SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
AUGUST 6, 1997 (JULY 22, 1997)
TELSCAPE INTERNATIONAL, INC.
(Exact name of registrant as specified in its Charter)
TEXAS 0-24622 75-2433637
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4635 SOUTHWEST FREEWAY, SUITE 800, HOUSTON, TEXAS 77027
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (713)968-0968
(Former name of former address, if changed since last report.)
ITEM 2. ACQUISITION OF DISPOSITION OF ASSETS
(a) On July 22, 1997, pursuant to a stock purchase agreement ("Agreement"),
Telereunion, Inc.("Telereunion") and Telcape USA, Inc. ("Telscape
USA")(collectively, the "Purchasers"), both wholly-owned subsidiaries of the
Registrant, acquired all of the outstanding shares of Integracion de Redes
S.A. de C.V. ("Integracion") and Lan and Wan S.A. de C.V. ("Lan"), both
Mexican corporations based in Mexico City, from Jose Luis Apan Wong, Raul de
la Parra Zavala and Alejandro Apan Wong ("Sellers"). Integracion distributes
data and network integration equipment in Mexico and represents such
manufacturers as Northern Telecom, 3Com, and Cisco and also provides the
value-added service of systems integration ("Integracion Business"). Lan
provides labor and management services to Integracion. The acquisition is
effective July 1, 1997.
Under the terms of the acquisition, the Purchasers paid cash of $10,000 to
the Sellers for Lan. As consideration for Integracion, the Purchasers paid the
following to the Sellers: i) the sum of $120,000 in cash, ii) an aggregate
of $2,201,000 in non-interest bearing promissory notes maturing January 1,
2001 ("Promissory Notes"), iii) an aggregate of $999,000 in non-interest
bearing convertible notes maturing on September 1, 1999, which are
convertible into 333,000 shares of common stock ("Common Stock") of the
Registrant ("Convertible Notes"), iv) warrants for the purchase of up
to 100,000 shares of Common Stock based on Integracion meeting certain
performance requirements ("Warrants") and v) a covenant by the Purchasers
to pay $280,000 in the event that Integracion meets certain performance
requirements over the cumulative periods beginning January 1, 1997 and
ending December 31, 2000 ("Additional Payment"). The consideration paid by
the Purchasers for the issued and outstanding common stock of Lan and
Integracion has been determined by negotiations between the parties. The
$10,000 and $120,000 paid at closing for Lan and Integracion, respectively,
was funded out of working capital.
The non-interest bearing Promissory Notes were issued by Telereunion and are
not guaranteed by the Registrant. The maturity of the Promissory Notes is as
follows: i) $300,000 due and payable on January 1, 1998, ii) $500,000 due and
payable on January 1, 1999, iii) $500,000 due and payable on January 1, 2000,
and iv) $901,000 due and payable on January 1, 2001.
The non-interest bearing Convertible Notes are convertible into Common Stock
solely at the discretion of the holders on or before September 1, 1999 at
$3.00 per share.
The exercise price of the Warrants and the conversion price for the
Convertible Notes (each $3.00 per share of Common Stock) was based on the
closing price of the Common Stock on the Nasdaq Small Cap market for May 19,
1997, the date on which the Sellers executed the letter of intent with
respect to the acquisition. The Warrants will vest and become
exercisable, if at all, upon Integracion meeting certain financial
performance requirements, as defined under the Warrants, and as determined in
accordance with U.S. GAAP. The vesting of the Warrants and the number of
shares exercisable thereunder are based on Integracion meeting certain gross
profit margins ("Gross Margins") for the year ended December 31, 1997, as
follows: i) 30,000 shares of Common Stock if the Gross Margins are greater
than $1,600,000 but less than $1,750,000, ii)40,000 shares of Common Stock
if the Gross Margins are greater than $1,750,000 but less than $1,800,000,
iii) 50,000 shares of Common Stock if the Gross Margins are greater than
$1,800,000 but less than $2,000,000, iv)60,000 shares of Common Stock if
the Gross Margins are greater than $2,000,000 but less than $2,500,000,
v) 80,000 shares of Common Stock if the Gross Margins are greater than
$2,500,000 but less than $3,000,000, and v)100,000 shares of Common Stock
if the Gross Margins are greater than $3,000,000.
The Additional Payment will be paid, if at all, by the Purchasers to the
Sellers upon Integracion meeting certain financial performance requirements,
as defined in the Agreement and as determined in accordance with U.S. GAAP.
The performance requirements are based on Integracion attaining a cumulative
gross margin of $8,250,000 for the period beginning January 1, 1997 and
ending December 31, 2000.
In addition to the foregoing terms, the Sellers (three individuals), who are
the principal executive officers of Integracion, each received three year
employment agreements. A representative of the Sellers is also entitled to
serve as a non-voting advisor to the Registrant's Board of Directors.
(b) Certain property and equipment was acquired in connection with the
acquisition of Integracion which was utilized in the Integracion Business.
The Purchasers intend to continue the use of such property and equipment in a
substantially similar manner.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
At this time, it is impracticable to provide the financial statements of
Integracion and Lan and the pro forma financial information required by this
report. The Registrant will file such statements and information as an
amendment to this report as soon as it is available, but no later than sixty
days after the date this report is filed.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
See Item 2(a) for a description of the date, title and amount of securities
of the Registrant issued in connection with the purchase of the capital stock
of Integracion and Lan, including the terms of conversion or exercise of the
securities that are convertible or exchangeable into equity securities of the
Registrant. Registrant relied on the private placement exemption contained in
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
and Rule 901 of the rules and regulations promulgated pursuant to the
Securities Act in determining that the issuance of securities of the
Registrant was exempt from the registration requirements of Section 5 of the
Securities Act.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
TELSCAPE INTERNATIONAL, INC.
Registrant
/s/ Todd M. Binet
August 6, 1997 Executive Vice President and Chief Financial Officer
INDEX OF EXHIBITS
EXHIBIT NO. DESCRIPTION
*10.1 Form of Promissory Note dated July 1, 1997, between Telereunion and
Jose Luis Apan Wong, Raul de la Parra Zavala and Alejandro Apan
Wong
*10.2 Form of Convertible Promissory Note dated July 1, 1997, between the
Registrant and Telereunion and Jose Luis Apan Wong, Raul de la
Parra Zavala and Alejandro Apan Wong
*10.3 Form of Common Stock Warrant dated July 1, 1997, between the
Registrant and Jose Luis Apan Wong, Raul de la Parra Zavala and
Alejandro Apan Wong
*10.4 Stock Purchase Agreement dated July 1, 1997, by and among the
Registrant, Telscape USA, Telereunion and Jose Luis Apan Wong, Raul
de la Parra Zavala and Alejandro Apan Wong
_________________
*Filed herewith
EXHIBIT 10.1
P A G A R E
PROMISSORY NOTE
Importe: $ Amount: U.S. $
Dolares E.U.A. Dollars.
Por este PAGARE, el By this PROMISSORY NOTE the
suscriptor promete undersigned unconditionally
incondicionalmente pagar a promises to pay to the order
la orden de of in
en la ciudad de , ,
, , in the
, en la account number at
cuenta numero Merrill Lynch the amount of
que mantiene con Merrill U.S. $ , in
Lynch, la cantidad de
four (4) equal annual
, pagaderos en installments on the following
cuatro (4) abonos anuales expiry dates:
en las siguientes fechas
de vencimiento:
Expiry DATE
Fechas de VENCIMIENTO Principal AMOUNT
Cantidad PRINCIPAL
January 1, 1998
Enero 1 de 1998 $ U.S. Dlls.
$ Dls. E.U.A. January 1, 1999
Enero 1 de 1999 $ U.S. Dlls.
$ Dls. E.U.A. January 1, 2000
Enero 1 de 2000 $ U.S. Dlls.
$ Dls. E.U.A. January 1, 2001
Enero 1 de 2001 $ U.S. Dlls.
$ Dls. E.U.A.
Todos los pagos de la All payments of principal
suerte principal seran shall be made in United
efectuados en Dolares de States Dollars, in same day
los Estados Unidos de funds free and clear of all
Norteamerica, en fondos taxes or other deductions
pagaderos el mismo dia, y levied or assessed by any
libres de toda clase de domestic or foreign
impuestos u otras governmental entity.
deducciones establecidos
por cualquier entidad
gubernamental nacional o
extranjera. The maker may pay in
advance, on any principal
El suscriptor podra pagar payment date, totally or
anticipadamente, total o partially, the outstanding
parcialmente, el saldo balance of this PROMISSORY
insoluto del presente NOTE, provided however, that
PAGARE, en cualquier fecha the payments in advance of
de vencimiento de la principal shall be applied
suerte principal, en la to the most remote
inteligencia de que los maturities of this
pagos anticipados de PROMISSORY NOTE.
principal seran aplicados
a los vencimientos mas
remotos de este PAGARE.
En caso de incumplimiento Upon default in the prompt
en el pago puntual de payment of any instalment of
cualquier pago parcial de principal on this PROMISSORY
la suma principal de este NOTE on the relevant
PAGARE en la fecha de maturity date, the
vencimiento relevante, los moratorium interest accrued
intereses moratorios and not paid shall
devengados y no pagados immediately become due and
seran exigibles y payable.
pagaderos de inmediato.
Si alguno de los pagos If any installment of
parciales de la suerte principal is not paid on the
principal no es cubierto date it is due, such
en la fecha en que sea instalment or instalments
exigible, dicho pago o shall bear default interest
pagos parciales devengaran each day, from such date or
diariamente un interes dates, at a rate of 1% (one
moratorio, a partir de esa percent) monthly until its
fecha o fechas, a una tasa full payment, calculated on
igual de 1% (uno por the basis of a 360 day year
ciento) mensual hasta su and actual days elapsed.
pago total, calculado
sobre la base de un ano de
360 dias y de los dias
realmente transcurridos.
El suscriptor consiente y The undersigned consents and
esta de acuerdo en que el agrees that the holder
tenedor podra iniciar hereof shall be able to
cualquier juicio, accion o bring any suit, action or
procedimiento con respecto proceeding with respect to
a este PAGARE en los this PROMISSORY NOTE in the
Estados Unidos Mexicanos. United Mexican States. For
Para todo lo relativo a la everything related to the
interpretacion, interpretation of,
cumplimiento o compliance with, or judicial
requerimiento judicial de request for payment of the
las obligaciones obligations herein
contraidas conforme a este undertaken, the undersigned
PAGARE, el suscriptor se hereby irrevocably and
somete irrevocable y expressly submits, to the
expresamente, a la jurisdiction of the
jurisdiccion de los competent courts of the City
tribunales competentes de of Mexico, Federal District,
la Ciudad de Mexico, United Mexican States,
Distrito Federal, Estados therefore expressly waiving
Unidos Mexicanos, any other jurisdiction it
renunciando por lo mismo may be entitled to by reason
expresamente a cualquier of its present or future
otra jurisdiccion a la que domicile.
pudiera tener derecho por
razon de su domicilio
actual o futuro.
El presente PAGARE This PROMISSORY NOTE shall
quedara sujeto a y sera be governed by and construed
interpretado de in accordance with the laws
conformidad con las leyes of the City of Mexico,
de Mexico, Distrito Federal District.
Federal.
En caso de litigio para In the event a suit is
obtener el pago de este brought to enforce payment
PAGARE y los intereses of this PROMISSORY NOTE and
devengados, en su caso, el accrued interest thereon, if
suscriptor conviene en any, the undersigned agrees
cubrir la cantidad to pay such additional sum
adicional por concepto de for expenses and attorney
gastos y honorarios fees as the court may
legales que los tribunales adjudge reasonable.
determinen sea razonable.
El suscriptor renuncia en The undersigned hereby
este acto a toda waives diligence,
diligencia, presentacion, presentment, protest or
protesto o aviso de falta notice of non-payment or
de pago o de rechazo de dishonor with respect to
este PAGARE. this PROMISSORY NOTE.
La falta de ejercicio por Failure by the holder hereof
parte del tenedor de este to exercise any of its
PAGARE de cualquiera de rights hereunder in any
los derechos derivados del instance shall not
mismo en cualquier constitute a waiver thereof
instancia, no constituira in that or any other
una renuncia a tales instance.
derechos en esa o en
cualquier otra instancia.
El suscriptor extiende la The maker hereby extends the
epoca de presentacion de term of presentment of this
este PAGARE hasta el 1 PROMISSORY NOTE until
de enero de 2001. January 1, 2001.
El presente pagare se This PROMISSORY NOTE has
firma, tanto en ingles been executed in both
como en espanol, siendo English and Spanish
ambas versiones versions, both of which
obligatorias para las shall bind the parties.
partes.
MEXICO, D.F. A 1 DE JULIO DE 1997.
(Lugar y fecha de firma)
(Place and date of execution)
SUSCRIPTOR
(MAKER)
TELEREUNION, INC.
Domicilio: 4635 Southwest
Freeway, Suite 800
Houston, Texas, U.S.A.
________________________________
Por (By): MANUEL LANDA
Cargo (Title): Chief Executive Officer
EXHIBIT 10.2
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY OTHER APPLICABLE SECURITIES LAWS AND, ACCORDINGLY,
THE SECURITIES REPRESENTED BY THIS NOTE MAY NOT BE RESOLD, PLEDGED, OR
OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT
AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
TELEREUNION, INC.
CONVERTIBLE PROMISSORY NOTE
$ Houston, Texas July 1, 1997
TELEREUNION, INC., a Delaware corporation (hereinafter called the
"Company," which term includes any successor corporation), for value received,
hereby promises to pay to ___________________ , an individual and resident of
Mexico City, Mexico (hereinafter called "Holder"), or his registered assigns,
the principal sum of _________________________________ with no interest,
payable in accordance with the terms set forth below.
ARTICLE I
DEFINITIONS
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles as promulgated from time to time by the Association of
Independent Certified Public Accountants and (iii) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this Note
as a whole and not to any particular Article, Section or other subdivision.
"BOARD OF DIRECTORS" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
"COMMON STOCK" means shares of common stock, par value $0.001 per share,
of Telscape.
"CONVERSION PRICE" means the price per share determined in accordance
with Articles IV and V (as adjusted in accordance with the terms of this Note)
at which shares of Common Stock, shall be delivered to Holder upon conversion
of this Note.
"DEFAULT" means any event which is, or after notice or passage of time
would be, an Event of Default.
"EVENT OF DEFAULT" has the meaning specified in Section 3.1.
"MATURITY DATE", when used with respect to this Note, means September 1,
1999 (or such earlier date upon which this Note becomes due and payable under
Section 3.2).
"NOTE" means this Convertible Promissory Note, as hereafter amended,
modified, substituted or replaced.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"SUBSIDIARY" means a corporation or other entity more than 50% of the
outstanding voting stock of which, or more than 50% of the equity interest in
which, is owned, directly or indirectly, by the Company or by one or more
other Subsidiary of the Company, or by any combination of the Company and one
or more other Subsidiaries. For purposes of this definition, "voting stock"
means stock which ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such
voting power by reason of any contingency.
"STOCK PURCHASE AGREEMENT" means that certain Stock Purchase Agreement
dated to be effective as of the date hereof, by and among Telscape, the
Company, Telscape USA, Inc., Holder, Raul de la Parra Zavala and Alejandro
Apan Wong.
"TELSCAPE" means Telscape International, Inc. a Delaware corporation and
the parent corporation of the Company.
ARTICLE II
PAYMENTS
2.1 INTEREST. This Note shall be non-interest bearing.
2.2 PAYMENT OF PRINCIPAL. The principal on this Note shall be due and
payable in full on the Maturity Date.
2.3 MANNER OF PAYMENT. Cash payments of principal on this Note will be
made by delivery of a check to Holder at his address as set forth in this Note
or wire transfers pursuant to instructions from Holder. If the date upon which
the payment of principal is required to be made pursuant to this Note occurs
other than on a Business Day, then such payment of principal shall be made on
the next occurring Business Day following said payment date.
ARTICLE III
REMEDIES
3.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:
(a) the Company defaults in the payment of principal on this Note
when such principal becomes due and payable and such default remains
uncured for a period of five days without the necessity of presentment,
notification or presentation for payment to the Company; or
(b) the Company defaults in the performance of any covenant made by
the Company, and such default remains uncured for a period of 30 Business
Days after the Default Date in this Note (other than a default in the
performance of a covenant specifically addressed elsewhere in this
Section 3.1); as used in this Section 3.1(b), "Default Date" means the
date on which any of the members of the Board of Directors, any of the
officers, or any of the employees (other than employees involved solely
in marketing or product development functions) becomes aware of the
occurrence of any of the events defined or described in this Section
3.1(b); or
(c) any representation or warranty made by the Company in this
Note, the Stock Purchase Agreement, the Promissory Note, the Warrant, or
in any certificate furnished by the Company in connection with the
consummation of the transactions contemplated thereby or hereby, is
untrue in any material respect as of the date of making thereof; or
(d) a court of competent jurisdiction enters a final non-appealable
judgment or judgments against the Company or any Subsidiary or any
property or assets of the Company or any Subsidiary, for the payment of
money aggregating $100,000 or more in excess of applicable insurance
coverage; or
(e) a court of competent jurisdiction enters (i) a decree or order
for relief in respect of the Company or any Subsidiary in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (ii) a decree or order
adjudging the Company or any Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or
any Subsidiary under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Subsidiary or of any substantial
part of the property of the Company or any Subsidiary or ordering the
winding up or liquidation of the affairs of the Company or any Subsidiary
and any such decree or order of relief or any such other decree or order
remains unstayed for a period of 90 days from its date of entry; or
(f) the Company or any Subsidiary: (i) commences a voluntary case
or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or
proceeding to be adjudicated a bankrupt or insolvent, (ii) files a
petition, answer or consent seeking reorganization or relief under any
applicable federal or state law; or (iii) makes an assignment for the
benefit of creditors, or admits in writing its inability to pay its debts
generally as they become due.
3.2 ACCELERATION OF MATURITY. This Note shall automatically become due
and payable if an Event of Default described in Sections 3.1(e) or 3.1(F)
occurs and, this Note shall, at the option of the Holder in its sole
discretion, become immediately due and payable if any other Event of Default
occurs, and in every such case the Holder of this Note may declare the
principal on the Note to be due and payable immediately.
ARTICLE IV
CONVERSION OF NOTE
Subject to and upon compliance with the provisions of this Article, at
the option of Holder, this Note may be converted into fully paid and
nonassessable shares (calculated as to each conversion to the nearest 1/100 of
a share) of Common Stock on the Maturity Date by the delivery of a notice of
such conversion to the Company and Telscape at least, thirty (30), but not
more than sixty (60) days prior to the Maturity Date. This Note is
convertible at the Conversion Price, determined in each case as hereinafter
provided, in effect at the time of conversion. The Conversion Price shall be
initially $3.00 per share. In the event the conversion of this Note results
in fractional shares, no fractional shares shall be issued, and in lieu
thereof Holder shall be paid an amount in cash equal to such fractional share
multiplied by the Conversion Price then in effect.
ARTICLE V
ADJUSTMENT OF CONVERSION PRICE
5.1 STOCK SPLITS AND REVERSE SPLITS. In the event that Telscape shall at
any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares into
which this Note may be converted immediately prior to such subdivision shall
be proportionately increased, and conversely, in the event that the
outstanding shares of Common Stock shall at any time be combined into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased and the number of Shares
into which this Note may be converted immediately prior to such combination
shall be proportionately reduced.
5.2 REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of Telscape, or any consolidation,
merger or share exchange of Telscape with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect
to or in exchange for their shares, then the following provisions shall apply:
5.2.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in Section 5.4.3), lawful and adequate
provisions shall be made whereby the holder of this Note shall thereafter have
the right to purchase and receive upon the terms and conditions specified in
this Note and in lieu of the shares immediately theretofore receivable upon
the exercise of the rights represented hereby, such shares of capital stock,
securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger, share exchange or
sale not taken place, and in any such case appropriate provision reasonably
satisfactory to such holder shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Conversion Price and of
the number of shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital stock,
securities or assets thereafter deliverable upon the conversion of this Note.
5.2.2 In the event of a merger, share exchange or consolidation
of Telscape with or into another Person (a "Successor Person") as a result of
which a number of shares of common stock or its equivalent of the Successor
Person greater or lesser than the number of shares of Common Stock outstanding
immediately prior to such merger, share exchange or consolidation are issuable
to holders of Common Stock, then the Conversion Price in effect immediately
prior to such merger, share exchange or consolidation shall be adjusted in the
same manner as though there were a subdivision or combination of the
outstanding shares of Common Stock.
5.2.3 Telscape shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the Successor Person (if other
than Telscape) resulting from such consolidation, share exchange or merger or
the Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Holder hereof at
the last address of such Holder appearing on the books of Telscape the
obligation to deliver to such Holder such shares of capital stock, securities
or assets as, in accordance with the foregoing provisions, such Holder may be
entitled to receive, and all other liabilities and obligations of Telscape
hereunder. Upon written request by the Holder hereof, such Successor Person
will issue a new Note revised to reflect the modifications in this Note
effected pursuant to this Section 5.2.
5.2.4 If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, Telscape shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the
Telscape's assets with the Person having made such offer or with any affiliate
of such Person, unless prior to the consummation of such consolidation,
merger, share exchange, sale, transfer or other disposition the holder hereof
shall have been given a reasonable opportunity to then elect to receive upon
the conversion of this Note either the capital stock, securities or assets
then issuable with respect to the Common Stock or the capital stock,
securities or assets, or the equivalent, issued to previous holders of the
Common Stock in accordance with such offer.
5.3 ADJUSTMENT FOR ASSET DISTRIBUTION. If Telscape declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of Telscape or other assets of Telscape, including,
cash, capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property, the Conversion Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per
share of Common Stock (as reasonably determined in good faith by the Board of
Directors of Telscape), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is
made and shall be effective as of the date as of which a record is taken for
purpose of such dividend or distribution or, if a record is not taken, the
date as of which holders of record of Common Stock entitled to such dividend
or distribution are determined.
5.4 DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of this Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least $.01 in the Conversion Price; provided, however, that any
adjustments which by reason of this Section 5.4 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest full share or nearest one
hundredth of a dollar, as applicable.
5.5 NOTICE OF ADJUSTMENT. Whenever the Conversion Price or the number of
Shares issuable upon the conversion of the Note shall be adjusted as herein
provided, or the rights of the holder hereof shall change by reason of other
events specified herein, Telscape shall compute the adjusted Conversion Price
and the adjusted number of Shares in accordance with the provisions hereof and
shall prepare an Officer's Certificate setting forth the adjusted Conversion
Price and the adjusted number of Shares issuable upon the conversion of this
Note or specifying the other shares of stock, securities or assets receivable
as a result of such change in rights, and showing in reasonable detail the
facts and calculations upon which such adjustments or other changes are based.
Telscape shall cause to be mailed to the Holder hereof copies of such
Officer's Certificate together with a notice stating that the Conversion Price
and the number of Shares purchasable upon conversion of this Note have been
adjusted and setting forth the adjusted Conversion Price and the adjusted
number of Shares purchasable upon conversion of this Note.
5.6 NOTIFICATIONS TO HOLDERS. In case at any time Telscape proposes:
(i) to declare any dividend upon its Common Stock payable
in capital stock or make any special dividend or other distribution
(other than regular cash dividends) to the holders of its Common
Stock;
(ii) to effect any capital reorganization, or
reclassification of the capital stock of Telscape, or consolidation,
merger or share exchange of Telscape with another Person, or sale,
transfer or other disposition of all or substantially all of its
assets; or
(iii)to effect a voluntary or involuntary
dissolution, liquidation or winding up of Telscape,
then, in any one or more of such cases, Telscape shall give the holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such issuance, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, and (b) in the case of
any such issuance, reorganization, reclassification, consolidation, merger,
share exchange, sale, transfer, disposition, dissolution, liquidation or
winding up, at least 10 days (but not more than 90 days) prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (b) shall also specify the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock, as the case may
be, for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, as the case may be.
ARTICLE VI
COVENANTS
The Company covenants and agrees that, so long as this Note is
outstanding:
6.1 PAYMENT OF PRINCIPAL. The Company will duly and punctually pay or
cause to be paid the principal amounts due under of this Note, in accordance
with the terms hereof.
6.2 CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if it shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of its business.
6.3 NOTICE OF DEFAULTS. The Company will promptly notify the Holder in
writing of the occurrence of any Event of Default under this Note.
ARTICLE VII
MISCELLANEOUS
7.1 COLLECTION; FEES. If this Note is placed in the hands of an attorney
for collection, and if it is collected through any legal proceedings at law or
in equity or in bankruptcy, receivership or other court proceedings, the
Company hereby undertakes to pay all reasonable costs and expenses of
collection including, but not limited to, court costs and the reasonable
attorney's fees of Holder.
7.2 CONSENT TO AMENDMENTS. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required
to be performed by it, if and only if the Company shall obtain the written
consent to such amendment, action or omission to act from the holders of 51%
of the aggregate principal amount of this Note.
7.3 BENEFITS OF NOTE. Nothing in this Note, express or implied, shall
give to any Person, other than the Company, Holder, and their successors any
benefit or any legal or equitable right, remedy or claim under or in respect
of this Note.
7.4 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure
to the benefit of the respective successors and assigns of the Company and the
Holder.
7.5 RESTRICTIONS ON TRANSFER. Holder shall not transfer this Note
except (by the grant of a security interest) to its lender or lenders and as
between Holder and its lender or lenders this Note is transferable in the same
manner and with the same effect as in the case of a negotiable instrument
payable to a specified person. Any lender to which Holder grants a security
interest in this Note shall be entitled to exercise all remedies to which it
is entitled by contract or by law, including (without limitation) transferring
this Note into its own name or into the name of any purchaser at any sale
undertaken in connection with enforcement by such lender of its remedies.
(b) Prior to any transfer (other than the grant of a security interest)
as provided herein, the transferor shall provide written notice to the
Company. The Company, however, may treat Holder as the owner hereof for all
purposes until this Note shall have been surrendered for transfer as
hereinafter provided. Upon surrender of this Note duly executed by Holder or
his agent or attorney, the Company shall execute and deliver a new Note in the
name of the assignee or assignees and in the denominations specified in such
instrument of assignment, and this Note shall promptly be canceled.
7.6 NOTICE; ADDRESS OF PARTIES. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference
to this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, to the following addresses: if to
Telereunion, Inc.:4635 Southwest Freeway, Suite 800, Houston, TX 77027 Attn:
Todd Binet, or at any other address designated by the Company in writing to
Holder; if to Holder: [JOSE LUIS APAN WONG, __________________,
_________________, ______________], or at any other address designated by
Holder to the Company in writing.
7.7 SEPARABILITY CLAUSE. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not
in any way be affected or impaired thereby; provided, however, such
construction does not destroy the essence of the bargain provided for
hereunder.
7.8 GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Texas (without regard to
principles of choice of law).
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
TELEREUNION, INC.
By:
Name:
Title:
TELSCAPE INTERNATIONAL, INC.
(solely for purposes of Article IV and V hereof)
By:
Name:
Title:
EXHIBIT 10.3
THE SECURITIES REPRESENTED BY THESE WARRANTS AND THE COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES
LAW. THE SECURITIES REPRESENTED BY THESE WARRANTS MAY NOT BE TRANSFERRED,
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
WARRANTS
to Purchase Common Stock of
Telscape International, Inc.
Expiring on July 1, 2002
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, ____________________, an individual and resident of Mexico
City, Mexico (the "Holder") is entitled to subscribe for and purchase from the
Company (as hereinafter defined), in whole or in part, up to _____________
shares of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock as hereinafter defined at a per share initial Exercise Price
as hereinafter defined, subject, however, to the provisions and upon the terms
and conditions hereinafter set forth. The number of Warrants (as hereinafter
defined), the number of shares of Common Stock purchasable hereunder, and the
Exercise Price therefor are subject to an adjustment as hereinafter set forth.
This Warrant and all rights hereunder shall expire at 5:00 p.m., Houston,
Texas time, on July 1, 2002 (the "Expiration Date").
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below:
"CLOSING DATE" shall mean July 1, 1997.
"COMPANY" shall mean Telscape International, Inc., a Texas corporation,
and shall also include any successor thereto with respect to the obligations
hereunder, by merger, consolidation or otherwise.
"COMMON STOCK" means shares of the Company's common stock, par value
$.001 per share of the Company, authorized on the date of the original issue
of these Warrants and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets, the stock or other securities provided for
herein, and (ii) any other shares of common stock of the Company into which
such shares of Common Stock may be converted.
"DATA PRODUCTS" as set forth in the Stock Purchase Agreement.
"DATA PRODUCTS GROSS MARGIN" as set forth in the Stock Purchase
Agreement.
"EXERCISE PRICE" shall mean the initial purchase price of $3.00 per share
of Common Stock, as adjusted from time to time pursuant to the provisions
hereof.
"INTEGRACION" Integracion de Redes, S.A. de C.V.
"MARKET PRICE" for any day, when used with reference to Common Stock
shall mean the price of said Common Stock determined as follows: (i) the last
reported sale price for the Common Stock on such day on the principal
securities exchange on which the Common Stock is listed or admitted to trading
or if no such sale takes place on such date, the average of the closing bid
and asked prices thereof as officially reported, or, if not so listed or
admitted to trading on any securities exchange, the last sale price for the
Common Stock on the National Association of Securities Dealers National Market
System or Small Cap Market on such date, or, if there shall have been no
trading on such date or if the Common Stock shall not be listed on such
system, the average of the closing bid and asked prices in the over-the-
counter market as furnished by any NASD member firm selected from time to time
by the Company for such purpose, in each such case, unless otherwise provided
herein, averaged over a period of twenty (20) consecutive Trading Days prior
to the date as of which the determination is to be made; or (ii) if the Common
Stock shall not be listed or admitted to trading as provided in clause (i)
above, the fair market value of the Common Stock as determined in good faith
by the Board of Directors of the Company.
"OUTSTANDING", when used with reference to Common Stock, shall mean
(except as otherwise expressly provided herein) at any date as of which the
number of shares thereof is to be determined, all issued shares of Common
Stock, except shares then owned or held by or for the account of the Company.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCK PURCHASE AGREEMENT" use definition in Convertible Note.
"TELEREUNION" means Telereunion, Inc., a Delaware corporation.
"TRADING DAYS" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted
to trading is open for the exchange of securities.
"WARRANT" shall mean the right upon exercise to purchase one Warrant
Share.
"WARRANT DETERMINATION PERIOD" shall mean the period of time beginning on
January 1, 1997 and ending December 31, 1997.
"WARRANT SHARES" shall mean the shares of Common Stock purchased or
purchasable by the holder hereof upon the exercise of the Warrants.
ARTICLE II
EXERCISE OF WARRANTS
2.1 NUMBER OF WARRANTS. The number of shares of Common Stock issuable
upon the exercise of this Warrant shall be determined by the Data Products
Gross Margin for the Warrant Determination Period, in accordance with the
following table:
NUMBER OF SHARES OF
DATA PRODUCTS GROSS MARGIN COMMON STOCK SUBJECT
TO WARRANT
Greater than $1,600,000, but less than $1,750,000
Greater than $1,750,000, but less than $1,800,000
Greater than $1,800,000, but less than $2,000,000
Greater than $2,000,000, but less than $2,500,000
Greater than $2,500,000, but less than $3,000,000
Greater than $3,000,000
The Data Products Gross Margin for the Warrant Determination Period shall be
determined in accordance with the Company's normal accounting practices, but
in any event prior to April 15, 1998. Within ten (10) days after the final
determination of the Data Products Gross Margin for the Warrant Determination
Period, the Company shall deliver to the Holder of record a written notice of
such amount. Notwithstanding any provision of this Warrant, this Warrant
shall terminate automatically upon the final determination that the Data
Products Gross Margin for the Warrant Determination Period is less than
$1,600,000. Within thirty (30) days of any such termination, the Holder shall
deliver this Warrant Certificate to the Company for cancellation; provided
further that the failure of Holder to deliver this Warrant Certificate shall
not impair the automatic termination of the Warrants.
2.2 METHOD OF EXERCISE. The Warrants represented hereby may be
exercised by the holder hereof, in whole or in part, at any time and from time
to time after the conditions of Section 2.1 have been satisfied and until 5:00
p.m., Houston, Texas time, on the Expiration Date. To exercise the Warrants,
the holder hereof shall deliver to the Company, at the Warrant Office
designated herein, (i) a written notice in the form of the Subscription Notice
attached as Exhibit 1 hereto, stating therein the election of such holder to
exercise the Warrants in the manner provided in the Subscription Notice; (ii)
payment in full of the Exercise Price in cash or by bank check for all Warrant
Shares purchased hereunder; and (iii) these Warrants. The Warrants shall be
deemed to be exercised on the date of receipt by the Company of the
Subscription Notice, accompanied by payment for the Warrant Shares and
surrender of these Warrants, as aforesaid, and such date is referred to herein
as the "Exercise Date". Upon such exercise, the Company shall, as promptly as
practicable and in any event within five business days, issue and deliver to
such holder a certificate or certificates for the full number of the Warrant
Shares purchased by such holder hereunder, and shall, unless the Warrants have
expired, deliver to the holder hereof a new Warrant representing the number of
Warrants, if any, that shall not have been exercised, in all other respects
identical to these Warrants. As permitted by applicable law, the Person in
whose name the certificates for Common Stock are to be issued shall be deemed
to have become a holder of record of such Common Stock on the Exercise Date
and shall be entitled to all of the benefits of such holder on the Exercise
Date, including without limitation the right to receive dividends and other
distributions for which the record date falls on or after the Exercise Date
and to exercise voting rights.
2.3 EXPENSES AND TAXES. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock
issuable upon exercise of the Warrants.
2.4 RESERVATION OF SHARES. The Company shall reserve at all times so
long as the Warrants remain outstanding, free from preemptive rights, out of
its authorized but unissued shares of Common Stock solely for the purpose of
effecting the exercise of the Warrants, a sufficient number of shares of
Common Stock to provide for the exercise of the Warrants.
2.5 VALID ISSUANCE. All shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issuance by the Company, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issuance thereof and, without limiting the
generality of the foregoing, the Company shall take no action or fail to take
any action which will cause a contrary result (including, without limitation,
any action that would cause the Exercise Price to be less than the par value,
if any, of the Common Stock).
2.6 PURCHASE AGREEMENT. The Warrants represented hereby are part of a
duly authorized issue and sale of warrants to purchase Common Stock issued and
sold pursuant to that certain Stock Purchase Agreement dated to be effective
as of the date hereof (the "Agreement"), among the Company, Telereunion,
Telscape USA, Inc., Holder, Raul de la Parra Zavala and Alejandro Apan Wong.
The terms of the Agreement, including the documents entered into in connection
therewith, are hereby incorporated herein for all purposes and shall be
considered a part of this Warrant as if they had been fully set forth herein.
Notwithstanding the previous sentence, in the event of any conflict between
the provisions of the Agreement and of this Warrant, the provisions of this
Warrant shall control.
2.7 NO FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of these Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of whole
shares of Common Stock purchasable on exercise of the Warrants so presented.
If any fraction of a share of Common Stock would, except for the provisions of
this Section, be issuable on the exercise of this Warrant, the Company shall
pay an amount in cash calculated by it to be equal to the Market Price of one
share of Common Stock at the time of such exercise multiplied by such fraction
computed to the nearest whole cent.
ARTICLE III
TRANSFER
3.1 WARRANT OFFICE. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices at 4635 Southwest Freeway, Suite 800, Houston, Texas
77027 and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock in the continental United States as to
which written notice has previously been given to the Holder. The Company
shall maintain, at the Warrant Office, a register for the Warrants in which
the Company shall record the name and address of the Person in whose name
these Warrants has been issued, as well as the name and address of each
permitted assignee of the rights of the registered owner hereof.
3.2 OWNERSHIP OF WARRANTS. The Company may deem and treat the Person in
whose name the Warrants are registered as the holder and owner hereof until
provided with notice to the contrary. The Warrants may be exercised by a
permitted assignee for the purchase of Warrant Shares without having new
Warrants issued.
3.3 RESTRICTIONS ON TRANSFER OF WARRANTS. These Warrants may not be
transferred, in whole or in part, by the Holder without the prior written
consent of the Company. The Company agrees to maintain at the Warrant Office
books for the registration and transfer of the Warrants. The Company, from
time to time, shall register the transfer of the Warrants in such books upon
surrender of this Warrant at the Warrant Office properly endorsed or
accompanied by appropriate instruments of transfer and written instructions
for transfer. Upon any such transfer and upon payment by the holder or its
transferee of any applicable transfer taxes, new Warrants shall be issued to
the transferee and the transferor (as their respective interests may appear)
and the surrendered Warrants shall be cancelled by the Company. The Company
shall pay all taxes (other than securities transfer taxes or income taxes) and
all other expenses and charges payable in connection with the transfer of the
Warrants pursuant to this Section.
3.4 COMPLIANCE WITH SECURITIES LAWS. Notwithstanding any other
provisions contained in this Warrant, the Holder understands and agrees that
the following restrictions and limitations shall be applicable to all Warrant
Shares and to all resales or other transfers thereof pursuant to the
Securities Act:
3.4.1 Except as set forth in the next sentence, the holder
hereof agrees that the Warrants and Warrant Shares may not be sold or
otherwise transferred unless the Warrants and Warrant Shares are registered
under the Securities Act and applicable state securities or blue sky laws or
are exempt therefrom.
3.4.2 A legend in substantially the following form will be placed
on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAW AND, ACCORDINGLY, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS."
3.4.3 Stop transfer instructions will be imposed with respect
to the Warrants and the Warrant Shares so as to restrict resale or other
transfer thereof.
ARTICLE IV
ANTI-DILUTION
4.1 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in the event
that the outstanding shares of Common Stock shall at any time be combined into
a smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of Warrant
Shares purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced.
4.2 REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect
to or in exchange for their shares, then the following provisions shall apply:
4.2.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition,
lawful and adequate provisions shall be made whereby the Holder shall
thereafter have the right to purchase and receive upon the terms and
conditions specified in this Warrant and in lieu of the Warrant Shares
immediately theretofore receivable upon the exercise of the rights represented
hereby, such shares of capital stock securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of Warrant Shares immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger, share exchange or sale not taken place, and in any such
case appropriate provision reasonably satisfactory to such holder shall be
made with respect to the rights and interests of such holder to the end that
the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of Warrant Shares
receivable upon the exercise) shall thereafter be applicable, as nearly as
possible, in relation to any shares of capital stock securities or assets
thereafter deliverable upon the exercise of Warrants.
4.2.2 In the event of a merger, share exchange or
consolidation of the Company with or into another Person (a "Successor
Person") as a result of which a number of shares of common stock or its
equivalent of the Successor Person greater or lesser than the number of shares
of Common Stock outstanding immediately prior to such merger, share exchange
or consolidation are issuable to holders of Common Stock, then the Exercise
Price in effect immediately prior to such merger, share exchange or
consolidation shall be adjusted in the same manner as though there were a
subdivision or combination of the outstanding shares of Common Stock.
4.2.3 The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the Successor Person (if other
than the Company) resulting from such consolidation, share exchange or merger
or the Person purchasing or otherwise acquiring such assets shall have assumed
by written instrument executed and mailed or delivered to the holder hereof at
the last address of such holder appearing on the books of the Company the
obligation to deliver to such holder such shares of capital stock securities
or assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive, and all other liabilities and obligations of the Company
hereunder. Upon written request by the holder hereof, such Successor Person
will issue a new Warrant revised to reflect the modifications in this Warrant
effected pursuant to this Section 4.2.3.
4.2.4 If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange
or sale, transfer or other disposition of all or substantially all of the
Company's assets with the Person having made such offer or with any affiliate
of such Person, unless prior to the consummation of such consolidation,
merger, share exchange, sale, transfer or other disposition the holder hereof
shall have been given a reasonable opportunity to then elect to receive upon
the exercise of the Warrants either the capital stock, securities or assets
then issuable with respect to the Common Stock or the capital stock,
securities or assets, or the equivalent, issued to previous holders of the
Common Stock in accordance with such offer.
4.3 DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
adjustments are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations shall be made to
the nearest full share or nearest one hundredth of a dollar, as applicable.
4.4 NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the number of
Warrant Shares issuable upon the exercise of this Warrant shall be adjusted as
herein provided, or the rights of the holder hereof shall change by reason of
other events specified herein, the Company shall compute the adjusted Exercise
Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable
upon the exercise of the Warrants or specifying the other shares of stock,
securities or assets receivable as a result of such change in rights, and
showing in reasonable detail the facts and calculations upon which such
adjustments or other changes are based. The Company shall cause to be mailed
to the holder hereof copies of such Officer's Certificate together with a
notice stating that the Exercise Price and the number of Warrant Shares
purchasable upon exercise of the Warrants have been adjusted and setting forth
the adjusted Exercise Price and the adjusted number of Warrant Shares
purchasable upon the exercise of the Warrants.
4.5 NOTIFICATIONS TO HOLDERS. In case at any time the Company proposes:
(i) to effect any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation, merger or share
exchange of the Company with another Person, or sale, transfer or other
disposition of all or substantially all of its assets; or
(ii) to effect a voluntary or involuntary dissolution, liquidation
or winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder
hereof (a) at least 10 days (but not more than 90 days) prior written notice
of the date on which the books of the Company shall close or a record shall be
taken for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, and (b) in the case of
any such reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
at least 10 days (but not more than 90 days) prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause shall also specify the date on which the holders of Common Stock shall
be entitled to exchange their Common Stock, as the case may be, for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition,
dissolution, liquidation or winding up, as the case may be.
ARTICLE V
MISCELLANEOUS
5.1 ENTIRE AGREEMENT. This Warrant, together with the Stock Purchase
Agreement, contain the entire agreement between the holder hereof and the
Company with respect to the Warrant Shares purchasable upon exercise hereof
and the related transactions and supersedes all prior arrangements or
understandings with respect thereto.
5.2 GOVERNING LAW. This warrant shall be governed by and construed in
accordance with the laws of the State of Texas.
5.3 WAIVER AND AMENDMENT. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any
time by agreement of the holder hereof and the Company, except that any waiver
of any term or condition, or any amendment or supplementation, of this Warrant
shall be in writing. A waiver of any breach or failure to enforce any of the
terms or conditions of this Warrant shall not in any way effect, limit or
waive a party's rights hereunder at any time to enforce strict compliance
thereafter with every term or condition of this Warrant.
5.4 ILLEGALITY. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of these Warrants shall not, at the election of the party for whom
the benefit of the provision exists, be in any way impaired.
5.5 COPY OF WARRANT. A copy of this Warrant shall be filed among the
records of the Company.
5.6 NOTICE. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be in writing and delivered at,
or sent by certified or registered mail to such holder at, the last address
shown on the books of the Company maintained at the Warrant Office for the
registration of this Warrant or at any more recent address of which the holder
hereof shall have notified the Company in writing. Any notice or other
document required or permitted to be given or delivered to the Company, other
than such notice or documents required to be delivered to the Warrant Office,
shall be delivered at, or sent by certified or registered mail to, the offices
of the Company at 4635 Southwest Freeway, Suite 800, Houston, Texas 77027 or
such other address within the continental United States of America as shall
have been furnished by the Company to the holder of this Warrant.
5.7 LIMITATION OF LIABILITY; NOT STOCKHOLDERS. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of
the Company. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to
any liability of such holder for the purchase price of any shares of Common
Stock or as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
5.8 EXCHANGE, LOSS, DESTRUCTION, ETC. OF WARRANT. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, mutilation
or destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of an appropriate affidavit in such form as shall be
reasonably satisfactory to the Company, or in the event of such mutilation
upon surrender and cancellation of this Warrant, the Company will make and
deliver new Warrants of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Warrants. Any Warrants issued under the provisions of this Section
in lieu of any Warrants alleged to be lost, destroyed or stolen, or in lieu of
any mutilated Warrants, shall constitute an original contractual obligation on
the part of the Company. This Warrant shall be promptly canceled by the
Company upon the surrender hereof in connection with any exchange or
replacement. The Company shall pay all taxes (other than securities transfer
taxes or income taxes) and all other expenses and charges payable in
connection with the preparation, execution and delivery of Warrants pursuant
to this Section.
5.9 HEADINGS. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
IN WITNESS WHEREOF, as of the date set forth above, the Company has
caused this Warrant to be signed in its name.
TELSCAPE INTERNATIONAL,
INC.
By:
Name:
Title:
SUBSCRIPTION NOTICE EXHIBIT 1
The undersigned, the holder of the foregoing Warrants, hereby elects to
exercise purchase rights represented thereby for, and to purchase thereunder,
________ shares of the Common Stock covered by such Warrants, and herewith
makes payment in full for such shares pursuant to Section 2.2 of such
Warrants, and requests (a) that certificates for such shares (and any other
securities or other property issuable upon such exercise) be issued in the
name of, and delivered to, ________________________________ and (b), if such
shares shall not include all of the shares issuable as provided in such
Warrants, that new Warrants of like tenor and date for the balance of the
shares issuable thereunder be delivered to the undersigned.
Date:__________________________
ASSIGNMENT
For value received, _______________________________, hereby sells,
assigns and transfers unto these Warrants, together with all rights, title and
interest therein, and does irrevocably constitute and appoint
_______________________________ attorney, to transfer such Warrants on the
books of the Company, with full power of substitution.
Date:_________________________
STOCK PURCHASE AGREEMENT
BY AND AMONG
TELSCAPE INTERNATIONAL, INC.
TELEREUNION, INC.
TELSCAPE USA, INC.
JOSE LUIS APAN WONG
RAUL DE LA PARRA ZAVALA
AND
ALEJANDRO APAN WONG
AS OF JULY 1, 1997
TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF STOCK; CLOSING
1.1 PURCHASE AND SALE OF INTEGRACION STOCK 1
1.2 INTEGRACION PURCHASE PRICE AND PAYMENT AT CLOSING 2
1.3 ADDITIONAL PAYMENT 2
1.4 PURCHASE AND SALE OF LAN STOCK 2
1.5 LAN PURCHASE PRICE AND PAYMENT AT CLOSING 3
1.6 CLOSING; CLOSING DATE 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
2.1 ORGANIZATION AND QUALIFICATION 3
2.2 VALIDITY OF AGREEMENT 3
2.3 NO APPROVALS OR NOTICES REQUIRED;
NO CONFLICT WITH INSTRUMENTS 3
2.4 CAPITALIZATION 4
2.5 OWNERSHIP OF INTEGRACION STOCK AND LAN STOCK 4
2.6 FINANCIAL STATEMENTS 5
2.7 ABSENCE OF CHANGES 5
2.8 LIABILITIES 6
2.9 TITLE TO ASSETS; ENCUMBRANCES 6
2.10 ACCOUNTS RECEIVABLE; INVENTORY 7
2.11 PROPERTIES, CONTRACTS, PERMITS AND OTHER DATA 7
2.12 TAXES AND RETURNS 8
2.13 LITIGATION 9
2.14 LICENSES, PERMITS, AUTHORIZATIONS, ETC 9
2.15 INSURANCE 9
2.16 PATENTS, TRADEMARKS, ETC 9
2.17 COMPLIANCE 10
2.18 ENVIRONMENTAL, HEALTH AND SAFETY COMPLIANCE 10
2.19 LABOR MATTERS 11
2.20 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS 11
2.21 TRANSACTIONS WITH AFFILIATES 13
2.22 DISCLOSURES 13
2.23 CERTAIN FEES 13
2.24 UNITED STATES SECURITIES LAW COMPLIANCE 13
2.25 ILLEGAL OR UNAUTHORIZED PAYMENTS;
POLITICAL CONTRIBUTIONS 14
2.26 WITHHOLDING OF MEXICAN TAXES 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 DUE ORGANIZATION; GOOD STANDING AND POWER 15
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT 15
3.3 NO APPROVALS OR NOTICES REQUIRED;
NO CONFLICT WITH INSTRUMENTS 15
3.4 CERTAIN FEES 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TELSCAPE
4.1 DUE ORGANIZATION; GOOD STANDING AND POWER 16
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT 16
4.3 NO APPROVALS OR NOTICES REQUIRED;
NO CONFLICT WITH INSTRUMENTS 16
4.4 SUBSIDIARIES 17
4.5 CERTAIN FEES 17
ARTICLE V
COVENANTS; ACTIONS SUBSEQUENT TO CLOSING
5.1 SELLERS' COVENANT NOT TO COMPETE 17
5.2 FURTHER ASSURANCES 18
ARTICLE VI
DELIVERIES AT CLOSING
6.1 DELIVERIES BY SELLERS 18
6.2 DELIVERIES BY PURCHASERS 19
6.3 DELIVERIES BY TELSCAPE 19
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY SELLERS 19
7.2 INDEMNIFICATION BY TELSCAPE COMPANIES 20
7.3 INDEMNIFICATION PROCEDURES 20
7.4 TIME LIMITS ON LIABILITY 21
7.5 APPOINTMENT OF SELLER REPRESENTATIVE 21
ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS 22
8.2 PAYMENT OF CERTAIN FEES AND EXPENSES 22
8.3 NOTICES 22
8.4 SCHEDULES 23
8.5 PUBLICITY 23
8.6 ENTIRE AGREEMENT 23
8.7 BINDING EFFECT; BENEFIT 24
8.8 ASSIGNABILITY 24
8.9 SECTION HEADINGS; INDEX 24
8.10 SEVERABILITY 24
8.11 COUNTERPARTS 24
8.12 APPLICABLE LAW 24
8.13 MEDIATION/ARBITRATION 24
ARTICLE IX
DEFINITIONS
9.1 DEFINED TERMS 26
9.2 CERTAIN ADDITIONAL DEFINED TERMS 28
SCHEDULES AND EXHIBITS
TARGETS' SCHEDULES
Schedule 2.1 Qualification
Schedule 2.3 Approvals or Notices;
Conflicts with Instruments
Schedule 2.4 Capital
Schedule 2.5 Ownership of Integracion Stock and Lan Stock
Schedule 2.6 Financial Statements
Schedule 2.7 Absence of Changes
Schedule 2.8 Liabilities
Schedule 2.9 Title to Assets; Encumbrances
Schedule 2.10 Accounts Receivable; Inventory
Schedule 2.11 Property, Contracts, Permits and Other Data
Schedule 2.12 Taxes and Returns
Schedule 2.13 Litigation
Schedule 2.15 Insurance
Schedule 2.16 Patents, Trademarks, Etc.
Schedule 2.18 Environmental, Health and Safety Compliance
Schedule 2.20 Employee Benefit Plans and Arrangements
Schedule 2.21 Transactions with Affiliates
PURCHASERS' SCHEDULES
Schedule 3.3 Approvals or Notices;
Conflicts with Instruments
TELSCAPE'S SCHEDULES
Schedule 4.3 Approvals or Notices;
Conflicts with Instruments
EXHIBITS
Exhibit A - Purchase Price Allocation
Exhibit B-1 - Promissory Note (Jose Luis Apan Wong)
Exhibit B-2 - Promissory Note (Raul de la Parra Zavala)
Exhibit B-3 - Promissory Note (Alejandro Apan Wong)
Exhibit C-1 - Convertible Note (Jose Luis Apan Wong)
Exhibit C-2 - Convertible Note (Raul de la Parra Zavala)
Exhibit C-3 - Convertible Note (Alejandro Apan Wong)
Exhibit D-1 - Warrants (Jose Luis Apan Wong)
Exhibit D-2 - Warrants (Raul de la Parra Zavala)
Exhibit D-3 - Warrants (Alejandro Apan Wong)
Exhibit E - Sellers' Counsel's Opinion Letter
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), is made
and entered into to be effective as of July 1, 1997, by and among
JOSE LUIS APAN WONG, an individual residing in Mexico City,
Mexico, RAUL DE LA PARRA ZAVALA, an individual residing in Mexico
City, Mexico, and ALEJANDRO APAN WONG, an individual residing in
Mexico City, Mexico, (collectively, the "SELLERS"), and
TELEREUNION, INC., a Delaware corporation ("TELEREUNION"),
TELSCAPE USA, INC., a Texas Corporation ("TELSCAPE USA")
(Telereunion and Telscape USA are sometimes referred to herein
collectively as the "PURCHASERS" and individually as a
"PURCHASER"), and TELSCAPE INTERNATIONAL, INC. (AND ITS
SUBSIDIARIES), a Texas corporation and the sole shareholder of
Telereunion and Telscape USA ("TELSCAPE") (Purchasers and
Telscape are sometimes referred to herein collectively as the
"TELSCAPE COMPANIES" and individually as a "TELSCAPE COMPANY").
W I T N E S S E T H:
WHEREAS, Sellers own all of the issued and outstanding
capital stock (the "INTEGRACION STOCK") of Integracion de Redes,
S.A. de C.V., a Mexican corporation ("INTEGRACION"), which is
engaged in the data and network integration business in the
United Mexican States (the "INTEGRACION BUSINESS"); and
WHEREAS, Sellers own all of the issued and outstanding
capital stock (the "LAN STOCK") of Lan and Wan, S.A. de C.V., a
Mexican corporation ("LAN") (Integracion and Lan are sometimes
referred to herein collectively as the "TARGETS" and individually
as a "TARGET"), which is engaged in the business of providing
labor and management services to Integracion (the "LAN
BUSINESS"); and
WHEREAS, Sellers desire to sell to Purchasers and Purchasers
desire to acquire from Sellers, all of the capital stock of
Integracion (the "INTEGRACION STOCK"), in consideration of the
delivery by Purchasers and Telscape of the purchase price
provided for herein, all upon the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, Sellers desire to sell to Purchasers and Purchasers
desire to acquire from Sellers, all of the capital stock of Lan
(the "LAN STOCK"), in consideration of the delivery by Purchasers
of the purchase price provided for herein, all upon the terms and
subject to the conditions hereinafter set forth; and
WHEREAS, Sellers hereby declare that the Targets do not
have substantial power in the relevant markets for the
Integracion Business and the Lan Business, respectively, in
accordance with Articles 11, 13, and 18, paragraph II of the
Mexican Federal Law of Economic Competition;
WHEREAS, Sellers and Purchasers jointly declare that one of
the principal purposes for this Agreement is to obtain more
efficiency in the operation of the Integracion Business and Lan
Business and therefore increase their respective market share;
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and
conditions of the parties contained herein, it is hereby agreed
as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK; CLOSING
1.1 PURCHASE AND SALE OF INTEGRACION STOCK. Subject to the
terms and conditions of this Agreement, at the Closing, Sellers
shall sell and deliver to Purchasers and Purchasers shall
purchase from Sellers all of the Integracion Stock, free and
clear of all Encumbrances. At the Closing, each of Sellers shall
deliver to Purchasers certificates evidencing the Integracion
Stock owned by such Seller (which, in the aggregate, shall
constitute all of the Integracion Stock), duly endorsed for
transfer.
1.2 INTEGRACION PURCHASE PRICE AND PAYMENT AT CLOSING. The
aggregate purchase price for the Integracion Stock shall be USD
$3,320,000 (the "INTEGRACION PURCHASE PRICE"). The Purchase
Price shall be payable as follows:
(a) The amount of USD $120,000 (the "CASH AMOUNT").
The Cash Amount shall be payable to each of the Sellers at
the Closing in accordance with EXHIBIT A, at the option of
the Sellers in the form of a bank cashier's check payable to
the order of such Seller or in immediately available funds
by confirmed wire transfer to a bank account to be
designated by such Seller (such designation to occur no
later than the second business day prior to the Closing
Date).
(b) The amount of USD $2,201,000 (the "Credit") as
follows:
(i) USD $300,000 due and payable on January 1, 1998;
(ii) USD $500,000 due and payable on January 1, 1999;
(iii)USD $500,000 due and payable on January 1, 2000;
(iv) USD $901,000 due and payable on January 1, 2001.
The obligation of the Telereunion to pay the Credit to the
Sellers shall be documented at the Closing by promissory notes issued by
Telereunion as maker in the aggregate principal amount of USD $2,201,000
and bearing no interest (the "PROMISSORY NOTES"). Each Seller shall be
issued a Promissory Note at the Closing in the principal amount set forth
beside such Seller's name on EXHIBIT A. The Promissory Notes shall be in
substantially the forms set forth on EXHIBITS B-1, B-2 AND B-3 hereto.
(c) The amount of USD $999,000 (the "Convertible
Amount") due on September 1, 1999. The Convertible Amount
shall be documented at Closing by convertible promissory
notes issued by Telereunion as maker in the aggregate
principal amount of USD $999,000 bearing no interest and
convertible into shares of Telscape Common Stock at a
conversion price of USD $3.00 per share (the "CONVERTIBLE
NOTES") at the option of the Sellers. Each Seller shall be
issued a Convertible Note at the Closing in the principal
amount set forth beside such Seller's name on EXHIBIT A.
The Convertible Notes shall be in substantially the forms
set forth on EXHIBITS C-1, C-2 AND C-3 hereto.
(d) Warrants issued by Telscape to purchase 100,000
shares of Telscape Common Stock (the "WARRANTS"). Each
Seller shall be issued a Warrant Certificate at the Closing
for the number of Warrants set forth beside such Seller's
name on EXHIBIT A. The Warrants shall be in substantially
the form set forth on EXHIBIT D hereto.
Sellers acknowledge and agree that the allocation of the
Integracion Purchase Price among them as set forth on EXHIBIT A
is the sole responsibility of Sellers, and none of Purchasers
shall have any obligation or other responsibility with respect to
such allocation.
1.3 OTHER OBLIGATIONS.
(A) ADDITIONAL PAYMENT. If the Data Products Gross
Margin during the Earnings Period exceeds USD $8,250,000,
Purchasers hereby covenant and agree to pay to Sellers an amount
equal to USD $280,000 (the "ADDITIONAL PAYMENT") on or before
thirty (30) days after the date of such determination.
(B) EMPLOYMENT AGREEMENTS. Each of the Sellers shall
execute and maintain an Employment Agreement (the
"Employment Agreements") with Lan at the Closing in the
form set forth in Exhibit E hereto.
1.4 PURCHASE AND SALE OF LAN STOCK. Subject to the terms
and conditions of this Agreement, at the Closing, Sellers shall
sell and deliver to Purchasers and Purchasers shall purchase from
Sellers all of the Lan Stock, free and clear of all Encumbrances.
At the Closing, each of Sellers shall deliver to Purchasers
certificates evidencing the Lan Stock owned by such Seller
(which, in the aggregate, shall constitute all of the Lan Stock),
duly endorsed for transfer .
1.5 LAN PURCHASE PRICE AND PAYMENT AT CLOSING. The
aggregate purchase price for the Lan Stock shall be USD $10,000
(the "LAN PURCHASE PRICE"), all of which shall be payable at the
Closing by wire transfer or delivery of immediately available
funds to Sellers in accordance with EXHIBIT A.
1.6 CLOSING; CLOSING DATE. The closing of the transactions
provided for in this Agreement (the "CLOSING") shall take place
(i) at the offices of Santamarina y Steta, S.C., Edificio
"Omega", Campos Eliseos 345-3 Piso, Col. Chapultepec Polanco,
11560 Mexico, D.F. MEXICO, at 10:00 a.m., local time, on July
22, 1997, or (ii) at such other time or place or on such other
date as the parties hereto shall agree. The date on which the
Closing is required to take place is herein referred to as the
"CLOSING DATE."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to each
of Purchasers and Telscape as follows:
2.1 ORGANIZATION AND QUALIFICATION. Each of the Targets is
a corporation duly organized and validly existing and licensed to
do business under the laws of Mexico. Each of the Targets has
the corporate power and authority to own, lease and operate its
respective assets and to conduct its respective business as now
conducted within the United Mexican States. Each of the
jurisdictions in which the Targets are qualified or licensed to
do business are set forth on SCHEDULE 2.1. No actions or
proceedings to dissolve the Targets are pending. Sellers have
caused each of the Targets to make available to Purchasers true
and complete copies of the minute books (Libros de Actas de
Asamblea y Libros de Sesiones de Consejo de Administracion) and
stock registry books (Registro de Accionistas) of the Targets,
each of which is accurate and complete, as well as the other
books and records of the Targets.
2.2 VALIDITY OF AGREEMENT. This Agreement has been duly
executed and delivered by Sellers and constitutes a legal, valid
and binding obligation of each of them, enforceable against them
in accordance with its terms, except as the same may be limited
by (i) bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and by general equity principles; and
(ii) with respect to Article V, the application of Article 28 of
the Political Constitution of Mexico or the Mexican Federal Law
of Economic Competition and its regulations , if any.
2.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH
INSTRUMENTS. Except as described in SCHEDULE 2.3 hereto, the
execution, delivery and performance of this Agreement by Sellers
and the consummation by them of the transactions contemplated
hereby (i) will not violate (with or without the giving of notice
or the lapse of time or both) or require any consent, approval,
filing or notice under, any provision of any Applicable Law and
(ii) will not result in the creation of any Encumbrance on the
Integracion Stock or the Lan Stock under, conflict with, or
result in the breach or termination of any provision of, or
constitute a default under, or result in the acceleration of the
performance of the obligations of Sellers, the Targets under, or
result in the creation of an Encumbrance upon any portion of the
assets of the Targets pursuant to, the charters or by-laws of the
Targets, or any indenture, mortgage, deed of trust, lease,
licensing agreement, contract, instrument or other agreement to
which Sellers, the Targets are a party or by which any of them or
any of their assets is bound or affected. Each of the
Integracion Stock and the Lan Stock is transferable and
assignable to Purchasers as contemplated by this Agreement
without the waiver of any right of first refusal or the consent
of any other party being obtained, and there exists no
preferential right of purchase in favor of any person with
respect of any of the Integracion Stock or the Lan Stock or the
Integracion Business or the Lan Business or any of the assets of
the Targets.
2.4 CAPITALIZATION. Integracion's corporate capital is
represented by 500 shares of common stock, Mex.Cy. $100.00 par
value, which are subscribed and fully paid-in. Lan's corporate
capital is represented by 50,000 shares of common stock, Mex. Cy.
$1.00 par value, which are subscribed and fully paid-in. The
legal ownership of such shares as recorded in the Stock Registry
Book is as set forth on SCHEDULE 2.4 hereto. All of the issued
and outstanding shares of each of the Targets have been duly
authorized and validly issued, are fully paid and nonassessable,
have not been issued in violation of any preemptive or similar
rights, and have been issued in compliance with all Applicable
Laws (including Mexican federal and state securities laws). The
Integracion Stock constitutes all shares of the outstanding
capital stock of Integracion. The Lan Stock constitutes all
shares of the outstanding capital stock of Lan. Except as set
forth on SCHEDULE 2.4, there are outstanding (i) no shares of
capital stock or other voting securities of the Targets, (ii) no
securities of the Targets convertible into or exchangeable for
shares of the capital stock or other voting securities of the
Targets, (iii) no options or other rights to acquire from the
Targets, and no obligation of the Targets to issue or sell, any
shares of its capital stock or other voting securities or any
securities of the Targets convertible into or exchangeable for
such capital stock or voting securities, (iv) no equity
equivalents, interest in the ownership or earnings, or other
similar rights of or with respect to the Targets, and (v) no
shares of any other entity owned by the Targets. There are (and
as of the Closing Date there will be) no outstanding obligations
of the Targets to repurchase, redeem or otherwise acquire any
shares, securities, options, equity equivalents, interests or
rights. Neither of the Targets has any Subsidiaries.
2.5 OWNERSHIP OF INTEGRACION STOCK AND LAN STOCK. Each
Seller is the legal owner of, and upon consummation of the
transactions contemplated hereby Purchasers will acquire, good,
valid and marketable title to, the number of shares of
Integracion Stock and Lan Stock set forth opposite the name of
such Seller on SCHEDULE 2.5, free and clear of all Encumbrances.
2.6 FINANCIAL STATEMENTS. Set forth on SCHEDULE 2.6 are
accurate and complete copies of (i) Targets' unaudited
consolidated balance sheet as of December 31, 1996 (the
"1996 UNAUDITED BALANCE SHEET") and the related unaudited
consolidated statements of income, stockholders' equity and cash
flows for each of the year then ended, and the notes and
schedules thereto (the "1996 UNAUDITED FINANCIAL STATEMENTS") and
(ii) the Targets' unaudited consolidated balance sheet as of
April 30, 1997 (the "April Unaudited Balance Sheet") and the
related unaudited statements of income, stockholders' equity and
cash flows for the four month period then ended (the "April
UNAUDITED FINANCIAL STATEMENTS") (the 1996 Unaudited Balance
Sheet, 1996 Unaudited Financial Statements, April Unaudited
Balance Sheet, and April Unaudited Financial Statements are
collectively, the "FINANCIAL STATEMENTS"). The Financial
Statements and the notes and schedules thereto were prepared in
conformity with GAAP by BDO Hernandez, Lozano, Marron, Lebrija
("BDO") as independent public accountants. The Financial
Statements are true and correct, and are in accordance with the
books and records of the Targets, and present fairly, accurately
and completely the financial condition of Targets as of the
dates, and for the periods, indicated, and have been prepared in
accordance with GAAP consistently applied and each of the
Financial Statements are certified by the Chief Financial Officer
of the Targets. As of June 30, 1997 the aggregate net book value
(computed in accordance with GAAP) of the Targets will be at
least USD $1,108,000. To the extent that the net book value is
less than USD $1,108,000 ("Deficiency"), the Integracion Purchase
Price shall be reduced dollar for dollar by the amount that the
net book value is less than USD $1,108,000 by reducing dollar for
dollar the Convertible Note by an amount equal to the
Deficiency.
2.7 ABSENCE OF CHANGES. Except as disclosed on SCHEDULE
2.7, since the date of the Audited Balance Sheet, there has not
been nor will there be any material change in the assets,
liabilities, financial condition, or operations of the Targets
from that reflected in the Financial Statements, other than
changes in the ordinary course of business, none of which
individually or in the aggregate have had or will have a material
adverse effect on such assets, liabilities, financial condition,
or operations. Without limiting any of the foregoing, since the
date of the Audited Balance Sheet, except as disclosed on
SCHEDULE 2.7 the Targets have not:
(a) incurred or become subject to, or agreed to
incur or become subject to, any obligation or
liability, absolute or contingent, except current
liabilities incurred in the ordinary course of
business;
(b) mortgaged, pledged, or subjected to any
Encumbrance (or agreed to do so with respect to) any of
their assets, or discharged or satisfied any
Encumbrance, or paid or satisfied any obligation or
liability other than in the ordinary course of business
and consistent with past practice;
(c) sold or transferred, or agreed to sell or
transfer, any of their assets, or canceled or agreed to
cancel, any debts due them or claims therefor, except,
in each case, for full consideration and in the
ordinary course of business;
(d) engaged in any transactions adversely
affecting the Integracion Business and the Lan
Business, or their respective assets, or suffered any
extraordinary losses or waived any rights of
substantial value not in the ordinary course of
business;
(e) purchased or agreed to purchase any
securities, bonds, or any other capital stock or assets
of any other entity with cash or liquid assets, or used
cash or liquid assets to incur debts, for matters not
within the ordinary course of business or not for
appropriate corporate purposes;
(f) increased any salaries or granted or agreed
to grant, or paid, or agreed to pay, any bonus, loan,
incentive payment or other item of value or made any
other similar agreement, to or with any of its
directors, officers or agents except as compensation in
the ordinary course of business for appropriate
services performed;
(g) declared or paid any dividend or made any
other distribution to their shareholders other than the
declaration by Integracion of a dividend for USD
$170,000 (or its Peso equivalent);
(h) made or agreed to make any changes in their
bylaws (estatutos) or capital structure other than
those changes required in order for this transaction to
be consummated;
(i) entered into any representative,
distributorship, service, installation, support and
maintenance, agency or other similar agreement (other
than in the normal ordinary course of business);
(j) incurred or suffered any damage, destruction,
or loss, whether or not covered by insurance,
materially affecting the Integracion Business or Lan
Business or any of their respective assets;
(k) made or applied to make any change in
accounting methods or practices, including for tax
purposes; or
(l) entered into any agreement, commitment or
understanding, whether or not in writing, with respect
to any of the foregoing.
2.8 LIABILITIES. Except as set forth in SCHEDULE 2.8, the
Targets have no liabilities or obligations, either accrued,
absolute, contingent, or otherwise that have had or will have a
material adverse effect on the value or business of the Targets,
and Sellers have no knowledge of any potential liability that it
reasonably believes would likely result in a material adverse
effect on the value or business of the Targets, other than those
reflected or reserved against in the Audited Balance Sheet.
2.9 TITLE TO ASSETS; ENCUMBRANCES. Except as set forth in
SCHEDULE 2.9:
(a) Each of the Targets has good and indefeasible
title to its assets, whether real, personal or intangible,
free and clear of all Encumbrances except as reflected in
the Financial Statements and liens granted or incurred by
Seller in the ordinary course of its business or financing
of office equipment, office space, furniture and computers
in the ordinary course of its business;
(b) There are no parties in possession of any of the
assets of the Targets other than personal property held by
third parties in the reasonable and ordinary course of
business. Each of the Targets enjoys full, free and
exclusive use and quiet enjoyment of its assets and its
rights pertaining thereto. The Targets enjoy peaceful and
undisturbed possession under all leases under which it is a
lessee, and all such leases are legal, valid and binding
obligations of the Targets, enforceable against the Targets
in accordance with its terms.
2.10 ACCOUNTS RECEIVABLE; INVENTORY. All accounts
receivable reflected on the Audited Balance Sheet or on the
accounting records of the Targets as of the Closing Date
(collectively, the "ACCOUNTS RECEIVABLE") represent or will
represent valid obligations arising from sales actually made or
services actually performed in the ordinary course of business.
Unless paid prior to the Closing Date, the Accounts Receivable
are or will be as of the Closing Date current and collectible net
of the respective reserve shown on the Balance Sheet or on the
accounting records of the Targets as of the Closing Date (which
reserves are adequate and calculated consistently with past
practice). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without
any setoff. The inventories and work in progress reflected on
the Audited Balance Sheet and those items of inventory
constructed or acquired by the Targets and the work performed by
the Targets after the date of the Audited Balance Sheet, except
to the extent disposed of or billed since such date in the
ordinary conduct of the business by the Targets, are, in the case
of such inventory, in good, merchantable and usable condition,
and, in the case of such work in progress, represent work
completed in accordance with the requirements of any applicable
contract, and, in each case, have been reflected on the books of
the Targets in accordance with GAAP. Except as set forth on
SCHEDULE 2.10 hereto, all such inventories and work in progress
are owned by the Targets free and clear of any Encumbrances.
2.11 PROPERTIES, CONTRACTS, PERMITS AND OTHER DATA.
(a) SCHEDULE 2.11 hereto contains a complete and
correct list of, and summaries of all the material
specifications and details of, all contracts, contract
proposals, outstanding bids, maintenance and service
agreements, purchase commitments for materials and other
services, distribution agreements, leases under which the
Targets is a lessor or lessee and other agreements
pertaining to the Integracion Business and the Lan Business
to which the Targets or any affiliate of the Targets is a
party, the benefits of which are enjoyed in the Integracion
Business or the Lan Business or to which any of the assets
of the Targets is subject;
(b) SCHEDULE 2.11 hereto contains a complete and
correct list of the real estate leased by the Targets (the
"REAL ESTATE"); neither of the Targets owns any real estate;
and
(c) SCHEDULE 2.11 hereto contains a complete and
correct list of all Permits relating to the development,
use, maintenance or occupation of the properties or Real
Estate leased by the Targets, or used in the operation of
the Integracion Business or the Lan Business.
True and complete copies of all documents (including all
amendments thereto) referred to in SCHEDULE 2.11 hereto have
been delivered to or made available for inspection by
Purchasers. All rights, licenses, leases, registrations,
applications, contracts, commitments, Permits and other
arrangements by Sellers, the Targets referred to in SCHEDULE
2.11 are in full force and effect and are valid and
enforceable in accordance with their respective terms,
except where the failure to be in full force and effect and
valid and enforceable would not in the aggregate have an
adverse effect on the assets of the Targets or on their
respective results of operations. The Targets and any of
their respective affiliates are not in breach or default in
the performance of any material obligation thereunder and to
the best knowledge of Sellers, no event has occurred or has
failed to occur whereby any of the other parties thereto
have been or will be released therefrom or will be entitled
to refuse to perform thereunder. Except as set forth in
SCHEDULE 2.11 hereto, there are no contracts, agreements,
licenses, Permits, franchises or rights to which the Targets
or affiliates of the Targets is a party which are material
to the ownership of any of the assets of the Targets, or to
the conduct of the Integracion Business or the Lan Business
as conducted by the Targets. Except as described on
SCHEDULE 2.11 hereto, the Targets have and will have
following the Closing, all licenses, Permits, consents,
approvals, authorizations, qualifications and orders of
Governmental Entities required for the conduct of the
business as presently conducted. There are no outstanding
powers of attorney relating to or affecting the Targets.
None of the Targets is a guarantor for or otherwise liable
for any liability or obligation (including indebtedness of
any other person).
2.12 TAXES AND RETURNS. The Targets have caused to be
timely filed with appropriate Mexican federal, state, local and
other Governmental Entities all Tax Returns required to be filed
with respect to the Targets or the conduct of the Integracion
Business and the Lan Business and have paid, caused to be paid,
or adequately reserved in the Financial Statements all Taxes due
or claimed to be due from or with respect to such Tax Returns.
Except as set forth on SCHEDULE 2.12, no extension of time has
been requested or granted with respect to the filing of any Tax
Return or payment of any Taxes, and no issue has been raised or
adjustment proposed by the Mexican Treasury (Secretaria de
Hacienda y Credito Publico) or any other taxing authority in
connection with any of the Targets' Tax Returns, and there are no
outstanding agreements or waivers that extend any statutory
period of limitations applicable to any Mexican federal, state or
local Tax Returns that include or reflect the use and operation
of the Targets or the conduct of the Integracion Business and the
Lan Business. Except as set forth on SCHEDULE 2.12, neither
Sellers nor the Targets have received or have knowledge of any
notice of deficiency, assessment, audit, investigation, or
proposed deficiency, assessment or audit with respect to the
Targets or the conduct of the Integracion Business and the Lan
Business from any taxing authority. None of the Targets has
taken action which is not in accordance with past practice that
could defer any liability for Taxes from any taxable period
ending on or before the Closing Date to any taxable period ending
after such date.
2.13 LITIGATION. Except as described in SCHEDULE 2.13
hereto, (i) there is no litigation, proceeding, claim or
governmental investigation pending or, to the knowledge of any of
Sellers or the Targets, threatened seeking relief or damages
which, if granted, would adversely affect the Targets, any of
their respective assets, or the ability of Purchasers to use and
operate the assets of the Targets or which would prevent the
consummation of the transactions contemplated by this Agreement
and (ii) neither Sellers nor the Targets have been charged with
any violation of or, to the knowledge of either Sellers,
threatened with a charge or violation of, nor are Sellers aware
of any facts or circumstances that, if discovered by third
parties, could give rise to a charge or a violation of, any
provision of Applicable Law or regulation which charge or
violation, if determined adversely to any of Sellers or the
Targets would adversely affect the Integracion Business or the
Lan Business or the results of operations of the Targets or that
might reasonably be expected to affect the right of Purchasers to
own the Integracion Stock and the Lan Stock or operate the
Integracion Business and the Lan Business after the Closing Date
in substantially the manner in which it is currently operated.
None of the Targets or Sellers (or to the knowledge of the
Sellers, any, employee or agent of any of them) has, directly or
indirectly, paid or delivered any fee, commission or other sum of
money or item of property however characterized to any broker,
finder, agent, governmental official or other person, in any
matter related to the Integracion Business and Lan Business,
which Sellers, or any director, officer, employee or agent of the
Targets knows or has reason to believe to have been illegal under
any Applicable Law.
2.14 LICENSES, PERMITS, AUTHORIZATIONS. Each of the
Targets holds all approvals, authorizations, consents, licenses,
orders, franchises, rights, registrations and permits of any type
required to operate its business as presently conducted. The
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not result in any
revocation, cancellation, suspension or modification of any such
approval, authorization, consent license, order, franchise,
right, registration or permit.
2.15 INSURANCE. SCHEDULE 2.15 hereto sets forth a list and
brief description of the insurance policies relating to the
insurable properties of the Targets and the conduct of the
Integracion Business and the Lan Business of the Targets. All
premiums due and arising thereon have been paid and such policies
are in full force and effect.
2.16 PATENTS, TRADEMARKS. Attached hereto as SCHEDULE 2.16
is a schedule of all (i) patents, trademarks, service marks,
works of authorship, tradenames, brandnames and copyrights, and
licenses or other rights with respect to any of the foregoing,
and other licenses, rights or permits, owned or possessed by each
of the Targets, all of which are in good standing, in full force
and effect, and are free and clear of all Encumbrances, and (ii)
of all patent applications of each of the Targets presently on
file and pending or which are presently being prepared for
filing. SCHEDULE 2.16 lists all intellectual property necessary
for the operation of the Integracion Business and the Lan
Business as now conducted and as proposed to be conducted. No
patent or patent application of the Targets is involved in any
interference proceeding. None of the Targets is using, and does
not have any plan to manufacture, use or sell, anything which
would violate or infringe on any patent or proprietary right of
any other person, firm or corporation or which would require a
license under any such patent or proprietary right. None of the
Targets has received any communications alleging that the Targets
has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks,
tradenames, copyrights, works of authorship or trade secrets or
other proprietary rights in processes of any other person or
entity.
2.17 COMPLIANCE. Each of the Targets has complied in
all material respects with all laws, and is not in violation of
any bylaws (estatutos) charter or other corporate restrictions or
any law, ordinance, requirement, regulation, judgment,
injunction, award, decree, or other order applicable to its
business, the violation of which would be likely to have a
material adverse effect on Targets, the Integracion Business and
the Lan Business. There is no term or provision of any mortgage,
indenture, contract, agreement or instrument to which the Targets
are a party or by which it is bound, any provision of any Mexican
federal or state judgment, decree, order, injunction, writ,
statute, rule or regulation applicable to or binding upon
Targets, which materially adversely affects the business,
prospects, condition, affairs or operations of the Targets or any
of its properties or assets.
2.18 ENVIRONMENTAL, HEALTH AND SAFETY COMPLIANCE. Except as
described on SCHEDULE 2.18 hereto, to the best of Sellers'
knowledge:
(a) each of the Targets is, and has continuously been,
in compliance with all Environmental Laws;
(b) all material notices, Permits, licenses or similar
authorizations, if any, required to be obtained or filed
under any Environmental Law in connection with the operation
of the Integracion Business and the Lan Business have been
obtained or filed;
(c) there are no past, pending or threatened
investigations, proceedings or claims against the Targets
relating to the presence, release or remediation of any
Hazardous Material or for non-compliance with any
Environmental Law;
(d) Hazardous Materials have not been treated, stored
or disposed of on, to or from any property relating in any
way to the Targets or that is or was owned or leased by the
Targets;
(e) none of the properties owned, leased or operated
by the Targets have been used as landfill or waste disposal
sites or contain any underground storage tanks;
(f) no conditions or circumstances are known to the
Targets or Sellers to exist or to have existed with respect
to the Targets that could give rise to any remedial action
under, or impose any liability on the Targets or Purchasers
with respect to any Environmental Law;
(g) neither Sellers nor the Targets has received any
notice or claim, and none of them is aware of any facts
suggesting, that the Targets are or may be liable to any
person as a result of any Hazardous Material generated,
treated or stored at any real estate at any time owned or
leased by the Targets or discharged, emitted, released or
transported from any real estate at any time owned or leased
by the Targets or any other source in the conduct of the
business of the Targets;
(h) no conditions or circumstances are known by
Sellers or the Targets to exist or to have existed, and no
activities are known by Sellers or the Targets to be
occurring or to have occurred, that are resulting or have
resulted in the exposure of any person or property to a
Hazardous Material such that the owner of the Real Estate or
of the Integracion Business and the Lan Business may in the
future be liable to such persons or to the owners of such
property for personal or other injuries or damages resulting
from such exposure; and
For purposes of this Agreement, the term "Environmental
Laws" shall mean, as to any given asset or operation of the
Targets, all applicable laws, statutes, ordinances, rules
and regulations of any Governmental Entity pertaining to
protection of the environment in effect as of the Closing
Date. For purposes of this Agreement, the term "Hazardous
Material" shall mean any substance which is listed or
defined as a hazardous substance, hazardous constituent or
solid waste pursuant to any Environmental Law.
2.19 LABOR MATTERS. Neither of the Targets has
suffered any strike, slowdown, picketing or work stoppage by any
union or other group of employees. Neither of the Targets is a
party to any collective bargaining agreement; no such agreement
determines the terms and conditions of employment of any employee
of the Targets; no collective bargaining agent has been certified
as a representative of any of the employees of the Targets; and
no representation campaign or election is now in progress with
respect to any of the employees of the Targets. Each of the
Targets has, as of the Closing Date, made all Sistema de Ahorro
para el Retiro ("SAR") payments required by Applicable Law to the
Mexican Treasury (Secretaria de Hacienda y Credito Publico), the
Mexican Social Security Institute (Instituto Mexicano del Seguro
Social) or special SAR accounts opened at Mexican banks in the
name of each employee of the Targets. The Targets have complied
in all material respects with all laws relating to the employment
of labor in the conduct of the Integracion Business and the Lan
Business, including provisions thereof relating to wages, hours,
equal opportunity and the payment of pension contributions,
social security and other taxes.
2.20 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS.
(a) SCHEDULE 2.20 hereto lists all employee benefit
plans and collective bargaining, labor and employment
agreements and severance agreements or other similar
arrangements, whether or not in writing (together with all
documents or instruments establishing or constituting any
related trust, annuity contract or other funding instrument)
to which the Targets are (or ever has been) a party or by
which the Targets are (or ever has been) bound, including,
without limitation, (1) any profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, severance, or incentive
compensation plan, agreement or arrangement, (2) any welfare
benefit plan, agreement or arrangement or any plan,
agreement or arrangement providing for "fringe benefits" or
perquisites to employees, officers, directors or agents,
including but not limited to benefits relating to
automobiles, clubs, vacation, child care, parenting or
maternity leave, sabbaticals, sick leave, medical expenses,
dental expenses, disability, accidental death or
dismemberment, hospitalization, life insurance and other
types of insurance, or (3) any employment agreement.
(b) Sellers and the Targets have delivered to
Purchasers true, correct and complete copies of all plan
documents and/or contracts (including, where applicable, any
documents and/or instruments establishing or constituting
any related trust, annuity contract or funding instrument)
and summary plan descriptions with respect to the plans,
agreements and arrangements listed in SCHEDULE 2.20 hereto,
or summary descriptions of any such plans, agreements or
arrangements not otherwise in writing. In addition, Sellers
and the Targets have provided Purchasers with (a) true,
correct and complete copies of any and all written
communications notices or claims that Sellers or the Targets
have received from the Mexican Treasury (Secretaria de
Hacienda y Credito Publico), the Mexican Social Security
Administration (Instituto Mexicano del Seguno Social) or a
Mexican Labor Law Court (Juntas de Conciliacion y Arbitraje)
concerning any plan, arrangement or agreement identified in
SCHEDULE 2.20 hereto that give notice of possible imposition
of a fine, penalty or liability with respect to such plan,
arrangement or agreement and (b) true, correct and complete
copies of any complaints, petitions, claims or other notices
of liability relating to any such plan, arrangement or
agreement that have been filed by any other party.
(c) For each of the plans, agreements and arrangements
identified in SCHEDULE 2.20 hereto, there are no
negotiations, demands or proposals that are pending or have
been made since the dates of the respective items furnished
pursuant to Section 2.20(b) hereto which concern matters now
covered, or that would be covered, by plans, agreements or
arrangements of the type described in this Section.
(d) The Targets and each of the plans, agreements and
arrangements identified in SCHEDULE 2.20 hereto are in full
compliance with the applicable provisions of the Mexican
Income Tax Law, the Mexican Fiscal Code of the Federation
and the Mexican Federal Labor Law, the regulations and
published authorities thereunder, and all other laws
applicable with respect to all such employee benefit plans,
agreements and arrangements. Each of Sellers and the
Targets have performed all of their respective obligations
under all such plans, agreements and arrangements including,
but not limited to, the full payment when due of all amounts
required to be made as contributions thereto or otherwise.
There are no actions, suits or claims (other than routine
claims for benefits) pending or threatened against such
plans or their assets, or arising out of such plans,
agreements or arrangements, and, to the best knowledge of
Sellers, no facts exist which could give rise to any such
actions, suits or claims that might have a material adverse
effect on such plans, agreements or arrangements.
2.21 TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 2.21, no shareholder, officer, director or employee of
Sellers or Targets, nor any affiliate of such persons, is
presently a party to any transaction with any of Sellers or
Targets, including without limitation, any contract, agreement or
other arrangement providing for the employment of, furnishing of
services by, rental of real or personal property from or
otherwise requiring payments to, any such person or entity.
Notwithstanding the foregoing, Integracion and Lan have entered
into that certain Labor Services Agreement dated January 1, 1997,
pursuant to which Lan provides to Integracion labor and
management services (the "SERVICES AGREEMENT"). Integracion has,
as of the Closing Date, made all payments due and owing under the
Services Agreement to Lan and Lan has made all payments required
by Applicable Law, including, but not limited to the payment of
mandatory profit sharing as required by the Mexican Federal Labor
Law, to its employees.
2.22 DISCLOSURES. Neither this Agreement nor any
Exhibit or Schedule hereto, nor any certificate or other
instrument furnished to Purchasers or Telscape, or its counsel,
by Seller in connection with the transactions contemplated
hereby, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the
statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.
2.23 CERTAIN FEES. None of Sellers, the Targets, nor
any of the officers, directors or employees of the Targets on
their behalf, have employed any broker or finder or incurred any
other liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby.
2.24 UNITED STATES SECURITIES LAW COMPLIANCE. Solely for
Purchasers' compliance with the federal and state securities laws
of the United States of America and without limiting or affecting
the other representations, warranties, covenants or agreements of
Purchasers hereunder, each Seller further represents and warrants
as follows:
(a) Sellers have received from Purchasers and have had
access to such information as they deem necessary for the
acquisition of the Promissory Notes, Convertible Notes and
Warrants (the "SECURITIES"), including, without limitation,
the following documents, in each case as filed with the
Securities and Exchange Commission (the "SEC"):
(i) Telscape's Annual Report on Form 10-K
for the year ended December 31, 1996;
(ii) Telscape's Quarterly Report on Form 10-
KSB for the quarter ended March 31, 1997;
(iii)Telscape's Proxy Statement for its
Annual Meeting of Shareholders held in 1997; and
(iv) all Current Reports on Form 8-K filed
with the SEC since 12/31/96.
Sellers have had, to the best of their knowledge, full
access to all other information of Purchasers requested by
Sellers;
(b) Sellers understand that the acquisition of
securities hereunder is intended to be exempt from
registration under the Securities Act of 1933, as amended
(the "ACT");
(c) Sellers or their advisors have had a reasonable
opportunity to ask questions of and receive answers from a
person or persons acting on behalf of Purchasers concerning
the acquisition of the Securities hereunder and all such
questions have been answered to the satisfaction of Sellers;
(d) Sellers will not sell or otherwise transfer the
Securities without registration of such Securities under the
Act or an exemption therefrom, and fully understand and
agree that Sellers must bear the economic risk of their
acquisition for an indefinite period of time because, among
other reasons, the Securities have not been registered under
the Act or under the securities laws of certain states and,
therefore, cannot be resold, pledged, assigned or otherwise
disposed of unless the Securities are subsequently
registered under the Act and under the applicable securities
laws of such states or unless an exemption from such
registration is available in the opinion of counsel for the
holder, which counsel and opinion are reasonably
satisfactory to Purchasers and their counsel. Sellers
represent that they are willing and able to bear the
economic risk of their investment in the Securities, have no
need for liquidity with respect thereto, are able to sustain
a complete loss of their investment, and are purchasing such
Securities for their own account for investment and not with
a view to resale or distribution thereof except in
compliance with the Act;
(e) Each of Sellers are an accredited investor as such
term is defined in Rule 501(a) of Regulation D promulgated
under the Act;
(f) Sellers have such knowledge and experience in
business and financial matters as to be capable of
evaluating the merits and risks to them of an investment in
the Securities;
(g) Sellers are purchasing the Securities for their
own account for investment and not with a view to, or for
resale in connection with, any distribution thereof within
the meaning of the Act; and
(h) Each of Sellers is not a U.S. Person and is not
acquiring the securities for the account or benefit of any
U.S. Person.
2.25 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL
CONTRIBUTIONS. None of the Targets or the Sellers (or to the
best of the Sellers' knowledge, any of their respective
employees, agents, or other representatives or any other
business entity or enterprise with which the Targets are or have
been affiliated or associated,) has, directly or indirectly, made
or authorized any payment, contribution or gift of money,
property or services, 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 Targets. None of the Targets has violated any Mexican
federal or state antitrust statutes, rules or regulations,
including, without limitation, those relating to unfair
competition, price fixing, bid rigging or collusion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of Purchasers hereby represents and warrants to Sellers
as follows:
3.1 DUE ORGANIZATION; GOOD STANDING AND POWER. Telereunion
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Telscape USA
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Each of
Purchasers has all corporate power and authority to enter into
this Agreement (and each other agreement expressly provided for
herein) and to perform its respective obligations hereunder and
thereunder.
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The
execution, delivery and performance of this Agreement and the
Promissory Notes and Convertible Notes by each of Telereunion and
Telscape USA, as the case may be, and the consummation by
Purchasers of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on
its part. No other corporate action is necessary for the
authorization, execution, delivery and performance by Purchasers
of this Agreement and the Promissory Notes, Convertible Notes and
Warrants and the consummation by Purchasers of the transactions
contemplated hereby and thereby. This Agreement has been and at
Closing the Promissory Notes, Convertible Notes and Warrants will
have been duly executed and delivered by Telereunion and Telscape
USA, as the case may be, and constitute a legal, valid and
binding obligation of Telereunion and Telscape USA, as the case
may be, enforceable against each in accordance with their
respective terms, except as the same may be limited by
bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and by general equity principles.
3.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH
INSTRUMENTS. Except as disclosed on SCHEDULE 3.3, the execution,
delivery and performance of this Agreement by Purchasers and the
consummation by them of the transactions contemplated hereby
(i) will not violate (with or without the giving of notice or the
lapse of time or both), or require any consent, approval, filing
or notice under any provision of any law, rule or regulation,
court order, judgment or decree applicable to Purchasers, and
(ii) will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under,
or result in the acceleration of the performance of the
obligations of Purchasers, under the charter or bylaws of
Purchasers or any indenture, mortgage, deed of trust, lease,
licensing agreement, contract, instrument or other agreement to
which any of Purchasers is a party or by which any of Purchasers
or any of their assets or properties is bound.
3.4 CERTAIN FEES. None of Purchasers nor any of their
respective officers, directors or employees, on behalf of them,
has employed any broker or finder or incurred any other liability
for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TELSCAPE
Telscape hereby represents and warrants to Sellers as
follows:
4.1 DUE ORGANIZATION; GOOD STANDING AND POWER. Telscape is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Telscape has all
corporate power and authority to enter into this Agreement (and
each other agreement expressly provided for herein) and to
perform its respective obligations hereunder and thereunder.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The
execution, delivery and performance of this Agreement and the
Convertible Notes and Warrants by Telscape and the consummation
by Telscape of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on
its part. No other corporate action is necessary for the
authorization, execution, delivery and performance by Telscape of
this Agreement and the Convertible Notes and Warrants and the
consummation by Telscape of the transactions contemplated hereby
and thereby. This Agreement has been and at Closing the
Convertible Notes and Warrants will have been duly executed and
delivered by Telscape and constitute a legal, valid and binding
obligation of Telscape, enforceable against it in accordance with
their terms, except as the same may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights
generally and by general equity principles.
4.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH
INSTRUMENTS. Except as disclosed on SCHEDULE 4.3, the execution,
delivery and performance of this Agreement by Telscape and the
consummation by it of the transactions contemplated hereby
(i) will not violate (with or without the giving of notice or the
lapse of time or both), or require any consent, approval, filing
or notice under any provision of any law, rule or regulation,
court order, judgment or decree applicable to Telscape, and
(ii) will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under,
or result in the acceleration of the performance of the
obligations of Telscape, under the charter or bylaws of Telscape
or any indenture, mortgage, deed of trust, lease, licensing
agreement, contract, instrument or other agreement to which any
of Telscape is a party or by which any of Telscape or any of its
assets or properties is bound.
4.4 SUBSIDIARIES. Telscape owns all of the issued and
outstanding capital stock of Telereunion and Telscape USA.
4.5 CERTAIN FEES. Neither Telscape nor any of its
officers, directors or employees, on behalf of them, has employed
any broker or finder or incurred any other liability for any
brokerage fees, commissions or finders' fees in connection with
the transactions contemplated hereby.
ARTICLE V
COVENANTS; ACTIONS SUBSEQUENT TO CLOSING
5.1 SELLERS' COVENANT NOT TO PERFORM UNFAIR COMPETITION.
In order to prevent any unfair competition by the Sellers with
respect to the Targets and the Telscape Companies, to protect the
information, technology, know-how, intellectual property whichthe
Targets and the Telscape Companies have, or may develop in the
future, to prevent a situation of disadvantage to the Telscape
Companies and the Targets against their competitors, and to
avoid a decrease of efficiency in the operation of the Telscape
Companies and the Targets or any kind of possible loss or
detriment to the corporate capital, goodwill and the market
competitiveness of the Telscape Companies and the Targets, the
parties hereto agree that , each of the Sellers will not at any
time for a period of time commencing on the Closing Date and
ending on the later of (i) two (2) years following the Closing
Date, or (ii) two (2) years following the termination of such
Seller's Employment Agreement, directly or indirectly, acting
alone or as a member of a partnership or as a holder of in excess
of five percent (5%) of any security of any class, or as a
consultant to or representative of, any corporation or other
business entity:
(a) engage in any business in competition with the
Integracion Business as conducted by the Targets at the date
hereof in those geographic areas in which such Integracion
Business is conducted or has been conducted within one (1)
year prior to the Closing Date or engage in any business in
competition with the Telscape Companies at the date hereof
in those geographic areas in which the Telscape Companies
have conducted business within one (1) year prior to the
Closing Date; or
(b) request any present or future customer or supplier
of the Telscape Companies or Integracion Business and the
Lan Business as conducted by Purchasers to curtail or cancel
its business with Purchasers or the Telscape Companies; or
(c) unless otherwise required by law, disclose to any
person, firm or corporation any details of organization or
business affairs of the Telscape Companies or the Targets or
the Integracion Business, any names of past or present
customers of the Targets or Telscape Companies or any other
non-public information concerning the Integracion Business
or the Targets or the Telscape Companies; or
(d) induce or attempt to influence any employee of the
Telscape Companies or the Purchasers or the Targets to
terminate his or her employment.
The parties hereto agree and acknowledge that Purchasers would be
substantially damaged in the event of a breach of this Section
5.1 by Sellers, which damages the parties estimate of USD
$750,000. Accordingly, Sellers further agree that Purchasers may
file suit against Sellers and any of their affiliates based on a
breach of this section and seek to recover the amount of damages
provided in this Section 5.1. Sellers understand and agree that
the act of Purchasers in entering into this Agreement, and
Purchasers' covenants and payments hereunder, shall and do
constitute sufficient consideration for Sellers to this Section 5.1.
Provisions of this Section 5.1 shall not apply (i) if the Mexican
Federal Competition Commission issues a written opinion or
regulation by means of which it is stated that the obligations
herein contained are in violation of the provisions of the
Federal Law of Economic Competition, or (ii) if the Employment
Agreements are terminated early without severance in full to the
Sellers according the Law.
5.2 FURTHER ASSURANCES. From time to time after the
Closing, Sellers will execute and deliver, or cause to be
executed and delivered, without further consideration, such other
instruments of conveyance, assignment, transfer and delivery and
will take such other actions as Purchasers or Telscape may
reasonably request in order to more effectively transfer, convey,
assign and deliver to Purchasers, and to place Purchasers in
possession and control of any of the Integracion Stock and Lan
Stock or to enable Purchasers to exercise and enjoy all rights
and benefits of Sellers with respect thereto. Specifically,
Sellers shall cooperate with Purchasers to provide notice to the
Mexican National Registry of Foreign Investments (Registro
Nacional de Inversiones Extranjeras) of the purchase of the
Integracion Stock and Lan Stock by Purchasers within forty (40)
days from the effective date of this Agreement.
5.3 PERSONAL GUARANTEES. Purchasers agree to take such
steps as they deem, in their sole discretion, necessary to
relieve Jose Luis Apan Wong and Alejandro Apan Wong of their
obligations under the personal guarantees set forth in Schedule 5.3.
5.4 ADVISORY SEAT ON TELSCAPE BOARD OF DIRECTORS. For so long
as either the Promissory Notes or the Convertible Notes are
outstanding, the Sellers may appoint one representative to the
Telscape Board of Directors as a non-voting advisor. Such
individual shall have the right to attend all Telscape Board
meetings but shall not have the right to vote on any matter or to
be compensated for serving as an advisor to the Board of
Directors.
5.5 CAPITALIZATION. Purchasers agree to provide the capital
after Closing necessary to enable Integracion to pay the $170,000
dividend referenced in Section 2.7(g).
5.6 RELEASE OF BOARD OF DIRECTORS. Purchasers agree to
hold a shareholders meetings following the Closing Date for each
of the Targets to replace the Board of Directors for each Target
and ratify the past actions of the Board of Directors to the
extent that they have complied with the obligations set forth in
Article 157, et. seq., of the Mexican General Law of Commercial
Corporations. Notwithstanding anything to the contrary contained
herein, this provision shall not release Sellers from any
obligation under this Agreement.
5.7 SPECIAL BASKET FOR UNCOLLECTED ACCOUNTS RECEIVABLE.
Purchasers may exercise their indemnification rights under
Article VII with respect to any Accounts Receivable referenced in
Section 2.10 that are not collected after Closing but only to the
extent that such amount exceeds USD $50,000.
ARTICLE VI
DELIVERIES AT CLOSING
6.1 DELIVERIES BY SELLERS. At the Closing, Sellers shall
deliver the following to the Purchasers:
(a) original stock certificates representing the
Integracion Stock and the Lan Stock, endorsed to the
Purchasers in accordance with Sections 1.1 and 1.4 hereof,
respectively, and any other documents necessary to transfer
to Purchasers good title to the Integracion Stock and the
Lan Stock;
(b) an opinion of Lic. Alberto de la Parra, counsel to
the Sellers, in the form of that attached hereto as EXHIBIT E;
(c) originals of the incorporation charter (Acta Constitutiva)
of each of the Targets certified by a Mexican notary public and
registered with the Public Registry of Commerce and Property of
the Federal District;
(d) originals of the books and records of the Targets
referred to in Section 2.1;
(e) originals of the Registry of Shareholders
(Registro de Accionistas) for the Targets;
(f) Employment Agreements executed by each Seller and
Integracion (each an "EMPLOYMENT AGREEMENT"; and
(g) the resignations, effective as of the Closing, of
each director of the Targets.
6.2 DELIVERIES BY PURCHASERS. At the Closing, Purchasers
shall deliver the following to Sellers:
(a) the Cash Amount of the Integracion Purchase Price;
(b) the Promissory Notes;
(c) the Convertible Notes; and
(d) the Lan Purchase Price.
6.3 DELIVERIES BY TELSCAPE. At the Closing, Telscape shall
deliver the following to the Sellers:
(a) the Warrants.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY SELLERS. Subject to the provisions
of this Article VII, Sellers, jointly and severally, shall
protect, indemnify and hold harmless Purchasers and Telscape,
each officer, director and agent of Purchasers and each person
who controls Purchasers in respect of any losses, claims,
damages, liabilities, deficiencies, delinquencies, defaults,
assessments, fees, penalties or related costs or expenses,
including, but not limited to, court costs and reasonable
attorneys', and accountants' fees and disbursements, and any
Mexican federal, state or local income, value-added or
withholding taxes payable in respect of the receipt of cash or
money in discharge of the foregoing (collectively referred to
herein as "DAMAGES") to which Purchasers or Telscape may become
subject if such Damages arise out of or are based upon:
(a) the breach of any of the representations and
warranties, covenants or agreements made by Sellers or the
Targets in this Agreement, including the Exhibits and
Schedules hereto, or in any certificate or instrument
delivered by or on behalf of Sellers or the Targets;
(b) other than those set forth in Schedule 2.13, any
lawsuit, claim or proceeding of any nature existing at or
prior to the Closing, or arising out of any act or
transaction of Sellers or the Targets, or arising out of
facts or circumstances that existed at or prior to the
Closing that are related to the Targets, their respective
assets or the operation of the Integracion Business or the
Lan Business; and
(c) any liabilities for Taxes, whether Mexican or
United States federal, state or local taxes, incurred or
accrued by Sellers as a result of the consummation of the
transactions contemplated in this Agreement;
The obligations by Sellers pursuant to Section 7.1 (b) herein to
indemnify Purchasers and Telscape, among others, shall in no
event exceed the greater of USD $2,000,000.00 or the fair market
value of the shares of Telscape underlying the Convertible Notes
(333,000 shares of Telscape Common Stock) upon the exercise by
Purchasers of its rights under Section 7.4 (e) hereof.
Notwithstanding anything to the contrary contained in this
Section 7.1, the Sellers shall be only severally liable for any
Damages that may arise under Article V.
7.2 INDEMNIFICATION BY TELSCAPE COMPANIES. Subject to the
provisions of this Article VII, each of the Telscape Companies
shall protect, indemnify and hold harmless Sellers, in respect of
any Damages to which Sellers may become subject if such Damages
arise out of or are based upon the breach of any of the
representations, warranties, covenants or agreements made by the
Telscape Companies in this Agreement, including the Exhibits and
Schedules hereto, or in any certificate delivered by or on behalf
of the Telscape Companies pursuant to this Agreement.
7.3 INDEMNIFICATION PROCEDURES. The obligations and
liabilities of each indemnifying party hereunder with respect to
claims resulting from the assertion of liability by the other
party or third parties shall be subject to the following terms
and conditions:
(a) If any person shall notify an indemnified party
(the "INDEMNIFIED PARTY") with respect to any matter which
may give rise to a claim for indemnification (a "CLAIM")
against the Telscape Companies or Sellers (the "INDEMNIFYING
PARTY") under this Article VII, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to
defend the Indemnified Party against a Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party
so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within fifteen (15) days after
the Indemnified Party has given notice of the Claim that the
Indemnifying Party will indemnify the Indemnified Party from
and against the entirety (subject to any limitations
contained in Article VII) of any Damages the Indemnified
Party may suffer resulting from, arising out of, relating
to, in the nature of or caused by the Claim, (ii) the
Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that
the Indemnifying Party will have the financial resources to
defend against the Claim and fulfill its indemnification
obligations hereunder, (iii) the Claim involves only money
damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with
respect to, the Claim is not, in the good faith judgment of
the Indemnifying Party, likely to establish a precedential
custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Claim
actively and diligently and in good faith.
(c) So long as the Indemnifying Party is conducting
the defense of the Claim in accordance with Section 7.3(b)
above, (i) the Indemnified Party may retain separate co-
counsel at its sole cost and expense and participate in the
defense of the Claim, (ii) the Indemnified Party will not
consent to the entry of any judgment or enter into any
settlement with respect to the Claim without the prior
written consent of the Indemnifying Party (not to be
withheld unreasonably), and (iii) the Indemnifying Party
will not consent to the entry of any judgment or enter into
any settlement with respect to the Claim without the prior
written consent of the Indemnified Party (not to be withheld
unreasonably).
(d) In the event any of the conditions in Section
7.3(b) above is or becomes unsatisfied, however, (i) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in
connection therewith), (ii) the Indemnifying Party will
remain responsible for any damages the Indemnified Party may
suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Claim to the fullest extent
provided in this Article VII.
(e) The Purchasers may offset any Claims against any
of the obligations owing to the Sellers under this Agreement,
the Warrants and the Convertible Notes.
7.4 TIME LIMITS ON LIABILITY. Anything contained in this
Agreement to the contrary notwithstanding, the indemnity
liability of any party for indemnity shall only extend to matters
for which a bona fide Claim has been asserted by written notice
of such Claim delivered to the Indemnifying Party on or before
the fourth anniversary of the Closing Date. Notwithstanding the
foregoing, any Claims asserted in connection with the breach of
the representation and warranties contained in Sections 2.5, 2.9,
2.12, 2.24 and 2.25 shall not, subject to applicable statues of
limitations, expire pursuant to this Section 7.4 and may be made
at any time following the Closing Date.
7.5 APPOINTMENT OF SELLER REPRESENTATIVE. Sellers hereby
appoint Jose Luis Apan Wong as their representative, who shall
have full power and authority to make all decisions relating to
the defense and/or settlement of any claims for which Sellers may
be required to indemnify Purchasers (and vice versa) and to take
such other actions (and any other actions reasonably related or
ancillary thereto) provided to be taken after the Closing by
Sellers. Decisions and actions by Jose Luis Apan Wong,
including, without limitation, any agreement between Jose Luis
Apan Wong and Purchasers relating to the defense or settlement of
any claims for which Sellers may be required to indemnify
Purchasers, shall be binding upon all of Sellers, and no Seller
shall have the right to object, dissent, protest or otherwise
contest the same. If Jose Luis Apan Wong shall die or become
incapacitated then the other Sellers (acting by a majority vote)
shall select another representative from among Sellers (or their
heirs, executors, administrators or personal representatives) to
replace Jose Luis Apan Wong, which representative shall have the
same rights and authorities as Jose Luis Apan Wong hereunder. By
their execution of this Agreement, Sellers shall be deemed to
have agreed that (i) the provisions of this Section 7.5 are
independent and separable, irrevocable and coupled with an
interest and shall be enforceable notwithstanding any rights or
remedies that any Seller may have in connection with the
transactions contemplated by this Agreement, (ii) the remedy at
law for any breach of the provisions of this Section 7.5 would be
inadequate, (iii) Purchasers shall be entitled to temporary and
permanent injunctive relief without the necessity of proving
damages if it brings an action to enforce the provisions of this
Section 7.5, (iv) the provisions of this Section 7.5 shall be
binding upon the heirs, executors, administrators, personal
representatives and successors of each Seller, and (v) any
reference in this Agreement to a Seller shall mean and include
the successors to the Seller's rights hereunder, whether pursuant to a
testamentary disposition, the laws of descent and distribution, or otherwise.
ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations, warranties and agreements contained in this
Agreement shall survive the Closing.
8.2 PAYMENT OF CERTAIN FEES AND EXPENSES. Each of the
parties hereto shall pay the fees and expenses incurred by it in
connection with the negotiation, preparation, execution and
performance of this Agreement, including, without limitation,
brokers' fees, attorneys' fees and accountants' fees; provided,
however, that Sellers shall be responsible for all such fees and
expenses incurred by Integracion and Lan.
8.3 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed, first class mail,
postage prepaid, return receipt requested, or by facsimile, but
only if confirmed by a return receipt, as follows:
(a) If to Sellers' Representative:
Jose Luis Apan Wong
Cataratas 60-13 Col.
Ampliacion los
Alpes, Mexico, D.F.
Federal Mexico
with a copy to:
Alberto de la Parra
C/O Santamarina y Steta
Edificio "Omega"
Campos Eliseos 345-3 Piso
Col. Chapultepec Polanco
11560 Mexico, D.F. Mexico
Alejandro Apan Wong
Pedro Santacilia 241
Col. Ixtaccihuatl
03520, Mexico D.F.
Raul de la Parra Zavala
Emilio Rabasa 69
Cto, Juristas Satelite
53100, Naucalpan
Edo. Mex.
(b) If to Purchasers:
TELEREUNION, INC.
4635 SOUTHWEST FREEWAY,
SUTIE 800
HOUSTON, TEXAS 77027
ATTN: TODD M. BINET
with a copy to:
Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay, Suite 800
Houston, Texas 77002
Attention: Eric A. Blumrosen
Facsimile: (713) 308-5555
(c) If to Telscape:
Telscape International, Inc.
4635 Southwest Freeway, Suite 800
Houston, Texas 77027
Attention: Todd M. Binet
Facsimile: (713) 968-0930
with a copy to:
Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay, Suite 800
Houston, Texas 77002
Attention: Eric A. Blumrosen
Facsimile: (713) 308-5555
or to such other address as either party shall have specified by
notice in writing to the other party. All such notices,
requests, demands and communications shall be deemed to have been
received on the earlier of the date of delivery or on the fifth
business day after the mailing thereof.
8.4 SCHEDULES. All statements contained in any exhibit,
schedule, appendix, certificate or other instrument delivered by
or on behalf of the parties hereto, or in connection with the
transactions contemplated hereby, are an integral part of this
Agreement and shall be deemed representations and warranties hereunder.
8.5 PUBLICITY. Sellers shall promptly advise and cooperate
with Purchasers prior to the issuance by the Targets or any of
the Targets' directors, officers, employees or agents of any
press release with respect to this Agreement or the transactions
contemplated hereby. Notwithstanding the foregoing, without the
prior consent of Purchasers, neither Sellers nor any of its
directors, officers, employees or agents shall issue any press
release which includes the name of any of Purchasers or their affiliates.
8.6 ENTIRE AGREEMENT. This Agreement (including the
Exhibits and Schedules hereto) constitutes the entire agreement
between the parties hereto and supersedes all prior agreements
and understandings, oral and written, between the parties hereto
with respect to the subject matter hereof.
8.7 BINDING EFFECT; BENEFIT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their
respective permitted heirs, personal representatives, successors
and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or
their respective heirs, personal representatives, successors and
assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
8.8 ASSIGNABILITY. This Agreement shall not be assignable
by Sellers without the prior written consent of Purchasers or by
Purchasers without the prior written consent of Sellers;
provided, however, that any of Purchasers shall be entitled to
assign this Agreement to an affiliate of such Purchaser without
the consent of Sellers.
8.9 SECTION HEADINGS; INDEX. The section headings
contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
8.10 SEVERABILITY. If any provision of this Agreement shall
be declared by any court of competent jurisdiction to be illegal,
void or unenforceable, all other provisions of this Agreement
shall not be affected and shall remain in full force and effect.
If the operation or application of any provision of this
Agreement leads to the application of fines, penalties or
sanctions pursuant to the enforcement of Applicable Law, the
parties agree to strike such provision from this Agreement and
substitute same for a similar provision that is not in conflict
with Applicable Law.
8.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and
the same instrument.
8.12 APPLICABLE LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of Mexico.
8.13 MEDIATION/ARBITRATION. The parties hereto will attempt
to settle any dispute, difference or claim arising between them
regarding the interpretation, performance or enforcement of this
Agreement ("DISPUTE") through direct discussion, and, if that is
not successful, they will submit any Dispute to mediation under
the Commercial Mediation Rules of the American Arbitration
Association ("AAA"). If, in the opinion of either party, the
parties are unable to agree on a mediator, and a time and place
for mediation, such party may submit the Dispute to the AAA in
Houston, Texas for mediation in Houston, Texas under the AAA's
rules, and the AAA shall appoint a mediator who shall be fluent
in English and Spanish and who will provide simultaneous
translations throughout the mediation. The mediator shall be an
expert in the telecommunications industry with experience in
international telecommunications projects. The parties shall
attend such mediation for a period of at least three entire
consecutive working days.
(a) If the parties are unable to resolve the Dispute
through mediation as provided in the preceding paragraph,
the Dispute shall be submitted to arbitration, and neither
party shall have the right to file suit against the other.
Except to the extent specifically provided in this clause,
the administrative aspects of the arbitration will be
governed and controlled by the International Chamber of
Commerce ("ICC"), and the arbitration, including the
rendering of the award, shall take place in Houston, Texas.
The arbitration shall be settled in accordance with the
International Commercial Arbitration Rules of the ICC.
However, in the case of any conflict between the provisions
of said rules and the provisions of this Agreement, the
provisions of this Agreement shall govern.
(b) The arbitral tribunal shall be composed of three
arbitrators. Each party shall appoint one arbitrator. If a
party fails to appoint an arbitrator within ten days after
the date the claimant's demand for arbitration is
communicated to the other party ("NOTIFICATION DATE"), the
ICC shall make such appointment. The two arbitrators thus
appointed shall attempt to agree upon the appointment of a
neutral arbitrator to serve as chairman of the arbitral
tribunal. If said two arbitrators fail to agree upon the
appointment of such neutral arbitrator within three days
after the Notification Date, the ICC shall make such
appointment.
(c) The decision of the arbitral tribunal shall be
final and binding upon the parties. Unless the parties
subsequently agree in writing to terminate the arbitration,
the submission to arbitration shall continue to have effect
until the final award has been made. Judgment upon the
decision and an award made by the arbitral tribunal may be
entered by any court of competent jurisdiction. All
decisions of the arbitral tribunal must be made by a
majority vote, including, but not limited to, the following
issues: the decision, damages, costs of the proceedings, and
the compensation of the arbitrators. The arbitral tribunal
must render the award in writing to all parties and their
representatives pursuant to the notification provision of
this Agreement.
(d) The languages to be used in the arbitration
proceeding shall be English with simultaneous translation in
Spanish available for Sellers at Sellers' cost if requested
in writing. Any decision or award of the arbitral tribunal
shall be based solely on the provisions of this Agreement;
provided, however, that to the extent that the subject
matter for the decision or award is not provided for in such
provisions, it shall be based on the substantive law of
Mexico (except its conflict of laws principles).
(e) With respect to the initial appearance of the
parties in the arbitration proceeding and with respect to
the arbitral award, notification thereof shall be made
personally to the parties at the addresses indicated in
Section 8.3 above through the judicial authority of the
domicile of the party to whom notification is directed,
unless the law of the place of notification permits another
form of notification. All other notifications and
communications arising from the arbitral proceeding may be
made to the parties by facsimile, confirmed in writing sent
via registered first class mail, return receipt requested,
postage prepaid, to such party's facsimile number and/or
address specified in Section 8.3.
(f) In the event that the losing party, if any, fails
or refuses to comply with the arbitral award within ten
business days following the date on which it is notified of
the award, the prevailing party, the arbitrator or their
attorneys-in-fact may immediately proceed to request the
judicial approval necessary for the execution before a
competent judge of the domicile of the losing party or
before any other court of competent jurisdiction. Any award
of monetary damages shall bear interest at the lesser of
eighteen percent (18%) per annum in U.S. currency or the
maximum contractual rate permissible under the laws of the
jurisdiction of the party against which the award is
granted. Further, the party against which the award is made
shall reimburse the cost of counsel's fees (and related
costs) to the prevailing party with interest accruing from
the date such fees or costs were incurred at the lesser of
eighteen percent (18%) per annum in U.S. currency or the
maximum contractual rate permissible under the law of the
jurisdiction of the party against which the award is
granted.
(g) At the commencement of the arbitration proceeding,
the parties will deposit, in equal proportions, an amount
sufficient to cover all expenses and fees, which amount will
be determined by the arbitrator or, as the case may be, by
the AAA. All of the expenses that arise from the arbitral
proceedings, as well as the fees of the arbitrator, will be
paid by the losing party, if any, as determined by the
arbitrator. Said losing party shall reimburse the other
party the amounts deposited by said other party at the
commencement of the arbitration.
(h) The validity of this Section 8.13 shall be
governed by the United Nations Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (New York, June
10, 1958) to which Mexico and the United States of America
are parties.
ARTICLE IX
DEFINITIONS
9.1 DEFINED TERMS. As used in this Agreement, each of the
following terms has the meaning given it below:
"AFFILIATE" means, with respect to any person, any
other person that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under
common control with, such person.
"APPLICABLE LAW" means any statute, law, rule or
regulation or any judgment, order, writ, injunction or
decree of any Governmental Entity to which a specified
person or property is subject.
"DATA PRODUCTS" means any equipment or service used in
private telecommunications networks for the transport of
data, voice or video under the following technologies:
Ethernet, Token Ring, MAN, WAN, HDLC, SDLC, SNA, X.25, Frame
Relay, X.400, ATM, Gigabit Ethernet, Fast Ethernet or any
new technology that replaces it or arrives in the future.
3Com, Newbridge, Cisco, Sun Microsystems, Bay Networks,
Nortel Magellan and Hewlett Packard are examples of Data
Product manufacturers. Data Products also includes all
workstations, servers, software, components and any element
for their operation or monitoring of such equipment.
Provided, however, that any wiring and related products
dedicated only for voice shall not be included in Data
Products.
"DATA PRODUCTS GROSS MARGIN" shall mean the difference
between (i) the total revenues (net of any returns of
product or allowances and net of any bad debt expenses
associated with such sales) generated from the sale of Data
Products by Integracion or Telereunion and (ii) the direct
costs incurred to generate such sales. Data Products Gross
Margin shall be determined in accordance with GAAP applied
on a consistent basis.
"EARNINGS PERIOD" means the four year period ending
December 31, 2000.
"ENCUMBRANCES" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims,
restrictions (whether on voting, sale, transfer, disposition
or otherwise), licenses, sublicenses, easements and other
encumbrances of every type and description, whether imposed
by law, agreement, understanding or otherwise.
"GAAP" means generally accepted U.S. accounting
principles as in effect on the date of this Agreement.
"GOVERNMENTAL ENTITY" means any court or tribunal in
any jurisdiction (domestic or foreign) or any public,
governmental or regulatory body, agency, department,
commission, board, bureau or other authority or
instrumentality (mexican or foreign).
"INTELLECTUAL PROPERTY" means patents, trademarks,
service marks, trade names, copyrights, trade secrets, know-
how, inventions, and similar rights, and all registrations,
applications, licenses and rights with respect to any of the
foregoing.
"MEXICO" means the United Mexican States.
"PERMITS" means licenses, permits, franchises,
consents, approvals and other authorizations of or from
Governmental Entities.
"PERSON" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, enterprise, unincorporated organization or
Governmental Entity.
"PROCEEDINGS" means all proceedings, actions, claims,
suits, investigations and inquiries by or before any
arbitrator or Governmental Entity.
"SUBSIDIARY" means, with respect to any corporation,
any corporation more than thirty (30) percent of whose
outstanding voting securities, or any partnership, joint
venture, or other entity more than thirty (30) percent of
whose total equity interests is owned, directly or
indirectly, by such corporation.
"TAXES" means any income taxes or similar assessments
or any sales, excise, occupation, use, value-added ad
valorem, property, production, severance, transportation,
employment, payroll, franchise or other tax imposed by any
Mexican federal, state or local (or any foreign or
provincial) taxing authority, including any interest,
penalties or additions attributable thereto.
"TAX RETURN" means any return or report, including any
related or supporting information, with respect to Taxes.
"TELSCAPE COMMON STOCK" means the common stock, USD
$0.001 par value, of Telscape.
"USD" means the lawful currency of the United States of
America.
"U.S. PERSON" means any natural person resident in the
United States of America, its territories and possessions
and the District of Columbia.
9.2 CERTAIN ADDITIONAL DEFINED TERMS. In addition to such
terms as are defined in Section 9.2, the following terms are used
in this Agreement as defined in the Sections of this Agreement
referenced opposite such terms:
DEFINED TERMS REFERENCE
AAA Section 6.13
Accounts Receivable Section 2.10
Act Section 2.24
Additional Payments Section 1.3
Agreement Preamble
Audited Balance Sheet Section 2.6
Audited Financial Statements Section 2.6
Cash Amount Section 1.2
Claim Section 5.3
Closing Section 1.5
Closing Date Section 1.5
Convertible Notes Section 1.2
Damages Section 5.1
Dispute Section 6.13
Employment Agreements Section 6.1(d)
Environmental Laws Section 2.18
Financial Statements Section 2.6
Hazardous Material Section 2.18
Indemnified Party Section 5.3
Indemnifying Party Section 5.3
Integracion Recitals
Integracion Business Recitals
Integracion Purchase Price Section 1.2
Integracion Stock Recitals
Lan Recitals
Lan Business Recitals
Lan Purchase Price Section 1.4
Lan Stock Recitals
Telscape USA Preamble
Notification Date Section 6.13
Promissory Notes Section 1.2
Purchaser; Purchasers Preamble
Real Estate Section 2.11
SAR Section 2.19
SEC Section 2.24
Securities Section 2.24
Sellers Preamble
Services Agreement Section 2.21
Target; Targets Preamble
Telereunion Preamble
Telscape Preamble
Telscape Company; Telscape Companies Preamble
Unaudited Financial Statements Section 2.6
Warrants Section 1.2
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the date first above written.
JOSE LUIS APAN WONG
Jose Luis Apan Wong
RAUL DE LA PARRA ZAVALA
Raul de la Parra Zavala
ALEJANDRO APAN WONG
Alejandro Apan Wong
TELSCAPE INTERNATIONAL, INC.
By:
Name:
Title:
TELEREUNION, INC.
By:
Name:
Title:
TELSCAPE
By:
Name:
Title:
EXHIBIT A
ALLOCATION OF PURCHASE PRICE
(USD)
<TABLE>
<CAPTION>
INTEGRACION PURCHASE PRICE
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
CASH OF OF
SELLER AMOUNT PROMISSORY NOTES CONVERTIBLE NOTES
<S> <C> <C> <C>
Jose Luis Apan Wong USD $ 61,200 USD $1,122,510 USD $509,490
Raul de la Parra Zavala USD $ 18,000 USD $ 330,150 USD $149,850
Alejandro Apan Wong USD $ 40,800 USD $ 748,340 USD $339,660
USD $120,000 USD $2,201,000 USD $999,000
</TABLE>
<TABLE>
<CAPTION>
LAN PURCHASE
NUMBER OF PRICE
SELLER WARRANTS (CASH)
<S> <C> <C>
Jose Luis Apan Wong 51,000 USD $ 3,700
Raul de la Parra Zavala 15,000 USD $ 3,800
Alejandro Apan Wong 34,000 USD $ 2,500
100,000 USD $10,000
</TABLE>
