Exhibit 10.25
Letter of Intent between Convergence Communications, Inc. and DigiTEC 2000, Inc.
September 22, 1998
Xxxxx Xxxxxxxx VIA FACSIMILE: 000-000-0000
Digitec 2000, Inc.
0 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Letter of Intent
Dear Sirs:
The purpose of this letter ("Letter of Intent") is to set forth the
general terms under which Convergence Communications, Inc. ("CCI") will enter
into a series of agreements with Digitec 2000, Inc. ("Digitec"). Based on our
discussions, I believe we have agreed as follows:
1. International Origination/Termination Agreement. On and subject to the
further terms of this Letter of Intent, CCI and Digitec will enter into an
Agreement pursuant to which all international long distance minutes, either
originated or terminated by or through Digitec will be first offered to CCI for
local origination and/or termination in any country where CCI operates provided
that CCI provides origination and/or termination at the prevailing market
pricing subject to the parties' good faith negotiations. The initial commitment
level will be 1 million minutes per month after a 90 day ramp up to the Republic
of Guatemala. Additional countries will be added by CCI as soon as possible.
Digitec will provide a list of actual and projected usage by country for each
country CCI offers origination and/or termination. The International
Origination/Termination Agreement will have an initial term of 3 years with
extension periods.
2. Purchase of Promissory Notes. On and subject to the terms and
conditions of definitive agreements to be executed between and among the
parties, CCI will purchase from Digitec, and Digitec will sell to CCI, two
promissory notes, each in the original principal amount of $500,000 (the
"Promissory Notes"). The first Promissory Note will be purchased by CCI at the
Initial Closing, as defined in paragraph 7 below. The second Promissory Note
will be purchased by CCI, assuming it is not in default on its obligations under
the first Promissory Note, upon the execution by CCI and Digitec of the
definitive agreements for the transactions described in paragraph 3 below. The
principal amounts of each of the Promissory Notes will be payable in twelve
equal monthly installments, together with interest on all unpaid portions
thereof at the rate of 10% per annum (except in the event of a default
thereunder, in which case the interest rate will be 12% per annum from the date
of default until all amounts due under the Promissory Notes are paid in full.).
At the sole election of CCI at any time during the period when any amounts
remain unpaid
under the Promissory Notes, all or any portion of those unpaid amounts
(including interest and charges and fees, if any) will be payable through the
conversion of those amounts into common shares of Digitec (the "Conversion
Right"). If CCI elects to exercise the Conversion Right, the number of Digitec
common shares CCI will be entitled to receive in the conversion will be equal to
the aggregate amounts elected by CCI to be so converted, divided by an amount
equal to the average bid price for Digitec's common shares on the principal
market on which they trade during the 5 day period immediately preceding the
closing of CCI's purchase of the Promissory Notes (hereinafter, the "5 Day
Average Price"). In connection with CCI's purchase of the Promissory Notes, CCI
will also acquire, for a nominal price, warrants to acquire common shares of
Digitec. The number of shares subject to the warrants, the terms of their
exercise and their exercise price will be determined by good faith negotiations
between the parties.
3. Corporate Combination Transaction. CCI and Digitec will negotiate,
diligently and in good faith, the terms of an agreement pursuant to which (i)
CCI will acquire 100% of Digitec's outstanding capital stock (or its assets, at
CCI's election) solely in exchange for shares of CCI common stock, or (ii)
Digitec will acquire 100% of CCI's outstanding capital stock (or its assets, at
Digitec's election) solely in exchange for shares of Digitec common stock.
4. Assistance in Protel Negotiations. Digitec will use its diligent and
good faith efforts to assist CCI in its negotiations with Protel, Inc.,
("Protel") regarding an agreement pursuant to which CCI and Protel will form a
joint venture entity for the purpose of utilizing Protel's wireless and
fiber-optic network to provide last-mile connectivity for data, voice and video
telecommunication services. CCI's capital contribution to the joint venture
would consist of certain management services and the capital necessary to fund
the joint venture's business operations in compliance with a business plan to be
determined mutually by Protel and CCI, and Protel's capital contribution would
be its wireless networks rights and a usage right for its fiber-optic cable
systems.
5. Conditions to Purchase of Promissory Notes. CCI's obligation to
purchase the Promissory Notes will be subject to the satisfaction of the
following conditions:
(a) The execution of the Minute Termination Agreement.
(b) The conclusion of the limited due diligence review by CCI
referred to in paragraph 6 below and the results of such due diligence review
being satisfactory to CCI in its sole discretion.
(c) The receipt by CCI of opinion of counsel to Digitec relating to
the matters set forth in this Letter of Intent.
(d) No suit or action pending or being threatened which would
prevent the consummation of any of the transactions contemplated by this Letter
of Intent.
(e) The parties having performed and complied with all of their
covenants in all material respects through the Closing.
2
(f) Digitec making standard representations, warranties and
covenants regarding its business, operations and financial condition in the
definitive agreements for the purchase of the Promissory Notes and the Minute
Termination Agreement, and those representations, warranties and covenants being
true and correct as of the date of the execution and closing of those documents.
6. Due Diligence Review. The parties acknowledge and agree that it will be
a condition to the parties' obligations under this Letter of Intent that either
party be able to conduct a review and audit of the other party in connection
with the consummation of the transactions described in this Letter of Intent.
The parties currently anticipate that, although CCI's purchase of the Promissory
Notes and the execution of the Minute Termination Agreement will require only a
limited review and audit of Digitec's business operations and financial
conditions, the consummation of the transactions described in paragraphs 3 will
require a more extensive review and audit of Digitec. In order to facilitate
these reviews and audits, each party will provide to the other party with
reasonable access, following reasonable notice, to its books of account,
financial and corporate records, contracts, leases, licenses, permits, tax
returns, properties and other assets, permit the other party to make copies of
such records and other documents as each party may reasonably requests,
cooperate with each party in conducting those examinations, and cause its
officers, employees, accountants, counsel and other advisors to furnish such
additional market, financial and operating data and other information as the
other party may from time to time reasonably request in order to carry out the
due diligence review and audit. Each party will bear its own costs relating to
the due diligence review and audit. Promptly after the execution of this Letter
of Intent, CCI and Digitec will execute standard confidentiality and
non-disclosure agreements to protect the confidentiality of any information
disclosed to either party during or as a result of the due diligence process.
7. Timetable.
(a) Within 7 business days of the execution of this Letter of
Intent, CCI will deliver to Digitec an initial draft of the documents for the
purchase of the first Promissory Note and the Minute Termination Agreement. It
is the intention of CCI and Digitec to work diligently and in good faith to
effect a closing of the transactions described in those agreements (the "Initial
Closing") within 15 business days of the execution of this Letter of Intent.
(b) Within 30 business days of the date of the Initial Closing, CCI
will deliver an initial draft of the documents for the transaction described in
paragraph 3. It is the intention of CCI arc Digitec to work diligently and in
good faith to effect the closing of that transaction within 60 business days of
the Initial Closing.
8. Conduct of Business Pending the Closing. Between the date of the
execution of this Letter of Intent and the Initial Closing, Each party will
conduct its business and operations in substantially the same manner in which it
operated them prior to entering into this Letter of Intent. During such period,
Digitec will also give CCI prompt written notice of any
3
material developments in its business or operations.
9. Notices. All notices and other communications required or permitted
under this Letter of Intent must be in writing and will be deemed given if
delivered personally or by facsimile (with confirmation), or mailed by
registered mail or by overnight courier to the parties at the following
addresses, or such address for a party as it shall hereafter specify in writing:
(a) If to CCI, to Xx. Xxxxx X'Xxxxxxxx, Chairman and Chief Executive
Officer, at 102 West 000 Xxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx, 00000, XXX,
facsimile number 000-000-0000.
(b) If to Digitec, to Xxxxx Xxxxxxxx at 8 West 38th Street, 5th
Floor, New York, New York 10018, USA, facsimile number 000-000-0000.
10. No Assignment. No party to this Letter of Intent may assign its rights
or obligations under it to any other party or individual without the prior
written approval of the other parties.
11. Agency Clause. Nothing in this Letter of Intent will be construed as
creating a joint venture or legal partnership between CCI and Digitec, or as
authorizing any party to act as an agent or representative of any other party to
this Letter of Intent.
12. Termination. The parties' agreements to cooperate in the specific
areas set forth in this Letter of Intent will terminate upon the earliest to
occur if (i) the execution of the definitive agreements anticipated by this
Letter of Intent, (ii) the parties' mutual agreement in writing to terminate
this Letter of Intent, or (iii) the expiration of 90 business days from the date
of this Letter of Intent unless extended by the parties by written amendment.
13. Press Releases. No party to this Letter of Intent will make any news
release, public announcement, advertisement or publicity concerning this Letter
of Intent without the prior written approval of the other parties; provided,
however, that this provision shall not be interpreted so as to prevent the
disclosure of information to any governmental agency or other authority which is
necessary to carry out the intent of this Letter of Intent or a party's
obligations under law, rule or regulation.
14. Entire Agreement. This Letter of Intent constitutes the entire
understanding of the Parties to cooperate with respect to the areas specifically
set forth in it. No modification of this Letter of Intent will be operative
unless it is in writing and signed by the authorized representatives of the
parties.
15. Governing Law. This Letter of Intent shall be governed by the laws of
the State of Nevada.
* * * * * *
4
If this Letter of Intent correctly sets forth your understanding of
our discussions, please executed it in the appropriate space below and return a
copy of the executed agreement to CCI for its files.
Sincerely,
CONVERGENCE COMMUNICATIONS, INC.
By: /s/ Xxxxx X'Xxxxxxxx
----------------------------
Its: CEO
ACCEPTED AND AGREED:
DIGITEC 2000, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------
Its: CEO
5
