EXHIBIT 2.3
QUOTA PURCHASE AGREEMENT
PREAMBLE
WHEREAS; Xx. Xxxxxx Xxxxx is the owner of two quotas in the nominal value of DM
850,000.00 and DM 50,000.00 in Global Communications GmbH, Xxxxxxx Xxxxxxx
00-00, 00000 Xxxxxxx, registered with the commercial register of the Lower Court
of Cologne under HRB 25429 ("COMPANY") with a registered stated capital
amounting to DM 1,000,000. Xx. Xxxx Xxxxx is the owner of one quota in the
nominal value of DM 100,000.00 in the Company. The aforementioned quotas
("QUOTAS") form 100% of the registered stated capital of the Company.
WHEREAS; Sellers desire to sell and Buyers desire to purchase the Quotas of the
Company under the terms and conditions set forth herein.
Now, THEREFORE; the parties agree as follows:
1. PURCHASE AND SALE
Sellers hereby sell assign and transfer to Buyer the Quotas in the Company
including the right to undistributed profits and all other rights
pertaining to the Quotas, and Buyer purchases and accepts the transfer of
said Quotas for the herein below stated purchase price. The assignment and
transfer of the Quotas shall be subject to the condition precedent set out
in clause 2.1.
2. TRANSFER OF LEGAL TITLE AND LEGAL OWNERSHIP
2.1 The transfer of legal title in the Quotas is conditional upon the
payment of the A-Consideration as set out in Clause 3.1 to the escrow
account as described in Clause 3.2.
2.2 The Buyer shall be entitled to all profits and losses as of 30
December 1998, 24:00 hrs. ("EFFECTIVE DATE") and all retained profits
of prior business years. Risk shall pass to the Buyer as of the
Effective Date. As of the Effective Date the Sellers are obliged not
to perform or exercise any of their shareholder's rights in the
Company without prior consent of the Buyer. Xx. Xxxxxx Xxxxx as the
registered director of the Company is aware and acknowledges this
obligation
2.3 From the Effective Date the Buyer is entitled to review the business
documents of the Company. Such documents shall be delivered to the
Buyer within three weeks after the Effective Date.
2.4 The risk of loss in respect of the Quotas shall pass to the Buyer as
of the Effective Date.
3. CONSIDERATION
3.1 The following two items comprise the purchase price for the Quotas
sold hereunder: an amount of DM 9,000,000 (German marks nine million,
"A-CONSIDERATION") and an additional amount of DM 350,000 (German
marks three hundred fifty thousand, "B-CONSIDERATION").
3.2 The payment of the A-Consideration shall be made in full to an escrow
account provided by the notary Xx. Xxxxxxx Xxxxxxxxx, Frankfurt/Main
pursuant to the escrow agreement attached hereto as ANNEX 3.2. The
A-Consideration becomes due as of the December 30, 1998. Default
interest in the statutory amounts shall be payable by Buyer if payment
of the A-Consideration has not been effected by January 10, 1999.
3.3 It is the understanding of the parties that the A-Consideration is to
pay off (1) all outstanding liabilities in the amount of DM
6,103,168.94 (2) all liability reserves (Ruckstellungen) in the amount
of DM 187,452 and (3) the outstanding share capital in the amount of
DM 665,000, as well as (4) liabilities as referenced to in clause 6.2.
The Company hereby requests the payment of the respective outstanding
amounts of the share capital.
The balance between the A-Consideration and the sum of the
aforementioned amounts will be paid for goodwill (DM 2,044,379).
3.4 The A-Consideration will be adjusted downwards in the market value of
any liabilities or liability reserves against the Company which have
-- in violation of German GAAP -- not been shown in the Company's
preliminary balance sheet and profit and loss statements as of 31
December 1998 ("BALANCE SHEET") attached hereto as ANNEX 3.4.
Further downside adjustments shall be made with regard to any costs
which are shown in the balance sheet but which are not related to the
Company's German business.
The adjustment of the A-Consideration shall be made by a deduction of
the A-Consideration in the amount of the market value of the
respective liabilities, liability reserves or costs in accordance with
the escrow agreement.
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3.5 The B-Consideration to be effected to Xx. Xxxxxx Xxxxx is subject to
the following conditions, it being understood that the external costs
incurred in the fulfilment of the conditions shall be borne by the
Company or the Buyer:
a. the arrangement of an irrevocable offer by
STAR-Telecommunications Deutschland GmbH ("STAR") to amend the
existing co-location agreement between STAR and the Company which
provides for a fixed lease term until 31 December 1999 and an
option in favour of the Company to prolong the lease term for one
further year as additional fixed terms;
b. the co-operation in obtaining an offer by DTAG for the Company
for an interconnection agreement (ZusammenschluBvereinbarung)
which includes originating services for carrier network operators
(Zufuhrungsleistungen fur Verbindungsnetzbetreiber) and no more
than 2 PoI;
c. the delivery of two ICAs (Interconnect Accesses) [Interconnection
Anschlusse] for terminating as well as originating services of
DTAG at a PoI in Dusseldorf;
d. the making available of a calling card platform billing system
for use by the Company, subject to separate agreement;
e. submission of a security concept for use by the Company and best
efforts to obtain unconditional approval of such concept by the
Regulatory Authority for Telecommunication and Post in accordance
with Section 87 of the German Telecommunications Act as soon as
possible;
f. submission of a call monitoring for use by the Company concept
and best efforts to obtain unconditional approval of such
concepot by the Regulatory Authority for Telecommunication and
Post in accordance with Section 88 of the German
Telecommunications Act as soon as possible;
g. the fulfilment of the conditions (a), (b) and the delivery of one
ICA under (c) as well as the submission of the concepts under (e)
and (f) within three months after having received clear
instructions by the Buyer.
The B-Consideration shall amount to DM 200,000 if the conditions as required
under (g) will be fulfilled within 6 months including the second ICA foreseen
under (c). If those conditions are met within nine months the B-Consideration
amounts to DM 100,000. Thereafter no B-Consideration is owed to Xx. Xxxxxx
Xxxxx.
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4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
In addition to and not to the exclusion of any warranties implied under
law, Sellers represent and warrant in the form of an independent warranty
without fault (verschuldensunabhangige Garantie) that the following
statements are correct. Unless stated otherwise, hereinafter, the
warranties relate to the Effective Date.
4.1 The information contained in the Preamble above is correct. Company is
a limited liability company duly organised, validly existing and in
good standing under the laws of Germany with a stated capital of DM,
1,000,000.00 and is duly qualified of conduct its present business.
4.2 The Quotas are paid-up in the amount of DM 335,000.00 in cash and are
non-assessable. No disclosed or hidden repayments (offene oder
verdeckte Ruckzahlungen) have been effected from the assets required
in order to maintain the paid-up share capital. There are no
agreements, options, warrants or rights outstanding to purchase or
otherwise acquire Quotas or any other interests in Company. Sellers
are the owner, free and clear of any encumbrances, of all Quotas sold
hereunder and by this Agreement and this Agreement shall convey to
Buyer full title thereto, free and clear of all liens, encumbrances,
or other charges. In particular, the Quotas and/or rights resulting
therefrom were neither pledged nor transferred for security purposes,
and neither option rights of first refusal thereto exist. There are no
outstanding resolutions on distributions of profit or capital.
4.3 All necessary approvals and ratifications required from Sellers in
order to consummate this Agreement have been granted. There are no
further approvals and ratifications necessary on behalf of Sellers for
a valid and binding sale and assignment of Sellers Quotas. The Company
hereby declares its consent to the sale and transfer of the Quotas.
4.4 The Company has no Company law relationship of any kind with third
parties; in particular, it does not hold any participation or
sub-participation in any other company, it has not entered into any
affiliation agreements within the meaning of secs. 291, 292 German
Stock Corporation Act (Aktiengesetz - "AKTG"), it has not entered into
any co-operation agreement and has not
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issued any letters of comfort in favour of other companies. No third
party has any right to or interest in the profit of the Company.
4.5 As between the Company on the one part and the Sellers and
undertakings affiliated to the Sellers pursuant to sec. 15 AktG on the
other part, there are no contractual relationships of any kind
whatsoever.
4.6 Company's financial Balance Sheet is prepared in accordance with the
generally accepted accounting principles (Grundsatze ordnungsgemaBer
Buchfuhrung), consistently applied, and in accordance with the books
and records of the Company and present a true and fair view of the
asset position (Vermogenslage), financial position (Finanzlage) and
earnings position (Ertragslage) of the Company as of December 31,
1998.
4.7 There has been no material adverse change in the business, properties
or financial condition of the Company since the Balance Sheet has been
prepared.
4.8 Except as disclosed in ANNEX 4.8, there are no actions, claims, suits,
proceedings, or governmental investigations pending, or to the
knowledge of the Sellers threatened, or any known basis therefor,
against or to the knowledge of the Sellers affecting the Company,
except claims and actions as to which the Company is fully covered by
insurance.
4.9 Company has good and marketable title to all the assets and property
reflected in the Balance Sheet (other than property disposed of in the
ordinary course of business after the Balance Sheet date), free and
clear of all liens, charges and encumbrances except those which are
disclosed in the Balance Sheet and such imperfections of title and
encumbrances which do not interfere with the use of the assets or
impair the operations of Company, including customary title retentions
by suppliers. All lease pursuant to which Company leases real or
personal property are valid and enforceable substantially in
accordance with their terms. Company is not in default under any such
lease. The purchase agreement regarding the purchase of the Siemens
EWSD Switch and ancillary voice and data communications equipment is
concluded with the Company
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and Company holds and expectant right (Anwartschaftsrecht) to the
Siemens EWSD Switch and all ancillary voice and data communications
equipment as documented in the invoices provided to Buyers in written
form and as located at the co-location site of Company with STAR
TELECOM at Xxxxxxxxxxxx 0, Xxxxxxxxxx, and that such Switch and
equipment are free of any third party rights. The EWSD Switch is
covered by a producer warranty by Siemens until April 30, 1999.
4.10 Company has obtained all consents, licenses and permits to be issued
to the Company by a governmental or public entity which is required
for its operations as presently conducted; in particular, the Company
holds a national class 4 license ("LICENSE") granted by the
"Regulierungsbehorde fur Telekommunikation und Post" on August 21,
1998 (license number 98 04 0614 A), The License has not been revoked
at the Effective Date and will not be revoked by the Regulatory
Authority for Telecommunication and Post due to reasons or events
relating to the time period until the Effective Date.
4.11 Company has not received notice of violation of any applicable
regulations, ordinance or other law, regulation or requirements
relating to its operations or to its properties, and Sellers are not
aware of any pending actions, claims and notices of claim.
4.12 Company has performed all obligations required to be performed by it
to the date of this agreement, and is not in default in any respect
under any contract, agreement lease, license or other documents, which
default would have a material adverse effect on the operations of
Company.
4.13 Company is not in default of any order, writ, injunction or decree of
any court or governmental department.
4.14 Since the Balance Sheet has been prepared, Company has not , (i) sold,
assigned or granted rights with respect to any inventions, patents,
patent applications, licenses, written know-how, secret processes or
trade secrets, (ii) entered into any transactions or series of
transactions other that in the ordinary course of business, (iii) made
any material change in their
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accounting or billing policy practices or procedures, (iv) made any
distributions of cash or assets to its shareholders, neither by way of
dividends nor otherwise, (v) mortgaged, pledged or subjected to lien
or encumbrance any of its properties or assets, or (vi) increased the
rate of compensation of its key employees.
4.15 The entering into and implementation of this agreement does not
violate any obligation or commitment of Company or the Sellers, nor
will it affect any existing agreements in particular any lease or loan
agreements.
4.16 The Company has submitted all declarations and prepayment notices with
regard to income taxes, trade taxes, turnover taxes, wage taxes, and
social security charges ("TAXES") concerning the period until December
31, 1998, completely and accurately. Taxes have been paid when due or
have been reserved against on the Balance Sheet. The Company, as of
the Effective Date, will have prepared and timely filed or may have
timely filed requests for extension of filing periods for all required
tax returns and as of the Effective Date is not in default in the
payment of such due Taxes.
4.17 The only employees of the Company as of 1 January 1999 will be Mr.
Fees and Xx. Xxxxx employed under the conditions disclosed to the
Buyer.
4.18 The acquisition of the Quotas by the Buyer does not constitute a
transfer of all, or substantially all of the Sellers' assets within
the meaning of Section 419 German Civil Code (BGB).
4.19 Pursuant to the letter of intent between the Company and Technology
Control Services, Inc. dated May 21, 1998 the Company has no
obligation exceeding 100,000 Xxxxxxxxx Xxxxxxx.
4.20 All information furnished to the Buyer or to its advisers in
connection with the acquisition of the Company is correct. The Sellers
have not withheld any material information in this context from the
Buyer or its advisers.
5. LEGAL CONSENQUENCES
5.1 If and to the extent to which any of the representations and
warranties extended by Sellers under Clause 4 other than Clause 4.16
above are not true,
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Sellers will put the Company in the same position they would be in had
the representations and warranties been true. Sellers are obliged to
compensate Buyer in money ("DAMAGES") if Sellers do not put the
Company in such position within a reasonable period of time, one month
at the longest, or if the restitution of such status should prove to
be impossible.
The compensation shall be made by deduction of the Damages from the
A-Consideration in accordance with the escrow agreement. In the event
that the escrow funds are fully released the Damages shall be paid
directly by the Sellers to the Buyer.
5.2 To the extent the representations under 4.16 are breached, assessed
taxes and/or interest payments (minus interest reimbursements) must be
reimbursed by Sellers to the Company, if and to the extent to which
such Taxes and interest payments are not covered by Balance Sheet
reserves and relate to time periods prior to December 31, 1998. Tax
savings realized by the Company for the time period up to December 31,
1998, will be set off against additional taxes to be paid by the
Company for periods up to December 31, 1998; the same applies if tax
savings or additional tax payments are owed for different fiscal
years. Sellers are not liable for additional taxes caused by changes
to and changes in the evaluation of Balance Sheet items if the changes
are not provided by law.
5.3 Damage claims for breach of representations and warranties may be
asserted only if they exxceed an amount of DM 10,000.00 (Freigrenze).
5.4 Any claims by Buyer based on a breach of the representations and
warranties set forth under Clause 4 above must be made in writing
vis-a-vis Sellers and shall be time-barred 12 (twelve) months after
the Effective Date and shall be time-barred if Buyer does not start
arbitration proceedings which have been claimed within the 12-months
period within an additional period of three months after expiry of the
initial 12 months' period. However, if the claim pertains to tax or
other public levy liabilities or to liabilities for claims raised by
third parties, the claim shall be time-barred six month after the
claim has
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become final and unappealable. Sellers shall not be liable for a
breach of representation, warranty or covenant if and to the extent
that (i) the amount of the claim is covered by an insurance of the
Company or satisfied by a third party not being an affiliate of Buyer
(within the meaning of sec. 15 AktG) or (ii) results from a failure of
Buyer to mitigate damages pursuant to sec. 254 of the German Civil
Code.
5.5 Claims for damages under this Clause 5 are limited in total to 50% of
the purshace price. In the event that damages have been caused by
gross negligence, the limitation of liability is extended to 100% of
the purchase price. Sellers are jointly and severally liable for
damages.
5.6 Sellers liability under this section 5 is excluded if and to the
extent that the underlying facts have been disclosed to Buyer prior to
December 30, 1998 within the meaning of sec. 460 German Civil Code.
6. INDEMNIFICATION
6.1 The Sellers shall jointly and severally indemnify and hold the Buyer
harmless against any and all liabilities, penalties or other claims
arising from the dispute regarding the Company's name as disclosed in
Annex 4.8.
6.2 The Sellers shall jointly and severally indemnify and hold the Buyer
harmless against any other obligations of the Company as of December
30, 1998 exceeding DM 10,000, except to the extent that such
obligations or their existence have been disclosed to the Buyer, in
particular contingent liability in the amount of approximately DM
40,000 claimed by Siemens.
6.3 Sellers acknowledge that certain positions of the invoices provided to
Buyer in relation to the Switch and related equipment contain products
and services which either relate directly or indirectly to specific
envisaged corporate customers of Sellers without being of interest to
Buyer or which have not been provided by Siemens or other contractors
yet. The parties agree to hold a review within six weeks from the
Effective Date in order to determine such positions, it being
understood that such positions in sum will be deducted from the
consideration in accordance with Clause 3.4 above.
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Furthermore, Sellers shall jointly and severally indemnify and hold
the Buyer harmless against a future claim in the approximate amount of
DM 800,000 of Aspect Telecommunications, Ratingen, for delivery of an
ordered PBX-facility expected in January 1999.
6.4 Sellers jointly and severally undertake to hold harmless and indemnify
Buyer against any and all administrative fees and costs relating to
permits, approvals and/or allocations other than the national class 4
license addressed in Clause 4.11 above applied for or granted by the
Regulatory Authority for Telecommunication and Post before the
Effective Date.
6.5 Except as regards claims under Clause 6.4 above, the Buyer shall
immediately inform the Sellers in writing if any third party claims
have been asserted or threatened against the Buyer which could result
in the Sellers becoming liable under an indemnity under this Clause 6.
In such case, the Buyer must within a reasonable period of time make
available to the Sellers relevant documents and furnish all relevant
information as well as allow the Sellers to inspect the documents and
books of the Company to the extent that this is necessary in order to
evaluate the justification of the asserted or threatened claims. In
respect to such asserted claims, the Buyer shall not be entitled to
effect any comprise (Vergleich) or make any acknowledgement
(Anerkenntnis) which could result in an obligation on the Sellers part
without the Sellers prior written consent. The Buyers must enable the
Sellers to effect a third party intervention (Nebenintervention). Any
procedural orders (comprise, declaration of settlement
(Erledigungserklarung), judicial confession (gerichtliches
Gestandnis), acknowledgment)) require the Sellers prior written
consent.
6.6 If on the grounds of certain facts the Buyer is entitled to both an
indemnity pursuant to Clause 6 and to claims pursuant to Clause 5,
then the Buyer may decide at its complete discretion which entitlement
it shall assert against the Sellers.
6.7 Any claims by Buyer based on the aforementioned indemnifications must
be made in writing vis-a-vis Sellers and shall be time-barred 18
(eighteen)
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months after the Effective Date and shall be time-barred if Buyer does
not start arbitration proceedings which have been claimed within the
18-months period within an additional period of three months after
expiry of the initial 18 months' period.
6.8 Clause 5.1 para. 2 shall apply accordingly.
7. MISCELLANEOUS
7.1 It is expressly understood that the Buyer is entitled to use the name
of the Company for a period of 9 months commencing on the Effective
date. Thereafter the Buyer undertakes to file all necessary documents
to the commercial register in order to change the name of the Company
and Xx. Xxxxxx Xxxxx shall be entitled to use the name of the Company
for his own purposes. However, the Buyer retains the right to use the
components "Global Communication" inter alia for the future name of
the Company.
7.2 Subject to a separate agreement to be concluded between the parties,
Buyer commits to provide to Sellers or an entity designated by
Sellers, and Sellers commit to exclusively acquire from Buyer, all
services which Buyer obtains from Deutsche Telekom AG ("TELEKOM") on
the basis of the existing agreements between Company and Telekom or
agreements replacing or amending the existing agreements
("AGREEMENTS") at the prices charged by Telekom to Buyer plus Buyers
costs and a maximum 15% service fee if and to the extent that Buyer
has available service capacity and that Sellers can demonstrate that
Sellers intend to offer these services to clients in the insurance and
banking business in Germany which are not intended or existing clients
of the Buyer; this shall, in particular, apply for freephone services.
Buyer will keep Sellers informed about any material changes of the
terms of the Agreements.
7.3 The parties will conclude a separate agreement as to the terms under
which Xx. Xxxxxx Xxxxx may continue to act as Managing Director of
Company after December 20, 1998, if so agreed by the parties.
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8. GENERAL
8.1 Each party agrees to bear the fees and costs of all, consultants,
brokers, lawyers and other advisors employed by it in connection with
the transaction contemplated by this agreement.
8.2 Transfer taxes, the costs of this notarial deed and other costs, if
any, arising in connection with the transfer of the Quotas shall be
borne by Buyer.
8.3 All notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing by registered air
mail, telefax copy and shall be sent to the address set forth below or
to such other address as the party in question may have substituted
therefor by notice to the other in accordance with this provision:
If to Seller:
Xx. Xxxxxx Xxxxx, Eupener Str 57-59, Koln, Telefax-No.: 0000-00 00 00
30,
Tel.: 0000-00 00 00 00
If to Buyer:
Startec Global Communications, attn. Mr. Ram Xxxxxxx, 00000 Xxxxx
Xxxxx, Xxxxxxxx, XX 00000, Xxxxxxxx, XXX (Fax: x0-000-000-0000, Tel:
x0-000-000 1447), with a copy to Xxxxxxxx Chance, attn. Xxxx-Xxxx
Xxxx, Xxxxxxxxxx 00-00, 00000 Xxxxxxxxx xx Xxxx (Fax: x00-00-00000
555, Tel.: x00-00-00000-0).
8.4 The parties agree that all notices to third parties and all other
publicity concerning the transactions contemplated by this agreement
shall be agreed between before the initial release.
8.5 This agreement, including the exhibits attached thereto and made a
part hereof, contains the entire understanding of the parties hereto
with respect to the subject matter contained herein and supersedes all
prior arrangements and understandings, whether oral or written.
Provisions of this agreement may be amended only by written instrument
signed by the parties.
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8.6 In the event that one or more provisions of this agreement shall be
invalid of unenforceable or this agreement is incomplete, the validity
and enforceability of the other provisions of this agreement shall not
be affected hereby. In such cases the parties hereto agree hereby on
such valid and enforceable provision or on provisions completing this
agreement which are commensurate with the commercial intent of this
agreement. The same applies in the event of an omission.
8.7 This agreement shall be exclusively governed by and constructed in
accordance with the laws of Germany under exclusion of the United
Nations Convention on the international Sale of Goods.
8.8 All disputes from this agreement including the validity shall be
finally settled by arbitration in accordance with the Arbitration
Rules of the German Institution of Arbitration e.V. (DIS) without
recourse to the ordinary courts of law. The arbitration tribunal may
also decide on the validity of this agreement to arbitrate. There
shall be one arbitrator. The arbitration procedure shall be held in
Frankfurt am Main and shall be carried on in the English language
only. All documents must be submitted in the English language, or,
where the original is in a different language, with a translation in
English, certified by a sworn interpreter. German substantive law
(materielles Recht) as provided in Clause 8.7 shall apply.
The notary instructed both parties that
-- the purchaser of Quotas is liable for unpaid or repaid subscriptions;
-- only such party is recognized as the shareholder by a GmbH who has
notified the GmbH of the assignment of the Quotas.
The Buyer requested the notary to notify the Company of the assignment of Quotas
hereunder in accordance with Section 16 GmbHG.
The above protocol and the exhibits thereto were read to the parties present in
the English language, approved by them and signed by them and the notary in
their on hand as follows:
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