Exhibit 10.5
EL SITIO INTERNATIONAL CORPORATION
SUBSCRIPTION AGREEMENT
Dated as of August 31, 1999
THIS SUBSCRIPTION AGREEMENT, dated as of this 31st day of August.
1999 (this "Agreement"), by and between El Sitio International Corporation, a
corporation organized and existing under the laws of the British Virgin Islands
(the "Company"), and TV Azteca, S.A. de C.V., a corporation organized and
existing under the laws of Mexico (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company desires to issue to the Purchaser, and the
Purchaser desires to purchase from the Company, Shares (as such term is defined
below) in exchange for the Purchaser providing the Company television
advertising time; and
WHEREAS, certain terms used in this Agreement are defined in Section
6.1 hereof;
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Sale and Purchase of Securities.
1.1 Sale and Purchase of Shares. Subject to the terms and conditions
of this Agreement, the Company shall issue, sell and deliver to the Purchaser,
and the Purchaser shall purchase from the Company 355,478 shares of Class A
Preferred Stock, par value $1.00 per share, of the Company ("Shares").
2. Purchase Price.
2.1 Amount of Consideration. The Purchaser agrees to provide the
Company with television advertising time worth US$3,500,000 over a period of
three (3) years, beginning on July 2, 1999, on the Purchaser's television
channels (which amounts shall be based on rates actually charged to
similarly-situated clients of the Purchaser at the time) as set forth on
Schedule A. For purposes of calculating the number of Shares to be issued
pursuant to this Agreement, the value of the advertising time provided by the
Purchaser shall be the net present value of such advertising time, which has
been calculated by applying an annual discount rate of 30% and equals
US$2,489,010.
2.2 Additional Consideration. The Purchaser agrees to use reasonable
efforts to enter into barter arrangements with third parties to reduce the
Company's cash infrastructure and promotional costs related to office space and
other overhead expenses. Any cash savings for the Company obtained by the
Purchaser through such arrangements (as mutually agreed in good faith by the
parties hereto) shall be treated as "Additional Consideration" for the purchase
of Shares. Within 15 days after realizing any such cash savings, the Company
agrees to issue Shares in an amount equal to (x) such Additional Consideration
divided by (y) US$7.00186.
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser that:
3.1 Organization and Good Standing: Capitalization. The Company is
duly organized and validly existing under the laws of the British Virgin Islands
and has the corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now conducted and as it is
proposed to be conducted. The Company is duly qualified or authorized to do
business as a foreign corporation and, except as specifically stated therein, is
in good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties or assets requires such
qualification or authorization.
3.2 Authorization of Agreement: Enforceability. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform fully its obligations hereunder and thereunder. The execution,
delivery and performance by the Company of this Agreement has been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by the Purchaser,
this Agreement constitutes the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with its respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
3.3 Authorization of Shares. The issuance, sale and delivery of the
Shares to be purchased pursuant to Section 1.1 have been duly authorized by all
requisite action of the Company, and, when issued, sold, and delivered in
accordance with this Agreement, the Shares will be validly issued and
outstanding, fully paid and non-assessable, with no personal liability attaching
to the ownership thereof, and not subject to preemptive or any other similar
rights of the stockholders of the Company or others.
3.4 Changes. The representations and warranties set forth in Section
4 of a certain Stock Purchase Agreement dated as of June 21, 1999 (the "Stock
Purchase Agreement"), among El Sitio International Corporation and each of the
persons or entities set forth on Exhibit A thereto (a copy of which
representations and warranties are attached hereto), were true and correct as of
the date of such Stock Purchase Agreement; there has been no material adverse
change in the Company, or its business or prospects since June 21, 1999.
4. Representations and Warranties of the Purchaser.
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The Purchaser hereby represents and warrants to the Company that:
4.1 Capacity; Authorization. The Purchaser is duly organized and
validly existing under the laws of Mexico and has the corporate power to carry
on its business as now conducted. The Purchaser has all requisite corporate
authority to execute and deliver this Agreement and to perform fully its
obligations hereunder and thereunder. Assuming due execution and delivery by the
Company of this Agreement, this Agreement will constitute a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
4.2 Investment Purposes. (a) The Purchaser is acquiring the Shares
it has agreed to purchase for investment purposes only, for its own account, and
not as nominee or agent for any other Person, and not with a view to, or for
resale in connection with, any distribution thereof within the meaning of the
Securities Act, (b) it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment, (c) it is an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act, (d) the Company has made available to it
the opportunity to ask questions and to receive answers, and to obtain
information necessary to evaluate the merits and risks of this investment, and
the Purchaser believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Shares, (e) the
Purchaser understands, acknowledges and agrees that the Shares have not been
registered under (and that the Company has no present intentions to register the
Shares under) the U.S. Securities Act or applicable U.S. state securities law,
and may not be sold or otherwise transferred by the Purchaser to a United States
person unless the Shares have been registered under the U.S. Securities Act and
applicable U.S. state securities laws or are sold or transferred in a
transaction exempt therefrom, and (f) no broker has acted on behalf of the
Purchaser in connection with this Agreement, and there are no brokerage
commissions, finders' fees or commissions payable in connection therewith based
on any agreement, arrangement or understanding with the Purchaser or any action
taken by the Purchaser.
5. Further Agreements of the Parties.
5.1 Confidentiality. Except as may be required by applicable law or
as otherwise agreed among the parties hereto, neither the Company nor the
Purchaser nor any of their respective Affiliates (as such term is defined below)
shall at any time divulge, disclose, disseminate, announce or release any
information to any Person concerning this Agreement, the transactions
contemplated hereby or any trade secrets or other confidential information of
the Company or the Purchaser, without first obtaining the prior written consent
of the other parties hereto; provided, however, that each party to this
Agreement shall be entitled to disclose information with respect to the
Purchaser's investment in the Company on any reports the Purchaser furnishes to
its investors or as otherwise required by law.
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5.2 Extension. If, after three (3) years from July 2, 1999, the
Purchaser has not provided the Company with television advertising time worth
US$3,500,000, this Agreement shall be automatically extended for an additional
twelve (12) months (the "Extension Period"). During the Extension Period, the
Purchaser shall make a reasonable effort to provide the Company with advertising
time such that the total amount of advertising time received by the Company
under this Agreement equals US$3,500,000. Any unused advertising amounts after
the Extension Period shall be deemed surrendered and the Purchaser's obligations
under this Agreement will cease to exist.
5.3 Ratification of Other Undertakings. In connection with the sale
and purchase of Shares, the Company and the Purchaser hereby ratify the
undertakings set forth in paragraph 5 of a certain Letter Agreement, dated
February 11, 1999, by and between the Company and the Purchaser (the "Letter
Agreement"). The undertakings pertain to barter arrangements, a promotional
event and commissions.
5.4 Registration Rights. The Company will use all reasonable efforts
to cause the Purchaser to become a party to that certain Registration Rights
Agreement, by and among El Sitio International Corporation and the holders of
its Class A Preferred Stock, dated as of July 2, 1999.
5.5 Reservation of Shares. The Company will reserve a number of its
common shares sufficient to enable the Purchaser to convert the Shares into
common shares pursuant to the Memorandum of Association of the Company.
6. Miscellaneous.
6.1 Certain Definitions.
"Affiliate" of any Person means any Person that directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including with its correlative
meanings, "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through ownership
of securities or partnership or other ownership interests, by contract or
otherwise).
"law" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
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"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect at the time.
6.2 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
Borough of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or proceeding by
the mailing of a copy thereof in accordance with the provisions of Section 6.5
hereof.
6.3 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto) and the surviving provisions
contained in the Letter Agreement as per paragraph 9 thereof represent the
entire understanding and agreement among the parties hereto with respect to the
subject matter hereof and thereof and can be amended, supplemented or changed,
and any provision hereof and thereof can be waived, only by written instrument
making specific reference thereto signed by the parties hereto.
6.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the principles of conflict of laws thereunder which would specify the
application of the law of another jurisdiction.
6.5 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally, telecopied or mailed by certified mail, return receipt requested, to
the parties at the following addresses (or to such other address as a party may
have specified by notice given to the other party pursuant to this provision):
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If to the Company:
El Sitio International Corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Telephone: ▇▇▇▇▇-▇▇▇-▇▇▇▇
Telecopier: 54114 343-9122, ext. 104
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇
with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser:
TV Azteca, S.A. de C.V.
Periferico Sur, No. 4121
Col. ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, D.F.
Telephone: ▇▇▇-▇▇▇▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: 212-225-3999
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
All notices are effective upon receipt or upon refusal if properly
delivered.
6.6 Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
6.7 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, except that neither
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party may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of the other party.
6.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed, or have
caused this Agreement to be executed, by their respective officers thereunto
duly authorized, as of the date first written above.
EL SITIO INTERNATIONAL CORPORATiON,
as the Company
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇
Title: President, CEO
TV AZTECA, SA. de C.V.,
as the Purchaser
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name:
Title:
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SCHEDULE A
Net Present Value of Advertising Time
Deemed to be Delivered by TV Azteca, S.A. de C.V.
Actual Value Net Present Value of
Year/Quarter of Advertising Time Advertising Time
------------ ------------------- ----------------
1999/Q3* US$375,000 US$359,012
1999/Q4 US$375,000 US$336,220
2000/Q1 US$375,000 US$314,875
2000/Q2 US$375,000 US$294,885
2000/Q3 US$250,000 US$184,109
2000/Q4 US$250,000 US$172,421
2001/Q1 US$250,000 US$161,474
2001/Q2 US$250,000 US$151,223
2001/Q3 US$250,000 US$141,622
2001/Q4 US$250,000 US$132,631
2002/Q1 US$250,000 US$124,211
2002/Q2 US$250,000 US$116,325
Total US$3,500,000 US$2,489,010
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* As of the date of this Agreement, US$139,221 of advertising time has been
provided to the Company by the Purchaser, and such amount will be credited
towards the advertising time to be delivered in the third quarter of 1999.