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)
OCTOBER 15, 1997 (OCTOBER 1, 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.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On October 1, 1997, pursuant to a stock purchase agreement ("Agreement"),
Telereunion, Inc. ("Telereunion") and Telscape USA, Inc. ("Telscape USA")
(collectively, the "Purchasers"), both wholly-owned subsidiaries of the
Registrant, acquired all of the outstanding shares of N.S.I., S.A. de C.V.
("NSI"), a Mexican corporation based in Mexico City, from Jose Martin Pena
Nunez, Carlos Joaquin De Lara Y Campos, Jorge Pena Nunez and Martha Teresita
Martin del Campo Gutierrez ("Sellers"). NSI distributes data and network
integration equipment in Mexico and represents such manufacturers as 3Com
and Newbridge Networks and also provides the value-added service of systems
integration ("NSI Business"). The acquisition is effective October 1, 1997.
Under the terms of the acquisition, the Purchasers paid cash of $1,000 USD
to the shareholders of NSI and Telereunion agreed to guarantee the repayment
of approximately $260,000 USD to one of the Sellers. The $1,000 paid at
closing for NSI was funded out of working capital.
(b) Certain property and equipment was acquired in connection with the
acquisition of NSI, which was utilized in the NSI 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 NSI
and the pro forma financial information required by this report. The
Company 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.
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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
October 15, 1997 /S/ TODD M. BINET
Todd M. Binet
Executive Vice President and Chief Financial
Officer
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INDEX OF EXHIBITS
EXHIBIT NO. DESCRIPTION
*10.1 Stock Purchase Agreement dated October 1, 1997, by and among
Telscape USA, Inc., Telereunion, Inc. and Jose Martin Pena Nunez,
Carlos Joaquin De Lara Y Campos, Jorge Pena Nunez, Martha Teresita
Martin Del Campo Gutierrez
_________________
*Filed herewith
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STOCK PURCHASE AGREEMENT
BY AND AMONG
TELEREUNION, INC.
TELSCAPE USA, INC.
AND
JOSE MARTIN PENA NUNEZ
CARLOS JOAQUIN DE LARA Y CAMPOS
JORGE PENA NUNEZ
MARTHA TERESITA MARTIN DEL CAMPO GUTIERREZ
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), is made and entered
into to be effective as of October 1, 1997, by and among JOSE PENA NUNEZ,
an individual residing in Mexico City ("Pena"), CARLOS JOAQUIN DE LARA,
an individual residing in Mexico City ("De Lara", JORGE MARTIN PENA NUNEZ,
an individual residing in Mexico City, and MARTHA TERESITA MARTIN DEL CAMPO
GUTIERREZ, an individual residing in Mexico City,(collectively, the "SELLERS"),
and, TELSCAPE USA, INC., a Delaware Corporation ("Telscape USA") and
TELEREUNION, INC., a Delaware corporation ("TELEREUNION") (Telscape USA and
Telereunion are sometimes referred to herein collectively as the "PURCHASERS"
and individually as a "PURCHASER" and sometimes referred to herein 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 "NSI STOCK") of N.S.I., S.A. de C.V., a Mexican corporation ("NSI" or
"Target"), which is engaged in the data and network integration business
(the "NSI BUSINESS"); and
WHEREAS, Sellers desire to sell to Purchasers and Purchasers desire
to acquire from Sellers, all of the capital stock of NSI, 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;
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 NSI 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 NSI Stock, free and
clear of all Encumbrances (except as set forth in Exhibit A and Schedule 2.4),
as set forth in Schedule 1.1. At the Closing, each of Sellers shall deliver
to Purchasers certificates evidencing NSI Stock owned by such Seller (which,
in the aggregate, shall constitute all of NSI Stock), duly endorsed for
transfer.
1.2 NSI PURCHASE PRICE AND PAYMENT AT CLOSING. The aggregate purchase
price for NSI Stock shall be $1,000 USD (the "NSI PURCHASE PRICE") (or its
equivalent in the lawful currency of the United Mexican States at the
exchange price to purchase US Dollars at Bancomer on the day prior to the
respective payment). NSI Purchase Price shall be payable at the Closing
and shall consist of cash in the amount of $1,000 USD (the "CASH AMOUNT")
The Cash Amount shall be payable to each of the Sellers in accordance with
EXHIBIT A in the form of a 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).
Sellers acknowledge and agree that the allocation of the NSI 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 CLOSING; CLOSING DATE. The closing of the transactions provided for
in this Agreement (the "CLOSING") shall take place (i) at the offices of
Vextro, in Mexico City, at 1:00 p.m., local time, on Wednesday, October 1,1997,
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
as follows:
2.1 ORGANIZATION AND QUALIFICATION. NSI is a corporation duly organized
and validly existing under the laws of Mexico. NSI has the corporate power and
authority to own, lease and operate its respective assets and to conduct its
respective business as now conducted. NSI is duly authorized, qualified or
licensed to do business as a Mexican corporation and is in good standing under
the laws of Mexico and under the laws of any state within the Mexican Republic
in which its right, title or interest in or to any of its assets, or the
conduct of its business, requires such authorization, qualification or
licensing. NSI is not doing business, qualified or licensed to do business
outside of Mexico. No actions or proceedings to dissolve NSI are pending.
Sellers have caused NSI to make available to Purchasers true and complete
copies of the minute books (Libros de Actas de Asamblea y Libros de
Reuniones de Consejo de Administracion), stock registry book (Registro de
Accionistas) and capital registry book (Libro de Aumentos de Capital) of NSI,
each of which is accurate and complete, as well as the other books and records
of NSI.
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 bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and by general equity principles.
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 NSI 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 or NSI , or result in the creation of an Encumbrance
upon any portion of the assets of NSI pursuant to, the charters or by-laws of
the Target, or any indenture, mortgage, deed of trust, lease, licensing
agreement, contract, instrument or other agreement to which Sellers or NSI are
a party or by which any of them or any of their assets is bound or affected.
The NSI 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 NSI Stock or the
NSI Business or any of the assets of NSI.
2.4 CAPITALIZATION. NSI's authorized capital consists of ten shares of
common stock, $5,000 Mexican pesos par value, of which ten are authorized and
ten are subscribed and fully paid-in. The record and beneficial ownership of
such shares is as set forth on SCHEDULE 2.4 hereto. All of the issued and
outstanding shares of NSI 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 laws). The NSI Stock
constitutes all shares of the outstanding capital stock of NSI. Except as set
forth on SCHEDULE 2.4, there are outstanding (i) no shares of capital stock or
other voting securities of NSI, (ii) no securities of NSI convertible into or
exchangeable for shares of the capital stock or other voting securities of NSI,
(iii) no options or other rights to acquire from NSI, and no obligation of NSI
to issue or sell, any shares of its capital stock or other voting securities
or any securities of NSI 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 NSI, and
(v) no shares of any other entity owned by NSI. There are (and as of the
Closing Date there will be) no outstanding obligations of NSI to repurchase,
redeem or otherwise acquire any shares, securities, options, equity
equivalents, interests or rights. NSI has no Subsidiaries.
2.5 OWNERSHIP OF NSI STOCK. Each Seller is the record and beneficial
owner of, and upon consummation of the transactions contemplated hereby
Purchasers will acquire, good, valid and marketable title to, the number
of shares of NSI Stock set forth opposite the name of such Seller on
SCHEDULE 2.5, free and clear of all Encumbrances, except as set forth in
Schedule A and 2.4.
2.6 FINANCIAL STATEMENTS. Set forth on SCHEDULE 2.6 are accurate and
complete copies of (i) NSI's audited consolidated balance sheet as of
December 31, 1996 (the "AUDITED BALANCE SHEET") and the related audited
consolidated statements of income, stockholders' equity and cash flows
for each of the years then ended, and the notes and schedules thereto,
prepared in conformity with GAAP, together with the unqualified reports
thereon of LAMBARRI BATRES Y COMPANIA, S.C., independent public accountants
(the "AUDITED FINANCIAL STATEMENTS") and (ii) each of NSI' unaudited
consolidated balance sheets as of December 31, 1995 and December 31, 1994,
and the related audited consolidated statements of income, stockholders'
equity and cash flows for each of the years then ended and each of NSI
unaudited consolidated balance sheet as of July 31, 1997 and the related
unaudited statements of income, stockholders' equity and cash flows for the
five month period then ended (the "UNAUDITED FINANCIAL STATEMENTS"), certified
by NSI's Chief Financial Officer (the Audited Financial Statements and the
Unaudited Financial Statements collectively, the "FINANCIAL STATEMENTS").
The Financial Statements are true and correct, and are in accordance with the
books and records of NSI, and present fairly, accurately and completely the
financial condition of NSI as of the dates, and for the periods, indicated,
and have been prepared in accordance with GAAP consistently applied. At the
Closing, the aggregate tangible net book value (computed in accordance with
GAAP) of NSI will be at least $50,000.
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
change in the assets, liabilities, financial condition, or operations of NSI
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 NSI has 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
therefore, except, in each case, for full consideration and in the
ordinary course of business;
(d) engaged in any transactions adversely affecting the NSI
Business, or its 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;
(h) made or authorized any capital expenditure of more than $50,000
USD in the aggregate;
(i) made or agreed to make any changes in its bylaws (estatutos)
or capital structure;
(j) entered into any representative, distributorship, service,
installation, support and maintenance, agency or other similar agreement
(other than in the ordinary course of business);
(k) incurred or suffered any damage, destruction, or loss, whether
or not covered by insurance, materially affecting the NSI Business or
any of its assets;
(l) made or applied to make any change in accounting methods or
practices, including for tax purposes;
(m) entered into any agreement, commitment or understanding,
whether or not in writing, with respect to any of the foregoing; or
(n) failed to disclose any materials transactions, contracts,
agreements of obligations between NSI and companies partially or
wholly-owned by any of the Sellers.
2.8 LIABILITIES. Except as set forth in SCHEDULE 2.8, NSI has 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 NSI, 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 NSI, 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) NSI 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 NSI
other than personal property held by third parties in the reasonable
and ordinary course of business. NSI enjoys full, free and exclusive use
and quiet enjoyment of its assets and its rights pertaining thereto. NSI
enjoys peaceful and undisturbed possession under all leases under which it
is a lessee, and all such leases are legal, valid and binding obligations
of NSI, enforceable against NSI 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 NSI 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 NSI 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 NSI and the work performed by NSI 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 NSI, 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 NSI in accordance with GAAP. Except as set forth on SCHEDULE
2.10 hereto, all such inventories and work in progress are owned by NSI 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 NSI is a lessor or lessee
and other agreements pertaining to the NSI Business to which NSI or any
affiliate of NSI is a party, the benefits of which are enjoyed in the
NSI Business or to which any of the assets of NSI is subject;
(b) NSI owns no real estate. SCHEDULE 2.11 hereto contains a
complete and correct list of the real estate leased by NSI
(the "REAL ESTATE"); and
(c) NSI leases Real Estate pursuant to a properly executed,
recorded and valid lease agreement whereby NSI has the right to use,
maintain or occupy the Real Estate leased by NSI, or used in the
operation of the NSI 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 or NSI 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 NSI or on their respective results
of operations. NSI 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
NSI or affiliates of NSI is a party which are material to the ownership
of any of the assets of NSI, or to the conduct of the NSI Business as
conducted by NSI. Except as described on SCHEDULE 2.11 hereto, (i) NSI
has 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;
(ii) there are no outstanding powers of attorney relating to or affecting
NSI and (iii) NSI is not a guarantor for or otherwise liable for any
liability or obligation (including indebtedness of any other person).
2.12 TAXES AND RETURNS. Except as set forth in Schedule 2.12, NSI
and Sellers 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 NSI or the conduct of the NSI 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 NSI's 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 NSI or the conduct of the
NSI Business. Except as set forth on SCHEDULE 2.12, neither Sellers nor NSI
have received or have knowledge of any notice of deficiency, assessment,
audit, investigation, or proposed deficiency, assessment or audit with
respect to NSI or the conduct of the NSI Business from any taxing authority.
NSI has taken no 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 NSI, threatened seeking relief or damages
which, if granted, would adversely affect NSI, any of its respective
assets, or the ability of Purchasers to use and operate the assets of NSI or
which would prevent the consummation of the transactions contemplated by this
Agreement and (ii) neither Sellers nor NSI 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 NSI would adversely affect the
NSI Business or the results of operations of NSI or that might reasonably
be expected to affect the right of Purchasers to own the NSI Stock or operate
the NSI Business after the Closing Date in substantially the manner in which
it is currently operated. Neither NSI nor any director, officer, employee
or agent of any of it 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 NSI Business, which Sellers, or any director, officer,
employee or agent of NSI knows or has reason to believe to have been illegal
under any Applicable Law.
2.14 LICENSES, PERMITS, AUTHORIZATIONS, ETC. NSI 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 NSI and the conduct of the NSI Business. All premiums due and arising
thereon have been paid and such policies are in full force and effect.
2.16 PATENTS, TRADEMARKS, ETC. 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 NSI, 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 NSI 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 NSI Business as now conducted and as proposed
to be conducted. No patent or patent application of NSI is involved in any
interference proceeding. NSI is not 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.
NSI has not received any communications alleging that NSI 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. NSI 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 NSI
or the NSI Business. There is no term or provision of any mortgage, indenture,
contract, agreement or instrument to which NSI is 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
NSI, which materially adversely affects or, in the future is reasonably likely
to affect materially and adversely the business, prospects, condition, affairs
or operations of NSI or any of its properties or assets.
2.18 ENVIRONMENTAL, HEALTH AND SAFETY COMPLIANCE. Except as described
on SCHEDULE 2.18 hereto:
(a) NSI 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 NSI
Business have been obtained or filed;
(c) there are no past, pending or threatened investigations,
proceedings or claims against NSI 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 NSI or that is or
was owned or leased by NSI;
(e) none of the properties owned, leased or operated by NSI have
been used as landfill or waste disposal sites or contain any underground
storage tanks;
(f) no conditions or circumstances are known to NSI or Sellers
to exist or to have existed with respect to NSI that could give rise
to any remedial action under, or impose any liability on NSI or
Purchasers with respect to any Environmental Law;
(g) neither Sellers nor NSI has received any notice or claim, and
none of them is aware of any facts suggesting, that NSI 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 NSI or
discharged, emitted, released or transported from any real estate at
any time owned or leased by NSI or any other source in the conduct of
the business of NSI;
(h) no conditions or circumstances are known by Sellers or NSI
to exist or to have existed, and no activities are known by Sellers or
NSI 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 NSI 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 NSI, 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. NSI has not suffered any strike, slowdown,
picketing or work stoppage by any union or other group of employees. NSI
is not a party to any collective bargaining agreement; no such agreement
determines the terms and conditions of employment of any employee of NSI;
no collective bargaining agent has been certified as a representative of
any of the employees of NSI; and no representation campaign or election is
now in progress with respect to any of the employees of NSI. Except as set
forth in Schedule 2.12, NSI 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 del Seguro Social) or special SAR accounts
opened at Mexican banks in the name of each employee of NSI. Neither Sellers
nor NSI has taken or failed to take any action that would cause Purchasers
to incur any liability greater than the minimum liability imposed by Mexican
law in the event NSI chooses to dismiss from its employment any of NSI's
employees following the Closing. NSI has complied in all material respects
with all laws relating to the employment of labor in the conduct of the NSI
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
NSI is (or ever has been) a party or by which NSI is (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 NSI 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 NSI have provided Purchasers with (a) true,
correct and complete copies of any and all written communications notices
or claims that Sellers or NSI 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) NSI 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.
NSI 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.
Each of Sellers and NSI 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 NSI, nor any
affiliate of such persons, is presently a party to any transaction with any
of Sellers or NSI, 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.
2.22 DISCLOSURES. Neither this Agreement nor any Exhibit or Schedule
hereto, nor any certificate or other instrument furnished to Purchasers, 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. Except as disclosed in Schedule 2.23, none of Sellers,
NSI, nor any of the officers, directors or employees of NSI on their behalf,
have employed any broker or finder ("Broker") or incurred any other liability
for any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby. Neither NSI nor the Purchasers shall be
liable for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
2.25 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL CONTRIBUTIONS.
Neither NSI nor any of their respective officers, directors, employees,
agents, shareholders or other representatives or any other business entity
or enterprise with which NSI are or have been affiliated or associated, has,
directly or indirectly, made or authorized any payment, contribution or gift
of money, property or services, whether or not in contravention of applicable
law, (a) as a kickback or bribe to any person, or (b) to any political
organization, or the holder of or any aspirant to any elective or appointive
public office, except for personal political contributions not involving
the direct or indirect use of funds of NSI. NSI has not violated any
United States or Mexican federal or state antitrust statutes, rules or
regulations, including, without limitation, those relating to unfair
competition, price fixing, bid rigging or collusion.
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 Texas corporation duly
organized, validly existing and in good standing under the laws 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 by each of the Purchasers, 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 consummation by Purchasers of the transactions contemplated
hereby and thereby. This Agreement has been and at Closing will have been duly
executed and delivered by Purchasers, and constitutes a legal, valid and
binding obligation of the Purchasers, enforceable against each in accordance
with its 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
CONDITIONS PRECEDENT TO CLOSING
The closing of this Agreement shall be expressly conditioned upon the
following:
4.1 Purchasers shall be satisfied with the assignment of Serpcco's
debt with 3Com International to NSI and such assignment is agreed to by 3Com
International.
4.2 Purchasers shall be satisfied with the assignment of Serpcco's
debt with Newbridge Networks to NSI and such assignment is agreed to by
Newbridge Networks.
4.3 The delivery of the duly executed shareholders' meetings of NSI
(all as set forth in Exhibit B) held on:
(a) September 22, 1997, modifying Article V of NSI's by-laws
(notarized);
(b) September 23, 1997, approving the NSI share transfer
contemplated by this Agreement; and
(c) September 23, 1997, approving the modification of Article II
of NSI's by-laws (notarized).
4.4 All representations and warranties of Sellers are true and correct
as of the Date of Closing.
ARTICLE V
COVENANTS; ACTIONS SUBSEQUENT TO CLOSING
5.1 SELLERS' COVENANT NOT TO COMPETE. In order to allow Purchasers to
realize the full benefit of its bargain in connection with the purchase of
the NSI Stock, each of the Sellers will not at any time for a period of time
commencing on the Closing Date and ending three (3) years following the
Closing Date, directly or indirectly, acting alone, as a member of a
partnership or through an entity such as, but not limited to, Servicio
Partes y Componentes Para Computacion, S.A. de C.V. ("Serpcco") :
(a) establish or create a business that directly competes with the
NSI Business as conducted by NSI at the date hereof in those geographic
areas in which such NSI Business is conducted or has been conducted
within one (1) year prior to the Closing Date; or
(b) request any present or future customer or supplier of the NSI
Business as conducted by Purchasers to curtail or cancel its business with
Purchasers; or
(c) unless otherwise required by law, disclose to any person, firm
or corporation any details of organization or business affairs of NSI
or the NSI Business, any names of past or present customers of NSI or
any other non-public information concerning the NSI Business or NSI; or
(d) induce or attempt to influence any employee of Purchasers or
NSI assigned to the conduct of the NSI Business to terminate his or her
employment.
Sellers acknowledge that in the event the scope of the covenants set forth in
this Section 5.1 is deemed to be too broad in any court proceeding, the court
may reduce such scope to that which it deems reasonable under the
circumstances. 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 $500,000 USD.
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 or
threatened breach and consent to the issuance of injunctive relief hereunder.
Sellers understand and agree that the act of Purchasers is entering into this
Agreement, and Purchasers' covenants and payments hereunder, shall and do
constitute sufficient consideration for Sellers to agree not to compete
against Purchasers as set out in this Section 5.1. Notwithstanding paragraph
(a) above, Sellers may continue the operations in existence during the one
(1) year period prior to the Closing Date of i) NSI Instalaciones, S.A. de C.V.
("NSI Instalaciones"), ii) Serpcco de Occidente, S.A. de C.V., iii) Serpcco
del Sureste, S.A. de C.V., iv) Artefactum, S.A. de C.V. and v) Servicios
Partes y Componentes para Computacion, S.A. de C.V., that compete with the
NSI Business, as such business was conducted during the one (1) year period
prior to the Closing Date provided; however, that these established businesses
may not create a new company to compete with NSI for a period of three
years after the Closing Date.
5.2 POST-CLOSING ACTIONS, PURCHASERS. Following the Closing, Purchasers
agree to hold a shareholders meeting to remove directors and officers, revoke
powers of attorney, designate new directors and officers and grant new powers
of attorney. Telereunon shall pay Sellers' legal fees in connection with this
matter up to an amount of $8,000 USD. In addition, Purchasers agree in good
faith to use their best efforts to substitute all personal guaranties granted
by any of the Sellers in connection with the NSI Business.
5.3 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 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 NSI 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 NSI Stock by Purchasers within forty
(40) days from the effective date of this Agreement.
5.4 TELEREUNION COVENANTS. Telereunion agrees to guarantee the
repayment of the $260,000 promissory note, which is attached as Schedule 5.6
("NSI Promissory Note") owed by NSI to Jose M. Pena Nunez, which is payable
in equal monthly installments beginning April 1, 1998 and ending June 30, 1998
and shall not bear interest.
5.5 NAME CHANGE. The Sellers agree to cause NSI Instalaciones
to change its name within forty five (45) days after the Date of Closing
to a name which does not have NSI in any part of the name.
5.6 CONFIRMATION OF TAX COMPLIANCE BY SELLERS. Sellers shall deliver
to Purchasers, no later than the 17th day of the month immediately following
the Closing Date, the documents and or tax returns necessary to confirm that
Sellers either (i) paid the provisional Mexican Tax triggered by the sale of
the NSI Stock to the Mexican Treasury, or (ii) retained a Mexican Certified
Public Accountant to certify that the sale of the NSI Stock did not result in
taxable income to the Sellers.
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 NSI 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 NSI Stock;
(b) an opinion of Madrazo y Armida, S.C., counsel to the Sellers,
in the form of that attached hereto as EXHIBIT E;
(c) originals of the incorporation charter (Acta Constitutiva)
of NSI 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 NSI referred to in
Section 2.1, including all minutes of the shareholder meetings
authorizing the transactions contemplated herein;
(e) originals of the Registry of Shareholders (Registro de
Accionistas) for NSI;
(f) the resignations, effective as of the Closing, of each Seller
who is acting as a director or officer of NSI; and
(g) a letter from the Broker releasing NSI and the Purchasers
from any liability arising from the consummation of the transaction.
(h) a complete set of the schedules to this Agreement initialed
by the Sellers.
6.2 DELIVERIES BY PURCHASERS. At the Closing, Purchasers shall deliver
the following to Sellers:
(a) the Cash Amount of the NSI Purchase Price;
(b) Telereunion's guaranty of the NSI Promissory Note;
(c) a complete set of the schedules to this Agreement initialed by
the Purchasers;
(d) a pagare issued by NSI to Serpcco in the amount of approximately
$150,000 USD, with a maturity date no later than December 31, 1997 (the
parties agree to negotiate in good faith to have a maturity sooner than
December 31, 1997;
(e) a pagare issued by NSI to NSI Instalaciones in the amount
of approximately $95,000 USD, with a maturity date of December 31, 1997.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY SELLERS. Subject to the provisions of this
Article VII, and after the conclusion of a period of fifteen days in which
the parties agree in good faith to resolve the matter giving rise to the
application of this Article VII, Sellers, jointly and severally, shall protect,
indemnify and hold harmless Purchasers and, 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 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 NSI in this Agreement,
including the Exhibits and Schedules hereto, or in any certificate
or instrument delivered by or on behalf of Sellers or NSI;
(b) any lawsuit, claim or proceeding of any nature existing at
or prior to the Closing, or arising out of any act or transaction of
Sellers or NSI, or arising out of facts or circumstances that existed
at or prior to the Closing that are related to NSI, their respective
assets or the operation of the NSI 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;
7.2 INDEMNIFICATION BY TELSCAPE COMPANIES. Subject to the provisions
of this Article VII, and after the conclusion of a period of fifteen days
in which the parties agree in good faith to resolve the matter giving rise
to the application 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 the Sellers under this Agreement .
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 and 2.24
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 Martin Pena Nunez 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 Martin Pena Nunez,
including, without limitation, any agreement between Jose Martin Pena Nunez
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 Martin Pena Nunez 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 Martin Pena Nunez,
which representative shall have the same rights and authorities as Jose Martin
Pena Nunez 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 NSI.
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 Martin Pena Nunez
_______________________
_______________________
with a copy to:
Lic. Jorge Madrazo de la Garza
Madrazo y Armida, S.C.
Bosque de Ciruelos No. 162, PB-2
Bosques de las Lomas
11700 Mexico, D.F.
Attention: Lic. Jorge Madrazo de la Garza
Facsimile: (525)596-9110
(b) If to Purchasers:
Telereunion, Inc.
c/o 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 NSI or any of NSI' 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.
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, if the submitting party is one of the
Sellers, and mediation in Mexico City, Federal District, Mexico under the
AAA's rules, if the submitting party is any of the Purchasers, 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 AAA, and the arbitration, including the
rendering of the award, shall take place in Mexico City, Federal
District, Mexico. The arbitration shall be settled in accordance with
the International Commercial Arbitration Rules of the AAA. 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 AAA 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 AAA 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.
"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 Mexican 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.
"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
Damages Section 5.1
Dispute Section 6.13
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
NSI Recitals
NSI Business Recitals
NSI Purchase Price Section 1.2
NSI Stock Recitals
Notification Date Section 6.13
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
NSI Preamble
Telereunion Preamble
Telscape Company; Telscape Companies Preamble
Unaudited Financial Statements Section 2.6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first above written.
JOSE MARTIN PENA NUNEZ
Jose Martin Pena Nunez
CARLOS JOAQUIN DE LARA Y CAMPOS
Carlos Joaquin De Lara
JORGE PENA NUNEZ
Jorge Pena Nunez
MARTHA TERESITA MARTIN DEL CAMPO GUTIERREZ
Martha Teresita Martin del Campo Gutierrez
TELEREUNION, INC.
By:
Name:
Title:
TELSCAPE USA, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT A
ALLOCATION OF PURCHASE PRICE
(USD)
NSI PURCHASE PRICE
Cash
AMOUNT
Jose M. Pena Nunez $400
Carlos J. De Lara $400
Jorge Pena Nunez $100
Martha Teresita Martin del Campo $100
Total $1,000
