SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K-A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
August 7, 1996
Date of Report
(Date of Earliest Event Reported)
G/O INTERNATIONAL, INC
(Exact Name of Registrant as Specified in its Charter)
Colorado 0-24688 76-0025986
(State or other (Commission File No.) (IRS Employer I.D. No.)
Jurisdiction)
11849 Wink
Houston, Texas 77024
(Address of Principal Executive Offices)
Registrant's Telephone Number
(713) 783-1204
N/A
(Former Name or Former Address if changed Since Last Report)
Item 1. Changes in Control of Registrant.
None; not applicable.
Item 2. Acquisition or Disposition of Assets.
Pursuant to a Reorganization Plan and Agreement ("Plan") dated
July 26, 1996, between and among: (i) the Company, (ii) G/O
International (Cayman) Inc., a Cayman Island corporation, that,
prior to the Reorganization described herein, was the Company's
wholly owned subsidiary ("G/O Cayman"), (iii) Valle Grande S.A.
de C.V., a Mexican corporation, ("Valle Grande") and (iv) the
beneficial owners of 329,856,844 shares of capital stock of Valle
Grande which constitutes 96.45% of the issued and outstanding
capital stock of Valle Grande ("Valle Grande Shareholders"), G/O
Cayman issued, in a stock for stock exchange, a total of
15,333,690 of its Ordinary Shares, $0.0001 par value per share,
for a total of 329,856,844 shares or 96.45% of the issued and
outstanding shares of capital stock of Valle Grande, thereby
giving G/O Cayman control of Valle Grande and its subsidiary
corporations. No cash or other consideration was tendered in
connection with the Reorganization.
Upon completion of the Reorganization, G/O Cayman had a total of
17,433,500 Ordinary Shares, $0.0001 par value per share, issued
and outstanding, of which a total of 15,333,690 or approximately
88% are held by the Valle Grande Shareholders and 2,099,809 or
approximately 12% are held by the Company.
In connection with the completion of the Plan:
1. John Benbow and Peter Anderson, the two directors of G/O
Cayman, resigned, and were replaced by the following nine
person board of directors who were nominated by the Valle Grande
Shareholders for the terms designated:
Name Class Term
Sebastian Rivera Pena I 1 year
German Garcia Aztiazaran I 1 year
Gilberto Munoz Almada I 1 year
Juan Manuel Mancilla II 2 years
Fernando Tapia Gamez II 2 years
Eduardo Gutierrez Bustamante II 2 years
Enrique Ignacio Taia Camou III 3 years
Eduardo Javier Tapia Camou III 3 years
German Tapia Gamez III 3 years
2. The Company distributed a total of 2,099,809 of the Ordinary
Shares of G/O Cayman to Luis A. Ochoa, Esq. of the Law Firm of
DeConcini McDonald Brammer Yetwin & Lacy, as escrow agent,
("Dividend Escrow Agent"), who, according to the terms of a
Dividend Escrow Agreement entered into between the Company and
the Escrow Agent, will in turn distribute such shares of G/O
Cayman to the shareholders of the Company (and/or their assigns)
as of July 24, 1996 (the "Dividend Record Date"), upon
registration of such class of Ordinary Shares by G/O Cayman with
the United States Securities Exchange Commission ("SEC") under
Section 12(g) of the Securities and Exchange Act of 1934, as
amended (the "Dividend Escrow").
3. Seven of the Company's shareholders, determined as of the
Dividend Record Date, assigned their respective interests in and
to a total of 989,924 Ordinary Shares of G/O Cayman distributable
from the Dividend Escrow, to three corporate entities domiciled
outside of the United States ("Share Assignment").
4. Nine of the Company's shareholders ("Company's
Shareholders"), determined as of the Dividend Record Date, along
with the assignee of a total of 689,924 Ordinary Shares of G/O
Cayman under the Share Assignment, executed and delivered a Share
Lock-Up Agreement appointing Givens Hall Bank & Trust, Ltd.,
Georgetown, Grand Cayman, Cayman Islands, British West Indies as
Share Lock-up Agent to hold a total of 1,379,848 Ordinary Shares
of G/O Cayman delivered upon distribution of the Dividend Escrow
for future release by mutual instruction of the shareholders
delivering such shares pursuant to the Share Lock-Up Agreement
("Shareholders"). At the time of execution of the Share Lock-Up
Agreement a joint instruction was delivered providing that the
Escrow Agent was to distribute to Q-Marq Securities, Ltd.
("Q-Marq"), on May 31, 1997, that number of Shares deposited by
the Company's Shareholders, remaining (after any authorized
distributions) determined by multiplying the number of Shares
deposited by the Company's Shareholders (reduced by any
authorized distributions prior to May 31, 1997) by the fraction,
the numerator of which is the amount of financing raised G/O
International (Cayman) Inc., a Cayman Island corporation on or
before May 31, 1997 and the denominator of which is
USD$30,000,000. The Share Lock-Up Agent was further instructed
that any Shares collectively deposited by the Company's
Shareholders not otherwise distributed to the Company's
Shareholders, or their agent, from the Escrow on or before May
31, 1997, shall be distributed to the remaining party to the
Share Lock Up Agreement.
As the result of the Reorganization, the Company divested a total
of approximately 88% of its interest in G/O Cayman through the
issuance of 15,333,690 Ordinary Shares of G/O Cayman to the Valle
Grande Shareholders in exchange for 96.45% interest in Valle
Grande. Further, the 12% interest, represented by 2,099,809
Ordinary Shares of G/O Cayman held by the Company have been
distributed to the Company's shareholders as of July 24, 1996,
subject to G/O Cayman's registering its class of Ordinary Shares,
par value $0.0001 par value per share, with the SEC pursuant to
Section 12(g) of the Securities and Exchange Act of 1934.
To the best knowledge of the Company's management, no Valle
Grande Shareholder and no member of the management of Valle
Grande are the holders of any shares of the Company's $0.01 par
value per share common stock; the only interests held by the
Valle Grande Shareholders in G/O Cayman were acquired under the
Plan; and the Share Lock-Up Agreement and through the Share
Assignment; the consideration exchanged by the Valle Grande
Shareholders was capital stock of Valle Grande; and no bank loans
were used as a part of the exchange. The following table sets
forth the names and addresses of the Valle Grande Shareholders
and their respective interests acquired in G/O Cayman, to wit:
Name & Address Number of Shares Percentage
Auto Rentas Del Pacifico
Boulevard Kino, 1110 Col. Pitic
Hermosillo, Sonora
Mexico 11,884 .068
Fierro Echave Ramon
Boulevard Kino, 1110 Col. Pitic
Hermosillo, Sonora
Mexico 38,966 .223
Inmobiliaria Cocoris
Boulevard Kino, 1110 Col. Pitic
Hermosillo, Sonora
Mexico 781,950 4.48
L Tonelli Limited
Commerce House, Les Banques
St. Peter Port, Guernsey
Channel Islands GY13WP 6,086,050 34.91
Dolomiti Limited
Commerce House, Les Banques
St. Peter Port, Guernsey
Channel Islands GY13WP 557,830 3.19
Berninee Limted
Commerce House, Les Banques
St. Peter Port, Guernsey
Channel Islands GY13WP 6,092,045 34.94
Capriccio Limited
Commerce House, Les Banques
St. Peter Port, Guernsey
Channel Islands GY13WP 557,830 3.19
Tapia Camou Ana Maria
Boulevard Kino, 1110 Col. Pitic
Hermosillo, Sonora
Mexico 665,303 3.81
Tapia Gamez German
Boulevard Kino, 1110 Col. Pitic
Hermosillo, Sonora
Mexico 417,108 2.39
Versacce Limted
Commerce House, Les Banques
St. Peter Port, Guernsey
Channel Islands GY13WP 124,724 .71
TOTALS 15,333,690
Valle Grande, through four of its subsidiaries is the owner and
operator of four hotels, all located in Mexico, as follows:
Subsidiary Hotel Facility Location
Hoteles Costa Alegre, Holiday Inn-Vallarta Beach Puerto Vallarta,
S.A. de C.V. Hotel & Resort Jalisco, Mexico
Empresas Tapia Gamez, Holiday Inn Hotel Obregon, Sonora,
S.A. de C.V. Mexico
Hotel Nainari, S.A. Hotel Bugambilia Hermmosillo,
de C.V. Sonora, Mexico
Hotel Pitic, S.A. de Holiday Inn Hotel Hermmosillo,
C.V. Sonora, Mexico
The new management of G/O Cayman has indicated to the Company
that they intend to continue to operate these existing properties
and, subject to obtaining further financing, to acquire and
operate additional hotel properties located in Mexico.
Item 3. Bankruptcy or Receivership.
None; not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
None; not applicable.
Item 5. Other Events.
None; not applicable.
Item 6. Resignations of Registrant's Directors.
None; not applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Consolidated balance sheets of Valle Grande, S.A. de C.V. and subsidiaries as
of December 31, 1995 and 1994 (audited), and September 30, 1996 (unaudited).
G/O International (Cayman) Inc. unaudited financial statements as of September
30, 1996
(b) Pro-forma Financial Information.
Proforma financial statements of G/O International, Inc.; Leather Leather,
Inc.; and Valle Grande S.A. de C.V. at June 30, 1996.*
* For financial statements of Leather Leather, Inc., see the
Company's Current Report on Form 8-K-A1 , dated September 25, 1996.
(c) Exhibits.
Description of Exhibit* Exhibit
Number
Agreement and Plan of Merger 2
Schedule A-Valle Grande Shareholders
Schedule B-Valle Grande Subsidiaries
Schedule C-Valle Grande Assets
Schedule D-Valle Grande Licenses and
Permits
Schedule E-Valle Grande Contracts
Schedule F-Valle Grande Equipment
Schedule G-Valle Grande Existing Mortgages,
Liens and Etc.
Schedule H-Valle Grande Insurance
Schedule I-Employees, Pensions and Sick
Leave Policies
Schedule J-Valle Grande Litigation
Schedule K-Valle Grande Material Changes
Schedule L-G/O International, Inc.-subsidiaries
Schedule M-G/O International, Inc.-documents
filed with the Securities and
Exchange Commission and changes
Exhibit 1-Valle Grande Financial Statements
December 31, 1995 and 1994
Exhibit 2-Investment Letter
Exhibit 3-Finders
Dividend Escrow Agreement 10.1
Share Lock Up Agreement 10.2
Item 8. Changes in Fiscal Year.
None; not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned hereunto duly authorized.
G/O INTERNATIONAL, INC.
Date: Jan. 31, 1997 By: J. L. Burns
----------------
Jack Burns, President and Treasurer
Sotomayor
Elias, S.C.
(Letterhead)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
VALLE GRANDE, S.A. DE C.V.
We have audited the consolidated balance sheets of VALLE GRANDE, S.A. DE
C.V. AND SUBSIDIARIES as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity and
changes in financial position for each of the three years in the period
ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Mexico, which are substantially the same as those followed in
the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
VALLE GRANDE, S.A. DE C.V. W SUBSIDIARIES as of December 31, 1995 and
1994, and the consolidated results of their operations, changes in
stockholders' equity and changes in financial position for each of the
three years in the period ended December 31, 1995 in conformity with
accounting principles generally accepted in Mexico.
The accounting principles applied vary in certain respects from
accounting principles generally accepted in the United States of America.
In our opinion, based on our audits, application of accounting principles
generally accepted in the United States of America would have affected
the determination of the amount shown as net loss for the years ended
December 31, 1995, 1994 and 1993, and the amount of total stockholders'
equity as of December 31, 1995 and 1994 to the extent summarized in Note
18 to the consolidated financial statements.
The figures for September 30, 1996 have not been audited and are
presented only for comparative purposes.
DESPACHO SOTOMAYOR ELIAS, S.C.
CONTADORES PUBLICOS
/s/C.P. Rodrigo Sotomayor Elias
Hermosillo, Sonora, Mexico
March 18, 1996
(Except with respect
to constant currency
as discussed in Note lf and
unaudited figures for
September 1996)
VALLE GRANDE, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994 AND SEPTEMBER 30, 1996
(ADJUSTED FOR PRICE-LEVEL CHANGES AND EXPRESSED
IN THOUSANDS OF CONSTANT MEXICAN PESOS AS OF SEPTEMBER 30, 1996)
Unaudited
September
1996 1995 1994
ASSETS
CURRENT ASSETS
Cash and temporary Investments
(Note 2) $ 2,559 $ 2,096 $ 26,754
Notes and trade accounts
receivable (Note 3) 12,480 23,813 44,730
Inventories 937 949 2,228
Advanced payments (Note 4) 1,857 519 790
17,833 27,377 74,502
INVESTMENTS
Investments in shares (Note 5) 7,761 9,363 14,412
Trust rights 44,738 53,860 14,157
Investments in affiliated companies
(Note 6) 10,598 12,759 8,152
63,097 75,982 36,721
FIXED ASSETS (Note 7)
Land 163,521 163,521 137,988
Buildings and construction 229,256 229,254 260,007
Office furniture and fixtures 58,688 58,287 66,250
Transportation equipment 3,497 3,480 3,611
454,962 454,542 468,656
Accumulated depreciation (61,430) (51,375) (72,768)
393,524 403,167 395,888
DEFERRED ASSETS
Bond Issue expenses (Note 8) 76 91 139
Prepaid expenses (Note 9) 64 77 145
140 168 284
OTHER ASSETS (NOTE 10)
Land 4,923 4,923 6,234
Construction in progress 2,247 5 7
7,170 4,928 6,241
TOTAL ASSETS $481,764 $511,622 $513,636
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and accounts payable
(Note 11) $55,094 $73,424 $94,580
Reserves and provisions 830 125 256
employees' profit sharing payable 2 10 5
Tax on assets payable 2,043 2,831
55,926 75,602 97,672
LONG-TERM LIABILITIES
Notes payable (Note 12) 181,749 221,037 204,873
Accrued seniority premiums
cost (Note 13) 437 462 695
Mortgage bonds (Note 14) 12,002 14,450 18,295
Deferred value added tax payable 594
194,188 235,949 224,457
TOTAL LIABILITIES 250,114 311,551 322,129
STOCKHOLDERS' EQUITY
Capital stock, fixed and variable
(Note 15) 116,934 116,934 66,629
Excess from reinstatement of
stockholders' equity (Note 16) 345,714 345,714 318,816
Paid-in capital 2,538 2,538 2,538
Legal reserve 5,218 5,218 5,218
Retained earnings (Deficit) (270,333) (248,503) (70,277)
Net income (loss) for the year 31,579 (21,830) (131,417)
TOTAL STOCKHOLDERS' EQUITY 231,650 200,071 191,507
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $48l,764 $511,622 $513,636
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS
VALLE GRANDE S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
(ADJUSTED FOR PRICE-LEVEL CHANGES AND EXPRESSED
IN THOUSANDS OF CONSTANT MEXICAN PESOS
AS OF SEPTEMBER 30, 1996)
NOTE 1) THE COMPANY'S MAIN ACTIVITIES
The main activities of the company are offering lodging, restaurant, and
bar services, as well as the renting of halls for special events.
OTHER SECONDARY OBJECTIVES
a) Purchase and sale of all kinds of products for trading by the company
or other companies.
b) The promotion and fomentation of industrial, commercial and touristic
development and acquisition, sale or any other juridical acts with
shares, participation certificates, bonds, debentures and all class of
instruments issued by Mexican societies.
c) The promotion and foment of industrial, commercial and touristic
development by the purchase, sale or any juridical act with real estate,
factories, laboratories, plants, warehouses, machinery, furniture,
credits and rights.
d) To grant, stand for, guarantee loans given to societies which the
company is or is not the owner, as well as give warranty in favor of
third parties.
e) Give all kinds of services and make promotional, enlargement or
restructuration studies destined exclusively for societies which the
company is proprietor of, or any other society which the company has the
intention of having stock participation.
f) Acquire and rent all kinds of real estate with the intention of
selling or using them in all kinds of business operations.
g) In general, carry out all class of representations, commissions,
celebrate contracts and do all kinds of acts necessary to reach the
company's goals.
ACCOUNTING POLICIES
a) Consolidation principles
The financial statements include the accounts of VALLE GRANDE, S.A. DE
C.V., and its subsidiaries, except Intervuelos, S.A. de C.V.,
Agrofrutales de Sonora, S. de R.L. de C.V., Hotelera Rio Sonora, S.A. de
C.V., and Delfin Vacation Club, S.A. de C.V.; the balances of all the
current accounts, as well as important transactions between related
parties have been eliminated.
b) Accounts receivable
A monthly allowance for doubtful accounts is registered, it is calculated
by applying a 19 rate to the previous month sales.
c) Inventories
Inventories are valued at their average cost. The amounts shown for
inventories do not exceed their market value.
d) Property and equipment
The investments in real estate, furniture and equipment are registered at
their acquisition and installation values.
The repairs and adaptations to these investments are capitalized, when
those repairs represent additions or improvements to these assets.
Depreciation is determined on the assets balances at year end by the
straight-line method. In this year, the depreciation rates were modified
due to an appraisal made by an independent expert, who provided the
remaining useful life for each type of asset.
e) Allowance and provisions
The company has allowances for seniority premiums, year end bonus,
vacation premiums and dismissal indemnity, which are calculated on a
monthly basis by applying to each month wages specific rates, that vary
according to each company severance compensation plans.
f) Financial statements presentation
The financial statements were prepared in conformity with B-10 accounting
principle, consequently:
1. The financial statements are stated in constant Mexican pesos of
September 30, 1996 purchasing power. In the statement of income, items
are restated monthly by applying to each months balances a restatement
factor. This factor is obtained by dividing the National Consumer Price
Index of the month the financial statement is referring to and the
National Consumer Price Index of the month the income item balances
refers to.
2. Restatement of the stockholders' equity is distributed between each
item that conforms it.
The statement of changes in the financial position was prepared
considering as resources provided or used, the change in constant Mexican
pesos of the different items in the balance sheet.
NOTE 2) CASH AND TEMPORARY INVESTMENTS
The balance in this account is represented by cash funds and checking
accounts in national and foreign currency (US dollars), US dollars
currency accounts are valued at $ 7.6842 pesos for one dollar, this
exchange rate is the prevailing at December 31, 1995. The balances of
December 31, 1994 were restated with the annual inflation factor of
1.5196 for presentation purposes.
1995 1994
Cash $ 398 $ 215
Banks National Currency 1,481 5,741
Banks Foreign Currency
(U.S. Dollars) 214 292
Investments in realizable
securities 3 20,506
$ 2,096 $26,754
NOTE 3) INTEGRATION OF NOTES AND TRADE ACCOUNTS RECEIVABLE
1995 1994
Clients $ 7,413 $ 26,575
Others:
Wage credit 50
Sundry debtors 14,160 9,106
Tax advances 398 313
Executives and employees 288 281
Recoverable value added
tax 285 466
Delfin Vacation Club,
S.A. de C.V. 1,400
Notes receivable 149
Intervuelos, S.A.
de C.V. 3,735
Empresas Tapia Gamez,
S.A. de C.V. 1,448
Hotelera Rio Sonora,
S.A. de C.V. 1,417
Other debtors 160 1,632
24,104 45,172
Minus:
Allowance for doubtful
accounts (291) (442)
$ 23,813 $ 44,730
NOTE 4) INTEGRATION OF ADVANCED PAYMENTS
1995 1994
Advances to suppliers $ 263 $ 248
Other advance payments 161 400
Guaranty deposits 95 142
$ 519 $ 790
NOTE 5) INVESTMENTS IN SHARES
This item is represented by the acquisition of equity securities (shares)
and is integrated as follow:
1995 1994
Grupo Financiero
Inverlat, S.A. $ 8,522 $ 12,921
Banca Confia, S.A. 841 1,277
Other investments 214
$ 9,363 $ 14,412
NOTE 6) INVESTMENTS IN AFFILIATED COMPANIES
1995 1994
It's integration is as follows:
Delfin Vacation Club,
S.A. de C.V. $ 4,544 $
Hotelera Rio Sonora,
S.A. de C.V. 4,866 7,394
Intervuelos, S.A.
de C.V. 3,345 758
Other enterprises of
the group 4
$ 12,759 $ 8,152
NOTE 7) PROPERTY AND EQUIPMENT
RESTATED FIGURES
1995 1994
Land $ 163,521 $ 137,988
Building and
constructions 229,254 260,807
Furniture and
equipment 58,287 66,250
Transportation
equipment 3,480 3,611
454,542 468,656
Accumulated
depreciation (51,375) (72,768)
$ 403,167 $ 395,888
The real estate property of Hotel Nainari, S.A. de C.V., (Subsidiary
Company) are granted as guarantee for the bond issue and as guarantee for
the loan of $10,000,000 American dollars given by Multibanco Commermex,
S.A., real estate assets of subsidiary companies, Hotel Pitic, S.A. de
C.V., Hotel Nainari, S.A. de C.V. and Hotelera de Nogales, S.A. de C.V.
were granted.
NOTE 8) BOND ISSUE EXPENSES
This item refers to incurred expenses in the issuing of the mortgage
bonds, that will be amortized in a 7 year period.
NOTE 9) PREPAID EXPENSES
This caption is represented by expenses of seniority premiums coming from
previous years, these expenses will be amortized in a 14 year period
determined by the workers remanent labour life.
NOTE 10) OTHER ASSETS
Caption represented by land and construction in progress located in the
city of Nogales, Sonora.
NOTE 11) INTEGRATION OF CURRENT NOTES AND ACCOUNTS PAYABLE
1995 1994
Notes payable $ 42,218 $ 60,173
Suppliers 4,069 9,800
Sundry creditors 12,706 12,865
Taxes payable 5,674 2,996
Invertur del Pacifico,
S.A. de C.V. - 2,014
Payable tickets to airlines 357 303
Advances on reservations 3,635 2,314
Income tax payable 1,500
Value added tax payable 981 1,346
Other creditors 2,284 2,769
$ 73,424 $ 94,580
NOTE 12) INTEGRATION OF LONG TERM NOTES PAYABLE
1995 1994
BANCO MEXICANO, S.A.
Loan for $302,863 American dollars
valued at the exchange rate of $7.6842
and $4.94 at December 31, 1995 and 1994
bearing interest at the prime rate plus
6 points, with maturity in December
5, 1995. $ 1,681 $ 2,737
Interest and exchange loss 208
ARRENDADORA BANCOMER, S.A.
Loans contracted for the acquisition
of fixed assets. The last loan is due
during January 1996. 41 999
BANCOHER, S.A.
Loans contracted for operating
expenses, at an annual rate of 235.
The last loans is due on January 26,
1993. 8,050
Interest earned 100
INVERIAT, S.A.
Loan for $1,490,000 American dollars
valued at the exchange rate of $7.6842
bearing interest at libor plus 6
points, contracted for the acquisition
of trust rights. The loan is due on
October 5, 2003 with a grace period of
two years. 13,784
Interest earned 1,706
Loan for $6,935,000 American dollars
valued at the exchange rate of
$7,6842 and $4.94 at December 1995
and 1994, bearing interest at libor
plus 6.5 points, maturing on October
5, 2009. 64,156 62,675
Earned interest 7,812 1,349
MULTIBANCO COKERMEX, S.A.
Loan for $5,882,950 American dollars
valued at the exchange rate of
$7.6842 and $4.94 at December 1995
and 1994 bearing interest at libor
plus 7.5 points, contracted for the
restructuring of debt and maturing
on July 5, 2002. 54,423 53,167
Interest earned 6,545 1,383
Loans for $4,117,050 American dollars
valued of the exchange rate of $7.6842
and $4.94 at December 31, 1995 and 1994
bearing interest of libor rate plus 6.5
points, assigned for the rooms remodeling
with maturity on July 5, 2002. 38,087 37,208
Earned interest 4,279 881
Credit for $718,121 American dollars
valued at the exchange rate of $ 7.6842
and $4.94 at December 31, 1995 and 1994
bearing interest of libor rate plus 6.5
points and destined for the rooms
remodeling, with maturity on
July 5, 2002. 5,862 7,857
Earned interest 2,899 245
Loan for $4,000,000 American dollars
valued at the exchange rate of $7.6842
and $4.94 at December 31, 1995 and 1994
bearing interest of libor rate plus
7 points, assigned for working capital
and remodeling with maturity on October
5, 2004. 39,184 36,150
Earned Interest 2,769 1,129
INVERTUR DEL PACIFICO
Loan bearing interest of the CETES rate
with maturity on October 3, 1994. 703 1,068
FIDEICOMISO RIO SONORA
Loan for the acquisition of land with
expiration of December 31, 1995. 6,135
EDVARDO AVINA BATIZ AND PARTNERS
Loan for the acquisition of shares bearing
interest of CD rate plus P. RATE/2/2 with
the final expiration in May of 2000. 8,867 10,693
BANCA SERFIN
Loan destined to assume the liabilities
and discharge the solidary obligation
that in relation with that credit they
had with Invertur del Pacific, S.A. de
C.V. and Burquez Brothers with the
purpose of consolidating liabilities
contracted by the same financial
institution, bearing interest of 80% of
CETES with maturity on April of 1995. 21,496
Earned Interest 1,805
Unsecured loan bearing interest rate of
25.5+ with maturity on December 16, 1994. 3,659
Interest 217
Unsecured loan with maturity on October
13, 1995, with an annual interest rate
of 43%. 3,491
Earned interest 432
COMERMEX, S.A.
Financial lease contract subscribed with
Arrendamiento Dinamico Serfin, S.A. de
C.V., to acquire computer equipment
with value of $208,474; the interest
rate was CETES (X) 1.3, the term of the
contract was for 36 months 250
ARRENDAMIENTO DINAMICO SERFIN, S.A. DE C.V.
Financial lease contract subscribed for
the acquisition of computer equipment
with value of $208,474, the interest
rate agreed is CETES (X) by 1.3 with
duration of 36 months. 165
Other documented liabilities 58 97
256,944 259,553
Minus:
Current Portion (35,907) (54,685)
$ 221,037 $ 204,873
NOTE 13) LABOUR LIABILITIES
Derived from the actuarial valuation of the labour liabilities of the
company at December 31, 1994 the following data was obtained:
* Current benefit obligations as of December 31, 1994:
$ 228
* Projected benefit obligations projected to:
a) January 1, 1994: $484
b) December 31, 1994: $508
* Assets as of:
a) January 1, 1994: $0
b) December 31, 1994: $0
* Unamortized prior service cost and plan modifications as of December
31, 1994: $0
* Unamortized assumption variations and experience adjustments
(loss)/gain, as of December 31, 1994: $(6).
* Additional liabilities adjusted amount as of December 31, 1994:
$(14)
* Unamortized transition liabilities as of December 31, 1994.
$358
* Net period cost as of January 1, 1994: $159
All calculations were made by independent actuaries.
For the year of 1995, the actuarial study was not done by the company,
because is was considered that the allowance was adequate for the labour
liabilities.
NOTE 14 ) MORTGAGE BONDS
This item is represented by the issuing of 100,000 mortgage bonds, with a
nominal value of one hundred pesos for each one with maturity on November
21, 1998, bearing variable interest rates.
The bonds will be amortized in 8 equal payments, these would be
semestral, consecutive, fixed and without draws, starting the 42nd month
after the issue, each semestral amortization includes a complete series
of bonds, with a nominal value of $ 1,250.
The derivated interest of this issue are payable quarterly, however the
last time interest were paid was on November 21 of 1992.
As a collateral, real estate assets of Hotel Nainari, S.A. de C.V.
(Subsidiary) were given as mortgage; additionally financial and corporate
structure limitations of the issuer were established in the contract.
NOTE 15) CAPITAL STOCK
The fixed capital stock in represented by 10,000,000 of shares with value
of 10 cents each.
The variable capital stock is composed by 332,002,510 shares with face
value of 10 cents each, which comes from the capitalization of the
restatement of stockholders! equity accounts.
It's integration is as follows:
Fixed capital stock $ 1,000
Variable capital stock 37,830
Historic balance 38,830
Restatement 78,104
Restated balance $ 116,934
A portion of the stockholders' equity of Hoteles Valle Grande, S. A. de
C.V., of $5,573, is included in the variable capital stock, when Delfin
Vacation Club, S.A. de C.V., is not consolidating, since it has
46,296,590 shares (18~) of Hoteles Valle Grande, S.A. de C.V.,
stockholders' equity.
NOTE 16) RESTATEMENT OF FINANCIAL STATEMENTS
The financial statements are restated at replacement cost determined on
the basis of appraisals made by independent experts at December 31, 1995.
The item "Excess from restatement of stockholders' equity" is composed as
follows:
Results from monetary position $ 18,489
Results from non monetary
assets holding 327,225
$ 345,714
The results from holding non monetary assets was obtained by comparing
the restatement by using replacement cost and the restatement by using
the variation for the year of the National Consumer Price Index,
resulting for the year a gain in 1995 of $13,433 representing that the
increase in value of the assets was larger than inflation.
The results from monetary position for 1995 resulted into a profit of
$73,541 originated by having monetary liabilities larger than monetary
assets, which decrease their real value due to inflation. This gain is
applied to the years results under the item of "Operational
monetary result".
NOTE 17) INTEGRAL COST OF FINANCING
Its integration is as follows:
1995 1994
Interest earned $ 4,638 $
Interest paid (47,303) (18,637)
Operational monetary result 73,541 5,206
Exchange gains 5,597
Exchange loss (84,589) (59,310)
$ (48,116) $ (72,741)
NOTE 18) DIFFERENCES BETWEEN MEXICAN AND U.S. ACCOUNTING PRINCIPLES
The company's consolidated financial statements are prepared in
accordance with Mexican GAAP, which differs in certain respects from U.S.
GAAP.
The Mexican GAAP consolidated financial statements include the effects of
inflation as provided for under bulletin B-10, as amended, whereas
financial statements prepared under U.S. GAAP are presented on a
historical cost basis. The following reconciliation to U.S. GAAP does not
include the reversal of the adjustments required under bulletin B-10, as
amended. The application of bulletin B 10, as amended, represents a
comprehensive measure of the effects of price level changes in the
inflationary Mexican economy and, as such, is considered a more
meaningful presentation than historical cost-based financial reporting
for both Mexican and U.S. accounting purposes. The principal differences
other than inflation accounting between Mexican GAAP and U.S. GAAP and
the effect on net earnings (losses) and total stockholders' equity are
presented below. Deferred income taxes under U.S. GAAP arise principally
due to the deduction of purchases remaining in inventory for book
purposes which are expensed for tax purposes, differences in depreciation
expense recognized for book and tax purposes, and differences related to
restatements of assets to appraised value.
YEAR ENDED DECEMBER 31,
1995 1994 1993
Net income (loss)
Net loss under Mexican GAAP $ (21,830) $(131,417)$ (33,228)
Approximate U.S. GAAP adjustments:
Deferred income tax (14,437) 14,535 (32,255)
Deferred employee profit
sharing (6,638) (4,407) (11,548)
Approximate net loss under U.S.
GAAP (42,905) (121,289) (77,031)
Weighted average common
Shares outstanding (000's) 342,002 113,928 42,002
Approximate net loss per share
under U.S. GAAP (0.13) (1.06) (1.83)
Under U.S. GAAP, tax on assets and employee profit sharing are classified
as operating expenses.
December 31,
1995 1994
Stockholders' equity under
Mexican GAAP $ 200,071 $ 191,507
Approximate U.S. GAAP
adjustments:
Deferred income taxes (46,555) (32,119)
Deferred employee profit
sharing (29,748) (23,109)
Approximate stockholders'
equity under U.S. GAAP $ 123,768 $ 136,279
DEFERRED INCOME TAXES AND EMPLOYEE PROFIT SHARING
Under Mexican GAAP, deferred taxes are provided only for nonrecurring
temporary differences, which are defined as items which will reverse and
not be replaced by a similar item. Under SFAS No. 109, which requires the
liability method of accounting, deferred income taxes are recognized for
the tax consequences of all temporary differences both recurring and
nonrecurring, between the financial statements carrying amounts, which
have been adjusted for inflation and appraised values, and the tax basis
of existing assets and liabilities. The deferred taxes related to
restatements of assets to appraised value or for the national consumer
price index have been considered as a part of the provision.
The tax effect of temporary differences that generated deferred tax
(liabilities) assets under SFAS No. 109 are as follows:
DEFERRED DEFERRED EMPLOYEE
INCOME TAXES PROFIT SHARING
DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994
Current:
Inventories $ (496) $ (804) $ (146) $ (237)
Long-term:
Fixed assets (100,999) (78,157) (29,706) (22,987)
Accrued liability
For employee benefits 241 265 71 78
Tax loss carryforwards 44,409 37,499 - -
Tax on assets 10,178 8,954 - -
Other 112 124 33 37
Total liability $(46,555) $(32,119)$(29,748) $(23,109)
The accompanying notes are an integral part of these consolidated
financial statements.
G/O INTERNATIONAL (CAYMAN) INC.
UNAUDITED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1996
G/O INTERNATIONAL (CAYMAN) INC. AND SUBSIDIARIES
UNAUDITED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(THOUSANDS OF MEXICAN PESOS)
Unaudited
September
1996
ASSETS
CURRENT ASSETS
Cash and temporary investments $ 2,559
Notes and trade accounts
receivable 12,490
Inventories 937
Advanced payments 1,857
17,833
INVESTMENTS
Investments in shares 7,761
Trust rights 44,738
Investments in affiliated companies 10,598
63,097
FIXED ASSETS
Land 163,521
Buildings and constructions 229,256
Office furniture and fixtures 58,688
Transportation equipment 3,497
454,962
Accumulated depreciation (61,438)
393,524
DEFERRED ASSETS
Bond issue expenses 76
Prepaid expenses 64
140
OTHER ASSETS
Land 4,923
Construction in progress 2,247
TOTAL ASSETS $ 461,764
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and accounts payable $ 55,094
Reserves and provisions 830
Employees' profit sharing payable 2
55,926
LONG-TERM LIABILITIES
Notes payable 181,749
Accrued seniority premiums cost 437
Mortgage bonds 12,002
194,188
OTHER LIABILITIES
Minority Interest 8,224
TOTAL LIABILITIES 253,338
STOCKHOLDERS' EQUITY
Capital stock 13
Contributed surplus and excess from
restatement of stockholders' equity 192,979
Net income for the period 30,434
TOTAL STOCKHOLDERS' EQUITY 223,426
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 481,764
G/O INTERNATIONAL (CAYMAN) INC. AND SUBSIDIARIES
UNAUDITED INCOME STATEMENT
FOR THE PERIOD ENDING SEPTEMBER 30, 1996
(THOUSANDS OF MEXICAN PESOS)
Unaudited
September 30,
1996
REVENUES
Net sales $ 53,398
Commissions earned ticket sales 899
Revenues from services 227
Other revenues 1,808
56,332
COSTS AND EXPENSES
Cost of sales and operating expenses 29,449
Administrative expenses 13,989
43,438
OPERATING INCOME 12,894
DEPRECIATION AND AMORTIZATION 10,299
INTEGRAL FINANCING COST (GAIN) (28,960)
NET INCOME BEFORE MINORITY INTEREST 31,555
MINORITY INTEREST (1,121)
NET INCOME FOR THE PERIOD $ 30,434
G/O INTERNATIONAL (CAYMAN) INC. (NOTE 1)
UNAUDITED INCOME STATEMENT
FOR THE PERIOD ENDING SEPTEMBER 30, 1996
(THOUSANDS OF MEXICAN PESOS)
Unaudited
September 30,
1996
REVENUES
Participation in results of subsidiaries
(Note 4) $ 30,458
EXPENSES
Professional fees (24)
NET INCOME FOR THE PERIOD $ 30,434
G/O INTERNATIONAL (CAYMAN) INC. (NOTE 1)
UNAUDITED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(THOUSANDS OF MEXICAN PESOS)
Unaudited
September 30,
1996
ASSETS
Investments in subsidiary Companies (Note 2) $ 223,426
TOTAL ASSETS 223,426
STOCKHOLDERS' EQUITY (NOTE 3)
Capital stock 13
Contributed surplus and excess from
restatement of stockholders' equity
(Note 2) 192,979
Net income for the period 30,434
TOTAL STOCKHOLDERS' EQUITY $ 223,426
The accompanying notes are an integral part of these financial
statements.
G/O INTERNATIONAL (CAYMAN) INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1996
(THOUSANDS OF MEXICAN PESOS)
1. INCORPORATION AND PRINCIPAL ACTIVITY
G/O International (Cayman) Inc. (the "Company") is a Cayman Island
corporation that was incorporated on March 12, 1996, by its parent
corporation G/O International, Inc., a Colorado corporation (G/O
Colorado') on or about May 24, 1996. The Company has never engaged in any
business and its principal activity is that of an investment holding
company. It is anticipated that the Company will remain a holding company
and only indirectly engage in business operations through its
subsidiaries. On or about June 26, 1996, the Company acquired, from the
holders thereof, 96.45% of the issued and outstanding capital stock of
Valle Grande S.A. de C.V. ("Valle Grande"), a corporation (sociedad
anonima de capital variable) organized under the laws of the United
Mexican States. The shares of capital stock of Valle Grande are the only
material asset of the Company. Valle Grande is the sole shareholder of
nine subsidiary corporations (sociedad anonima de capital variable) also
organized under the laws of the United Mexican States, through which it
holds and operates its principal properties.
Valle Grande, through its nine subsidiaries, is engaged in the
hospitality business, including the operation of hotels, restaurants and
other hospitality-related entities. In its business, Valle Grande owns
and operates four hotels, all located in Mexico: Holiday Inn-Puerto
Vallarta located in Puerto Vallarta, Jalisco, Mexico; Holiday Inn
Ciudad Obregon located in Ciudad Obregon, Sonora, Mexico; Hotel
Bugambilia located in Hermosillo, Sonora, Mexico; and Holiday Inn
Hermosillo also located in Hermosillo, Sonora, Mexico. Each of the these
hotel facilities is hereinafter referred to individually as a "Hotel" and
collectively as the "Hotels."
In addition to the ownership and operation of these Hotels, Valle
Grande, through two of its subsidiaries in engaged in the travel agency
business through travel agencies located in its Holiday Inn Hermosillo,
located in Hermosillo, Sonora, Mexico, and its Holiday Inn Ciudad
Obregon, located in Ciudad Obregon, Sonora Mexico. Further, Valle Grande
through another subsidiary provides contract management services for a
244 suite condominium facility located adjacent ~o its Holiday Inn
Puerto Vallarta Hotel in Puerto Vallarta, Jalisco, Mexico. Valle Grande
also owns 75 of the 244 suites located in such condominium facility and a
contiguous parcel of undeveloped land measuring approximately 138,600
square feet.
2. REORGANIZATION PLAN AND AGREEMENT
On July 26, 1996, the company entered into a reorganization plan and
agreement to acquire 329,856,844 shares of common stock (96.45 %) of
Valle Grande, S.A. de C.V. (a Mexican corporation) for 15,333,690 shares
of common stock in a tax free reorganization wherein Valle Grande, S.A.
de C.V. became a subsidiary of the Company. As a result of this
reorganization plan and agreement, the subsidiary through its major
shareholders owns approximately 88% of the outstanding shares of the
company on the merger date. At the acquisition date the company was
essentially inactive, with no assets and minimal operations.
Accordingly, the subsidiary became the continuing entity for accounting
purposes, and the transaction was accounted for as a reverse acquisition
which is accounted for as an exchange of shares between enterprises under
common control which is similar to a combination under the pooling of
interests method of accounting.
3. STOCKHOLDERS' EQUITY
Authorized capital stock (par value of U.S. dollars 0.0001 each):
100,000,000 Common shares $75,374
10,000,000 Preferred shares 7,537
390,000,000 Unclassified shares 293,959
$376,870
Issued capital stock:
2,099,810 Common shares $ 2
15,333,690 Common shares 11
$ 13
The 2,099,810 common shares were issued for a total consideration of $24.
The 15,333,690 common shares were issued in accordance with the
reorganization plan and agreement dated July 26, 1996.
4. EQUITY METHOD
The accompanying financial statements for the Company include the equity
method of accounting for the participation of results in the subsidiary
company.
5. SUBSEQUENT EVENTS
Since December 19, 1994, when the economic crisis began, the Mexican
economic authorities implemented various debtor relief measures for the
purpose of providing relief to Mexican banks as well as the bank's loan
debtors. As a result of the Mexican economic crisis, and the peso
devaluation, past due loans increased and corporate debtor default became
common place by mid-1995. This was a consequence of the high interest
rates on outstanding loans, at one time up to 90% in pesos.
Additionally, the peso devaluation from 3.47 pesos per dollar in December
1994 to 7.95 pesos per dollar in December 1996 (a devaluation of 1275),
resulted in a currency exchange loss reported by Mexican bank loan
debtor's. The currency exchange losses were generated when outstanding
loan balances reported in pesos on Mexican bank loan. debtor's balance
sheets for loans in which the bank loan debtors had agreed to repay in
U.S. dollars. As a result of the peso devaluation, many bank loan debtors
defaulted under the original terms of their respective bank loans.
Valle Grande reported such currency exchange losses for its bank loans in
its 1994 and 1995 balance sheets and defaulted under the original terms
of its bank loans with Inverlat and Banca Serfin.
Pursuant to the original terms of such loans, Inverlat and Banca Serfin's
have the right to accelerate and declare immediately due and payable, the
outstanding principal balance and accrued interest of their respective
loans. Valle Grande has obtained verbal assurances from Inverlat and
Banca Serfin that they have no intention of proceeding with any action,
legal or otherwise, to declare the loans due and payable and to collect
the outstanding loan balances. Inverlat and Banca Serfin have given the
Valle Grande group its verbal assurances that they shall renegotiate and
restructure the repayment terms in principal balances of the respective
loans. The material terms of the Valle Grande group's outstanding bank
loans are illustrated in the table below.
GRUPO VALLE GRANDE
BANK LOANS TO NOVEMBER
30,1996
LONG - TERM LIABILITIES
Lender Loan DATE MATURITY TERM INTEREST PESOS
type YEARS RATE 7.9
Ps./dl.
COMERMEX(INVERLAT) Long T 250ct-93 5-0ct-04 11 Libor+6.5% 213,689,529
MEXICANO Long T 5-Jun-92 5-Dec-96 4 PRIME + 6 1,447,631
SERFIN Short T 16-Sep-95 13Oct-95 1 43.00% 3,469,167
SERFIN Short T 16-Sep-95 13Oct-95 1 43.00% 1,561,125
220,167,452
Short Term Portion 36,033,304
Long Term Portion 184,134,148
G/O INTERNATIONAL, INC.
Proforma Balance Sheet
June 30, 1996
(Unaudited)
ASSETS
Leather
Leather, Inc. Valle Grande
(formerly) G/O (formerly) G/O Proforma
G/O International International Adjustments
International Group (Cayman) Increase
Inc. (USA), Inc. Inc. (Decrease) Proforma
CURRENT ASSETS
Cash $ 11,497 $ - $ - $ - $ 11,497
Total Current
Assets 11,497 - - - 11,497
OTHER ASSETS
Investments - - - - -
TOTAL ASSETS $ 11,497 $ - $ - $ - $ 11,497
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts
payable $ 5,327 $ - $ - $ - $ 5,327
Advances
from
stockholders 14,385 - - - 14,385
Total Current
Liabilities 19,712 - - - 19,712
Total
Liabilities 19,712 - - - 19,712
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock;
par value $0.01;
20,000,000
authorized;
3,985,372
issued and
outstanding 39,854 - - - 39,854
Additional
paid-in
capital 2,321,626 - - - 321,626
Accumulated
deficit (2,369,695) - - - (2,369,695)
Total
Stockholders'
Equity
(Deficit) (8,215) - - - (8,215)
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY
(DEFICIT) $11,497 $ - $ - $ - $ 11,497
G/O INTERNATIONAL, INC.
Statement of Operations
June 30, 1996
(Unaudited)
Leather
Leather, Inc. Valle Grande
(formerly) G/O (formerly) G/O Proforma
G/O International International Adjustments
International Group (Cayman) Increase
Inc. (USA), Inc. Inc. (Decrease) Proforma
SALES $ 21 $ - $ - $ - $ 21
EXPENSES
General and
administrative 7,446 - - - 7,446
Total Expenses 7,446 - - - 7,446
LOSS FROM
OPERATIONS (7,446) - - - (7,446)
NET LOSS $ (7,425) $ - $ - $ - $ (7,425)
G/O INTERNATIONAL, INC.
Statements of Assumptions and Disclosures for the
Proforma Financial Statements
June 30, 1996
(Unaudited)
BACKGROUND AND HISTORICAL INFORMATION
G/O International, Inc. (the Company) was incorporated under the laws
of the State of Colorado. The Company has had very little activity over the
past several years and has been searching for and evaluating potential
business acquisitions and combinations.
PROFORMA TRANSACTIONS
The historical financial information contained herein has been prepared
assuming the distribution of shares of the common stock of the subsidiaries of
the Company to the shareholders of the Company on a prorata basis.
Leather Leather, Inc., (Leather) manufactures and sells leather
furniture, primarily within the Dallas-Fort Worth and Houston areas. Leather
was incorporated effective December 15, 1994. Although some start-up costs
were incurred during the first three months of 1995, the Company did not
initiate operations until April 1, 1995.
On September 18, 1996, all of Leather's outstanding stock was acquired
by Leather Leather, Inc., a Delaware Corporation formerly known as G/O
International (USA), Inc. Leather was incorporated on October 10, 1995, and
through September 30, 1996, has had no business or operations and prior to the
merger was classified as a development stage enterprise.
G/O International (Cayman) Inc. (Cayman) is a Cayman Island corporation
that was incorporated on March 12, 1996. Cayman has never engaged in any
business and its principal activity is that of an investment holding company.
On or about June 2, 1996, Cayman acquired, from the holders thereof, 95.45% of
the issued and outstanding capital stock of Valle Grande S.A. de C.C. ("Valle
Grande"), a corporation organized under the laws of the United Mexican States.
Valle Grande is the sole shareholder of nine subsidiary corporations also
organized under the laws of the United Mexican States, through which it holds
and operates its principal properties.
Valle Grande, through its nine subsidiaries, is engaged in the
hospitality business, including the operation of hotels, restaurants and other
hospitality-related entities.
PROFORMA ADJUSTMENTS
1) Record the distribution of all of the shares of Leather to the
shareholders of the Company.
Investment $ -
Additional paid-in capital -
Total $ -
2) Record the distribution of all of the shares of Cayman to the
shareholders of the Company.
Investment -
Additional paid-in capital -
Total $ -
REORGANIZATION PLAN AND AGREEMENT
This Reorganization Plan and Agreement ("Agreement") is
made and entered into this 26th day of July, 1996, between and
among: (i) G/O International (Cayman) Inc., a Cayman Island
corporation, which is referred to herein as the "Company,"
(ii) G/O International, Inc., a Colorado corporation, which is
referred to herein as G/O Colorado (iiii) Valle Grande S.A. de
C.V., a Mexican corporation, which is referred to herein as
"Valle Grande," and (iv) those persons or entities identified
in Schedule A attached hereto, who are the beneficial owners
of 329,856,844 shares of capital stock of Valle Grande which
constitutes 96.45% of the issued and outstanding capital stock
of Valle Grande, which are referred to herein as the "Valle
Grande Shareholders".
WHEREAS, the Valle Grande Shareholders, as set forth in
Schedule A hereto, own and have the right to sell, transfer
and convey 329,856,844 shares of the capital stock of Valle
Grande which constitutes ninety six and one half percent
(96.45%) of the issued and outstanding capital stock of Valle
Grande; and
WHEREAS, the Company wishes to acquire the issued and
outstanding capital stock of Valle Grande, from the Valle
Grande Shareholders; and
WHEREAS, the Valle Grande Shareholders have agreed to
deliver 329,856,844 shares of the capital stock of Valle
Grande which constitutes ninety six and one half percent
(96.45%) of the issued and outstanding shares of capital stock
of Valle Grande to the Company in exchange for those shares of
the Company s $0.0001 par value per share Ordinary Shares set
forth in Schedule A hereto; and
WHEREAS, in connection with such exchange of shares among the
Valle Grande Shareholders and the Company, G/O Colorado, the
Company s parent, has agreed, subject to the fulfillment of
certain conditions, to distribute the 2,099,809 currently
outstanding shares of the Company s $0.0001 par value per
share Ordinary Shares held by it to its existing shareholders;
and
WHEREAS, the parties hereto wish to formalize the above
mentioned agreements and thereafter accomplish such exchange
on the terms and conditions set forth herein.
NOW THEREFORE, for and in consideration of the premises,
and the agreements, covenants, representations and warranties
hereinafter set forth, and other good and valuable
considerations, the receipt and adequacy all of which are
forever acknowledged and confessed, the parties hereto agree
as follows:
1. REPRESENTATIONS AND WARRANTIES BY VALLE GRANDE, AND
THE VALLE GRANDE SHAREHOLDERS. Valle Grande and the Valle
Grande Shareholders hereby jointly and severally make the
following express representations and warranties to the
Company and to G/O Colorado:
A. Valle Grande is a corporation duly organized,
validly existing and in good standing under
the laws of the Country of Mexico.
B. Valle Grande is the holder of one hundred
percent of the issued and outstanding capital
stock of each of those subsidiaries
corporations set forth in Schedule B hereto
(the Subsidiaries ). Except as disclosed in
Schedule B hereto, Valle Grande has no
subsidiaries and does not own any security of
any corporation. Further, none of the Valle
Grande Shareholders has conducted the business
of Valle Grande or any business similar to the
business of Valle Grande or related to the
business of Valle Grande under any other name
or identity. Each of the Subsidiaries is a
corporation duly organized, validly existing
and in good standing under the laws of the
Country of Mexico.
C. Valle Grande, the Subsidiaries and the Valle
Grande Shareholders have taken all necessary
steps to assure that Valle Grande and the
Subsidiaries have the corporate power and are
duly authorized, qualified and licensed under
all applicable laws, regulations, ordinances
and orders of public authorities to own their
properties and conduct their businesses in the
places and in the manner now conducted.
D. Valle Grande has the corporate authority to
issue an unlimited number of capital shares of
which 342,002,500 shares have been issued and
342,002,500 shares are presently outstanding.
In addition, Valle Grande has issued a total
of $1,250,000 in principal amount of its
mortgage bonds which currently trade on the
Mexican Stock Exchange located in Mexico
City, Mexico.
E. The execution, delivery and performance of
this Agreement by Valle Grande and the Valle
Grande Shareholders and the transactions
contemplated hereby:
(i) are within the corporate powers of Valle
Grande, are not in contravention of the terms
of any of the terms of the Acta Constitutiva
or any amendments thereto of Valle Grande or
any of its Subsidiaries, and have been duly
authorized by the Board of Directors of Valle
Grande, and to the best knowledge of the
officers of Valle Grande and the Valle Grande
Shareholders are not in contravention of law;
(ii) will neither conflict with nor result in
any breach or contravention of, or the
creation of any lien under, any indenture,
agreement, lease, instrument or understanding
to which Valle Grande or any of its
Subsidiaries or any Valle Grande Shareholder
is a party or by which any of the Assets of
Valle Grande or any of its Subsidiaries is or
are bound; and
(iii) are and will constitute the valid and
legally binding obligations of Valle Grande
and of each and every Valle Grande
Shareholder, enforceable in accordance with
the terms of this Agreement.
F. Valle Grande and the Valle Grande Shareholders
have delivered to the Company copies of those
financial statements set forth on Exhibit 1
hereto respecting the operation of Valle
Grande and its Subsidiaries, prepared by
Despacho Sotomayor Elias, S.C. in accordance
with auditing standards generally accepted in
Mexico ("Existing Financial Statements").
The Existing Financial Statements have been
prepared by Despacho Sotomayor Elias S.C. from
the books and records of Valle Grande and its
Subsidiaries and, to the best of knowledge of
the management of Valle Grande and the Valle
Grande Shareholders, accurately reflect the
status and results of operations of Valle
Grande and its Subsidiaries as of the dates
specified therein. Since December 31, 1995
(the "Balance Sheet Date"), and to the best
knowledge of Valle Grande and the Valle
Grande Shareholders there have occurred no
material adverse changes in the financial
condition or business of Valle Grande and/or
its Subsidiaries as reflected in such Existing
Financial Statements, other than changes in
the ordinary course of business which have not
had any material adverse effect on the
business or financial condition of Valle
Grande and/or its Subsidiaries, and or any of
their respective Assets.
G. Valle Grande and the Valle Grande Shareholders
have delivered to the Company an accurate list
and summary description (Exhibit C) as of the
date of this Agreement of all material assets
of Valle Grande and its Subsidiaries (the
Assets ).
H. Valle Grande and the Valle Grande Shareholders
have delivered to the Company an accurate list
and summary description (Schedule D) as of the
date of this Agreement of all licenses,
permits, franchises, certificates of need,
certificate of need applications, trademarks,
trade names, patents, patent applications and
copyrights, owned or held by Valle Grande
and/or its Subsidiaries relating to the
ownership, development or operations of Valle
Grande and/or its Subsidiaries, all of which
are now valid, in good standing, not subject
to renewal prior to Closing. Valle Grande
and/or the Valle Grande Shareholders are not
aware of any licenses, permits, franchises,
certificates of need, certificate of need
applications, trademarks, trade names,
patents, patent applications and copyrights
which are not possessed or held by Valle
Grande or its Subsidiaries which, taken
together with the business of Valle Grande
and/or its Subsidiaries or any proposed
business of Valle Grande and/or its
Subsidiaries such failure to possess or hold
the same would materially adversely effect the
ability of Valle Grande and/or its
Subsidiaries to conduct their existing
business or any proposed business.
I. Valle Grande and the Valle Grande Shareholders
have delivered to the Company an accurate list
(Schedule E) as of the date of this Agreement
of all material agreements which relate to or
may affect the Assets or the operation of the
Valle Grande and/or its Subsidiaries, to which
Valle Grande and/or any of its subsidiaries is
a party or by which Valle Grande and/or any of
its Subsidiaries, or any of its Assets is
bound (the Contracts ) and have made copies
of such agreements available to the Company
and G/O Colorado for inspection. None of such
agreements unduly burdens or restricts Valle
Grande and/or its Subsidiaries in conducting
its current ordinary course of businesses nor
restricts or would tend to restrict any
proposed further courses of business. Valle
Grande and its Subsidiaries have complied with
all material commitments and obligations under
all such agreements, such agreements
constitute the entire agreements by and
between the parties as respectively indicated
on Schedule E. Neither Valle Grande nor any of
its Subsidiaries are a party to nor are
their Assets bound by:
(i) except as expressly set forth in Schedule
E, any contracts or commitments affecting
ownership of, title to, use of, or any
interest in the Assets;
(ii) except as expressly set forth in Schedule
E, any patent licensing agreements or any
other agreements or commitments with respect
to patents, patent applications, trademarks,
trade names, technical assistance, copyrights
or other like terms;
(iii) except as expressly set forth in
Schedule E, any incentive compensation,
pension, retirement, profit sharing or other
like employee pension or welfare plans of any
nature whatsoever, other than sick leave and
vacation policies for any of the employees of
Valle Grande and/or its Subsidiaries;
(iv) except as expressly set forth in Schedule
E, any collective bargaining agreements or
other contracts or commitments to or with any
labor unions or other employee representatives
or groups of employees affecting or which
could affect the Assets;
(v) except as expressly set forth in Schedule
E, any employment contracts or any other
contracts, agreements or commitments to or
with individual employees or agents affecting
or which could affect its business or the
Assets extending for a period of more than
ninety (90) days from the Closing Date, or
which cannot be terminated without cause upon
not more than ninety (90) days notice without
payment of penalty or equivalent thereof;
(vi) except as expressly set forth in Schedule
E, any other contracts or commitments
providing for payments based in any matter on
the revenues, purchases or profits of Valle
Grande or any of its Subsidiaries.
J. Valle Grande and the Valle Grande Shareholders
warrant and represent that:
(i) The Contracts constitute the entire
agreements by and between the respective
parties thereto; and
(ii) In all material respects, all obligations
required to be performed under the terms of
the Contracts have been performed, and each of
the Contracts is now and will be, upon and
after the Closing Date, in full force and
effective without default on the part of the
parties thereto.
(iii) with respect to any leases respecting
real estate:
(a) Valle Grande and/or its Subsidiaries
and/or the Valle Grande Shareholders, to
the best of their knowledge, have not
received any notice of violation of any
applicable ordinance or other law, order,
regulation or requirement, or notice of
condemnation, lien, assessment or the
like, relating to any part of the real
property at which any business conducted
by Valle Grande and/or its Subsidiaries
are located or from which they are
operated;
(b) To the best knowledge of Valle Grande
and the Valle Grande Shareholders, each
operation of Valle Grande and/or its
Subsidiaries, wherever located, is in
compliance with all applicable zoning
ordinances and the consummation of
transactions contemplated herein will not
result in a violation of any applicable
zoning ordinance or termination of any
applicable zoning variance now existing;
(c) All fixtures and improvements within
or upon real estate utilized by Valle
Grande and/or its Subsidiaries is in
operating condition and in a reasonable
state of maintenance and repair, except
for deterioration caused by normal wear
and tear in the ordinary course of
business;
K. All the inventory and supplies constituting
any part of the Assets are of a quality usable
and salable in the ordinary course of the
business of Valle Grande and/or its
Subsidiaries. Inventory and supplies are
carried at the lower of cost or market, on a
first-in, first-out basis and are properly
stated in the Existing Financial Statements.
L. Valle Grande and the Valle Grande Shareholders
have delivered to the Company an accurate list
and a substantially complete description
(Schedule F) of all the equipment (including
all software) associated with, or constituting
any part of the Assets as of the Balance Sheet
Date, designating which of the equipment is
owned or leased by Valle Grande and/or its
Subsidiaries. The equipment included in
Schedule F is adequate in all material
respects to fully equip and operate Valle
Grande and or its Subsidiaries as now being
operated and is in operating condition and in
a reasonable state of maintenance and repair,
except for deterioration caused by normal wear
and tear in the ordinary course of business;
Since the Balance Sheet Date, Valle Grande and
/or its Subsidiaries have not acquired or sold
or otherwise disposed of any equipment
associated with, or constituting any part of,
the Assets.
M. Valle Grande and/or its Subsidiaries will have
good and marketable title to all properties,
assets and leasehold estates, real and
personal, constituting or associated with the
Assets or any part thereof, subject to no
mortgage, lien, pledge, security interest,
conditional sales agreement, encumbrance or
charge, except as set forth on Schedule G and
liens for current taxes and assessments, if
any, with respect to which no default exists.
N. Valle Grande and the Valle Grande Shareholders
have delivered to the Company an accurate
schedule (Schedule H) as of the Closing Date
of this Agreement reflecting the insurance
policies covering the ownership and operations
of the Assets by Valle Grande and/or its
Subsidiaries, which Schedule H reflects the
policies numbers, terms, identity of
insurers, amounts and coverage. All of such
policies are now and will be in full force and
effect on and after the Closing hereunder on
an occurrence basis with no premium
arrearages. True and correct copies of all
such policies and any endorsements thereto
have been delivered to the Company and to G/O
Colorado.
O. Valle Grande and/or its Subsidiaries currently
employs those management personnel set forth
in Schedule I hereto at the salary levels set
forth therein. Valle Grande and the Valle
Grande Shareholders have provided to the
Company all materials containing policies and
procedures governing employees of Valle Grande
and/or its Subsidiaries. Except as set forth
in Schedule I, neither Valle Grande nor any of
its Subsidiaries have had any pension, profit
sharing, deferred compensation or other
employee pension or welfare benefit plan or
arrangement relating to the operations of
Valle Grande and/or its Subsidiaries. There
is not pending and, to the knowledge of Valle
Grande or the Valle Grande Shareholders,
there is not threatened, any employee strike
or work stoppage affecting Valle Grande and or
its Subsidiaries. Further, no management
personnel has threatened to leave the employ
or has left the employ of Valle Grande and/or
its Subsidiaries for the preceding twelve
months except as set forth in Schedule I
hereto. Schedule I hereto sets forth all
employment contracts entered into between
Valle Grande and any employees of Valle Grande
and between any of its Subsidiaries and any
employees of its Subsidiaries, copies of which
have been provided to the Company and G/O
Colorado.
P. Valle Grande and the Valle Grande Shareholders
have delivered to the Company an accurate list
and summary description (Schedule J) as of the
Balance Sheet Date of all litigation,
complaints or proceedings to which Valle
Grande and/or its Subsidiaries or any Valle
Grande Shareholder is a party as the same
relates to or in any way is connected with the
operation of Valle Grande and/or its
Subsidiaries. Neither Valle Grande nor any of
its Subsidiaries is in default under any law
or regulation, or under any order of any court
or federal, state, municipal or other
governmental department, commission, board,
bureau, agency or instrumentality wherever
located which would have a material adverse
effect on the Assets or the operation of Valle
Grande and/or its Subsidiaries and, except to
the extent set forth on Schedule J there are
no claims, actions, suits, proceedings or
investigations pending or to the best
knowledge of Valle Grande and/or the Valle
Grande Shareholders threatened against or
affecting Valle Grande and/or its Subsidiaries
and/or the Assets or the Valle Grande
Shareholders, at law or in equity, or before
or by any federal, state, municipal or other
governmental department, commission, board,
bureau, agency or instrumentality wherever
located.
Q. Since the Balance Sheet Date, except as
disclosed in Schedule K, there has not been:
(i) any material adverse change in the
financial condition, assets, liabilities
(contingent or otherwise), income or business
of Valle Grande and/or its Subsidiaries;
(ii) any damage, destruction or loss (whether
or not covered by insurance) materially
adversely affecting the properties or business
of Valle Grande and/or its Subsidiaries;
(iii) any increase in the compensation payable
or to become payable by Valle Grande and/or
its Subsidiaries to any Valle Grande and/or
any of its Subsidiaries employee, officers, or
agents, or any bonus payment or arrangement
made to or with any thereof;
(iv) any labor dispute, proposed law or
regulation or any event or condition of any
character materially adversely affecting the
business or future prospects of Valle Grande
and/or its Subsidiaries; or
(v) any transaction by Valle Grande and/or its
Subsidiaries outside the ordinary course of
their respective businesses.
R. The Valle Grande Shareholders are acquiring
the Shares of the Company solely for their own
account, for investment, and not with a view
to any subsequent "distribution" thereof
within the meaning of the Securities Act of
1933, as amended (said Act and rules and
regulations promulgated thereunder being
hereinafter referred to as the "Act"). The
Valle Grande Shareholders understand that the
Company's Shares have not been registered
under the Act by reason of the specific
exemptions therefrom, which exemptions depend
in part upon their subjective investment
intent as expressed herein. In furtherance of
the foregoing, each shall be required to
execute and deliver to the Company an
Investment Letter, in the form attached hereto
as Exhibit 2, as a condition precedent to the
issuance of the Company's securities issuable
to them hereunder.
S. The Valle Grande Shareholders. hereby
acknowledges that they are:
(i) "Accredited Investors" as such term is
defined in Regulation D promulgated under the
Act, or they have such knowledge and
experience in financial and business matters
that they are capable of evaluating the merits
and risks of the proposed transaction and
their acquisition of the Company's Shares, and
(ii) That they are able to bear the economic
risks associated with the acquisition of the
Company's Shares and are able to protect their
own interests in an investment of this nature.
T. Each Valle Grande Shareholder possesses good
title to his respective shares of Valle Grande
capital stock, free and clear of all liens,
charges, encumbrances and restrictions, except
restrictions as to resale imposed by state and
federal securities laws. No consent, approval
or authorization of any government,
administrative agency or court, domestic or
foreign having jurisdiction over the Valle
Grande Shareholders is legally required for
the sale or the transfer of the Valle Grande
shares to the Company in the manner
contemplated by this Agreement.
U. The shares of Valle Grande capital stock, to
be tendered by each Valle Grande Shareholder
to the Company pursuant to this Agreement
were, when issued and remain, duly and validly
issued and authorized by Valle Grande and
remain issued on a fully paid basis with no
further right of assessment by Valle Grande.
Valle Grande and each of the Valle Grande Shareholders
further represents and warrants that all of the
representations and warranties set forth above are true as of
the date of this Agreement, shall be true at the Closing Date
and shall survive for a period of two years from the Closing
Date. Further, the Exhibits and Schedules hereto and all other
documents and information furnished to the Company and to G/O
Colorado and the Company's and G/O Colorado s representatives
by Valle Grande and the Valle Grande Shareholders pursuant
hereto do not and will not include any untrue statement of a
material fact or omit to state any material fact necessary to
make the statements made and to be made not misleading.
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND BY
G/O COLORADO. The Company and G/O Colorado hereby make the
following express representations and warranties to Valle
Grande and the Valle Grande Shareholders:
A. The Company is a corporation duly organized,
validly existing and in good standing under the
laws of the Cayman Islands, British West Indies and
G/O Colorado is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Colorado and each has the
corporate power to own its properties and carry on
its business as now being conducted. Copies of the
Company's Memorandum & Articles of Association and
G/O Colorado s Articles of Incorporation and By-
Laws have heretofore been furnished to Valle Grande
and the Valle Grande Shareholders by the Company
and by G/O Colorado, and all such copies are true,
correct and complete copies of the original
Memorandum & Articles of Association and Articles
of Incorporation and By-Laws including all
amendments thereto.
B. The Company has the corporate authority to issue a
total of 100,000,000 Ordinary Shares of a nominal
or par value of US$0.0001 per share, of which
2,099,810 shares are presently issued and
outstanding and 10,000,000 Preferred Shares of a
nominal or par value of US$0.0001 per share, none
of which are outstanding, and 390,000,000
unclassified shares of a nominal or par value of
US$0.0001, none of which are issued or outstanding.
G/O Colorado has the corporate authority to issue a
total of 20,000,000 shares of $0.01 par value per
share common stock, of which 5,985,372 shares are
presently issued and outstanding.
C. The Company's has no subsidiaries. G/O Colorado has
those subsidiaries set forth in Schedule L hereto.
D. Attached hereto as Schedule M is a list of all
documents filed by G/O Colorado with the United
States Securities & Exchange Commission for the
past twelve months as of the date of this Agreement
(the Disclosure Information ). The Company has
provided to each of the Valle Grande Shareholders
copies of each item set forth on Schedule M.
E. The audited Financial Statements of G/O Colorado
contained in the G/O Colorado Form 10KSB included
in the Disclosure Information described in Schedule
M hereto (the "Company's Financial Statements"),
except as further described in Schedule M hereto,
constitute substantially true and correct
statements of the financial condition of the
Company and the Company's assets, liabilities and
income as of such date. Since the date of the
Balance Sheet contained in the Financial
Statements, except as described in Schedule M the
Company has not:
(i) issued any additional shares of its
common stock to any person;
(ii) paid or declared any dividends or
distributions of capital, surplus, or
profits with respect to any of its issued
and outstanding shares of common stock;
(iii) paid or agreed to pay any
consideration in redemption of any of its
issued and outstanding shares of common
stock; or
(iv) entered into any other transaction or
agreement which would, or might,
materially impair the shareholder's
equity of the Company as reflected in
such Balance Sheet.
F. The execution and delivery of this Agreement,
and issuance of the Company's Shares required
to be issued hereunder, will have been duly
authorized by all necessary corporate action
and neither the execution nor delivery of this
Agreement nor issuance of the Company's
Shares, nor the performance, observance or
compliance with the terms and provisions of
this Agreement will violate any provision of
law, any order of any court or other
governmental agency, the Memorandum & Articles
of Association of the Company or the Articles
of Incorporation or By-Laws of G/O Colorado or
any indenture, agreement or other instrument
to which the Company or G/O Colorado is a
party, or by which either is bound or by which
their property is bound.
G. Neither the Company nor G/O Colorado is
involved in any pending or threatened
litigation which would, or might, materially
affect its financial condition and which has
not been:
(i) provided for in the G/O Colorado
Financial Statements , and
(ii) disclosed to Valle Grande, and/or the
Valle Grande Shareholders in writing.
H. There are no unpaid assessments or proposed
assessments of income taxes pending against
the Company or G/O Colorado. All liabilities
for Federal and State income or franchise
taxes, as shown on the tax returns filed, or
to be filed, by the Company and G/O Colorado,
have been paid or the liability therefor has
been provided for in the Balance Sheet
contained in the Disclosure Information set
forth in Schedule M hereto and all Federal and
State income or franchise taxes for periods
subsequent to the periods covered by said
returns likewise have been paid or adequately
accrued.
I. The Company s 15,333,690 Ordinary Shares,
$0.0001 par value per share, which will be
delivered by the Company to the Valle Grande
Shareholders pursuant to the terms of this
Agreement, as set forth in Schedule A hereto,
will, on delivery in accordance with the terms
hereof, be duly authorized, validly issued and
fully paid and non assessable.
J. The Company and G/O Colorado, upon execution
and delivery of this Agreement among the
parties shall commence to take any and all
actions necessary to distribute to the
shareholders of G/O Colorado a total of
2,099,809 shares of the Company s currently
issued and outstanding $0.0001 par value per
share Ordinary Shares held by G/O Colorado. In
connection therewith G/O Colorado, through its
directors shall immediately distribute the
Company s 2,099,809 Ordinary Shares to an
escrow agent designated by the Valle Grande
Shareholders to be held by such escrow agent
for further distribution to those G/O Colorado
Shareholders, or their assigns, determined as
of a dividend date selected by G/O Colorado,
upon registration by the Company of its
Ordinary Shares, $0.0001 par value per share,
under Section 12(g) of the Securities Exchange
Act of 1934, as amended, all pursuant to a
mutually satisfactory escrow agreement to be
executed among the G/O Colorado and the Escrow
Agent.
The Company further represents and warrants that all of
the representations and warranties set forth above are true as
of the date of this Agreement, shall be true Closing Date and
shall survive for a period of two years from the Closing Date.
3. COVENANTS OF VALLE GRANDE AND THE VALLE GRANDE
SHAREHOLDERS PRIOR TO CLOSING. Between the date of this
Agreement and the Closing Date:
A. Valle Grande and the Valle Grande Shareholders
shall afford to the officers and authorized
representatives of the Company and/or G/O
Colorado reasonable access to the properties,
books and records of Valle Grande and its
Subsidiaries, and will furnish the Company and
G/O Colorado with such additional financial
and operating data and other information as to
the business and properties of Valle Grande
and its Subsidiaries as the Company and/or G/O
Colorado may from time to time reasonably
request without regard to where such
information may be located. Valle Grande and
Valle Grande Shareholders shall cooperate with
the Company and G/O Colorado, the Company's
and G/O Colorado s representatives and counsel
in the preparation of any document or other
material which may be required in connection
with any document or material required by any
governmental agency as a predicate to or
result of the transaction herein contemplated.
The Company and G/O Colorado shall cause all
information obtained in connection with the
negotiation and performance of this Agreement
to be treated as confidential (except such
information as the Company and/or G/O Colorado
may be required to disclose to disclose to any
governmental agency) and will not use, and
will not knowingly permit others to use, any
such information in a manner detrimental to
Valle Grande and/or its Subsidiaries and/or
the Valle Grande Shareholders.
B. With respect to the ownership, operations and
development of Valle Grande and/or its
Subsidiaries, Valle Grande and the Valle
Grande Shareholders agree to:
(i) carry on the business of Valle Grande and
its Subsidiaries in substantially the same
manner as heretofore and not make any material
change in personnel, operations, finance,
accounting policies, or real or personal
property;
(ii) maintain the Assets and all parts thereof
in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform all of the obligations of Valle
Grande and its Subsidiaries under agreements
relating to or affecting the assets,
properties and rights of Valle Grande and/or
its Subsidiaries;
(iv) keep in full force and effect present
insurance policies or other comparable
insurance coverage;
(v) maintain and preserve the business
organization of Valle Grande and its
Subsidiaries intact, retain the present
management personnel of Valle Grande and its
Subsidiaries and maintain the relationship of
Valle Grande and its Subsidiaries with
suppliers, customers and others having
business relations with Valle Grande and its
Subsidiaries;
C. With respect to the ownership, operation and
development of Valle Grande and its
Subsidiaries, Valle Grande and the Valle
Grande Shareholders will not, without the
prior written consent of the Company:
(i) increase compensation payable or to become
payable or make a bonus payment to or
otherwise enter into one or more agreements
with or otherwise create any officer, employee
or agent;
(ii) create, assume or permit to exist any new
mortgage, pledge or other lien or encumbrance
upon any of the Assets;
(iii) sell, assign, lease or otherwise
transfer or dispose of any of the Assets; or
(iv) merge or consolidate or agree to merge or
consolidate with or into any other entity
4. COVENANTS OF THE COMPANY AND G/O COLORADO. Between the
date of this Agreement and the Closing Date:
A. with respect to corporate action to be taken
by G/O Colorado:
(i) The G/O Colorado directors shall adopt
resolutions approving the distribution of the
currently issued and outstanding 2,099,809
$0.0001 par value per share Ordinary Shares of
the Company held by it to its existing
Shareholders to an appointed escrow agent for
further distribution to the G/O Colorado
shareholders, subject to the Company
registering its Ordinary Shares, $0.0001 par
value per share, under Section 12(g) of the
Securities Exchange Act of 1934, as amended.
(ii) The G/O Colorado directors shall
distribute the Company s 2,099,809 Ordinary
Shares to an escrow agent designated by the
Valle Grande Shareholders to be held by such
escrow agent for further distribution to those
G/O Colorado Shareholders or their assigns,
determined as of a dividend date selected by
G/O Colorado, upon registration by the Company
of its Ordinary Shares, $0.0001 par value per
share, under Section 12(g) of the Securities
Exchange Act of 1934, as amended.
B. With respect to the ownership, operations and
development the Company, the Company and G/O
Colorado agree to:
(i) carry on the business of the Company in
substantially the same manner as heretofore
and not make any material change in personnel,
operations, finance, accounting policies, or
real or personal property;
(ii) maintain any assets of the Company and
all parts thereof in as good working order and
condition as at present, ordinary wear and
tear excepted;
(iii) perform all of the obligations of the
Company under agreements relating to or
affecting the assets, properties and rights of
the Company;
(iv) keep in full force and effect present
insurance policies or other comparable
insurance coverage;
(v) maintain and preserve the business
organization of the Company intact, retain the
present employees of the Company and maintain
the relationship of the Company with
suppliers, customers and others having
business relations with the Company;
C. With respect to the ownership, operation and
development of the Company, the Company and
G/O Colorado will not, without the prior
written consent of the Valle Grande
Shareholders:
(i) increase compensation payable or to become
payable or make a bonus payment to or
otherwise enter into one or more agreements
with or otherwise create any officer, employee
or agent;
(ii) create, assume or permit to exist any new
mortgage, pledge or other lien or encumbrance
upon any of the Company s assets;
(iii) sell, assign, lease or otherwise
transfer or dispose of any of the Company s
assets; or
(iv) merge or consolidate or agree to merge or
consolidate with or into any other entity.
D. G/O Colorado and the Company shall afford to
the officers and authorized representatives of
Valle Grande reasonable access to the
properties, books and records of G/O Colorado
and the Company, and will furnish the Valle
Grande Shareholders with such additional
financial and operating data and other
information as to the business and properties
of G/O Colorado and the Company as the Valle
Grande Shareholders may from time to time
reasonably request without regard to where
such information may be located. G/O Colorado
and the Company shall cooperate with the Valle
Grande Shareholders and their representatives
and counsel in the preparation of any document
or other material which may be required in
connection with any document or material
required by any governmental agency as a
predicate to or result of the transaction
herein contemplated. The Valle Grande
Shareholders shall cause all information
obtained in connection with the negotiation
and performance of this Agreement to be
treated as confidential (except such
information as the Valle Grande Shareholders
may be required to disclose to disclose to any
governmental agency) and will not use, and
will not knowingly permit others to use, any
such information in a manner detrimental to
the Company or G/O Colorado.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
AND G/O COLORADO. The obligations of the Company and G/O
Colorado hereunder are, at the option of the Company and G/O
Colorado, subject to the satisfaction, on or prior to the
Closing Date, of the following conditions unless waived in
writing by the Company and G/O Colorado:
A. The representations and warranties of Valle
Grande and the Valle Grande Shareholders
contained in this Agreement shall be true when
made and on and as of the Closing Date, as
though such representations and warranties had
been made on and as of such Closing Date; and
each and all of the terms, covenants and
conditions of this Agreement to be complied
with or performed by Valle Grande and/or the
Valle Grande Shareholders on or before the
Closing Date pursuant to the terms hereof
shall have been duly complied with and
performed.
B. No material adverse change in the results of
operations, financial condition or business of
Valle Grande and/or its Subsidiaries shall
have occurred, and Valle Grande and or its
Subsidiaries shall not have suffered any
material change, loss or damage to its
business or to the Assets, whether or not
covered by insurance, since the Balance Sheet
Date or except as noted in Schedules attached
to this Agreement.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF VALLE
GRANDE, THE VALLE GRANDE SHAREHOLDERS. The obligations of the
Valle Grande Shareholders and Valle Grande hereunder are
subject to the following conditions
A. The Valle Grande Shareholders and Valle Grande
shall not have discovered any material error or
misstatement in any of the representations and
warranties made by the Company and/or G/O Colorado
herein and all the terms and conditions of this
Agreement to be performed and complied with by the
Company and G/O Colorado have been performed and
complied with.
B. There shall have been no substantial adverse
changes in the financial condition, business or
operations of the Company and/or G/O Colorado,
except for changes resulting from those operations
in the usual ordinary course of the business, and
no business and assets of the Company and/or G/O
Colorado shall have been materially adversely
affected as the result of any fire, explosion,
earthquake, flood, accident, strike, lockout,
combination of the workmen, taking over of any such
assets by any governmental authorities, riot,
activities of armed forces, or Acts of God or of
the public enemies.
G/O Colorado s board of directors shall have:
(i) adopted a resolution approving the
distribution of a total of 2,099,809
shares of the Company s $0.0001 par value
per share Ordinary Shares to its
shareholders.
(ii) distributed the Company s 2,099,809
Ordinary Shares to an escrow agent
designated by the Valle Grande
Shareholders to be held by such escrow
agent for further distribution to those
G/O Colorado Shareholders or their
assigns, determined as of a dividend date
selected by G/O Colorado, upon
registration of its Ordinary Shares,
$0.0001 par value per share, under
Section 12(g) of the Securities Exchange
Act of 1934, as amended.
7. CONDITION SUBSEQUENT. The following conditions shall
occur within a reasonable time after the Closing
contemplated hereby:
A. G/O Colorado shall distribute a 2,099,809 shares of
the Company $0.0001 par value per share Ordinary
Shares to its shareholders.
B. The Company shall prepare and file with the SEC a
registration under Section 12(g) of the
Securities Act of 1934, thereby registering the
Company s $0.0001 par value per share Ordinary
Shares.
8. CLOSING DATE. The Closing of this Agreement (the
"Closing Date") shall take place on or before July 31, 1996.
9. ACTIONS AT CLOSING. Subject to the terms and
conditions set forth herein. At the time of the Closing
referred to in Section 8 hereof, G/O Colorado will cause to be
issued and delivered to the Valle Grande Shareholders,
identified in Schedule A hereto, certificates evidencing the
ownership of the securities as designated therein and
concurrently therewith the Valle Grande Shareholders,
identified in Schedule A hereto, shall directly or through
their agent deliver or cause to be delivered to G/O Colorado
the certificates evidencing the ownership of securities as
designated therein, all duly endorsed to the Company, and each
party shall pay any and all Federal and State taxes required
to be paid in connection with the issuance and the delivery of
their own securities. All stock certificates shall be in the
name of the party to which the same are deliverable. In
addition to the above mentioned exchange of certificates, the
following transactions will take place at the Closings:
The Company will deliver to the Valle Grande Shareholders
and Valle Grande:
A. Duly certified copies of corporate resolutions and
other corporate proceedings taken by the Company to
authorize the execution, delivery and performance
of this Agreement along with the duly certified
resolutions of the minutes of the board of
directors of G/O Colorado approving the
distribution of a total of 2,099,809 of the
Company s $0.0001 par value per share Ordinary
Shares to the designated escrow agent for further
distribution to the G/O Colorado shareholders upon
registration of the Company s Ordinary Shares,
$0.0001 par value per share, under Section 12(g) of
the Securities Exchange Act of 1934, as amended.
B. A certificate executed by a principal officer of
the Company and G/O Colorado attesting to the fact
that all of the foregoing representations and
warranties of the Company and G/O Colorado are true
and correct as of the Closing Date and that all of
the conditions to the obligations of Valle Grande,
and Valle Grande Shareholders which are to be
performed by the Company and G/O Colorado have been
performed as of the Closing Date; and
The Valle Grande Shareholders and Valle Grande
will deliver to the Company:
A. Duly certified copies of corporate resolutions and
other corporate proceedings taken by Valle Grande
to authorize the execution, delivery and
performance of this Agreement; and
B. A certificate by a principal officer of Valle
Grande, that each of the representations and
warranties of Valle Grande and the Valle Grande
Shareholders are true and correct as of the Closing
Date and that all of the conditions to the
obligations of the Company and G/O Colorado which
are to be performed by Valle Grande and the Valle
Grande Shareholders have been performed as of the
Closing Date.
10. BOARD OF DIRECTORS. Immediately after the Closing,
the Boards of Directors of G/O Colorado, the Company and Valle
Grande shall hold a meeting at which the Company's Board of
Directors will resign and will be replaced by designees of the
Valle Grande Shareholders.
11. FUTURE REGISTRATION. The Valle Grande Shareholders
understand that because the Company's Ordinary Shares to be
delivered to them hereunder have not been registered under the
Act or any State Act, they must hold the Company s Shares
indefinitely, and cannot dispose of any or all of them unless
such they are subsequently registered under the Act and any
applicable State Act, or exemptions from registration are
available. The Valle Grande Shareholders acknowledge and
understand that, except as provided herein, they have no
independent right to require the Company to register the
Shares. The Valle Grande Shareholders further understand that
the Company may, as a condition to the transfer of any of the
Shares require that the request for transfer be accompanied by
an opinion of legal counsel, in form and substance
satisfactory to the Company, provided at such Valle Grande
Shareholder's expense, to the effect that the proposed
transfer does not result in violation of the Act or any
applicable State Act, unless such transfer is covered by an
effective registration statement under the Act and is in
compliance with all applicable State Acts.
12. TRANSFERABILITY. All Shares which are issued to the
Valle Grande Shareholders pursuant to the terms of this
Agreement shall be "restricted securities" within the meaning
of Rule 144 of the Act. The Company shall issue stop transfer
instructions to the transfer agent for its common stock and
with respect to the Shares and shall place the following
legend, or one substantially similar thereto, on the
certificates representing such Shares:
"The securities represented by this certificate
have been acquired pursuant to a transaction
effected in reliance upon an exemption under the
Securities Act of 1933, as amended (the "Act"), and
have not been the subject to a Registration
Statement under the Act or any state securities
act. The securities may not be sold or otherwise
transferred in the absence of such registration or
applicable exemption therefrom under the Act or any
applicable state securities act."
13. ACCESS TO INFORMATION. Concurrently herewith, the
Company and G/O Colorado have delivered to the Valle Grande
Shareholders and their respective representatives those
materials set forth in Schedule M hereto along with correct
and complete copies of all documents and records requested by
them. In addition, the Valle Grande Shareholders have had
the opportunity to ask questions of, and received answers
from, officers and directors of the Company and G/O Colorado,
and persons acting on its behalf concerning such information
and the terms and conditions of the Agreement, and have
received sufficient information relating to the Company and to
G/O Colorado to enable them to make an informed decision with
respect to the acquisition of the common stock.
14. NO SOLICITATION. At no time were the Valle Grande
Shareholders presented with or solicited by any leaflet,
public promotion meeting, circular, newspaper or magazine
article, radio or television advertisement, or any other form
of general advertising in connection with their acquisition of
the common stock.
15. EXPENSES. The Valle Grande Shareholders and Valle
Grande and the Company and G/O Colorado shall each pay their
respective expenses incident to this Agreement and the
transactions contemplated hereby, including all fees of their
counsel and accountants, whether or not such transactions
shall be consummated.
16. FINDERS. The Valle Grande Shareholders and Valle
Grande shall indemnify and hold the Company and G/O Colorado
harmless against and with respect to all claims or brokerage
or other commissions relative to this Agreement or the
transactions contemplated hereby, based on any agreements,
arrangements, or understandings claimed to have been made by
the Valle Grande Shareholders and Valle Grande with any third
party. The Company and G/O Colorado shall indemnify and hold
the Valle Grande Shareholders and Valle Grande harmless
against and with respect to all claims for brokerage or other
commissions relative to this Agreement or the transactions
contemplated hereby, based in any agreements, arrangements, or
understandings claimed to have been made by the Company and/or
G/O Colorado with any third party. Except as provided in
Exhibit 3, each party to this Agreement represents and
warrants to each other party that it has not dealt with and
does not know of any person, firm or corporation asserting a
brokerage, finder's or similar claim in connection with the
making or negotiation of this Agreement or the transactions
contemplated hereby.
17. MISCELLANEOUS.
A. Each Exhibit, Certificate and Schedule to this
Agreement shall be considered a part hereof as
if set forth herein in full. Notwithstanding
any other provision herein to the contrary,
all Exhibits, Certificates, Schedules or other
instruments provided for herein and not
delivered at the time of execution of this
Agreement shall be delivered or completed on
or before Closing; and it shall be deemed a
condition precedent to the Closing hereunder
that each such Exhibit, Certificate, Schedule
or other instrument shall meet with the
approval of the party to whom such Exhibit,
Certificate, Schedule or other instrument is
to be delivered hereunder.
B. The provisions of this Agreement shall be
self-operative and shall not require further
agreement by the parties except as may be
herein specifically provided to the contrary;
provided, however, at the request of either
party, the other party shall execute such
additional instruments and take such
additional acts as the requesting party may
deem necessary to effectuate this Agreement.
C. Except as herein expressly provided to the
contrary, whenever this Agreement requires any
consent or approval to be given by either
party or either party must or may exercise
discretion, the parties agree that such
consent or approval shall not be unreasonably
withheld or delayed and such discretion shall
be reasonably exercised.
D. In the event either party elects to incur
legal expenses to enforce or interpret any
provision of this Agreement, the prevailing
party will be entitled to recover such legal
expenses, including, without limitation,
attorney's fees, costs and necessary
disbursements, in addition to any other relief
to which such party shall be entitled.
E. The parties agree that this Agreement shall be
governed by and construed in accordance with
the laws of the State of Colorado, and that
the courts of the State of Colorado shall be
the exclusive courts of jurisdiction and venue
for any litigation, special proceeding or
other proceeding as between the parties that
may be brought, or arise out of, in connection
with or by reason of this Agreement.
F. Subject to provisions herein to the contrary,
this Agreement shall inure to the benefit of
and be binding upon the parties hereto and
their respective legal representatives,
successors and assigns; provided, however,
that no party may assign this Agreement
without the prior written consent of the other
party, which consent shall not be unreasonably
withheld. All provisions contained herein
shall be binding upon the respective parties
their legal representatives, successors and
assigns unless otherwise explicitly stated;
provided however that the use of a party's
name without more shall not be deemed such an
explicit statement.
G. The transactions contemplated hereby shall be
effective for accounting purposes as of the
Closing Date, unless otherwise agreed in
writing by the Valle Grande Shareholders and
the Company and G/O Colorado.
H. The Valle Grande Shareholders and the Company
and G/O Colorado mutually agree that no party
hereto shall release, publish or otherwise
make available to the public in any manner
whatsoever any information or announcement
regarding the transactions herein contemplated
without the prior written consent of the Valle
Grande Shareholders and the Company and G/O
Colorado, except for information and filings
reasonably necessary to be directed to
governmental agencies to fully and lawfully
effect the transactions herein contemplated.
I. The waiver by either party of breach or
violation of any provision of this Agreement
shall not operate as, or be construed to be, a
waiver of any subsequent breach of the same or
other provision hereof.
J. Any notice, demand or communication required,
permitted, or desired to be given hereunder
shall be deemed effectively given when
personally delivered or mailed by prepaid
certified mail, return receipt requested,
addressed as follows:
If to Valle Grande or the Valle Grande
Shareholders:
Javier Tapia Camou, Director General
Valle Grande S.A. de C.V.
Boulevard Kino 1110 Col. Pitic
Hermosillo, Sonora
Mexico
With Copy to:
Luis Ochoa, Esq.
DeConcini McDonald Brammer Yetwin & Lacy
Suite 200
2525 East Broadway Blvd.
Tucson, Arizona 85716-5303
If to the Company or G/O Colorado:
G/O International, Inc.
11849 Wink
Houston, Texas 77024
With Copy to:
Leonard W. Burningham, Esq.
Hermes Building Suite 205
455 East 500 South
Salt Lake City, Utah 84111
or to such other address, and to the attention
of such other person or officer as any party
may designate, with copies thereof to the
respective counsel thereof as notified by such
party.
K. In the event any provision of this Agreement
is held to be invalid, illegal or
unenforceable for any reason and in any
respect, such invalidity, illegality, or un-
enforceability shall in no event affect,
prejudice or disturb the validity of the
remainder of this Agreement, which shall be in
full force and effect, enforceable in
accordance with its terms.
L. Whenever the context of this Agreement
requires, the gender of all words herein shall
include the masculine, feminine and neuter,
and the number of all words herein shall
include the singular and plural.
M. The divisions of this Agreement into sections
and subsections and the use of captions and
headings in connection therewith are solely
for convenience and shall have no legal effect
in construing the provisions of this
Agreement.
N. This Agreement supersedes all previous
contracts, and constitutes the entire
agreement of whatsoever kind or nature
existing between or among the parties
respecting the within subject matter and no
party shall be entitled to benefits other than
those specified herein. As between or among
the parties, no oral statements or prior
written material not specifically incorporated
herein shall be of any force and effect; the
parties specifically acknowledge that in
entering into and executing this Agreement,
the parties rely solely upon the
representations and agreements contained in
this Agreement and no others. All prior
representations or agreements, whether written
or verbal, not expressly incorporated herein
are superseded and no changes in or additions
to this Agreement shall be recognized unless
and until made in writing and signed by all
parties hereto. The provisions of this
Agreement shall survive the Closing and remain
of full force and effect for a period of two
years; All other agreements described,
referenced or contemplated herein shall not be
merged herewith. This Agreement may be
executed in two or more counterparts, each and
all of which together shall constitute but one
and the same instrument.
REORGANIZATION PLAN AND AGREEMENT
SIGNATURE PAGE
Valle Grande S.A. de C.V.,
a Mexican corporation By:/ss/ E. Javier Tapia Camou
-----------------------------
Its Director General
G/O International (Cayman) Inc.,
a Cayman Island Corporation By:/ss/ Peter Anderson
-----------------------------
Its Director
G/O International, Inc.,
a Colorado Corporation By:/ss/ Jack L. Burns
-----------------------------
Its President
REORGANIZATION PLAN AND AGREEMENT SIGNATURE PAGE
VALLE GRANDE SHAREHOLDERS
Dolomiti Limited By:/ss/Paine Webber Trust
Company
Berninee Limited By:/ss/Paine Webber Trust
Company
Versacce Limited By:/ss/Paine Webber Trust
Company
L'Tonelli Limted By:/ss/Paine Webber Trust
Company
Capriccio Limited By:/ss/Paine Webber Trust
Company
Inmobiliaria Cocoris By:/ss/Inmobiliaria Cocoris
Tapia Gamez German By:/ss/Tapia Gamex German
Auto Rentas Del Pacifico By:/ss/Agent
Anna Maria Tapia Camou By:/ss/Anna Maria Tapia Camou
Ramon Fierro Echave By:/ss/Ramon Fierro Echave
SCHEDULE A
VALLE GRANDE SHAREHOLDERS
ACTUAL SHAREHOLDERS OF G/O ACTUAL CONVERTED
INTERNATIONAL (CAYMAN] INC. SHARES PCTG SHARES
AUTO RENTAS DEL PACIFICO 255,647 0.08% 11,884
FIERRO ECHAVE RAMON 838,235 0.25% 38,966
INMOBILIARIA COCORIS 16,821,233 5.10% 781,950
L'TONELLI LIMITED 130,922,502 39.69% 6,086,050
DOLOMITI LIMITED 12,000,000 3.64% 557,830
BERNINEE LIMITED 131,051,481 39.73% 6,092,045
CAPRICCIO LIMITED 12,000,OO0 3.64% 557,830
TAPIA CAMOU ANA MARIA 14,311,923 4.34% 665,303
TAPIA GAMEZ GERMAN 8,972,781 2.72% 417,108
VERSACCE LIMITED 2,683,042 0.81% 124,724
TOTAL 329,856,844 100.00% 15,333,690
Schedule B-Valle Grande Subsidiaries
1. Hoteles Costa Alegre, S.A. de C.V.
2. Empresas Tapia Gamez, S.A. de C.V.
3. Hotel Nainari, S.A. de C.V.
4. Hotelera de Nogales, S.A. de C.V.
5. Hotel Pitic, S.A. de C.V.
Schedule C- Valle Grande Assets
As disclosed in 12/31/95 financial statements
Schedule D- Valle Grande Licenses and Permits
As Disclosed in 12-31-95 Financial Statement
Schedule E- Valle Grande Contracts
As provided by separate attachment
Schedule F-Valle Grande Equipment
As provided by separate attachment
Schedule G- Valle Grande Existing Mortgages, Liens and
Etc.
As provided by separate attachment
Schedule H- Valle Grande Insurance
As provided by separate attachment
Schedule I- Employees, Pensions and Sick Leave Policies
As provided by separate attachment
Schedule J- Valle Grande Litigation
none
Schedule K- Valle Grande Material Changes
As provided by separate attachment
Schedule L G/O International, Inc.-Subsidiaries
1. G/O International (Cayman) Inc., a Cayman Island
corporation
2. Waterbury Resources Inc., a Cayman Island corporation
3. Daimyo Industries Ltd., a Cayman Island corporation
4. Antares Trading Inc., a Cayman Island corporation
5. G/O International, Inc., a Delaware corporation
Schedule M- G/O International, Inc.
Documents filed with the Securities & Exchange Commission
and changes
The Form 10-KSB for the fiscal year ending December 31, 1995.
Since the date of the G/O Colorado audited financial statements
contained in the Form 10KSB, G/O Colorado has:
1. Sold an additional 2,000,000 shares of its $0.01 par value
per share common stock for total consideration of $20,000,
which has been utilized to defray expenses of the Company.
Such shares of common stock were sold by G/O Colorado to non
"U.S. Persons" as such term is defined in Regulation S and
were sold pursuant to Rule 903(c)(2) of Regulation S as
promulgated under the Act.
2. Formed those wholly owned subsidiary corporations set forth
in Schedule L to this Reorganization Plan and Agreement.
Exhibit 1- Valle Grande Financial Statements
Sotomayor Elias, S.C.
TO THE SHAREHOLDERS OF
VALLE GRANDE, S.A. DE C.V. AND SUBSIDIARIES
We have audited the balance sheet of VALLE GRANDE, S.A. DE C.V.
AND SUBSIDIARIES, as of December 31, l994 and l995, and the
related statements of income, of changes in stockholders equity
and of changes in financial position for the years then ended.
These financial statements are the responsibility of the
Company's Management. Our responsibility is to express an opinion
on those financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in Mexico. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misrepresentation and that they were prepared in accordance with
generally accepted accounting principles. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, An audit also includes
assessing those accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present
fairly, in all material respects, the financial situation of
Valle Grande, S.A. de C.V., and subsidiaries as of December 3l,
l994 and l995, and the profit and loss statement, also the changes
in the stockholders' equity and the financial position for each
of the three years ending in December 31, in conformity with the
general accepted accounting principles in Mexico.
DESPACHO SOTOMAYOR ELIAS, S.C.
Contadores Publico
C.P. Rodrigo Sotomayor Elias
March 18th, 1996.
STATEMENT 1
VALLE GRANDE, S.A. DE C.V. AND SUBSIDIARIES
BALANCE SHEET T0 DECEMBER 31, 1995 and 1994
MEXICAN PESOS AT PURCHASING POWER OF DECEMBER 1995
1995 1994
ASSET
CURRENT ASSETS
Cash and temporary Investments 2) $ 1,740,737 $22,221,717
Notes and Trade accounts receivable 3) 19,780,430 37,153,303
Inventories 788,209 1,850,908
Advanced payments 4) 431,095 656,098
22,740,471 61,882,026
Investments
Investment in shares 5) 7,776,941 11,970,318
Trust Rights 44,738,181 11,758,940
Investments in affiliated companies 6) 10,597,919 6,771,410
63,113,041 30,500,668
Fixed Assets 7)
Land 135,825,972 114,614,312
Buildings and constructions 190,426,294 216,628,864
Office furniture and fixtures 48,415,376 55,028,001
Equipment transportation 2,890,115 2,999,441
377,557,757 389,270,618
Accumulated depreciation (42,673,399)(60,442,067)
334,884,358 328,828,551
Deferred
Bond issue expenses 8) 75,937 115,394
Prepaid expenses 9) 63,754 120,738
139,691 236,132
Other assets 10)
Land 4,088,738 5,177,703
Constructions in process 3,968 6,030
4,092,706 5,183,733
TOTAL ASSETS $ 424,970,267 $426,631,110
LIABILITIES 1995 1994
Notes and accounts payable 11) 60,988,722 $78,559,182
Reserves and supplies 103,440 212,408
Equity of the laborers in the profits 8,172 4,109
tax on assets payable 1,697,279 2,351,830
62,797,613 81,127,529
Fixed
Notes payable 12) 183,601,032 170,168,986
Accrued seniority premiums cost 13) 383,681 577,188
Mortgage bonds 14) 12,002,122 15,196,000
Value added tax deferred payable 493,402
195,986,835 186,435,576
TOTAL LIABILITIES 258,784,448 267,563,105
STOCKHOLDERS EQUITY
Fixed and variable capital stock 15) 97,129,698 55,342,780
On restatement of capital surplus 16) 287,161,683 264,811,513
Stock sale premium 2,108,561 2,108,561
Lega1 reserve 4,334,449 4,334,449
Retained earnings (206,415,448) (58,373,259)
Net loss for the year (18,133,124) (109,156,039)
Total Stockholder's Equity 166,185,819 159,068,005
TOTAL LIABILITIES STOCKHOLDERS'
EQUITY $ 424,970,267 $426,631,110
The accompanying notes are integral part of these financial
statements
C.P. German Garcia Astiazaran SR. Moises A. Artiz Castillo
Administrative Director Accountant
March 18th, 1996.
STATEMENT 2
VALLE GRANDE, S.A. DE C.V. AND SUBSIDIARIES
STATEMENT OF INCOME FROM THE PERIOD OF JANUARY 1, TO
DECEMBER 31, OF 1995 AND 1994
MEXICAN PESOS AT PURCHASING POWER OF DECEMBER 1995
1995 1994
INCOME
Net sales $56,782,795 $ 75,895,814
Commissions earned ticket sale 930,730 713,326
Commissions earned reservation 11,639 21,019
Service income 1,458,848 0
other income 38,702,315 3,664,667
97,886,327 80,294,826
COSTS AND EXPENSES
Cost of sales and operating expenses 39,651,832 56,510,476
Administrative expenses 24,311,549 25,169,669
63,963,381 81,680,145
OPERATING PROFIT (LOSS) 33,922,946 (1,385,319)
Depreciation and amortization (9,827,005) (12,537,323)
Comprehensive financing cost 17) (39,966,875) (60,419,298)
RESULTS FOR CONTINUOUS TRANSACTIONS (15,870,934) (74,341,940)
EXTRAORDINARY ITEM
Stock sale loss 33,331,851
INCOME (LOSS) BEFORE MINORITY INTEREST (15,870,934)(107,673,791)
Minority interest (l,200,572)
LOSS BEFORE TAX AND EMPLOYEES'
PROFIT SHARING (17,071,506)(107,673,791)
Asset tax 1,056,818 1,482,081
Employees' profit sharing 4,800 167
NET LOSS $(18,133,124)$(109,156,039)
The accompanying notes are an integral part of these financial
statements.
C.P. German Garcia Astiazaran SR. Moises A. Ortiz Castillo
Administrative Director Accountant
March 18th, 1996.
STATEMENT 3
VALLE GRANDE, S.A. DE C.V. AND SUBSIDIARIES
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD OF
JANUARY 1 TO DECEMBER 31, 1995 AND 1994
MEXICAN PESOS AT PURCHASING POWER OF DECEMBER 1995
1 9 9 5 1994
FIXED AND VARIABLE CAPITAL STOCK
Balances at beginning of year $ 55,342,780 $44,412,955
Increase in the variable capital
stock, according to stockholders -
agreement 10,929,825
Contributions to capital stock in
Empresae Tapia Gamez merger 15,351,252
Decrease of stockholders' equity at
redemption of Valle Grande, S.A. de
C.V., capital stock, which the -
holding company owned previously. (13,820,036)
Capitalization of a portion of the
surplus on restatement to capital -
stock, according to stockholders
agreement. 19,317,121
Payment of capital not paid-up,
with the assets contributed by the
merger. 16,308,922
Increase to capital stock of the -
subsidiary Hoteles Valle Grande,
S.A. de C.V. 4,629,659
Balances at end of year 97,l29,698 55,342,780
SURPLUS ON RESTATEMENT OF CAPITAL
Balances at beginning of the year 264,811,513 173,169,502
- - Increase in Empresas Tayia Gainez -
merger 30,507,275
- - Capitalization of portion of the
surplus on restatement to capital
stock, according to stockholders
agreement. (19,317,121)
- - gain from holding nonmonetary
assets 11,160,016 91,642,011
Balances at end of the year 287,161,683 264,811,513
1995 1994
STOCK SALE PREMIUM
Balance at beginning and end of year 2,108,561 2,108,561
LEGAL RESERVE
Balances at beginninq and end of year 4,334,449 4,334,449
RETAINED EARNINGS
Balance at beginning of year (58,373,259) (30,766,774)
- - Application of the year's loss
to retained earning (109,156,039) (27,599,673)
- - Transfer of Empresas Tapis Gamez
losses to the merger ( 39,837,151)
- - Complementary tax payment ( 2,087) (6,812)
- - Asset tax receivable 497,551 0
- - Cancelation of asset tax from
l989 to 1993 455,537 0
Balances at end of year (206,415,448) (58,373,259)
NET LOSS FOR THE YEAR
Balance at beginning of year (109,156,039) (27,599,673)
- - Transfer of last year's loss
balance to retained earnings l09,156,039 27,599,673
- - Net loss for the year (l8,l33,124)(109,156,039)
Balance at end of year (18,133,124)(109,156,039)
TOTAL CAPITAL $ 166,185,819 $159,068,005
The accompanying notes are an integral part of this financial
statements.
C.P. GERMAN GARCIA ASTIAZARAN SR. MOISES A. ORTIZ CASTILLO
Administrative Director Accountant
March l8th, 1996.
STATEMENT 4
VALLE GRANDE, S.A. DE C.V. AND SUBSIDIARIES
STATEMENT OF CHANGES IN FINANCIAL POSITIONS FOR TH PERIOD
OF JANUARY 1 TO DECEMBER 31, 1995 AND 1994
MEXICAN PESOS AT PURCHASING POWER OF DECEMBER
1995 1994
OPERATIONS
NET LOSS $(l8,l33,124)$(109,156,039)
ITEMS NOT AFFECTING RESOURCES:
Stock sale loss 33,331,852
Depreciation and amortization 9,827,005 12,891,168
Accrued interest not paid and
exchange 1oss 71,967,641 39,361,749
Allowance and provisions 164,840 474,618
Income tax and asset tax 711,552 1,105,242
Employees' profit sharing 4,800 167
64,542,714 (21,991,243)
(Increase) decrease in accounts
receivable 17,372,873 (21,836,965)
(Increase) decrease in inventories 1,062,699 (1,539,458)
(Increase) decrease in other assets 2,954,734 4,769,198
Increase (decrease) in accounts
payable (l8,944,929) (35,915,338)
Resources provided by operations 66,988,091 (76,513,806)
1995 1994
FINANCING
Private companies and financial
institutions loans 102,434,192
Payments to private companies
and financial institutions loans (61,729,473) 0
Increase in capital stock 17,84O,138 10,929,825
Asset tax paid (83,928)
Employees' profit sharing paid (2,087) (6,813)
Resources used in financing
activities (43,891,422) 113,273,276
INVESTMENT
Trust rights (32,979,241) (11,758,94O)
Sale (investment)in land and
buildings 4,990,910 (5,119,915)
Acquisition of other fixed assets (19,782,695) (3,476,210)
Sale (investment) of shares 4,193,377 (783,490)
Resources used in investment
activities (43,577,649) (21,138,555)
(Decrease) increase in cash
and temporary investments (20,480,980) 15,620,915
Cash and temporary investments at
beginning of year 22,221,717 6,600,802
Cash and temporary investments
at end of year $1,740,737 $ 22,221,717
The accompanying notes are an integral part of these financial
statements.
C.P. German Garcia Astiazaran SR. Moises A. Ortiz Castillo
Administrative Director Accountant
March 18th, 1996.
VALLE GRANDE, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 AND
1994
NOTE 1) THE COMPANY'S MAIN ACTIVITIES
- - The main activities of the company are offering lodging,
restaurant, and bar services, as well as the renting of halls for
special events.
OTHER SECONDARIES OBJECTIVES
a) Purchase and sale of all kinds of products for trading by the
company or other companies.
b) The promotion and fomentation of industrial, commercial and
touristic development and acquisition, sale or any other
juridical acts that has to be with shares, participation
certificates, bonds, debentures and all class of
instruments issued by Mexican societies.
c) The promotion and fomentation of industrial, commercial and
touristic development and acquisition, sale or any other
juridical acts that has to be with real estate, factories,
laboratories, plants, warehouses, machinery, furniture, credits
and rights.
d) To grant, stand for, quarantee loans given to societies which
the company is or is not the owner, as well as give any warranty
in favor of third parties.
e) Give all kind of services and make promotional, enlargement
or restructuration studies destined exclusively for societies
with the company is proprietor of, or any other society which the
company has the intention of having stock participation.
f) Acquire and rent all kind of real estate with the intention
of selling or using them in all kind of business operations.
g) In general, carry out all class of representations,
commissions, celebrate contracts and of all kind of acts
necessary to reach the company's goals.
ACCOUNTING POLICIES
a) Consolidation principles
The financial statements include the accounts of Valle Grande,
S.A de C.V., and their subsidiaries, except Intervuelos, S.A. de
C.V., Agrofrutales de Sonora, S. de R.L. de C.V., Hotelera Rio
Sonora, S.A. de C.V., and Delfin Vacation Club, S.A. de C.V.; the
balances of all the current accounts, as well as important
transaction between related parties have been eliminated.
b) Accounts receivable
A monthly allowance for doubtful accounts is registered, it is
calculated by applying a 1% rate to the previous month sales.
c) Inventories
Inventories are valued at their average cost their market value
the amounts shown for inventories do not exceed.
d) Property and equipment
The investment in real estate, furniture and equipment are
registered at their acquisition and installation values.
The repairs and adaptations to these investments are capitalized,
when those repairs represent additions or improvements to these
assets.
Depreciation is determined on the assets balances at year's end
by the straight-line method, calculated over the balance of the
investments at the end of year. In this year, the depreciation
rates were modificated due to an appraisal made by an independent
expert, who provided the remainder useful life for each type of
asset.
e) Allowance and provisions
The company has allowances for seniority premiums, year end
bonus, vacation premiums and dismissal indemnity, which are
calculated on a monthly basis by applying to each month wages
specific rates, that vary according to each company severance
compensation plans.
f) Financial statements presentation
The financial statements were prepared in conformity with B-10
accounting principle, consequently:
1. The financial statement are stated in constant Mexican pesos
of December 31, 1995 purchasing power. In the statement of
income items are restated monthly by applying to each months
balances an restatement factor. This factor is obtained by
dividing the National Consumer Price Index of the month
the financial statement is referring to and the National Consumer
Price Index of the month the income item balances refers to.
2. Restatement of the stockholders' equity is distributed
between each item that conforms it.
The statement of changes in the financial position was prepared
considering as resources provided or used, the change in constant
Mexican pesos the different items in the balance sheet.
NOTE 2) CASH AND BANK
The balance in this account is represented by cash funds and
checking accounts in national and foreign currency (US dollars),
U.S. dollars currency accounts are valuated at $7.6842 pesos for
one dollar, this exchange rate is the prevailing at December 31,
1995. The balances of December 31, 1994 were restated with the
annual inflation factor of 1.5196 for presentation purposes.
1995 1994
Cash $330,395 $178,545
Banks National Currency (U.S. dollars) 1,229,793 4,768,676
Banks Foreign Currency 177,937 242,220
Investments in realizable securities 2,612 17,032,276
1,740,737 22,221,717
NOTE 3) INTEGRATION OF NOTES AND TRADE ACCOUNTS RECEIVABLE
1995 1994
Clients 6,157,363 22,074,451
Others:
Wage credit 41,304
Sundry debtors 11,762,061 7,563,336
Tax Advances 330,359 259,785
Executives and employees 239,359 232,961
Recoverable value added tax 236,495 387,076
Delfin Vacation Club, S.A. de C.V. 1,163,187 0
Notes receivable 123,671
Intervuelos, S.A. de C.V. 3,102,560
Empresas Tapia Games, S.A. de C.V. 1,203,108
Hotelera Rio Sonora, S.A. de C.V. 1,176,687
Other debtors 133,333 1,355,673
$20,022,157 $37,520,612
Minus:
Allowance for doubtful accounts ( 241,727) ( 367,309)
$19,780,430 $37,153,303
NOTE 4) INTEGRATION OF ADVANCED PAYMENTS
Advanced to supplies $218,420 $206,360
Other advance payments 133,920 332,031
Guaranty deposits 78,755 117,707
$431,095 $656,098
NOTE 5) INVESTMENTS IN SHARES
This item is represented by the acquisition of equity securities
(shares) and is integrated as follows:
Grupo Financiero Inverlat, S.A. $7,078,894 $10,732,555
Banca Confia, S.A. 698,047 1,060,752
Other investments 0 177,011
$7,776,941 $11,970,318
NOTE 6) INVESTMENTS IN AFFILIATED COMPANIES
1995 1994
It's integration is as follows:
Delfin Vacation Blud, S.A. de C.V. $3,774,770
Hotelera Rio Sonora, S.A. de C.V. 4,041,907 $6,142,082
Intervuelos, S.A. de C.V. 2,778,100 629,322
Other enterprises of the group 3,142 6
$10,597,919 $6,771,410
NOTE 7) PROPERTY AND EQUIPMENT
RESTATED FIGURES
1995 1994
Land $135,825,972 $114,614,312
Buildings and constructions 190,426,294 216,628,864
Furniture and equipment 48,415,376 55,028,001
Transportation equipment 2,890,115 2,999,441
377,557,757 389,270,618
Accumulated depreciation ( 42,673,399)
(60,442,067)
$334,884,358 $328,828,551
The real estate property of Hotel Nainari, S.A. de C.V.,
(subsidiary Company) are granted as guarantee for the bond issue
as guarantee for the loan of $10,000,000 American dollars given
by Multibanco Comermex, S.A., real estate assets of subsidiaries
companies, Hotel Pitic, S.A. de C.V., Hotel Nainari, S.A. de C.V.
and Hotelera de Nogales, S.A. de C. V. were granted.
NOTE 8) BOND ISSUE EXPENSES
This item refers to incurred expenses in the issuing of the
mortgage bonds, that will be amortizated in a 7 year period.
NOTE 9) PREPAID EXPENSES
This caption is represented by expenses of seniority premiums
coming from previous years, these expenses will be amortizated in
a 14 year period determined by the workers remanent labor life.
NOTE 10) OTHER ASSETS
Caption represented by one land and construction in process
located in the city of Nogales, Sonora.
NOTE 11) INTEGRATION OF CURRENT NOTES AND ACCOUNTS PAYABLE
1995 1994
Notes payable $35,067,594 $49,981,642
Suppliers 3,380,277 8,140,353
Sundry creditors 10,553,951 10,686,025
Taxes payable 4,713,486 2,488,413
Invertur del pacifico, S.A. de C.V. 0 1,672,779
Payable tickets to airlines 296,889 251,614
Advances on reservation 3,018,969 1,921,862
Income tax payable 1,246,078 0
Value added tax payable 814,566 1,117,807
Other creditors 1,896,912 2,298,687
$60,988,722 $78,559,182
NOTE 12) INTEGRATION OF LONG TERM NOTES PAYABLE
BANCO MEXICANO, S.A.
Loan for $302,863 American dollars
valued at the exchange rate of
$7.6842 and $4.94 at December 31,
1995 and 1994 bearing interest at
the prime rate plus 6 points, with
maturity in December 5, 1995
interest and exchange loss. $ 1,396,356 $ 2,273,539
Interest and exchange loss 172,554
ARRENDADORA BANKCOMER, S.A.
Loans assigned to the acquisition
of fixed assets with maturity the
last of them on January of 1996. 34,482 830,164
BANCOMER, S.A.
Unsecured loans assigned to support
the operating expenses, with an
annual rate of 23% with maturity,
the last of them in January 26, 1993 6,686,240
Earned interest 83,298
INVERLAT, S.A.
Loan for $1,490,000 American
dollars valued at the exchange
rate of $7.6842 bearing interest
of libor rate plus 6 points
assigned to the acquisition of the
trust rights. The maturity
is October 5, 2003 with the
grace period to the capital
payment for the first two years. $11,449,458
Earned Interest 1,416,872
Loan for $6,935,000 American
dollars valued at the exchange
rate of $7.6842 and $4.94 at
December 31, 1995 and 1994
bearing interest of libor rate
plus 6.5 points with maturity
in October 5, 2009. 53,289,927 52,059,824
Earned interests 6,488,971 1,120,726
MULTIBANCO COMERMEX, S.A.
Loan for $5,882,950 American
dollars valued at the exchange
rate of $7.6842 and $4.94 at
December 31, 1995 and 1994
bearing interest of libor rate
plus 7.5 points, assigned for
the reorganization of
liabilities with maturity on
July 5, 2002. 45,205,765 44,162,270
Earned interest 5,436,473 1,149,071
Loans for $4,117,050 American
dollars valued of the exchange
rate of $7.6842 and $4.94 at
December 31, 1995 and 1994
bearing interest of libor rate
plus 6.5 points, assigned for
the rooms remodeling with
maturity on July 5, 2002. 31,636,235 30,905,970
Earned interest 3,554,642 731,791
Credit for $718,121 American
dollars value at the exchange
rate of $7.6842 and $4.94 at
December 31, 1995 and 1994 for
bearing interest of libor rate,
the rooms remodeling with
maturity on July 5, 2002. 4,869,357 6,526,111
Earned interest 2,408,010 203,825
Loan for $4,000,000 American
dollars valued at the exchange
rate of $7.6842 and $4.94 at
December 31, 1995 and 1994 at
bearing interest of libor rate
plus 7 points assigned for
working capital and remodeling
with maturity on July 5, 2004. 32,547,754 30,027,296
Earned Interest 2,300,094 937,820
INVERTUR DEL PACIFICO
Loan bearing interest of the CETES
rate with maturity on October
3, 1994 583,814 887,164
FIDEICOMISO RIO SONORA
Loan for the acquisition of
land with expiration on
December 31, 1995 5,096,185
EDUARDO AVINA BATIZ AND PARTNERS
Lona for the acquisition of
shares bearing interest of CD
rate plus P.RATE /2/2 with the
final expiration in May of
2000. 7,365,003 8,882,214
BANCA SERFIN
Loan destinaded to assume the
liabilities and discharge the
solidary obligation that in
relation with that credit they
had with Invertur del Pacifico,
S.A. de C.V. and Burquez Brothers
with the purpose of consolidating
liabilities contracted by the
same financial institution,
bearing interest of 80% of
CETES with maturity on April
of 1995. 17,855,300
Earned Interest 1,499,055
Unsecured loan bearing interest
rate of 25.5% with maturity on
December 16, 1994. 3,039,200
Interest 180,294
Unsecured loan with maturity
on October 13, 1995, with an
annual interest rate of 43%. 2,900,000
Earned Interest 358,747
COMERMEX, S.A.
Financial lease contract
subscribed with Arrendamiento
Dinamico Serfin, S.A. de C.V.
to acquire computer equipment
with value of $208,474; the
interest rate was CETES (x) 1.3,
the life on the contract is
36 months. 207,672
ARRENDAMIENTO DINAMICO SERFIN, SA DE CV
Financial lease contract
subscribed for the acquisition
of computer equipment with
value of $208,474, the interest
rate agreed on CETES (x) by
1.3 with duration of 36
months. 136,662 0
Other documented liabilities 48,097 74,245
213,426,719 215,591,828
Minus:
Current Portion 29,825,687 45,422,842
$183,601,032 $170,168,986
NOTE 13) LABOUR LIABILITIES
Derivated of the actuarial valuation of the labour liabilities of
the company at December 31, 1994 the following data was obtained:
- -Current benefit obligations as of:
$189,601.92
- -Projected benefit obligations projected to:
a) January 1, 1994: $402,146.42
b) December 31, 1994: $422,369.02
- -Asset as of:
a) January 1, 1994: $0.00
b) December 31, 1994: $0.00
- -Unamortized prior service cost and plan modifications as of
December 31, 1994: $0.00
- -Unamortized assumption variations and experience adjustments
(loss)/gain, as of December 31, 1994: $(5,149,63)
- -additional liabilities adjusted amount as of December 31, 1994:
$(11,575.72)
- -Unamortized transition liabilities as of December 31, 1994:
$297,763.98
- -Net period cost as of January 2, 1994:
$131,990.52
All calculations were made by independent actuaries.
For the year of 1995, the actuarial study was not done for the
company, because it was considerated that the allowance was
adequate for the labour liabilities.
NOTE 14) MORTGAGE BONDS
This item is represented by the issuing of 100,000 mortgage
bonds, with a nominal value of one hundred pesos for each one
with maturity on November 21, 1998, bearing variable interest
rates.
The bonds will be amortized in 8 equal payments, these would be
semestral, consecutive, fixed and without draws, starting the
42nd month after the issue, each semestral amortization include a
complete series of bonds, with a nominal value of $1,250,000.
The derivated interest of this issue are payable quarterly;
however, the last time interest were paid was on November 21,
1992.
As a collateral, real estate assets of Hotel Nainari, S.A. de C.
V. (subsidiary) were given as mortgage; additionally financial
and corporate structure limitations of the issuer were
established in the contract.
NOTE 15) CAPITAL STOCK
The fixed capital stock is represented by 10,000,000 of shares
with value of 10 cents each.
The variable capital stock is composed by 332,002,510 shares with
face value of 10 cents each; which comes from the capitalization
of the restatement of stockholders' equity accounts.
It's integration is as follows:
Fixed capital stock $ 1,000,000
Variable capital stock 37,829,910
Historic balance 38,829,910
Restatement 58,299,788
Restated balance $ 97,129,698
It's include in the variable capital stock, the proportion of the
capital of Hoteles Valle Grande, S.A. de C.V., for $4,629,659,
when we didn't consolidate the enterprise Delfin Vacation Club,
S.A. de C.V., owner of 46,296,590 shares, 18% of capital of
Hoteles Valle Grande, S.A. de C.V.
A portion of the stockholders' equity of Hoteles Valle Grande,
S.A. de C.V., of $4,629,659 is included in the variable capital
stock, when Delfin Vacation Club, S.A. de C.V., is not
consolidating, since it is has 46,296,590 shares (18%) of Hoteles
Valle Grande, S.A. de C.V., stockholders' equity.
NOTE 16) RESTATEMENT OF FINANCIAL STATEMENTS
The financial statements are restated at replacement cost
determined on the basis of appraisals made by independent experts
at December 31, 1995.
The item "Surplus on restatement of capital" is composed as
follows:
Results from monetary position $ 15,357,345
Results from non monetary assets tenancy 271,804,338
$287,161,683
The results from non monetary assets was obtained by comparing
the restatement by using replacement cost and the restatement by
using the variation for the year of the National Consumer Price
Index, resulting for the year a gain in 1995 of $11,160,016
representing that the increase in value of the assets was
larger than inflation.
The results from monetary position for 1995 resulted into a
profit of $61,085,339 originated by having monetary liabilities
larger than monetary assets, which decrease their real value due
to inflation. This gain is applied to the years results under
the item of "Operational monetary result".
NOTE 17) INTEGRAL COSTS OF FINANCING
His integration is next:
1995 1994
Interest earned $ 3,852,345
Interest paid (39,291,137) $(15,479,901)
Operational monetary result 61,085,339 4,324,350
Exchange gains 4,649,325
Exchange loss (70,262,747) (49,263,747)
$(39,966,875) $(60,419,298)
The accompanying notes are an integral part of these financial
statements.
C.P. GERMAN GARCIA ASTIAZARAN SR. MOISES A. ORTIZ CASTILLO
Administrative Director Accountant
March 18th, 1996.
I AGREE WITH THE TRANSLATION TO ENGLISH OF THESE FINANCIAL
STATEMENTS AND
THEIR NOTES WHICH ORIGINALLY WERE WRITTEN IN SPANISH.
DESPACHO SOTOMAYOR ELIAS, S.C.
CONTADORES PUBLICOS
Exhibit 2-Investment Letter
G/O International (Cayman) Inc.
and
G/O International, Inc.
INVESTMENT LETTER
G/O International (Cayman) Inc.
P.O. Box 2097
Grand Cayman, Cayman Islands, British West Indies
G/O International, Inc.,
11849 Wink
Houston, Texas 77024
Re: Acquisition of Ordinary Shares of G/O International
(Cayman) Inc., a Cayman Island corporation (the "Company").
Gentlemen,
Pursuant to that certain Reorganization Plan and
Agreement ("Plan") among the Company, G/O International, Inc.,
a Colorado corporation, the Company s parent ("G/O Colorado"),
Valle Grande S.A. de C.V. a Mexican corporation ("Valle
Grande") and the holders of 329,856,844 shares of the capital
stock of Valle Grande (the "Valle Grande Shareholders")
including the undersigned, being the holder of that number of
shares of the capital stock of Valle Grande set forth in
Schedule A of the Plan, the undersigned has agreed to exchange
his, her or its shares of the capital stock of Valle Grande
for that number of the Ordinary Shares of the Company as set
forth in Schedule A to the Plan. In connection therewith, the
undersigned hereby acknowledges that he, she or it has
approved this exchange; that he, she or it is aware of all of
the terms and conditions of the Plan; that he, she or it has
received and personally reviewed a copy of any and all
material documents regarding the Company and G/O Colorado
which have been delivered for his, her or its review,
including those documents set forth in Schedule M of the Plan
and, based upon such review, desires to acquire at total of
that number of the $0.0001 par value per share Ordinary Shares
of the Company (the "Shares") set forth in Schedule A of the
Plan, upon the terms set forth in the Plan. In connection
therewith:
1. Representations and Warranties of the Undersigned.
(a) Respecting Offering Materials. The undersigned
hereby represent and warrant that he, she or it :
(1) has been furnished with those materials and
documents set forth in Schedule M to the Plan
("Disclosure Materials").
(2) has been given the opportunity to ask
questions of and receive answers from the
officers and directors of the Company and G/O
Colorado with respect to the issuance of the
Ordinary Shares pursuant to the Plan, the
Shares, the business of the Company and G/O
Colorado and any other matters which they
considered to be material to his her or its
investment decision and all such questions
have been answered to his, her or its full
satisfaction;
(3) has not relied on any information or
representation other than those set forth in
the Company's and G/O Colorado s Disclosure
Materials and such other written information
and representations as have been provided by
the officers and directors of the Company and
G/O Colorado pursuant to a specific question
or request for additional information;
(4) has not been presented with or solicited by
any leaflet, public promotional meeting,
circular, newspaper or magazine article, radio
or television advertisement, or any other form
of general advertising.
(b) Respecting Investor Suitability. The undersigned
hereby represents and warrants that he, she or its:
(1) is an "Accredited Investors" as that term is
defined in Securities and Exchange Commission
Regulation D, promulgated under the Securities
Act of 1933, as amended (the "Act");
(2) is capable of bearing the high degree of
economic risk associated with this investment
including, but not limited to, the possibility
of complete loss of all his, her or its
investment capital;
(3) has sufficient financial and other resources
to provide for anticipated financial needs,
without taking into account any income which
may be generated as a result of his, her or
its investment in the Shares, and has no need
for liquidity with respect to the investment
in the Shares;
(4) has total investments in illiquid investments
that are reasonable in relation to his, her
or its net worth and can afford the total loss
of the investment in the Shares;
(5) has had substantial experience in business of
investments in one or more of the following:
(i) investment experience with securities,
such as stock and bonds; (ii) ownership of
interests in new ventures and start-up
companies; and (iii) experience in business
and financial dealings; and
(6) can protect his, her or its own interests in
an investment of this nature and does not have
a "Purchaser Representative," as that term is
defined in Regulation D of the Act and does
not need such Representative.
(7) understands and agrees that the Shares
acquired pursuant to the Plan have not been
and will not be registered under the Act, that
the Shares are being offered and sold in
reliance upon the exemption from registration
afforded by Section 4(2) and Rule 506 of
Regulation D as promulgated under the Act and
that the Shares have not been registered with
any state securities commission or other
governmental authority. Undersigned hereby
acknowledge that pursuant to the requirements
of Section 4(2) and Rule 506 or Regulation D,
the Shares acquired from the Company may not
be transferred, sold or otherwise exchanged
unless registered or in transactions that are
exempt therefrom.
(8) undersigned acknowledge that the Company and
G/O Colorado are relying upon the
representations made by him, her or its herein
in transferring the Shares hereunder without
registration under the Act pursuant to an
exemption therefrom as provided in Section
4(2) and Rule 506 of Regulation D promulgated
thereunder. Undersigned has consulted with
legal counsel in connection with this
transaction.
(9) is purchasing the Shares exclusively for his,
her or its own account and not for the account
or benefit or on behalf of another person.
(c) Respecting Investment Liquidity. The undersigned
hereby represent and warrant that he, she or it:
(1) has been advised that the Shares have not been
registered under the Securities Act of 1933 in
reliance on the exemption provided by Section
4(2) and Rule 506 of Regulation D of the Act
relating to transactions not involving a
public offering;
(2) understands that the issuance of the Shares
has not been approved or disapproved by the
Securities and Exchange Commission or the
securities regulatory authority of any state;
(3) understands that the Shares, are, and will
continue to be, unregistered securities which
may not be assigned, sold, transferred,
conveyed or hypothecated to any person unless
such are subsequently registered under
applicable Federal and state law, or unless an
exemption from such registration is available
to both the undersigned and the proposed
transferee under such laws;
(4) understands that, the Company has no
obligation or intention to register the Shares
for sale under the Act;
(5) understand that there is at present a limited
public market for the Shares and that the lack
of a liquid market may make it impossible to
liquidate the Shares when desired or at then
current asking price, and there can be no
assurances that an active public market will
ever develop; and
(6) understands and acknowledges that this
investment may be long term, must be held
indefinitely, and is, by nature, highly
speculative.
Undersigned further represent and warrant that all of the
representations and warranties set forth above are true as of
the date of this Investment Letter.
2. Representations and Warranties of the Company
a. The Company is a corporation organized under the
laws of the Cayman Islands with full corporate authority to
conduct its business as now being conducted,
b. The issuance of the Shares required to be delivered
by the Company pursuant to this Agreement, will have been duly
authorized by all necessary corporate action by the Company
and will not violate any provision of the corporate statutes
or similar organic documents of the Company.
c. Neither the execution nor delivery of this
Investment Letter nor the issuance of Shares, nor the
performance, observance or compliance with the terms and
provisions of this Investment Letter by the Company will
violate any provision of law, any order of any court or other
governmental agency, or any indenture, agreement or other
instrument to which the Company is a party or by which the
Company is bound. This Investment Letter, upon its execution
and delivery by the Company and assuming the due authorization,
execution and delivery by the other parties hereto, will be the
valid, binding, and legally enforceable obligation of the
Company.
d. The Shares, when issued to undersigned will be duly
and validly authorized and issued on a fully paid basis with
no further right of assessment by the Company. In order to
further compliance with the requirements of Regulation D, the
Company shall cause the certificates delivered by the
Company's transfer agent for delivery to the Purchaser to
bear the following legend or one substantially similar
thereto, to be contained on the certificate representing the
Shares:
"The securities represented by this certificate
have been acquired pursuant to a transaction
effected in reliance upon an exemption under the
Securities Act of 1933, as amended (the "Act"), and
have not been the subject to a Registration
Statement under the Act or any state securities
act. The securities may not be sold or otherwise
transferred in the absence of such registration or
applicable exemption therefrom under the Act or any
applicable state securities act."
e. The Company will take any and all reasonable action
necessary to assist the undersigned in obtaining timely
transfer and delivery of the Shares as contemplated hereby
(including the execution and delivery of such additional
documents as may be required to effect transfer of the Shares
to the undersigned thereof as contemplated hereby).
3. Express Covenants of the Undersigned.
(a) Respecting Resales and Transfers. The undersigned
expressly represent, covenant and warrant that he,
she or it:
(1) will not transfer or assign this Investment
Letter or any of its rights hereunder, and
further agrees that the assignment and
transferability of the Shares shall be made
only in accordance with this Investment Letter
and the Plan; and
(2) will not, without the prior written consent of
the Company, assign, sell, transfer, convey or
hypothecate any interest in the Shares to any
person, unless the proposed transfer may be
lawfully completed without such consent under
the applicable provisions of the Securities
and Exchange Commission Rule 144 and/or
Regulation D or pursuant to a registration.
(b) Respecting Indemnification of the Company. The
undersigned represents, warrants and agrees that
he, she or it will indemnify and hold the Company
and each of its officers, directors and principal
shareholders harmless from and against all costs
and expenses, including attorney's fees, judgments
and amounts paid in settlement, which may be paid
or incurred by any such person in connection with
or as a result of any claim, demand, action or
right of action which in anyway arises from or
relates to any breach by the undersigned of any
representation, warranty or covenant set forth in
this Investment Letter or any incomplete, evasive
or misleading answer to any question set forth in
herein which has been completed by them and
submitted herewith.
4. Restrictive Legend. The Company intends to place the
following restrictive legend, or a legend similar thereto, on
each certificate representing the Common Stock:
"The securities represented by this
certificate have been acquired pursuant to a
transaction effected in reliance upon an exemption
under the Securities Act of 1933, as amended (the
"Act"), and have not been the subject to a
Registration Statement under the Act or any state
securities act. The securities may not be sold or
otherwise transferred in the absence of such
registration or applicable exemption therefrom
under the Act or any applicable state securities
act."
5. Notices. All notices or other communications which are,
or may be, required or permitted to be given or made hereunder
shall be in writing and shall be delivered or mailed by
registered or certified mail, return receipt requested,
postage prepaid, to the Company at the address first above
written and to the undersigned at the address designated in
undersigned's counterpart signature page to this Investment
Letter tendered herewith.
6. Governing Law. The offer and other transactions
contemplated under this Agreement shall be construed in
accordance with the governed by the laws of the Cayman
Islands, British West Indies.
7. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject
matter hereof and may be amended only by a writing executed by
all parties.
SIGNED
Versacce Limited By:/ss/Paine Webber Trust
Company
Capriccio Limited By:/ss/Paine Webber Trust
Company
Dolomiti Limited By:/ss/Paine Webber Trust
Company
Auto Rentas Del Pacifico By:/ss/Agent
Tapia Gamez German By:/ss/Tapia Gamez German
Anna Maria Tapia Camou By:/ss/Anna Maria Tapia Camou
L'Tonelli Limited By:/ss/Paine Webber Trust
Company
Inmobiliaria Cocoris By:/ss/Inmobiliaria Cocoris
Berninee Limited By:/ss/Paine Webber Trust
Company
Ramon Fierro Echave By:/ss/Ramon Fierro Echave
SUBSCRIPTION ACCEPTANCE
The subscription for Shares set forth in this Investment
Letter is accepted by the Company on this 26th day of July,
1996.
G/O International (Cayman) Inc.
By: /ss/Peter Anderson
------------------
Its Director
Exhibit 3- Finders
DIVIDEND ESCROW AGREEMENT
THIS DIVIDEND ESCROW AGREEMENT is made and entered into as
of the 26th day of July, 1996 between and among Luis A. Ochoa,
Esq. of the Law Firm of DeConcini McDonald Brammer Yetwin &
Lacy, as escrow agent, ("Escrow Agent"), and G/O
International, Inc., a Colorado (the "Company").
RECITALS
WHEREAS, the Company is the holder of a total of
2,099,809 shares of the $0.0001 par value per share Ordinary
Shares of G/O International (Cayman) Inc., a Cayman Island
corporation;
WHEREAS, the Company, pursuant to that certain
Reorganization Plan and Agreement dated July 26, 1996 among
G/O International (Cayman) Inc., a Cayman Island corporation
( G/O Cayman ), (ii) G/O International, Inc., a Colorado
corporation, (iii) Valle Grande S.A. de C.V., a Mexican
corporation, and (iv) those persons or entities who are the
beneficial owners of 329,856,844 shares of capital stock of
Valle Grande which constitutes 96.45% of the issued and
outstanding capital stock of Valle Grande (the "Valle Grande
Shareholders"), has caused G/O Cayman to issue to the Valle
Grande Shareholders, in exchange for 329,856,844 shares of the
capital stock of Valle Grande tendered by such Valle Grande
Shareholders, a total of 15,333,690 of the $0.0001 par value
per share Ordinary Shares of G/O Cayman and, in addition, has
agreed to: (i) immediately distribute the 2,099,809 of $0.0001
par value per share Ordinary Shares of G/O Cayman held by the
Company to an escrow agent designated by the Valle Grande
Shareholders to be held by such escrow agent for further
distribution to those G/O Colorado Shareholders or their
assigns, determined as of a dividend date selected by G/O
Colorado, upon registration by G/O Cayman of its $0.0001 par
value per share Ordinary Shares under Section 12(g) of the
Securities Exchange Act of 1934, as amended;
WHEREAS, Valle Grande desires that Escrow Agent be
appointed for the purposes of receiving, holding and
distributing the 2,099,809 Ordinary Shares, $0.0001 par value
per share of G/O Cayman distributed by the Company based upon
the terms stated herein and G/O Cayman and the Company agree
to the appointment of Escrow Agent for such purposes.
NOW, THEREFORE, in consideration of the foregoing
premises and mutual covenants hereinafter expressed, the
parties hereto do hereby agree as follows:
1. Appointment of Escrow Agent. Escrow Agent is hereby
appointed by each of the signatories hereto as agent for the
purpose of receiving holding and distributing all Shares
delivered into escrow hereunder.
2. Deposit of Shares. Simultaneous with the execution
and delivery of this Escrow Agreement, the Company shall
deliver to Escrow Agent a share certificate representing a
total of 2,099,809 of the $0.0001 par value per share Ordinary
Shares of G/O Cayman (the "Shares"). The Shares shall be
accompanied by: (1) a duly executed irrevocable Assignment
Separate From Certificate with executed, in blank, by the
Company with signatures guaranteed by a commercial bank or
trust company having an office or correspondent in New York
City or by a member of the New York Stock Exchange; and (2) a
list compiled, as of the dividend date established by the
Company, setting forth those shareholders of record of the
Company that are entitled to the receipt of the Shares
deposited with Escrow Agent and their respective shareholdings
in the Company, as of such dividend date ("Shareholders List").
3. Release of Escrow Shares. Upon receipt by the Escrow
Agent of a copy of the registration materials of G/O Cayman
stamped filed by the United States Securities and Exchange
Commission, registering the $0.0001 par value per share
Ordinary Shares of G/O Cayman under Section 12(g) of the
Securities Exchange Act of 1934, as amended, Escrow Agent,
shall release the Shares to the Company's shareholders, set
forth in the Shareholder List. Each of the Company's
shareholders shall receive that number of the G/O Cayman
Ordinary Shares as determined by multiplying 2,009,809 by the
fraction determined by dividing the number of shares of each
respective shareholder of the Company as set forth in the
Shareholder List by 5,985,372. Escrow Agent shall maintain
books and records of such Shares distributed, which shall be
available for inspection by the Company's shareholders at the
offices of the Escrow Agent upon 48 hours prior written
request.
4. Concerning The Escrow Agent. To induce the Escrow
Agent to act hereunder, it is further agreed by the
Company,
that:
(a) The Escrow Agent shall not be under any duty to
give the Shares (the Shares deposited by the Company hereunder
shall hereinafter be referred to collectively as the "Escrowed
Property") held by it hereunder any greater degree of care
than it gives its own similar property.
(b) This Escrow Agreement expressly sets forth all the
duties of the Escrow Agent with respect to any and all matters
pertinent hereto. No implied duties or obligations shall be
read into this Agreement against the Escrow Agent. The Escrow
Agent shall not be bound by the provisions of any agreement
among the other parties hereto except this Escrow Agreement.
(c) The Escrow Agent shall not be liable, except for its
own gross negligence or willful misconduct and, except with
respect to claims based upon such gross negligence or willful
misconduct that are successfully asserted against the Escrow
Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any
successor Escrow Agent) from and against any and all losses,
liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of
and in connection with this Escrow Agreement. Without
limiting the foregoing, the Escrow Agent shall in no event be
liable in connection with its investment or reinvestment of
any cash held by it hereunder in good faith in accordance with
the terms hereof, including without limitation any liability
for any delays (not resulting from its gross negligence or
willful misconduct) in the investment or reinvestment of the
Escrowed Property, or any loss of interest incident to any
such delay.
(d) The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or
other writing delivered to it hereunder without being required
to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity of the service
thereof. The Escrow Agent may act in reliance upon any
instrument or signature believed by it to be genuine and may
assume that any person purporting to give receipt or advice or
make any statement or execute any document in connection with
the provisions hereof has been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Escrow
Agreement and shall not be liable for any action taken or
omitted in accordance with such advice.
(f) The Escrow Agent does not have any interest in the
Escrow Property deposited hereunder but is serving as escrow
holder only and having only possession thereof. the Company
shall pay or reimburse the Escrow Agent upon request for any
transfer taxes or other taxes relating to the Escrowed
Property incurred in connection herewith and shall indemnify
and hold harmless the Escrow Agent from any amount that it is
obligated to pay in the way of such taxes. Any payments of
income from this Escrow Account shall be subject to
withholding regulations then in force with respect to United
States taxes. The parties hereto will provide the Escrow
Agent with appropriate W-9 forms for tax I.D., number
certifications, or W-8 forms for non-resident alien
certifications. It is understood that the Escrow Agent shall
be responsible for income reporting only with respect to
income earned on investment or funds which are part of the
Escrowed Property and it is not responsible for any other
reporting. This paragraph and paragraph (c) shall survive
notwithstanding any termination of this Escrow Agreement or
the resignation of this Escrow Agent.
(g) The Escrow Agent makes no representations as to the
validity, value, genuineness or the collectability of any
security or other document or instrument held by or delivered
to it.
(h) The Escrow Agent shall not be called upon to advise
any party as to the wisdom in selling or retaining or taking
or refraining from any action with respect to any securities
or other property deposited hereunder.
(i) The Escrow Agent (and any successor Escrow Agent) may
at any time resign as such by delivering the Escrowed Property
to any successor Escrow Agent jointly designated by the other
parties hereto in writing, or to any court of competent
jurisdiction, whereupon the Escrow Agent shall be discharged
of and from any an all further obligations arising in
connection with the Escrow Agreement. The resignation of the
Escrow Agent will take effect on the earlier of (a) the
appointment of a successor (including a court of competent
jurisdiction) or (b) the day which is 30 days after the date
of delivery of its written notice of resignation to the other
parties hereto. If at the time the Escrow Agent has not
received a designation of a successor Escrow Agent, the Escrow
Agents sole responsibility after that time shall be to safe
keep the Escrowed Property until receipt of a designation of
successor Escrow Agent or a joint written disposition
instruction by the other parties hereto or a Final Order of a
Court of competent jurisdiction.
(j) The Escrow Agent shall have no responsibility for the
contents of any writing of the arbitrators or any third party
contemplated herein as a means to resolve disputes and may
rely without any liability upon the content thereof.
(k) In the event of any disagreement between the other
parties hereto resulting in adverse claims or demands being
made in connection with the Escrowed Property, or in the event
that the Escrow Agent in good faith is in doubt as to what
action it should take hereunder, the Escrow Agent shall be
entitled to retain the Escrowed Property until the Escrow
Agent shall have received (i) a final non-appealable order of
a Court of competent jurisdiction directing delivery of the
Escrowed Property or (ii) a written agreement executed by the
other parties hereto directing delivery of the Escrowed
Property, in which event the Escrow Agent shall disburse the
Escrowed Property in accordance with such order or agreement.
Any court order shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to the Escrow
Agent to the effect that said opinion is final and non-
appealable. The Escrow Agent shall act on such court order
and legal opinions without further question.
(l) The Company shall pay the Escrow Agent compensation
(as payment in full for the services to be rendered by the
Escrow Agent hereunder) in accordance with Schedule A attached
hereto and incorporated herein at the time of Closing as
provided in this Escrow Agreement and agree to reimburse the
Escrow Agent for all reasonable expenses, disbursements and
advances incurred or made by the Escrow Agent in performance
of its duties hereunder (including reasonable fees, expenses
and disbursements for its counsel). It is agreed that the
Escrow Shares shall be held by Escrow Agent as collateral for
such payment of fees or expenses of the Escrow Agent or its
counsel which are not paid as provided for herein and Escrow
Agent may, after reasonable written notice to the Company
liquidate such number of Escrow Shares as is necessary and
reasonable to fully reimburse Escrow Agent for any fees or
expenses due hereunder. It is understood that the Escrow
Agent's fees may be adjusted from time to time to conform to
its then-current guidelines.
(m) The parties hereunder hereby irrevocably submit to
the jurisdiction of any court located in Arizona in any
action or proceeding arising out of or relating to this Escrow
Agreement, and the parties hereby irrevocably agree that all
claims in respect of any such action or proceeding shall be
heard and determined in such a Arizona court. The parties
hereby consent to and grant to any such court jurisdiction
over the parsons of such parties and over the subject matter
of any such dispute and agree that delivery or mailing of any
process or other papers in the manner provided herein above,
or in such other manner as may be permitted by law, shall be
valid and sufficient service thereof.
(n) No printed or other matter in any language (including
without limitation prospectuses, notices, reports and
promotional material) which mention the name of Escrow Agent
or the rights, powers, or duties of the Escrow Agent shall be
issued by the other parties hereto or on such parties' behalf
unless the Escrow Agent shall first have given its specific
written consent thereto.
(o) The Escrow Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and the respective
successors and assigns, heirs, administrators and
representatives and shall not be enforceable by or inure to
the benefit of any third party except as provided in paragraph
7(i) with respect to a resignation by the Escrow Agent. No
party may assign any of its rights or obligations under this
Escrow Agreement without the written consent of the other
parties. This Escrow Agreement shall be construed in
accordance with and governed by the internal law of Arizona
(without reference to its rule as to conflicts of law). To
the best knowledge of the principals to this transaction,
neither the underlying transaction/purpose nor the Escrow
Agreement violate any law or regulation.
(p) This Escrow Agreement may only be modified by a
writing signed by all of the parties hereto, and no waiver
hereunder shall be effective unless in writing signed by the
party to be charged.
(q) The Company authorizes the Escrow Agent, for any
securities held hereunder, to use the services of any United
States central securities depository it deems appropriate,
including. but not limited to the Depository Trust Company and
the Federal Reserve Book Entry System.
5. Effective Date and Termination. This Agreement shall
become effective on the date of execution by Escrow Agent.
All of the provisions of this Agreement shall be fully
performed and the escrow established hereunder shall terminate
upon the distribution of all Escrow Shares as contemplated
hereby.
6. Paragraph Headings and Counterpart Signature. All
paragraph headings herein are inserted for convenience only.
This Agreement may be executed in several counterparts, each
of which shall be deemed an original, which together shall
constitute one and the same instrument.
7. Notices. All notices, requests, instructions, or
other documents to be given hereunder shall be in writing
and sent by registered mail:
If to the Escrow Agent:
Luis A. Ochoa, Esq.
DeConcini McDonald Brammer Yetwin & Lacy
Suite 200
2525 East Broadway Blvd.
Tucson, Arizona 85716-5303
If to the Company or G/O Colorado:
G/O International, Inc.
11849 Wink
Houston, Texas 77024
In Witness whereof, the undersigned have execute this Escrow
Agreement this 26th day of July 1996.
ESCROW AGENT
By:/ss/Luis A. Ochoa, Esq.
G/O International, Inc.
By:/ss/Jack L. Burns
--------------------
Its President
SHARE LOCKUP AGREEMENT
THIS SHARE LOCKUP AGREEMENT ( Agreement ) is made and entered
into as of the 26th day of July, 1996 between and among Givens
Hall Bank & Trust Co., Ltd., as escrow agent, ("Escrow Agent"),
and those beneficial owners of 1,379,849 of the $0.0001 par value
per share Ordinary Shares (the "Shares") of G/O International
(Cayman) Inc., a Cayman Island corporation and any of its
successors (the "Company"), who may hereafter execute and deliver
a "Counterpart Signature Page" in the form attached hereto as
Exhibit 1, evidencing the independent agreement of each such
person, as a holder of Shares ("Shareholder") to be personally
bound by all of the terms, conditions and provisions of this
Share Lockup Agreement.
RECITALS
WHEREAS, each Shareholder is the beneficial owner of that
number of Shares set forth opposite his or its respective name
in his or its Counterpart Signature Page executed and delivered
herewith;
WHEREAS, the Shares to which each Shareholder possesses
beneficial ownership, as set forth in his or its counterpart
signature page hereto are held in escrow (the Dividend Escrow )
by Luis A. Ochoa, Esq. of the Law Firm of DeConcini McDonald
Brammer Yetwin & Lacy, Suite 200, 2525 East Broadway Blvd.,
Tucson, Arizona 85716 as dividend escrow agent ("Dividend Escrow
Agent") acting for and on behalf of the Shareholders of G/O
International, Inc., a Colorado corporation, and their respective
assigns, which has distributed the Shares to the Dividend Escrow
Agent for further distribution to the those holders of the shares
of common stock of G/O International, Inc. as of July 24, 1996,
and/or their assigns, all pursuant to the Dividend Escrow
Agreement among the Escrow Agent and Luis A. Ochoa, Esq.; subject
to the conditions contained in the Dividend Escrow Agreement;
WHEREAS, each of the Shareholders, desires to limit the
resale of each other Shareholder's Shares for and in
consideration for their undertaking to limit the resale of their
respective Shares and in connection therewith to appoint an
escrow agent for purposes of holding and releasing the Shares
upon written instructions executed by each of the Shareholders;
NOW, THEREFORE, in consideration of the foregoing
premises and mutual covenants hereinafter expressed, the parties
hereto do hereby agree as follows:
1. Appointment of Escrow Agent. Escrow Agent is hereby
appointed by each of the signatories hereto as agent for the
purpose of receiving and distributing all Shares delivered into
escrow hereunder pursuant to the terms contained herein as may be
further amended by Joint Instructions of the Shareholders.
2. Deposit and Disbursement of Shares.
(a) Each Shareholder through the Dividend Escrow Agent
shall deposit his or its respective Shares to be released
pursuant hereto with Escrow Agent for purposes of this Share
Lockup Agreement ("Escrow Shares") upon release of the Shares
from the Dividend Escrow. Simultaneous with the execution of this
Agreement each Shareholder shall execute and deliver a Power of
Attorney authorizing the Dividend Escrow Agent to deposit such
Shares with Escrow Agent pursuant to this Share Lockup
Agreement.
(b) Concurrent with the delivery of the Shares and the Power
of Attorney by the Dividend Escrow Agent to the Escrow Agent, the
Dividend Escrow Agent shall deliver an executed Counterpart
Signature Page to this Share Lockup Agreement in a form
substantially similar to Exhibit 1 hereto.
3. Release of Escrow Shares. Escrow Agent, shall release,
from time to time that number of shares of common stock as shall
be set forth in a written instruction bearing the signature of
each of the Shareholders. Such instruction shall, further, set
forth instructions for the delivery of the Shares released.
Escrow Agent shall maintain books and records of such Share
deposits noting therein the date of receipt of the Shares and the
accompanying Counterpart Signature Page and Power of Attorney.
In addition, the Escrow Agent shall maintain books and records of
all Share releases, which shall be available for inspection by a
Shareholder at the offices of the Escrow Agent upon 48 hours
prior written request.
4. Concerning The Escrow Agent. To induce the Escrow
Agent to act hereunder, it is further agreed by each of the
Shareholders, that:
(a) The Escrow Agent shall not be under any duty to give
the Shares (the Shares deposited by the Shareholders hereunder
shall hereinafter be referred to collectively as the "Escrowed
Property") held by it hereunder any greater degree of care than
it gives its own similar property.
(b) This Share Lockup Agreement, as amended and or modified
by Joint Instructions delivered by the Shareholders to the Escrow
Agent, expressly sets forth all the duties of the Escrow Agent
with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against
the Escrow Agent. The Escrow Agent shall not be bound by the
provisions of any agreement among the other parties hereto except
this Share Lockup Agreement.
(c) The Escrow Agent shall not be liable, except for its
own gross negligence or willful misconduct and, except with
respect to claims based upon such gross negligence or willful
misconduct that are successfully asserted against the Escrow
Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor
Escrow Agent) from and against any and all losses, liabilities,
claims, actions, damages and expenses. including reasonable
attorneys' fees and disbursements, arising out of and in
connection with this Share Lockup Agreement. Without limiting
the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held
by it hereunder in good faith in accordance with the terms
hereof, including without limitation any liability for any delays
(not resulting from its gross negligence or willful misconduct)
in the investment or reinvestment of the Escrowed Property, or
any loss of interest incident to any such delay.
(d) The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or
other writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service thereof. The
Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person
purporting to give receipt or advice or make any statement or
execute any document in connection with the provisions hereof has
been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Share Lockup
Agreement and shall not be liable for any action taken or omitted
in accordance with such advice.
(f) The Escrow Agent does not have any interest in the
Escrow Property deposited hereunder but is serving as escrow
holder only and having only possession thereof. Shareholders
shall pay or reimburse the Escrow Agent upon request for any
transfer taxes or other taxes relating to the Escrowed Property
incurred in connection herewith and shall indemnify and hold
harmless the Escrow Agent from any amount that it is obligated to
pay in the way of such taxes. Any payments of income from this
Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes. The parties hereto
will provide the Escrow Agent with appropriate W-9 forms for tax
I.D., number certifications, or W-8 forms for non-resident alien
certifications. It is understood that the Escrow Agent shall be
responsible for income reporting only with respect to income
earned on investment or funds which are part of the Escrowed
Property and it is not responsible for any other reporting. This
paragraph and paragraph (c) shall survive notwithstanding any
termination of this Share Lockup Agreement or the resignation of
this Escrow Agent.
(g) The Escrow Agent makes no representations as to the
validity, value, genuineness or the collectability of any
security or other document or instrument held by or delivered to
it.
(h) The Escrow Agent shall not be called upon to advise any
party as to the wisdom in selling or retaining or taking or
refraining from any action with respect to any securities or
other property deposited hereunder.
(i) The Escrow Agent (and any successor Escrow Agent) may at
any time resign as such by delivering the Escrowed Property to
any successor Escrow Agent jointly designated by the other
parties hereto in writing, or to any court of competent
jurisdiction, whereupon the Escrow Agent shall be discharged of
and from any an all further obligations arising in connection
with the Share Lockup Agreement. The resignation of the Escrow
Agent will take effect on the earlier of (a) the appointment of a
successor (including a court of competent jurisdiction) or (b)
the day which is 30 days after the date of delivery of its
written notice of resignation to the other parties hereto. If at
the time the Escrow Agent has not received a designation of a
successor Escrow Agent, the Escrow Agents sole responsibility
after that time shall be to safe keep the Escrowed Property until
receipt of a designation of successor Escrow Agent or a joint
written disposition instruction by the other parties hereto or a
Final Order of a Court of competent jurisdiction.
(j) The Escrow Agent shall have no responsibility for the
contents of any writing of the arbitrators or any third party
contemplated herein as a means to resolve disputes and may rely
without any liability upon the content thereof.
(k) In the event of any disagreement between the other
parties hereto resulting in adverse claims or demands being made
in connection with the Escrowed Property, or in the event that
the Escrow Agent in good faith is in doubt as to what action it
should take hereunder, the Escrow Agent shall be entitled to
retain the Escrowed Property until the Escrow Agent shall have
received (i) a final non-appealable order of a Court of competent
jurisdiction directing delivery of the Escrowed Property or (ii)
a written agreement executed by all of the Shareholders directing
delivery of the Escrowed Property, in which event the Escrow
Agent shall disburse the Escrowed Property in accordance with
such order or agreement. Any court order shall be accompanied by
a legal opinion by counsel for the presenting party satisfactory
to the Escrow Agent to the effect that said opinion is final and
non-appealable. The Escrow Agent shall act on such court order
and legal opinions without further question.
(l) The Shareholders shall pay the Escrow Agent compensation
(as payment in full for the services to be rendered by the Escrow
Agent hereunder) in accordance with Schedule A attached hereto
and incorporated herein at the time of Closing as provided in
this Share Lockup Agreement and agree to reimburse the Escrow
Agent for all reasonable expenses, disbursements and advances
incurred or made by the Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses and disbursements
for its counsel). It is agreed that the Escrow Shares shall be
held by Escrow Agent as collateral for such payment of fees or
expenses of the Escrow Agent or its counsel which are not paid as
provided for herein and Escrow Agent may, after reasonable
written notice to the Shareholders liquidate such number of
Escrow Shares as is necessary and reasonable to fully reimburse
Escrow Agent for any fees or expenses due hereunder. It is
understood that the Escrow Agent's fees may be adjusted from time
to time to conform to its then-current guidelines.
(m) The parties hereunder hereby irrevocably submit to the
jurisdiction of any Cayman Island court in any action or
proceeding arising out of or relating to this Share Lockup
Agreement, and the parties hereby irrevocably agree that all
claims in respect of any such action or proceeding shall be heard
and determined in such a Cayman Island court. The parties hereby
consent to and grant to any such court jurisdiction over the
persons of such parties and over the subject matter of any such
dispute and agree that delivery or mailing of any process or
other papers in the manner provided herein above, or in such
other manner as may be permitted by law, shall be valid and
sufficient service thereof.
(n) No printed or other matter in any language (including
without limitation prospectuses, notices, reports and promotional
material) which mention the name of Givens Hall Bank & Trust Co.
Ltd. or the rights, powers, or duties of the Escrow Agent shall
be issued by the other parties hereto or on such parties' behalf
unless the Escrow Agent shall first have given its specific
written consent thereto.
(o) The Share Lockup Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and the
respective successors and assigns, heirs, administrators and
representatives and shall not be enforceable by or inure to the
benefit of any third party except as provided in paragraph 7(i)
with respect to a resignation by the Escrow Agent. No party may
assign any of its rights or obligations under this Share Lockup
Agreement without the written consent of the other parties. This
Share Lockup Agreement shall be construed in accordance with and
governed by the internal law of Cayman Islands (without reference
to its rule as to conflicts of law). To the best knowledge of
the principals to this transaction, neither the underlying
transaction/purpose nor the Share Lockup Agreement violate any
law or regulation.
(p) This Share Lockup Agreement may only be modified by a
writing signed by all of the parties hereto, and no waiver
hereunder shall be effective unless in writing signed by the
party to be charged.
(q) The Shareholders authorize the Escrow Agent, for any
securities held hereunder, to use the services of any United
States central securities depository it deems appropriate,
including, but not limited to the Depository Trust Company and
the Federal Reserve Book Entry System.
5. Effective Date and Termination. This Agreement shall
become effective on the date of execution by Escrow Agent. All
of the provisions of this Agreement shall be fully performed and
the escrow established hereunder shall terminate upon the
distribution of all Escrow Shares as contemplated hereby.
6. Paragraph Headings and Counterpart Signature. All
paragraph headings herein are inserted for convenience only.
This Agreement may be executed in several counterparts, each of
which shall be deemed an original, which together shall
constitute one and the same instrument.
7. Notices. All notices, requests, instructions, or other
documents to be given hereunder shall be in writing and sent by
registered mail:
If to any Shareholder:
The address set forth in such Purchasers
Counterpart Signature Page, delivered in
connection with this Agreement.
If to the Escrow Agent:
Givens Hall Bank & Trust Co. Ltd.,
P.O. Box 2097
Georgetown, Grand Cayman
Cayman Islands, British West Indies
In witness whereof the undersigned has executed this Share Lockup
Agreement as of the date first above written.
ESCROW AGENT
Givens Hall Bank & Trust Co., Ltd.
By:/ss/Edna Bissell
- -------------------
Director
SHARE LOCKUP AGREEMENT
SHAREHOLDER'S
COUNTERPART SIGNATURE PAGE
Exhibit 1
This Counterpart Signature Page for that certain Share Lockup
Agreement dated as of July 26, 1996 among the undersigned as a
Shareholder thereunder, Givens Hall Bank & Trust Co. Ltd. as
Escrow Agent, and the other Shareholders that are signatories
thereto is executed by the undersigned Shareholder as of the date
first written above.
155,014 Charlie Investments Ltd.
Number of Shares deposited into By:/ss/Peter D. Anderson
Lockup Director
P.O. Box 2097
Grand Cayman, Cayman Islands
British West Indies
Shareholders Address
(809) 949-8141
Shareholders Telephone Number
(809) 9949-8295
Shareholders Fax Number
20,669 Cicero Cinzano Ltd.
Number of Shares deposited into By:/ss/Peter D. Anderson
Lockup Director
P.O. Box 2097
Grand Cayman, Cayman Islands
British West Indies
Shareholders Address
Shareholders Telephone Number
Shareholders Fax Number
138,277 David R. Strawn
Number of Shares deposited into By:/ss/David R. Strawn
Lockup
11440 West Bernardo Court
Suite 300
San Diego, California 92127
Shareholders Address
(619) 674-6624
Shareholders Telephone Number
(619) 674-6628
Shareholders Fax Number
138,277 David M. Klausmeyer
Number of Shares deposited into By:/ss/David M. Klausmeyer
Lockup
10878 Westheimer #178
Houston, Texas 77042
Shareholders Address
(713) 827-8947
Shareholders Telephone Number
(713) 461-1470
Shareholders Fax Number
5167 Fairweather Securities, Ltd.
Number of Shares deposited into By:/ss/Peter D. Anderson
Lockup Director
P.O. Box 2097
Grand Cayman, Cayman Islands
British West Indies
Shareholders Address
(809) 949-8141
Shareholders Telephone Number
(809) 949-8295
Shareholders Fax Number
36,170 Gordian Investments, Ltd.
Number of Shares deposited into By:/ss/Peter D. Anderson
Lockup Director
P.O. Box 2097
Grand Cayman, Cayman Islands
British West Indies
Shareholders Address
(809) 949-8141
Shareholders Telephone Number
(809) 949-8295
Shareholders Fax Number
36,170 Huggermugger Limited
Number of Shares deposited into By:/ss/Peter D. Anderson
Lockup Director
P.O. Box 2097
Grand Cayman, Cayman Islands
British West Indies
Shareholders Address
(809) 949-8141
Shareholders Telephone Number
(809) 949-8295
Shareholders Fax Number
689,924 Novamar, Ltd.
Number of Shares deposited into By:/ss/Peter D. Anderson
Lockup
P.O. Box 2097
Grand Cayman, Cayman Islands
British West Indies
Shareholders Address
(809) 949-8141
Shareholders Telephone Number
(809) 949-8295
Shareholders Fax Number
5166 Q-Marq Securities, Ltd.
Number of Shares deposited into By:/ss/Peter D. Anderson
Lockup Director
P.O. Box 2097
Grand Cayman, Cayman Islands
British West Indies
Shareholders Address
(809) 949-8141
Shareholders Telephone Number
(809) 949-8295
Shareholders Fax Number
155,014 Yankee Investments Ltd.
Number of Shares deposited into By:/ss/Peter D. Anderson
Lockup Director
P.O. Box 2097
Grand Cayman, Cayman Islands
British West Indies
Shareholders Address
(809) 949-8141
Shareholders Telephone Number
(809) 949-8295
Shareholders Fax Number
SCHEDULE A
ESCROW AGENT'S FEE
Escrow Agent shall charge a fee of $200.
Joint Escrow Instruction
Givens Hall Bank & Trust Co. Ltd.
P.O. Box 2097
Georgetown, Grand Cayman
Cayman Islands, British West Indies
RE: Distribution of Escrowed Shares
Gentlemen:
Based upon a mutual agreement of the Shareholders, you are hereby
instructed to distribute to Q-Marq Securities, Ltd. ("Q-Marq"),
on May 31, 1997, that number of Shares deposited by Yankee
Investment, Ltd., Charlie Investments, Ltd. Gordian, Ltd.,
Huggermugger, Ltd. Cicero Cinzano, Ltd., Fairweather Securities,
Ltd., Q-Marq Securities, Ltd., David R. Strawn and David M.
Klausmeyer remaining, after any distribution authorized by a
Joint Instruction of the Shareholders delivered subsequent
hereto, determined by multiplying the number of Shares deposited
by the persons and entities enumerated above (reduced by any
distributions authorized by a Joint Instruction of the
Shareholders prior to May 31, 1997) by the fraction, the
numerator of which is the amount of Financing raised G/O
International (Cayman) Inc., a Cayman Island corporation
on or before May 31, 1997 and the denominator of which is
USD$30,000,000. You are hereby instructed that any Shares
deposited by the above enumerated persons or entities not
otherwise distributed to such persons or entities from the Escrow
on May 31, 1997, shall be distributed by you to Novamar Ltd.
Dated July 26, 1996
Yankee Investment Ltd. By:/ss/Peter D. Anderson
Charlie Investments, Ltd. By:/ss/Peter D. Anderson
Gordian, Ltd. By:/ss/Peter D. Anderson
Huggermugger, Ltd. By:/ss/Peter D. Anderson
Cicero Cinzano, Ltd. By:/ss/Peter D. Anderson
Fairweather Securities, Inc. By:/ss/Peter D. Anderson
Q-Marq Securities, Inc. By:/ss/Peter D. Anderson
Novamar Ltd. By:/ss/Peter D. Anderson
David R. Strawn By:/ss/David R. Strawn
David M Klausmeyer By:/ss/David M. Klausmeyer
SPECIAL POWER OF ATTORNEY
The Undersigned does hereby designate, constitute and appoint
Luis A. Ochoa, Esq. of the Law Firm of DeConcini McDonald Brammer
Yetwin & Lacy, with offices at: Suite 200, 2525 East Broadway
Blvd., Tucson, Arizona 85716-5303 (the "Agent") as the true and
lawful Attorney-In-Fact of the Undersigned, in the name, place
and stead and on behalf of the Undersigned and for the use and
benefit of the Undersigned:
1. To tender Undersigned's Counter Part Signature Page to
that certain Share Lock-Up Agreement between and among
Givens Hall Bank & Trust, Ltd., Grand Cayman, Cayman
Islands, British West Indies ("GHB&T"), and those
beneficial owners of the Ordinary Shares of G/O
International (Cayman) Inc. a Cayman island
corporation, that shall execute and deliver a
Counterpart Signature Page to the Share Lock-Up
Agreement, for and an behalf of Undersigned.
2. To tender to GHB&T, Undersigned s Shares as set forth
in Undersigned's Counterpart Signature page to the
Share Lock-Up Agreement, along with Undersigned s
Assignment Separate from Certificate and a copy of this
special Power of Attorney.
3. To provide the transfer agent of G/O International
(Cayman) Inc. with instructions to deliver the newly
issued Ordinary Shares of the G/O International
(Cayman) Inc. released to Undersigned under the Share
Lock-Up Agreement in the name(s) designated in the
Joint Instructions to the Share Lock-Up Agreement.
4. To take such additional actions on behalf of
Undersigned as shall be reasonable and prudent to
conclude and fulfill the purposes of the Share Lock-Up
Agreement.
Undersigned hereby certifies that he, she or it has reviewed this
power attorney and is familiar with the powers and rights granted
hereby and willfully and voluntarily and with full knowledge of
its effects and consequences executes the same this 26th day of
July 1996.
Charlie Investments, Ltd. By:/ss/Peter D. Anderson
------------------------
Director