STOCK PURCHASE AGREEMENT
BY AND AMONG
TELSCAPE INTERNATIONAL, INC.
MSN COMMUNICATIONS, INC.
▇▇▇▇▇▇ ▇▇▇▇▇▇
AND
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
DATED JANUARY 22, 1998
TO BE EFFECTIVE JANUARY 1, 1998
TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF MSN SHARES; CLOSING
1.1 PURCHASE AND SALE OF MSN SHARES 1
1.2 PURCHASE PRICE AND PAYMENT AT CLOSING 1
1.3 ESCROW 2
ARTICLE II
REPRESENTATIONS AND WARRANTIESOF THE SELLERS
2.1 ORGANIZATION, STANDING AND QUALIFICATION 2
2.2 VALIDITY OF AGREEMENT 2
2.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH
INSTRUMENTS 2
2.4 CAPITALIZATION 3
2.5 MSN SHARES 3
2.6 FINANCIAL CONDITION 3
2.7 ABSENCE OF CHANGES 4
2.8 LIABILITIES 5
2.9 TITLE TO ASSETS; ENCUMBRANCES 5
2.10 ACCOUNTS RECEIVABLE 6
2.11 CONTRACTS, PERMITS AND OTHER DATA 6
2.12 TAXES AND RETURNS 7
2.13 LITIGATION 7
2.14 INSURANCE 7
2.15 PATENTS, TRADEMARKS, ETC 7
2.16 COMPLIANCE 8
2.17 LABOR MATTERS 8
2.18 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS 8
2.19 TRANSACTIONS WITH AFFILIATES 8
2.20 INVESTMENT REPRESENTATIONS 8
2.21 DISCLOSURES 9
2.22 CERTAIN FEES 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 DUE ORGANIZATION; GOOD STANDING AND POWER 10
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT 10
3.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH
INSTRUMENTS 10
3.4 CERTAIN FEES 10
3.5 BUSINESS CHANGES UNDER PREPAID CALLING CARD AGREEMENT 10
ARTICLE IV
CONDITIONS TO CLOSING
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF ALL PARTIES 11
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 11
4.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS 12
ARTICLE V
COVENANTS; ACTIONS SUBSEQUENT TO CLOSING
5.1 SELLERS' COVENANT NOT TO COMPETE 12
5.2 FURTHER ASSURANCES 13
5.3 EMPLOYMENT OF EMPLOYEES 13
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE SELLERS 13
6.2 INDEMNIFICATION BY PURCHASER 14
6.3 INDEMNIFICATION PROCEDURES 14
6.4 TIME LIMITS ON LIABILITY 15
6.5 OFFSET 15
ARTICLE VII
GENERAL PROVISIONS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS 15
7.2 PAYMENT OF CERTAIN FEES AND EXPENSES 15
7.3 NOTICES 15
7.4 SCHEDULES 16
7.5 PUBLICITY 16
7.6 ENTIRE AGREEMENT 16
7.7 BINDING EFFECT; BENEFIT 16
7.8 ASSIGNABILITY 16
7.9 SECTION HEADINGS; INDEX 16
7.10 SEVERABILITY 17
7.11 COUNTERPARTS 17
7.12 APPLICABLE LAW 17
7.13 DISPUTE RESOLUTION 17
ARTICLE VIII
DEFINITIONS
8.1 DEFINED TERMS 18
8.2 CERTAIN ADDITIONAL DEFINED TERMS 19
EXHIBIT "A" - Allocation of Purchase Price Among Sellers
EXHIBIT "B-1" - Form of Promissory Note (▇▇▇▇▇▇ ▇▇▇▇▇▇)
EXHIBIT "B-2" - Form of Promissory Note (▇▇▇▇▇▇▇ ▇▇▇▇▇▇)
EXHIBIT "C-1" - Form of Employment Agreement (▇▇▇▇▇▇ ▇▇▇▇▇▇)
EXHIBIT "C-2" - Form of Employment Agreement (▇▇▇▇▇▇▇ ▇▇▇▇▇▇)
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), is made
and entered into as of January 22, 1998 to be effective January
1, 1998 by and among ▇▇▇▇▇▇ ▇▇▇▇▇▇, an individual residing in the
State of California ("▇. ▇▇▇▇▇▇") and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, an
individual residing in the State of Texas ("▇. ▇▇▇▇▇▇") (▇.
▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ are sometimes referred to collectively as
the "SELLERS"), MSN COMMUNICATIONS, INC., a California
corporation ("MSN"), and TELSCAPE INTERNATIONAL, INC., a Texas
corporation ("PURCHASER").
W I T N E S S E T H:
WHEREAS, the Sellers own all of the issued and outstanding
shares (the "MSN SHARES") of the capital stock of MSN, which is
engaged in the business of the sale of domestic and international
long distance via debit cards (the "MSN BUSINESS"); and
WHEREAS, the Sellers desire to sell to Purchaser and
Purchaser desires to acquire from the Sellers, all of the MSN
Shares, in consideration of the delivery by Purchaser of the
purchase price provided for herein, all upon the terms and
subject to the conditions hereinafter set forth; and
WHEREAS, MSN joins in the execution of this Agreement for
the purpose of evidencing its consent to consummation of the
foregoing transaction and for the purpose of making certain
representations and warranties to and covenants and agreements
with Purchaser.
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 MSN SHARES; CLOSING
1.1 PURCHASE AND SALE OF MSN SHARES. Subject to the terms
and conditions of this Agreement, at the Closing, the Sellers
shall sell and deliver to Purchaser and Purchaser shall purchase
from Sellers all of the MSN Shares, free and clear of all
Encumbrances. At the Closing, each of the Sellers shall deliver
to Purchaser certificates evidencing the MSN Shares owned by such
Seller (which, in the aggregate, shall constitute all of the MSN
Shares), duly endorsed for transfer or accompanied by duly
executed stock powers.
1.2 PURCHASE PRICE AND PAYMENT AT CLOSING. The purchase
price (the "PURCHASE PRICE") shall be payable at the Closing and
shall consist of:
(a) Cash in the amount of $3,250,000 payable by wire
transfer or delivery of a certified or bank cashier's check
in accordance with EXHIBIT A attached hereto;
(b) Promissory notes issued by Purchaser as maker in
the aggregate principal amount of $750,000 and bearing no
interest (the "PROMISSORY NOTES"). Each Seller shall be
issued a Promissory Note at the Closing in the face amount
set forth beside such Seller's name on EXHIBIT A. The
Promissory Notes shall be in substantially the form set
forth on EXHIBIT B hereto; and
(c) 100,000 fully paid and nonassessable restricted
shares of Telscape Common Stock (the "TELSCAPE SHARES").
Sellers acknowledge and agree that the allocation of the
Purchase Price among them as set forth on EXHIBIT A is the sole
responsibility of the Sellers, and neither Purchaser nor Telscape
shall have any obligation or other responsibility with respect to
such allocation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, jointly and severally, represent and warrant to
each of the Purchaser and Telscape as follows:
2.1 ORGANIZATION, STANDING AND QUALIFICATION. MSN is
a corporation duly organized, validly existing and in good
standing under the laws of the State of California. MSN has the
corporate power and authority to own, lease and operate its
respective assets and to conduct its respective business as now
conducted. MSN is duly authorized, qualified or licensed to do
business as a foreign corporation and, except as set forth on
SCHEDULE 2.1, is in good standing in each jurisdiction 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, except to the extent that failure to
be so authorized, qualified or licensed would not have a material
adverse effect on MSN or the MSN Business. The jurisdictions in
which MSN is qualified or licensed to do business are set forth
on SCHEDULE 2.1. No actions or proceedings to dissolve MSN are
pending. MSN has delivered to the Purchaser true and complete
copies of the minute books and stock transfer books of MSN, each
of which is accurate and complete.
2.2 VALIDITY OF AGREEMENT. This Agreement and the
Employment Agreements have been duly executed and delivered by
the Sellers and constitute 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 the
Sellers and MSN 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 MSN Shares 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 the Sellers or MSN under, or result in the
creation of an Encumbrance upon any portion of the assets of MSN
pursuant to, the charters or by-laws of MSN, or any indenture,
mortgage, deed of trust, lease, licensing agreement, contract,
instrument or other agreement to which the Sellers or MSN are a
party or by which any of them or any of the assets of MSN is
bound or affected.
2.4 CAPITALIZATION. MSN's authorized capital consists
of 100,000 shares of common stock, no par value, of which 10,000
are issued and are outstanding. 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 each of MSN 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 federal and state securities
laws). The MSN Shares constitute all shares of the outstanding
capital stock of MSN. Except as set forth on SCHEDULE 2.4, there
are outstanding (i) no shares of capital stock or other voting
securities of MSN, no securities of MSN convertible into or
exchangeable for shares of the capital stock or other voting
securities of MSN, (iii) no options, warrants or other rights to
acquire from MSN, and no obligation of MSN to issue or sell, any
shares of its capital stock or other voting securities or any
securities of MSN 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 MSN, and (v) no shares of any other entity
owned by MSN. There are no outstanding obligations of MSN to
repurchase, redeem or otherwise acquire any shares, securities,
options, equity equivalents, interests or rights. MSN does not
own more than twenty percent (20%) of the voting securities of,
or more than a twenty percent (20%) interest in, any corporation,
partnership, joint venture or any other company.
2.5 MSN SHARES. Each Seller is the record and
beneficial owner of, and upon consummation of the transactions
contemplated hereby Purchaser will acquire, good, valid and
marketable title to, the number of shares of the MSN Shares set
forth opposite the name of such Seller on SCHEDULE 2.4, free and
clear of all Encumbrances. Neither of the Sellers has entered
into a Shareholders' Agreement or any other agreement or
arrangement regarding the MSN Shares and each of the MSN Shares
is transferable and assignable to Purchaser as contemplated by
this Agreement without the waiver of any right of first refusal
or the consent of any other party being obtained. There exists
no preferential right of purchase in favor of any person with
respect of any of the MSN Shares or the MSN Business or any of
the assets of MSN.
2.6 FINANCIAL CONDITION. Set forth on SCHEDULE 2.6
are accurate and complete copies of each of MSN's unaudited
consolidated balance sheets as of December 31, 1997 and January
17, 1998 (the "CLOSING BALANCE SHEET") and the related unaudited
statements of income and stockholders' equity for the year ended
December 31, 1997 and the seventeen days ended January 17, 1998
(the unaudited balance sheets, statements of income and
stockholders' equity referred to above are collectively referred
to as the "FINANCIAL STATEMENTS"). Other than any liability
associated with the Universal Service Fund Fee,
Telecommunications Relay Services Fund Filing, NECA Universal
Service "Pooling" Requirement, Federal Excise Taxes, possible
state taxes where MSN does not file tax returns, and potential
liability for pay telephone "dial-around" charges, and other than
accruals totaling less than $50,000 on the Financial Statements
that may be needed to reflect liabilities incurred in the
ordinary course of business, the Financial Statements are in all
material respects true and correct; are in accordance with the
books and records of MSN; and, to the best of Sellers' knowledge,
after due inquiry, using management's best estimates of MSN's
cost of sales, present fairly, accurately and completely the
financial condition and results of operations of MSN as of the
dates, and for the periods indicated. In addition, the Sellers
represent that the Financial Statements reflect the following:
(a) Revenue is recognized on the sale of prepaid
phone cards when such cards are shipped to customers.
There are no agreements with customers whereby
shipments are made on a consignment basis or whereby a
right of return exists, other than in the normal course
of business for defective products.
(b) Accounts payable and accrued liabilities are
recorded on the accrual basis of accounting. Cost of
sales include the costs of printing cards, the costs of
shipping cards from suppliers and telecommunications
costs. MSN's practice has been to record cost of sales,
reflected in "Accounts Payable" on MSN's balance sheet,
based on management's best estimates, after due
inquiry, of 95% of sales. To the best of each Seller's
knowledge, after due inquiry, cost of sales does not
exceed management's estimate. MSN has recorded all
invoices that it has received and expects to receive
from its vendors for services rendered through the
balance sheet date. In addition, Sellers represent
that the amounts reflected as "Accounts Payable" on the
Closing Balance Sheet include $2,900,000 as an accrual
for amounts due to American Digital Networks, Arch
Business Solutions and Communications Distributors
International. Sellers represent that this amount
represents an adequate accrual for unpaid ▇▇▇▇▇▇▇▇,
invoiced and to be invoiced at a later date, from its
telecommunications providers related to sales of
prepaid phone cards through January 17, 1998.
Notwithstanding the foregoing, SCHEDULE 2.6 contains statements
of aged receivables and aged payables as of January 17, 1998,
regardless of whether such statements are labeled "as of January
31, 1998."
2.7 ABSENCE OF CHANGES. Except as disclosed on SCHEDULE
2.7, since December 31, 1997, there has not been nor will there
be any change in the assets, liabilities, financial condition, or
operations of MSN 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 December 31, 1997, except as
disclosed on SCHEDULE 2.7 MSN 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 therefor, except,
in each case, for full consideration and in the
ordinary course of business;
(d) engaged in any transactions adversely
affecting the MSN 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 $100,000 in the aggregate;
(i) made or agreed to make any changes in their
articles of incorporation, bylaws, or capital
structure;
(j) entered into any representative,
distributorship, service, installation, support and
maintenance, agency or other similar agreement;
(k) incurred or suffered any damage, destruction,
or loss, whether or not covered by insurance,
materially affecting the MSN Business or any of their
respective 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;
(n) conducted business other than in the ordinary
course; or
(o) paid any bonuses or salary to the Sellers.
2.8 LIABILITIES. Except as set forth in SCHEDULE 2.8,
SECTION 2.6, or in any other Section of or Schedule to this
Agreement , to the knowledge of Sellers, MSN has no liabilities
or obligations, either accrued, absolute, contingent, or
otherwise that may have a material adverse effect on the
financial condition, results of operations or prospects of the
MSN Business, which have not been either (a) reflected or
reserved against in the Closing Balance Sheet or (b) incurred in
the ordinary course of business since date of the Closing Balance
Sheet.
2.9 TITLE TO ASSETS; ENCUMBRANCES. Except as set forth in
SCHEDULE 2.9:
(a) MSN 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 equipment, office
space, furniture and computers in the ordinary course of its
business (all of which have been disclosed to the Purchaser
in writing);
(b) There are no parties in possession of any of the
assets of MSN other than personal property held by third
parties in the reasonable and ordinary course of business.
MSN enjoys full, free and exclusive use and quiet enjoyment
of its assets and its rights pertaining thereto. MSN 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 MSN, enforceable against MSN in
accordance with its terms; and
(c) MSN owns or leases all of the assets used in
connection with the conduct of the MSN Business.
2.10 ACCOUNTS RECEIVABLE. All accounts receivable
reflected on the Closing Balance Sheet or on the accounting
records of MSN as of the Closing Date (collectively, the
"ACCOUNTS RECEIVABLE") 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 Closing Balance Sheet or on the accounting records of MSN
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.
2.11 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, leases under which MSN is a lessor or lessee and
other agreements pertaining to the MSN Business to which MSN
or any affiliate of MSN is a party, the benefits of which
are enjoyed in the MSN Business or to which any of the
assets of MSN is subject;
(b) SCHEDULE 2.11 hereto contains a complete and
correct list of all Permits relating to the development,
use, maintenance or occupation of the properties owned or
leased by MSN or used in the operation of the MSN Business
(other than sales and use tax Permits and franchise tax
registrations).
True and complete copies of all documents (including all
amendments thereto) referred to in SCHEDULE 2.11 hereto have
been delivered to Purchaser. All rights, licenses, leases,
registrations, applications, contracts, commitments, Permits
and other arrangements by the Sellers or MSN 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 MSN or on its results of
operations. Neither MSN nor any affiliate of MSN are in
breach or default in the performance of any material
obligation thereunder and to the best knowledge of the
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, or in any other Section of or Schedule to this
Agreement, there are no contracts, agreements, licenses,
Permits, franchises or rights to which MSN is a party which
are material to the ownership of any of the assets of MSN or
to the conduct of the MSN Business as conducted by MSN.
Except as described on SCHEDULE 2.11 hereto, or in any other
Section of or Schedule to this Agreement, MSN 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. There are no outstanding
powers of attorney relating to or affecting MSN. MSN 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 otherwise provided
on SCHEDULE 2.12 or as set forth in SECTION 2.6 or in any other
Section of or Schedule to this Agreement, except to the extent
that failure to do so would not have a material adverse effect on
MSN or the MSN Business, MSN and the Sellers have caused to be
timely filed with appropriate federal, state, local and other
Governmental Entities all Tax Returns required to be filed with
respect to MSN or the conduct of the MSN 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 IRS or
any other taxing authority in connection with any of MSN's Tax
Returns, and there are no outstanding agreements or waivers that
extend any statutory period of limitations applicable to any
federal, state or local Tax Returns that include or reflect the
use and operation of MSN or the conduct of the MSN Business.
Except as set forth on SCHEDULE 2.12, neither the Sellers nor MSN
have received or have any knowledge of any notice of deficiency,
assessment, audit, investigation, or proposed deficiency,
assessment or audit with respect to MSN or the conduct of the MSN
Business from any taxing authority. MSN has not 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
the Sellers, threatened seeking relief or damages which, if
granted, would adversely affect MSN, any of MSN's assets, or the
ability of Purchaser to use and operate the assets of MSN or
which would prevent the consummation of the transactions
contemplated by this Agreement and (ii) neither the Sellers nor
MSN has been charged with any violation of or, to the knowledge
of either the Sellers, threatened with, a charge or violation of,
nor are the 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 either the
Sellers or MSN would adversely affect the MSN Business or the
results of operations of MSN or that might reasonably be expected
to affect the right of Purchaser to own the MSN Shares or operate
the MSN Business after the Closing Date in substantially the
manner in which it is currently operated. Neither MSN nor any
director, officer, employee or agent of MSN 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 MSN Business which the Sellers, or any
director, officer, employee or agent of MSN, knows or has reason
to believe to have been illegal under any Applicable Law.
2.14 INSURANCE. SCHEDULE 2.14 hereto sets forth a list
and brief description of the insurance policies relating to the
insurable properties of MSN and the conduct of the MSN Business.
All premiums due and arising thereon have been paid and such
policies are in full force and effect.
2.15 PATENTS, TRADEMARKS, ETC. Except as set forth on
SCHEDULE 2.15 , MSN does not own, possess or have any rights in
any patents, trademarks, service marks, works of authorship,
trade names, brand-name and copyrights, and licenses or other
rights with respect to any of the foregoing, and other licenses,
rights or permits nor has MSN filed any patents or trademark
applications. MSN 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. MSN has not received any
communications alleging that MSN has violated or, by conducting
its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights, works of
authorship or trade secrets or other proprietary rights in
processes of any other person or entity.
2.16 COMPLIANCE. Except as set forth on SCHEDULE 2.16
or in any other Section of or Schedule to this Agreement, MSN has
complied in all material respects with all laws, and is not in
violation of any 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 MSN or the MSN Business. There is no term or provision
of any mortgage, indenture, contract, agreement or instrument to
which MSN is a party or by which it is bound, any provision of
any federal and state judgment, decree, order, injunction, writ,
statute, rule or regulation applicable to or binding upon MSN,
which materially adversely affects or, in the future is
reasonably likely to affect materially and adversely the
business, prospects, condition, affairs or operations of MSN or
any of its properties or assets.
2.17 LABOR MATTERS. MSN has complied in all material
respects with all laws relating to the employment of labor in the
conduct of the MSN Business, including provisions thereof
relating to wages, hours, equal opportunity and the payment of
pension contributions, social security and other taxes.
2.18 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. MSN
has not established nor is not a party to any 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 MSN is (or ever has been) a
party or by which MSN 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, (3) any employment agreement, or (4) any
other "employee benefit plan" (within the meaning of Section 3(3)
of ERISA).
2.19 TRANSACTIONS WITH AFFILIATES. Except as set forth
on SCHEDULE 2.19, no stockholder, officer, director or employee
of Sellers or MSN, nor any affiliate or "associate" of such
persons (as such terms are defined in the rules and regulations
promulgated under the Securities Act), is presently a party to
any transaction with any of the Sellers or MSN, 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.
2.20 INVESTMENT REPRESENTATIONS.
(a) Each Seller is acquiring the Telscape Shares for
his own account for investment and not with a view to, or
for sale or other disposition in connection with, any
distribution of all or any part thereof, except pursuant to
an applicable exemption under the Securities Act. In
acquiring the Telscape Shares, each Seller is not offering
or selling, and will not offer or sell, for Purchaser in
connection with any distribution of the Telscape Shares and
each Seller does not have a participation and will not
participate in any such undertaking or in any underwriting
of such an undertaking except in compliance with applicable
federal and state securities laws.
(b) Each Seller further represents that he has had an
opportunity to ask questions of and receive answers from
Purchaser regarding Purchaser and its business, assets,
results of operations and financial condition and the terms
and conditions of the issuance of the Telscape Shares. The
foregoing, however, shall not limit or modify the
representations and warranties of Purchaser in Article III,
shall not limit the rights of a Seller prior to and in
anticipation of any issuance of the Telscape Shares pursuant
hereto, and shall not limit the disclosure requirements of
applicable federal and state securities laws.
(c) Each Seller acknowledges that he is able to fend
for himself, can bear the economic risk of his investment in
the Telscape Shares, and has such knowledge and experience
in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the
Telscape Shares and is an "accredited investor" as defined
in Regulation D under the Securities Act.
(d) Each Seller understands that the Telscape Shares,
when issued to such Seller, will not have been registered
pursuant to the Securities Act or any applicable state
securities laws, that the Telscape Shares will be
characterized as "restricted securities" under federal
securities laws, and that under such laws and applicable
regulations the Telscape Shares cannot be sold or otherwise
disposed of without registration under the Securities Act or
an exemption therefrom. In this connection, each Seller
represents that he is familiar with Rule 144 promulgated
under the Securities Act, as currently in effect, and
understands the resale limitations imposed thereby and by
the Securities Act. Stop transfer instructions may be
issued accordingly to the transfer agent for the Telscape
Shares.
(e) It is agreed and understood by each Seller that
the certificates representing the Telscape Shares shall each
conspicuously set forth on the face or back thereof, in
addition to any legends required by Applicable Law or other
agreement, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SHARES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS THEY
ARE FIRST REGISTERED PURSUANT TO THAT ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
CORPORATION RECEIVES A WRITTEN OPINION OF COUNSEL,
WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS
NOT REQUIRED.
2.21 DISCLOSURES. Neither this Agreement nor any
Exhibit or Schedule hereto, nor any certificate or other
instrument furnished to Purchaser 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.
2.22 CERTAIN FEES. Except with respect to the $250,000
payable by Sellers to Garte & Associates, Inc., none of the
Sellers, MSN, nor any of the officers, directors or employees of
MSN on its 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Sellers
as follows:
3.1 DUE ORGANIZATION; GOOD STANDING AND POWER.
Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas. The
Purchaser 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 by Purchaser and the consummation by the
Purchaser 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 Purchaser
of this Agreement and the Promissory Notes and the consummation
by the Purchaser of the transactions contemplated hereby and
thereby. This Agreement and the Promissory Notes have been, duly
executed and delivered by Purchaser and constitute a legal, valid
and binding obligation of Purchaser enforceable against it 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 the Purchaser 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 the Purchaser, 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 the Purchaser under the charter or bylaws of the
Purchaser or any indenture, mortgage, deed of trust, lease,
licensing agreement, contract, instrument or other agreement to
which the Purchaser is a party or by which Purchaser or any of
its assets or properties is bound.
3.4 CERTAIN FEES. Neither the Purchaser nor any of
its officers, directors or employees, on behalf of Purchaser, 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.
3.5 BUSINESS CHANGES UNDER PREPAID CALLING CARD
AGREEMENT. Purchaser acknowledges and understands that in
connection with MSN's execution of the "Prepaid Calling Card
Agreement" dated January 5, 1998 with American Digital Networks,
Inc. ("ADN"), the business and operations of MSN have
significantly changed in that substantially all revenues of MSN
are, as a result of such agreement, currently derived from MSN's
resale of prepaid calling cards and PINs purchased by MSN from
ADN as a distributor of ADN. Purchaser further acknowledges and
understands that the terms of such agreement, which has a
scheduled term of ninety (90) days, require MSN to pay half of
the cost of ordered PINs upon activation and the balance within
fifteen (15) days thereafter. Purchaser further acknowledges and
understands that until MSN began acting as a distributor of ADN,
MSN had purchased long distance and other telecommunication
services from a variety of vendors and generally realized
revenues from its sale of prepaid calling cards/services in
advance of incurring and paying the telecommunications costs
associated with such sales, and that the financial condition and
results of operations of MSN as presented in the Financial
Statements reflect this prior method of doing business.
ARTICLE IV
CONDITIONS TO CLOSING
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF ALL PARTIES.
The respective obligations of the parties to consummate the
transactions contemplated by this Agreement shall be subject to
the satisfaction (or waiver by each party) of each of the
following conditions:
(a) No action of any private party or Governmental
Entity shall have been taken or threatened and no statute,
rule, regulation or executive order shall have been
proposed, promulgated or enacted by any Governmental Entity
which seeks to restrain, enjoin or otherwise prohibit or to
obtain damages or other relief in connection with this
Agreement or the transactions contemplated hereby.
(b) MSN and each of the Sellers shall have entered
into a two-year Employment Agreement in substantially the
form attached hereto as EXHIBIT C.
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The
obligations of Purchaser to consummate the transactions
contemplated by this Agreement are subject to the satisfaction
(or waiver by Purchaser) of each of the following conditions:
(a) All representations and warranties of the Sellers
and MSN contained herein or in any certificate or document
delivered to Purchaser pursuant hereto shall be true and
correct in all material respects.
(b) The Sellers and MSN shall have, in all material
respects, performed all obligations and agreements, and
complied with all covenants and conditions, contained in
this Agreement to be performed or complied with by them.
(c) All corporate actions, proceedings, instruments
and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all
other related legal matters shall be reasonably satisfactory
to counsel for Purchaser.
(d) Purchaser shall be satisfied in its reasonable
discretion as to the Sellers' ownership of the MSN shares,
free and clear of all liens, easements, claims, charges and
Encumbrances.
(e) All licenses, Permits, consents, approvals,
authorizations, qualifications and orders of governmental
authorities which are reasonably necessary to enable
Purchaser to own the assets of MSN and conduct the MSN
Business after the Closing in substantially the same manner
as the assets of MSN are owned and the MSN Business is being
conducted as of the date hereof shall be in full force and
effect.
(f) Purchaser shall have received the resignations,
effective as of the Closing, of each director and officer of
MSN other than those whom the Purchaser shall have specified
in writing.
(g) ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for the
Sellers, shall have furnished to Purchaser its written
opinion, dated the Closing Date, as to the matters set forth
in SECTIONS 2.1, 2.2, 2.3, 2.4 and 2.5.
(h) The Board of Directors of Purchaser shall have
approved this Agreement and the transactions contemplated
hereby.
(i) Since December 31, 1997, the MSN Business shall
have been operated and maintained substantially in the
manner in which it has been operated and maintained
previously in the ordinary course of business and MSN shall
not have entered into or renewed any material agreements or
other commitments extending a substantial term beyond the
date of Closing or taken any action which was not in the
ordinary course of business, except for the transactions
otherwise contemplated herein, without the prior written
approval of Purchaser.
4.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers under this Agreement are subject
to the satisfaction (or waiver by the Sellers) of each of the
following conditions:
(a) All representations and warranties of Purchaser
contained herein or in any certificate or document delivered
to the Sellers pursuant hereto shall be true and correct on
and as of the Closing Date, with the same force and effect
as though such representations and warranties had been made
on and as of the Closing Date, except as contemplated or
permitted by this Agreement.
(b) Purchaser shall have performed all obligations and
agreements, and complied with all covenants and conditions
contained in this Agreement to be performed or complied with
by it prior to or at the Closing Date.
(c) All corporate actions, proceedings, instruments
and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all
other related legal matters shall be reasonably satisfactory
to counsel for the Sellers.
(d) Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, general counsel for
Purchaser, shall have furnished to Sellers its written
opinion as to the matters set forth in SECTIONS 3.1 and 3.2.
ARTICLE V
COVENANTS; ACTIONS SUBSEQUENT TO CLOSING
5.1 SELLERS' COVENANT NOT TO COMPETE. In order to allow
Purchaser to realize the full benefit of its bargain in
connection with the purchase of the MSN Shares, the Sellers will
not at any time for a period of four years following the Closing
Date (the "RESTRICTED PERIOD"), directly or indirectly, acting
alone or as a member of a partnership or as a holder of in excess
of 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 MSN
Business as conducted by the Sellers or MSN at the date
hereof in those geographic areas in which the MSN Business
is conducted or has been conducted within one year prior to
the Closing Date; or
(b) request any present or future customer or supplier
of the Sellers or of the MSN Business as conducted by
Purchaser to curtail or cancel its business with Purchaser;
or
(c) unless otherwise required by law, disclose to any
person, firm or corporation any details of organization or
business affairs of MSN or the MSN Business, any names of
past or present customers of MSN, or any other non-public
information concerning the MSN Business or MSN; or
(d) induce or attempt to influence any employee of the
Purchaser or MSN assigned to the conduct of the MSN Business
to terminate his or her employment.
The 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 the Purchaser would not have
any adequate remedy at law for the breach or threatened breach by
either the Sellers or any of their affiliates of the covenants
and agreements set forth in this SECTION 5.1 and, accordingly,
the Sellers further agree that the Purchaser may, in addition to
the other remedies which may be available to it hereunder, file
suit in equity to enjoin either the Sellers and any of their
affiliates from such breach or threatened breach and consent to
the issuance of injunctive relief hereunder. Sellers understand
and agree that the act of the Purchaser in entering into this
Agreement, and the Purchaser's covenants and payments hereunder,
shall and do constitute sufficient consideration for the Sellers
to agree not to compete against the Purchaser as set out in this
SECTION 5.1. Notwithstanding any provision to the contrary
contained in this Agreement, if MSN terminates the employment of
Seller on or before the second anniversary of the date of this
Agreement for any reason other than for "just cause" (as defined
in each Seller's Employment Agreement), then the "Restricted
Period" shall terminate six months after such termination of
employment.
5.2 FURTHER ASSURANCES. From time to time after the
Closing, the 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 Purchaser may reasonably request
in order to more effectively transfer, convey, assign and deliver
to Purchaser, and to place Purchaser in possession and control of
any of the Telscape Shares or to enable Purchaser to exercise and
enjoy all rights and benefits of the Sellers with respect
thereto.
5.3 EMPLOYMENT OF EMPLOYEES. In addition to employing the
Sellers pursuant to the two-year Employment Agreements in the
form attached hereto as EXHIBIT C, Purchaser agrees that MSN
shall upon the Closing retain those employees of MSN identified
on SCHEDULE 5.3 indefinitely on an"at will" basis for the same
rates of compensation and with substantially the same benefits
that they respectively enjoyed (as shown in SCHEDULE 5.3) as of
the Closing.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE SELLERS. Subject to the
provisions of this Article VI, the Sellers, jointly and
severally, shall protect, indemnify and hold harmless the
Purchaser, each officer, director and agent of the Purchaser and
each person who controls the Purchaser 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
attorneys', and accountants' fees and disbursements, and any
federal, state or local income or franchise taxes payable in
respect of the receipt of cash or money in discharge of the
foregoing, but reduced by any net amount paid to the Purchaser on
account of such loss by any insurance policies (collectively
referred to herein as "DAMAGES") to which Purchaser may become
subject if such Damages arise out of or are based upon the breach
of any of the representations and warranties, covenants or
agreements made by the Sellers or MSN in this Agreement,
including the Exhibits and Schedules hereto, or in any
certificate or instrument delivered by or on behalf of the
Sellers or MSN.
6.2 INDEMNIFICATION BY PURCHASER. Subject to the
provisions of this Article VI, the Purchaser shall protect,
indemnify and hold harmless the Sellers, in respect of any
Damages to which the 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
Purchaser in this Agreement, including the Exhibits and Schedules
hereto, or in any certificate delivered by or on behalf of the
Purchaser pursuant to this Agreement.
6.3 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 Purchaser or the Sellers (the "INDEMNIFYING
PARTY") under this Article VI, 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 the 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 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 VI) 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 6.3(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
6.3(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 VI.
6.4 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 second anniversary of the Closing Date; provided, however,
that if the statute of limitations with respect to any such claim
extends beyond the second anniversary of the Closing Date, then
the indemnity liability of any party with respect to such claim
shall 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, the indemnity
liability of Sellers with respect to the representations and
warranties contained in SECTION 2.5 shall continue indefinitely.
6.5 OFFSET. Purchaser shall have the right to offset any
Damages, other than Damages related to an Escrow Claim, for which
it is entitled to indemnification pursuant to this Article VI
against any payments due to the Sellers under the Promissory
Notes and against the Telscape Shares held in escrow.
6.6 ESCROW OF TELSCAPE SHARES. Notwithstanding any
provision to the contrary contained in this Agreement, the
Telscape Shares deliverable at the Closing to the Sellers
pursuant to SECTION 1.2(C) shall be held by Telscape in escrow
until the first anniversary of the date of this Agreement (the
"ESCROW TERMINATION DATE"). Any increase over $10 in the price
per share of the Telscape Shares held in escrow pursuant to this
SECTION 6.6 (the "ESCROWED SHARES") may be offset by Purchaser
against any Damages of MSN with respect to the Universal Service
Fund Fee, Telecommunications Relay Services Fund Filing, NECA
Universal Service "Pooling" Requirement, Federal Excise Taxes,
any state or local income, franchise, sales or use or excise
taxes, and pay telephone "dial-around" charges arising out of or
related to the conduct of the MSN Business on or before December
31, 1997 (an "ESCROW CLAIM"). On the Escrow Termination Date,
Purchaser shall deliver to each of the Sellers their pro rata
share of the Escrowed Shares less, with respect to each Escrow
Claim made on or before the Escrow Termination Date, a number of
shares equal to (a) the amount of any Damages paid by MSN with
respect to any Escrow Claim made on or before the Escrow
Termination Date, divided by (b) the higher of the last reported
sales price of the Telscape Common Stock (the "TELSCAPE STOCK
PRICE") on the date MSN is first officially notified of such
Escrow Claim (with respect to each Escrow Claim, a "TRIGGER
DATE") or the Telscape Stock Price on the Escrow Termination
Date. Notwithstanding the foregoing, if MSN is officially
notified or otherwise becomes aware of an Escrow Claim prior to
the Escrow Termination Date, and such Escrow Claim has not been
satisfied, paid or otherwise settled by such date, then Purchaser
may retain in escrow until the final satisfaction, payment or
settlement of such claim a number of the Escrowed Shares equal to
the estimated Damages of MSN related to such Escrowed Claim
divided by the Telscape Stock Price on such claim's Trigger Date.
If there are no Escrow Claims, then, on the Escrow Termination
Date, Purchaser shall deliver to each of the Sellers their pro
rata share of all of the 100,000 shares of Telscape Common Stock
held in escrow. Notwithstanding any provision of this SECTION
6.6, the number of Escrowed Shares deliverable to the Sellers
after the Escrow Termination Date shall not be reduced to an
amount that is less than (y) $1,000,000, divided by (z) the
greater of $10, the Telscape Stock Price on any Trigger Date or
the Telscape Stock Price on the Escrow Termination Date.
ARTICLE VII
GENERAL PROVISIONS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements
contained in this Agreement shall survive the Closing.
7.2 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 Purchaser shall pay directly to Garte & Associates,
Inc. the $250,000 fee incurred by the Sellers.
7.3 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:
▇▇▇▇▇▇ ▇▇▇▇▇▇
1337 Cassins
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(b) If to Purchaser:
Telscape USA, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.,▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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.
7.4 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.
7.5 PUBLICITY. Sellers shall promptly advise and
cooperate with the Purchaser prior to the issuance by MSN or any
of MSN's 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 Purchaser, neither Sellers nor any of its
directors, officers, employees or agents shall issue any press
release which includes the name of any of the Purchaser or their
affiliates.
7.6 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.
7.7 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.
7.8 ASSIGNABILITY. This Agreement shall not be
assignable by the Sellers without the prior written consent of
the Purchaser or by the Purchaser without the prior written
consent of the Sellers; provided, however, that any of the
Purchaser shall be entitled to assign this Agreement to an
affiliate of such Purchaser without the consent of Sellers.
7.9 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.
7.10 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.
7.11 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.
7.12 APPLICABLE LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of State of Texas.
7.13 DISPUTE RESOLUTION. Any dispute, difference or
question ("DISPUTE") between Buyer and the Sellers ("DISPUTING
PARTIES"), shall be resolved in accordance with the following
dispute resolution procedures:
(a) GOOD FAITH NEGOTIATIONS. The Disputing Parties
shall endeavor, in good faith, to resolve the Dispute
through negotiations. If the Parties fail to resolve the
Dispute within a reasonable time, each Party shall nominate
a senior officer or officers of its management to meet at
any mutually agreed location to resolve the Dispute.
(b) MEDIATION. In the event that the negotiations do
not result in a mutually acceptable resolution, either
Disputing Party may require that the Dispute shall be
referred to mediation in Houston, Texas. One mediator shall
be appointed by the agreement of the Parties. The mediator
shall be suitably qualified person having no direct or
personal interest in the outcome of the Dispute. Mediation
shall be held within thirty (30) days of referral to
mediation. In the event the Disputing Parties are unable to
agree on a mediator, the Parties agree to the appointment of
a mediator pursuant to the Commercial Mediation Rules of the
American Arbitration Association.
(c) ARBITRATION. In the event the Parties are
unsuccessful in their mediation of the Dispute, either
Disputing Party may request that the Dispute be settled by
arbitration by an arbitrator mutually acceptable to the
Disputing Parties in an arbitration proceeding conducted in
the City of Houston, Texas in accordance with the rules
existing at the date hereof of the American Arbitration
Association. If the Disputing Parties hereto cannot agree
on an arbitrator within ten (10) business days of the
initiation of the arbitration proceeding, an arbitrator
shall be selected for the Disputing Parties by the American
Arbitration Association. The Disputing Parties shall use
their reasonable best efforts to have the arbitral
proceeding concluded and a judgment rendered by the
arbitrator within forty (40) business days of the initiation
of the arbitration proceeding. The decision of such
arbitrator shall be final, and judgment upon the award
rendered by the arbitration may be entered in any court
having jurisdiction thereof, and the costs (including,
without limitation, reasonable fees and expenses of counsel
and experts for the Disputing Parties) of such arbitration
(including the costs to enforce or preserve the rights
awarded in the arbitration) shall be borne by the Disputing
Party whom the decision of the arbitrator is against. If
the decision of the arbitrator is not clearly against one of
the disputing Parties or the decision of the arbitrator is
against more than one Disputing Party on one or more issues,
the costs of such arbitration shall be borne equally by the
Disputing Parties. Notwithstanding the foregoing, Buyer may
apply to any court of competent jurisdiction for injunctive
relief under SECTIONS 5.1 without breach of this arbitration
provision.
ARTICLE VIII
DEFINITIONS
8.1 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.
"Closing" means the consummation of the transactions
contemplated by this Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended and in effect on the Closing Date.
"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.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"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
(domestic 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.
"IRS" means the Internal Revenue Service.
"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.
"Securities Act" means the Securities Act of 1933, as
amended.
"Taxes" means any income taxes or similar assessments
or any sales, excise, occupation, use, ad valorem, property,
production, severance, transportation, employment, payroll,
franchise or other tax imposed by any 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, $.001
par value, of Telscape.
8.2 CERTAIN ADDITIONAL DEFINED TERMS. In addition to
such terms as are defined in SECTION 8.1, the following terms are
used in this Agreement as defined in the Sections of this
Agreement referenced opposite such terms:
DEFINED TERMS REFERENCE
Accounts Receivable Section 2.10
ADN Section 3.5
Agreement Preamble
Claim Section 6.3
Closing Balance Sheet Section 2.6
Damages Section 6.1
Dispute Section 7.13
Disputing Parties Section 7.13
Escrow Claim Section 6.6
Escrow Termination Date Section 6.6
Escrowed Shares Section 6.6
Financial Statements Section 2.6
Indemnified Party Section 6.3
Indemnifying Party Section 6.3
▇. ▇▇▇▇▇▇ Preamble
Promissory Notes Section 1.2(b)
Purchaser Preamble
Purchase Price Section 1.2
Restricted Period Section 5.1
▇. ▇▇▇▇▇▇ Preamble
Sellers Preamble
MSN Recitals
MSN Business Recitals
MSN Shares Recitals
Telscape Shares Section 1.2(c)
Telscape Stock Price Section 6.6
Trigger Date Section 6.6
[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.
SELLERS:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
MSN:
MSN COMMUNICATIONS, INC.
By:
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
PURCHASER:
TELSCAPE INTERNATIONAL, INC.
By:
E. ▇▇▇▇▇ ▇▇▇▇▇, President and
Chief Executive Officer
EXHIBIT A
CASH PROMISSORY NOTE TELSCAPE SHARES
▇▇▇▇▇▇ ▇▇▇▇▇▇ $1,500,000 $375,000 50,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 1,500,000 375,000 50,000
Garte & Associates, Inc. 250,000
