CCI SHAREHOLDERS' AGREEMENT
THIS CCI SHAREHOLDERS' AGREEMENT is made as of October 18, 1999, (this
"Agreement"), by and among TELEMATICA EDC, C.A., a Venezuelan sociedad anonima,
("Telematica"), TCW/CCI HOLDING LLC, a Delaware limited liability company
("TCW"), INTERNATIONAL FINANCE CORPORATION, an international organization
established by Articles of Agreement among its member countries ("IFC"), GLACIER
LATIN-AMERICA LTD., a British Virgin Islands International Business Company
("Glacier"), THE ESTATE OF XXXXXX X'XXXXXXXX, XXXXX X'XXXXXXXX and XXXX
X'XXXXXXXX (the latter three sometimes in the aggregate referred to as the
"D'Ambrosio Parties"), FONDELEC GROUP INC., a Delaware corporation ("FondElec
Group"), PEGASUS FUND, L.P., a New York limited partnership ("Pegasus"),
FONDELEC ESSENTIAL SERVICES GROWTH FUND, L.P., a Cayman Islands limited
partnership ("FESGF", together with FondElec Group and Pegasus sometimes in the
aggregate referred to as "FondElec"), INTERNEXUS S.A., an Argentine sociedad
anonima ("Internexus"), and CONVERGENCE COMMUNICATIONS, INC., a Nevada
corporation (the "Company", all the foregoing sometimes referred to collectively
as the "Parties" and individually as a "Party").
R E C I T A L S
WHEREAS, Telematica, TCW, IFC, Glacier, the D'Ambrosio Parties,
FondElec and Internexus (each a "Shareholder Party" and collectively the
"Shareholder Parties") are shareholders of the Company, each of Telematica, TCW,
IFC and Glacier having acquired its interests in the Company, and each of
FondElec and Internexus having acquired certain of its interests in the Company,
pursuant to a certain Participation Agreement (the "Participation Agreement")
among them, the D'Ambrosio Parties and the Company dated October 15, 1999, and
the entering into this Agreement being also contemplated in the Participation
Agreement;
WHEREAS, the Parties intend that this Agreement cover (i) the shares of
stock of the Company held, legally or beneficially, by any Shareholder Party as
of the date hereof, which shares are as set out in Schedule 1 (the "Present
Shares"), (ii) the shares of stock of the Company acquired by any Shareholder
Party on the exercise of any warrant, option or other similar right, held
legally or beneficially by any Shareholder Party as of the date hereof, which
warrant, option or other rights are as set out in Schedule 1 (the "Share
Rights"), and (iii) any shares of stock of the Company that are presently
outstanding and which may be acquired directly or indirectly from time to time
by any Shareholder Party (the "Further Shares"). The Present Shares, the Further
Shares and the shares of stock acquired by any Shareholder Party from time to
time on the exercise of any Share Rights are referred to herein in the aggregate
as the "Company Shares", and the Company Shares, together with the Share Rights,
are referred to in the aggregate as the "Company Equity".
WHEREAS, as an inducement for Telematica, TCW, IFC, Glacier, FondElec
and Internexus to acquire interests in the Company pursuant to the Participation
Agreement, the Parties have agreed as to the manner in which the Company shall
be managed and the manner in which the Shareholder Parties may dispose of their
interests in Company Equity; and
WHEREAS on December 23, 1998, the D'Ambrosio Parties (or their
predecessors in interest), Pegasus, FESGF and Internexus entered into a certain
Stockholders' Agreement (the "Prior Agreement") among them with respect to the
same matters, and they now wish to substitute the Prior Agreement in its
entirety with this Agreement.
NOW, THEREFORE, the Parties agree as follows:
1. Definitions.
Capitalized Terms used herein but not defined herein shall have the
meaning given to them in the Schedule of Definitions to the
Participation Agreement, being Schedule 1 thereto.
2. Restriction on Transfer Prior to Realized Valuation Event. No
Shareholder Party may Transfer (as that term is defined in Section 4
below) the entirety or any part of its Company Equity, unless and until
there has occurred one of the following events (each, a "Realized
Valuation Event"):
(a) all the Shareholder Parties, acting together, Transfer their
Company Equity for cash consideration, or for securities of
another company that are registered and freely tradeable
pursuant to a registration statement filed with and declared
effective by the SEC under U.S. Securities Law and listed on a
Recognized Exchange ("Publicly Traded Securities") (such a
Transfer being herein referred to as a "Qualified
Disposition"), or
(b) there occurs a registered public offering of the Company's
securities under U.S. Securities Law, the shares of a class of
the Company's securities so registered are approved for
listing on a Recognized Exchange, the net proceeds of the
offering obtained by the Company are not less than Seventy
Five Million United States Dollars (U.S. $75,000,000) and the
offering is managed by a lead underwriter of international
standing (a "Qualified Public Offering").
3. Tag-Along Rights. Upon the happening of a Qualified Disposition, this
Agreement shall terminate as contemplated in Section 18, and thus the
Shareholder Parties shall have no further restrictions on the Transfer
of their respective Company Equity. However, if there occurs a
Qualified Public Offering, the Parties shall have the following rights
and obligations with respect to the Transfer of any of their Company
Equity, for a period of three years following the Qualified Public
Offering.
(a) Notice. If a Shareholder Party ("Transferor") intends to
Transfer any of its Company Shares ("Tag Shares") to any
Person, the Transferor shall give each other Shareholder Party
("Optionee") notice of the Transferor's intent to so transfer,
setting out in reasonable detail the terms and conditions of
the proposed transaction.
(b) Exercise. Any Optionee may elect to exercise its rights under
this Section 3 by its written notice to the Transferor given
not more than 15 Business Days after receipt of the notice
given as required in Section 3(a), setting out the number of
its Company Shares that such Optionee desires to transfer
pursuant to this Section 3. Thereupon, the Transferor shall be
obligated to cause its intended transferee to acquire from the
Optionee, and the Optionee shall be obligated to transfer to
the intended transferee, on the same terms and conditions and
at the same time as any of the Tag Shares are transferred,
(except that any Optionee may elect to transfer rights to
acquire Company Shares on the exercise of warrants, provided
that it does not receive any premium therefor) the lesser of
(A) the number of Company Shares specified in the Optionee's
notice, or (B) a number of Company Shares equal to the product
of a fraction having as its numerator the number of Company
Shares that the Optionee owns or has the right to acquire on
the exercise of warrants and as its denominator the aggregate
of Company Shares that the Transferor, and all Optionees
having elected to exercise rights under this Section 3 owns or
has the right to acquire on the exercise of warrants,
multiplied by the number of Tag Shares.
(c) Closing on Tag Transaction. Upon the closing of any transfer
by an Optionee as contemplated in this Section 3, the Optionee
shall deliver the instruments representing the same, duly
endorsed so as to effect transfer thereof by delivery.
(d) Excluded Transfers. A Shareholder Party may Transfer, free and
clear of the provisions of this Section 3: (i) any Company
Shares pursuant to an effective registration statement,
provided such Company Shares are sold on a Recognized
Exchange; and provided further that no negotiations have
occurred between such Shareholder Party or its agents and any
proposed buyer or their respective agents, including without
limitation, an underwriter; (ii) such number of its Company
Shares as is permitted to be disposed of by "affiliates" under
Rule 144 of the U.S. Securities Laws, in each case, subject to
the volume and other limitations set forth in Rule 144; or
(iii) rights under warrants for the purchase of Company
Shares.
4. Provisions Generally Applicable to Transfers.
(a) Applicability of Sections 2 and 3. The rights, obligations and
restrictions set out in Sections 2 and 3:
(i) apply to Company Equity (or, in the case of Section
3, to Company Shares) presently owned or hereafter
acquired by a Shareholder Party, or by the successor
of any Shareholder Party or a Related Party;
(ii) apply (subject to the limitations of clauses (iii)
and (iv) below) to any direct or indirect
disposition, including, within that concept and
without limitation, a sale, bequest, exchange,
assignment or gift, the creation of any security
interest or other encumbrance, a transfer in
connection with a receivership, bankruptcy,
insolvency, dissolution, liquidation, judicial
determination of incompetency or similar proceeding,
and any other disposition of any kind, whether
voluntary or involuntary, and however accomplished
(including, among other means, by way of merger,
recapitalization, share exchange or other
extraordinary corporate action), affecting title to
or possession of any Company Equity ("Transfer");
(iii) do not apply (A) to transfers to be made by a
Shareholder Party to a Control Affiliate, or (B) (1)
in the case of a transfer by FondElec or a successor
to FondElec, to an entity that has as a general
partner, a Person that is Controlled by, FondElec
Group or an entity which Controls, is Controlled by
or under Common Control with FondElec Group, (2) in
the case of a transfer by TCW or a successor to TCW,
to an entity that has as a general partner, a Person
that is Controlled by, TCW/Latin America Partners LLC
or an entity which Controls, is Controlled by or
under Common Control with TCW/Latin America Partners
LLC, (3) in the case of a transfer by Telematica to
an entity that is a Control Affiliate of Corporacion
EDC, C.A. or of C.A. Electricidad de Caracas and, (4)
in the case of a transfer by Glacier or a successor
to Glacier, to an entity that has as an investment
advisor, Fenway Capital Ltd. or an entity which
Controls, is Controlled by or under Common Control
with Fenway Capital Ltd. (in any case, such Control
having been evidenced to the reasonable satisfaction
of the other Shareholder Parties), or (C) in the case
of Internexus, to transfers of interests in
Internexus made to a spouse, or to a relative within
the first degree of consanguinity, of any of the
current holders of Internexus or to trusts or similar
estate planning vehicles for the benefit of any of
them, or (D) in the case of any of the D'Ambrosio
Parties, to transfers made to a spouse or to a
relative within the first degree of consanguinity, or
to trusts or similar estate planning vehicles for the
benefit of any of them (any entity or person
described in this clause (iii), a "Related Party");
and
(iv) do not apply to the transfer of Common Stock upon
exercise by the optionee of the "Diamond D Options"
or of the "Continental LLC Option" which are
described in Schedule 1 hereto.
(b) Restructure or Disassociation.
(i) If, during the term of this Agreement, a Shareholder
Party (the "Proposing Party") in its reasonable
discretion determines that its continued investment
in the Company and/or the Company's subsidiaries, as
the investment may be structured from time to time,
exposes the Proposing Party to substantial claims
from third parties or other legal or regulatory
process that results in substantial burdens or
liability arising from arrangements or circumstances
existing as of the date hereof or changes in law or
regulation after the date hereof, (a "Trigger Event")
then, at the Proposing Party's request, the other
Shareholder Parties (the "Responding Parties") and
the Proposing Party shall exercise reasonable,
diligent and timely efforts to restructure their
respective investments so as to remove or mitigate
the risk of liability to the Proposing Party while
preserving the Proposing Party's investment, provided
that the Responding Parties need not agree to the
restructuring if it would (a) reduce the rights or
preferences that the Responding Parties had prior to
the restructuring, (b) change the relative aggregate
ownership interests in the enterprise that the
Responding Parties had prior to the restructuring,
(c) reduce the rights of representation or
participation in corporate governance that the
Responding Parties enjoy by virtue of the CCI
Shareholders' Agreement, (d) create any substantial
liability on the Responding Parties for which that
the Proposing Party does not agree to be responsible,
(e) reduce the overall value of the Responding
Parties' investment, (f) substantially reduce the
likelihood of a Qualified Disposition or a Qualified
Public Offering, or (g) otherwise adversely affect
the Company, any Subsidiary or the Responding
Parties, except in immaterial respect.
(ii) If the Proposing Party makes, in its sole discretion,
a good faith determination that a restructuring, as
contemplated by the preceding paragraph, would
involve terms and conditions (economic or otherwise)
not satisfactory to the Proposing Party, then the
Proposing Party may cease to be obligated to continue
funding the Company or any of its subsidiaries and
may dispose of the entirety of its interest in the
Company (the "Proponent's Interest") as provided in
the following clauses (A) through (D): (A) if the
Proposing Party holds any direct equity right or
interest or an interest or right convertible or
exchangeable into an equity interest in a subsidiary
of the Company; the Proposing Party first, with the
good faith cooperation of the Company, shall have
exchanged such interest for Common Stock of the
Company at fair value (as determined pursuant to
Section 12 (b)) or otherwise caused the transferee to
acquire only Common Stock of the Company; (B) the
Proposing Party shall negotiate to dispose of its
interest in the following order, in each case for a
reasonable time, first, to the Company, then, on a
pro rata basis, to the other Shareholder Parties or
such of them as wish to purchase the entirety of the
Proponent's Interest, next, to the third party
designated by the majority of the other Shareholder
Parties, and last, to one or more third parties,
except that if the transfer to a third party is
proposed to occur on terms and conditions
substantially equal or more favorable to the third
party than negotiated with any of the other
Shareholder Parties or their designee, the
Shareholder Parties may elect to purchase at that
price, or their designee may do so; (C) each
transferee of the Proponent's Interest adheres to the
CCI Shareholders' Agreement in its entirety (and
shall have the benefit of all the rights and
privileges available to the Proposing Party with
respect to its Company Equity, including the
Registration Rights Agreement and the other
Transaction Documents, except that if the transferee
is a Shareholder Party, it shall not have the benefit
of designating a greater number of directors than it
had prior to the transfer); and (D) each transferee,
in the good faith opinion of the Responding Parties,
is reputable, creditworthy and not a substantial
competitor of the Company or its Subsidiaries. The
tag along rights under Section 3 of the CCI
Shareholders Agreements shall not apply to a transfer
under this Agreement.
(iii) The Parties acknowledge and agree that the Proposing
Party shall have no liability to the other Parties
under any Transaction Document for any (i) loss or
damages to or suffered by the other Parties flowing
from the Proposing Party's need to restructure or
sell pursuant to this Section, or the restructuring
or sale itself, or (ii) the consequences of the
restructuring or sale, including any loss or damages
to or suffered by other Parties flowing from or that
result from such restructuring or sale, such as the
loss of funding commitments associated with the
Proposing Shareholder, the loss of the Proposing
Party's ability to support the Company and its
subsidiaries, and loss of reputation and prestige
associated therewith, provided that the Proposing
Party shall indemnify the Responding Parties for the
reasonable out-of-pocket expenses incurred by the
Responding Parties, and any out-of-pocket damages
against the Responding Parties assessed against them,
as a result of claims by third parties who may bring
the substantial claims or other legal process
referred to above. The Parties further acknowledge
and agree that the restructuring or mere
disassociation of the Proposing Party from all or a
part of its investment as originally structured will
not, in and of itself, be or be deemed to result in
any loss to the other Parties or be taken into
account in determining whether the overall value of
the Responding Parties' investment has been reduced
for purposes of clause (e) of the first paragraph of
this Section.
(iv) In no event shall the Proposing Party be liable for
damages other than direct out-of-pocket damages, and
therefore will not be responsible for other damages
such as loss of profits, indirect, consequential,
special or punitive damages.
(v) If a Qualified Disposition Event occurs at any time
after a Trigger Event, then, except for transactions
previously consummated under this Section 4(b), the
right to restructure under Section 4(b)(i) and the
right to dispose under Section 4(b)(ii) will expire,
but not the other rights under this Section 4(b),
including the right to cease funding under Section
4(b)(ii) and the provisions of Sections 4(b)(iii) and
4(b)(iv).
(c) Acknowledgment of Agreement Required. Prior to making any
Transfer of Company Equity to a Related Party other than
pursuant to the provisions of paragraph 3(d), the transferring
Shareholder Party shall cause the transferee to execute, and
deliver to each other Party, a copy of this Shareholders'
Agreement so as to bind the transferee as a Shareholder Party
for all purposes of this Shareholders' Agreement, and to
assume all of the obligations and liabilities of the
transferring Shareholder Party, from and after the date of the
Transfer.
(d) Certain Transfers Void. Any purported Transfer of Company
Equity contrary to this Agreement shall be null and void, and
the Shareholder Parties shall cause the Company not to
recognize the Transfer.
5. Formation of Board of Directors. The Parties shall take such actions as
are necessary or appropriate so that upon the Closing the board of
directors of the Company ("Board of Directors") is constituted of five
members and, as promptly as practicable following the Closing, the
Company's Articles of Incorporation are amended so as to provide that
the Board of Directors shall be constituted of ten members. At each
election of directors, each Shareholder Party shall vote its Company
Shares for the election as members of the Board of Directors of the
following:
(a) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by FondElec, Pegasus,
FESGF and, if any, the immediate or subsequent Related Party
transferees thereof, as they may agree among themselves (the
"FondElec Group");
(b) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by Internexus, and, if
any, the immediate or subsequent Related Party transferees
thereof, as they may agree among themselves (the "Internexus
Group");
(c) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by the Estate of Xxxxxx
X. X'Xxxxxxxx, Xxxxx X'Xxxxxxxx and Xxxx X'Xxxxxxxx and, if
any, the immediate or subsequent Related Party transferees
thereof as they may agree among themselves (the "D'Ambrosio
Group");
(d) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by Telematica and, if
any, the immediate or subsequent Related Party transferees
thereof, as they may agree among themselves (the "Telematica
Group"); and
(e) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by TCW and, if any, the
immediate or subsequent Related Party transferees thereof, as
they may agree among themselves (the "TCW Group").
Each Shareholder Party agrees to vote its Company Shares, and
take such other actions as are necessary, so as to elect and thereafter
continue in office as members of the Board of Directors the designees
set forth above (the "Designated Directors", each group of shareholders
described in any of Sections 5(a) through 5(e) being referred to as a
"Group"). Further, as to each of IFC and Glacier, so long as it does
not Transfer (other than pursuant to Section 4(a)(iii)) any Company
Equity received pursuant to the transactions contemplated by the
Participation Agreement, it shall be entitled to receive notices of all
meetings of the Board of Directors, and copies of the minutes thereof,
and be permitted to designate a person from time to time by notice to
the Company to be present so as to observe (but not participate in)
such meetings.
Immediately prior to any Qualified Public Offering (or, if no
Qualified Public Offering has occurred prior to the seventh anniversary
of the Closing, immediately prior to such seventh anniversary), the
Shareholder Parties shall take all actions necessary or appropriate so
that the terms of the members of the Board of Directors are staggered
in a manner such that four directors serve three-year terms, three
directors serve two-year terms and three directors serve one-year
terms, and so that one director designated by each of the Internexus
Group, the Telematica Group, the TCW Group and the D'Ambrosio Group
comprise the directors serving three-year terms, two directors
designated by the FondElec Group, and one director designated by the
Telematica Group, comprise the directors serving two-year terms, and
one director designated by each of the Internexus Group, the TCW Group
and the D'Ambrosio Group comprise the directors serving one-year terms.
6. Corporate Governance.
(a) Ordinary Matters. The Board of Directors of the Company shall
make all decisions with respect to the business or operations
of the Company by a simple majority vote of the directors
present at a meeting duly called and continuing as to all
matters, except that, as to those matters described in Section
6(b) through Section 6(e), the Company shall take no action
with respect thereto until it has obtained the approval as
described in those sections.
(b) Extraordinary Matters. The Company shall not proceed with any
of the following matters unless a director designated by each
of the number of Groups indicated following the description of
the matter are among the directors approving the matter:
(i) the selection of the persons to fill the positions of
chief executive officer, chief technical officer,
chief operating officer and chief financial officer
of the Company or any Subsidiary, and the
continuation of any of such person in his or her
position after any Shareholder Party has expressed
reservations, set out in writing and with reasonable
substantiating information supporting its position,
to the effect that the person has failed to carry out
the duties of the position in a competent manner,
three Groups;
(ii) the adoption of an annual budget for the operation of
the Company and its Subsidiaries (the Parties
confirming their agreement to the adoption of the
Budget attached to the Participation Agreement as the
budget for the 12 month period following the date
hereof and confirming also that (1) while the Budget
assumes greenfield development of expansion
opportunities, if any such opportunities can more
efficiently be carried out by acquisition, they are
agreeable to an acquisition structure and that (2)
each budget shall include a provision for
transactions not specifically foreseen in the
budget), or the approval of any transaction or
related series of transactions, not provided for in
the current budget or that varies from the current
budget by a significant degree, including, without
limitation:
(A) entering into or amending Material
Contracts, except for those that substitute
for earlier contracts or licenses on similar
terms;
(B) making capital expenditures or other
investments (a variance of 10% of budgeted
cost, or, if less, $500,000, being deemed
significant);
(C) disposing of any assets (a variance of 10%
of the budgeted disposition value or, if
less, $500,000, being deemed significant);
(D) incurring any debt or granting any guarantee
or lien for fair value (a variance of 10% of
budgeted principal or guaranteed or secured
amount, or, if less, $500,000, being deemed
significant);
(E) entering into a merger, consolidation or
other restructuring, or a joint venture,
profit sharing agreement or similar
arrangement in any case other than a
Transaction Resulting in a Change of
Interest;
(F) issuing or failing to issue dividends or
making pro rata stock repurchases or other
prorata distributions; and
(G) engaging in any business activity outside
the scope of business contemplated in the
then current budget,
(H) entering into any transaction described in
subsections (B), (C) and (D) above not
provided for in the current budget or
varying therefrom in any amount which would
cause the aggregate variance with respect to
such transactions to exceed $1,000,000.
or the decision to decline any corporate opportunity
that is identified in the then current budget, four
Groups;
(iii) issuing securities for fair value, three Groups;
unless the same constitutes a Transaction Resulting
in a Change of Interest, in which case approval as
provided in Section 6(b)(vi) or 6(c)(i) shall be
required;
(iv) the adoption of a change in accounting principles
affecting the Company or any Subsidiary having a
significant effect on financial results, except to
the extent required by GAAP or Applicable Law, four
Groups;
(v) the approval to conduct a Qualified Public Offering,
four Groups, unless the purchase price of the
Company's securities in such offering evidences a
value per share of Common Stock (taking into account
the number of shares issuable in connection with such
offering and all warrants and options remaining
outstanding upon the effectiveness of the offering)
equal to or greater than the Target Value, in which
case the number of Groups shall be three;
(vi) a Transaction Resulting in a Change of Interest or
the sale of all or substantially all of the assets of
the Company or any Subsidiary, provided that, as a
result thereof, the Shareholder Parties Transfer all
of their Company Equity, and each receives, in
consideration thereof, a prorata portion of cash
and/or Publicly Traded Securities, four Groups, if
the value per share of Common Stock as evidenced by
such transaction (taking into consideration the
number of shares issuable in connection with the
transaction and all warrants and options remaining
outstanding upon the effectiveness of the
transaction) is less than the Target Value, or three
Groups, if such value per share equals or exceeds the
Target Value.
(c) Consensus Matters. The Company shall not proceed with any of
the following matters unless a director designated by each
Group is among the directors approving the matter as provided
in Section 6(a):
(i) a Transaction Resulting in a Change of Interest or a
Transfer of all or substantially all of the assets of
the Company or any Subsidiary other than as
contemplated in Section 6(b)(v) or 6(b)(vi), or any
fundamental change in the nature of the business of
such company;
(ii) any transaction with any person or entity having a
significant relationship with any Shareholder Party,
other than on a reasonably arms' length basis;
(iii) the appointment or removal of the independent
auditors of the Company or any Subsidiary, which
should, in any case, be an internationally recognized
accounting firm;
(iv) the issuing of any securities other than for fair
value, or the taking of any action that creates,
increases or reduces a preference for one or more,
but not all, series or classes of capital stock of
the Company or any Subsidiary;
(v) increases or decreases in the size of the Board of
Directors in a manner that affects the rights of
representation set forth in this Agreement;
(vi) incurring any debt, granting any guarantee,
transferring assets or permitting any Encumbrance
thereon, or acting as a surety or guarantor for any
third party, in any such case other than for fair
value received;
(vii) making stock repurchases or other distributions other
than on a prorata basis;
(viii) taking any action that would amend, modify or restate
the Articles of Incorporation or Bylaws of the
Company or any Subsidiary or entering into any voting
or management agreement regarding the governance of
any Subsidiary other than to effect a transaction
expressly provided for in Section 6(b); and
(ix) the determination to cease to be a reporting company
under the provisions of the United States Securities
and Exchange Act of 1934, as amended.
(d) Related Party Transactions. If a transaction is sought to be
approved that will significantly benefit or involve any
Shareholder Party or any Affiliate of a Shareholder Party,
then, in addition to the approval requirements that may be
applicable pursuant to Sections 6(a), 6(b), or 6(c), as
appropriate, that matter will also require the approval of one
director designated by each Group constituting a majority
(without taking into account any Group having any relationship
to the transaction being approved).
(e) Calling of Meetings. The Board of Directors will not consider
any matter at a given meeting unless such matter was described
in sufficient detail to give reasonable notice thereof in the
notice of that meeting, or unless Designated Directors
corresponding to all the Groups are present at the meeting and
agree that the matter should be taken up.
(f) Governance of Subsidiaries. The Company will cause each
controlled Subsidiary to refrain from taking any action that
is described in Sections 6(a), 6(b) or 6(c) above, unless and
until the action has been approved by the Board of Directors
in the manner described in the appropriate section.
(g) Advisory Agreements. Promptly and diligently following the
Closing, the Company shall negotiate (i) with Telematica the
terms and conditions of a definitive agreement providing for
an experienced and skilled person designated by Telematica to
act as the Company's advisor with respect to strategic
planning, and (ii) with TCW the terms and conditions of a
definitive agreement providing for an experienced and skilled
person designated by TCW to act as the Company's advisor with
respect to technical matters, in each case providing for a
term continuing until a Qualified Disposition occurs or until
the third anniversary of a Qualified Public Offering (or, if
earlier, until the fifth anniversary of the Closing Date), and
in the case of Telematica, providing for annual compensation
not greater than $135,000 and, in the case of TCW, annual
compensation commensurate with the advisor's scope of work.
(h) Interest in CCI Salvador. As of the completion of the
transactions contemplated by the Participation Agreement to
occur on the Subsequent Closing with respect to CCI Salvador,
Fondelec will hold (i) the Salvador Note (having a remaining
principal balance of U.S.$1,269,491), (ii) 27.87% of the
issued and outstanding common stock of CCI Salvador (the
rights therein being affected by the transfer of voting rights
pursuant to, and FondElec having the other obligations and
rights as provided in, the Salvador Shareholders' Agreement),
(iii) rights under a certain Special Shareholders' Agreement
dated as of December 10, 1998, and (iv) rights under a certain
Warrant granted by CCI Salvador dated March 3, 1999
(collectively the "FondElec Salvador Interests"). The Parties
acknowledge and agree that it is in the Company's best
interests that the FondElec Salvador Interests be transferred
to the Company for fair consideration, and the Shareholder's
Parties agree further to cause the Company to negotiate
diligently and in good faith with FondElec the terms and
conditions for such transfer, and FondElec also agrees so to
negotiate, with an aim that the closing of such transaction
should occur simultaneously with the expiration of the period
provided for the exercise of options under the Option
Agreement. This Section 6(i) should be interpreted to be an
expression of intent only, and a commitment to negotiate
diligently and in good faith, the obligations of the Company
to acquire the FondElec Salvador Interests, and of FondElec to
transfer the same, being set out, if at all, only in the
definitive documentation between them incorporating the terms
and conditions to such transfer as are acceptable to them in
their discretion.
(i) No Waiver. No provision of Section 6 shall be deemed to waive,
abrogate or otherwise modify any dissenters' rights granted
under state law to the holders of Company Equity, if such
holders do not vote in favor of that matter.
(j) Increasing Authorized Shares. The Parties agree that if the
number of the Company's authorized and unissued shares of
Common Stock or other authorized securities shall ever be
insufficient to permit the Company to satisfy (i) its
obligation to issue Indemnity Shares pursuant to Section 7 of
the Participation Agreement, (ii) its obligation to issue and
deliver any securities upon the exercise by a Shareholder
Party of any Share Rights or (iii) to satisfy other
obligations to any Shareholder Party, they shall take such
actions (and, with respect to the Shareholder Parties, cast
such votes or grant such consents) as shall be required to
amend the Company's Articles of Incorporation to increase (as
necessary) the number of shares of Common Stock or other
securities, as appropriate which the Company is authorized to
issue.
7. Removal of Directors. Neither the Company nor any Shareholder Party may
attempt to remove a Designated Director unless the Group who designated
such Designated Director so votes, and if such Group so votes, then the
other Shareholder Parties shall likewise so vote, except that if there
is just cause to remove a Designated Director, because of improper acts
or similar reason, the Designated Director may be removed. If a
Designated Director ceases to serve as a director for any reason, the
vacancy resulting thereby shall be filled as promptly as practicable by
the Board of Directors in a manner consistent with the provisions of
this Agreement.
8. Fiduciary Obligations. The Shareholder Parties acknowledge that any
person who serves as a director of the Company will be obligated as a
fiduciary to the Company and its shareholders, as is more specifically
provided by the corporate statutes of the State of Nevada, which
require that directors satisfy a duty of care and loyalty to the
corporation on whose board they serve.
9. Joint Sale Agreement. If any third party offers to acquire all of the
Company Equity of all of the Shareholder Parties, in a bona-fide
arm's-length transaction for cash consideration in United States
Dollars, which transaction evidences that the value per share of Common
Stock (taking into account all warrants and options remaining
outstanding upon the effectiveness of the transaction) is equal to or
greater than the Target Value, and after reasonable consultation among
such Shareholder Parties three out of Telematica, TCW, the D'Ambrosio
Parties, FondElec and Internexus agree to such transaction (or if the
transaction evidences that such value per share is less than the Target
Value, four out of Telematica, TCW, the D'Ambrosio Group, FondElec and
Internexus agree to such transaction), all of the Shareholder Parties
shall be obligated to participate in the transaction, and shall with
respect to itself cause the same to occur, provided that the third
party acquires all of the Company Equity of each Shareholder Party on
the same terms and conditions each as the other, and at the same time.
Without limiting the obligation of the Parties to consummate the
transaction described in the foregoing section, the Parties will
consult reasonably with each other in connection with the timing of
such transactions.
10. Cooperation with an Underwriting. If the Board of Directors of the
Company, acting in the manner provided for in Section 6(a) and clauses
(v) or (vi) of Section 6(b), or the Shareholder Parties acting in the
manner provided for in Section 9, determine to proceed with a given
transaction, all the Shareholder Parties shall cooperate as necessary
or appropriate to cause such transaction to be effective, including,
without limitation, cooperating with the requirements of the lead
underwriter in any connection with any Qualified Public Offering.
11. Option to Sell or Purchase Interest in Subsidiaries.
(a) Right to Election. If the Board of Directors of the Company,
acting in the manner provided for in Section 6(a) and clause
(v) or (vi) of Section 6(b), or the Shareholder Parties acting
in the manner provided for in Section 9, determine to carry
out a transaction that they anticipate will result in a
Qualified Disposition and if at that time, Telematica has a
50% or greater equity interest in any Subsidiary or has a
right, whether by conversion of debt or otherwise, to acquire
a 50% or greater equity interest in any subsidiary (such
equity or right to acquire being herein referred to as a
"Shareholder Interest"), the Company shall provide Telematica
a written notice of the Company's good faith estimation of the
value of the aggregate of all equity interests in the
Subsidiary (the "Subsidiary Value"). Within 20 Business Days
following receipt of such notice, Telematica shall make an
irrevocable election, by its written notice to the Company,
either to purchase the Company's equity interest in the
Subsidiary (the "Company Interest"), or to sell to the Company
the Shareholder Interest in the Subsidiary, in each case
pursuant to this Section 11 (the "Put-Call Notice"). If that
20 Business Day period elapses without Telematica's having
delivered a Put-Call Notice, it shall be deemed to have
irrevocably elected to sell to the Company the Shareholder
Interest, and a Put-Call Notice to that effect shall be deemed
to have been given on the close of business of the 20th day of
such period.
(b) Election to Purchase. If Telematica makes an election to
purchase the Company Interest, the Company shall be obligated
to sell, and Telematica shall be obligated to purchase, all of
the Company Interest for an amount equal to the product of a
fraction having as its numerator the number of shares of
common stock to which the Company Interest is equivalent, and
as its denominator the total number of shares of common stock
of the Subsidiary to which the Subsidiary's equity then issued
and outstanding is equivalent, multiplied by the Subsidiary
Value ("Company Sale Price"), and Telematica shall be
obligated to purchase all of the Company Interest for the
Company Sale Price, payable in cash in United States Dollars.
(c) Election to Sell. If Telematica makes an election to sell the
Shareholder Interest, then, the Company shall be obligated to
purchase, and Telematica shall be obligated to sell, the
Shareholder Interest simultaneously with the closing of the
Qualified Disposition that was contemplated when the notice of
the Subsidiary Value was given (the "Exit Closing"), for a
consideration ("Company Purchase Consideration") equal to a
fraction of each item of consideration received by the Company
at the Exit Closing, which fraction:
(i) has as its numerator the product of the number of
shares of common stock to which the Owner's equity
interest in the Subsidiary is equivalent multiplied
by the Subsidiary Value; and
(ii) as its denominator the product of the total number of
shares of common stock of the Subsidiary to which the
Subsidiary's equity then issued and outstanding is
equivalent multiplied by the value of the
consideration received at the Exit Closing,
and the Owner shall be obligated to sell to the Company the
Shareholder Interest for such consideration.
(d) Purchase and Sale Agreement. The Company and Telematica shall,
beginning upon the giving of the Put-Call Notice, negotiate
diligently and in good faith the terms and conditions of a
definitive agreement providing for the purchase and sale of
the relevant interest in a Subsidiary, with an aim to entering
into such definitive agreement within 30 calendar days
following the Put-Call Notice. Such agreement shall include
provisions consistent with the foregoing:
(i) the selling party shall have no obligation to make
any representations or warranties to the purchasing
Party with respect to the assets, liabilities,
business or prospects of the Subsidiary;
(ii) the respective obligations of the Company and
Telematica to buy or sell shall be unconditional,
except that:
(A) a Party's performance shall depend on the
other Party's delivery of the appropriate
consideration;
(B) in the case of a transaction as described in
Section 11(b), Telematica may condition its
obligation to purchase on the occurrence of
the Exit Closing within six months following
the giving of the Put-Call Notice, and
(C) in the case of a transaction as described in
Section 11(c), each party's respective
obligations shall be conditioned on the
occurrence of the Exit Closing within six
months following the giving of the Put-Call
Notice;
(iii) the closing of the purchase and sale of the relevant
interest shall occur:
(A) in the case of a transaction as described in
Section 11(b), within 60 days following the
giving of the Put-Call Notice, or, if the
occurrence of the Exit Closing is a
condition to Telematica's obligation to
purchase, on the Exit Closing, and
(B) in the case of a transaction described in
Section 11(c), simultaneously with the Exit
Closing; and
(iv) the respective obligations of the Company and
Telematica to buy or sell shall be terminated prior
to the closing of the purchase and sale of the
relevant interest:
(A) in the case of a transaction as described in
Section 11(b), if Telematica has conditioned
its obligations to purchase on the
occurrence of the Exit Closing, if the Board
of Directors of the Company determines to
abandon the transaction that was
contemplated at the time the notice of
Subsidiary Value was given as provided in
Section 11(a), and
(B) in the case of a transaction as described in
Section 11(c), if the Board of Directors of
the Company makes such determination; and
(v) if, in the case of a transaction as described in
Section 11(b), Telematica has conditioned its
obligation to purchase on an Exit Closing, then,
simultaneously with the execution of the purchase and
sale agreement:
(A) Telematica shall deliver to the Company a
commitment of Corporacion EDC, C.A., or
other instrument reasonably acceptable to
the Company, in support of Telematica's
obligation to pay the Company Sale Price;
and
(B) the Company shall deposit the certificates
evidencing the Company Interest with an
escrow agent reasonably acceptable to both
Telematica and the Company, as security for
its obligation to sell the Company Interest;
and otherwise the purchase and sale agreement shall be on
terms as are customary in similar transactions. The provisions
of this Section 11(d) shall not limit the obligation of the
Parties to effect the transaction described in Section 11(b)
and 11(c).
12. Exchange of Subsidiary Interests. The provisions of this Section 12 are
intended to apply to Telematica's interest in any Subsidiary in which
it has a less than 50% interest (whether the same is an equity interest
or a right, by conversion of debt or otherwise, to acquire an equity
interest), upon the occurrence of a Qualified Disposition, and to
Telmatica's interest in any Subsidiary (whether the same is an equity
interest or a right, by conversion of debt or otherwise, to acquire an
equity interest) from and after the expiration of any lock-up period
imposed by the Company's underwriter upon the occurrence of a Qualified
Public Offering through the third anniversary of the Qualified Public
Offering (any such interest being hereafter referred to as a "Roll-Up
Interest" and the time at or during which this Section 12 applies being
hereafter referred to as the "Applicable Time").
(a) Agreement to Exchange. At or during the Applicable Time,
Telematica may require that the Company acquire the entirety
of any Roll-Up Interest by exchanging the Roll-Up Interest for
Common Stock, according to the fair value that the Roll-Up
Interest represents to the fair value of the Company
("Exchange Percentage") as determined in Section 12(b).
Telematica shall provide the Company with reasonable notice of
its intent to exercise its rights under this Section 12,
taking into account the time necessary for the determination
of fair values as provided for in Section 12(b).
(b) Determination of Exchange Percentage. The Exchange Percentage
shall be determined as of the date of closing of the exchange
transaction provided for in Section 12(a) according to the
following method: (A) first, the Company shall, at its
expense, engage an investment advisor of international
reputation as selected by the Company, to determine the
Exchange Percentage; (B) second, if the value is not
acceptable to Telematica, it shall, at its expense, engage an
investment advisor of international reputation as selected by
Telematica, to determine the Exchange Percentage, and if that
value is within 10% of the value determined in the first step,
then the average of the two values obtained in the first and
second steps shall be the Exchange Percentage; and (C) third,
if the value determined in the second step is not within 10%
of the value determined in the first, the Company and
Telematica shall select a third investment advisor of
international reputation, whose fees will be paid in equal
parts by the Company and Telematica, and the Exchange
Percentage shall be the average of the two nearest values
obtained in the first, second or third steps.
(c) Exchange Transaction. Upon the occurrence of the Qualified
Dispositions (or, if the exchange occurs after a Qualified
Public Offering, promptly following the determination of
Exchange Percentage), the Company shall issue to Telematica a
number of shares of Common Stock that correspond (taking into
account such issuance) to the Exchange Percentage. The issue
shall be without warranty except for customary warranties as
to authorization and title.
13. Successors and Assigns. Except as otherwise expressly provided herein,
this Agreement shall bind and inure to the benefit of the Parties and
their respective successors or heirs and personal representatives and
permitted assigns. The Parties express their intention that this
Agreement is entered into for the benefit of the Parties hereto (or
their respective successors or permitted assigns), and that no other
person shall be or be deemed to be a third-party beneficiary of any
Party's rights under this Agreement.
14. Relationship to Agreement. This Agreement supersedes all prior
arrangements or understandings with respect to the subject matter
hereof, including the Prior Agreement, and the Parties that are parties
thereto confirm that the same is terminated and of no further force and
effect. The entering into of this Agreement is one of a series of
transactions contemplated to occur under the Participation Agreement.
15. Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in
a written instrument delivered in person, by telecopy or recognized
international courier, addressed or telecopied to such party at the
address or telecopier number set forth in the Participation Agreement,
or such other address or telecopier number as may hereafter be
designated in writing by the addressee in a notice complying as to
delivery with the terms of this Section 15.
All such notices, requests, consents and communications shall
be deemed to have been given (a) in the case of personal or courier
delivery, on the date of actual delivery, or (b) in the case of telex
or telecopier transmission, on the date on which the sender receives
machine confirmation of such transmission.
16. Changes. The terms and provisions of this Agreement may not be modified
or amended, or any of the provisions hereof waived, temporarily or
permanently, except pursuant to express written agreement executed by
all the Parties.
17. Confidentiality. Each Party will hold in confidence and not disclose,
and cause its Affiliates, employees and agents (and, in the case of IFC
and Vision, their observers designated pursuant to Section 5) to hold
in confidence and not disclose, all of the Confidential Information of
each other Shareholder Party or the Company or any Subsidiary or any
affiliate of the other, and refrain from using any such information
except in furtherance of the business of the Company and its
Subsidiaries. As used herein, "Confidential Information" means any
information concerning the business and affairs of any Shareholder
Party or their Affiliates or of the Company or its Subsidiaries that is
not already known by or generally available to the public. If any Party
is requested or required (by oral question or request for information
or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that Party will notify the others promptly of the request
or requirement so that the others may seek an appropriate protective
order or waive compliance with the provisions of this Section.
18. Term. This Agreement is effective from and after the Closing, and shall
continue in effect until the earlier to occur of (a) the tenth
anniversary of the Closing (except, that IFC, by its written notice to
the other Parties delivered prior to the fifth anniversary of the
Closing, may elect that the Agreement should expire as to itself on
such fifth anniversary; provided, however, that any Transfer of Company
Shares by IFC after such expiration but prior to termination of this
Agreement shall be subject to a right of first refusal (i.e., prior to
Transfer IFC shall first receive a bona fide offer, notify other
Parties of the terms and conditions thereof and provide the other
Parties the right to acquire such Company Equity on such terms and
conditions for a period of at least 45 days)) or (b) a Qualified
Disposition. If a Qualified Public Offering occurs, (a) the provisions
of Sections 5, 6, 7, 9 and 10 shall be of no force and effect from and
after the happening of a Qualified Public Offering (except that the
advisory agreements entered into pursuant to Section 6(h) shall
continue for the term provided for in such section), and (b) this
Agreement shall otherwise continue in effect until the third
anniversary of the Qualified Public Offering. Upon the seventh
anniversary of the Closing, the provisions of Xxxxxxx 0, 0, 0, 0 xxx 00
xxxxx xx of no further force and effect. Notwithstanding any
termination pursuant to Section 18, the provisions of Section 17 shall
continue for a period of two years following such termination.
19. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall
constitute but one agreement.
20. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed
to be part of this Agreement.
21. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability. Such
prohibition or unenforceability in any one jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
22. Governing Law; Dispute Resolution. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
United States of America, without giving effect to any choice or
conflict of law provision or rule that would cause the application of
laws of any jurisdiction other than the State of New York except to the
extent this Agreement would require the mandatory application of the
corporate law of the State of Nevada. All disputes arising under or
relating to this Agreement shall first be subject to conciliation in
accordance with the Rules of Conciliation of the International Chamber
of Commerce and, failing conciliation, be finally settled under the
Rules of Arbitration of the International Chamber of Commerce by three
arbitrators appointed in accordance with said Rules. The place of
arbitration shall be New York, New York. The language of the
arbitration shall be English. In the event any dispute under the
Participation Agreement relates in any way to the validity, performance
or interpretation of this Agreement and an arbitral tribunal is
constituted pursuant to Section 11(n) of the Participation Agreement,
all parties to any dispute hereunder agree (i) to be joined to the
procedures initiated pursuant to Section 11(n) of the Participation
Agreement; (ii) to have any proceedings initiated hereunder
consolidated with proceedings initiated pursuant to Section 11(n) of
the Participation Agreement and (iii) to be bound by any ruling of the
arbitral tribunal constituted pursuant to Section 11(n) of the
Participation Agreement or any interim or final award thereof.
Submission of disputes to arbitration pursuant to the Rules of
Arbitration of the International Chamber of Commerce, in consolidation
with any disputes submitted to arbitration pursuant to Section 11(n) of
the Participation Agreement as provided above, shall be the sole method
of resolving disputes between the Parties hereto. Judgment upon an
arbitration award may be entered in any court having jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CONVERGENCE COMMUNICATIONS, INC.
By: /s/ Xxxxx X'Xxxxxxxx
--------------------------------
Its:
--------------------------------
TELEMATICA EDC, C.A.
By: /s/ Xxxxxxxx Xxxxxxxx
--------------------------------
Its:
--------------------------------
TCW/CCI HOLDING LLC
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Its:
--------------------------------
INTERNATIONAL FINANCE CORPORATION
By:
--------------------------------
Its:
--------------------------------
GLACIER LATIN-AMERICA LTD.
By: /s/ Xxxxx Xxxxxxx
--------------------------------
Its:
--------------------------------
FONDELEC ESSENTIAL SERVICES
GROWTH FUND, L.P.
By: FondElec E.S.G.P. Corp.
Its: General Partner
By: /s/ Xxxxxx Xxxxxx-Xxx
--------------------------------
Its:
--------------------------------
FONDELEC GROUP, INC.
By: /s/ Xxxxxx Xxxxxx-Xxx
--------------------------------
Its:
--------------------------------
PEGASUS FUND, L.P.
By: Pegasus Management Corp.
Its: General Partner
By: /s/ Xxxxxx Xxxxxx-Xxx
--------------------------------
Its:
--------------------------------
INTERNEXUS S.A.
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Its: Duly Authorized
--------------------------------
/s/ Xxxxx X'Xxxxxxxx
---------------------------------------
Xxxxx X'Xxxxxxxx
/s/ Xxxx X'Xxxxxxxx
---------------------------------------
Xxxx X'Xxxxxxxx
ESTATE OF XXXXXX X. X'XXXXXXXX
By: /s/ Xxxxx X'Xxxxxxxx
--------------------------------
Its:
--------------------------------
Schedule 1
List of Securities Issued by Convergence Communication, Inc.
