAGE> 24
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
27. SUBSEQUENT EVENTS, CONTINUED:
have resulted in the development of a new business plan and strategy to
address the Company's current financial situation and disappointing recent
financial performance.
28. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES:
Chilean GAAP varies in certain important respects from the accounting
principles generally accepted in the United States ("U.S. GAAP"). Such
differences involve methods for measuring the amounts shown in the
financial statements, as well as additional disclosures required by U.S.
GAAP.
(a) Differences in Measurement Methods
The principal methods applied in the preparation of the accompanying
financial statements which have resulted in amounts that differ from those
that would have otherwise been determined under U.S. GAAP are as follows:
(i) Inflation accounting:
Chilean GAAP requires that the financial statements be restated to reflect
the full effects of loss in the purchasing power of the Chilean peso on the
financial position and results of operations of reporting entities. The
method, described in Note 2(c), is based on a model which enables
calculation of net inflation gains or losses caused by monetary assets and
liabilities exposed to changes in the purchasing power of local currency.
The model prescribes that the historical cost of all non-monetary accounts
be restated for general price-level changes between the date of origin of
each item and the year-end, but allows direct utilization of latest cost
values for the restatement of inventories, as an alternative to the
price-level restatement of those assets only if the resulting variation is
not material.
The inclusion of price-level adjustments in the accompanying financial
statements is considered appropriate under the prolonged inflationary
conditions affecting the Chilean economy. Accordingly, the effect of
price-level changes is not eliminated in the reconciliation to U.S. GAAP
included under paragraph (a)(v) below.
(ii) Income taxes:
The accounting treatment of income taxes under Chilean GAAP and U.S. GAAP
differs in respect to accounting for deferred income taxes. Under U.S.
GAAP, prescribed by Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes", all temporary differences arising
as a result of transactions that have different accounting and tax
treatments are recognized as deferred tax assets and liabilities as of the
balance sheet date. A valuation allowance is provided against deferred tax
assets that are not recoverable on a more-likely-than-not basis. Under
Chilean GAAP, only deferred tax assets and liabilities that are
non-recurring are recognized in the financial statements. Chilean GAAP also
permits not providing for deferred income taxes where a deferred tax asset
or liability is not expected to be realized.
The Company has deferred tax assets relating to tax loss carryforwards
amounting to ThCh$ 481,241 and ThCh$ 709,008, at December 31, 1995 and
1996, respectively, for which the Company has recorded a full valuation
allowance due to the uncertainty of the realization of such tax loss
carryforwards.
F-18
<PAGE> 25
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
28. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, CONTINUED:
(ii) Income taxes, continued:
The Company's management considers that the net effect of applying SFAS No.
109 for all periods presented in paragraph (a)(v) below to be immaterial.
(iii) Impairment of Long-Lived Assets:
Under U.S. GAAP, SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of ", requires that assets
to be disposed of be valued at the lower of carrying amount or fair value
less cost to sell. Furthermore, companies are required to review long-lived
assets and certain identifiable intangibles to be held and used for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of the
expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset, an impairment loss is
recognized. Otherwise, an impairment loss is not recognized. Measurement of
an impairment loss for long-lived assets and identifiable intangibles that
an entity expects to hold and use should be based on the fair value of the
asset. Under Chilean GAAP, the impairment loss related to the Company's
long-lived assets was recorded in the period that the Company's management
decided to dispose of such assets.
The effect of the application of SFAS No. 121 is presented in paragraph
(a)(v) below.
Under U.S. GAAP, such adjustments would be included in the operating costs
of the Company.
(iv) Allowance for doubtful accounts
Based upon information available subsequent to the release date of the
Chilean financial statements, the Company reduced its estimate of
recoverable amounts related to certain accounts receivable which existed as
of December 31, 1996. As a result of this change in estimate, an additional
allowance for doubtful accounts has been recorded for U.S. GAAP purposes.
The effect of the above adjustment is presented in paragraph (a)(v) below.
F-19
<PAGE> 26
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
28. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, CONTINUED:
(ii) Income taxes, continued:
(v) Effects of conforming to U.S. GAAP:
The adjustments to reported Net income required to conform with U.S. GAAP
are as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTH PERIOD
FOR THE YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
------------------------ -------------
1995 1996 1997
THCH$ THCH$ THCH$
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net loss as shown in the Chilean GAAP
financial statements...................... (2,580,230) (1,505,508) (887,165)
Impairment of long-lived assets (paragraph
a(iii))................................... -- (199,829) 199,829
Allowance for doubtful accounts (paragraph
a(iv)).................................... -- (293,998) 293,998
---------- ---------- -----------
Subtotal.................................... -- (493,827) 493,827
Deferred tax effect of the above
adjustments............................... -- 74,074 (74,074)
---------- ---------- -----------
Net loss in accordance with U.S. GAAP....... (2,580,230) (1,925,261) (467,412)
========== ========== ===========
U.S. GAAP loss per share.................... (56.57) (42.21) (0.0008)
========== ========== ===========
Weighted average number of common stock
outstanding (Note 20)..................... 45,613 45,613 574,037,149
========== ========== ===========
</TABLE>
(vi) Effects of conforming to U.S. GAAP:
The adjustments required to conform to shareholders' equity amounts with
U.S. GAAP are as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTH
FOR THE YEARS ENDED PERIOD ENDED
DECEMBER 31, JUNE 30,
----------------------- ------------
1995 1996 1997
THCH$ THCH$ THCH$
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Shareholders' equity as shown in the Chilean GAAP
financial statements........................... (2,705,421) (4,210,929) 658,615
Impairment of long-lived assets (paragraph
a(iii))........................................ -- (199,829) --
Allowance for doubtful accounts (paragraph
a(iv))......................................... -- (293,998) --
---------- ---------- --------
Subtotal......................................... -- (493,827) --
Deferred tax effect of the above adjustments..... -- 74,074 --
---------- ---------- --------
Shareholders' equity in accordance with U.S.
GAAP........................................... (2,705,421) (4,630,682) 658,615
========== ========== ========
</TABLE>
F-20
<PAGE> 27
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
28. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, CONTINUED:
(b) Additional Disclosure:
(i) Statements of Cash Flows:
Information for inclusion in the statement of cash flows presented in U.S.
GAAP format is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
FOR THE YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
------------------------ ------------
1995 1996 1997
THCH$ THCH$ THCH$
---------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. (2,580,230) (1,505,508) (887,165)
Adjustments to reconcile net income to net cash provided
by
operating activities:
Depreciation............................................ 162,203 223,279 107,636
Provision for losses on accounts receivable............. 45,422 433,914 343,839
Gain on sale of fixed assets............................ 203 --
Write-off of fixed assets............................... -- -- 215,168
Changes in assets and liabilities:
(Increase) decrease in accounts receivable............ (553,014) (1,014,774) (20,499)
---------- ---------- ----------
Decrease in inventories............................... (627) (4,691) 0
(Increase) decrease in taxes recoverable.............. (55,946) 15,212 67,193
(Increase) decrease in prepaid expenses............... (150,341) 30,037 62,600
(Increase) decrease in other assets................... (29,352) (3,684) 27,556
Increase (decrease) in accounts payable............... 146,427 107,936 (114,144)
Increase (decrease) in accrued liabilities and
other............................................... 300,625 (101,419) 129,893
---------- ---------- ----------
Net cash used by operating activities....................... (2,714,630) (1,819,698) (67,925)
---------- ---------- ----------
Cash flow from investing activities:
Acquisition of fixed assets............................... (274,734) (171,534) (40,416)
---------- ---------- ----------
Net cash (used) provided by investing activities............ (274,734) (171,534) (40,416)
---------- ---------- ----------
Cash flow from financing activities:
Net decrease in short-term bank liabilities............... 2,236,641 (31,284) 5,353
Payments on capital lease obligations..................... -- (68,588) (71,158)
Net increase (decrease) in notes payable.................. 124,211 246,992 3,058
Increase in amounts payable to related parties............ 699,890 1,795,795 183,643
---------- ---------- ----------
Net cash provided (used) by financing activities............ 3,060,742 1,942,915 120,897
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents........ 71,378 (48,317) 12,556
---------- ---------- ----------
Cash and cash equivalents at beginning of period............ 697 72,075 24,376
========== ========== ==========
Cash and cash equivalents at end of period.................. 72,075 23,758 36,932
========== ========== ==========
Supplemental Cash Flow Information:
Interest paid............................................. 99,099 220,340 27,880
Supplemental Non-cash Investing and Financing Activities:
a. During the two years ended December 31, 1995 and 1996 and
the six months ended June 30, 1997, Iusatel financed certain
capital expenditures totaling ThCh$ 274,280, ThCh$ 205,692,
and ThCh$ 151,687, respectively, by entering into capital
leasing arrangements.
b. During the two years ended December 31, 1995 and 1996 and
the six months ended June 30, 1997, Iusatel acquired assets
and assumed a corresponding liability with related parties
totaling ThCh$ 51,204, ThCh$ 385,774, and ThCh$ 259,266,
respectively.
c. In the six months ended June 30, 1997, approximately ThCh$
5,739,915 of liabilities previously held as short-term bank
liabilities and amounts payable to related parties were
reclassified to equity subsequent to the Superintendency's
approval of the capital increase. See Note 27.
</TABLE>
F-21
<PAGE> 1
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
INTERAMERICAS COMMUNICATIONS CORPORATION,
AND
INVERSIONES DRUMA, S.A.,
THE MAJORITY SHAREHOLDER
OF
IUSATEL CHILE, S.A.
----------------------------
SEPTEMBER 9, 1997
----------------------------
<PAGE> 2
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - SALE AND PURCHASE OF SHARES......................................... 1
1.01 Sale and Purchase of Company Common Stock.............................. 1
1.02 Deposits at Closing.................................................... 2
1.03 Preliminary Purchase Price Adjustments................................. 2
1.04 Stockholder's Representative........................................... 3
ARTICLE II - CLOSING............................................................ 4
2.01 Closing................................................................ 4
2.02 Deliveries by the Stockholder to the Escrow Agent...................... 4
2.03 Deliveries by the Buyer to Escrow Agent................................ 5
2.04 Deliveries by Escrow Agent............................................. 6
2.05 Termination in Absence of Closing...................................... 6
ARTICLE III- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER..................................................... 7
3.01 Organization, Standing and Corporate Power............................. 7
3.02 No Subsidiaries........................................................ 7
3.03 Capital Structure...................................................... 7
3.04 Noncontravention....................................................... 7
3.05 Absence of Certain Changes or Events................................... 8
3.06 Litigation............................................................. 8
3.07 Compliance with Laws................................................... 8
3.08 Taxes.................................................................. 8
3.09 Brokers................................................................ 9
3.10 Financial Statements of the Company.................................... 9
3.11 Commitments............................................................ 9
3.12 Insurance.............................................................. 10
3.13 Compliance with Laws................................................... 10
3.14 Banks.................................................................. 11
3.15 Disclosure; Due Diligence.............................................. 11
3.16 Ownership Interests of Interested Persons.............................. 11
3.17 Investments in Competitors............................................. 11
3.18 Certain Payments....................................................... 11
3.19 Other Transactions..................................................... 11
3.20 Protest................................................................ 11
3.21 Labor.................................................................. 11
ARTICLE IV - FURTHER REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDER............................................................ 12
4.01 Title to the Shares.................................................... 12
4.02 Authority to Execute and Perform Agreement............................. 12
4.03 No Stockholder Defaults or Consents.................................... 12
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE BUYER......................... 13
5.01 Organization, Standing and Corporate Power............................. 13
5.02 Authority; Noncontravention............................................ 13
5.03 Brokers................................................................ 14
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VI - OBLIGATIONS PRIOR TO CLOSING....................................... 14
6.01 Buyer's Access to Information and Assets............................... 14
6.02 Company's Conduct of Business and Operations........................... 14
6.03 General Restrictions................................................... 14
6.04 Notice Regarding Changes............................................... 16
6.05 Preferential Purchase Rights........................................... 16
6.06 Consents and Best Efforts.............................................. 16
6.07 Maintenance of Insurance Policies...................................... 16
6.08 Casualty Loss.......................................................... 16
6.09 No Solicitation........................................................ 17
6.10 Employment Agreements.................................................. 17
6.11 Agreement between Stockholder and Grupo Iusacell S.A. de C.V........... 17
6.12 Agreement not to Issue Additional Shares............................... 17
6.13 No Solicitation by Buyer............................................... 17
ARTICLE VII - CONDITIONS TO STOCKHOLDER'S
AND BUYER'S OBLIGATIONS................................................ 18
7.01 Conditions to Obligations of All Parties............................... 18
7.02 Conditions to Obligations of Stockholder............................... 18
7.03 Conditions to Obligations of the Buyer................................. 19
ARTICLE VIII - SURVIVAL......................................................... 21
8.01 Survival of Representations and Warranties of the Stockholder.......... 21
ARTICLE IX - INDEMNIFICATION.................................................... 21
9.01 Obligation of the Stockholder to Indemnify............................. 21
9.02 Obligation of the Buyer to Indemnify................................... 21
9.03 Notice and Opportunity to Defend....................................... 22
9.04 Limitations on Indemnification......................................... 22
ARTICLE X- POST-CLOSING OBLIGATIONS............................................. 22
10.01 Further Assurances..................................................... 22
10.02 Publicity.............................................................. 22
10.03 Access to Records...................................................... 23
ARTICLE XI - MISCELLANEOUS...................................................... 23
11.01 Costs and Expenses..................................................... 23
11.02 Notices................................................................ 23
11.03 Governing Law.......................................................... 24
11.04 Resolution of Disputes................................................. 24
11.05 Representations and Warranties......................................... 24
11.06 Entire Agreement, Amendments and Waivers............................... 24
11.07 Binding Effect and Assignment.......................................... 24
11.08 Remedies............................................................... 25
11.09 Exhibits and Schedules................................................. 25
11.10 Multiple Counterparts.................................................. 25
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
11.11 References............................................................. 25
11.12 Survival............................................................... 25
ARTICLE XII - DEFINITIONS....................................................... 25
12.01 Affiliate.............................................................. 25
12.02 Ancillary Documents.................................................... 25
12.03 Damages................................................................ 26
12.04 Governmental Authorities............................................... 26
12.05 Knowledge.............................................................. 26
12.06 Legal Requirements..................................................... 26
12.07 Permits................................................................ 26
12.08 Used................................................................... 26
</TABLE>
iii
<PAGE> 5
LIST OF EXHIBITS
Exhibit A - Escrow Agreement
Exhibit B - Letter of Resignation and Waiver of Hernan Streeter Rios
Exhibit C - Mutual Release between the Stockholder Hernan Streeter Rios and
InterAmericas Communications Corporation
Exhibit D - Guaranty, Indemnification and Assignment of Obligation of Hernan
Streeter Rios
iv
<PAGE> 6
SCHEDULES
Schedule 3.02 - List of Subsidiaries
Schedule 3.06 - Litigation
Schedule 3.11 - Material Contracts
Schedule 3.14 - Banks
Schedule 3.16 - Ownership Interests of Interested Persons
Schedule 3.17 - Investments in Competitors
v
<PAGE> 7
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of September 9, 1997, by and between INTERAMERICAS
COMMUNICATIONS CORPORATION, a Texas corporation (the "Buyer"), and INVERSIONES
DRUMA S.A., a Chilean corporation (the "Stockholder"), for the purchase of 99.9%
of the issued and outstanding shares of Common Stock (the "Company Common
Stock") of Iusatel Chile S.A., a corporation duly organized and validly existing
under the laws of the Republic of Chile (the "Company").
PRELIMINARY STATEMENT:
A. The Buyer desires to purchase 99.9% of the issued and outstanding
shares of Company Common Stock, and the Stockholder desires to sell such Company
Common Stock to the Buyer, upon the terms and subject to the conditions set
forth herein.
B. Capitalized terms used herein which have not been defined prior to
such use shall have the respective meanings given such terms in Article XII
hereof.
AGREEMENT
In consideration of the premises and the respective mutual agreements,
covenants, representations and warranties herein contained, the parties hereto
agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
Section 1.01. Sale and Purchase of Company Common Stock.
(a) On the terms and subject to the conditions of this
Agreement, at the Closing or as otherwise provided in Article II hereof, the
Stockholder shall sell, transfer, convey and deliver to the Buyer, and the Buyer
shall purchase, acquire and accept from the Stockholder the transfer and
assignment of all of its rights to 99.9% of the issued and outstanding shares of
Company Common Stock. The sale and purchase of the Company Common Stock pursuant
to this Agreement is sometimes hereinafter referred to as the "Stock Purchase."
(b) To effect the transfers contemplated by Section 1.01(a),
on or before November 30, 1997, and pursuant to Article II hereof, the
Stockholder shall deliver, or cause to be delivered, to Citibank N.A., Santiago
branch, as Escrow Agent (the "Escrow Agent") pursuant to the Escrow Agreement
(the "Escrow Agreement"), in form and substance as required by the Escrow Agent
and attached hereto as Exhibit A, for redelivery to the Buyer, stock
certificates representing the Company Common Stock being sold by the Stockholder
hereunder, constituting 99.9% of the issued and outstanding shares of Company
Common Stock, together with the transfer and assignment of Company Common Stock
documents (Traspaso de Acciones) in proper form acceptable to the Buyer for
transfer to the Buyer on the books of the Company and duly registered with the
Superintendencia de Valores y Seguros of the Republic of Chile, against payment
therefor in accordance with Sections 1.02 and 2.04(ii) and as adjusted pursuant
to Section 1.03 hereof.
(c) Upon the terms and subject to the conditions of this
Agreement, the aggregate purchase price (the "Purchase Price") for the Company
Common Stock being purchased by the Buyer
<PAGE> 8
from the Stockholder hereunder shall be an amount equal to US$5,250,000 (the
"Preliminary Purchase Price"), subject to (A) reduction as provided in Section
1.03(a) hereof, and (B) increase as provided in Section 1.03(b) hereof.
Section 1.02 Deposits at Closing. At the Closing, the Buyer shall
deliver to the Escrow Agent an aggregate amount of approximately US$7,250,000,
representing (A) the Purchase Price as adjusted pursuant to Section 1.03(a) plus
(B) US$2,000,000 to be released in accordance with Sections 1.03(b) and 2.04.
Section 1.03 Preliminary Purchase Price Adjustments. The Preliminary
Purchase Price shall be adjusted as follows:
(a) Audit; Reduction in the Preliminary Purchase Price. No
later than September 30, 1997, the Company shall, at Buyer's expense, cause to
be prepared and delivered to the Buyer and the Stockholder the audited balance
sheet of the Company dated as of August 31, 1997 (the "August 1997 Balance
Sheet") prepared by Coopers & Lybrand LLP/Langton Clarke, Santiago, the
Company's independent certified public accountants ("Company's Accountants"), in
accordance with Chilean generally accepted accounting principles ("Chilean
GAAP"). The Preliminary Purchase Price shall be reduced dollar-for-dollar to the
extent that the Net Worth of the Company as indicated in the August 1997 Balance
Sheet is less than US$1,582,000. The Preliminary Purchase Price, as adjusted
pursuant to this Section 1.03(a), is hereinafter referred as the "Interim
Purchase Price." For purposes of this Section 1.03(a), "Net Worth" shall mean
the Company's total assets less its total liabilities.
(b) Audit; Increase in the Interim Purchase Price. No later
than January 31, 1998, the Buyer and the Company, at Buyer's expense, shall
cause to be prepared and delivered to the Stockholder an income statement of the
Company for the four months ended December 31, 1997 (the "December 1997 Income
Statement") prepared and audited by the Company's Accountants in accordance with
Chilean GAAP. The Stockholder shall be entitled to receive an additional payment
(the "Additional Payment") of up to a maximum aggregate amount of US$2,000,000
based on the Company's earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the four month period commencing on September 1,
1997 and ending December 31, 1997, as set forth in the December Income
Statement, such Additional Payment to be determined as follows:
<TABLE>
<CAPTION>
EBIDTA
For Four Months Ended Additional
December 31, 1997 Payment
----------------- -------
<S> <C>
$0 - $499,999................... - 0 -
$500,000 - $749,999............. US$1,000,000
$750,000 or above............... US$2,000,000
</TABLE>
Notwithstanding the above, in the event the Buyer determines in its
sole and absolute discretion that the Company will meet the EBIDTA thresholds
set forth above prior to January 31, 1998, then it may, at its option, pay in
advance all or a portion of the Additional Payment. The Interim Purchase Price
plus the Additional Payment, if any, is hereinafter referred to as the "Final
Purchase Price."
(c) Notification of Interim Purchase Price and of the
Additional Payment.
(i) Notification of Interim Purchase Price. Upon
the calculation of the adjustment to the Preliminary Purchase Price pursuant to
Section 1.03(a), and prior to the release of the Interim Purchase Price by the
Escrow Agent to the Stockholder pursuant to Section 2.04(ii) hereof, the Buyer
shall notify the Stockholder in writing of the Interim Purchase Price to be
delivered by the Escrow Agent to the Stockholder pursuant to Section 2.04(ii)
(the "Interim Purchase Price Notice"), subject to Section 1.03(d) below.
2
<PAGE> 9
(ii) Notification of Additional Payment. On or
before February 5, 1998, the Buyer shall notify the Stockholder in writing (the
"Additional Payment Notice") of the Additional Payment, if any, determined
pursuant to Section 1.03(b). Subject to Section 1.03(d) below, the Escrow Agent
shall deliver to the Stockholder the Additional Payment, if any, pursuant to
Section 2.04(iii) hereof and the Escrow Agreement.
(d) Procedures for Resolving Disputes with Respect to the
Interim Purchase Price and the Additional Payment. The following clauses (i)
through (ii) set forth the procedures for resolving disputes among the parties
with respect to the determination of the Interim Purchase Price and the
Additional Payment, as the case may be:
(i) Within five (5) business days after delivery
by the Buyer to the Stockholder of the Interim Purchase Price Notice or the
Additional Payment Notice, as the case may be, the Stockholder may deliver to
the Buyer a written notice advising the Buyer either that the Stockholder (A)
agrees with the calculation of the Interim Purchase Price or the Additional
Payment, as the case may be, or (B) disagrees with such calculation. If the
Stockholder shall concur with the calculation of the Interim Purchase Price or
Additional Payment, as the case may be, or if the Stockholder shall not object
thereto in a writing delivered to the Buyer within five (5) business days after
the Stockholder' receipt of the Interim Purchase Price Notice or the Additional
Payment Notice, as the case me be, the calculation of the Interim Purchase Price
or Additional Payment, as the case may be, (and as so adjusted as provided in
the Interim Purchase Price Notice or Additional Payment Notice) shall become
final and shall not be subject to further review, challenge or adjustment absent
fraud.
(ii) In the event that the Buyer submits the
Interim Purchase Price Notice or Additional Payment Notice, as the case may be,
and the Stockholder and the Buyer are unable to resolve the disagreements set
forth in such written notice within ten (10) business days after the date of the
delivery of Interim Purchase Price Notice or Additional Payment Notice, as the
case may be, then such disagreements shall be referred to Ernst & Young LLP
Santiago, Chile branch (the "Settlement Accountants"), and the determination of
the Interim Purchase Price or Additional Payment, as the case may be, by the
Settlement Accountants shall be final and shall not be subject to further
review, challenge or adjustment absent fraud. The Settlement Accountants shall
use their best efforts to reach a determination not more than ten (10) business
days after such referral. The costs and expenses of the services of the
Settlement Accountants shall be paid by the Stockholder and the Buyer in equal
proportions.
(e) After the final determination of the Interim Purchase
Price or Additional Payment, as the case may be, or the Settlement Accountants'
Interim Purchase Price or Additional Payment, as applicable, the amount of the
adjustment calculated pursuant thereto, shall be (i) in the case of the Interim
Purchase Price, paid by the Escrow Agent to the Stockholder' Representative
pursuant to Section 2.04(i) and (ii) in the case of the Additional Payment, if
any, paid by the Escrow Agent to the Stockholder's Representative pursuant to
Section 2.04(iii).
Section 1.04 Stockholder's Representative.
(a) As used in this Agreement, the "Stockholder's
Representative" shall mean Hernan Streeter Rios or any person appointed as a
successor Stockholder's Representative pursuant to Section 1.04 hereof.
(b) If the Stockholder's Representative dies, becomes
incapacitated, resigns or is removed by a majority shareholders of the
Stockholder (the "Majority"), the Majority shall appoint a successor
Stockholder's Representative to fill the vacancy so created. If the Majority is
required to but has not appointed a successor Stockholder's Representative
within 30 business days from a request by Buyer to appoint a successor
Stockholder's Representative, the Buyer shall have the right to appoint a
3
<PAGE> 10
Stockholder's Representative to fill any vacancy so created, and shall advise
all those who were holders of Company Common Stock immediately prior to the
Effective Time of such appointment by written notice. A copy of any appointment
by the Majority of any successor Stockholder's Representative shall be provided
to Buyer promptly after it shall have been effected.
(c) The Stockholder's Representative shall be authorized, upon
approval by a Majority, to take any action and to make and deliver any
certificate, notice, consent or instrument required or permitted to be made or
delivered under this Agreement or under the documents referred to in this
Agreement (an "Instrument") which the Stockholder's Representative determines to
be necessary, appropriate or desirable, and, in connection therewith, to hire or
retain, at the sole expense of the Stockholder, such counsel, investment
bankers, accountants, representatives and other professional advisors as he
determines in his sole and absolute discretion to be necessary, advisable or
appropriate in order to carry out and perform his rights and obligations
hereunder. The Stockholder hereby grants each of the Stockholder's
Representative the right and power to execute the Escrow Agreement on its behalf
with such changes or amendments thereto as the Stockholder's Representative, or
either of them, shall determine to be necessary or desirable in their sole and
absolute discretion. Any party receiving an Instrument from the Stockholder's
Representative shall have the right to rely in good faith upon such Instrument,
and to act in accordance with the Instrument without independent investigation.
(d) Buyer shall have no liability to any Stockholder or
otherwise arising out of the acts or omissions of the Stockholder's
Representative or any disputes among the Stockholder or with the Stockholder's
Representative. Buyer may rely entirely on its dealings with, and notices to and
from, the Shareholder's Representative to satisfy any obligations it might have
under this Agreement, any agreement referred to herein or otherwise to the
Stockholder.
ARTICLE II
CLOSING
Section 2.01 Closing. Subject to the satisfaction of the conditions
stated in Article VII of this Agreement, the closing of the transactions
contemplated hereby (the "Closing") shall be held at 10:00 a.m., Santiago, Chile
time, on October 15, 1997, at the offices of Baker & McKenzie, in Santiago,
Chile, unless another date or place is agreed to in writing by the parties
hereto. The date upon which the Closing occurs is hereinafter referred to as the
"Closing Date." The Closing shall be deemed completed as of 11:59 p.m. Santiago
time on the night of the Closing Date.
Section 2.02 Deliveries by the Stockholder to the Escrow Agent. The
Stockholder shall deliver to the Escrow Agent:
(i) At or prior to Closing:
(a) the resignation of Hernan Streeter Rios
as General Manager of the Company, effective
December 31, 1997, as set forth in Section
6.10 hereof;
(b) the resignations of members of the board
of directors of the Company as set forth in
Section 7.03(h);
(c) certified copies of the stock books,
stock ledgers, and minute books of the
Company;
4
<PAGE> 11
(d) a certificate executed by the
Stockholder to the effect that the
conditions set forth in Sections 7.03(b),
(d), (e) and (g), have been satisfied as of
the Closing Date;
(e) evidence of the consents of Stockholder
required pursuant to Section 7.03(d), if
any;
(f) wire transfer instructions for the
payment of the Interim Purchase Price to the
Escrow Agent;
(g) delivery of the audited August 1997
Balance Sheet;
(h) assignment and transfer documents
(Traspaso de Acciones) transferring all of
Stockholder's rights to the 99.9% of the
issued and outstanding shares of the Company
Common Stock;
(i) a written agreement between the
Stockholder and Grupo Iusacell S.A. de C.V.
pursuant to Section 6.11 hereof;
(j) Guaranty, Indemnification and Assumption
of Obligations executed by Hernan Streeter
Rios; and
(k) the executed Escrow Agreement as set
forth in Section 7.01(c).
(ii) On or before November 30, 1997:
(a) certificates representing 99.9% of the
issued and outstanding shares of the Company
Common Stock, together with the transfer and
assignment of shares documents, duly
registered with the Chilean Superintendencia
de Valores y Seguros;
(b) evidence of waiver of preferential
rights to the authorized but unissued shares
of Company Common Stock from each of Sergio
Munoz, Inversiones Santa Teresa Ltda and
Grupo Iusacell S.A. de C.V.;
(c) a certificate executed by the Company to
the effect that the conditions set forth in
Sections 7.03(a) through 7.03(g) have been
satisfied as of on or before November 30,
1997; and
(d) opinion of counsel reasonably
satisfactory to Buyer and Stockholder as set
forth in Section 7.03(f).
(e) the Mutual Release between the
Stockholder, Hernan Streeter Rios and Buyer
pursuant to Section 7.03(l);
Section 2.03 Deliveries by the Buyer to Escrow Agent. At or prior to
Closing, the Buyer shall deliver to the Escrow Agent:
(i) by wire transfer in immediately available
funds to the Escrow Agent, the payment
described in Section 1.02 as being required
to be deposited by the Buyer at Closing;
5
<PAGE> 12
(ii) a certified copy of all necessary corporate
action on the Buyer's behalf approving its
execution, delivery and performance of this
Agreement pursuant to Section 7.02(a); and
(iii) a certificate executed by an authorized
officer of the Buyer on behalf of the Buyer
to the effect that the conditions set forth
in Sections 7.02(b) and 7.02(c) have been
satisfied.
(iv) the executed Escrow Agreement as set forth
in Section 7.01(c)
(v) the Mutual Release referred to in Section
7.03(l) executed by Buyer.
Section 2.04 Deliveries by Escrow Agent.
(i) Deliveries by Escrow Agent at Closing. At
Closing the Escrow Agent shall deliver (A) to Buyer, the documents and
certificates listed in Section 2.02(i) hereof except for item 2.02(i)(h) and (B)
to Stockholder's Representative, for re-delivery to the Stockholder, the
documents and certificates listed in Section 2.03(ii) and 2.03(iii) and
confirmation by the Escrow Agent of receipt of the payment described in Section
1.02.
(ii) Post-Closing Deliveries by Escrow Agent. On
or before November 30, 1997, the Escrow Agent shall deliver (A) to the Buyer,
(I) certificates representing 99.9% of the issued and outstanding shares of the
Company Common Stock, together with the transfer and assignment documents
(Traspaso de Acciones) duly registered with the Superintendencia de Valores y
Seguros of the Republic of Chile and (II) evidence of waiver of preferential
rights to the authorized but unissued shares of Company Common Stock of each of
Sergio Munoz, Inversiones Santa Teresa Ltda. and Grupo Iusacell S.A. de C.V. and
(B) to the Stockholder, the Interim Purchase Price.
(iii) Delivery by Escrow Agent of the Additional
Payment. The Escrow Agent shall deliver to the Stockholder the Additional
Payment, if any, pursuant to Section 1.03(b).
Section 2.05 Termination in Absence of Closing. If by 5:00 p.m. on
November 30, 1997, the deliveries required to be made by the Stockholder to the
Escrow Agent pursuant to Section 2.02(ii) have not occurred then any party
hereto may thereafter terminate this Agreement by written notice to such effect,
to the other parties hereto, without liability of or to any party to this
Agreement or any shareholder, director, officer, employee or representatives of
such party unless the reason for Closing having not occurred is (i) such party's
willful breach of the provisions of this Agreement, or (ii) if all of the
conditions to such party's obligations set forth in Article VII have been
satisfied or waived in writing by the date scheduled for the Closing pursuant to
Section 2.01, the failure of such party to perform its obligations under this
Article II on such date; provided, however, that the provisions of Section 12 of
that certain letter of intent (the "Letter of Intent") dated June 26, 1997
between the Buyer and the Stockholder shall survive any such termination; and
provided further, however, that any termination pursuant to this Section 2.05
shall not relieve any party hereto who was responsible for the Closing having
not occurred as described in clauses (i) or (ii) above of any liability for (x)
such party's willful breach of the provisions of this Agreement, or (y) if all
of the conditions to such party's obligations set forth in Article VII have been
satisfied or waived in writing by the date scheduled for the Closing pursuant to
Section 2.01, the failure of such party to perform its obligations under this
Article II on such date.
6
<PAGE> 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
Subject to non-material deviations from the statements contained herein
and to the information set forth in the attached Schedules to this Article III,
the Stockholder represents and warrants to the Buyer that:
Section 3.01 Organization, Standing and Corporate Power. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of Chile and has the requisite corporate power and authority to carry on
its business as now being conducted. The Company is duly qualified or licensed
to do business and is in good standing in the Republic of Chile. The Stockholder
has delivered to the Buyer complete and correct copies of the Company's
Certificate of Incorporation and by-laws, each as amended to the date hereof.
Section 3.02 No Subsidiaries. Except as set forth in Schedule 3.02
hereof, the Company does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, partnership, joint venture or other
entity. The subsidiary listed in Schedule 3.02 hereof is substantially
wholly-owned by the Company and the financial results of such subsidiaries have
been reflected in the historical financial statements of the Company.
Section 3.03 Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of 1,125,519,213 shares of Company Common
Stock. On or before November 30, 1997, 574,037,149 shares of Company Common
Stock shall be issued and outstanding of which 99.9% shall be held and owned
beneficially and of record by the Stockholder. On or before November 30, 1997
all outstanding shares of capital stock of the Company shall be duly authorized,
validly issued, fully paid and nonassessable and shall not be subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of the Company having the right to vote (or convertible into securities having
the right to vote) on any matters on which shareholders of the Company may vote.
Except as set forth above, as of November 30, 1997, there will not be any
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or the Stockholder
is a party or by which it or he is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or obligating the
Company to issue, grant, extend or enter into any such security, option warrant,
call, right, commitment, agreement, arrangement or undertaking. On or before
November 30, 1997, there shall not be any outstanding contractual obligations of
the Company or any of the Stockholder to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company. On or before November 30, 1997 the
99.9% of the Company Common Stock to be sold by the Stockholder to the Buyer (i)
shall not be subject to any option, warrant, call, right, commitment, agreement,
assignment or undertaking of any kind which would obligate the Stockholder to
sell the Company Shares to any person other than the Buyer, (ii) shall have been
duly authorized and, (iii) when delivered pursuant to this Agreement, will be
duly and validly issued, registered with the Superintendencia de Valores y
Seguros of the Republic of Chile and fully-paid and nonassessable, and free of
any Liens or restrictions.
Section 3.04 Noncontravention. The execution, delivery and performance
of this Agreement and each of the other Ancillary Documents to be executed and
delivered by the Stockholder does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions of this Agreement will
not, conflict with, or result in any violation of, or constitute a default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company under, any provision of (i) the Articles of
Incorporation or by-laws (or similar organizational documents) of the Company,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, or license
7
<PAGE> 14
applicable to the Company, its properties or assets or (iii) any (A) statute,
law, ordinance, rule or regulation or (B) judgment, order or decree applicable
to the Company or its properties or assets.
Section 3.05 Absence of Certain Changes or Events. Except as expressly
contemplated by this Agreement, since June 30, 1997, the Company has conducted
its business only in the ordinary course, and there has not been (i) any
material adverse change in the Company, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock, or
property), (iii) any split, consolidation or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (x) any granting by the Company to any officer of the
Company of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of the date of the Company's most recent audited
financial statements, (y) any granting by the Company to any officer of any
increase in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date of the
Company's most recent audited financial statements (provided, however, that
under no circumstance, shall the Company grant any increase in severance or
termination payment for Streeter) or (z) any entry by the Company into any
employment, severance or termination agreement with any officer except in the
ordinary course of business, (v) any damage, destruction or loss, whether or not
covered by insurance, that has or is likely to have a material adverse effect on
the Company, or (vi) any change in accounting methods, principles or practices
by the Company materially affecting its assets, liabilities, or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
Section 3.06 Litigation. Except as set forth in Schedule 3.06 there is
no suit, action or proceeding pending or, to the knowledge of the Stockholder,
threatened against the Company that, in the aggregate, would amount to greater
than $7,500.00, or would reasonably be expected to have an adverse effect on the
Company, nor is there is any judgment, decree, injunction, ruling or order of
any Governmental Entity or arbitrator outstanding against the Company having, or
which could reasonably be expected to have, any such effect.
Section 3.07 Compliance with Laws. The Company is in compliance with
all applicable statutes, laws, ordinances, regulations, rules, judgments,
decrees and orders of any governmental entity applicable to its business or
operations, except for instances of possible noncompliance that, individually or
in the aggregate, would not have a material adverse effect on the Company. To
the knowledge of the Stockholder, the Company has in effect all state and local
government approvals, authorizations, certificates, concessions, filings,
franchises, licenses, notes, permits and rights ("Permits"), necessary for it to
own, lease or operate its properties and assets and to carry on its business as
now conducted, including, without limitation, the concessions granted by the
Chilean Telecommunications authority for the supply of the services as provided
or as currently contemplated to be provided by the Company (the "Concessions")
and there has occurred no default under any such Permit. Further, there is no
notice from any regulatory authority which has been received by, or action is
threatened or pending against, the Company of that any Permit has been revoked,
terminated or canceled as a consequence of this Agreement or for any other
reason.
Section 3.08 Taxes. The Company has filed all material tax returns and
reports required to be filed by it and has paid all taxes required to be paid by
it (other than taxes the failure to pay which would not, individually or in the
aggregate, have an adverse effect on the Company), and the Company's financial
statements as of and for the six month period ended June 30, 1997 reflect an
adequate accrual for all material taxes payable by the Company for all taxable
periods and portions thereof through the date of such financial statements. No
deficiencies for any taxes have been proposed, asserted or asserted against the
Company other than deficiencies, the liability for which would not, individually
or in the aggregate, have a material adverse effect on the Company, and no
requests for waivers of the time to assess any taxes are pending. None of the
assets or properties of the Company is subject to any material tax lien. As used
in this Agreement, "taxes" shall include all state and local income, property,
net assets, sales, excise and other taxes, tariffs or governmental charges of
any nature whatsoever to which the
8
<PAGE> 15
Company is subject in any jurisdiction including, without limitation, the
Republic of Chile, including any interest, penalties or additions with respect
thereto.
Section 3.09 Brokers. No broker, investment banker, financial advisor
or other person is entitled to any broker's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Stockholder
or the Company.
Section 3.10 Financial Statements of the Company. The Company and the
Stockholder previously have delivered to Buyer a true and complete copy of the
audited balance sheet of the Company as of December 31,1995 and December 31,
1996, and the audited statements of income, and changes in financial position
for the twelve month periods ended on such dates and the unaudited balance sheet
at June 30, 1997 and the unaudited statements of income and cash flows for the
six month periods ended June 30, 1997 (all the foregoing financial statements,
including the notes thereto, being referred to herein collectively as the
"Company Financial Statements"). The Company Financial Statements are in
accordance with the books and records of the Company and present fairly, in all
material respects, the financial position of the Company as of the dates
indicated, and the results of operations and cash flows of the Company for the
periods indicated are in each case in conformity with Chilean generally accepted
accounting principles, and include all adjustments, which consist of only normal
recurring accruals, necessary for such fair presentations.
Section 3.11 Commitments. Except for the material contracts,
agreements, commitments and other arrangements, whether oral or written, to
which the Company is a party (the "Contracts") set forth in Schedule 3.11, as of
the Closing Date, the Company has not entered into, nor is the capital stock,
the assets or the business of the Company bound by, whether or not in writing,
any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement,
except in the ordinary course of business
(iii) guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iv) employment, consulting or compensation
agreement or arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another, except in the ordinary course of business;
(vii) deed or other document evidencing an
interest in or contract to purchase or sell real property;
(viii) agreement with dealers or sales or
commission agents, investment bankers, financial advisors, business brokers,
public relations or advertising agencies, accountants or attorneys, except with
respect to confidentiality agreements;
(ix) lease of real or personal property, whether
as lessor, lessee, sublessor or sublessee, except in the ordinary course of
business;
(x) agreement between the Company and any
Affiliate;
9
<PAGE> 16
(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
affiliate of the Company;
(xii) any agreement for the acquisition of
services, supplies, equipment or other personal property and involving more than
US$50,000 in the aggregate, except in the ordinary course of business;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition
covenants;
(xv) any other contract or arrangement that
involves either an unperformed commitment in excess of $50,000 or that
terminates more than thirty (30) days after the date hereof, except in the
ordinary course of business;
(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity affiliated with
the Company, its subsidiaries or other related parties;
(xvii) agreement providing for the purchase from a
supplier of all or substantially all of the requirements of the Company of a
particular product where such product accounts for more than 10% of the
Company's gross inventory; or
(xviii) any other agreement or commitment not made
in the ordinary course of business that is material to the business or financial
condition of the Company.
True, correct and complete copies of the written Contracts, and true, correct
and complete written descriptions of the oral Contracts, have heretofore been
delivered or made available to the Buyer. There are no existing material
defaults, material events of default or events, occurrences, acts or omissions
that, with the giving of notice or lapse of time or both, would constitute
material defaults by the Company, and no material penalties have been incurred
nor are amendments pending, with respect to the Contracts. The Contracts are in
full force and effect and are valid and enforceable obligations of the Company,
except as such enforceability may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally. The Company has not received notice
of any material default with respect to any Contracts. For the purposes of this
Section 3.11(a), the term "material" shall mean a condition the existence or
breach of which could result in damage or loss to the Company valued in excess
of $50,000 individually or $150,000 in the aggregate.
(b) Except as contemplated hereby, the Company has not
received notice of any plan or intention of any other party to any Contract to
exercise any right to cancel or terminate any Contract. The Company currently
does not contemplate, or has reason to believe any person or entity currently
contemplates, any amendment or change to any Contract. None of the customers,
joint venture partners or suppliers of the Company has refused, or communicated
that it will or may refuse, to purchase or supply goods or services, as the case
may be, or has communicated that it will or may substantially reduce the amounts
of goods or services that it is willing to purchase from, or sell to, the
Company.
Section 3.12 Insurance. The Company has previously delivered or made
available to the Buyer all insurance policies of the Company. All of such
policies are valid and enforceable against the Company, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally.
Section 3.13 Compliance with Laws. The Company has all material
franchises, Permits, licenses and other rights and privileges necessary to
permit them to own their respective properties and to conduct their respective
businesses as presently conducted. The business and operations of the
10
<PAGE> 17
Company have been and are being conducted in accordance in all material respects
with all applicable laws, rules and regulations, and neither the Company n is in
violation of any judgment, law or regulation except where any such violation
would not have a material adverse effect on the Company's 's results of
operations, business, assets or financial condition.
Section 3.14 Banks. Schedule 3.14, to be delivered prior to or at
Closing, sets forth (i) the name of each bank, trust company or other financial
institution and stock or other broker with which the Company has an account,
credit line or safe deposit box or vault, (ii) the names of all persons
authorized to draw thereon or to have access to any safe deposit box or vault,
(iii) the purpose of each such account, safe deposit box or vault, and (iv) the
names of all persons authorized by proxies, powers of attorney or other like
instrument to act on behalf of the Company in matters concerning any of its
business or affairs. Except as otherwise set forth in Schedule 3.14, no such
proxies, powers of attorney or other like instruments are irrevocable.
Section 3.15 Disclosure; Due Diligence. This Agreement and the Exhibits
and Schedules hereto, when taken as a whole with other documents and
certificates furnished by the Company and the Stockholder to the Buyer or its
counsel, do not contain any untrue statement of material fact or omit any
material fact necessary in order to make the statements therein not misleading.
Section 3.16 Ownership Interests of Interested Persons. Except as set
forth in Schedule 3.16 hereof, no director or executive officer of the Company
or their respective spouses or children, owns directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer or
director of, any principal customer or material supplier which has a business
relationship with the Company or any organization that has a material contract
or arrangement with the Company. Any such transactions as set forth in Schedule
3.16 were arm's length transactions.
Section 3.17 Investments in Competitors. Except as set forth in
Schedule 3.17 hereof, no director or executive officer of the Company owns
directly or indirectly any material interests or has any investment equal to 5%
or more of the outstanding voting securities in any corporation, business or
other person that is a direct competitor of the Company.
Section 3.18 Certain Payments. To the Knowledge of the Stockholder,
neither the Company, nor any director, officer or employee of the Company, has
paid or caused to be paid, directly or indirectly, in connection with the
business of the Company: (a) to any government or agency thereof or any agent of
any supplier or customer any bribe, kick-back or other similar payment; or (b),
any material contribution to any political party or candidate (other than from
personal funds of directors, officers or employees not reimbursed by their
respective employers or as otherwise permitted by applicable law).
Section 3.19 Other Transactions. Neither the Company n has entered into
any agreements or arrangements and there are no pending offers or discussions
concerning or providing for the merger or consolidation of the Company or all or
any substantial portion of its assets, the sale by the Company or any material
stockholder of the Company of any securities of the Company or any similar
transaction affecting the Company or its securityholders.
Section 3.20 Protest. To the best of Stockholder's Knowledge, as of the
date hereof, there are no protested documents or titles of any kind with respect
to the Company which remain unpaid and there are no public records which reflect
any filings with the Chilean Commercial Information Bulletin with respect to the
Company which remains unpaid.
Section 3.21 Labor. The Company is in full compliance with all Social
Security and other Chilean statutory labor obligations, including, without
limitation, employment, pension or employment benefit programs, whether public
or private, and that no payments due thereunder are overdue as of the date
hereof. To the extent required by Chilean law, all obligations related to
severance, bonus and other
11
<PAGE> 18
similar employment benefits have been accrued and recorded in the Company's June
30, 1997 financial statements.
ARTICLE IV
FURTHER REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder further represents and warrants to the Buyer as
follows:
Section 4.01 Title to the Shares. On or before November 30, 1997 the
Stockholder shall own beneficially and of record, free and clear of any lien,
option or other encumbrance, or shall own of record and have full power and
authority to convey free and clear of any liens or other encumbrances 99.9% of
the shares of Company Common Stock, and, upon delivery of and payment for such
shares as herein provided, the Stockholder will convey to the Buyer good and
valid title thereto, free and clear of any lien or other encumbrance, such
shares constituting 99.9% of the issued and outstanding shares of Company Common
Stock.
Section 4.02 Authority to Execute and Perform Agreement. The
Stockholder has the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement and to perform fully
the Stockholder's obligations hereunder. This Agreement has been duly executed
and delivered by the Stockholder and is a valid and binding obligation of each
of Streeter and the Stockholder enforceable in accordance with its terms, except
as such enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally. The execution and delivery by the Stockholder of
this Agreement and the performance by the Stockholder of this Agreement in
accordance with its terms and conditions will not (i) require the approval or
consent of any foreign, federal, state, county, local or other governmental or
regulatory body or the approval or consent of any other person; or (ii) conflict
with or result in any breach or violation of any of the terms and conditions of,
or constitute (or with notice or lapse of time or both constitute) a default
under, any statute, regulation, order, judgment or decree applicable to the
Stockholder or to the shares of Company Common Stock, held by the Stockholder,
or any instrument, contract or other agreement to which the Stockholder is a
party or by or to which the Stockholder is or the shares of Company Common
Stock, held by such Stockholder is bound or subject.
Section 4.03 No Stockholder Defaults or Consents. The execution and
delivery of this Agreement and the Ancillary Documents by the Stockholder and
the performance by the Stockholder who is a party hereto or thereto of its
obligations hereunder or thereunder will not violate any provision of law or any
judgment, award or decree or any indenture, agreement or other instrument to
which the Stockholder is a party, or by which the Stockholder or any properties
or assets of the Stockholder is bound or affected, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge, security interest or encumbrance of
any nature whatsoever upon any of the properties or assets of the Stockholder.
Any and all consents required to be obtained the Stockholder as set forth in
Schedule 4.03 including, without limitation, the consents of any Government
Authority with respect to the transfer of a controlling interest in the Company,
shall be obtained and copies thereof delivered to the Buyer upon execution of
this Agreement.
12
<PAGE> 19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Subject to non-material deviations from the statements contained herein
and to the information set forth in that attached Schedule to this Article V,
the Buyer, represents and warrants to the Stockholder that:
Section 5.01 Organization, Standing and Corporate Power. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as now being conducted. The Buyer
is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed or to be in
good standing (individually or in the aggregate) would not have a material
adverse effect on the Buyer.
Section 5.02 Authority; Noncontravention. The Buyer has the requisite
corporate power and authority to enter into this Agreement, each of the other
Ancillary Documents to be executed and delivered by the Buyer, and all other
agreements and instruments contemplated hereby and thereby and to consummate the
transactions and perform the obligations contemplated hereby and thereby to be
consummated by it. The execution and delivery by the Buyer of this Agreement and
the consummation by the Buyer of the transactions contemplated hereby and
thereby to be consummated by it have been duly authorized by all necessary
corporate action on the part of the Buyer. This Agreement has been duly executed
and delivered by the Buyer and constitutes, and the other Ancillary Documents to
be entered into by the Buyer at or prior to the Closing will be, when executed
and delivered by the Buyer (and assuming this Agreement and such other Ancillary
Documents to be entered into by the Stockholder constitute legal, valid and
binding obligations of the Stockholder) valid and binding obligations of the
Buyer, enforceable in accordance with their respective terms, except that
enforceability of this Agreement and the other Ancillary Documents may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and that
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The execution, delivery and
performance of this Agreement and each of the other Ancillary Documents to be
executed and be delivered does not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions of this
Agreement and each of the other Ancillary Documents to be delivered by the Buyer
will not, conflict with, or result in any violation of, or constitute a default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any Lien upon any of
the properties or assets of the Buyer under, any provision of (i) the Articles
of Incorporation or By laws of the Buyer, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Buyer or its respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any (A) statute, law, ordinance,
rule or regulation or (B) judgment, order or decree applicable to the Buyer or
its properties or assets, other than, in the case of clause (ii) and clause
(iii), any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not (x) have a material adverse effect on
the Buyer, (y) impair in any material respect the ability of the Buyer to
perform its obligations under this Agreement, or (z) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement to be
consummated by it. No consent, approval, order or authorization of or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to the Buyer in connection with the execution and delivery of
the Buyer of this Agreement and each of the other Ancillary Documents to be
executed and delivered by the Buyer or the consummation by the Buyer of the
transactions contemplated hereby and thereby to be consummated by it, except for
(i) those required by federal and state securities laws, (ii) those required by
NASDAQ (iii) those required by any applicable state takeover laws and (iv) such
other consents, approvals, orders, authorizations,
13
<PAGE> 20
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a material adverse effect
on the Buyer or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
Section 5.03 Brokers. Except for Patricio Silva Echenique, no other
broker, investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Buyer.
ARTICLE VI
OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
Section 6.01 Buyer's Access to Information and Assets. The Company
shall permit the Buyer and its authorized employees, agents, accountants, legal
counsel and other representatives, at Buyer's own expense, to have access to the
books, records, employees, counsel, accountants, and other representatives of
the Company at all times reasonably requested by the Buyer for the purpose of
conducting an investigation of each of the Company's financial condition,
corporate status, operations, business and Properties. The Company shall make
available to the Buyer for examination and reproduction, at Buyer's own expense,
all documents and data of every kind and character relating to the Company in
possession or control of, or subject to reasonable access by, the Stockholder,
or the Company, including, without limitation, all files, records, data and
information relating to the Company's assets (whether stored in paper, magnetic
or other storage media) and all agreements, instruments, contracts, assignments,
certificates, orders, and amendments thereto. Also, the Company shall allow the
Buyer, at Buyer's own expense, access to, and the right to inspect, the
Company's assets, except to the extent that such assets are operated by a
third-party operator, in which case the Company shall use its best efforts to
cause the operator of such Company Assets to allow the Buyer access to, and the
right to inspect, such assets.
Section 6.02 Company's Conduct of Business and Operations. The Company
shall keep the Buyer advised as to all material operations and proposed material
operations relating to the Company, or the Company Assets. The Company shall (a)
conduct its respective business in the ordinary course, (b) use its reasonable
efforts to keep available to the Company, the services of present employees, (c)
maintain and operate Company Assets in a good and workmanlike manner, (d) pay or
cause to be paid all costs and expenses (including but not limited to insurance
premiums) incurred in connection therewith in a timely manner, (e) use
reasonable efforts to keep all Contracts listed or required to be listed on
Schedule 3.13 in full force and effect, (f) comply with all of the covenants
contained in all such material Contracts, (g) maintain in force until the
Closing Date insurance policies (subject to the provisions of Section 6.07)
equivalent to those in effect on the date hereof, and (h) comply in all material
respects with all applicable Legal Requirements. Except as otherwise
contemplated in this Agreement, the Company shall use its best efforts to
preserve the present relationships of the Company with persons having
significant business relations therewith.
Section 6.03 General Restrictions. Except as otherwise expressly
permitted in this Agreement, without the prior written consent of the Buyer, the
Company will not:
(i) (x) declare, set aside or pay any dividends
on, or make any other distribution (whether in cash, stock or property)
in respect of, any of its capital stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in view of or in substitution
for shares of its capital stock, or (z) purchase,
14
<PAGE> 21
redeem or otherwise acquire any shares of capital stock of the Company
or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible
securities;
(iii) amend its Certificates of Incorporation or
By-laws;
(iv) acquire or agree to acquire (x) by merging
or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business of any corporation,
partnership, joint venture, association or other business organization
or division thereof or (y) any assets that are material, individually
or in the aggregate, to the Company, except purchases of assets in the
ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise
encumber or otherwise dispose of, or agree to sell, transfer, lease,
mortgage, encumber or otherwise dispose of, any Properties except (i)
in the ordinary course of business consistent with past practice, or
(ii) pursuant to any Contract;
(vi) (y) incur any indebtedness for borrowed
money, except for that certain indebtedness of the Company to the
Stockholder in the amount of $250,000, or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company,
guarantee any debt securities of another person, enter into any "keep
well" or other agreements to maintain any financial statement condition
of another person or enter into any arrangement having the economic
effect of the foregoing, and also except for borrowings incurred in the
ordinary course of business consistent with past practice, or (z) make
any loans, advances or capital contributions to, or investments in, any
other person;
(vii) make or agree to make any new capital
expenditure or expenditures which, in the aggregate, are in excess of
$100,000 (other than those required pursuant to currently outstanding
Contracts or in the ordinary course of business consistent with past
practice);
(viii) make any material tax election or settle or
compromise any material tax liability;
(ix) pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in the accordance with their
terms, of liabilities reflected or reserved against in, or contemplated
by, the Financial Statements (or the notes thereto) or incurred in the
ordinary course of business consistent with past practice, or waive any
material benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which the Company
is a party;
(x) except in the ordinary course of business
consistent with past practice, modify, amend or terminate any Contract;
(xi) except in the ordinary course of business
consistent with past practice, enter into any contracts, agreements,
arrangements or understandings relating to the rental, distribution,
sale or marketing by third parties of the Company's rental equipment,
inventory or other products;
15
<PAGE> 22
(xii) except as required to comply with applicable
law (A) adopt, enter into, terminate or amend any Benefit Plan or other
arrangement for the benefit or welfare of any director, officer or
current or former employee, (B) increase in any manner the compensation
or fringe benefits of, or pay any bonus to, any director, officer or
employee (except for normal increases or bonuses in the ordinary course
of business consistent with past practice), (c) pay any benefit not
provided for under any Benefit Plan, (D) grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement
or Benefit Plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance
units or restricted stock, or the removal of existing restrictions in
any Benefit Plans or agreement or awards made thereunder) or (E) take
any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, agreement, contract
or arrangement or Benefit Plan;
(xiii) make any change in any method of accounting
or accounting practice or policy other than those required by Chilean
generally accepted accounting principles; or
(xiv) authorize any of, or commit or agree to take
any of, the foregoing actions.
Section 6.04 Notice Regarding Changes. The Stockholder shall promptly
inform the Buyer in writing of any change in facts and circumstances that could
render any of the representations and warranties made herein by the Stockholder
inaccurate or misleading if such representations and warranties had been made
upon the occurrence of the fact or circumstance in question. The Buyer shall
promptly inform the Stockholder in writing of any change in facts and
circumstances that could render any of the representations and warranties made
herein by it inaccurate or misleading if such representations and warranties had
been made upon the occurrence of the fact or circumstance in question.
Section 6.05 Preferential Purchase Rights. To the extent there are any
parties entitled or who may become entitled to exercise preferential purchase or
consent rights with respect to the transactions contemplated hereby, the
Stockholder shall on or before November 30, 1997, obtain the agreement in
writing of such parties to waive or not exercise such rights, which request
shall be in form and substance reasonably satisfactory to and approved by the
Buyer.
Section 6.06 Consents and Best Efforts. Each of the parties hereto
shall use all commercially reasonable good faith efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations, and consult and fully
cooperate with and provide reasonable assistance to each other party and their
respective representatives in order to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable
hereafter, including without limitation, (i) using all commercially reasonable
good faith efforts to make all filings, applications, notifications, reports,
submissions and registrations with, and to obtain all consents, approvals,
authorizations or permits of, governmental entities or other persons or entities
as are necessary for the consummation of the transactions contemplated by this
Agreement, and (ii) taking such actions and doing such things as any other party
hereto may reasonably request in order to cause any of the conditions to such
other party's obligation to consummate the transactions contemplated hereby as
specified in Article VII of this Agreement to be fully satisfied.
Section 6.07 Maintenance of Insurance Policies. The Stockholder shall
take (or cause the Company to take) all actions necessary or appropriate to
cause any and all insurance coverage currently carried by or for the benefit of
the Company to remain in full force and effect.
Section 6.08 Casualty Loss. If, between the date of this Agreement and
the Closing, any of the Properties of the Company shall be destroyed or damaged
in whole or in part by fire, earthquake, flood, other casualty or any other
cause, then the Stockholder shall, at the Buyer's election, (i) cause the
Company to cause such Properties to be repaired or replaced prior to the Closing
with Property of
16
<PAGE> 23
substantially the same condition and function, (ii) cause the Company to deposit
in a separate account an amount sufficient to cause such Property to be so
repaired or replaced, or (iii) enter into contractual arrangements with the
Company satisfactory to the Buyer so that the Company will have at the Closing
the same economic value as if such casualty had not occurred.
Section 6.09 No Solicitation. The Stockholder and the Company and its
officers, directors, employees, representatives and agents shall immediately
cease any discussions or negotiations with any parties that may be ongoing with
respect to a Third Party Acquisition Proposal (as defined below). Neither the
Company nor the Stockholder shall, nor shall they permit any of their Affiliates
to, nor shall they authorize or permit any of their officers, directors or
employees or any investment banker, attorney or other advisor or representatives
retained by them or any of their Affiliates to, (i) solicit, initiate or
knowingly encourage the submission of, any Third Party Acquisition Proposal, or
(ii) participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action
knowingly to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Third Party
Acquisition Proposal. For purposes of this Agreement, "Third Party Acquisition
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of all or a portion or more of the
consolidated assets of the Company or all or a portion any class of equity
securities of the Company or any offer to acquire or purchase that if
consummated would result in any person beneficially owning all or a portion of
any class of equity securities of the Company, or any merger, consolidation,
business combination, sale of assets, recapitalization, liquidation, dissolution
or similar transaction involving the Company other than the transactions
contemplated by this Agreement, or any other transaction the consummation of
which could reasonably be expected to impede, interfere with, prevent or
materially delay, or dilute materially the benefits to the Buyer of the
transactions contemplated hereby. The Stockholder shall be released from this
obligation upon the termination of this Agreement pursuant to Section 2.05 or as
a result of a material breach of this Agreement by the Buyer.
Section 6.10 Employment Agreements. Mr. Hernan Streeter Rios
("Streeter") shall remain as General manager of the Company until December 31,
1997, provided however, that, on or before Closing, Mr. Streeter shall have
executed, and delivered to the Escrow Agent, a letter of resignation of his
employment with the Company in form and substance as attached hereto as Exhibit
B waiving any claim to any payment under any employment and severance agreement
or agreements between the Company and Streeter, in accordance with applicable
Chilean law, such resignation to become effective as of December 31, 1997.
During such four month period, Streeter shall be allowed to maintain the
Company's key personnel. Notwithstanding the above, Buyer shall have the right
to appoint consultants at Buyer's expense during the four month period ending
December 31, 1997.
Section 6.11 Agreement between Stockholder and Grupo Iusacell S.A. de
C.V. On the Closing Date, the Stockholder shall have entered into a valid and
binding agreement, under applicable law, with Grupo Iusacell S.A. de C.V.
("Iusacell") (the "Iusacell Agreement") which provides for the transfer and
assignment to the Stockholder of: (i) all shares of Company Common Stock owned
or held by Iusacell or its affiliates; (ii) all preferential rights to subscribe
for Company Common Stock held by Iusacell; and (iii) all preferential rights to
subscribe for Company Common Stock held by Sergio Munoz and Inversiones Santa
Teresa, Ltda., and shall have delivered a copy of the Iusacell Agreement to the
Escrow Agent.
Section 6.12 Agreement not to Issue Additional Shares. The Stockholder
agrees that the 551,482,064 shares of Common Stock of the Company which are
authorized, but have not been issued by the Company, shall not be issued by the
Company, except as required under Chilean law, provided, however, that in the
event such shares are issued, the Buyer shall have the right to terminate this
Agreement.
Section 6.13 No Solicitation by Buyer. The Buyer, its officers,
directors, employees, and/or any person acting at the direction of the Buyer
shall not engage in discussions or negotiations with Iusacell or Bell Atlantic
with respect to the transactions contemplated hereby. The Buyer, its officers,
directors,
17
<PAGE> 24
employees, and/or any person acting at the direction of the Buyer shall be
released from their obligations under this Section 6.13 upon the termination of
this Agreement pursuant to Section 2.05 or as a result of a material breach of
this Agreement by Stockholder.
ARTICLE VII
CONDITIONS TO STOCKHOLDER'S, AND BUYER'S OBLIGATIONS
Section 7.01 Conditions to Obligations of All Parties. The respective
obligations of each party to carry out the transactions contemplated by this
Agreement are subject to the satisfaction or waiver on or prior to the Closing
Date, or on such other date as provided herein, of the following conditions:
(a) All filings with all Governmental Authorities required to
be made in connection with the transactions contemplated hereby shall have been
made, except that such filing shall be made and all orders, permits, waivers,
authorizations, exemptions, and approvals of such entities required to be in
effect on the date of the Closing in connection with the transactions
contemplated hereby including, without limitation, approvals by the Chilean
Ministry of Communications and the Foreign Investment Committee shall have been
issued, all such orders, permits, waivers, authorizations. exemptions or
approvals shall be in full force and effect on the date of the Closing;
provided, however, that no provision of this Agreement shall be construed as
requiring any party to accept, in connection with obtaining any other requisite
approval, clearance or assurance of non-opposition, avoiding any challenge, or
negotiating settlement, any condition that would materially change or restrict
the manner in which the Company or the Buyer conducts or proposes to conduct its
business. Notwithstanding the above, it is understood that the Stockholder shall
obtain the registration of 99.9% of the Company Common Stock with the
Superintendencia de Valores y Seguros by November 30, 1997.
(b) None of the parties hereto shall be subject to any
statute, rule, regulation, decree, ruling, injunction or other order issued by
any Governmental Entity of competent jurisdiction (collectively, an
"Injunction") which prohibits, restrains, enjoins or restricts the consummation
of the transactions contemplated by this Agreement.
(c) The Buyer, the Escrow Agent and the Stockholder shall have
executed and delivered the Escrow Agreement as set forth in Exhibit A.
Section 7.02 Conditions to Obligations of the Stockholder. The
obligations of the Stockholder to carry out the transactions contemplated by
this Agreement are subject, at the option of Stockholder, to the satisfaction,
or waiver by Stockholder, of the following conditions:
(a) The Buyer shall have furnished Stockholder with a
certified copy of all necessary corporate action on its behalf approving its
execution, delivery and performance of this Agreement.
(b) All representations and warranties of the Buyer contained
in this Agreement qualified by materiality shall be true and correct in all
respects at Closing and all other representations and warranties of the Buyer
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing, as if such representations and warranties were made at
and as of the Closing, except for changes contemplated by the terms of this
Agreement except as and to the extent that the facts and conditions upon which
such representations and warranties are based are expressly required or
permitted to be changed by the terms thereof, and the Buyer shall have performed
and satisfied in all material respects all covenants and agreements required by
this Agreement to be performed and satisfied by the Buyer at or prior to the
Closing.
(c) As of the Closing Date, and on or before November 30,
1997, as the case may be, no suit, action or other proceeding (excluding any
such matter initiated by or on behalf of the
18
<PAGE> 25
Stockholder or the Company) shall be pending or threatened before any
Governmental Authority seeking to restrain Stockholder or prohibit the Closing
or seeking Damages against the Stockholder or the Company as a result of the
consummation of this Agreement.
(d) As of the Closing Date, the Iusacell Agreement shall have
been executed by the Stockholder and Iusacell and shall have been delivered to
the Escrow Agent.
(e) The Escrow Agent shall have received the payment described
in Section 1.02 as of the Closing Date.
(f) The Escrow Agent shall have received the Mutual Release
executed by all parties thereto by November 30, 1997.
(g) Waiver from Sergio Munoz, Inversiones Santa Teresa, Ltda.,
Iusacell and any other current Stockholder of the Company, of preferential
rights to subscribe for additional shares of Company Common Stock on or before
November 30, 1997.
Section 7.03 Conditions to Obligations of the Buyer. The obligations of
the Buyer to carry out the transactions contemplated by this Agreement are
subject, at the option of the Buyer, to the satisfaction, or waiver by the
Buyer, of the following conditions:
(a) 99.9% of the Company Common Stock shall have been tendered
to Buyer on or before November 30, 1997.
(b) All representations and warranties of the Stockholder
contained in this Agreement qualified by materiality shall be true and correct
in all respects at Closing and all other representations and warranties of the
Stockholder contained in this Agreement shall be true and correct in all
material respects at and as of the Closing as if such representations and
warranties were made at and as of the Closing, except for changes contemplated
by the terms of this Agreement except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms thereof, and the
Stockholder and the Company shall have performed and satisfied in all material
respects all agreements and covenants required by this Agreement to be performed
and satisfied by the Stockholder and the Company at or prior to the Closing.
(c) As of the Closing Date and on or before November 30, 1997,
as the case may be, no suit, action or other proceeding (excluding any such
matter initiated by or on behalf of the Buyer) shall be pending or threatened
before any Governmental Authority seeking to restrain the Buyer or prohibit the
Closing or seeking Damages against the Buyer, the Company or their respective
Properties as a result of the consummation of this Agreement.
(d) All notices required to be given in connection with the
transactions contemplated by this Agreement shall have been duly and timely
given, and there shall not be any preferential purchase rights or consent
requirements of Stockholder, if any, with respect to the transactions
contemplated by this Agreement that have not expired or been waived.
(e) Since the date of the June 1997 Balance Sheet and up to
and including the Closing there shall not have been:
(i) any change in the business, operations,
prospects or financial condition of the Company that had or would reasonably be
likely to have a material adverse effect on the business, operations, prospects,
Properties, securities or financial condition of the Company ; and
19
<PAGE> 26
(ii) any damage, destruction or loss to the
Company (whether or not covered by insurance) that had or would reasonably be
likely to have a material adverse effect on the business, operations, prospects,
Properties, securities or financial condition of the Company .
(f) The Escrow Agent shall have received the opinion of
counsel to the Company and the Stockholder addressed to the Buyer, dated on or
before November 30, 1997, in form and substance reasonably satisfactory to the
Buyer and Stockholder.
(g) The Escrow Agent shall have received the resignation of
Hernan Streeter Rios as General Manager of the Company effective as of December
31, 1997 in form and substance as contained in Exhibit B.
(h) The Escrow Agent shall have received the resignation of
all of the members of the board of directors of the Company effective as of the
Closing Date, except for that of Juan Jose Illanes Yanquez who shall remain on
the Board of Directors of the Company until December 31, 1997.
(i) All proceedings to be taken by Stockholder and the Company
in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in form and substance to the Buyer and
its counsel, and the Buyer and said counsel shall have received all such
counterpart originals or certified or other copies of such documents as it or
they may reasonably request.
(j) The Buyer shall have received written evidence, in form
and substance satisfactory to the Buyer, of the consent to the transactions
contemplated by this Agreement of all governmental, quasi-governmental and
private third parties (including, without limitation, persons or other entities
leasing real or personal property to the Company), except where the failure to
have obtained any such consent would not have an adverse effect on the Company
following the Closing.
(k) In the course of the Buyer's due diligence investigation
of the Company, which due diligence investigation period shall terminate on
November 30, 1997 the Buyer shall not have uncovered any information which would
cause the Stockholder's or the Company's representations and warranties
contained herein to be untrue or misleading in any material respect and that
would have a material adverse effect on the Company.
(l) The Escrow Agent shall have received, on or before
November 30, 1997, from the Stockholder and the Buyer and Hernan Streeter Rios a
mutual release (the "Mutual Release"), in form and substance as attached hereto
as Exhibit C.
(m) As of the Closing Date, the Escrow Agent shall have
received the Iusacell Agreement executed by the Stockholder and Iusacell.
(n) The Buyer shall have consummated a private placement
through PaineWebber Incorporated of Units consisting of Notes and Warrants
resulting in gross proceeds to the Buyer of at least $50,000,000.
(o) On or before November 30, 1997 the Escrow Agent shall have
received from the Stockholder waiver from Sergio Munoz, Inversiones Santa Teresa
Ltda., Grupo Iusacell, and any other current stockholder of the Company, of
preferential rights to subscribe for additional shares of Company Common Stock.
(p) As of the Closing Date, the Escrow Agent shall have
received the Guaranty, Indemnification and Assumption of Obligation in form and
substance as attached hereto as Exhibit D.
20
<PAGE> 27
ARTICLE VIII
SURVIVAL
Section 8.01 Survival of Representations and Warranties of the
Stockholder. Notwithstanding any right of the Buyer fully to investigate the
affairs of the Company, and notwithstanding any knowledge of facts determined or
determinable by the Buyer pursuant to such investigation or right of
investigation, the Buyer has the right to rely fully upon the representations,
warranties, covenants and agreements of the Stockholder contained in this
Agreement, or in any certificate delivered pursuant to any of the foregoing. All
such representations, warranties, covenants and agreements shall survive the
execution and delivery of this Agreement and the Closing hereunder, and, except
as otherwise specifically provided in this Agreement and, except for all
representations and warranties of the Stockholder contained in Article IV, shall
thereafter terminate and expire (i) on June 30, 1998, with respect to any
General Claim (as herein defined) based upon, arising out of or otherwise in
respect of any fact, circumstance, action or proceeding of which the party
asserting such claim shall not have given notice on or prior to June 30, 1998 to
the party against which such General Claim is asserted, at which time an amount
equal to $200,000 less the amount of any Losses and (ii) on June 30, 1998, with
respect to any Tax Claim (as herein defined) based upon, arising out of or
otherwise in respect of any fact, circumstance, action or proceeding of which
the party asserting such claim shall not have given notice on or prior to June
30, 1998 to the Stockholder. As used in this Agreement, the following terms have
the following meanings:
(i) "General Claim" means any claim (other than
a Tax Claim) based upon, arising out of or otherwise in respect of any
inaccuracy in or any breach of any representation, warranty, covenant or
agreement of each of the Stockholder and Streeter contained in this Agreement.
(ii) "Tax Claim" means any claim based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of any
representation or warranty of each of the Stockholder or Streeter contained in
Section 3.08 of this Agreement related to Taxes.
ARTICLE IX
INDEMNIFICATION
Section 9.01 Obligation of the Stockholder to Indemnify.
(i) Subject to the limitations contained in
Article VIII and Article IX hereof, the Stockholder agrees to indemnify, defend
and hold harmless the Buyer (and its directors, officers, affiliates, successors
and assigns) from and against all losses, liabilities, damages, deficiencies,
costs or expenses (including interest, penalties and reasonable attorneys' fees
and disbursements, but offset by any proceeds from insurance and taking into
account any tax savings to the Buyer or the Company resulting from such losses,
liabilities, damages, deficiencies, costs or expenses) ("Losses") based upon,
arising out of or otherwise in respect of any breach of any representation,
warranty, covenant or agreement of each of the Stockholder.
(ii) The Stockholder agrees to indemnify, defend
and hold harmless the Buyer (and its directors, officers, affiliates, successors
and assigns) from and against any Losses based upon, arising out of or otherwise
in respect of any breach of any representation or warranty of each of the
Stockholder contained in Article IV or in any document or other papers delivered
pursuant to Article IV.
Section 9.02 Obligation of the Buyer to Indemnify. The Buyer agrees to
indemnify, defend and hold harmless the Company and the Stockholder from and
against any Losses based upon, arising out of or otherwise in respect of any
breach of any representation, warranty, covenant or agreement of the Buyer
contained in this Agreement.
21
<PAGE> 28
Section 9.03 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt by
any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would or might give rise to a claim
or the commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to Section 9.01 or
9.02 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within thirty (30) days (or sooner, if the nature
of the Asserted Liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee shall cooperate, at the expense of the Indemnifying
Party, in the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify the Indemnitee of its election as herein provided or contests
its obligation to indemnify under this Agreement, the Indemnitee may pay,
compromise or defend such Asserted Liability. Notwithstanding the foregoing,
neither the Indemnifying Party nor the Indemnitee may settle or compromise any
claim over the objection of the other, provided, however, that consent to
settlement or compromise shall not be unreasonably withheld. In any event, the
Indemnitee and the Indemnifying Party may participate, at their own expense, in
the defense of such Asserted Liability. If the Indemnifying Party chooses to
defend the claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are necessary or
appropriate for such defense.
Section 9.04 Limitations on Indemnification. The indemnification
provided for in Section 9.01 shall be subject to the following limitations:
(i) The Stockholder shall not be obligated to
pay any amounts for indemnification under this Article IX arising out of any
Losses based upon, arising out of or otherwise in respect of any breach
disclosed in writing to the Buyer and specifically waived in writing by the
Buyer prior to the Closing; and
(ii) The Buyer shall not be obligated to pay any
amounts for indemnification under this Article IX arising out of any losses
based upon, arising out of or otherwise in respect of any breach disclosed in
writing to the Stockholder's Representative and specifically waived in writing
by the Stockholder prior to the Closing.
ARTICLE X
POST-CLOSING OBLIGATIONS
Section 10.01 Further Assurances. Following the Closing, in addition to
the actions contemplated by Article II hereof, the Stockholder, and the Buyer
shall execute and deliver such documents, and take such other action, as shall
be reasonably requested by any other party hereto to carry out the transactions
contemplated by this Agreement including, without limitation, obtaining the
registration of 99.9% the Company Common Stock with the Superintendencia de
Valores y Seguros as of November 30, 1997.
Section 10.02 Publicity. None of the parties hereto shall issue or
make, or cause to have issued or made, any public release or announcement
concerning this Agreement or the transactions
22
<PAGE> 29
contemplated hereby, without the advance approval in writing of the form and
substance thereof by each of the other parties, and the parties shall endeavor
jointly to agree on the text of any announcement or circular so approved or
required.
Section 10.03 Access to Records. From and after the Closing, (i) each
of the Stockholder shall (A) permit the Buyer and its authorized employees,
agents, accountants, legal counsel and other representatives to have access to
the books, records, files, agreements and other information in the possession of
the Stockholder or their respective Affiliates, and (B) use his best efforts to
permit the Buyer and its authorized employees, agents, accountants, legal
counsel and other representatives to have access to the employees, counsel,
accountants and other representatives of the Stockholder and their respective
Affiliates, in each case, to the extent and at all times reasonably requested by
the Buyer for the purpose of investigating or defending any claim made against
the Stockholder, the Company in connection with periods ending on or before the
Closing Date and (ii) the Buyer shall use its best efforts to permit the
Stockholder and their respective authorized employees, agents, accountants,
legal counsel and other representatives to have access to the employees,
counsel, accountants and other representatives of the Buyer, the Company and
their Affiliates, in each case, to the extent and at all time reasonably
requested by the Stockholder, or any of them, for the purpose of investigating
or defending any claim made against the Stockholder in connection with Article
IX.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Costs and Expenses. Each of the parties to this Agreement
shall bear its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and the transactions
contemplated hereby.
Section 11.02 Notices. Any notice, request, instruction, correspondence
or other document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or by telecopier, as follows:
BUYER: InterAmericas Communications Corporation
1221 Brickell Avenue
Suite 90
Miami, Florida 33131
Attention: Mr. Patricio E. Northland
Telecopy No.: (305) 377-6793
With a copy to:
Baker & McKenzie
701 Brickell Avenue, Suite 1600
Miami, Florida 33131
Attention: Andrew Hulsh, Esq.
Telecopy No.: (305) 789-8953
23
<PAGE> 30
THE COMPANY
OR THE STOCKHOLDER: Iusatel Chile, S.A..
Santa Rosa, 76
Piso 11
Santiago, Chile
Attention: Hernan Streeter Rios
Telecopy No.: (011-562) 635-1255
With a copy to:
Alfonso Silva, Esq.
Carey & Cia. Ltda.
Miraflores / 24th Floor
Santiago, Chile
Telecopy No.: (011-562) 638-4985
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, notices to any party hereto shall not
be deemed effective with respect to such party until such Notice would, but for
this sentence, be effective both as to such party and as to all other persons to
whom copies are provided above to be given.
Section 11.03 Governing Law. The provisions of this agreement and the
documents delivered pursuant hereto shall be governed by and construed in
accordance with the laws of the Republic of Chile.
Section 11.04 Resolution of Disputes. The parties irrevocably submit to
the exclusive jurisdiction of Chile and any dispute in connection with this
Agreement, or any matter originating therefrom, including the interpretation and
validity of this dispute resolution clause, shall be finally settled by
arbitration (arbitraje mixto) in accordance with the Arbitration Rules of the
Santiago de Chile Chamber of Commerce. The proceedings shall be held in Spanish
language in Santiago, Chile, where the award shall be given.
Section 11.05 Representations and Warranties. Each of the
representations and warranties of each of the parties to this Agreement shall be
deemed to have been made at the date hereof and at and as of the Closing Date.
Section 11.06 Entire Agreement, Amendments and Waivers. This Agreement,
together with all exhibits and schedules attached hereto, constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby. No supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (regardless of whether similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
Section 11.07 Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
24
<PAGE> 31
or otherwise, by any party hereto without the prior written consent of the other
party. Nothing in this Agreement, express or implied, is intended to confer upon
any person or entity other than the parties hereto and their respective
permitted successors and assigns, any rights, benefits or obligations hereunder.
Section 11.08 Remedies. The rights and remedies provided by this
Agreement are cumulative, and the use of any one right or remedy by any party
hereto shall not preclude or constitute a waiver of its right to use any or all
other remedies. Such rights and remedies are given in addition to any other
rights and remedies a party may have by law, statute, or otherwise.
Section 11.09 Exhibits and Schedules. The exhibits and schedules
referred to herein are attached hereto and incorporated herein by this
reference. Disclosure of a specific item in any one schedule shall be deemed
restricted only to the Section to which such disclosure specifically relates
except where there is an explicit cross-reference to another Schedule.
Section 11.10 Multiple Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 11.11 References. Whenever required by the context, and is used
in this Agreement, the singular number shall include the plural and pronouns and
any variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identification the person may require.
References to monetary amounts and specific named statutes are intended to be
and shall be construed as references to United States dollars and statutes of
the United States of the stated name, respectively, unless the context otherwise
requires.
Section 11.12 Survival. Any provision of this Agreement which
contemplates performance or the existence of obligations after the Closing Date,
and any and all representations and warranties set forth in this Agreement,
shall not be deemed to be merged into or waived by the execution and delivery of
the instruments executed at the Closing, but shall expressly survive Closing and
shall be binding upon the party or parties obligated thereby in accordance with
the terms of this Agreement, subject to any limitations expressly set forth in
this Agreement and under applicable law.
ARTICLE XII
DEFINITIONS
Capitalized terms used in this Agreement shall have the respective
meanings ascribed to such terms in this Article XII, unless otherwise defined in
this Agreement.
Section 12.01 Affiliate. The term "Affiliate" shall mean, with respect
to any Person, any other Person controlling, controlled by or under common
control with such Person. The term "Control" as used in the preceding sentence
means, with respect to a corporation, the right to exercise, directly or
indirectly, more than fifty percent (50%) of the voting rights attributable to
the shares of the controlled corporation and, with respect to any Person other
than a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person.
Section 12.02 Ancillary Documents. The term "Ancillary Documents" shall
mean any or all of the following agreements, the forms of which are attached
hereto as exhibits to this Agreement as indicated in parentheses:
(a) the Escrow Agreement;
25
<PAGE> 32
(b) The Mutual Release;
(c) Guaranty, Indemnification and Assumption of Obligations of
Hernan Streeter Rios; and
(d) Letter of Resignation of Hernan Streeter Rios.
Section 12.03 Damages. The term "Damages" shall mean any and all
damages, liabilities, obligations, penalties, fines, Judgments, claims,
deficiencies, losses, costs, expenses and assessments (including without
limitation income and other taxes, interest, penalties and attorneys' and
accountants' fees and disbursements).
Section 12.04 Governmental Authorities. The term "Governmental
Authorities" shall mean any nation or country (including but not limited to the
United States and Chile) and any commonwealth, territory or possession thereof
and any political subdivision of any of the foregoing, including but not limited
to courts, departments, commissions, boards, bureaus, agencies, ministries or
other instrumentalities.
Section 12.05 Knowledge. The term "Knowledge" shall mean the actual
knowledge of a party or, in the case of the Company or the Buyer, any of their
respective directors or executive officers (and, in the case of the Company, the
directors and executive officers of the Subsidiary) with respect to the
representation being made, and such knowledge of any such persons as reasonably
should have obtained upon due investigation and inquiry into the representation
being made.
Section 12.06 Legal Requirements. The term "Legal Requirements", when
described as being applicable to any Person, shall mean any and all laws
(statutory, judicial or otherwise), ordinances, regulations, judgments, orders,
directives, injunctions, writs, decrees or awards of, and any Contracts with,
any Governmental Authority, in each case as and to the extent applicable to such
Person or such Person's business, operations or Properties.
Section 12.07 Permits. The term "Permits" shall mean any and all
permits, concessions, authorizations or orders under any Legal Requirement or
otherwise granted by any Governmental Authority.
Section 12.08 Used. The term "Used" shall mean, with respect to the
Properties, Contracts or Permits of the Company, those owned, leased, licensed
or otherwise held by the Company which were acquired for use or held for use by
the Company in connection with the Company's 's business and
26
<PAGE> 33
operations, whether or not reflected on the Company's books of account.
EXECUTED as of the date first written above.
BUYER:
------
INTERAMERICAS COMMUNICATIONS CORPORATION
By: /s/ Patricio E. Northland
-----------------------------------------
Patricio E. Northland, President
STOCKHOLDER'S REPRESENTATIVE:
-----------------------------
By: /s/ Hernan Streeter Rios
-----------------------------------------
Name: Hernan Streeter Rios
---------------------------------------
Title: Stockholder's Representative
--------------------------------------
STOCKHOLDER:
------------
INVERSIONES DRUMA, S.A.
By: /s/ Hernan Streeter Rios
-----------------------------------------
Name: Hernan Streeter Rios
---------------------------------------
Title: President
--------------------------------------
27
<PAGE> 34
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement is made and entered into this ____ day of
____________, 1997, by and among INTERAMERICAS COMMUNICATIONS CORPORATION, a
Texas corporation ("Buyer"), INVERSIONES DRUMA, S.A., a Chilean corporation
("Stockholder") and CITIBANK, N.A., Santiago, Chile branch (the "Escrow Agent").
RECITALS
A. On September 9, 1997, the Buyer and Stockholder executed that
certain Stock Purchase Agreement (the "Stock Purchase Agreement") relating to
the purchase and sale of 99.9% of the issued and outstanding shares of common
stock (the "Company Common Stock") of IUSATEL Chile, S.A., a corporation
organized and existing under the laws of the Republic of Chile (the "Company").
B. The Buyer and Stockholder desire to close the transactions
contemplated by the Stock Purchase Agreement in escrow as herein provided.
C. All capitalized terms used herein and not otherwise defined shall
have the meaning given to them in the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the sum of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto mutually agree as follows:
TERMS:
1. Recitals. The foregoing Recitals are true and correct and are hereby
incorporated herein by reference.
2. Appointment. Stockholder and Buyer hereby appoint and designate
Escrow Agent as the Escrow Agent for the purposes set forth herein, and Escrow
Agent hereby accepts such appointment. Escrow Agent acknowledges having received
(i) the originals of the following documents (collectively, the "Buyer's Closing
Documents"):
(a) an executed counterpart of the Stock Purchase Agreement;
(b) a certified copy of all necessary corporate action on the Buyer's
behalf approving its execution, delivery and performance of the Stock Purchase
Agreement pursuant to Section 7.02(a) of the Stock Purchase Agreement;
(c) a certificate executed by an authorized officer of the buyer on
behalf of the Buyer to the effect that the conditions set forth in Sections
7.03(b) and 7.03(c) of the Stock Purchase Agreement have been satisfied;
(d) the executed Escrow Agreement; and
(e) the Mutual Release referred to in Section 7.03(l)
and (ii) the sum of $7,250,000 (the "Escrow Funds") representing (a) the Interim
Purchase Price plus (b) an aggregate amount of $2,000,000 representing
Additional Payment which may be made pursuant to Section 1.03(b) of the Stock
Purchase Agreement. Escrow Agent agrees to hold the Escrow Documents
<PAGE> 35
(which term shall include the Buyer's Closing Documents, the Stockholder's
Closing Documents and Stockholder's Post-Closing Documents as defined below) and
the Escrow Funds in escrow, pursuant to the terms hereof. Buyer and Stockholder
agree that the Escrow Documents shall not be deemed effective until the Escrow
Agent shall have delivered the Escrow Documents to the parties, as provided
herein.
3. Deliveries.
a. Closing Deliveries. Upon receipt by Escrow Agent of the
following original documents on or before October 15, 1997 (collectively, the
"Stockholder's Closing Documents"):
(i) executed counterpart of the Stock Purchase
Agreement;
(ii) the resignation of Hernan Streeter Rios,
effective December 31, 1997, as set forth in
Section 6.10 of the Stock Purchase
Agreement;
(iii) the resignations of all members of the board
directors of the Company as set forth in
Section 7.03(h) of the Stock Purchase
Agreement;
(iv) certified copies of the stock books, stock
ledgers and minute books of the Company;
(v) a certificate executed by the Company to the
effect that the conditions set forth in
Sections 7.03(b), (d), (e) and (g) of the
Stock Purchase Agreement, have been
satisfied as of the Closing Date;
(vi) evidence of the consents required of
Stockholder, if any, pursuant to Section
7.03(d) of the Stock Purchase Agreement;
(vii) wire transfer instructions for the payment
of the Interim Purchase Price to the
Stockholder;
(viii) delivery of the audited August 1997 Balance
Sheet;
(ix) assignment and transfer documents (Traspaso
de Acciones) transferring all of
Stockholder's rights in the 99.9% of the
issued and outstanding shares of the Company
Common Stock;
(x) a written agreement between the Stockholder
and Grupo Iusacell S.A. de C.V. pursuant to
Section 6.11 of the Stock Purchase
Agreement;
(xi) executed counterpart of the Escrow Agreement
as set forth in Section 7.01(c); and
(xii) Guaranty, Indemnification and Assumption of
Obligations of Hernan Streeter Rios.
The Escrow Agent shall (a) deliver one original counterpart of the Stock
Purchase Agreement (with schedules and exhibits, if any) to each of Streeter,
Stockholder and Buyer, and (b) deliver the Buyer's Closing Documents to the
Stockholder; and (c) deliver the Stockholder's Closing Documents to the Buyer.
If the Escrow Agent shall not have received all of the
Stockholder's Closing Documents, the Buyer's Closing Documents or the Escrow
Funds on or before October 15, 1997, the Escrow Agent shall return (i) the
Buyer's Closing Documents to the Buyer, (ii) the Stockholder's Closing Documents
delivered to it, if any, to the Stockholder, and (iii) the Escrow Funds to the
Buyer.
2
<PAGE> 36
b. Post-Closing Deliveries.
(i) On or before November 30, 1997, and upon receipt by
the Escrow Agent from the Stockholder of (a certificates representing 99.9% of
the issued and outstanding shares of the Company Common Stock, together with the
transfer and assignment documents (Traspaso de Acciones), duly registered with
the Superintendencia de Valores y Seguros of the Republic of Chile; (b) evidence
of waiver of preferential rights to subscribe for shares of Company Common Stock
from each of Sergio Munoz, Inversiones Santa Teresa Ltda, Grupo Iusacell S.A. de
C.V. and any other current stockholder of the Company; (c) certificates executed
by the Company to the effect that the conditions set forth in Sections 7.03(a)
through 7.03(g) have been satisfied as of on or before November 30, 1997; (d)
opinion of counsel reasonable satisfactory to Buyer and Stockholder as set forth
in Section 7.03(f); and (e) the Mutual Release between the Stockholder, Hernan
Streeter and Buyer pursuant to Section 7.03(f) (the "Stockholder's Post-Closing
Document"), the Escrow Agent shall release the Interim Purchase Price portion of
the Escrow Funds to the Stockholder.
If the Escrow Agent shall not have received the Stockholder's
Post-Closing Documents on or before November 30, 1997, the Escrow Agent shall
return (i) the Escrow Funds to the Buyer and (ii) the Post-Closing Documents to
Stockholder.
(ii) Upon receipt by the Escrow Agent of the Additional
Payment Notice from the Buyer or the written determination by the Settlement
Accountants of the Additional Payment, and if any such Additional Payment is due
thereunder, as the case may be, and subject to the delivery of Stockholder's
Post-Closing Documents pursuant to 3(b)(i) above, the Escrow Agent shall deliver
to the Stockholder the Additional Payment, if any, pursuant to Section 1.03(c)
of the Stock Purchase Agreement and return the difference between the Additional
Payment, if any, and the $2,000,000 portion of the Escrow Funds to Buyer.
4. Investment; No Duties. Pending receipt of the documents described in
Section 3 above, Escrow Agent shall deposit the Escrow Funds in an interest
bearing account at CITIBANK N.A., Santiago, Chile branch. All interest accrued
on the Escrow Funds shall become part of the Escrow Funds for all purposes
hereunder. The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein and no implied duties or obligations shall be read
into this Agreement against the Escrow Agent.
5. The Escrow Agent may act in reliance upon any writing or instrument
or signature which it believes to be genuine, may assume the validity and
accuracy of any statements or assertions contained in such writing or
instrument, and may assume that any person purporting to give any writing,
notice, advice or instruction in connection with the provisions hereof has been
duly authorized to do so. The Escrow Agent shall not be liable in any manner for
the sufficiency or correctness as to form, manner of execution or validity of
any written instructions delivered to it, nor as to the identity, authority or
rights of any person executing the same. The duties of the Escrow Agent
hereunder shall be limited to the safekeeping of the Escrow Documents and the
Escrow Funds and the delivery or the disbursements of the same in compliance
with the provisions of Section 3 above. Upon the Escrow Agent delivering and
releasing the Escrow Documents and Escrow Funds in accordance with the
provisions hereof, the Escrow Agreement shall terminate, and Escrow Agent shall
thereafter be released and relieved of all responsibility hereunder in
connection therewith.
6. The Escrow Agent may consult with counsel of its own choice and
shall have full and complete authority and protection for any action taken or
suffered by it hereunder in accordance with the advice of such counsel. The
Escrow Agent shall not be liable for any mistakes of fact or errors of judgment,
or for any acts or omissions of any kind, of for any mistakes of fact or law,
unless caused by its gross negligence or willful misconduct.
3
<PAGE> 37
7. The Buyer and the Stockholder hereby agree, jointly and severally,
to indemnify and hold the Escrow Agent harmless from any and all claims,
demands, causes of action, liabilities, damages and judgments, including the
cost of defending any action against it, together with any reasonable attorneys'
fees incurred therewith, or any other expenses, fees, or charges of any kind or
nature, in connection with Escrow Agent's undertaking pursuant to the terms and
conditions of this Escrow Agreement, unless resulting from the negligence or
willful misconduct of the Escrow Agent. The Escrow Agent shall be vested with a
lien on all property deposited hereunder, for indemnification, for attorneys'
fees, court costs, in connection with any suit, interpleader or otherwise, or
any other expenses, fees or charges of any character or nature, which may be
incurred by the Escrow Agent until and unless such expenses, fees and charges
shall be fully paid.
8. In the event of any disagreement regarding the interpretation of
this Agreement, or the rights and obligations of the Buyer or the Stockholder,
or the propriety of any action contemplated to be taken by the Escrow Agent
hereunder, the Escrow Agent may, in its sole discretion, continue to hold the
Escrow Documents and Escrow Funds until such time as the Stockholder and the
Buyer mutually agree upon the delivery or other disposition thereof or file an
action in interpleader to resolve such disagreement. The Escrow Agent shall be
indemnified by Buyer and Stockholder for all costs in equal proportion in
connection with the aforementioned interpleader action, and shall be fully
protected in suspending all or a part of its activities under this Agreement
until a final judgment in the interpleader action is received.
9. The rights created by this Agreement shall inure to the benefit of,
and the obligations created hereby shall be binding upon, the successors and
assigns of each of the parties hereto.
10. This Agreement may be modified only by a written amendment signed
by all parties hereto.
11. This Agreement shall be construed and enforced according to the
laws of the Republic of Chile.
12. Resolution of Disputes. The parties irrevocably submit to the
exclusive jurisdiction of Chile and any dispute in connection with this Escrow
Agreement, or any matter originating therefrom, including the interpretation and
validity of this dispute resolution clause, shall be finally settled by
arbitration (arbitraje mixto) in accordance with the Arbitration Rules of the
Santiago de Chile Chamber of Commerce. The proceedings shall be held in the
Spanish language in Santiago, Chile, where the award shall be given.
13. Notices. Any notice required to be sent hereunder by any of the
parties hereto shall in every case mean written notice, which shall be delivered
(a) in person by courier, (b) by mailing such notice by registered or certified,
first class mail, return receipt requested, or (c) by telecopier or similar
method of electronic telecommunication, in each case addressed to the addresses
of the parties set forth below, and the same shall be effective as of the date
which such notice is received by the party to whom such notice is sent:
If to Buyer: InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, Florida 33131
Attn: Mr. Patricio E. Northland
Chairman of the Board, President and
Chief Executive Officer
Fax: (305) 377-6791
With a Copy to: Baker & McKenzie
701 Brickell Avenue, Suite 1600
Miami, Florida 33131
4
<PAGE> 38
Attn: Mr. Andrew Hulsh, Esq.
Fax: (305) 789-8953
If to Stockholder: Iusatel Chile, S.A.
Santiago, Chile
Attn: Mr. Hernan Streeter
Fax: (562) 360-2893
With a Copy to: Alfonso Silva, Esq.
Carey y Cia. Ltda.
Miraflores/24th Floor
Santiago, Chile
Fax: (011-562) 638-4839
If to Escrow Agent: CITIBANK, N.A.
Santiago, Chile
Attn: __________________
Fax: (___) ______________
IN WITNESS WHEREOF, the parties have executed this Agreement this _____
day of September, 1997.
BUYER:
INTERAMERICAS COMMUNICATIONS CORPORATION,
a Texas corporation
By:
-----------------------------------------
STOCKHOLDER:
INVERSIONES DRUMAS, S.A.
By:
-----------------------------------------
--------------------------------------------
ESCROW AGENT:
CITIBANK, N.A., Santiago, Chile Branch
By:
-----------------------------------------
5
<PAGE> 39
EXHIBIT B
[LETTERHEAD OF HERNAN STREETER RIOS]
December 31, 1997
Board of Directors
Iusatel Chile S.A.
Santiago, Chile
Dear Sirs:
I hereby tender my resignation as General Manager of Iusatel Chile S.A.
(the "Company"). I also hereby waive, to the fullest extent permitted by Chilean
law, all my rights to any termination and severance payments due to me under any
employment agreement or agreements or any other understandings between the
Company and myself.
Sincerely,
Hernan Streeter Rios
<PAGE> 40
EXHIBIT C
MUTUAL RELEASE
THIS MUTUAL RELEASE (the "Agreement") is made and entered into as of
this ___ day of _________, 1997, by and between InterAmericas Communications
Corporation ("ICCA"), Inversiones Druma S.A. ("Stockholder") and Hernan Streeter
Rios ("Streeter").
A. WHEREAS, Streeter is a beneficial owner of substantially all of the
shares of stock of Inversiones Druma S.A. (the "Stockholder").
B. WHEREAS, pursuant to a Stock Purchase Agreement of even date
herewith (the "Stock Purchase Agreement"), ICCA will purchase (the "Stock
Purchase") 99.9% of the issued and outstanding shares of Common Stock (the
"Company Common Stock") of Iusatel Chile S.A. (the "Company").
C. WHEREAS, in consideration of the Stock Purchase, ICCA, Stockholder
and Streeter desire to release the other from certain claims or obligations they
or it now or hereafter may have against the other, upon the terms, and subject
to the conditions, hereinafter set forth and ICCA further desires to indemnify
Streeter and hold him harmless from any claims of Maroon Bells Capital Partners,
Inc., its subsidiaries, or direct or indirect affiliates, officers, directors or
employees.
NOW, THEREFORE, the parties hereto agree as follows:
1. INCORPORATION OF RECITALS. The recitals contained in Paragraphs A
through C are incorporated by reference herein as if at this point set forth in
full.
2. ICCA RELEASE AND INDEMNIFICATION. ICCA and its respective assigns,
transferees, directors, officers, employees, servants, successors, agents,
attorneys and representatives, and each of them, release and forever discharge
the Stockholder, Streeter and their respective assigns, transferees,
subsidiaries, directors, officers, employees, servants, successors, agents,
attorneys and representatives of and from any and all claims, demands, damages,
debts, liabilities, actions, causes of action, suits, contracts, controversies,
agreements, accounts, reckonings, obligations and judgments, whether in law or
equity, which the parties to this Agreement or any of them now have, own or
hold, or at any time previously ever had, owned or held, or could, shall, or may
later have, own or hold, whether personal, representatively, derivatively or
otherwise, based upon, related to, or by reason of any action, contract
(express, implied in fact, implied in law, or otherwise), lien, liability, law,
matter, cause, action, lawsuit, fact, thing, act, omission or whatever occurring
or existing at any time previously and to and including the date of this
Agreement, including without limitation, any claim, obligation or liability for
or on account of any and all matters which are or might have been the subject
matters which are or might have been referred to, or in any way involved with,
Streeter or Stockholder. Notwithstanding the foregoing, the release set forth in
this Section 2 shall not apply to any claims now existing or which may hereafter
arise (i) under the Stock Purchase Agreement or (ii) under the Guaranty,
Indemnification and Assumption of Obligations of even date herewith executed by
Hernan Streeter Rios in connection with the Stock Purchase Agreement. Further,
ICCA shall indemnify Streeter and Inversiones Druma S.A. and hold them harmless
from any claims, demands, damages, debts, liabilities, actions, causes of
action, suits, contracts, controversies, agreements, accounts, reckonings,
obligations and judgments, whether in law or in equity, asserted against him by
Maroon Bells Capital Partners, Inc. its subsidiaries, indirect or direct
affiliates, officers, directors or employees.
3. STREETER AND STOCKHOLDER RELEASE. The Stockholder and Streeter and
their respective assigns, transferees, directors, officers, employees, servants,
successors, agents, attorneys and representatives, and each of them, release and
forever discharge ICCA and its respective assigns, transferees, subsidiaries,
directors, officers, employees, servants, successors, agents, attorneys and
representatives of and from any and all claims, demands, damages, debts,
liabilities, actions, causes of
<PAGE> 41
action, suits, contracts, controversies, agreements, accounts, reckonings,
obligations and judgments, whether in law or equity, which the parties to this
Agreement or any of them now have, own or hold, or at any time previously ever
had, owned or held, or could, shall, or may later have, own or hold, whether
personal, representatively, derivatively or otherwise, based upon, related to,
or by reason of any action, contract (express, implied in fact, implied in law,
or otherwise), lien, liability, law, matter, cause, action, lawsuit, fact,
thing, act, omission or whatever occurring or existing at any time previously
and to and including the date of this Agreement, including without limitation,
any claim, obligation or liability for or on account of any and all matters
which are or might have been the subject matters which are or might have been
referred to, or in any way involved with, ICCA, and its respective subsidiaries,
officers, directors or employees. Notwithstanding the foregoing, the Release set
forth in this Section 3 shall not apply to any claims now existing or which may
arise under the Stock Purchase Agreement.
4. INTENTION OF THE PARTIES. It is the intention of the parties in
executing this Agreement that it shall be effective as a full and final accord
and satisfactory release of each and every matter herein specifically or
generally referred to.
Each of the parties hereto waive and relinquish any rights and benefits
which they have or may have under any statute or law which limits the release of
unknown claims, to the full extent that they may lawfully waive all such rights
and benefits pertaining to the subject matter of this Agreement. Each of the
parties hereto acknowledge that they are aware that they may later discover
facts in addition to or different from those which they now know or believe to
be true with respect to the subject matter of this Agreement, but it is their
respective intention to fully and finally forever settle and release any and all
matters, disputes and differences, known and unknown, suspected and unsuspected,
which now exist, may later exist or may previously have existed between them, in
each case only with respect to the matters set forth in Sections 2 and 3 of this
Agreement, and that in furtherance of this intention, the releases given in this
Agreement shall be and remain in effect as full and complete general releases
notwithstanding discovery or existence of any such additional or different
facts.
5. REPRESENTATIONS BY THE PARTIES. Each of the parties warrants and
represents to the others that none of them has assigned or transferred or
purported to assign or transfer to any person not a party to this Agreement any
matter or any part or portion of any matter covered by this Agreement, and each
of them agrees to indemnify and hold harmless the others from and against any
claim, demand, damage, debt, liability, account, reckoning, obligation, cost,
expense, lien, action or cause of action (including attorneys' fees and costs
paid or incurred) based upon or in connection with or arising out of any such
assignment or transfer or purported or claimed assignment of transfer.
6. NO ADMISSION. The execution of this Agreement effects the settlement
of claims which are contested and denied. Nothing contained in this Agreement
shall be construed as an admission by any part of any liability of any kind to
the other parties. Each party acknowledges that the others expressly deny that
any of them is in any way liable or obligated to the others.
7. ENTIRE AGREEMENT. This Agreement and the Stock Purchase Agreement
and the Ancillary Documents (as defined in the Stock Purchase Agreement), (the
"Documents") contain the entire understanding of the parties; there are no
representations, covenants or undertakings other than those expressly set forth
in the Documents. Each party acknowledges that no other party or any agent or
attorney of any other party has made any promise, representation or warranty
whatsoever, express, implied or statutory, other than those contained in any of
the Documents, to induce them to execute this Agreement. The parties acknowledge
that they have not executed this Agreement in reliance upon any such promise,
representation or warranty not specifically contained in any of the Documents.
8. BINDING ON SUCCESSORS. This Agreement and the covenants and
conditions contained in it shall apply to, be binding upon and inure to the
benefit of the respective heirs, administrators, executors, legal
representatives, assigns, successors and agents of each of the parties.
<PAGE> 42
9. SEVERABILITY. The provisions of this Agreement are severable; should
any provision for any reason be held to be unenforceable, the remaining
provisions shall nonetheless be of full force and effect.
10. GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the Republic of Chile.
11. ARBITRATION. The parties irrevocably submit to the exclusive
jurisdiction of Chile and any dispute in connection with this Agreement, or any
matter originating therefrom, including the interpretation and validity of this
dispute resolution clause, shall be finally settled by arbitration (arbitraje
mixto) in accordance with the Arbitration Rules of the Santiago de Chile Chamber
of Commerce. The proceedings shall be held in the Spanish language in Santiago,
Chile, where the award shall be given.
12. JOINT PREPARATION. This Agreement is to be deemed to have been
jointly prepared by the parties, and any uncertainty or ambiguity in it shall
not be interpreted against any of the parties, but according to the application
of the rules of interpretation of contracts.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
--------------------------------------------
HERNAN STREETER RIOS
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
-----------------------------------------
Its:
----------------------------------------
INVERSIONES DRUMA S.A.
By:
-----------------------------------------
Its:
----------------------------------------
<PAGE> 43
EXHIBIT D
GUARANTY, INDEMNIFICATION AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY, INDEMNIFICATION AND ASSUMPTION OF OBLIGATIONS is given
this ____ day of _____________, 1997 by Hernan Streeter Rios.
In consideration of, and as an inducement to, the execution of that
certain STOCK PURCHASE AGREEMENT of even date herewith (the "Agreement") by
INTERAMERICAS COMMUNICATIONS CORPORATION (the "Buyer") and INVERSIONES DRUMA
S.A., the undersigned hereby personally and unconditionally guarantees to the
Buyer, and its successors and assigns, for the term of the Agreement and
thereafter as provided in the Agreement, that the undersigned agrees to be
personally bound by, and personally liable for the breach by Inversiones Druma
S.A. of, each and every provision in the Agreement and any amendments thereto
imposing a monetary obligation or an obligation to take or refrain from taking
specific actions or to engage or refrain from engaging in specific activities,
including without limitation the provisions of Articles I, II, III, IV, VI,
VIII, IX and X of the Agreement.
The undersigned waives: (1) acceptance and notice of acceptance by the
Buyer of the foregoing undertakings; (2) notice of demand for payment of any
indebtedness or nonperformance of any obligations hereby guaranteed; (3) protest
and notice of default to any party with respect to the indebtedness or
nonperformance of any obligations hereby guaranteed; (4) any right he may have
to require that an action be brought against any other person as a condition of
liability; (5) any and all other notices; and (6) all defenses thereto.
The undersigned agrees to indemnify and hold each of the Buyer, the
Company, their respective subsidiaries, affiliates, officers, directors and
employees (the "Indemnified Parties") harmless of and from any claims, demands,
damages, debts, liabilities, actions, causes of actions, suits, contracts
controversies, agreements, accounts, reckonings, obligations and judgments any
current or former shareholder of the Company may have against any or all of the
Indemnified Parties.
The undersigned consents and agrees that: (1) his direct and immediate
liability under this Guaranty, Indemnification and Assumption of Obligations
shall not be contingent or conditioned upon pursuit by the Buyer of any remedies
against any other person; and (2) such liability shall not be diminished,
relieved or otherwise affected by (i) assignment of the Agreement to a
corporation or partnership which controls, is controlled by or is under common
control with the undersigned, or (ii) any extension of time, credit or other
indulgence which the Buyer may from time to time grant to the undersigned or to
any other person, including without limitation the acceptance of any partial
payment or performance, or the compromise or release of any claims, none of
which shall in any way modify or amend this Guaranty, which shall be continuing
and irrevocable during the term of the Agreement.
This Guaranty, Indemnification and Assumption of Obligations shall be
interpreted and construed under the laws of the Republic of Chile.
If a dispute arises concerning the validity or the enforceability of
this Guaranty, Indemnification and Assumption of Obligations or any provision
thereof, and such dispute shall not be resolved within thirty (30) days after
either party shall notify the other in writing of such dispute, then such
dispute shall be submitted for arbitration on demand of either party. The
parties irrevocably submit to the exclusive jurisdiction of Chile and any
dispute in connection with this Guaranty, Indemnification and Assumption of
Obligations, or any matter originating therefrom, including the interpretation
and validity of this dispute resolution clause, shall be finally settled by
arbitration (arbitraje mixto) in accordance with the Arbitration Rules of the
Santiago de Chile Chamber of Commerce. The proceedings shall be held in Spanish
language in Santiago, Chile, where the award shall be given. The undersigned
consents and agrees that
<PAGE> 44
Buyer may bring a collection action regarding any award or judgment obtained
against him hereunder within the country and judicial district in which the
undersigned may have assets, now or in the future, and waives all questions of
personal jurisdiction or venue to this effect.
This Guaranty, Indemnification and Assumption of Obligations shall
remain in full force and effect during the term of the Agreement. Upon
termination or expiration of the Agreement, the undersigned's obligation and
liabilities shall cease, except for those obligations and liabilities which
arose on or prior to such termination or which shall survive the termination of
the Agreement. These undertakings set forth in this Guaranty, Indemnification
and Assumption of Obligations shall also continue in effect notwithstanding the
Mutual Release executed between Hernan Streeter Rios, the Stockholder and the
Buyer. The obligations under such Mutual Release shall remain in full force and
effect according to their terms until satisfied or discharged by the parties
thereto. Upon the death of the undersigned, the estate of the guarantor shall be
bound by this Guaranty in accordance with the terms hereof.
IN WITNESS WHEREOF, the undersigned has hereunto affixed his signature
on the same day and year as the Agreement was executed.
--------------------------------------------
Hernan Streeter Rios
2
<PAGE> 1
EXHIBIT 20.1
[INTERAMCOM LETTERHEAD]
- --------------------------------------------------------------------------------
IMMEDIATE RELEASE Contact: Doug Geib, Chief Financial Officer
- ----------------- InterAmericas Communications
(305) 377-6790
Jean Woodcock
Rubin Barney & Birger
(305) 448-7450
INTERAMERICAS COMMUNICATIONS CORP. SIGNS
DEFINITIVE AGREEMENT TO ACQUIRE IUSATEL
LONG DISTANCE CARRIER IN CHILE
MIAMI - September 10, 1997 - InterAmericas Communications Corporation
("ICCA" -- Nasdaq Small Cap symbol "IntAComm"), a Miami-based provider of
telecommunications services in Latin America, announced today that it has signed
a definitive purchase agreement to acquire Iusatel, a long distance carrier
based in Santiago, Chile. Iusatel currently provides national and international
long distance services in Chile through its own International Gateway switch and
satellite earth station as well as through interconnection with other Chilean
long distance carriers.
The Company's CEO, Patricio Northland, commented, "This acquisition
continues to reinforce ICCA's business strategy of providing one-stop shopping
for all of our business customers in Chile. Iusatel's special access, enhanced
data, and local and long distance services offers both companies excellent cross
selling opportunities and other synergies."
The Company's CFO, Douglas G. Geib II, indicated that "ICCA agreed to
pay up to $7.25 million for Iusatel, $2 million of which is contingent on
Iusatel achieving certain earnings thresholds. ICCA intends to finance the
acquisition with part of the proceeds from and expected private placement of
approximately $100 million high yield debt." Iusatel reported approximately $8.1
million of operating revenues and $8 million of total assets as of and for the
year ended December 31, 1996. The transaction is expected to close in 45 to 60
days and is contingent on certain items, including satisfactory completion of
due diligence and regulatory approvals.
InterAmericas Communications is a growing provider of business to
business telecommunications services in Santiago, Chile and Lima, Peru. ICCA
currently provides these services through a 120 kilometer digital fiber optic
network in Santiago and a 50-kilometer digital fiber optic network in Lima. The
Company expects to expand its Lima, Peru fiber optic network to 230 kilometers
by the end of 1998. ICCA continues to access opportunities for the acquisition
of additional businesses and concessions that will enable it to rapidly expand
its Latin American network.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM IUSATEL
FINANCIAL STATEMENTS AS OF SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 8-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 89
<SECURITIES> 0
<RECEIVABLES> 1,865
<ALLOWANCES> 0
<INVENTORY> 13
<CURRENT-ASSETS> 2,641
<PP&E> 4,794
<DEPRECIATION> 977
<TOTAL-ASSETS> 6,488
<CURRENT-LIABILITIES> 4,774
<BONDS> 132
0
0
<COMMON> 0
<OTHER-SE> 1,582
<TOTAL-LIABILITY-AND-EQUITY> 6,488
<SALES> 0
<TOTAL-REVENUES> 4,419
<CGS> (3,137)
<TOTAL-COSTS> (3,137)
<OTHER-EXPENSES> (2,595)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (156)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,130)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
