EXHIBIT 25
FREE TRANSLATION
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CONFIDENTIAL
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STOCK PURCHASE
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OF CHILESAT CORP. S.A.
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BETWEEN
REDES OPTICAS S.A. AND OTHER
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AND
TELMEX CHILE HOLDING S.A.
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In Santiago, Chile, on April 28, 2004, appearing REDES OPTICAS S.A., Tax Payer
Number 96.978.570-6, a corporation validly incorporated and existing under the
laws of the Republic of Chile (hereinafter also referred to as "REDES") and
REDES OPTICAS (CAYMAN) CORP., a corporation validly incorporated and existing
under the laws of the Cayman Islands (hereinafter also referred to as "REDES
CAYMAN"), each of which are duly represented by Xx. Xxxxxxx Xxxxxx Xxxxxxx,
national identity number 6.356.972-0, and by Xx. Xxxxxx xx Xxxxxxxx Vicuna,
national identity number 9.979.914-5, all domiciled for these purposes at
Xxxxxxx Xxxxxx Xxxxx 0000, Xxxxx 00, Xxx Xxxxxx, Santiago, (hereinafter Redes
and Redes Cayman are referred to jointly as "SELLERS"); and for the other part
TELMEX CHILE HOLDING S.A., Tax Payer Number 96.901.710-5, a corporation validly
incorporated and existing under the laws of Chile, (hereinafter also referred to
as the "BUYER"), duly represented by Xx. Xxxxx Xxxxxxxx Xxxxxx, Mexican passport
number 00000000000, and by Mr. Xxxx Xxxxxxxxx Xxxxxxxxx Irarrazaval, national
identity number
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6.693.164-1, all domiciled for these purposes at Xxxxxxx Xx Xxxx Xx. 00, Xxxxx
00, Xxx Xxxxxx, Xxxxxxxx; both the Sellers and the Buyer are referred to also as
the "PARTIES" and individually as the "PARTY", and they declare through this
instrument that they come to enter into a purchase and sale of Chilesat Corp.
S.A. stock, under the terms and conditions provided by this instrument
(hereinafter referred to as the "STOCK PURCHASE").
ANTECEDENTS
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1. Redes Cayman is the current owner of 117,565,186 shares of stock in
Chilesat Corp. S.A., a public corporation, registered in the Security
Registry of the Superintendent of Securities and Insurance under number
350, validly incorporated and existing under the laws of the Republic
of Chile (hereinafter also referred to as the "Company"), representing
25.0305% of the total stock issued, subscribed and fully paid of the
Company. In addition, Redes is the current owner of 70,310,008 shares
of stock of the Company, representing 14.9695% of the total stock
issued, subscribed, and fully paid of the Company (the aforementioned
shares owned by the Sellers will also be referred to for the purposes
of the Stock Purchase as the "Shares");
The Shares are registered in the Shareholder Registry of the Company in
the name of Redes Cayman under share certificate number 8.453 and in
the name of Redes under share certificate numbers 7.937 and 8.455.
2. Redes acquired control of the Company by virtue of a capitalization of
loans carried out on April 26, 2002, which was done as a consequence of
and pursuant to the judicial agreements of the Company and its
affiliate, Chilesat S.A., approved by the Twenty-Eighth Civil Court of
Santiago by resolutions of January 25, 2002. The Sellers acquired the
Company, and Redes acquired control of the same on the basis of the
balance sheet and financial statements of the Company and its
affiliates as of December 31, 2001, and on the basis of the reports
issued by the receiver of the Company, Mr. German Sandoval M. and by
the receiver of its affiliate Chilesat
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S.A., Xx. Xxxx Xxxxxx Xxxxxxx E. Before April 26, 2002, the majority of
the shares of the Company and its affiliate, Chilesat S.A. were owned
directly and indirectly by a group of creditors of the Company in
accordance with precautionary judicial agreements agreed to by a
meeting of creditors of said corporations on June 11, 1999.
3. Pursuant to the contracts entered into before the date of this
agreement with third parties and which remain in effect, the Sellers
have the right to require those third parties to sell 18,905,980 shares
of the Company, approximately representing 4.0252% of the total shares
issued, subscribed and fully paid by the Company (these 18,905,980
shares are denominated "Drag Along Shares"). The Drag Along Shares are
not part of this Stock Purchase.
Corporations related to the Sellers are owners of 20,406,103 shares of
the Company, which represent 4.3446% of the total shares issued,
subscribed and fully paid by the Company, which are currently pledged
for the benefit of Banco de Chile and cannot be subject to any liens
and cannot be sold (these shares are denominated hereinafter as
"Pledged Shares"). The Pledged Shares are not part of this Stock
Purchase.
FIRST: DEFINITIONS AND ANNEXES
1. Definitions
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For purposes of this Stock Purchase, and without prejudice to the definitions
contemplated in the other sections of this instrument, and unless the context
clearly indicates another meaning, the terms described herein will have the
meaning that to each one of those terms is ascribed as follows:
1.1. "Shares" has the meaning given to such term in paragraph One of the
Antecedents of this Stock Purchase.
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1.2. "Drag Along Shares" has the meaning given to such term in paragraph
Three of the Antecedents of this Stock Purchase.
1.3. "Pledged Shares" has the meaning given to such term in paragraph Three
of the Antecedents of this Stock Purchase.
1.4. "Governmental Authority" means any authority, self-governing agency,
tribunal, court, commission, whether municipal, governmental,
administrative, controlling authority or other similar entity
(including any division or political subdivision of the same).
1.5. "Notice of Acceptance" has the meaning given to such term en Section
7.4.4 of this Stock Purchase.
1.6. "Notice of Claim" has the meaning given to such term in Section 7.4.1
of this Stock Purchase.
1.7. "Balance" has the meaning given to such term in section 4.6 of this
Stock Purchase.
1.8. "Working Capital" has the meaning assigned to it in ANNEX 1.8.
1.9. "Company" has the meaning given to such term in paragraph One of the
Antecedents of this Stock Purchase.
1.10. "Buyer" has the meaning given to such term at the beginning of this
Stock Purchase.
1.11. "Damage" has the meaning indicated in Section 7.2.1 of this contract.
1.12. "Net Debt" has the meaning assigned to it in ANNEX 1.12, in which net
debt is identified.
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1.13. "Day" or "days" means calendar days.
1.14. "Business Days" means every day of the week excluding Saturdays,
Sundays and bank holidays in the Republic of Chile.
1.15. "EBITDA" means the operational result before the depreciation and
amortization of the fiscal year such as it appears in Note 29 of the
Balance.
1.16. "Relevant Detrimental Effect" means a detrimental effect which
substantially affects the business, financial, economic, or legal
conditions, or the results of the operations of the Company and/or its
Affiliates, considered in their entirety and that have not been
reflected in the Balance or on its Notes. In the case of a discrepancy
between the Parties, with respect to the relevance of a detrimental
effect, the economic value of any damage or individual loss or its sum
shall be presumed to be the amount subject to indemnification under the
Seventh Clause of this Stock Purchase.
1.17. "Affiliate" or "affiliate" corresponds to the definition of that term
contained in the current Article 86 of Law 18.046 regarding
Corporations. ANNEX NO. 1.17 lists the Affiliates of the Company and
the percentages owned by the Company of said Affiliates.
1.18. "Encumbrances" or "Encumbrance" means any mortgage, pledge, charge,
use, rent, prohibition, seizure, limitation on ownership, pending
judgments, precautionary, judicial or prejudicial measures, option or
preference, contractual limitation, pending debt for balance of price
or for any other concept, including any right of third parties over an
asset or its fruits or other limitation on full ownership, transfer,
availability and/or exercise of the rights related to ownership of the
asset subject to such encumbrance, in accordance with the law and any
other encumbrances in general, whether legal, judicial, or contractual.
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1.19. "Taxes" means any income tax, tax on stamps and seals, contributions of
real property, taxes on assets or value added tax, taxes on capital
earnings, municipal franchise, customs fees and any other tax, right or
contribution, contemplated in Chilean legislation or in any other
legislation of any country in which the Company or its Affiliates do
business, including any withholding tax and any provisional monthly
payment, in conjunction with any additional interest or fine, or any
additional amount charged by a Governmental Authority responsible for
the imposition of any similar tax.
1.20. "Fair Knowledge and Understanding" means the degree of knowledge which
a controlling shareholder of a Chilean public Corporation has with
respect to the business of said open Corporation, in accordance with
the law.
1.21. "Securities Market Law" means Law No. 18.045 and its modifications.
1.22. "Party," "Parties," "party," or "parties" have the meanings given to
such terms at the beginning of this Stock Purchase.
1.23. "Indemnified Party" has the meaning given to such term in Section 7.4.1
of this Stock Purchase.
1.24. "Indemnifying Party" has the meaning given to such term in Section
7.4.1 of this Stock Purchase.
1.25. "Liabilities" means the obligations and contingencies of the Company
and its affiliates, which should be reflected in their respective
balances and financial statements in accordance with generally accepted
accounting principles in Chile complemented by regulations issued by
the SVS and by the accounting criteria and itemization consistently
applied by the Company for the 2002 and 2003 fiscal years.
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1.26. "Person" means natural persons and entities, including associations,
corporations, individuals, and any other entity or organization.
1.27. "Subtel" means the Undersecretary of Telecommunications.
1.28. "SVS" means the Superintendence of Securities and Insurance.
1.29. "$" means Chilean pesos, legal tender of the Republic of Chile.
1.29. "US$", "Dollars" means dollars of the United States of America.
1.30. "Sellers" has the meaning given to such term at the beginning of this
Stock Purchase.
1.31. "Arbitrator" means the arbitrator of those designated in the Tenth
Clause who has accepted the letter of instructions which is included as
an annex to the Stock Purchase Contract, or the one who succeeds or
replaces him.
2. Annexes
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2.1) Annex 1.8: Working Capital
2.2) Annex 1.12: Net Debt
2.3) Annex 1.17: Affiliate Chart
2.4) Annex 3: Deposit Agreement and Mandate
2.5) Annex 4.12: Listing of Telecommunications Concessions
2.6) Annex 4.14: Listing of Commercial Trademarks
2.7) Annex 6: Format of Notice to the SVS and to the SEC
2.8) Annex 7.2.7: Letter of Instructions to the Arbitrator
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SECOND: STOCK PURCHASE
Through this instrument, Redes Cayman sells, conveys, and transfers all of its
Shares to Telmex Chile Holding S.A., for whom its representatives, already
individualized at the beginning buy, accept and acquire 117,565,186 shares
issued by Chilesat Corp. S.A., all of which are subscribed and fully paid for
corresponding to share certificate number 8.453, representative of 25.0305% of
the total amount of stock issued, subscribed, and fully paid of the Company.
At the same time, through this instrument, Redes sells, conveys and transfers to
Telmex Chile Holding S.A., for whom its representatives, already indicated, buy,
accept and acquire the quantity of 70,310,008 Shares issued by Chilesat Corp.
S.A., all of which are subscribed and fully paid for corresponding to the share
certificates numbers 7.937 and 8.455, representative of 14.9695% of the total
shares issued, subscribed and fully paid of the Company.
The Shares are sold, conveyed and transferred free of any Encumbrances, with all
political and economic rights, subscription options of pending shares, credits
and interests, through the concept of capital, corporate funds of any nature,
end, or denomination, such as reserves, appreciating funds, etcetera, of loans,
utilities, dividends, including those accumulated or not, without distribution,
even when pending compliance agreements exist for the distribution, or for any
other title whereby each of the Sellers are holders of the Shares. Without
prejudice to the aforementioned concepts, the Sellers declare that no agreement
of distribution of pending dividend payments exists.
The Sellers make delivery in this act to the Buyer of the representative
certificates of the Shares which through this act are sold, corresponding to
certificate numbers 7.937, 8.453 and 8.455. The registration of the present
stock purchase is effected in this act in the Shareholder Registry of the
Company on the basis of this Stock Purchase and on the corresponding forms of
share transfer and share certificates referred to, and through this
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act, the Company issues new certificates under the name of the Buyer for the
amount of the Shares.
THIRD: PRICE OF THE STOCK PURCHASE
The price of the sale of the Shares is $154.23 (one hundred fifty-four pesos and
twenty-three cents) per share, and therefore, the sole, total and conclusive
price for the Shares equals $28,975,991,171 (twenty-eight billion, nine hundred
seventy-five million, nine hundred ninety-one thousand, one hundred seventy-one
pesos), the sum which the Buyer pays in this act in the form of cash upfront
money to Redes Cayman and Redes, in proportion to the number of shares sold by
each Seller to the Buyer under the terms of this instrument, by deposit in
Deutsche Bank, who has obligated itself to administer the funds in accordance
with the Deposit Agreement and Mandate executed on this date and which is
included as ANNEX 3 of the present Contract. The Sellers declare the receipt of
the sale price of their respective shares and their complete satisfaction and
agreement.
This price may be reduced through application of the Seventh Clause of this
contract.
FOURTH: REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Through this instrument the Sellers grant jointly, severally and irrevocably in
the exclusive benefit of the Buyer, the following representations and
warranties, which, when made in connection with the Company and its Affiliates,
it is understood that they refer to the facts, acts or omissions which occurred
in the period between April 26, 2002 and today's date.
4.1. Incorporation and Existence of the Corporation
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The Company is a public corporation (sociedad anonima), registered with
the Registry of Securities of the Superintendence of Securities and
Insurance under the number 350, validly incorporated and existing under
the laws of the Republic of Chile, incorporated by public deed on the
date, January 30, 1982, executed in the
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Notary of Santiago of Xx. Xxxx Xxxx Xxxxx Pefaur; the constituent
abstract was registered in sheets 2.305 number 1.267 in the Registry of
Commerce of Santiago in the year 1982 and was published in the
Commercial Registry of the date, February 8, 1982.
4.2. Corporate Authorizations
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The Sellers are empowered with all the corporate faculties and powers
necessary to subscribe and authorize this Stock Purchase and to effect
the transactions herein contemplated and which have been approved by
the Shareholder Meetings, the Board of Directors or administration of
the Sellers, as required under applicable law. Those who appear in
representation of the Sellers of this instrument are legally authorized
to subscribe and execute this Stock Purchase in the representation
vested in them and to obligate the Sellers in accordance with the terms
of the same.
4.3. Governmental and Third Party Authorizations
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The execution of this Stock Purchase on behalf of the Sellers does not
require previous registry or notification, approval or authorization of
third parties or of a governmental, judicial, or some other binding
authority, by virtue of the terms of any law, decree or judicial
resolution.
4.4. Absence of Contravention
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The grant of this Stock Purchase by the Sellers:
i) does not contravene, conflict, or constitute a breach,
non-compliance or violation of the provisions of the by-laws of
the Sellers;
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ii) does not contravene or affect the rights of third parties, or a
judicial resolution of a binding Governmental Authority that has
jurisdiction over the Sellers;
iii) does not constitute a breach, non-compliance or violation, loss
of rights or benefits or assumption of responsibilities in virtue
of (with or without prior notice or the passage of a determined
period of time or both) any term or contractual condition, nor
will it provoke the rescission, modification or anticipated
expiration of any contract, agreement or obligation of the
Company or of its Affiliates.
4.5 Shareholder Capital
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(a) At December 31, 2003, the share capital of the Company amounted to
$188,591,445,000, including the capitalization of the proportional
revaluation of its own capital as at December 31, 2003 in accordance
with Article 10 of Law 18.046, divided into 469,105,851 shares without
nominal value, each of equal value, without privileges, of a same and
sole series, each fully issued, subscribed and paid for. Through an
increase in capital of the Company agreed to by the Extraordinary
Shareholders Meeting held on September 24, 2003, it was agreed to issue
137,500,000 new paid shares. Of these 137,500,000 shares, 582,133
shares have been issued, subscribed, and fully paid for a total amount
of $75,253,787, leaving the remaining 136,917,867 shares pending
subscription and full payment. Those 582,133 shares were later issued,
subscribed and fully paid on December 31, 2003, and therefore, the
total shares subscribed and fully paid by today amount to 469,687,984.
The Shares represent 40% of the shares issued, subscribed and fully
paid of the Company and are free of Encumbrances as evidenced by share
certificate numbers 7.937, 8.453 and 8.455, which are registered in
Sellers name in the Shareholder Registry of the Company.
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The Sellers possess valid, sufficient, and leviable title over the
Shares, free of all Encumbrances.
Upon transfer of the Shares in accordance with this deed, Redes
reserves a direct and indirect stock participation in the Company of
233,785,757 shares, all issued, subscribed and fully paid, which
represent 49.7747% of the total shares issued, subscribed and fully
paid of the Company. Therefore, in this Stock Purchase, the control of
the Company has not been transferred and remains with Redes. The
previous representation and warranty delivered by the Sellers is
essential for the Buyer to enter into the present contract.
Except as set forth in ANNEX 1.17, there are no options, guarantees,
rights or securities in favor of third parties which (i) obligate the
Company to issue shares and (ii) obligate the Sellers to sell or
transfer any share of the Company.
(b) At December 31, 2003, the corporate capital of Chilesat S.A. amounted to
$102,221,935,959, including the capitalization of the proportional
revaluation of its own capital as at December 31, 2003 in accordance
with Article 10 of Law 18.046, divided into 262,897,263 shares without
nominal value, each of equal value, without privileges, of a same and
sole series, each fully issued, subscribed and fully paid.
No options, guarantees, rights or securities exist (i) that obligate
Chilesat S.A. to issue shares and (ii) that obligate the shareholders
of Chilesat S.A. to sell or transfer any share of Chilesat S.A.
The shares mentioned in the first paragraph of the letter (b) represent
100% of the shares issued, subscribed, and fully paid of Chilesat S.A.
as evidenced in the share certificates numbers 1, 4, and 5, which are
registered in Sellers' name and in the name of Inversiones San Xxxx
S.A. in the Shareholder Registry of Chilesat S.A. These shares are
subject to the Encumbrances set forth in ANNEX 1.17.
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(c) ANNEX 1.17 describes the number of shares or rights into which the
share capital of the Affiliates of the Company is divided, and the
ownership of the Company with respect to said shares or rights.
Except as set forth in ANNEX 1.17, there are no options, guarantees,
rights or securities which (i) obligate the Affiliates to issue shares
or rights, (ii) obligate the Company or the controllers of the
Affiliates to sell or transfer any share or right of the Affiliates, or
(iii) obligate the Company or the controllers of the Affiliates to buy
or acquire shares or rights of the affiliates owned by their
shareholders or minority owners.
Except as set forth in ANNEX 1.17 or in the financial statements of the
Company, the shares or property rights of the Company in the Affiliates
or the rights of the Affiliates represent 100% of the shares issued,
subscribed, and fully paid of the Affiliates and are free of
Encumbrances.
4.6 Financial Statements
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The Financial Statements of the Company and its Affiliates as at
December 31, 2003, duly audited by Ernst & Young, published and
reported to the shareholders, to the SVS and to the Stock Exchanges of
Chile (hereinafter referred to as the "Balance") are complete and
correct, adequately reflect in all relevant aspects the financial
condition of the Company and its Affiliates as at such date and the
results of its operations for the period reflected in the same, all in
accordance with the rules and regulations established by the SVS and
the accounting principles of general acceptance in Chile, with the
exceptions that may be contained in the notes of said balances.
The information contained in Form 20-F of the Company and its
Affiliates as at December 31, 2002, duly prepared by the Company,
audited by Ernst & Young, and reported to the Securities and Exchange
Commission ("SEC") of the United States
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of America (hereinafter referred to as "20-F") is complete and correct,
adequately reflects in all relevant aspects the financial condition of
the Company and its Affiliates as at such date and the results of the
operations for the 2002 period contained in said document, all in
accordance with the rules and regulations established by the SEC and
the accounting principles of general acceptance in the United States of
America, with the exceptions which may be contained in the notes to
said 20-F.
4.7. Absence of Changes
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From December 31, 2003 through to the date of this Stock Purchase, the
Company and its Affiliates have conducted their operations only within
the ordinary course of business, and from the date of the Balance
through to the date of execution of this Stock Purchase, to the Fair
Knowledge and Understanding of the Sellers, there has been no event or
incident that would result in a Relevant Detrimental Effect for the
Company or its Affiliates.
4.8. Liabilities
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All of the Liabilities of the Company and its Affiliates at December
31, 2003 are reflected in their respective account records and in the
Balance and are duly provisioned as required by the accounting
principles generally accepted in Chile. The Net Debt as at March 31,
2004 will not exceed US$38,700,000 (thirty-eight million, seven hundred
thousand dollars), as determined by the exchange rate observed on that
date (this is $616.41 per dollar). Any amount over said figure will be
treated as a Class A Claim. In the event that the Net Debt is less than
US$35,000,000 (thirty-five million dollars), it will be treated as a
relevant favorable event, as set forth in both paragraphs of Section
7.4.6 below.
For purposes of the determination of the Net Debt, the liability with
British Telecom referred to in Note 24 of the Balance will be valued
taking into consideration the
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agreement between the corresponding parties, which is evidenced in the
public deed executed on April 2, 2004 in the Notary of Santiago of Xx.
Xxxx Xxxxxxxxx Xxxx.
In the event that the Working Capital deficit calculated on March 31,
2004 is greater than -US$4,119,000 Dollars (negative four million, one
hundred nineteen thousand Dollars), then the increase of the deficit
will be added in its absolute number to the Net Debt and will be
considered for the calculation of the Net Debt for all purposes
indicated in the first paragraph of this Section 4.8.
4.9. Lawsuits
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All of the pending judicial processes and judicial complaints validly
notified to the Company or its Affiliates, both in Chile and abroad,
and that individually amount to more than US$50,000 (fifty thousand
dollars) or the equivalent in pesos or other currency, are set forth in
the notes to the Balance. The pending judicial processes and judicial
complaints validly notified to the Company or its Affiliates both in
Chile and abroad which individually involve amounts of less than
US$50,000 (fifty thousand dollars), do not involve a total aggregate
amount which exceeds the amount of US$100,000 (one hundred thousand
dollars). As to the Fair Knowledge and Understanding of the Sellers, no
pending judicial proceeding before any tribunal, arbitrator or
Governmental Authority exists which could give rise, either jointly or
individually, to a Relevant Detrimental Effect, or in any way
significantly damage the Company's ability to conduct its business,
except for the antecedents reflected in the notes to the Balance.
4.10. Intermediary Commission
-----------------------
With the one exception of Santander Investment Chile Ltda. and Cicerone
Capital LLC, whose fees and expenses will be paid for by the Sellers,
no investment bank, broker or other intermediary has been contracted or
authorized to act in the
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representation of the Sellers in the transfer of the Shares
contemplated by this Stock Purchase.
4.11. Municipal Permits and Permissions
---------------------------------
The Company and its affiliates have the necessary municipal permits and
permissions of Governmental Authority to conduct their operations in
the form in which they are currently doing.
4.12. Telecommunications Concessions
------------------------------
The Company and its Affiliates are holders of the concessions of
telecommunications and their modifications set forth individually in
ANNEX NO. 4.12 of this Stock Purchase, which are sufficient in the Fair
Knowledge and Understanding of the Sellers to conduct their business in
a form substantially similar to that which they have been doing through
this date. In addition, the Sellers do not have knowledge that said
concessions are subject to termination or forfeiture as a result of
acts or fault attributable to their concession holders, nor that the
works and facilities through which the licensed services are tendered
have not been duly authorized by Subtel, except from those which may be
in process of constitution or authorization.
4.13. Environment
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The Company and its Affiliates comply with the laws and regulations in
force regarding environmental protection applicable to their operations
and have not received any warning or notification from a governmental
authority of a claim resulting from a violation of environmental
protection laws or regulations.
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4.14. Intellectual Property
---------------------
The trademarks owned by the Company and its Affiliates which are
registered in their respective names in the Department of Industrial
Property of the Ministry of Economy, Development and Reconstruction of
Chile are set forth in ANNEX No. 4.14 of this Stock Purchase. All
trademarks registered by the Company and its Affiliates in order to
conduct their business are included in said Annex.
4.15. Labor and Retirement Issues
---------------------------
The Company and its Affiliates have complied with the laws and
regulations in labor, retirement and social security matters applicable
to their operations and have fully and duly paid the adequate
remunerations and benefits for employees, as well as withholding taxes,
social security and health contributions to which they are obligated.
The Company and its Affiliates have not subscribed individual or
collective agreements, or contracts in virtue of which payments would
exist in excess of those contemplated by applicable labor laws, in the
event which would result in the termination of employment of one of
their employees. If they do exist, they do not represent more than
US$300,000 in the aggregate.
With respect to the stock options in favor of employees of the Company
and its Affiliates, they are not redeemable in shares of the Company
and its Affiliates, rather only in money. The Sellers will be
responsible for any payment which may be required in accordance with
their terms, without any right to seek reimbursement subsequently from
the Company or its controllers.
4.16. Property
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The Company and its Affiliates are owners, or, in the alternative,
lessees of all real property, buildings, furnishings, vehicles and
installations which are necessary for the Company and its Affiliates to
continue to operate in a form substantially similar
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to that in which they have operated through today. As to the Fair
Knowledge and Understanding of the Sellers, no personal property
alluded to is subject to Encumbrances, expect for those duly reflected
in notes to the Balance.
4.17. Taxes
-----
Except as provisioned or indicated in the Balance and to the Fair
Knowledge and Understanding of the Sellers:
(i) all of the Tax filings and forms (the "Filings") which must be
made by the Company and its Affiliates to the tax authorities
have been timely made;
(ii) all of the Taxes due, accrued and payable in connection with the
business of the Company and its Affiliates have been timely and
duly paid or provisioned;
(iii) no contingencies exist for the Company or its Affiliates as a
result of any violation of applicable tax laws and regulations
which would result in Relevant Detrimental Effect for the Company
and its Affiliates.
The Sellers declare that to their Fair Knowledge and Understanding, the
tax loss of Chilesat S.A. at December 31, 2002 was reviewed without
major objections by the Internal Tax Service during the 2003 year. For
this purposes, major objections are understood as differences greater
than US$1,000 (one thousand dollars). The tax losses as at December 31,
2003 are estimates, inasmuch as the tax balance sheet is submitted
during the month of April of 2004.
4.18. Public Information
------------------
The public information presented by the Company before the SVS and
Subtel reasonably reflects the economic, financial, legal and
operational situation of the
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Company and its Affiliates, and on the date on which it was presented
and to the Fair Knowledge and Understanding of the Sellers, no relevant
information has been omitted that should have been included in said
presentations.
4.19. U.S.A. and Colombia Affiliates
------------------------------
The state of the Affiliates in the United States of America and in
Colombia is reflected in detail in Note 2 (D) of the Balance. As
indicated on the Balance, the situation of these two Affiliates does
not have nor may it have a Relevant Detrimental Effect for the Company.
The Company does not have Affiliates in Venezuela.
4.20. Legal Compliance
----------------
The Sellers, to their Fair Knowledge and Understanding, do not have
knowledge of non-compliance with legal, regulatory or administrative
resolutions which could give rise to a Relevant Detrimental Effect.
4.21. EBITDA
------
The EBITDA of the Company as at December 31, 2003 as set forth in the
profit and loss statement included in the Balance amounts to
$3,399,000,000 (three billion, three hundred ninety-nine million
pesos). After discounting the effect of the close of operations of
Affiliate Texcom USA in April of 2003, the EBITDA of the Company
increases by $1,290,000,000 (one billion, two hundred ninety million
Chilean pesos), resulting in total amount of EBITDA as at December of
2003, as adjusted by the effect of Texcom USA during this period, of
$4,689,000,000 (four billion, six hundred eighty-nine million pesos).
19
4.22. Validity of the Representations and Warranties of the Sellers
-------------------------------------------------------------
The representations and warranties of the Sellers contained in this
Stock Purchase and in the Annexes refer solely and exclusively to
events, acts or omissions occurring in the period between April 26,
2002 and the date indicated at the beginning of this instrument.
The only representations and warranties the Sellers have made in
relation to the Company and its Affiliates, or that in some way are
related to the Shares, are those expressly contained in this Stock
Purchase and its annexes. Without prejudice to the aforementioned,
neither the Sellers nor any dependent Person has made a representation
or authorized a warranty to the Buyer with respect to the economic and
financial condition of the Company and its Affiliates, except for that
expressly established in this Stock Purchase, nor have the Sellers, nor
any Person acting in their representation made a representation or
authorized any warranty in relation to the projections or future
profitability of the Company and its Affiliates.
FIFTH: REPRESENTATIONS AND WARRANTIES OF THE BUYER
Through this act the Buyer, for the exclusive benefit of the Sellers, agrees to
the following representations and warranties:
5.1. Constitution and Existence of the Buyer
---------------------------------------
The Buyer is validly incorporated and existing under the laws of Chile.
5.2. Corporate Authorizations
------------------------
The execution of this Stock Purchase is within the corporate capacities
of the Buyer, who has performed all legal and statutory requirements
and granted all authorizations required for said purposes. The
execution of this Stock Purchase
20
constitutes a valid and binding contract for the Buyer and compliance
in accordance with its terms may be demanded.
The signatory of this Stock Purchase in representation of the Buyer has
the legal capacity to do so under the terms of the document empowering
him to sign and has the legal capacity to bind the Buyer in accordance
with the terms of the Stock Purchase.
5.3. Governmental and Third Party Authorizations
-------------------------------------------
Neither the execution of this Stock Purchase nor compliance with the
same by the Buyer requires approval or authorization from third parties
or any governmental authority.
5.4. Absence of Contraventions
-------------------------
Neither the execution of this Stock Purchase nor performance hereunder
by the Buyer:
(i) contravenes or is in conflict with the by-laws of the Buyer;
(ii) contravenes or constitutes a violation of a legal norm,
regulation, precautionary measure, obligatory order or decree
for the Buyer.
5.5 Fees of Intermediaries
----------------------
No investment bank, broker or intermediary has been contracted or
authorized by the Buyer to act in its name on such terms as would
provide a right to receive a commission or fee from any of the Sellers
by virtue of this Stock Purchase.
21
5.6 Lawsuits
--------
No pending actions, complaints, investigations or proceedings exist, or
in the knowledge of the Buyer, constitute a threat before an
administrative, special or ordinary tribunal, arbitral tribunal or a
government authority, that could impede, create an obstacle for, or
alter the transfer of the Shares contemplated in this Stock Purchase.
5.7. Declared Information
--------------------
The Buyer is an experienced investor who has knowledge of the
commercial customs, practices and regulatory frameworks of the sector
in which the Company and its Affiliates operate, the information
delivered by the respective regulatory authorities of capital markets
and the telecommunications sector to the general public, and the Buyer
declares to have had sufficient opportunity to perform a review and
analysis of the telecommunications sector and of the legal, judicial,
economic, financial and operational condition of the Company which are
available to the general public on the basis of having been published
and/or delivered in Chile and in the United States of America to the
regulatory authorities of the telecommunications sector or the sector
of capital markets of the aforementioned countries and to their
respective Stock Exchanges (public "hechos esenciales", records,
balances, statements, FECUS, Schedules 13D, Forms 20-F, etc.), all of
which, together with the representations and warranties contained in
this instrument have been considered by the Buyer as adequate to
evaluate the merits and risks related to the purchase of the Shares
which is the object of this instrument.
5.8. Validity of the Representations and Warranties of the Buyer
-----------------------------------------------------------
The Representations and warranties of the Buyer contained in this
instrument are truthful on this date and in all relevant aspects,
except for those facts which, under reasonable criteria, should not
produce a Relevant Detrimental Effect for the Sellers.
22
SIXTH: INFORMATION OF THIS STOCK PURCHASE TO THIRD PARTIES
Within two Business Days following the execution of this Stock Purchase, the
parties agree to report the existence of this Stock Purchase in accordance with
the format for notification attached as ANNEX NO. 6 of this instrument to the
SVS, the Securities and Exchange Commission, and to the stock exchanges of Chile
and the United States of America, and to any others to whom it might be
necessary.
Except for the information and notifications required under applicable law and
the delivery of a copy of this Stock Purchase to the holders of joint sale or
tag along rights and to those obligated by Drag Along Shares; the parties may
not make any publication in reference to this Contract and its Annexes without
previously agreeing to its content.
SEVENTH: SURVIVAL AND INDEMNITY
7.1. Survival
--------
The Representations and warranties stipulated in the Fourth and Fifth
Clauses of this Stock Purchase will survive the execution of this Stock
Purchase for a maximum period of 90 days, except for those referred to
as Taxes, which will survive for a period of 24 months, calculated from
the date of this Stock Purchase indicated in the heading of this
instrument. Nevertheless, no representation or warranty will survive
for a longer period than legally prescribed in the event that such
period expires before the date here indicated.
Once the time periods previously referred to have expired, no party
will be able to initiate a claim, action, or judicial or extrajudicial
proceeding against the other party with respect to violations of or
non-compliance with the aforementioned representations and warranties.
23
7.2. Indemnifications
----------------
7.2.1 Subject to Clause 7.1, the Sellers will indemnify the Buyer with
respect to any damage, debt or loss in accordance with the economic
value duly accredited of said damage, debt or loss (in the case of
damage, debt or loss corresponding to obligations that should be paid
in the future, for the purpose of determining their present value, a
discounted rate will be applied, 5% real and 7.5% nominal, depending on
the case), including, among others, the reasonable and documented
expenses of investigation and legal fees, and (the "Damages") suffered
by the Company or the Buyer that originate exclusively from any
non-compliance or violation of the representations or warranties
contained in the Fourth Clause of this Stock Purchase and provided that
the Damage refers exclusively to the period after April 26, 2002.
The obligation to indemnify will be subject to the following additional
dispositions:
(1) The total amount to be paid by the Sellers to the Buyer as
indemnification in accordance with 7.2.1 above will not exceed in any
event the maximum amounts indicated in 7.2.1.(3).
(2) Classification of Claims that May Be Notified by the Buyer to the
-----------------------------------------------------------------
Sellers:
-------
2.a) Class A Claims:
--------------
Class A Claims are defined as all those amounts which must be paid,
which have their origin in differences in the Net Debt or in the
Working Capital with respect to the limits set forth in 4.8 and which
are determined in the manner which is indicated below:
For purpose of determining the Net Debt and the Working Capital, the
parties agree to the following procedure:
24
(i) The auditing firm of Ernst & Young will audit the amounts allotted to
Net Debt and Working Capital at March 31, 2004. In order to determine
the value of the Net Debt, it will apply the correction factors and
will follow the procedure and mechanics agreed to by the parties in
ANNEX 1.12. For purpose of determining the value of the Working
Capital, Ernst & Young will follow the procedure and mechanics agreed
to by the parties in ANNEX 1.8. For these purposes, Ernst & Young will
have a time period of 20 days calculated from this date, within which
it shall elaborate and deliver a report simultaneously to each party,
in which it will indicate the amount of Net Debt and Working Capital,
which result from the audit.
(ii) Once the report of Ernst & Young has been received, the parties will
have a total time period of 7 days calculated from the date of receipt
to formulate and deliver to the other its observations to said report.
(iii) Within the 5 days following the expiration of the time period indicated
in (ii), the parties will meet to attempt to reach a mutually
acceptable agreement with respect to the amount of the Net Debt and the
Working Capital.
(iv) In the lack of total or partial agreement, the parties will have 2
Business Days calculated from the expiration of said time period of 5
days indicated in (iii) to petition PriceWaterhouseCoopers to prepare a
final, absolute and definitive determination of the Net Debt and/or the
Working Capital, as applicable, which shall be performed within the
time period of 20 days. For these purposes, PriceWaterhouseCoopers
shall follow the same methodology indicated in (i) previously.
(v) Once the amount of these Class A Claims is agreed to by the parties, or
once said amount is determined by PriceWaterhouseCoopers, as the case
may be,
25
said amount will be paid to the Buyer through a deduction from the
amount of US$17,000,000 (seventeen million dollars) which shall be
deposited in escrow as provided in Section 7.2.7, a sum which may not,
in any case, exceed U.S.$17,000,000 (seventeen million dollars). For
this purpose, the Buyer will be able to solicit to the Arbitrator that
he instruct the release of the amount of the Class A Claims, by
delivering a copy of the agreement subscribed to between the Parties or
of the final report of PriceWaterhouseCoopers.
2.b) Class B Claims Formulated by the Buyer
--------------------------------------
Class B Claims are denominated as all those claims, including those relative to
Taxes (previous Section 4.17), formulated as set forth below.
Within the time period of 75 days calculated from this date, the Buyer shall
deliver to the Sellers a list of all its Class B Claims, in which it shall
clearly identify the Relevant Detrimental Effects and the amount of the Damage
claimed for each of them, and which may be different from those referred to in
Section 2.a) above. Said list may only be complemented by new Relevant
Detrimental Effects included in a list of equal characteristics delivered within
15 days following the conclusion of the time period of 75 days previously
referred to.
(i) Calculated from the day of receipt of the relevant list, the Sellers
will have a total time period of 15 days to exercise the option to
accept the procedure or reject it, pursuant to mechanism established in
(ii) and (iii) below, respectively.
(ii) If the existence of any Class B Claim is accepted, the Sellers, in
their discretion, may either: (a) Demand that an amount equivalent to
the Damage claimed by the Buyer is remain retained in the escrow
indicated in ANNEX 3, as adjusted pursuant to the mechanism set forth
in 7.2.2 below; or
26
(b) Demand that the expert designated under paragraph (iv) below
perform an economic valuation of said Damage, in accordance with the
procedure set forth in paragraph (v) below.
In the case of silence on the part of the Sellers it will be understood
that they accept both the origin of the claim as well as its amount,
and the mechanism indicated in letter (a) of this number (ii) will be
followed.
(iii) If the existence of one or more Class B Claims is rejected, the Sellers
will have the right to petition the arbitrator designated in this
contract, within the same time period set forth in (i) above. In the
request to the arbitrator, with respect to each Class B Claim, Sellers
shall indicate, in the event that the arbitrator determines the
validity of said claim, whether they elect (a) to use the amount of
Damage evaluated by the Buyer as the amount which shall remain subject
to the deposit in escrow indicated in ANNEX 3 as adjusted pursuant to
the mechanism set forth in 7.2.2 below; or (b) to solicit the
arbitrator to proceed with the valuation of the Damage in accordance
with the procedure indicated in paragraph (v) below. In any event, to
in order to determine the validity or not of the Class B Claim which is
the subject of arbitration, the arbitrator will have a time period of
60 days from the initiation of the arbitration. For this purpose, both
parties shall submit their arguments in writing regarding the validity
or lack thereof of the claim within the total time period of 10 days,
calculated from the date of initiation of the arbitration.
(iv) For purpose of this clause, the parties hereby designate Xx. Xxxxx
Xxxxxx as expert, and if he cannot or does not want to accept the
responsibility, Xx. Xxxx Xxxxxx Xxxxxxxx Xxxxxx, and if he cannot or
does not want to accept the responsibility, Xx. Xxxxx Selume Zaror.
27
(v) Within 15 days calculated from the date of the presentation of the
Class B Claims whose validity was accepted by the Sellers pursuant to
letter (b) of paragraph (ii), or from the date when the judgment of the
arbitrator indicated in paragraph (iii) has declared the validity of
such claim (and the Sellers having elected for the alternative
expressed in letter (b) of cited paragraph (iii)); the designated
expert will receive the Class B Claim, the Sellers' report with respect
thereto, and the judgment of the arbitrator, if applicable, so that the
determination of the economic value of said claim may proceed to its
final and definitive determination. The expert will have a time period
of 30 days to prepare his report and may meet jointly or separately as
many times as is convenient with the parties during this time period.
The parties hereby declare that they agree to act in good faith and
diligently with the purpose of cooperating with the expert in the
performance of his task.
Once the report of the expert has been provided to the parties in
accordance with Section 9.1 of this contract and to the Arbitrator in
his domicile, the latter shall instruct the trustee of the escrow
already referred to above to release and deliver to the Buyer the
amount of Damage determined by the expert, as adjusted pursuant to the
mechanism set forth in 7.2.2 below.
(vi) From the list of the Relevant Detrimental Effects described in
paragraph 2.b), all those Relevant Detrimental Effects which
individually exceed the amount of US$50,000 (fifty thousand dollars)
will be considered Class B Claims.
(vii) The maximum amount to be indemnified by the Sellers to the Buyer for
Class B Claims will amount to US$17,000,000 (seventeen million
dollars). The Sellers will only be able to opt to maintain the amounts
in escrow pursuant to (ii)(a) and (iii)(a) to the extent that the
Damages are due to contingencies that still have not been verified.
28
In any case, the maximum amount to be retained for these Class B Claims
will be US$17,000,000 (seventeen million dollars), and said maximum
amount to be retained will be reduced by the amounts effectively paid
due to Class A and Class B Claims as provided above.
2.c) Class C Claims:
--------------------
Class C Claims are defined as all claims relative to Taxes (Section
4.17 above) which individually exceed US$50,000 (fifty thousand
dollars) and that are communicated by the Buyer to the Sellers within
the period of time between day 91 and day 365 following the date of
execution of this stock purchase.
When the time period indicated in this paragraph 2.c) has expired, and
without prejudice to the notifications that the Buyer has made to the
Sellers during the period between day 91 and day 365, through
application of this paragraph 2.c), the Arbitrator will prepare a list
of all Class C Claims to the Sellers, which will continue or begin to
be processed, depending on the particular case, in accordance with the
procedure indicated in 7.4 below.
The maximum amount to be indemnified by the Sellers to the Buyer for
Class C Claims will amount to US$2,500,000 (two million five hundred
thousand dollars).
2.d) Class D Claims:
---------------------
Class D Claims are defined as all those claims relative to Taxes
(Section 4.17 above) which individually exceed US$50,000 (fifty
thousand dollars) and which are communicated by the Buyer to the
Sellers within the time period between day 366 and day 730 following
the date of execution of this stock purchase.
When the time period indicated in this paragraph 2.d) has expired, and
without prejudice to the notifications that the Buyer has made to the
Sellers during the
29
period between day 366 and day 730, through application of this
paragraph 2.d), the Arbitrator will prepare a list of all Class D
Claims to the Sellers, which will continue or begin to be processed,
depending on the particular case, in accordance with the procedure
indicated in 7.4 below.
The maximum amount to be indemnified by the Sellers to the Buyer for
Class D Claims will amount to US$1,000,000 (one million dollars).
2.e) Class E Claims:
------------------------
These correspond to the following Relevant Detrimental Event: the
collection of a credit by one or more of the preferred creditors
included in the roster of preferred creditors which was presented in
the precautionary judicial agreement of the Company according to the
rescheduling contract of Telex-Chile S.A. dated, October 5, 1999, other
than Banco de la Provincia de Buenos Aires. The maximum amount to be
indemnified for this Class E Claim will be US$1,058,000. The procedure
for indemnification of this Class E Claim will be the procedure set
forth in the Letter of Instruction to the Arbitrator (ANNEX 7.2.7).
(3) Indemnification Ceiling
-----------------------
3.a) The maximum amount to be indemnified by the Sellers to the Buyer as
indemnification pursuant to 7.1, and once the different classes of
claims indicated in 2) above are added together, will not exceed the
maximum and total amount of US$17,000,000 (seventeen million dollars)
in any event. Regardless of the aforementioned, if the sum of the Class
A, B, C and D Claims have reached the referred to US$17,000,000, said
maximum ceiling will be increased by the maximum amount indicated for
the Class E Claims.
30
Once the maximum amounts indicated in the previous paragraph have been
paid, the Buyer hereby waives any rights, actions, or claims against
the Sellers for indemnifications for any cause which may exist.
3.b) The indemnifications to be paid by the Sellers to the Buyer will be
subject to the maximum amount corresponding to each class of claims and
to the maximum amounts indicated in Section 3.a) above.
7.2.2 The obligation of indemnification of the Sellers within the established
maximum limits in this clause are limited to 40% of the Damage suffered
by the Company and its Affiliates. This percentage will be increased by
the percentage of the total shares issued, subscribed, and fully paid
by the Company which the Sellers sell to the Buyer within a 120-day
time period calculated from this date, with a maximum of 77.44%
(seventy-seven point forty-four percent) of said total. The
indemnification will not be limited in any form by said percentages and
will be fully paid by the Sellers to the Buyer in the sum in which the
Net Debt exceeds US$38,700,000 (thirty-eight million, seven hundred
thousand dollars), to which the amount in which the Working Capital
negatively increases will be added, according to Section 4,8, in both
cases, always respecting the maximum amounts referred to in 3.a).
7.2.3 Regardless of the amount which may be paid by the Seller as a
consequence of one or more claims of any class, only the amount
exceeding US$1,000,000 (one million dollars) will be indemnified. This
deductible will apply totally or partially until it is totally used.
7.2.4 In no event will the Parties have the right to claim: (i) indirect
damages; and/or (ii) loss of profit, this latter with the only
exception of the interests and readjustments accrued by the Damages,
both (i) an (ii) as a result of non-compliance or violation of the
representations and warranties made by the parties pursuant to this
Stock Purchase.
31
7.2.5 The Buyer waives any right to any actions or claims which originate as
a result of acts, events or omissions of the Company and its Affiliates
the existence of which was informed by the Sellers in this Stock
Purchase or in the Annexes, or that relates to acts, events or
omissions that have been publicly reported by the Company or its
Affiliates to the SVS, the Securities and Exchange Commission, or the
Stock Exchanges in Chile or in the United States.
7.2.6 The Buyer waives the right to proceed through an "accion resolutoria"
[suit for enforcement of a right to terminate a contractual
relationship] as a result of a breach by the Sellers of any of the
representations or warranties set forth in this Stock Purchase, and as
a result, will only be able to seek indemnification under the terms and
conditions stipulated in the Seventh Clause.
7.2.7 For purposes of guaranteeing the payment of the indemnifications that
may take place in accordance with the present clause, (i) Redes has
established a deposit in escrow in accordance with ANNEX 3, and (ii)
the parties will deliver a Letter of Instructions to the Arbitrator,
with the purpose of regulating the withholdings and releases applicable
to the escrow, all in accordance with the instruments entered into with
this same date and which are attached as ANNEX 7.2.7.
7.3. Indemnification Procedures of Class B Claims
--------------------------------------------
With respect to the Class B Claims the amounts for which have remained
in deposit in escrow as referred to repeatedly, in the event that the
contingency to which said claim refers to materializes through the
notification of the applicable complaint, then the Buyer shall
communicate such situation to the Sellers as soon as possible and in
any case, within the period of 10 Business Days from the time said
circumstance comes to the Buyer's knowledge, informing that such
contingency has materialized. The Notification indicated in this clause
will be denominated "Notice of Materialization of Class B Claim"
(NMCBC), which should be sent in
32
accordance with the procedure indicated in Clause 9.1 of this
instrument (Notifications).
In the event that the Buyer does not send the NMCBC to the Sellers
within the time period of 10 Business Days indicated above, it will be
irrevocably precluded from its right to be indemnified in accordance
with the procedure set forth in the Seventh Clause.
Within the time period of 5 Business Days calculated from the receipt
of the NMCBC, the Sellers will be able to proceed to the
indemnification payment that might result from said Class B Claim, in
accordance with the terms and conditions established in this Seventh
Clause, or assume the defense before the third party at their own cost,
with the relevant amount remaining in escrow during said period. To
this effect and in the time period indicated, the Sellers shall deliver
a notification in response to the NMCBC, with a copy to the Arbitrator,
indicating whether they opt for the payment or to assume the defense.
Whether or not the Sellers have effected the indemnification payment
which could have resulted from the Damage, and provided that they have
not directly assumed the defense, they will have the right to
participate in the defense of said actions, complaints, or proceedings,
and will be responsible for their own costs and expenses. In any event,
the Sellers will not be responsible under the terms contained in Clause
7.2 if the Company, its Affiliates, or the Buyer agree to some
settlement or waiver of rights, recourse, or procedural appeals without
the previous written consent by the Sellers in connection with any
claims, lawsuits, or proceedings which give rise to the indemnification
obligation pursuant to the terms of this clause.
33
7.4. Indemnification Procedures of Class C and D Claims
--------------------------------------------------
7.4.1 The party that must be indemnified under the terms of Clause 7.2. 2(c)
and 2(d), as well as for breaches by the Buyer to its representations
and warranties included in the Fifth Clause as a result of any Damage
(the "Indemnified Party"), shall notify, as soon as possible, and in
any case, within the time period of 10 Business Days from the date it
first learns about the existence of the fact which gives or could give
rise to the indemnifiable Damage, to the party from whom said
indemnification is sought (the "Indemnifying Party"), with a copy to
the Arbitrator, describing the Damage suffered by the Indemnified
Party, the Company, or its Affiliates, as applicable, or of the claim
or of the initiation of a complaint, action or procedure which has been
notified against the Indemnified Party, the Company or its Affiliates,
and which gives rise, in the case of acceptance of such claim,
complaint, action or procedure to indemnifications in accordance with
the terms of this Contract. The notification indicated in this clause
will be denominated "Notice of Claim," which shall be sent in
conformity with the procedures set forth in Clause 9.1 of this
instrument (Notifications).
7.4.2 In the event that the Indemnified Party does not send the Notice of
Claim to the Indemnifying Party within the time period of 10 Business
Days indicated, it will be irrevocably precluded from its right to be
indemnified in accordance with the procedure set forth in the Seventh
Clause.
7.4.3 In the event that the Indemnifying Party rejects the Notice of Claim
whether because it deems that it does not give rise to any Damage or
because the party is not responsible for the indemnification, it shall
so inform the Indemnified Party within the time period of 5 Business
Days from the receipt of the Notice of Claim, and the issue will be
submitted to Arbitration in accordance with the procedure set forth in
the Tenth Clause of this instrument at the petition of either of the
Parties. In the event of silence of the Indemnifying Party, it will be
understood that for all legal effects, it has rejected the Notice of
Claim.
34
7.4.4 In the event that the Indemnifying Party accepts the Notice of Claim
within the time period of 5 Business Days indicated in 7.4.3 above
through delivery of a notice of acceptance ("Notice of Acceptance")
within said time period in the manner indicated in Section 9.1
(Notifications), it will be able to proceed to the payment of the
indemnification which might have resulted from the Damage to the
Indemnified Party, in accordance with the terms and conditions
established for each Party in this Seventh Clause, and it will have the
right to subrogate itself in the rights of the Company, its Affiliates,
or of the Indemnified Party, depending on the case, against the third
party which has presented a claim, complaint, action or proceeding
and/or against third parties who may have caused the Damage.
7.4.5 Whether or not the Indemnifying Party has or has not accepted the
Notice of Claim or has or has not effected the indemnification payment
which may have resulted from the Damage, the Indemnifying Party will
always have the right to participate in the defense of said actions,
complaints, or proceedings, and will be responsible for its own costs
and expenses. In any event, the Sellers will not be responsible under
the terms contained in Clause 7.2 if the Company, its Affiliates, or
the Buyer agree to some settlement or waiver of rights, recourse, or
procedural appeals without the previous written consent by the Sellers
in connection with any claims, lawsuits, or proceedings which give rise
to the indemnification obligation pursuant to the terms of this clause.
7.4.6 Any amount which should be indemnified by the Sellers to the Buyer in
accordance with this Seventh Clause will be reduced or set off by a
relevant favorable event, regardless of whether this event may have
been verified before or after the harm to be indemnified in accordance
with this clause, provided that said favorable event exists and is
determined on the date the payment resulting from the damage
indemnification has to be made. A favorable relevant benefit will be
understood as any payment, reduced expense, or documented payment,
obtained by the Company or its Affiliates as a result of a judgment or
a favorable result in any judgment before an ordinary tribunal or by
arbitration in which the Company or its Affiliates
35
is a party as plaintiff, each one of which involves a value of at least
US$50,000 and only for that portion which exceeds US$1,000,000. For
this purpose, within the time period of 90 days calculated from this
date, the Sellers will report the favorable economic benefits to the
Buyer, indicating their economic value. To this effect, the Sellers may
ask Ernst & Young if it has knowledge of one or more relevant favorable
benefits. Once the list of relevant favorable benefits has been
received, the parties may agree to its amount by mutual agreement or by
submitting it to the decision of the Arbitrator and the expert,
following the same procedure contemplated to that effect in 7.2 2.b).
In the event that the resulting Net Debt is less than US$ 35,000,000
(thirty-five million dollars) by virtue of the procedure set forth in
Clause 4.8 above, the amount corresponding to said difference will be
considered in its totality as a favorable relevant event and the
corresponding economic benefit will be fully applied without necessity
that it be greater than US$50,000 (fifty thousand dollars).
The relevant favorable effect may only be reduced or compensated by an
obligation to indemnify conforming to the terms of this clause, and
therefore, may not be utilized if said indemnification obligation on
the part of the Sellers does not come into existence. In the case that
the favorable relevant event corresponds to credits which should be
charged and collected in the future, for the purpose of determining
their present value, a 5% real and 7.5% rate of discount will be
applied, depending on the particular case.
EIGHTH: COMMITMENT NOT TO CONTRACT
Without the previous authorization of the Buyer, the Sellers, including
their affiliates, will abstain for a period of three years calculated
from this date, in direct or indirect form, from contacting or enticing
any employee of the Company and its Affiliates with a monthly
remuneration greater than US$3,500 (three thousand, five hundred
dollars) in its equivalent in national currency, such that the employee
ends
36
his or her labor relationship with his or her current employer, in the
understanding that the aforementioned does not prohibit the Sellers
from making offers of employment directed to the general public.
NINTH: MISCELLANEOUS
9.1 Notifications
-------------
All communications or notifications to the Sellers or to the Buyer
under this Stock Purchase should be effected personally, by a courier
of international reputation, or by facsimile and will be understood as
communicated or notified on the day of delivery if personally, after
three Business Days if by courier, or on the same day of the date of
receipt of the facsimile, always when receipt has been confirmed in the
same manner by the receiver to the party that originally delivered it
and will be delivered as follows:
37
If to the Buyer
---------------
Telefonos de Mexico, S.A. de C.V.
Parque Xxx 000, Xxxxxxx Xxxxxxxxxx
00000 Xxxxxx, Distrito Federal
Attn.: Xxxxxx Xxxxxxxxx
Fax: (00000) 000-0000
With a copy to:
--------------
Sr. Xxxx Xxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Yrarrazaval, Xxxxxx x Xxxxxxx, Ltda.
El Golf 40, piso 20
Las Xxxxxx
Xxxxxxxx
Fax: (56) (0) 000-0000
If to the Sellers
-----------------
Senores
Redes Opticas S.A.
Xxxxxxx 0000, xxxx 0
Xxxxxx Xxxxx 0000
Xxxxxxxxx
Attn.: Sr. Xxxxxxx Xxxxxx
Fax: 00-00-00000000
With a copy to:
--------------
Sr. Xxxxxxx Xxxxxx X.
Xxxxxxx Xxxx Xxxxx-Cotapos y Cia. Ltda.
Xx. Xxxxxx Xxxxx 0000, Xxxx 00
Xxx Xxxxxx, Xxxxxxxx
Fax: (56) (0) 000-0000
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Sr. Xxxxxx xx Xxxxxxxx X.
Xxxxx y Cia. Ltda.
Apoquindo 3721, Piso 13
Las Xxxxxx, Xxxxxxxx
Fax: (56) (0) 000-0000
In the case of copies of the notifications which are addressed to the
Arbitrator, these will be addressed to the domicile indicated for him
in the acceptance of the letter of instructions.
All notifications made to Redes will be understood as effected to both
Sellers. Thus, all notification effected by Redes will be understood as
done by both Sellers.
9.2. Contract Modifications and Exercise of Rights
---------------------------------------------
a) This Stock Purchase may only be modified by written agreement
between the parties.
b) The lack or delay in the exercise by any of the parties of any
right established in this instrument will not amount to a waiver
of said right, except for that provided in Clauses 7.3 and 7.4.2
relative to the time period of 10 Business Days to deliver the
NMCBC and the Notice of Claim respectively. In itself, the
individual or partial exercise of said rights will not preclude
their joint or total exercise, just as nor will it preclude the
exercise of the remaining rights referred to in this instrument
or which the law grants the parties.
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9.3. Expenses
--------
Each Party will pay its own expenses of legal counsel, other counsel
and any other expenses incurred by said Party in relation to the
present Stock Purchase and the performance of the transactions
contemplated hereby. All notary, escrow included in ANNEX 7.2.7,
arbitration, experts and registry expenses which arise as a result of
the execution of the present Stock Purchase will be the responsibility
of the Parties by halves.
9.4. Successors and Transferees
--------------------------
No party may assign, neither totally nor partially, the rights and
obligations emanating from this instrument, without the previous
written consent from the other party.
9.5. Applicable Law
--------------
The present Stock Purchase will be interpreted according to the laws of
the Republic of Chile.
9.6. Copies
------
The present Stock Purchase is subscribed and executed in three copies
of equal tenor and date, two remaining in the power of the Sellers and
the other in the power of the Buyer.
9.7. Complete Agreement
------------------
This Stock Purchase and its Annexes constitute the sole, complete, and
total agreement among the parties in relation to the stock purchase of
the Shares which is the object of this instrument.
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The Annexes of this Stock Purchase duly initialed by the Sellers and
the Buyer are understood to form an integral part of the same for all
legal purposes.
9.8. Headings
--------
The titles and headings of each clause or article have been included
solely for the purpose of reference; they do not form part of the
content of the respective clauses or articles and should not be
considered in the interpretation of this Stock Purchase and its
acceptance. The nullity or rescission of any clause or article of this
Stock Purchase will not affect the validity and legal effect of the
remaining clauses in the same.
9.9. Solidarity
----------
In this act and by the present instrument, Redes Opticas S.A. and Redes
Opticas (Cayman) Corp., both acting duly represented as indicated in
the appearance, constitute the guarantors and joint and several
co-debtors with respect to compliance of all and each one of their
respective obligations under this Contract.
9.10. Together with the execution of this instrument, the Parties sign the
respective transfers of shares which evidence the Stock Purchase, which
transfers form part of the same for all legal effects.
9.11. Present in this act, Xx. Xxxxxxx Xxxx Xxxxxx, National Identification
Card Number 5.636.890-3 and Xx. Xxxxx Xxxxxxx Magnet Ferrero, National
Identification Card Number 5.813.546-1, both in representation of
Banmerchant S.A., declare that in the representation vested in them,
they have knowledge of the stock purchase which this instrument
evidences, and in this act they deliver to the Buyer shareholder
certificate Number 7.937, representative of 37,528,468 shares of
Chilesat Corp.
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S.A., sold to the Buyer in virtue of this instrument, who reports
entire satisfaction and conformity therewith.
Thus, Xx. Xxxxxxx Xxxx Xxxxxx and Xx. Xxxxx Xxxxxxx Magnet Ferrero, in
representation of Banmerchant S.A., the latter in his capacity as agent
of Redes Opticas S.A., receive in this act on behalf of the Buyer the
payment of the purchase price of 37,528,468 shares sold by this stock
purchase, rising to $5,788,015,620 (five billion, seven hundred
eighty-eight million, fifteen thousand, six hundred twenty pesos) sum
which is left in escrow in accordance with the terms provided in Clause
7.2.7 above.
9.12 Exchange Rate. Each time a payment has to be made in connection with a
Class B, C, D or E Claim and it is necessary to calculate it in
dollars, the exchange rate publicly "observed" on the date in which the
Arbitrator instructs the Agent (according to the definition of the term
in the Deposit Agreement and Mandate) to proceed with the payment of
the corresponding sums will be used, or alternatively that published on
the date in which the payment is effected directly by the Indemnifying
Party, as applicable.
TENTH: ARBITRATION
10.1 Any conflict or controversy between the parties which may arise in
connection with this Stock Purchase and of the acts herein
contemplated, be they about the existence, validity, enforcement,
rescission, termination, interpretation, application, compliance or
non-compliance, execution, or other cause, including relative
jurisdictional and competency questions regarding the arbitrator, will
be resolved by an arbitrator acting arbitrator of equity (in the
proceeding) and law (in the judgment) (Arbitro Mixto). The arbitrator
will act as many times as necessary and his resolutions will not be
susceptible to any appeal.
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10.2 Through the present instrument, the parties designate Xx. Xxxxxx
Xxxxxxxx Monckeberg as Arbitro Mixto. If he does not desire or is
unable to act or continue to act as such, the parties then designate in
his place, Xx. Xxxxxx Xxxx Xxxxxxxxxx Monckeberg, in the same capacity,
and if he does not desire or is unable to act as an arbitrator or
continue acting as such, the parties then designate in his place, Xx.
Xxxxxxx Xxxxxxx Xxxxx, in the same capacity. If none of the arbitrators
mentioned above desires or is in the condition to accept or continue
said appointment, the Arbitro Mixto will be named by mutual agreement
between the parties, and in the event of a lack of said agreement, the
naming of the arbitrator will be effected by an ordinary judge. In this
event, the naming must necessarily fall to an attorney, who at the date
of his or her naming, has been an Adjunct or Titled Professor for at
least three years in the branches of Civil or Commercial Law in the law
schools of the Universidad de Chile or of the Pontificia Universidad
Catolica de Chile.
The capacity of Xx. Xxxxxxx Xxxxxx Xxxxxxx and of Xx. Xxxxxx xx Xxxxxxxx Vicuna
to act in representation of the corporation Redes Opticas S.A. is demonstrated
in the public deed of the minutes of the board of directors of said company,
executed in the Notary of Santiago of Xx. Xxxxxxxx Xxxxxxxx Xxxxxxxx on April
19, 2004.
The capacity of Xx. Xxxxx Xxxxxxxx Xxxxxx and Mr. Xxxx Xxxxxxxxx Xxxxxxxxx
Irarrazaval to act in representation of the corporation Telmex Chile Holding
S.A. is demonstrated in the public deed of the minutes of the board of directors
of said company, executed in the Notary of Santiago of Xx. Xxxxx Xxxxxx Xxxxxxx
Toledo on April 19, 2004.
The capacity of Xx. Xxxxxxx Xxxx Candia and of Xx. Xxxxx Xxxxxxx Magnet Ferrero
for Banmerchant S.A. is demonstrated in the public deed of December 15, 1997
executed in the Notary of Santiago of Xx. Xxxxxxx de xx Xxxxxx Fabres.
/s/ Xxxxxxx Xxxxxx Xxxxxxx /s/ Xxxxxx xx Xxxxxxxx Vicuna
-------------------------- ------------------------------
Xxxxxxx Xxxxxx Xxxxxxx Xxxxxx xx Xxxxxxxx Xxxxxx
p. Redes Opticas S.A.
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/s/ Xxxxxxx Xxxxxx Xxxxxxx /s/ Xxxxxx xx Xxxxxxxx Vicuna
-------------------------- ------------------------------
Xxxxxxx Xxxxxx Xxxxxxx Xxxxxx xx Xxxxxxxx Xxxxxx
p. Redes Opticas (Cayman) Corp.
/s/ Xxxxx Xxxxxxxx Xxxxxx /s/ Xxxx Xxxxxxxxx Xxxxxxxxx Irarrazaval
------------------------- ----------------------------------------
Xxxxx Xxxxxxxx Xxxxxx Xxxx Xxxxxxxxx Xxxxxxxxx Irarrazaval
p. Telmex Chile Holding S.A.
/s/ Xxxxxxx Xxxx Candia /s/ Xxxxx Xxxxxxx Magnet Ferrero
------------------------- --------------------------------
Xxxxxxx Xxxx Xxxxxx Xxxxx Xxxxxxx Magnet Ferrero
p. Banmerchant S.A.
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