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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
Polish Telephones and Microwave Corporation
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(Name of Issuer)
Common Stock, $.001 par value
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(Title of Class of Securities)
730905 10 6
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(CUSIP Number)
Ralph V. De Martino, Esq.
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, D.C. 20036
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(Name, address and Telephone Number of Person Authorized to Receive Notices and
Communications)
May 20, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: / /
Check the following box if a fee is being paid with the statement: /X/.
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SCHEDULE 13D
CUSIP NO. 730905 10 6
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1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Frank M. DeLape
2. Check the appropriate box if a member of a group (a)/ /
(b)/x/
3. SEC Use only
4. Source of Funds
OO
5. Check Box if disclosure of legal proceedings is required pursuant to items 2(d) or (e) / /
Not applicable
6. Citizenship or place of organization
United States
7. Sole Voting Power
459,375 shares of Common Stock, $.001 par value
Number of Shares
Beneficially 8. Shared voting power
Owned by Not applicable
Each
Reporting 9. Sole dispositive power
Person 459,375 shares of Common Stock, $.001 par value
10. Shared dispositive power
Not applicable
11. Aggregate amount beneficially owned by each reporting person
459,375 shares of Common Stock, $.001 par value
12. Check box if the aggregate amount in row (11) excludes certain shares / /
Not applicable
13. Percent of class represented by amount in row (11)
13.1%
14. Type of reporting person
IN
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Item 1. This statement relates to the Common Stock, $.001 par value, (the
"Common Stock") of Polish Telephones and Microwave Corporation whose
principal executive offices are located at:
433 East Las Callowness Blvd.
Suite 815
Irving, TX 75039
Item 2. The person filing this statement is Frank M. DeLape. His business
address is c/o Benchmark Equity Group, Inc., 16815 Royal Crest Drive,
Suite 160, Houston, Texas 77058. Mr. DeLape is the President and
principal shareholder of Benchmark Equity Group, Inc. During the last
five years, Mr. DeLape has not been convicted in a criminal proceeding
nor was he a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction. Mr. DeLape is a
citizen of the United States.
Item 3. An Agreement and Plan of Merger (the "Agreement") was entered into on
or about April 26, 1996 between Polish Telephones and Microwave
Corporation ("PTMC"), a Texas corporation, PTMC Acquisition Sub, Inc.,
a Delaware corporation, Telereunion, Inc., ("Telereunion"), a Delaware
corporation, and the Stockholders of Telereunion. Pursuant to the
acquisition, on May 20, 1996, PTMC issued an aggregate of 1,605,000
shares of Common Stock, 380,000 shares of Series B Non-Voting,
Non-Participating Preferred Stock, $.001 par value (the "Series B
Preferred Stock") with an aggregate liquidation value of $380,000,
Series A Common Stock Warrants to purchase up to 2,500,000 shares of
Common Stock and Series B Common Stock Warrants to purchase up to
95,000 shares of Common Stock to the Stockholders of Telereunion in
exchange for the issued and outstanding shares of Common Stock, $.001
par value, of Telereunion. The Series A and Series B Common Stock
warrants will become exercisable only upon the attainment by PTMC of
certain financial objectives. In addition, PTMC issued options to
purchase an aggregate of approximately 217,000 shares of Common Stock
of PTMC to certain former shareholders of Telereunion. Pursuant to the
terms of the Agreement, the number of issued and outstanding shares of
PTMC prior to the merger was 1,890,442 shares of Common Stock and the
number of issued and outstanding shares of PTMC Common Stock after the
merger was 3,495,442. According to the terms of the Agreement, Mr.
DeLape acquired 459,375 shares of Common Stock of PTMC, a Series A
Common Stock Warrant representing the right to purchase 262,500 shares
of Common Stock and a Series B Common Stock Warrant representing the
right to purchase 83,125 shares of Common Stock. Pursuant to the
Agreement, PTMC has also increased the size of its board of directors
by one member, from its pre-acquisition size of six members to seven.
Messrs. Panno, Varghese, Kirkland, Efird, Landa, Garcia and Orea
comprise the board of directors of PTMC. A copy of the Agreement is
attached hereto as Exhibit A and incorporated herein by reference.
Item 4. See item 3 above, incorporated herein by reference.
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Item 5. (a) Mr. DeLape beneficially owns 459,375 shares of Common Stock of
PTMC or 13.1% of the 3,495,442 shares issued and outstanding after the
merger. The number of shares beneficially owned excludes the shares
of Common Stock issuable upon exercise of the Series A and the Series
B Common Stock Warrants as the rights represented thereby are subject
to vesting upon the attainment by PTMC of certain financial objectives
which are not anticipated to occur within the next 60 days.
(b) Mr. DeLape has the sole power to vote or to direct the vote and
the sole power to dispose or to direct the disposition of all 459,375
shares of Common Stock of PTMC.
(c) Other than as described herein, there were no transactions in the
Common Stock of PTMC effected during the past sixty days by
Mr. DeLape.
(d) There is no other person known to have the right to receive or the
power to direct the receipt of dividends from or the proceeds from the
sale of such securities reported herein.
(e) Mr. DeLape recently became a beneficial owner of more than five
percent of Common Stock of PTMC; accordingly, item 5(e) is not
applicable.
Item 6. There are no material contracts, understandings, or relationships
other than as described in Item 3, which information is incorporated
herein by reference.
Item 7. A copy of the Agreement dated April 26, 1996 is attached hereto as
Exhibit A and incorporated herein by reference.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
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June 4, 1996 /s/ FRANK M. DELAPE
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Date Signature
Frank M. DeLape
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Name
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Exhibit A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 26, 1996 (this
"Agreement"), by and among Polish Telephones and Microwave Corporation, a Texas
corporation (the "Parent"), PTMC Acquisition Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Parent (the "Merger Sub"), Telereunion,
Inc. (the "Company") and the stockholders of the Company listed on the
signature pages of this Agreement (the "Stockholders"). The Parent and Merger
Sub are sometimes referred to in this Agreement as the "Parent Companies."
BACKGROUND
Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "Delaware Law"),
Merger Sub will merge with and into the Company (the "Merger") and, pursuant
to such Merger the issued and outstanding shares of the Common Stock, $0.001
par value per share of the Company (the "Company Common Stock"), will be
converted into the right to receive shares of common stock, $0.001 par value
per share, of the Parent (the "Parent Common Stock"), shares of the Series B
Non-Voting, Non-Participating Preferred Stock, $0.001 par value per share, of
the Parent (the "Parent Preferred Stock")and certain Warrants to purchase
shares of the Parent Common Stock, as set forth in this Agreement.
The Board of Directors of the Company has determined that the Merger
is fair to, and in the best interests of, the Company and its stockholders and
has approved and adopted this Agreement and the transactions contemplated by
this Agreement.
The Board of Directors of the Parent has determined that the Merger is
fair to, and in the best interests of, the Parent and its stockholders and has
approved and adopted this Agreement and the transactions contemplated by this
Agreement.
The Board of Directors of Merger Sub has approved and adopted this
Agreement and the Parent, as the sole stockholder of Merger Sub, will adopt
this Agreement promptly after the execution by the parties.
For federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code").
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which all parties mutually acknowledge, the parties, intending
to be legally bound, agree as follows:
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ARTICLE I
THE MERGER; THE CONVERSION OF SECURITIES
1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the applicable provisions of
the Delaware Law, at the Effective Time (as defined in Section 1.3), Merger Sub
will be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Merger Sub will cease and the Company will
continue as the surviving corporation of the Merger (the "Surviving
Corporation").
1.2 Closings.
(a) Unless this Agreement has been terminated pursuant to
Section 8.1 before the Closing Date, and subject to the satisfaction or waiver
of the conditions set forth in Sections 6.1 and 6.2, the consummation of the
Merger (the "Closing") will take place at the offices of Hughes & Luce, L.L.P.,
1717 Main Street, Dallas, Texas as soon as practicable (but in any event within
two business days) after the satisfaction or waiver of the conditions as set
forth in Sections 6.1 and 6.2, or at such other date, time, and place as the
Parent and the Company agree; provided, that the conditions set forth in
Section 6.1 and 6.2 have been satisfied or waived at or prior to such time.
The date on which the Closing takes place is referred to as the "Closing Date."
As promptly as practicable on the Closing Date, the parties will cause the
Merger to be consummated by filing a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware, in such form as
required by, and executed in accordance with the relevant provisions of, the
Delaware Law (the date and time of such filing, or such later date or time
agreed upon by the Parent and the Company and set forth in the Certificate of
Merger, being the "Effective Time"). For all Tax purposes, the Closing will be
effective at the end of the day on the Closing Date.
(b) Upon the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as defined in Section 1.2(a)) and
at the Closing (as defined in Section 1.2(a)):
(i) the Parent Companies will execute and deliver
the other agreements, instruments and documents referred to in Section 6.1; and
(ii) the Company will execute and deliver the
other agreements, instruments and documents referred to in Section 6.2.
1.3 Merger Consideration; Conversion and Cancellation of Company
Common Stock. At the Effective Time, by virtue of the Merger and without any
action on the part of the Parent Companies, the Company, or their respective
stockholders, including, without limitation, the Stockholders:
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(a) subject to the other provisions of this Article I,
the outstanding shares of Company Common Stock (or fraction thereof) issued and
outstanding immediately prior to the Effective Time will be converted into:
(i) 1,605,000 shares of the Parent Common Stock;
(ii) 380,000 shares of the Parent Preferred Stock.
The rights and preferences of the Parent Preferred Stock will conform
to a certificate of designation substantially in the form of Exhibit
A.
(iii) warrants for the purchase of 2,500,000 shares
of Parent Common Stock (the "Series A Common Stock Warrants")
substantially in the form of Exhibit B.
(iv) warrants for the purchase of 95,000 shares of
Parent Common Stock (the "Series B Common Stock Warrants")
substantially in the form of Exhibit C.
(The Parent Common Stock, the Parent Preferred Stock, the
Series A Common Stock Warrants and the Series B Common Stock Warrants
are collectively referred to herein as the "Parent Securities".) The
Parent Securities will be allocated among the Stockholders as set
forth on Schedule 1.3(a) hereto (which allocation does not contemplate
the issuance of any fractional shares of the Parent's capital stock or
warrants to purchase the issuance of any such fractional shares).
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time the outstanding shares of the Parent Common Stock or Company
Common Stock have been changed into a different number of shares or a different
class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares, or similar
occurrence, the number of the Parent Securities into which the Company Common
Stock will be converted will be correspondingly and proportionately adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination, or exchange of shares.
(b) Notwithstanding any provision of this Agreement to
the contrary, each share of Company Common Stock held in the treasury of the
Company immediately prior to the Effective Time will be canceled and
extinguished without any conversion thereof and no payment will be made with
respect thereto.
(c) All shares of the Company Common Stock will cease to
be outstanding and will automatically be canceled and retired, and each
certificate previously evidencing the Company Common Stock outstanding
immediately prior to the Effective Time (other than Company Common Stock
described in Section l.3(b)) (the "Converted Shares") will thereafter represent
the right to receive that number of the Parent Securities determined in
accordance with Section 1.3(a) (the "Merger Consideration"). The holders of
certificates previously evidencing Converted Shares will cease to have any
rights with respect to such Converted Shares except as
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otherwise provided in this Agreement or by applicable law. Such certificates
previously evidencing Converted Shares will be exchanged for certificates
evidencing (i) the whole shares of the Parent Common Stock, (ii) the whole
shares of the Parent Preferred Stock, (iii) the Series A Common Stock Warrants
to purchase whole shares of the Parent Common Stock and (iv) the Series B
Common Stock Warrants to purchase whole shares of the Parent Common Stock into
which such Converted Shares have been converted upon the surrender of such
certificates in accordance with the provisions of Section 1.7, without
interest. No fractional shares of the Parent Common Stock will be issued in
connection with the Merger. In addition, after the Closing the Telereunion
1995 Stock Option and Appreciation Rights Plan (the "Telereunion Option Plan")
shall be converted and amended as necessary to provide for the right to acquire
shares of the Parent Common Stock in the stead of the Company Common Stock on
the same terms and subject to the same conditions as now set forth in such Plan
as in effect on the date of this Agreement. In addition, each option agreement
currently in effect and entered into pursuant to the Telereunion Option Plan
(the "Option Agreement") shall be amended after the Effective Time so as to
provide for the right to exercise the option granted by such option agreement
(the "Options") to acquire shares of the Parent Common Stock in the stead of
the Company Common Stock and so as to prevent the enlargement or dilution of
the Option holder's and the Company's rights and obligations under such Option
Agreement. With respect to each option intended to qualify under Section 422
of the Code, the amendments shall be consistent with the provisions of 424(a)
of the Code. Consistent with the provisions above, the amendments to each
Option Agreement shall be determined by the Board of Directors of the Parent.
The determinations of the Board of Directors of the Parent made in good faith
shall not be subject to review by anyone, and shall be final, binding and
conclusive on all persons ever interested hereunder.
(d) Each share of common stock, par value $.01 per share,
of Merger Sub issued and outstanding immediately prior to the Effective Time
will be converted into one share of common stock, par value $.01 per share, of
the Surviving Corporation.
1.4. Effect of the Merger. At the Effective Time, the effect of
the Merger will be as provided in the applicable provisions of the Delaware
Law.
1.5 Certificate of Incorporation: Bylaws. At the Effective Time,
the articles of incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, will be the articles of incorporation of the Surviving
Corporation and thereafter will continue to be its articles of incorporation
until amended as provided in such articles of incorporation and pursuant to the
Delaware Law. The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, will be the bylaws of the Surviving Corporation and thereafter
will continue to be its bylaws until amended as provided in such bylaws and
pursuant to the Delaware Law.
1.6 Directors and Officers. The directors of the Company
immediately prior to the Effective Time will be the directors of the Surviving
Corporation, each to hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time will be the officers of the
Surviving Corporation, each to hold office in accordance with the bylaws of the
Surviving
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Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
1.7 Exchange and Surrender of Certificates.
(a) As soon as practicable after the Effective Time, each
holder of a certificate previously evidencing Converted Shares will be
entitled, upon surrender of such certificate to the Parent or its transfer
agent, to receive in exchange for such certificate a certificate or
certificates representing the number of (i) the whole shares of the Parent
Common Stock, (ii) the whole shares of the Parent Preferred Stock, (iii) the
Series A Common Stock Warrants to purchase whole shares of the Parent Common
Stock and (iv) the Series B Common Stock Warrants to purchase whole shares of
the Parent Common Stock into which the Converted Shares so surrendered have
been converted as described in Section 1.3, in such denominations and
registered in such names as such holder may request consistent with the
provisions of this Agreement. Until so surrendered and exchanged, each
certificate previously evidencing Converted Shares will represent solely the
right to receive (i) the whole shares of the Parent Common Stock, (ii) the
whole shares of the Parent Preferred Stock, (iii) the Series A Common Stock
Warrants to purchase whole shares of the Parent Common Stock and (iv) the
Series B Common Stock Warrants to purchase whole shares of the Parent Common
Stock into which the Converted Shares have been converted as set forth in
Section 1.3(a). Unless and until any such certificates are so surrendered and
exchanged, no dividends or other distributions payable to the holders of record
of the Parent Common Stock or the Parent Preferred Shares (including, without
limitation, the amount of any redemption price with respect to the Parent
Preferred Stock) as of any time on or after the Effective Time will be paid to
the holders of such certificates previously evidencing Converted Shares;
provided, however, that, upon any such surrender and exchange of such
certificates, there will be paid to the record holders of the certificates
issued and exchanged therefor (i) the amount, without interest, of dividends
and other distributions, (including, without limitation, the amount of any
redemption price paid with respect to the Parent Preferred Stock) if any, with
a record date on or after the Effective Time theretofore paid with respect to
such whole shares of the Parent Common Stock or Parent Preferred Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions or payments, if any, with a record date on or after the Effective
Time but prior to surrender and a payment date occurring after surrender,
payable with respect to such whole shares of the Parent Common Stock or Parent
Preferred Stock. Notwithstanding the foregoing, no party to this Agreement (or
the Parent's transfer agent) will be liable to any former holder of Converted
Shares for any cash, the Parent Common Stock, the Parent Preferred Stock or
dividends or distributions (including without limitation, the amount of any
redemption price paid with respect to the Parent Preferred Stock) thereon or
any Series A Common Stock Warrants or Series B Common Stock Warrants delivered
to a public official pursuant to applicable abandoned property, escheat, or
similar law.
(b) All of the Parent Securities issued upon the
surrender for exchange of certificates previously representing Converted Shares
in accordance with the terms of this Agreement will be deemed to have been
issued in full satisfaction of all rights pertaining to such Converted Shares.
At and after the Effective Time, there will be no further registration of
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transfers on the stock transfer books of the Surviving Corporation of Company
Common Stock that was outstanding immediately prior to the Effective Time. If,
after the Effective Time, certificates that previously evidenced Converted
Shares are presented to the Surviving Corporation for any reason, they will be
canceled and exchanged as provided in this Article I.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company, Manuel Landa, Ricardo Orea and Oscar Garcia (the
"Management Stockholders"), jointly and severally, and the remaining
Stockholders, severally but not jointly with the other Stockholders, hereby
represent and warrant to Parent as follows:
2.1 Organization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and has full
corporate power to own its properties and to conduct its business as
presently conducted. The Company is duly authorized, qualified or
licensed to do business and is in good standing as a foreign
corporation in each country, state, or other jurisdiction in which its
assets are located or in which its business or operations as presently
conducted make such qualification necessary.
(b) Each of Vextro de Mexico S.A. de C.V. and Servicios
Corporativos Vextro, S.C. (collectively, the "Subsidiaries" and each
individually, a "Subsidiary") is a Sociedad Anonima de Capital
Variable duly organized, validly existing and in good standing under
the laws of Mexico and has full power to own its properties and to
conduct its business as presently conducted. Each of the Subsidiaries
is duly authorized, qualified or licensed to do business and is in
good standing as a foreign entity in each country, state or other
jurisdiction in which its assets are located or in which its business
or operations as presently conducted make such qualification
necessary, except that the transformation of Servicios from Sociedad
de Civil (Civil Legal Entity) into a stock corporation is in the
process of being recorded with the Public Registry of Commerce.
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2.2 Authority.
(a) The Company has all requisite corporate and other
power and authority to execute, deliver and perform its obligations
under this Agreement. The execution, delivery and performance of this
Agreement by the Company has been duly authorized by all necessary
action, corporate or otherwise, on the part of the Company. This
Agreement has been duly executed and delivered by the Company and is
the legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the extent
enforceability may be affected by (i) bankruptcy, insolvency,
moratorium and other similar laws affecting creditor's rights
generally; or (ii) principles of equity.
(b) Each Stockholder has all requisite power and
authority to execute, deliver and perform under this Agreement. The
execution, delivery and performance of this Agreement by each
Stockholder has been duly authorized by all necessary action,
corporate or otherwise, on the part of such Stockholder. This
Agreement has been duly executed and delivered by each Stockholders
and is the legal, valid and binding agreement of each of the
Stockholders, enforceable against each of the Stockholders in
accordance with its terms, except to the extent enforceability may be
affected by (i) bankruptcy, insolvency, moratorium and other similar
laws affecting creditor's rights generally; or (ii) principles of
equity. The Stockholders other than the Management Stockholders shall
be deemed to make this representation and warranty as to themselves
only.
2.3 Minute Books. The Company and the Stockholders have made
available to the Parent true, correct and complete copies of certificates of
incorporation or equivalent instrument, bylaws or equivalent instrument, minute
books, stock certificate books and stock record books of the Company and the
Subsidiaries. The minute books of the Company and the Subsidiaries contain
minutes or consents reflecting all actions taken by the directors (including
any committees) and stockholders of each of the Company and the Subsidiaries.
2.4 Capitalization.
(a) The authorized capital stock of the Company consists
solely of 50,000,000 shares of common stock, $.001 par value per
share, of which 3,315,002 shares are issued and outstanding; and
10,000,000 shares of "blank check" preferred stock, no shares of which
are issued or outstanding. The Company Common Stock is validly
issued, fully paid and nonassessable and held by the Stockholders free
and clear of preemptive or similar rights. The Company Common Stock
constitutes all of the issued and outstanding capital stock of the
Company. There are no outstanding options, warrants, convertible or
exchangeable securities or other rights, agreements, arrangements or
commitments obligating the Company, the Stockholders or any other
person or entity to issue or sell any securities or ownership
interests in the Company except options to purchase 454,908 shares of
the capital stock of the Company outstanding under the Telereunion
Option Plan more specifically described on Schedule 2.4(a) (the
"Options"), which options,
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pursuant to the Merger, shall be converted into options to purchase
Parent Common Stock; and warrants to purchase 663,000 shares of
capital stock, more specifically described on Schedule 2.4(a) (the
"Telereunion Warrants"), which Telereunion Warrants will expire and no
longer be exercisable upon the effectiveness of the Merger. Except as
set forth on Schedule 2.4(a), there are no stockholders' agreements,
voting agreements, voting trusts or similar agreements binding on the
Company or any of the Stockholders or applicable to any of the Shares.
All of the outstanding capital stock of the Company has been offered
and sold in compliance with all applicable securities laws, rules and
regulations.
(b) The authorized capital stock of Vextro consists
solely of 1,666,667 shares of common stock, no par value per share, of
which 1,666,667 shares are issued and outstanding. The capital stock
of Vextro is validly issued, fully paid and nonassessable and are held
by the stockholders of Vextro free and clear of preemptive or similar
rights. The Company owns of record and beneficially 1,616,667 shares
(the "Vextro Shares") of Vextro's common stock free and clear of all
liens, claims, security interests and rights of others of any
description. The Vextro Shares constitute 97% of the issued and
outstanding capital stock of the Subsidiary. There are no outstanding
options, warrants, convertible or exchangeable securities or other
rights, agreements, arrangements or commitments obligating Vextro, the
Company, the Stockholders or any other person or entity to issue or
sell any securities or ownership interests in Vextro. There are no
stockholders' agreements, voting agreements, voting trusts or similar
agreements binding on any of the Company, the Stockholders or
applicable to any of the shares of capital stock of Vextro. All of
the outstanding capital stock of Vextro has been offered and sold in
compliance with all applicable securities laws, rules and regulations.
The remaining issued and outstanding shares of the capital stock of
Vextro are owned by those persons whose names and addresses and stock
ownership are set forth in Schedule 2.4(b).
(c) The authorized capital stock of Servicios consists
solely of 10,000 shares of common stock, no par value per share, of
which 10,000 shares are issued and outstanding. The shares of capital
stock of Servicios are validly issued, fully paid and nonassessable
and are held by the stockholders of Servicios free and clear of
preemptive or similar rights. The Company owns of record and
beneficially 9,700 shares (the "Servicios Shares") of Servicios'
common stock free and clear of all liens, claims, security interests
and rights of others of any description. The Servicios Shares
constitute 97% of the issued and outstanding capital stock of the
Subsidiary. There are no outstanding options, warrants, convertible
or exchangeable securities or other rights, agreements, arrangements
or commitments obligating Servicios, the Stockholders or any other
person or entity to issue or sell any securities or ownership
interests in Servicios. There are no stockholders' agreements, voting
agreements, voting trusts or similar agreements binding on any of the
Stockholders or applicable to any of the shares of capital stock of
Servicios. All of the outstanding capital stock of Servicios has been
offered and sold in compliance with all applicable securities laws,
rules and regulations. The remaining issued and outstanding shares of
the capital stock of Servicios are owned
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by those persons whose names and addresses and stock ownership are set
forth in Schedule 2.4(c).
2.5 Title to the Shares.
(a) The Stockholders own the Company Common Stock,
Options and Telereunion Warrants of record and beneficially as set
forth on Schedule 2.5(a), free and clear of any lien, pledge, security
interest, liability, charge, right of first refusal or first offer,
option, or other encumbrance or claim of any person or entity (a
"Lien"). At the Effective Time by virtue of the Merger, the Parent
will acquire the entire legal and beneficial interest in all of the
Company Common Stock, free and clear of any Liens.
(b) The Company owns the Vextro Shares of record and
beneficially as set forth on Schedule 2.5(b), free and clear of any
Liens. At the Effective Time by virtue of the Merger, the Company
will retain the entire legal and beneficial interest in all of the
Vextro Shares, free and clear of any Liens and such Vextro Shares will
not be subject to any law or other right that could result in the loss
of any legal or beneficial interest therein by the Company or Vextro.
(c) The Company owns the Servicios Shares of record and
beneficially as set forth on Schedule 2.5(b), free and clear of any
Liens. At the Effective Time the Company will retain the entire legal
and beneficial interest in all of the Servicios Shares, free and clear
of any Liens and such Servicios Shares will not be subject to any law
or other right that could result in the loss of any legal or
beneficial interest therein by the Company or Servicios.
2.6 No Violation. Neither the execution or delivery of this
Agreement by the Company and the Stockholders nor the consummation of the
Merger and the other transactions contemplated hereby by the Company and the
Stockholders, will conflict with or result in the breach of any term or
provision of, or violate, or constitute a default under, or result in the
creation of any Lien on assets of the Company or any Subsidiary pursuant to, or
relieve any third party of any obligation to the Company or any Subsidiary, or
give any third party the right to terminate or accelerate any obligation under,
any charter provision, bylaw, Material Agreement (as defined in Section
2.20(a)), Permit (as defined in Section 2.14), order, law or regulation to
which the Company, any of the Stockholders or either of the Subsidiaries is a
party or by which the Company, any of the Stockholders, either of the
Subsidiaries or any of their respective assets is in any way bound or
obligated.
2.7 Governmental Consents. Except as described in Schedule 2.7
and except for the notice required to be provided to the Mexican National
Registry of Foreign Investments relating to the Company's acquisition of
Vextro's and Servicio's capital stock, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental or quasi-governmental agency, association,
authority, commission, board or other body (collectively, a "Governmental
Body") is required on the part of the Company or any
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Subsidiary, or any of the Stockholders in connection with the transactions
contemplated by this Agreement.
2.8 Financial Statements. Attached as Schedule 2.8 are true and
complete copies of (a) the audited balance sheets of the Company and the
audited combined balance sheets of Vextro and Servicios (the "Latest Balance
Sheets") as of December 31, 1995 (the "Latest Balance Sheet Date"), and (b)
the audited combined financial statements of Vextro and Servicios as of
December 31, 1994 and the related audited consolidated statements of operations
and cash flows for the 12 month periods ended December 31, 1995 and 1994
(collectively, the "Financial Statements"). The Financial Statements present
fairly the financial condition of the Company and Vextro and Servicios at the
dates specified and the results of its operations for the periods specified and
have been prepared in accordance with generally accepted accounting principles,
consistently applied, subject in the case of the unaudited statements to
changes resulting from normal period-end adjustments for recurring accruals
(which will not be material individually or in the aggregate). The Financial
Statements do not contain any items of a special or nonrecurring nature, except
as expressly stated therein. The Financial Statements have been prepared from
the books and records of the Company, and the books and records of Vextro and
Servicios, respectively, which accurately and fairly reflect all the
transactions of, acquisitions and dispositions of assets by, and incurrence of
liabilities by the Company and Vextro and Servicios, respectively. All
accounts receivable reflected on the Latest Balance Sheets arose in the
ordinary course of business and are fully collectible in the ordinary course of
business, without resort to litigation, at the face amount thereof, less any
reserve reflected in the Latest Balance Sheets, and will not be subject to
counterclaim, set-off or other reduction.
2.9 Absence of Undisclosed Liabilities. At the Closing, (a) the
aggregate amount of the indebtedness for borrowed money of the Company and of
the Subsidiaries (which excludes accounts payable arising in the ordinary
course of business) will not exceed $25,000 and $25,000 respectively and (b)
the aggregate book value of the assets minus the aggregate book value of the
liabilities (in each case, as determined in accordance with generally accepted
accounting principles, consistently applied) of the Company and of the
Subsidiaries will be at least $200,000. Neither the Company nor either of the
Subsidiaries has any direct or indirect debts, obligations or liabilities of
any nature, whether absolute, accrued, contingent, liquidated or otherwise, and
whether due or to become due, asserted or unasserted, known or unknown
(collectively, "Liabilities"), except for (i) Liabilities specifically
identified in the Latest Balance Sheets and (ii) obligations to be performed in
the ordinary course of business under the Material Agreements.
2.10 Absence of Material Adverse Change. Since the Latest Balance
Sheet Date, except as specifically contemplated by this Agreement, there has
not been: (a) any material adverse change in the condition (financial or
otherwise), results of operations, business, prospects, assets or Liabilities
of the Company or either of the Subsidiaries or with respect to the manner in
which the Company or either of the Subsidiaries conducts business or
operations; (b) any payment or transfer of assets (including without limitation
any dividend, stock repurchase or other distribution or any repayment of
indebtedness) to any Stockholder except as specifically described in Schedule
2.10; (c) any breach or default (or event that with notice or lapse of time
would constitute a breach or
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default), termination or threatened termination under any Material Agreement;
(d) any material theft, damage, destruction, casualty loss, condemnation or
eminent domain proceeding affecting any of the Company's or any Subsidiary's
assets, whether or not covered by insurance; (e) any sale, assignment or
transfer of any of the assets of the Company or either Subsidiary, except in
the ordinary course of business and consistent with past practices; (f) any
waiver by the Company or a Subsidiary of any material rights related to the
Company or such Subsidiary's business, operations or assets; (g) any other
transaction, agreement or commitment entered into by the Company or any
Subsidiary, or the Stockholders affecting the business, operations or assets of
the Company or any Subsidiary, except in the ordinary course of business and
consistent with past practices; or (h) any agreement or understanding to do or
that will result in any of the foregoing.
2.11 Taxes. All required United States or any Mexican federal,
state, local and other tax returns, notices and reports (including, as
applicable, without limitation income, property, sales, use, franchise,
withholding, social security and unemployment tax returns) relating to or
involving transactions with the Company or any Subsidiary have been accurately
prepared and duly and timely filed, and all taxes required to be paid with
respect to the periods covered by any such returns have been timely paid. No
tax deficiency has been proposed or assessed against the Company or any
Subsidiary, and neither the Company nor any Subsidiary has executed any waiver
of any statute of limitations on the assessment or collection of any tax. No
tax audit, action, suit, proceeding, investigation or claim is now pending or
threatened against either the Company or any Subsidiary, and no issue or
question has been raised (and is currently pending) by any taxing authority in
connection with any of the Company's or any Subsidiary's tax returns or
reports. The Company and the Subsidiaries have withheld or collected from each
payment made to each of their employees the full amount of all taxes required
to be withheld or collected therefrom and has paid the same to the proper tax
receiving officers or authorized depositories.
2.12 Litigation. Except as described in Schedule 2.12, there are
currently no pending or threatened lawsuits, administrative proceedings or
reviews, or formal or informal complaints or investigations by any individual,
corporation, partnership, Governmental Body or other entity (collectively, a
"Person") against or relating to the Company or any Subsidiary or any of their
directors, employees or agents (in their capacities as such) or to which any
assets of the Company or any Subsidiary are subject. Neither the Company nor
any Subsidiary are subject to or bound by any currently existing judgment,
order, writ, injunction or decree.
2.13 Compliance with Laws. The Company and the Subsidiaries are
currently complying with and have at all times complied with, and the use,
operation and maintenance of its assets comply with and have at all times
complied with, and neither the Company, any Subsidiary, the assets of any of
them, nor the use, operation or maintenance of assets of any of them is in
material violation or contravention of, any applicable statute, law, ordinance,
decree, order, rule or regulation of any Governmental Body, including without
limitation all United States or Mexican federal, state and local laws relating
to occupational health and safety, employment and labor matters.
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2.14 Permits. The Company and the Subsidiaries own or possess from
each appropriate Governmental Body all right, title and interest in and to all
permits, licenses, authorizations, approvals, quality certifications,
franchises or rights (collectively, "Permits") issued by any Governmental Body
necessary to conduct their respective businesses, including the Permit granted
to Vextro by The Ministry of Communications and Transportation (No. 42-STVA-94
6495) dated November 29, 1994. Each of such Permits is described in Schedule
2.14. No loss or expiration of any such Permit is pending or threatened or
reasonably foreseeable, other than expiration in accordance with the terms
thereof of Permits that may be renewed in the ordinary course of business
without lapsing.
2.15 Environmental Matters.
(a) Without limiting the generality of the other
representations and warranties set forth in this Article II: (i) the
Company and the Subsidiaries have conducted their businesses in
compliance with all applicable Environmental Laws (hereinafter
defined), including without limitation by having all Permits required
under any Environmental Laws for the operation of their respective
businesses; (ii) none of the properties owned or leased by the Company
or the Subsidiaries contains any Hazardous Substance (hereinafter
defined) in amounts exceeding the levels permitted by applicable
Environmental Laws; (iii) neither the Company nor any Subsidiary has
received any notices, demand letters or requests for information from
any Governmental Body or other Person indicating that the Company or
any Subsidiary may be in violation of, or liable under, any
Environmental Law or relating to any of the properties identified in
Schedule 2.18; (iv) no reports have been filed, or are required to be
filed, by the Company or any Subsidiary concerning the release of any
Hazardous Substance or the threatened or actual violation of any
Environmental Law; (v) no Hazardous Substance has been disposed of,
released or transported in violation of any applicable Environmental
Law from any properties owned or leased by the Company or any
Subsidiary or as a result of any activity of the Company or any
Subsidiary; (vi) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance
or noncompliance with any Environmental Law conducted by or which are
in the possession of the Company or any Subsidiary relating to the
activities of the Company or any Subsidiary or any of the real
property identified in Schedule 2.18 that have not been delivered to
the Parent prior to the date hereof; (vii) there are no underground
storage tanks on, in or under any properties owned or leased by the
Company or any Subsidiary, and no underground storage tanks have been
closed or removed from any of such properties; and (viii) neither the
Company, either Subsidiary nor any of the properties of the Company or
the Subsidiaries are subject to any material Liabilities or
expenditures relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or claim
asserted or arising under any Environmental Law.
(b) As used herein, "Environmental Law" means, as
applicable to the Parent, any subsidiary of the Parent, Telereunion or
any Subsidiary any United States, Mexican or Polish environmental
federal, state, provincial, local or other law, statute, ordinance,
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<PAGE> 18
rule, regulation, code, legal doctrine, Permit, license,
authorization, approval, consent, order, judgment, decree, injunction,
requirement or agreement with any Governmental Body relating to (i)
the protection preservation or restoration of the environment
(including without limitation air, water vapor, surface water,
groundwater, drinking water, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or
safety or (ii) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances, in each case
as amended and in effect on the date of the Closing.
(c) As used herein, "Hazardous Substance" means any
substance listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any
Environmental Law. Hazardous Substance includes any substance to
which exposure is regulated by any Governmental Body or any
Environmental Law, including without limitation any toxic waste,
pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material,
asbestos or asbestos containing material, urea formaldehyde, foam
insulation, lead or polychlorinated biphenyls.
2.16 Employee Matters. Set forth on Schedule 2.16 is a complete
list of all current employees of each of the Company and the Subsidiaries,
including date of employment, current title and compensation, and date and
amount of last increase in compensation. The consummation of the transactions
contemplated by this Agreement will not accelerate the time of payment or
vesting or increase the amount of compensation due to any director, officer or
employee (present or former) of the Company or of any Subsidiary or result a
change in any of the pre-existing labor conditions of any of the employees of
the Company or any Subsidiary or be a reason for the termination of any labor
relationship attributable to the Company or any Subsidiary. Neither the
Company nor any Subsidiary has any collective bargaining, union or labor
agreements, contracts or other arrangements with any group of employees, labor
union or employee representative. No organization effort is currently being
made or threatened by or on behalf of any labor union with respect to employees
of the Company or any Subsidiary. Neither the Company nor any Subsidiary has
experienced, nor is there any basis for, any strike, material labor trouble,
work stoppage, slow down or other interference with or impairment of the
business of the Company or any Subsidiary.
2.17 Employee Benefit Plans.
(a) None of the Company or the Subsidiaries currently
maintains or has ever maintained any employee benefit, retirement,
pension, welfare benefit or other plan for the benefit of the
employees of the Company or any Subsidiary that is governed by the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the Code or any other United States federal or state law, statute or
regulation. None of the Company nor any Subsidiary nor any Affiliate
of the Company has any liability to any such
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employee benefit, retirement, pension, welfare benefit or other plan
for the benefit of the employees of the Company or any Subsidiary,
that is governed by ERISA, the Code or any other United States federal
or state law, statute or regulation or to any Governmental Body,
whether in the manner of damages, fines, penalties, payments or other
liabilities. None of the Company, any Subsidiary or any Affiliate of
the Company has ever been required to make any filing or file any
report or return with any United States federal or state Governmental
Body in connection with any employee benefit matter.
(b) Schedule 2.17 lists all employee pension, welfare
and other benefit plans maintained by the Company and/or any
Subsidiary or to which the Company or any Subsidiary has any liability
or must make any contribution or payment under the provisions of any
Mexican laws governing employee benefits of any description, ever
maintained or contributed to (or required to be contributed to) by the
Company, any Subsidiary or any Affiliate (the "Benefit Plans"). As
used in this Section 2.17, "Affiliate" means any corporation, trade or
business the employees of which, together with the employees of the
Company and/or any Subsidiary, are required to be treated as employed
by a single employer under the provisions of ERISA or Section 414 of
the Internal Revenue Code of 1986, as amended (the "Code").
(c) No voluntary employees' beneficiary association or
other funding arrangement (other than insurance contracts) are being
used to fund or implement any Benefit Plan. Neither the Company nor
any Subsidiary has made any written or oral representations to any
employee or former employee promising or guaranteeing any employer
payment or finding for the continuation of benefits or coverage under
any Benefit Plan for any period of time beyond the end of the current
plan year (except to the extent required by applicable law, which
representations are described in Schedule 2.17).
(d) Schedule 2.17 lists each plan or policy providing for
"fringe benefits" (including but not limited to vacation, paid
holidays, personal leave, employee discount, educational benefit or
similar program), and any other deferred compensation, bonus, stock
option, employee stock purchase, severance, group insurance,
disability, unemployment, supplemental unemployment, layoff,
consulting or stock appreciation rights plan, and any other similar
plan, policy, arrangement, commitment or understanding (whether
written or oral) not required to be listed under paragraph (a) or (b)
above that is maintained by the Company or any Subsidiary for
employees or provides benefits or describes policies or procedures
applicable to any employee, former employee, director or former
director of the Company or any Subsidiary (the "Employee Benefit
Plans").
(e) Neither the Company, any Subsidiary nor any Affiliate
maintain, or has ever maintained, contributed to, been required to
contribute to or had any employees participating in, any benefit plan
other than those set forth on Schedule 2.17 or maintained by the
Mexican Social Security Institute. The Company, the Subsidiaries and
all Affiliates of the Company are in full compliance with all the
requirements and
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obligations arising under the Social Security Law and the Retirement
Savings Systems and the law, statutes and regulations of the Republic
of Mexico and any Governmental Body thereof governing such systems.
None of the Company, any Subsidiary or any Affiliate of the Company
has any liability to make any payment, contribution or other liability
to any Governmental Body in connection with the Mexican social
security system except as set forth in Schedule 2.17.
(f) The Benefit Plans are legally valid and binding
agreements and obligations of the Company and the Subsidiaries and are
in full force and effect under the laws of the Republic of Mexico.
The Benefit Plans comply and have complied at all times in the past
both as to form and operation with the provisions of all laws,
statutes and regulations of the Republic of Mexico governing or
applying to such Benefit Plans. No audit or investigation of any of
the Benefit Plans is being conducted or has been threatened by any
Governmental Body.
(g) Neither the Company nor any Subsidiary has any
Liabilities to any Person with respect to any Benefit Plan, except for
(i) Liabilities that are fully funded by assets set aside in trust or
irrevocably dedicated for that purpose, the fair market value of which
assets exceed the Liabilities to which they are set aside or
dedicated, and (ii) Liabilities that have been fully accrued on the
Financial Statements. Except as otherwise provided by the laws of the
Republic of Mexico, the Company and the Subsidiaries may terminate any
Benefit Plan immediately following the Closing without any Liability
(on the part of the Company or the Parent) to any Person except to the
extent such Liabilities have been accrued or funded as described in
the preceding sentence.
(h) Except as set forth on Schedule 2.17(h) other than
provisions for severance payments that may be mandated under
applicable Mexican law, there are no agreements that will provide
payments to any officer, employee, Stockholder, or highly compensated
individual that will be "parachute payments" of the type described
under Code Section 280G that are nondeductible to the Company or any
Subsidiary, or subject to tax under Code Section 4999 or any Mexican
law analog of such section of the Code for which the Company, any
Subsidiary, or any Affiliate would have withholding liability.
(i) True and complete copies of all documents related to
the Benefit Plans and their operations and compliance with the
requirements of law relating thereto have been delivered to the
Parent.
2.18 Title to Assets. Set forth in Schedule 2.18 is a complete
list (including the street address, where applicable) of (a) all real property
currently owned by the Company or any Subsidiary; (b) all real property
currently leased or otherwise used by the Company or any Subsidiary; (c) each
vehicle owned or leased by the Company or any Subsidiary; and (d) each asset of
the Company or any Subsidiary with a book value or fair market value greater
than $25,000. The Company and the Subsidiaries have good and marketable title
to all of their respective assets, including without limitation the assets
listed on Schedule 2.18, the assets
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reflected on the Latest Balance Sheets and all assets used by either the
Company or any Subsidiary in the conduct of its respective businesses (except
for assets disposed of in the ordinary course of business and consistent with
past practices since the Latest Balance Sheets Date and except for assets held
under leases or licenses disclosed pursuant to Section 2.20); and all such
assets are owned free and clear of any Liens, except for (A) Liens for current
taxes not yet due; (B) minor imperfections of title and encumbrances that do
not materially detract from or interfere with the present use or value of such
properties; and (C) Liens disclosed on Schedule 2.18.
2.19 Condition of Properties. All facilities, machinery,
equipment, fixtures, vehicles and other tangible property owned, leased or used
by the Company and/or the Subsidiaries are in good operating condition and
repair, normal wear and tear excepted, are reasonably fit and usable for the
purposes for which they are being used, will not likely require major overhaul
or repair in the foreseeable future, are adequate and sufficient for the
Company's and/or the respective Subsidiary's respective business and conform
with all applicable laws, rules and regulations. Each of the Company and the
Subsidiaries maintains policies of insurance issued by insurers of recognized
responsibility insuring the Company and the Subsidiaries and their respective
assets and businesses against such losses and risks, and in such amounts, as
are customary in the case of corporations of established reputation engaged in
the same or similar businesses and similarly situated in Mexico.
2.20 Material Agreements.
(a) Schedule 2.20(a) lists each agreement and arrangement
(whether written or oral and including all amendments thereto) to
which either of the Company or any Subsidiary are a party or a
beneficiary or by which either the Company, any Subsidiary, or any of
their respective assets are bound and that is material to the Company
or any Subsidiary, as the case may be (collectively, the "Material
Agreements"), including without limitation (i) any real estate leases;
(ii) any agreement evidencing, securing or otherwise relating to any
indebtedness for which the Company or either of the Subsidiaries is
liable; (iii) any capital or operating leases or conditional sales
agreements relating to vehicles, equipment or other assets of the
Company or any Subsidiary; (iv) any supply, distribution or
manufacturing agreements or arrangements pursuant to which the Company
or either of the Subsidiaries is entitled or obligated to acquire any
assets from a third party; (v) any licensing, franchising, servicing,
consulting, or other agreements; (vi) any marketing, sales or
advertising agreements; (vii) any insurance policies; (viii) any
employment, consulting, noncompetition, separation, collective
bargaining, union or labor agreements or arrangements; (ix) any
agreement with or for the benefit of any Stockholder, director,
officer or employee of the Company or any Subsidiary, or any affiliate
or family member thereof; and (x) any other agreement or arrangement
pursuant to which the Company or any Subsidiary could be required to
make or entitled to receive aggregate payments in excess of $10,000.
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(b) The Company has delivered to the Parent a copy of
each Material Agreement. Each Material Agreement is valid, binding
and in full force and effect and enforceable in accordance with its
terms; each of the Company and any Subsidiary has performed all of its
obligations under each Material Agreement, and there exists no breach
or default (or event that with notice or lapse of time would
constitute a breach or default) under any Material Agreement; there
has been no termination or notice of default or any threatened
termination under any Material Agreement, no consent of any Person is
required in connection with the transactions contemplated by this
Agreement in order to preserve the rights of the Company or any
Subsidiary under or to prevent any disadvantage to the Company or any
Subsidiary in respect of any Material Agreement.
2.21 Customers. Set forth in Schedule 2.21 is a complete list of
each customer of each of the Company and the Subsidiaries that has accounted
for more than $25,000 of revenues during any year since January 1, 1994, or is
expected to account for revenues exceeding such amount during the next twelve
months (the "Material Customers"), and indicating the amount of revenues
attributable to each Material Customer during the years ended December 31, 1994
and 1995. During the year ended December 31, 1995, the Subsidiaries earned an
aggregate of $ 17,005,301 Pesos in revenues from the Material Customers.
2.22 Intellectual Property Rights. Set forth in Schedule 2.22 is a
complete list of all registered patents, trademarks, service marks, trade names
and copyrights, and applications for and licenses (to or from the Company or
any Subsidiary) with respect to any of the foregoing (collectively, "Registered
Intellectual Property"), owned by the Company or any Subsidiary or with respect
to which the Company or any Subsidiary has any rights. The Company or any
Subsidiary have the sole and exclusive right to use all Registered Intellectual
Property and other computer software and software licenses, intellectual
property, proprietary information, trade secrets, trademarks, trade names,
copyrights, material and manufacturing specifications, drawings and designs
(collectively, "Intellectual Property") used by the Company or any Subsidiary
or necessary in connection with the operation of the Company's or any
Subsidiary's business, without infringing on or otherwise acting adversely to
the rights or claimed rights of any Person, and neither the Company nor either
of the Subsidiaries is obligated to pay any royalty or other consideration to
any Person in connection with the use of any such Intellectual Property. No
other Person is infringing the rights of the Company or any Subsidiary in any
such Intellectual Property.
2.23 Subsidiaries and Investments. Neither the Company nor any
Subsidiary owns any direct or indirect equity or debt interest in any other
Person, including without limitation any interest in a partnership or joint
venture, and is not obligated or committed to acquire any such interest.
2.24 Competing Interests. None of the Company, any Subsidiary, the
Stockholders or any director, officer, relative or affiliate of any of the
foregoing owns, directly or indirectly, an interest in any Person that is a
competitor, customer or supplier of the Company or any Subsidiary or that
otherwise has material business dealings with the Company or any Subsidiary.
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2.25 Illegal or Unauthorized Payments: Political Contributions.
Neither the Company, any Subsidiary nor any of their respective officers,
directors, employees, agents, stockholders or other representatives or any
other business entity or enterprise with which the Company or either of the
Subsidiaries is or has been affiliated or associated, has, directly or
indirectly, made or authorized any payment, contribution or gift of money,
property or services, whether or not in contravention of applicable law, (a) as
a kickback or bribe to any Person or (b) to any political organization, or the
holder of or any aspirant to any elective or appointive public office, except
for personal political contributions not involving the direct or indirect use
of funds of the Company or any Subsidiary. Neither the Company nor any
Subsidiary has violated any United States or Mexican federal or state antitrust
statutes, rules or regulations, including without limitation those relating to
unfair competition, price fixing, bid rigging or collusion.
2.26 No Misrepresentations. The Stockholders have disclosed to the
Parent all facts and information that would be material to a purchase of the
Company. Neither the Company, any Subsidiary nor any of the Stockholders has
received any appraisal, report or other similar information relating to the
value or condition of the Company, any Subsidiary or any of their respective
assets. The representations, warranties and statements made by the
Stockholders in or pursuant to this Agreement (including the Schedules hereto)
are true, complete and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make any such representation, warranty or statement, under the
circumstances in which it is made, not misleading.
ARTICLE III
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Stockholders acknowledge that none of the Parent Securities nor any
securities of the Parent issuable pursuant thereto have been or will be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon the exemption provided by Section 4(2) of the Securities Act
for transactions by an issuer not involving any public offering or under any
securities laws of Mexico and, in connection therewith, the Stockholders,
jointly and severally, represent and warrant as follows:
3.1 Receipt of Information. The Stockholders have received copies
(excluding exhibits) of the following documents, in each case as filed with the
Securities and Exchange Commission (the "SEC"): (a) the Parent's Annual Report
on Form 10-KSB for the year ended December 31, 1995 (the "1995 10-K"); (b) the
Parent's Quarterly Report on Form 10-QSB for the quarter ended September 30,
1995 (the "Latest 10-Q"); (c) the Parent's Proxy Statement for its Annual
Meeting of Stockholders held in 1995; and (d) all Current Reports on Form 8-K
filed by the Parent with the SEC since March 31, 1995 (collectively, the "SEC
Filings"). The Stockholders have received all information concerning the
Parent and DTS as they required in order to evaluate the terms and conditions
of this Agreement, the Merger and the Parent Securities. The Stockholders have
had the opportunity to ask any questions they might have concerning the
Parent's operations and financial condition.
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3.2 Legend. The Stockholders acknowledge that the certificates
for the Parent Securities will bear a restrictive legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SHARES UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF
COUNSEL FOR THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED."
3.3 Investment. Each Stockholder confirms that the Parent
Securities and any securities of the Parent issuable pursuant thereto will be
acquired for investment for the account of such Stockholder only, not as
nominee or agent, and not with a view to the resale or distribution of any part
thereof in a manner which would require registration under the Securities Act
or any applicable Mexican or state securities laws, and that Stockholder has no
present intention of selling, granting any participation in, or otherwise
distributing the same.
3.4 Restriction on Resale. Each Stockholder understands that the
Parent Securities and any securities of the Parent issued pursuant thereto have
not been and will not be registered under the Securities Act or any Mexican or
state securities law. The Stockholders can resell such securities in the
United States only pursuant to an effective registration statement or pursuant
to an exemption from registration under the Securities Act and otherwise in
accordance with any applicable United States or Mexican federal or state
securities laws.
3.5 Accredited Investor; Ability to Understand the Investment.
Each Stockholder is an "accredited investor" as that term is defined in Rule
501 of Regulation D promulgated pursuant to the Securities Act of 1933.
Further, by reason of each Stockholder's business and financial experience,
each has acquired the experience and knowledge of business and financial
matters necessary to evaluate effectively, and the capacity to protect his or
her interests in, investments of this nature. Each Stockholder has carefully
evaluated his or her financial resources and investment position and the risks
associated with this investment and is able to bear the economic risk of
investment in the Parent Securities. Further, each Stockholder acknowledges
that he or she has read this Agreement and fully understands its terms and
conditions, the terms on which the Merger will be effected and the respective
terms of the Parent Securities.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
The Parent represents and warrants to the Stockholders as follows:
4.1 Organization.
(a) The Parent is a corporation duly organized, validly
existing and in good standing under the laws of Texas and has full
corporate power to own its properties
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and to conduct its business as presently conducted. The Merger Sub is
a corporation duly organized, validly existing and in good standing
under the laws of Delaware and has full corporate power to own its
properties and to conduct its business as presently conducted. The
Parent is duly authorized, qualified or licensed to do business and is
in good standing as a foreign corporation in each country, state, or
other jurisdiction in which its assets are located or in which its
business or operations as presently conducted make such qualification
necessary.
(b) Digital Telecommunication Systems/ZWUT, ("DTS") is a
Polish limited liability company duly organized, validly existing and
in good standing under the laws of Poland and has full power to own
its properties and to conduct its business as presently conducted.
DTS is duly authorized, qualified or licensed to do business and is in
good standing as a foreign entity in each country, state or other
jurisdiction in which its assets are located or in which its business
or operations as presently conducted make such qualification
necessary. The Parent owns 90% of the issued and outstanding capital
stock of DTS, free and clear of any Lien. There are no outstanding
options, warrants, convertible or exchangeable securities or other
rights, agreements, arrangements or commitments obligating DTS or any
other person or entity to issue or sell any securities or ownership
interests in DTS. There are no stockholders' agreements, voting
agreements, voting trusts or similar agreements binding on any of the
stockholders of DTS or applicable to any of the outstanding shares of
the capital stock of DTS.
4.2 Authority. Each of the Parent Companies has all requisite
power and authority to execute, deliver and perform under this Agreement. The
execution, delivery and performance of this Agreement by each of the Parent
Companies has been duly authorized by all necessary action, corporate or
otherwise, on the part of such Parent Company. This Agreement has been duly
executed and delivered by each of the Parent Companies and is a legal, valid
and binding agreement of such Parent Company, enforceable against such Parent
Company in accordance with its terms except to the extent enforceability may be
affected by (i) bankruptcy, insolvency, moratorium and other similar laws
affecting creditor's right generally; or (ii) principles of equity.
4.3 No Violation. The execution, delivery and performance of this
Agreement by the Parent will not conflict with or result in the breach of any
term or provision of, or violate or constitute a default under any charter
provision or bylaw or under any agreement that is material to the Parent or
DTS, as the case may be, or any instrument, order, law or regulation to which
Parent is a party or by which the Parent is in any way bound or obligated. The
execution, delivery and performance of this Agreement by the Merger Sub will
not conflict with or result in the breach of any term or provision of, or
violate or constitute a default under any charter provision or bylaw or under
any agreement that is material to the Merger Sub, or any instrument, order, law
or regulation to which the Merger Sub is a party or by which the Merger Sub is
in any way bound or obligated.
4.4 Governmental Consents. Except as described in Schedule 4.4,
no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any
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Governmental Body is required on the part of The Parent or the Merger Sub in
connection with the transactions contemplated by this Agreement.
4.5 SEC Filings. True and complete copies of the SEC Filings are
attached hereto as Schedule 4.5. The SEC Filings do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make any statement contained therein, under the circumstances in which it is
made, not misleading. All of such SEC Filings have been timely filed. Parent
agrees to provide the Stockholders a copy of its Annual Report on Form 10-KSB
for the year ended December 31, 1995 at such time as that report becomes
available.
4.6 Parent Securities. When issued and delivered in accordance
with this Agreement, the Parent Securities will be duly authorized, validly
issued, fully paid and nonassessable, free of any preemptive or other similar
rights of any Person.
4.7 Minute Books. The Parent has made available to the
Stockholders true, correct and complete copies of certificates of incorporation
or equivalent instrument, bylaws or equivalent instrument, minute books, stock
certificate books and stock record books of the Parent and DTS. The minute
books of the Parent and DTS contain minutes or consents reflecting all actions
taken by the directors (including any committees) and stockholders of each of
the Parent and DTS.
4.8 Capitalization. The authorized capital stock of the Parent
consists solely of 10,000,000 shares of common stock, $0.001 par value per
share ("Parent Common Stock"), of which 1,890,442 shares of Parent Common Stock
are issued and outstanding, 4,000,000 shares of Preferred Stock, $0.001 par
value, of which no shares are issued and outstanding, and 1,000,000 shares of
Series A Preferred Stock, $0.001 par value, of which no shares are issued and
outstanding. The Parent Common Stock is validly issued, fully paid and
nonassessable and is held by the Parent's stockholders free and clear of
preemptive or similar rights. The Parent Common Stock constitutes all of the
issued and outstanding capital stock of the Company. Except as set forth on
Schedule 4.8, there are no outstanding options, warrants, convertible or
exchangeable securities or other rights, agreements, arrangements or
commitments obligating the Parent or any other person or entity to issue or
sell any securities or ownership interests in the Parent. There are no
stockholders' agreements, voting agreements, voting trusts or similar
agreements binding on any of the Parent's stockholders or applicable to any
shares of Parent Common Stock. All of the outstanding capital stock of the
Parent has been offered and sold in compliance with all applicable securities
laws, rules and regulations.
4.9 Financial Statements. The unaudited consolidated balance
sheet of the Parent (the "Latest Balance Sheet") as of September 30, 1995 (the
"Latest Balance Sheet Date") and the related unaudited consolidated statement
of operations and cash flow for the nine months then ended contained in
Parent's Latest 10-QSB, and the audited consolidated balance sheet of the
Parent as of December 31, 1994 and the related audited consolidated statements
of operations and cash flows for the two years then ended contained in the
Parent's 1995 10-KSB (collectively, the "Financial Statements") present fairly
the financial condition of the Parent at the dates specified and the results
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of its operations for the periods specified and have been prepared in
accordance with generally accepted accounting principles, consistently applied,
subject in the case of the unaudited statements to changes resulting from
normal period-end adjustments for recurring accruals (which will not be
material individually or in the aggregate). The Parent Financial Statements do
not contain any items of a special or nonrecurring nature, except as expressly
stated therein. The Parent Financial Statements have been prepared from the
books and records of the Parent, which accurately and fairly reflect all the
transactions of, acquisitions and dispositions of assets by, and incurrence of
liabilities by the Parent. All accounts receivable reflected on the Parent's
Latest Balance Sheet arose in the ordinary course of business and are fully
collectible in the ordinary course of business, without resort to litigation,
at the face amount thereof, less any reserve reflected in the Parent's Latest
Balance Sheet, and will not be subject to counterclaim, set-off or other
reduction.
4.10 Absence of Undisclosed Liabilities. At the Closing, (a) the
aggregate amount of the indebtedness for borrowed money of the Parent and of
DTS (which excludes accounts payable arising in the ordinary course of
business) will not exceed $25,000 and $100,000, respectively and (b) the
aggregate book value of the assets minus the aggregate book value of the
liabilities (in each case, as determined in accordance with generally accepted
accounting principles, consistently applied) of the Parent and of DTS will be
at least $3,475,000. Neither the Parent nor DTS has any Liabilities, except
for (i) Liabilities specifically identified in the Parent's Latest Balance
Sheet and (ii) obligations to be performed in the ordinary course of business
under the agreements that are material to the Parent or DTS, as the case may
be.
4.11 Absence of Material Adverse Change. Since the Parent's Latest
Balance Sheet Date, except as specifically contemplated by this Agreement,
there has not been: (a) any material adverse change in the condition (financial
or otherwise), results of operations, business, prospects, assets or
Liabilities of the Parent or DTS or with respect to the manner in which the
Parent or DTS conducts business or operations; (b) any payment or transfer of
assets (including without limitation any dividend, stock repurchase or other
distribution or any repayment of indebtedness) to any stockholder of the
Parent; (c) any breach or default (or event that with notice or lapse of time
would constitute a breach or default), termination or threatened termination
under any agreement that is material to the Parent or DTS, as the case may be;
(d) any material theft, damage, destruction, casualty loss, condemnation or
eminent domain proceeding affecting any of the Parent's or DTS's assets,
whether or not covered by insurance; (e) any sale, assignment or transfer of
any of the assets of the Parent or DTS, except in the ordinary course of
business and consistent with past practices; (f) any waiver by the Parent or
DTS of any material rights related to the Parent or DTS's business, operations
or assets; (g) any other transaction, agreement or commitment entered into by
either of the Parent or DTS affecting the business, operations or assets of the
Parent or DTS, except in the ordinary course of business and consistent with
past practices; or (h) any agreement or understanding to do or that will
result in any of the foregoing.
4.12 Taxes. All required United States or Polish federal, state,
local and other tax returns, notices and reports (including without limitation
income, property, sales, use, franchise, withholding, social security and
unemployment tax returns) relating to or involving transactions with the Parent
or DTS have been accurately prepared and duly and timely filed, and all taxes
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required to be paid with respect to the periods covered by any such returns
have been timely paid. No tax deficiency has been proposed or assessed against
the Parent or DTS, and neither the Parent nor DTS has executed any waiver of
any statute of limitations on the assessment or collection of any tax. No tax
audit, action, suit, proceeding, investigation or claim is now pending or
threatened against either the Parent or DTS, and no issue or question has been
raised (and is currently pending) by any taxing authority in connection with
any of the Parent's or DTS's tax returns or reports. The Parent and DTS have
withheld or collected from each payment made to each of their employees the
full amount of all taxes required to be withheld or collected therefrom and has
paid the same to the proper tax receiving officers or authorized depositories.
4.13 Litigation. There are currently no pending or threatened
lawsuits, administrative proceedings or reviews, or formal or informal
complaints or investigations by any individual, corporation, partnership,
Governmental Body or other Person against or relating to the Parent or DTS or
any of their directors, employees or agents (in their capacities as such) or to
which any assets of the Parent or DTS are subject. Neither the Parent nor DTS
are subject to or bound by any currently existing judgment, order, writ,
injunction or decree.
4.14 Compliance with Laws. The Parent and DTS are currently
complying with and have at all times complied with, and the use, operation and
maintenance of its assets comply with and have at all times complied with, and
neither the Parent, DTS, the assets of either of them, nor the use, operation
or maintenance of assets of either of them is in violation or contravention of,
any applicable statute, law, ordinance, decree, order, rule or regulation of
any Governmental Body, including without limitation all United States or Polish
federal, state and local laws relating to occupational health and safety,
employment and labor matters.
4.15 Permits. The Parent and DTS own or possess from each
appropriate Governmental Body all right, title and interest in and to all
Permits issued by any Governmental Body necessary to conduct their respective
businesses. No loss or expiration of any such Permit is pending or threatened
or reasonably foreseeable, other than expiration in accordance with the terms
thereof of Permits that may be renewed in the ordinary course of business
without lapsing.
4.16 Environmental Matters.
(a) Without limiting the generality of the other
representations and warranties set forth in this Article II: (i) the
Parent and DTS have conducted their businesses in compliance with all
applicable Environmental Laws, including without limitation by having
all Permits required under any Environmental Laws for the operation of
their respective businesses; (ii) none of the properties owned or
leased by the Parent or DTS contains any Hazardous Substance in
amounts exceeding the levels permitted by applicable Environmental
Laws; (iii) neither the Parent nor DTS has received any notices,
demand letters or requests for information from any Governmental Body
or other Person indicating that the Parent or DTS may be in violation
of, or liable under, any Environmental Law or relating to any of the
properties identified in Schedule 4.19; (iv) no reports have been
filed, or are required to be filed, by the Parent or DTS concerning
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the release of any Hazardous Substance or the threatened or actual
violation of any Environmental Law; (v) no Hazardous Substance has
been disposed of, released or transported in violation of any
applicable Environmental Law from any properties owned or leased by
the Parent or DTS or as a result of any activity of the Parent or DTS;
(vi) there have been no environmental investigations, studies, audits,
tests, reviews or other analyses regarding compliance or noncompliance
with any Environmental Law conducted by or which are in the possession
of the Parent or DTS relating to the activities of the Parent or DTS
or any of the real property identified in Schedule 4.19 that have not
been delivered to Parent prior to the date hereof; (vii) there are no
underground storage tanks on, in or under any properties owned or
leased by the Parent or DTS, and no underground storage tanks have
been closed or removed from any of such properties; (viii) there is no
asbestos or asbestos containing material present in any of the
properties owned or leased by the Parent or DTS, and no asbestos has
been removed from any of such properties; and (ix) neither the Parent,
DTS nor any of the properties of the Parent or DTS is subject to any
material Liabilities or expenditures relating to any suit, settlement,
court order, administrative order, regulatory requirement, judgment or
claim asserted or arising under any Environmental Law.
4.17 Employee Matters. Set forth on Schedule 4.17 is a
complete list of all current employees of each of the Parent and DTS, including
date of employment, current title and compensation, and date and amount of last
increase in compensation. The consummation of the transactions contemplated by
this Agreement will not accelerate the time of payment or vesting or increase
the amount of compensation due to any director, officer or employee (present or
former) of the Parent or of DTS or result a change in any of the pre-existing
labor conditions of any of the employees of the Parent or DTS or be a reason
for the termination of any labor relationship attributable to the Parent or
DTS. Neither the Parent nor DTS has any collective bargaining, union or labor
agreements, contracts or other arrangements with any group of employees, labor
union or employee representative. No organization effort is currently being
made or threatened by or on behalf of any labor union with respect to employees
of the Parent or DTS. Neither the Parent nor DTS has experienced, nor is there
any basis for, any strike, material labor trouble, work stoppage, slow down or
other interference with or impairment of the business of the Parent or DTS.
4.18 Employee Benefit Plans.
(a) Schedule 4.18 lists all "employee pension benefit
plans," as defined in Section 3(2) of the ERISA or the Polish
equivalent of ERISA, ever maintained or contributed to (or required to
be contributed to) by the Parent, DTS or any Affiliate (the "Parent
Pension Plans"). As used in this Section 4.18 "Affiliate" means
any corporation, trade or business the employees of which, together
with the employees of the Parent and/or DTS, are required to be
treated as employed by a single employer under the provisions of
ERISA or Section 414 of the Code.
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(b) Schedule 4.18 lists each "employee welfare benefit
plan" (as defined in Section 3(l) of ERISA) or the Polish equivalent
of ERISA that the Parent, DTS, or any Affiliate maintains, contributes
to or is required to contribute to on behalf of any employee or former
employee, including any multiemployer welfare plan (the "Parent
Welfare Benefit Plans"), and sets forth the amount of any Liability of
the Parent, DTS, or any Affiliate for any payment past due with
respect to each Parent Welfare Benefit Plan as of the date of the
Closing. No voluntary employees' beneficiary association or other
funding arrangement (other than insurance contracts) are being used to
fund or implement any Welfare Benefit Plan. Neither the Parent nor
DTS has made any written or oral representations to any employee or
former employee promising or guaranteeing any employer payment or
funding for the continuation of benefits or coverage under any Parent
Welfare Benefit Plan or other similar plan for any period of time
beyond the end of the current plan year (except to the extent required
under Code Section 4980B).
(c) Schedule 4.18 lists each plan or policy providing for
"fringe benefits" (including but not limited to vacation, paid
holidays, personal leave, employee discount, educational benefit or
similar program), and any other deferred compensation, bonus, stock
option, employee stock purchase, severance, group insurance,
disability, unemployment, supplemental unemployment, layoff,
consulting or stock appreciation rights plan, and any other similar
plan, policy, arrangement, commitment or understanding (whether
written or oral) not required to be listed under paragraph (a) or (b)
above that is maintained by the Parent or DTS for employees or
provides benefits or describes policies or procedures applicable to
any employee, former employee, director or former director of the
Parent or DTS (the "Parent Employee Benefit Plan").
(d) Schedule 4.18 lists and specifically identifies each
multiemployer plan (as defined in Section 3(37) of ERISA) or Polish
law analog to which the Parent or DTS or any Affiliate contribute or
has at any time contributed or had an obligation to contribute (the
"Parent Multiemployer Plans").
(e) Neither the Parent, DTS nor any Affiliate maintain,
or has ever maintained, contributed to, been required to contribute to
or had any employees participating in, any "defined benefit plan" (as
defined in Section 3(35) of ERISA) or Polish law analog.
(f) The Parent Pension Plans, the Parent Welfare Benefit
Plans and the Parent Employee Benefit Plans and related trusts and
insurance contracts, including any Parent Multiemployer Plans
(collectively, the "Parent Plans"), are legally valid and binding and
in full force and effect. All of the Parent Plans comply currently,
and have complied in the past, both as to form and operation, with the
provisions of all laws, rules and regulations governing or applying to
such Parent Plans; all necessary governmental approvals for the Parent
Pension Plans and the Parent Welfare Benefit Plans have been obtained;
and a favorable determination as to the qualification under the Code
of each of the Parent Pension Plans and each amendment thereto has
been made by the Internal
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Revenue Service, and nothing has occurred since the date of such
determination letters that could adversely affect the qualification of
such plans or the tax exempt status of the related trust. All reports
and filings required by any Governmental Body (including without
limitation Form 5500 Annual Reports, Summary Annual Reports and
Summary Plan Descriptions) with respect to each Parent Plan have been
timely and completely filed, and have been distributed to participants
as required by applicable law. Neither the Parent, DTS, any Affiliate
or any plan fiduciary of any Parent Plan has engaged in any
transaction in violation of Section 406(a) or (b) of ERISA or Polish
law analog or any "prohibited transaction" (as defined in Code Section
4975(c)(1)) that would subject the Parent or DTS to any taxes,
penalties or other Liabilities resulting from such transaction. None
of the Parent Plans is being audited or investigated by any
Governmental Body.
(g) Neither the Parent nor DTS has any Liabilities to any
Person with respect to any Parent Plan, except for (i) Liabilities
that are fully funded by assets set aside in trust or irrevocably
dedicated for that purpose, the fair market value of which assets
exceed the Liabilities to which they are set aside or dedicated, and
(ii) Liabilities that have been fully accrued on the Parent Financial
Statements.
(h) With respect to each Pension Plan that is subject to
Title I, Subtitle B, Part 3 of ERISA or any Polish law which has a
similar intent and function, (i) the funding method used in connection
with such Parent Pension Plan is acceptable under ERISA or the Polish
law which has a similar intent and function; (ii) the actuarial
assumptions use in connection with funding each Parent Pension Plan,
in the aggregate, are reasonable (taking into account the experience
of such Parent Pension Plan and reasonable expectations); and (iii) no
"accumulated funding deficiency" (as defined in Section 302(a)(2) of
ERISA), whether or not waived, exists with respect to any plan year.
(i) With respect to each Parent Pension Plan that is
subject to the minimum funding requirements of Code Section 412: (i)
the Parent, DTS and their Affiliates have paid all premiums (and
interest charges and penalties for late payment, if applicable) due
the Pension Benefit Guaranty Corporation ("PBGC") with respect to each
such Pension Plan and each plan year thereof for which such premiums
are required; (ii) there has been no "reportable event" (as defined in
Section 4043(b) of ERISA and the regulations of the PBGC under such
Section) for which the 30 day notice is not waived; (iii) no filing
has been made by the Parent, DTS, or any Affiliate with the PBGC (and
no proceeding has been commenced by the PBGC) to terminate any such
Plan; (iv) no amendment has occurred that has required or could
require the Parent or DTS, to provide security to any such Parent Plan
under Code Section 401(a)(29); (v) all installment contributions
required pursuant to Code Section 412(m) have been paid by the Parent,
DTS, and each Affiliate before the due date for such contribution as
set forth in Code Section 412(m) for each such Parent Plan; and (vi)
no partial termination has occurred or is expected to occur in
connection with the transactions contemplated by this Agreement or
otherwise.
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(j) With respect to each Parent Multiemployer Plan, (i)
the Parent, DTS and their Affiliates has or will have, as to the
Closing, made all contributions to each Parent Multiemployer Plan
required by the terms of such Parent Multiemployer Plan or any
collective bargaining agreement; and (ii) neither the Parent, DTS, nor
the Company and the Subsidiaries would be subject to any withdrawal
liability under Part 1 of Subtitle E of Title IV of ERISA or Polish
law analog if, as of the Closing, the Parent, DTS, or any of their
Affiliates were to engage in a complete withdrawal (as defined in
ERISA Section 4203 or Polish law analog from any Parent Multiemployer
Plan. Neither the Parent, DTS, nor any of their Affiliates has at any
time (A) incurred any Liabilities under the provisions of Section 4062
of ERISA; (B) withdrawn as a substantial employer so as to become
subject to the provisions of Section 4063 of ERISA; (C) ceased making
contributions to any Parent Multiemployer Plan; or (D) made a complete
or partial withdrawal from a Parent Multiemployer Plan so as to incur
withdrawal liability as defined in section 4201 of ERISA or Polish law
analog (without regard to subsequent reduction or waiver of such
liability under Section 4207 or 4208 of ERISA).
(k) There are no agreements that will provide payments to
any officer, employee, stockholder, or highly compensated individual
that will be "parachute payments" under Code Section 280G or Polish
law analog that are nondeductible to the Parent or DTS, or subject to
tax under Code Section 4999 or Polish law analog for which the Parent,
DTS, or their Affiliates would have withholding liability.
(l) True and complete copies of the following documents
have been delivered to the Stockholders: (i) each Parent Plan and each
related trust agreement or annuity contract (or other funding
instrument); (ii) the most recent determination letter issued by the
Internal Revenue Service with respect to each Parent Pension Plan;
(iii) Annual Reports on Form 5500 Series required to be filed with any
Governmental Body for each Parent Welfare Benefit Plan and each Parent
Pension Plan for the two most recent plan years; and (iv) the three
most recent actuarial reports for each Parent Pension Plan.
4.19 Title to Assets. Set forth in Schedule 4.19 is a complete
list (including the street address, where applicable) of (a) all real property
currently owned by the Parent or DTS; (b) all real property currently leased or
otherwise used by the Parent or DTS; (c) each vehicle owned or leased by the
Parent or DTS; and (d) each asset of the Company or DTS with a book value or
fair market value greater than $10,000. The Parent and DTS have good and
marketable title to all of their respective assets, including without
limitation the assets listed on Schedule 4.19, the assets reflected on the
Parent's Latest Balance Sheet and all assets used by either the Parent or DTS
in the conduct of its respective businesses (except for assets disposed of in
the ordinary course of business and consistent with past practices since the
Parent's Latest Balance Sheet Date and except for assets held under leases or
licenses disclosed pursuant to Section 4.21); and all such assets are owned
free and clear of any Liens, except for (A) Liens for current taxes not yet
due; (B) minor imperfections of title and encumbrances that do not materially
detract from or interfere with the present use or value of such properties; and
(C) Liens disclosed on Schedule 4.19.
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4.20 Condition of Properties. All facilities, machinery,
equipment, fixtures, vehicles and other tangible property owned, leased or used
by the Parent and DTS are in good operating condition and repair, normal wear
and tear excepted, are reasonably fit and usable for the purposes for which
they are being used, will not likely require major overhaul or repair in the
foreseeable future, are adequate and sufficient for the Parent's or DTS's
respective business and conform with all applicable laws, rules and
regulations. Each of the Parent and DTS maintains policies of insurance issued
by insurers of recognized responsibility insuring the Parent and DTS and their
respective assets and businesses against such losses and risks, and in such
amounts, as are customary in the case of corporations of established reputation
engaged in the same or similar businesses and similarly situated.
4.21 Material Agreements.
(a) Schedule 4.21 lists each agreement and arrangement
(whether written or oral and including all amendments thereto) to
which either of the Parent or DTS are a party or a beneficiary or by
which either the Parent, DTS, or any of their respective assets are
bound and that is material to the Parent or DTS, as the case may be
(collectively, the "Material Agreements"), including without
limitation (i) any real estate leases; (ii) any agreement evidencing,
securing or otherwise relating to any indebtedness for which the
Parent or DTS is liable; (iii) any capital or operating leases or
conditional sales agreements relating to vehicles, equipment or other
assets of the Parent or DTS; (iv) any supply, distribution or
manufacturing agreements or arrangements pursuant to which the Parent
or DTS is entitled or obligated to acquire any assets from a third
party; (v) any licensing, franchising, servicing, consulting, or other
agreements; (vi) any marketing, sales or advertising agreements; (vii)
any insurance policies; (viii) any employment, consulting,
noncompetition, separation, collective bargaining, union or labor
agreements or arrangements; (ix) any agreement with or for the benefit
of any stockholder, director, officer or employee of the Parent or
DTS, or any affiliate or family member thereof; and (x) any other
agreement or arrangement pursuant to which the Parent or DTS could be
required to make or entitled to receive aggregate payments in excess
of $10,000.
(b) The Parent has delivered to the Stockholders a copy
of each Parent Material Agreement. Each Parent Material Agreement is
valid, binding and in full force and effect and enforceable in
accordance with its terms; each of the Parent and DTS has performed
all of its obligations under each Material Agreement, and there exists
no breach or default (or event that with notice or lapse of time would
constitute a breach or default) under any Material Agreement; there
has been no termination or notice of default or any threatened
termination under any Material Agreement; and no consent of any Person
is required in connection with the transactions contemplated by this
Agreement in order to preserve the rights of the Parent or DTS under
or to prevent any disadvantage to the Parent or DTS in respect of any
Parent Material Agreement.
4.22 Customers. Set forth in Schedule 4.22 is a complete list of
each customer of each of the Parent and DTS that has accounted for more than
$10,000 of revenues during any month since
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January 1, 1994, or is expected to account for revenues exceeding such amount
during any of the next twelve months (the "Parent Material Customers"), and
indicating the amount of revenues attributable to each Parent Material Customer
during the years ended December 31, 1994 and 1995. During the year ended
December 31, 1995, the Parent earned no in revenues from the Parent Material
Customers, and DTS earned an aggregate of $1,086,041 in revenues from the
Parent Material Customers.
4.23 Intellectual Property Rights. Set forth in Schedule 4.23 is a
complete list of all registered patents, trademarks, service marks, trade names
and copyrights, and applications for and licenses (to or from the Parent or
DTS) with respect to any of the foregoing (collectively, "Registered
Intellectual Property"), owned by the Parent or DTS or with respect to which
the Parent or DTS has any rights. The Parent or DTS have the sole and
exclusive right to use all Registered Intellectual Property and other computer
software and software licenses, intellectual property, proprietary information,
trade secrets, trademarks, trade names, copyrights, material and manufacturing
specifications, drawings and designs (collectively, "Intellectual Property")
used by the Parent or DTS or necessary in connection with the operation of the
Parent's or DTS's business, without infringing on or otherwise acting adversely
to the rights or claimed rights of any Person, and neither the Parent nor DTS
is obligated to pay any royalty or other consideration to any Person in
connection with the use of any such Intellectual Property. No other Person is
infringing the rights of the Parent or DTS in any such Intellectual Property.
4.24 Subsidiaries and Investments. Neither the Parent nor DTS own
any direct or indirect equity or debt interest in any other Person, including
without limitation any interest in a partnership or joint venture, and is not
obligated or committed to acquire any such interest.
4.25 Competing Interests. Neither the Parent nor DTS nor any
director, officer, relative or affiliate of any of the foregoing owns, directly
or indirectly, an interest in any Person that is a competitor, customer or
supplier of the Parent or DTS or that otherwise has material business dealings
with the Parent or DTS.
4.26 Illegal or Unauthorized Payments; Political Contributions.
Neither the Parent, DTS nor any of their respective officers, directors,
employees, agents, stockholders or other representatives or any other business
entity or enterprise with which the Parent or DTS is or has been affiliated or
associated, has, directly or indirectly, made or authorized any payment,
contribution or gift of money, property or services, whether or not in
contravention of applicable law, (a) as a kickback or bribe to any Person or
(b) to any political organization, or the holder of or any aspirant to any
elective or appointive public office, except for personal political
contributions not involving the direct or indirect use of funds of the Parent
or DTS. Neither the Parent nor DTS has violated any United States or Polish
federal or state antitrust statutes, rules or regulations, including without
limitation those relating to unfair competition, price fixing, bid rigging or
collusion.
4.27 No Misrepresentations. The Parent has disclosed to the
Stockholders all facts and information that would be material to an investment
in the Parent. Neither the Parent nor DTS has
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received any appraisal, report or other similar information relating to the
value or condition of the Parent, DTS or any of their respective assets. The
representations, warranties and statements made by the Stockholders in or
pursuant to this Agreement (including the Schedules hereto) are true, complete
and correct in all material respects and do not contain any untrue statement of
a material fact or omit to state any material fact necessary to make any such
representation, warranty or statement, under the circumstances in which it is
made, not misleading.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Conduct of Business.
(a) Prior to the Closing, the Company will; the Company will cause
the Subsidiaries to; and the Stockholders will cause the Company and the
Subsidiaries to, (a) operate in the ordinary course of business and consistent
with past practices and use its best efforts to preserve the goodwill of the
Company and the Subsidiaries and of its employees, customers, suppliers,
Governmental Bodies and others having business dealings with the Company or any
Subsidiary; (b) except as contemplated by this Agreement, not engage in any
transaction outside the ordinary course of business, including without
limitation, by making any material expenditure, investment or commitment or
entering into any material agreement or arrangement of any kind; (c) maintain
all insurance policies and all Permits that are required for the Company or any
Subsidiary to carry on their respective businesses; (d) maintain books of
account and records in the usual, regular and ordinary manner and consistent
with past practices; and (e) take no action that would result in a breach (as
of the Closing) of the representations and warranties set forth in Section
2.10.
(b) Prior to the Closing, the Parent and DTS will (a) operate in
the ordinary course of business and consistent with past practices and use its
best efforts to preserve the goodwill of the Company and the Subsidiaries and
of their respective employees, customers, suppliers, Governmental Bodies and
others having business dealings with the Company or any Subsidiary; (b) except
as contemplated by this Agreement, not engage in any transaction outside the
ordinary course of business, including without limitation, by making any
material expenditure, investment or commitment or entering into any material
agreement or arrangement of any kind; (c) maintain all insurance policies and
all Permits that are required for the Company or any Subsidiary to carry on
their respective businesses; (d) maintain books of account and records in the
usual, regular and ordinary manner and consistent with past practices; and (e)
take no action that would result in a breach (as of the Closing) of the
representations and warranties set forth in Section 4.11.
5.2 No-Shop Provisions. (a) Until the earlier of the Closing or
June 30, 1996, the Company and the Stockholders will each comply and cause the
Company and the Subsidiaries to comply with the following no-shop provisions:
(a) the Company and the Stockholders will each negotiate exclusively and in
good faith with Parent with respect to the sale of the Company; (b) neither the
Company, any Subsidiary nor any Stockholder will, directly or indirectly
(through agents or otherwise), encourage or solicit any inquiries or accept any
proposals by, or engage in any
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discussions or negotiations with or furnish any information to, any other
Person concerning a sale of a substantial portion of the assets or business of
the Company or any Subsidiary (whether through an asset sale, stock sale,
merger or otherwise); and (c) the Company, the Subsidiaries and the
Stockholders will promptly communicate to Parent the material substance of any
inquiry or proposal concerning any such transaction that may be received by any
of them.
(b) Until the earlier of the Closing or June 30, 1996, the Parent
will comply and cause DTS to comply with the following no-shop provisions: (a)
the Parent will negotiate exclusively and in good faith with the Stockholders
and the Company with respect to the sale of the Company; (b) neither the Parent
nor DTS will, directly or indirectly (through agents or otherwise), encourage
or solicit any inquiries or accept any proposals by, or engage in any
discussions or negotiations with or furnish any information to, any other
Person concerning a sale of a substantial portion of the assets or business of
the Parent (whether through an asset sale, stock sale, merger or otherwise);
and (c) the Parent will promptly communicate to the Company and the
Stockholders the material substance of any inquiry or proposal concerning any
such transaction that may be received by the Parent.
5.3 Access and Information.
(a) The Company and the Stockholders will afford to the
Parent and its authorized representatives full access to the plants,
properties, books and records of or relating to the Company and the
Subsidiaries to permit the Parent to investigate the Company and the
Subsidiaries as the Parent deems desirable. The Company and the
Stockholders will also permit the Parent to discuss the Company's
and/or any Subsidiary's businesses and operations with the executive
officers and directors of the Company and/or any Subsidiary. The
Parent will also be permitted to discuss the Company and/or any
Subsidiary with the customers of the Company or any Subsidiary upon
prior notification to the Company or any Subsidiary of its intent to
contact said customers.
(b) The Parent will afford to the Stockholders and their
authorized representatives full access to the plants, properties,
books and records of or relating to the Parent and DTS to permit the
Stockholders to investigate the Parent and DTS as the Stockholders
deem desirable. The Parent will also permit the Stockholders to
discuss the Parent's and DTS's business and operations with the
executive officers and directors of the Parent and DTS, respectively.
The Stockholders will also be permitted to discuss the Parent with the
customers of the Parent upon prior notification to the Parent of its
intent to contact said customer.
5.4 Supplemental Disclosure. (a) The Company and the Stockholders
will promptly supplement or amend each of the Schedules hereto with respect to
any matter that arises or is discovered after the date hereof that, if existing
or known at the date hereof, would have been required to be set forth or listed
in the Schedules hereto; provided that, for purposes of determining the rights
and obligations of the parties hereunder (other than the obligations of the
Company and
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the Stockholders under this Section 5.4(a)), any such supplemental or amended
disclosure will not be deemed to have been disclosed to Parent unless Parent
otherwise expressly consents in writing.
(b) The Parent will promptly supplement or amend each of the
Schedules hereto pertaining to the Parent with respect to any matter that
arises or is discovered after the date hereof that, if existing or known at the
date hereof, would have been required to be set forth or listed in the
Schedules hereto pertaining to the Parent, provided that, for purposes of
determining the rights and obligations of the parties hereunder (other than the
obligations of the Parent under this Section 5.4(b)), any such supplemental or
amended disclosure will not be deemed to have been disclosed to the
Stockholders unless the Stockholders otherwise expressly consent in writing.
5.5 Information for Filings. The Company and the Stockholders
will furnish Parent with all information concerning the Stockholders and the
Company and the Subsidiaries as is required for inclusion in any application or
filing made by Parent to any Governmental Body in connection with the
transactions contemplated by this Agreement.
5.6 Fulfillment of Conditions by the Stockholders. The Company
and the Stockholders agree not to take any action that would cause the
conditions on the obligations of the parties to effect the transactions
contemplated hereby not to be fulfilled, including without limitation by taking
or causing to be taken any action that would cause the representations and
warranties made by the Company or the Stockholders herein not to be true and
correct as of the Closing. The Company will cause to be fulfilled, and the
Stockholders will take all reasonable steps within their power to cause to be
fulfilled, the conditions precedent to Parent's obligations to consummate the
transactions contemplated hereby that are dependent on the actions of the
Stockholders or the Company.
5.7 Fulfillment of Conditions by Parent. Parent agrees not to
take any action that would cause the conditions on the obligations of the
parties to effect the transactions contemplated hereby not to be fulfilled,
including without limitation by taking or causing to be taken any action that
would cause the representations and warranties made by Parent herein not to be
true and correct as of the Closing. Parent will take all reasonable steps
within its power to cause to be fulfilled the conditions precedent to the
Company's and the Stockholder's obligations to consummate the transactions
contemplated hereby that are dependent on the actions of Parent.
5.8 Assistance After Closing. For a period of 90 days following
the Closing, the Stockholders will provide all assistance reasonably requested
by Parent to assist in the transaction of the Company's business from ownership
by the Stockholders to ownership by Parent.
5.9 Publicity. The Parent, the Company and the Stockholders will
cooperate with each other in the development and distribution of all news
releases and other public disclosures relating to the transactions contemplated
by this Agreement. Neither Parent, on the one hand, nor the Company, any
Subsidiary or the Stockholders, on the other hand, will issue or make, or allow
to have issued or made, any press release or public announcement concerning the
transactions contemplated by this Agreement without the advance approval in
writing of the form
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and substance thereof by the other parties, unless otherwise required by
applicable legal or stock exchange requirements.
5.10 Transaction Costs. If the transactions contemplated by this
Agreement are consummated, the Parent will pay all attorneys', accountants',
finders', brokers', investment banking and other fees, costs and expenses
incurred by the Company, any Subsidiary or the Stockholders prior to the
Closing, or by the Stockholders after the Closing, in connection with the
preparation, negotiation, execution and performance of this Agreement or any of
the transactions contemplated by this Agreement, including without limitation,
the consulting fee to be paid to the Company's consultant, Robert Chamberlain,
described in Section 8.10. The Parent will pay all attorneys', accountants',
finders', brokers', investment banking and other fees, costs and expenses that
it incurs in connection with the preparation, negotiation, execution and
performance of this Agreement or any of the transactions contemplated by this
Agreement; provided that (in addition to any other remedies that Parent may
have under this Agreement), the Stockholders, jointly and severally, agree to
reimburse the Parent for all of its out-of-pocket expenses incurred in
connection with the transactions contemplated by this Agreement if the Parent
terminates this Agreement as a result of any breach by the Stockholders of any
of their representations, warranties or covenants hereunder, and provided
further that (in addition to any other remedies that the Stockholders may have
under this Agreement), The Parent agrees to reimburse the Stockholders for all
of their respective out-of-pocket expenses incurred in connection with the
transactions contemplated by this Agreement if the Stockholders terminate this
Agreement as a result of any breach by Parent of any of its representations,
warranties or covenants hereunder. If the transactions contemplated by this
Agreement are not consummated by reason other than a breach of any
representation, warranty or covenant of any party hereto, each party shall bear
its own attorneys', accountants', finders', brokers', investment banking and
other fees, costs and expenses that it incurred in connection therewith.
5.11 Nondisclosure. (a) Each Stockholder acknowledges and agrees
that all customer, prospect and marketing lists, sales data, intellectual
property, proprietary information and trade secrets of the Parent and DTS
(collectively, the "Parent Confidential Information") are valuable, special and
unique assets and are and will be owned exclusively by the Parent and DTS.
Each Stockholder agrees to treat and will use its reasonable efforts to ensure
that the Company and each Subsidiary treats the Parent Confidential Information
as confidential and not to disclose any Parent Confidential Information to any
Person or make use of any Parent Confidential Information for his own purposes
or for the benefit of any other Person (other than the Parent or DTS).
(b) The Parent acknowledges and agrees that all customer, prospect
and marketing lists, sales data, intellectual property, proprietary information
and trade secrets of the Company and any Subsidiary (collectively, the "Company
Confidential Information") are valuable, special and unique assets and are and
will be owned exclusively by the Surviving Corporation or the Subsidiaries.
The Parent agrees to treat and will use its reasonable efforts to ensure that
each executive officer of the Parent treats all Company Confidential
Information as confidential and not disclose any Company Confidential
Information to any Person or make use of any Company Confidential Information
for their own purposes or for the benefit of any other Person (other than
Parent or the Company).
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5.12 Noncompetition. If the transactions contemplated by this
Agreement are consummated, for a period of one year following the discharge of
any Stockholder as an executive officer of the Company or any Subsidiary, no
such Stockholder will, directly or indirectly, on his own behalf or as an
officer, director, employee, consultant or other agent of any Person (other
than the Company or Parent): (a) engage in the telecommunications business (the
"Business") in Mexico or any other territory in which the Company or any
Subsidiary conduct business (the "Territory"); (b) influence or attempt to
influence any customer or potential customer of the Company or any Subsidiary
in the Territory to acquire any services offered by the Company or any
Subsidiary from any other person; or (c) affiliate himself with, or own any
economic interest of any kind in, any business or Person engaged in the
Business in the Territory. Parent will obtain an agreement from its executive
officers on the Closing Date that for a period of one year following the
discharge of such executive officer as an executive officer of Parent, such
executive officer will not, directly or indirectly, on his own behalf or as an
officer, director, employee, consultant or other agent of any Person (other
than the Company or Parent): (a) engage in the Business in the Territory; (b)
influence or attempt to influence any customer or potential customer of the
Company or any Subsidiary in the Territory to acquire any services offered by
the Company or any Subsidiary from any other person; or (c) affiliate himself
with, or own any economic interest of any kind in, any business or Person
engaged in the Business in the Territory. Notwithstanding the foregoing, the
Stockholders and the executive officers of Parent may own publicly traded
securities of another entity that conducts Business in the Territory so long as
their holdings constitute less than 5% of the outstanding securities of a
class.
5.13 Election of Directors. Immediately upon the Closing of the
transactions contemplated in this Agreement (i) two of the current six
directors of the Parent shall resign as directors of the Parent and (ii) the
remaining pre-closing Board of Directors of the Parent shall (A) increase the
size of the Board of Directors to seven (7) members, and (B) elect Manuel
Landa, Oscar Garcia and Ricardo Orea to the Board of Directors of the Parent,
to serve until the next annual meeting of the Parent's shareholders or until
their successors shall be elected and qualified.
5.14 Election of Officer. Immediately upon the Closing of the
transactions contemplated in this Agreement, Manuel Landa shall be elected as
Executive Vice President of Operations of the Parent.
5.15 NASDAQ Listing. Parent will diligently seek approval for
continued listing on the NASDAQ Small Cap Market.
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ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of Parent. The obligations of the
Parent and the Merger Sub under this Agreement are subject to the satisfaction
at or prior to the Closing of the following conditions, but compliance with any
such conditions may be waived by Parent in writing:
(a) All representations and, warranties of the Company
and/or the Stockholders contained in this Agreement are true and
correct in all material respects at and as of the Closing with the
same effect as though such representations and warranties were made at
and as of the Closing.
(b) The Company and the Stockholders have performed and
complied with all the covenants and agreements and satisfied the
conditions required by this Agreement to he performed, complied with
or satisfied by them at or prior to the Closing, including without
limitation the delivery of all items required to be delivered by them
pursuant to Section 1.3.
(c) There is no pending or threatened litigation in any
court or any proceeding before or by any Governmental Body against the
Stockholders, the Company, any Subsidiary or Parent to restrain or
prohibit or obtain damages or other relief with to this Agreement or
the consummation of the transactions contemplated hereby.
(d) All necessary contractual and governmental consents,
approvals, orders or authorizations have been obtained and all
necessary contractual or governmental notices have been given.
(e) The Parent has completed a comprehensive due
diligence review of the legal, business, financial and technical
affairs of the Company and the Subsidiaries and their respective
assets and operations, the results of which are satisfactory to the
Parent.
(f) The Parent has received the approval of its Board of
Directors for the execution, delivery and performance of this
Agreement. The Merger Sub has received the approval of its board of
directors for the execution, delivery and performance of this
Agreement.
(g) The Stockholders have delivered to Parent a closing
certificate substantially in form of Exhibit D.
(h) The Company has delivered to Parent a closing
certificate substantially in the form of Exhibit E.
(i) The Stockholders have delivered to Parent and the
Merger Sub certificates of the secretary of the Company and the
Subsidiaries substantially in form of Exhibit F.
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(j) The Parent has received a fairness opinion in form
and substance reasonably satisfactory to Parent from a reputable,
disinterested investment banking firm chosen by Parent stating that
the terms of this Agreement and the transactions contemplated hereby
are fair to the Parent's stockholders from a financial standpoint.
(k) The Stockholders have delivered to Parent a legal
opinion of their counsel substantially in form of Exhibit G.
(l) The Parent shall have determined to its reasonably
satisfaction and after due inquiry with the staff of the NASDAQ(SM)
Small Cap Market, that it will not be required to reapply for the
listing of the Parent Company Stock on the NASDAQ(SM) Small Cap Market
as a result of the consummation of the Merger.
(m) The Stockholders have delivered to Parent an
agreement to transfer and return to the Parent, without the payment of
consideration to the Stockholders in any form whatsoever, the Parent
Preferred Shares in the event the Parent Preferred Shares do not
become redeemable in accordance their terms. Such agreement shall be
substantially in form of Exhibit H.
(n) The Parent and each of Manuel Landa, Oscar Garcia and
Ricardo Orea shall have executed and delivered employment agreements
in the forms attached hereto as Exhibit I.
(o) The Merger shall have been approved by all necessary
corporate action of the Company, including, without limitation, the
vote of the board of directors approving the Merger and this Agreement
and the submission of the Merger to the Stockholders and the vote of
the Stockholders approving the Merger in accordance with the Delaware
Law.
(p) Parent shall have received satisfactory written
evidence that the Registration Rights Agreement dated August 10, 1995
and the Share Disposition Agreement dated July 28, 1995 shall have
been terminated at or prior to the Closing.
(q) Parent shall have received satisfactory written
evidence that Benchmark Equity Group and its affiliates and the
Management Stockholders have waived any fee arising from or relating
to that certain Letter Agreement dated as of July 28, 1995 concerning
the sale of the Company, and that such Letter Agreement has been
terminated at or prior to the Closing.
6.2 Conditions to Obligations of the Company and the Stockholders.
The obligations of the Company under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived by the Company in writing:
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(a) All representations and warranties of Parent
contained in this Agreement are true and correct in all material
respects at and as of the Closing with the same effect as though such
representations and warranties were made at and as of the Closing.
(b) Parent has performed and complied with the covenants
and agreements and satisfied the conditions required by this Agreement
to be performed, complied with or satisfied by Parent at or prior to
the Closing.
(c) There is no pending or threatened litigation in any
court or any proceeding before or by any Governmental Body against the
Stockholders, the Company, any Subsidiary, or Parent to restrain or
prohibit or obtain damages or other relief with respect to this
Agreement or the consummation of the transactions contemplated hereby.
(d) All necessary governmental consents, approvals,
orders or authorizations have been obtained and all necessary
governmental notices have been given.
(e) The Stockholders have completed a comprehensive due
diligence review of the legal, business, financial and technical
affairs of the Parent and its assets and operations, the results of
which are satisfactory to the Stockholders.
(f) Parent has delivered to the Stockholders a legal
opinion of Parent's counsel in form and substance reasonably
satisfactory to the Stockholders.
(g) Since the date of the Parent's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1995, the Parent shall
not have suffered a material adverse change in the condition
(financial or otherwise), results of operations, business, prospects,
assets or Liabilities of the Parent or with respect to the manner in
which the Parent conducts its business or operations.
(h) The Company and each of Manuel Landa, Oscar Garcia
and Ricardo Orea shall have executed and delivered employment
agreements in the forms attached hereto as Exhibit I.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of Parent. Each of the Management
Stockholders, jointly and severally, and each of the other Stockholders,
severally but not jointly, will indemnify and hold Parent, its subsidiaries
(including the Company and the Subsidiaries) and their respective directors,
officers, employees and agents (collectively, the "Parent Parties") harmless
from any and all liabilities, obligations, claims, contingencies, damages,
costs and expenses, including all court costs and reasonable attorneys' fees
(collectively, "Claims"), that any Parent Party may suffer or incur as a result
of or relating to:
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(a) the breach or inaccuracy, or any alleged breach or
inaccuracy, of any of the representations, warranties, covenants or
agreements made by the Company and/or such Stockholder, in the case
of Stockholders other than the Management Stockholders, and/or any
Management Stockholder, in the case of the Management Stockholders, in
this Agreement or pursuant hereto; or
(b) any lawsuit, claim or proceeding of any nature
existing at or prior to the Closing, or arising out of any act or
transaction of such Stockholder, in the case of Stockholders other
than the Management Stockholders, and/or any Management Stockholder,
in the case of the Management Stockholders, the Company, or any
Subsidiary occurring prior to the Closing, or arising out of facts or
circumstances that existed at or prior to the Closing that is related
to the Company or any Subsidiary, their respective assets or the
operation of their respective businesses.
The indemnification obligations of the Stockholders shall not be effective
until the aggregate amount of all liabilities, obligations, claims,
contingencies, damages, costs and expenses that the Parent may suffer or incur
exceeds $50,000, at which time the Stockholders shall be obligated to indemnify
and hold harmless the Parent with respect to the aggregate amount of all such
matters in accordance with the terms of this provision. Notwithstanding the
foregoing, the indemnification obligations of the Stockholders shall be limited
to the amount of consideration received by such Stockholder in the transactions
contemplated by this Agreement.
7.2 Indemnification of Stockholders. The Parent will indemnify
and hold Stockholders, their subsidiaries and their respective directors,
officers, employees and agents (collectively, the "Seller Parties") harmless
from any and all liabilities, obligations, claims, contingencies, damages,
costs and expenses, including all court costs and reasonable attorneys' fees
(collectively, "Claims"), that any Seller Party may suffer or incur as a result
of or relating to:
(a) the breach or inaccuracy, or any alleged breach or
inaccuracy, of any of the representations, warranties, covenants or
agreements made by the Parent in this Agreement or pursuant hereto; or
(b) any lawsuit, claim or proceeding of any nature
arising out of any act or transaction of the Parent, the Company, or
any Subsidiary occurring after the Closing, or arising out of facts or
circumstances that did not exist at or prior to the Closing that is
related to the Company or any Subsidiary, their respective assets or
the operation of their respective businesses.
The indemnification obligations of the Parent shall not be effective until the
aggregate amount of all liabilities, obligations, claims, contingencies,
damages, costs and expenses that the Stockholders may suffer or incur exceeds
$50,000, at which time the Parent shall be obligated to indemnify and hold
harmless the Stockholders with respect to the aggregate amount of all such
matters.
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7.3 Survival. All representations and warranties made in or
pursuant to this Agreement will survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby for a
period of three (3) years. All statements contained in any schedule,
certificate or other writing delivered in connection with this Agreement or the
transactions contemplated hereby will constitute representations and
warranties under this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned (a) at any time prior to the Closing by
mutual written consent of Parent, the Merger Sub, the Company and the
Stockholders; or (b) by either Parent, on the one hand, or the Company and the
Stockholders, on the other hand, if a condition to performance by the
terminating party or parties hereunder has not been satisfied or waived prior
to June 30, 1996. Notwithstanding clause (b) above, (i) Parent may not
terminate this Agreement if the event giving rise to its termination right
results from Parent's willful failure to perform or observe any of its
covenants or agreements set forth herein or if Parent is, at such time, in
breach of this Agreement, and (ii) no Stockholder may terminate this Agreement
if the event giving rise to its termination right results from the willful
failure of any Stockholder to perform or observe any of its covenants or
agreements set forth herein or if any Stockholder is, at such time, in breach
of this Agreement.
8.2 Warrants. The parties hereto acknowledge and agree that the
issuance, vesting and right to exercise of the Series A Common Stock Warrants
and the Series B Common Stock Warrants is in no way related to or conditioned
upon the employment or continued employment by the Parent or any of affiliate
of Parent of the holder of any such warrant or any person affiliated with or
related to any holder of any such warrant.
8.3 Notices. All notices that are required or may be given
pursuant to this Agreement must be in writing and delivered personally, by a
recognized courier service, by a recognized overnight delivery service, by
telecopy or by registered or certified mail, postage prepaid, to the parties at
the following addresses (or to the attention of such other person or such other
address as any party may provide to the other parties by notice in accordance
with this Section 8.2):
If to Parent:
Polish Telephones and Microwave Corporation
433 East Las Colinas Blvd.
Suite 815
Irving, Texas 75039
Attention: Chief Executive Officer
Telecopy: (214) 831-8723
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If to the Company prior to the Closing:
Telereunion, Inc. c/o Vextro
Ave Coyoa cam 1523
Col Del Valle
Mexico City, DF 03100
Attention: Mr. Manuel Landa
Telecopy: 011-525-5242984
With a copy to:
Ralph De Martino
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W.
Suite 400
Washington, D.C. 20036-2492
If to any of the Stockholders:
Telereunion, Inc. c/o Vextro
Ave Coyoa cam 1523
Col Del Valle
Mexico City, DF 03100
Attention: Mr. Manuel Landa
Telecopy: 011-525-5242984
With a copy to:
Ralph De Martino
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W.
Suite 400
Washington, D.C. 20036-2492
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service, or if sent by
telecopy or if mailed, when actually received.
8.4 Attorneys' Fees and Costs. If attorneys' fees or other costs
are incurred to secure performance of any obligations hereunder, or to
establish damages for the breach thereof or to obtain any other appropriate
relief, whether by way of prosecution or defense, the prevailing party will be
entitled to recover reasonable attorneys' fees and costs incurred in connection
therewith.
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8.5 Further Assurances. Each party agrees to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated
hereby.
8.6 No Brokers. Each party to this Agreement represents to the
other party that it has not incurred and will not incur any liability for
brokerage fees or agents' commissions in connection with this Agreement or the
transactions contemplated hereby and agrees that it will indemnify and hold
harmless the other party against any claim for brokerage and finders' fees or
agents' commissions in connection with the negotiation or consummation of the
transactions contemplated by this Agreement.
8.7 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, all of which together
will constitute one and the same instrument.
8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned or delegated by any
Stockholders, the Company or the Parent, without the prior written consent of
the other parties. This Agreement is not intended to confer any rights or
benefits to any Person (including without limitation any employees of the
Company or any Subsidiary) other than the parties hereto.
8.9 Entire Agreement. This Agreement and the related documents
contained as Exhibits and Schedules hereto or expressly contemplated hereby
contain the entire understanding of the parties relating to the subject matter
hereof and supersede all prior written or oral and all contemporaneous oral
agreements and understandings relating to the subject matter hereof. This
Agreement cannot be modified or amended except in writing signed by the party
against whom enforcement is sought. The Exhibits and Schedules to this
Agreement are hereby incorporated by reference into and made a part of this
Agreement for all purposes.
8.10 Governing Law. This Agreement will be governed by and
construed and interpreted in accordance with the substantive laws of the State
of Texas, without giving effect to any conflicts of law rule or principle that
might require the application of the laws of another jurisdiction. The parties
agree to submit any dispute arising under this Agreement to binding
arbitration. Such arbitration shall be conducted in Dallas, Texas by the
American Arbitration Association pursuant to its Commercial Arbitration Rules
as in effect from time to time.
8.11 Consulting Fee. If the transactions contemplated by this
Agreement are consummated, the Parent shall award Robert Chamberlain, as
compensation for consulting services provided by Mr. Chamberlain to the
Company, options to purchase 79,191 shares of Parent Common Stock at an
exercise price of $2.19 per share. If the transactions contemplated by this
Agreement are not consummated, neither the Parent, DTS or any of their
Affiliates shall have an obligation to pay consulting or any other fees or
expenses to Robert Chamberlain, and any such consulting or any other fees or
expenses owing to Mr. Chamberlain shall be an obligation of the Company.
41
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
POLISH TELEPHONES AND MICROWAVE
CORPORATION
By: /s/ Gary Panno
-----------------------
Name: Gary Panno
-----------------------
Title: Pres./CEO
-----------------------
PTMC ACQUISITION SUB, INC.
By: /s/ Gary Panno
-----------------------
Name: Gary Panno
-----------------------
Title: Pres.
-----------------------
TELEREUNION, INC.
By: /s/ Manuel Landa Rangel
-----------------------
Name: Manuel Landa Rangel
-----------------------
Title: President
-----------------------
STOCKHOLDERS:
/s/ Manuel Landa Rangel
--------------------------------
Manuel Landa
/s/ Ricardo Orea Gudino
--------------------------------
Ricardo Orea
/s/ Oscar Garcia
--------------------------------
Oscar Garcia
Benchmark Equity Group
By: /s/ Frank M. Delape
---------------------------
Name: Frank M. DeLape
---------------------------
Title: President
--------------------------
42
<PAGE> 48
Willowtree Developments Ltd.
By:/s/ Manuel Landa
-----------------------------
Name: Manuel Landa
---------------------------
Title: President
--------------------------
Bollington Developments Ltd.
By: Ricardo Orea Gudino
----------------------------
Name: Ricardo Orea Gudino
---------------------------
Title: President
--------------------------
Trafford Park Holdings Ltd.
By: /s/ Oscar Garcia Mora
----------------------------
Name: Oscar Garcia Mora
---------------------------
Title: President
--------------------------
Four M. International, Ltd.
By: /s/ Henry Toh
----------------------------
Name: Henry Toh
---------------------------
Title: Director
--------------------------
/s/ Anthony Vaccaro
--------------------------------
Anthony Vaccaro
/s/ Ken McDonald
--------------------------------
Ken McDonald
/s/ Ken Zimmern
--------------------------------
Ken Zimmern
/s/ Scott Brown
--------------------------------
Scott Brown
/s/ J.B. Manning
--------------------------------
J.B. Manning
43
<PAGE> 49
/s/ Scott Mednick
--------------------------------
Scott Mednick
/s/ Asher Rabinowitz
--------------------------------
Asher Rabinowitz
44
