Exhibit 2
PARTICIPATION AGREEMENT
among
CONVERGENCE COMMUNICATIONS, INC.,
a Nevada, United States of America corporation,
TELEMATICA EDC, C.A.,
a Venezuelan compania anonima,
TCW/CCI HOLDING LLC,
a Delaware limited liability company,
INTERNATIONAL FINANCE CORPORATION,
an international organization established by Articles of Agreement
among its member countries
GLACIER LATIN-AMERICA LTD.,
a British Virgin Islands International Business Company
FONDELEC ESSENTIAL SERVICES GROWTH FUND, L.P.,
a Cayman Islands exempt limited partnership,
INTERNEXUS S.A.,
an Argentine sociedad anonima,
and
XXXXX X'XXXXXXXX, XXXX X'XXXXXXXX
and the
ESTATE OF XXXXXX X. X'XXXXXXXX
Dated: October 15, 1999
TABLE OF CONTENTS
Page
1. Definitions..............................................................................................2
2. The Transactions.........................................................................................2
(a) The Transactions................................................................................2
(b) The Closing and the Subsequent Closing..........................................................5
(c) Deliveries at the Closing.......................................................................6
(d) Deliveries at the Subsequent Closing............................................................9
3. Representations and Warranties of Investors.............................................................10
(a) Organization of the Investors..................................................................10
(b) Authorization of Transaction...................................................................10
(c) Noncontravention...............................................................................11
(d) Brokers'Fees...................................................................................11
(e) Investment Intent..............................................................................11
(f) Restrictive Legend.............................................................................11
(g) Accredited Investor............................................................................12
(h) HSR Warranty...................................................................................13
4. Representations and Warranties of the Company Concerning the Company and its Subsidiaries...............13
(a) Organization, Qualification and Corporate Power................................................13
(b) Authorization of Transaction...................................................................14
(c) Capitalization.................................................................................14
(d) Noncontravention...............................................................................15
(e) Intellectual Property; Permits and Licenses....................................................15
(f) Financial Statements; Financial Condition......................................................18
(g) Taxes..........................................................................................19
(h) Employees and Labor Contracts..................................................................19
(i) Environmental Laws and Regulations.............................................................20
(j) Litigation.....................................................................................20
(k) Bankruptcy.....................................................................................21
(l) Ordinary Course................................................................................21
(m) Brokers........................................................................................21
(n) Contracts......................................................................................21
(o) Compliance with Laws...........................................................................21
(p) Business Plan and Use of Proceeds..............................................................22
(q) Complete Statements............................................................................22
(r) Reports........................................................................................22
(s) Related Party Transactions.....................................................................23
(t) Foreign Corrupt Practices Act..................................................................23
(u) No Bank Regulation.............................................................................23
(v) Property; Assets...............................................................................23
(w) Employee Benefits..............................................................................24
(x) U.S. Employee Plans............................................................................24
(y) Insurance......................................................................................24
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(z) IFC Policies...................................................................................25
(aa) HSR Warranty...................................................................................25
5. Pre-Closing Covenants...................................................................................25
(a) General........................................................................................25
(b) Notices and Consents...........................................................................25
(c) Operation of Business..........................................................................25
(d) Preservation and Conduct of Business...........................................................26
(e) Full Access....................................................................................26
(f) Notice of Developments.........................................................................26
6. Conditions to Obligations...............................................................................26
(a) Conditions to Obligations of Each Investor at the Closing......................................26
(b) Conditions to Obligations of the Company at the Closing........................................27
(c) Conditions to Obligations at the Subsequent Closing............................................28
7. Indemnity...............................................................................................28
8. Termination.............................................................................................30
(a) Termination of Agreement.......................................................................30
(b) Effect of Termination..........................................................................31
(c) Specific Performance...........................................................................32
9. D'Ambrosio Participation................................................................................32
10. Removal of Legend; Use of Proceeds......................................................................32
11. Miscellaneous...........................................................................................32
(a) Press Releases and Public Announcements........................................................32
(b) No Third Party Beneficiaries...................................................................33
(c) Entire Agreement...............................................................................33
(d) Succession and Assignment......................................................................33
(e) Counterparts...................................................................................33
(f) Headings.......................................................................................33
(g) Notices........................................................................................33
(h) Governing Law..................................................................................36
(i) Amendments and Waivers.........................................................................36
(j) Severability...................................................................................36
(k) Expenses.......................................................................................36
(l) Construction...................................................................................36
(m) Incorporation of Attachments and Exhibits......................................................37
(n) Disputes.......................................................................................37
(o) Special IFC Covenants..........................................................................38
(p) Reporting to IFC...............................................................................38
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (this "Participation Agreement") is
entered into as of October 15, 1999, among CONVERGENCE COMMUNICATIONS, INC., a
Nevada, United States of America corporation (the "Company"), TELEMATICA EDC,
C.A., a Venezuelan compania anonima, ("Telematica"), TCW/CCI HOLDING LLC, a
Delaware, United States of America limited liability company ("TCW");
INTERNATIONAL FINANCE CORPORATION, an international organization established by
Articles of Agreement among its member countries, ("IFC"), and GLACIER
LATIN-AMERICA LTD., a British Virgin Islands International Business Company
("Glacier"), FONDELEC ESSENTIAL SERVICES GROWTH FUND, L.P., a Cayman Islands
exempt limited partnership ("FondElec"), INTERNEXUS S.A., an Argentine sociedad
anonima ("Internexus"), and, for purposes of Section 9 below, XXXXX X'XXXXXXXX,
XXXX X'XXXXXXXX and the ESTATE OF XXXXXX X. X'XXXXXXXX (the latter three being
sometimes referred to collectively herein as the "D'Ambrosios"). Telematica,
TCW, IFC, Glacier, FondElec and Internexus are sometimes referred to
collectively as the "Investors" and individually as an "Investor", and the
Company and the Investors are sometimes referred to collectively as the
"Parties" and singularly as a "Party".
A. The Company, directly or through wholly-owned or controlled
subsidiaries, is engaged in the business of providing data
transmission services, domestic and international telephony,
subscriber cable television, value-added telecommunications
services and services for access to and use of the Internet in
Latin America (together, the "Telecommunications Business"),
and proposes to continue to carry out and to further expand
and develop such Telecommunications Business in the manner and
to the extent set out in the business plan and budget attached
as Exhibits A and B (the "Business Plan" and "Budget",
respectively) to the Company's letter addressed to all
Investors and dated October 15, 1999 and previously delivered
to them ("Disclosure Letter") and for such purposes requires
additional capital;
B. The Investors individually desire to participate or to
participate further in the Telecommunications Business and
toward that end intend to invest in the Company;
C. FondElec is a shareholder in the Company and is the holder of
a certain Subordinated Exchangeable Promissory Note from the
Company, dated December 23, 1998, in the original principal
amount of Five Million United States Dollars (US$5,000,000)
(the "FondElec December Note"), and FondElec proposes to
capitalize and, therefore, convert and exchange the principal
amount of the FondElec December Note for equity securities of
the Company;
D. Internexus is a shareholder in the Company and the holder of
(i) a certain Subordinated Exchangeable Promissory Note from
the Company, dated December 23, 1998, in the original
principal amount of Five Million United States Dollars
(US$5,000,000) (the "Internexus December Note"); (ii) a
certain Promissory Note from the Company, dated June 12, 1999,
in the original principal amount of Xxx Xxxxxxx Xxxx Xxxxxxx
xxx Xxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars
(US$2,550,000) (the "MetroNet Note"), and (iii) certain
Promissory Notes from the Company dated September 3, 1999 and
October 2, 1999, in the respective original principal amounts
of One Million United States Dollars (US$1,000,000) and Five
Hundred Thousand United States Dollars (US$500,000) (the
"Bridge Notes"), and proposes to capitalize and, therefore,
convert and exchange the principal amount of, and accrued
interest on, the Internexus December Note, the MetroNet Note
and the Bridge Notes for equity securities of the Company; and
E. The Parties are entering into this Participation Agreement and
the other agreements and instruments entered into or delivered
in connection herewith to memorialize the terms for such
investments and conversions.
NOW, THEREFORE, the Parties agree as follows:
1. Definitions. Capitalized terms used in this Participation Agreement
have the meanings ascribed to them in the Schedule of Definitions
attached to this Participation Agreement as Schedule 1, unless the
context otherwise requires. The definition of terms defined in the
singular shall apply to the plural, and the definition of terms defined
in the plural shall apply to the singular.
2. The Transactions.
(a) The Transactions. The Parties confirm their intention that, on
and subject to the terms and conditions of this Participation
Agreement, they shall carry out the following transactions,
and enter into and deliver the following agreements and
instruments (such agreements and instruments herein referred
to collectively as the "Transaction Documents") at a closing
to occur on October 18, 1999 the ("Closing") and, where
appropriate, at a further closing (the "Subsequent Closing")
to occur within five Business Days following the satisfaction
of the conditions set out in Section 6(c), in each case as
provided for in Section 2(b) below:
(i) the entering into, at the Closing, between each of
Telematica, TCW, IFC and Glacier, and the Company of
a Stock Purchase Agreement in the form of Exhibit A
to this Participation Agreement (each a "CCI Stock
Purchase Agreement" and, collectively, the "CCI Stock
Purchase Agreements"), and the purchase and sale,
pursuant to such CCI Stock Purchase Agreements, of
7,733,332 shares in the aggregate of Series C
Convertible Preferred Stock issued by the Company and
having the rights and preferences set out in Schedule
2 to this Participation Agreement (the "Rights and
Preferences of Series C Shares") for an aggregate
purchase price, in cash or other immediately
available funds, of Fifty-Eight Million United States
Dollars (US$58,000,000), such purchases and sales of
Series C Shares to occur as follows:
(A) the purchase by and sale to Telematica of an
aggregate of 3,333,333 Series C Shares
pursuant to its CCI Stock Purchase
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Agreement, 2,000,000 being purchased and
sold at the Closing and 1,333,333 being
purchased and sold at the Subsequent
Closing, in each case for a purchase price
per share of Seven and 50/100 United States
Dollars (US$7.50), being an aggregate
purchase price of Twenty Five Million United
States Dollars (US$25,000,000), Fifteen
Million United States Dollars
(US$15,000,000) being payable at the Closing
and Ten Million United States Dollars
(US$10,000,000) being payable at the
Subsequent Closing,
(B) the purchase by and sale to TCW of an
aggregate of 3,333,333 Series C Shares
pursuant to its CCI Stock Purchase
Agreement, 2,000,000 being purchased and
sold at the Closing and 1,333,333 being
purchased and sold at the Subsequent
Closing, in each case for a purchase price
per share of Seven and 50/100 United States
Dollars (US$7.50), being an aggregate
purchase price of Twenty Five Million United
States Dollars (US$25,000,000), Fifteen
Million United States Dollars
(US$15,000,000) being payable at the Closing
and Ten Million United States Dollars
(US$10,000,000) being payable at the
Subsequent Closing,
(C) the purchase by and sale to IFC of 666,666
Series C Shares pursuant to its CCI Stock
Purchase Agreement, at the Subsequent
Closing, for a purchase price per share of
Seven and 50/100 United States Dollars
(US$7.50), being an aggregate purchase price
of Five Million United States Dollars
(US$5,000,000) payable at the Closing, and
(D) the purchase by and sale to Glacier of
400,000 Series C Shares, pursuant to its CCI
Stock Purchase Agreement, at the Closing,
for a purchase price per share of Seven and
50/100 United States Dollars (US$7.50),
being an aggregate purchase price of Three
Million United States Dollars (US$3,000,000)
payable at the Closing,
and the commitment by the Company to apply the
proceeds of such sale in the manner set out in
Schedule 3 to this Participation Agreement;
(ii) the conversion by Internexus, at the Closing, of the
principal and interest amounts of the Internexus
December Note, the MetroNet Note and the Bridge Notes
into 1,328,911 Series C Shares and the conversion by
FondElec, at the Closing, of the principal amount of
the FondElec December Note into 666,666 Series C
Shares;
(iii) the entering into, at the Closing, by the Investors,
and the Company of an Option Agreement in the form of
Exhibit B to this Participation Agreement (the
"Option Agreement"), granting an option to each
Investor
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to acquire further Series C Shares within nine months
following the Closing Date, on the same terms and
conditions as set out in the CCI Stock Purchase
Agreement attached hereto as Exhibit A, except that
the maximum number of Series C Shares acquired by
each Investor shall be 40% of the number to be
acquired by it as contemplated in subsection 2(a)(i),
in the case of Telematica, TCW, IFC and Glacier, or
40% of the number received upon conversion as
contemplated in subsection 2(a)(ii), in the case of
FondElec and Internexus;
(iv) the granting to each Investor of a Series C Warrant
in the form of Exhibit C to this Participation
Agreement (each a "Series C Warrant" and,
collectively, the "Series C Warrants"), providing for
the issuance by the Company of 2,432,226 shares of
Common Stock, such grants to occur as follows:
(A) the grant to Telematica, as to 500,000
shares, at the Closing, and as to 333,333,
at the Subsequent Closing,
(B) the grant to TCW, as to 500,000 shares, at
the Closing, and as to 333,333, at the
Subsequent Closing,
(C) the grant to IFC, as to 166,666 shares, at
the Subsequent Closing,
(D) the grant to Glacier, as to 100,000 shares,
at the Closing,
(E) the grant to Internexus, as to 332,228
shares, at the Closing, and
(F) the grant to FondElec, as to 166,666 shares,
at the Closing;
(v) the granting to each of FondElec and Internexus, at
the Closing, of a FondElec/Internexus Warrant in the
form of Exhibit D to this Participation Agreement
(each, a "FondElec/Internexus Warrant"), providing
for the issuance to each of them, in each case at the
same time and for the same price as the Series C
Warrants are subject to exercise, as to 260,000
shares each of Common Stock;
(vi) the entering into, at the Closing, among the Company,
the Investors, and the D'Ambrosios of a CCI
Shareholders' Agreement in the form of Exhibit E to
this Participation Agreement (the "CCI Shareholders'
Agreement") for the purpose of setting out how the
Investors and the D'Ambrosios will exercise their
rights as shareholders with respect to, among other
matters, corporate governance, the election of
directors and the disposition of their Company
Equity;
(vii) the entering into, at the Closing, among the
Investors, the Company, the D'Ambrosios and certain
other parties of an Amended and Restated Registration
Rights Agreement in the form of Exhibit F to this
Participation Agreement (the "Registration Rights
Agreement") for the
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purpose of setting out the rights of the Investors,
the D'Ambrosios and such other parties to require or
join in the registration of their shares of common
stock of the Company under U.S. Securities Laws;
(viii) the entering into, at the Closing, among Telematica,
FondElec, WCI de Cayman, Inc., a Cayman Islands
limited liability company and a Subsidiary ("WCI")
and Chispa Dos Inc., a Cayman Islands limited
liability company ("CCI Salvador") of a Subscription
and Refinance Agreement in the form of Exhibit G to
this Participation Agreement (the "Salvador
Subscription Agreement"), and the purchase, at the
Subsequent Closing, through the subscription of
unissued shares of CCI Salvador common stock, by
Telematica from CCI Salvador, and the sale by CCI
Salvador to Telematica, of 59.1550 shares of common
stock of CCI Salvador (the "Salvador Shares", as
further described in the Salvador Subscription
Agreement) for a purchase price, in cash or other
immediately available funds of Five Million Five
Hundred Twenty-Five Thousand United States Dollars
(US$5,525,000); the contribution, at the Subsequent
Closing, by WCI to CCI Salvador of Nine Hundred One
Thousand Seven Hundred and Sixty United States
Dollars (US$901,760) of its accounts receivable from
CCI Salvador in exchange and in subscription for
9.6549 shares of common stock of CCI Salvador; and
the payment, at the Subsequent Closing, by CCI
Salvador, utilizing a portion of the proceeds of the
sale of the Salvador Shares, of Three Million Eight
Hundred Sixty-Four Thousand Five Hundred Twenty-Nine
United States Dollars (US$3,864,529) to repay Three
Million Five Hundred Thousand United States Dollars
(US$3,500,000) of the principal amount of that
certain Promissory Note of CCI Salvador made to
FondElec and dated Xxxxx 0, 0000 ("Xxxxxxxx Note"),
and accrued interest thereon through October 14,
1999;
(ix) the entering into, at the Closing, among CCI
Salvador, Telematica, WCI, FondElec and the other
shareholders of CCI Salvador of an Amended and
Restated Salvador Shareholders' Agreement in the form
of Exhibit H to this Participation Agreement (the
"Salvador Shareholders' Agreement"), for the purpose
of setting out how Telematica and such other
shareholders will manage the business of CCI
Salvador, and provisions regarding the disposition of
their equity interests in CCI Salvador; and
(x) the entering into, at the Closing, between the
Company and an affiliate of Telematica of a letter of
intent in the form of Exhibit I to this Participation
Agreement ("Colombia Letter of Intent").
(b) The Closing and the Subsequent Closing. Subject to the
satisfaction or waiver by the appropriate Party or Parties of
the conditions set out in Section 6, the closing of the
transactions contemplated by this Participation Agreement to
occur at the Closing and the Subsequent Closing shall take
place at the offices of Xxxxxx Xxxx & Priest LLP in New York
City, New York.
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(c) Deliveries at the Closing. At the Closing, the Parties will
deliver the following, subject to the satisfaction or waiver
by the appropriate Party or Parties of the conditions set out
in Sections 6(a) and 6(b):
(i) each of Telematica, TCW, IFC and Glacier will deliver
or cause to be delivered the following:
(A) to the Company, the Investor's CCI Stock
Purchase Agreement, duly executed and
delivered by it, together with
(1) in the case of Telematica, Fifteen
Million United States Dollars
(US$15,000,000),
(2) in the case of TCW, Fifteen Million
United States Dollars
(US$15,000,000), and
(3) in the case of Glacier, Three
Million United States Dollars
(US$3,000,000);
(B) to the Company and each of the other parties
thereto, the CCI Shareholders' Agreement,
duly executed and delivered by it; and
(C) to the Company and each of the other parties
thereto, the Registration Rights Agreement,
duly executed and delivered by it;
(ii) Internexus will deliver or cause to be delivered the
following:
(A) to the Company and each of the other parties
thereto, the CCI Shareholders' Agreement,
duly executed and delivered by it;
(B) to the Company and each of the other parties
thereto, the Registration Rights Agreement,
duly executed and delivered by it; and
(C) to the Company, the Internexus December
Note, the MetroNet Note and the Bridge
Notes, in each case duly marked as cancelled
and paid in full;
(iii) FondElec will deliver or cause to be delivered the
following:
(A) to the Company, the FondElec December Note
duly marked as cancelled and paid in full;
(B) to the Company and each of the other parties
thereto, the CCI Shareholder Agreement, duly
executed and delivered by it;
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(C) to the Company and each of the other parties
thereto, the Registration Rights Agreement,
duly executed and delivered by it; and
(D) to CCI Salvador and each of the other
parties thereto, the Salvador Subscription
Agreement, duly executed and delivered by
FondElec; and
(iv) Telematica will deliver or cause to be delivered the
following:
(A) to CCI Salvador and each of the other
parties thereto, the Salvador Subscription
Agreement, duly executed and delivered by
it;
(B) to CCI Salvador and each other party
thereto, the Salvador Shareholders'
Agreement, duly executed and delivered by
it;
(C) to the Company, the Colombia Letter of
Intent, duly executed and delivered by it.
(v) the Company will deliver or cause to be delivered the
following:
(A) to each of Telematica, TCW, and Glacier, its
corresponding CCI Stock Purchase Agreement,
duly executed and delivered by the Company,
together with certificates representing
Series C Shares as follows:
(1) to Telematica, 2,000,000 Series C
Shares,
(2) to TCW, 2,000,000 Series C Shares,
and
(3) to Glacier, 400,000 Series C
Shares;
and a certified copy of the resolutions of
the Company's Board of Directors, resolving
to apply the proceeds of the sale of such
shares in the manner described in Schedule 3
to this Participation Agreement;
(B) To Internexus, certificates representing
1,328,911 Series C Shares;
(C) To FondElec, certificates representing
666,666 Series C Shares;
(D) to the Investors, the Option Agreement, duly
executed and delivered by the Company;
(E) to each of Telematica, TCW, Glacier,
Internexus and FondElec, a Series C Warrant,
duly executed and delivered by the Company
with respect to the following appropriate
number of shares of Common Stock:
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(1) as to Telematica, 500,000 shares,
(2) as to TCW, 500,000 shares,
(3) as to Internexus, 332,228 shares,
(4) as to Glacier, 100,000 shares, and
(5) as to FondElec, 166,666 shares;
(F) to each of FondElec and Internexus, its
FondElec/Internexus Warrant, duly executed
and delivered by the Company;
(G) to the Investors and each other party
thereto, the CCI Shareholders' Agreement,
duly executed and delivered by the Company
and by each other party thereto other than
the Investors;
(H) to the Investors and each other party
thereto, the Registration Rights Agreement,
duly executed and delivered by the Company;
(I) to Telematica, the Salvador Subscription
Agreement, duly executed and delivered by
CCI Salvador and WCI;
(J) to CCI Salvador, Telematica and FondElec,
and the other parties thereto, the Salvador
Shareholders' Agreement, duly executed and
delivered by the Company and by each party
thereto other than Telematica and FondElec;
(K) to Telematica, the Colombia Letter of
Intent, duly executed and delivered by the
Company;
(L) to FondElec, $419,178.08 as repayment of the
unpaid interest portions of the FondElec
December Note;
(M) to the Investors, opinions of counsel in the
form of Exhibit J-1, Exhibit J-2 and Exhibit
J-3, each addressed to all Investors and
each dated the Closing Date; and
(N) to IFC, a certificate to the effect that the
proceeds of the sale of the Series C Shares
to IFC shall not, when received, be in
reimbursement of, and shall not be used for,
expenditures in the territories of any
country other than less-developed countries
in which IFC is actively pursuing operations
(as described in its 1999 annual report) or
for goods produced in or services supplied
from any such country.
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(d) Deliveries at the Subsequent Closing. At the Subsequent
Closing, the Parties will deliver the following, subject only
to the satisfaction, as to the appropriate Party, of the
conditions set out in Section 6(c):
(i) Telematica will deliver or cause to be delivered:
(A) to the Company, Ten Million United States
Dollars (US$10,000,000), and
(B) to CCI Salvador, Five Million Five Hundred
Twenty Five Thousand United States Dollars
(US$5,525,000);
(ii) TCW will deliver to the Company Ten Million United
States Dollars (US$10,000,000);
(iii) FondElec will deliver or cause to be delivered to CCI
Salvador a partial release of the Salvador Note, in
the form of Exhibit K hereto, acknowledging receipt
of Three Million Eight Hundred Sixty Four Thousand
Five Hundred Twenty Nine United States Dollars
(US$3,864,529) in payment of Three Million Five
Hundred Thousand United States Dollars (US$3,500,000)
of the principal amount thereof, and of interest
accrued thereon through October 14, 1999;
(iv) IFC will deliver or cause to be delivered to the
Company Five Million United States Dollars
(US$5,000,000);
(v) The Company will deliver or cause to be delivered the
following:
(A) To Telematica:
(1) Certificates representing 1,333,333
Series C Shares,
(2) A Series C Warrant with respect to
333,333 shares of Common Stock, and
(3) Certificates representing the
Salvador Shares;
(B) To TCW:
(1) Certificates representing 1,333,333
Series C Shares, and
(2) A Series C Warrant with respect to
333,333 Shares of Common Stock;
(C) To IFC:
(1) Certificates representing 666,666
Series C Shares, and
(2) A Series C Warrant with respect to
166,666 shares;
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(D) To each of Telematica, TCW and IFC, an
opinion of counsel in the form of Exhibit L,
addressed to each of them and dated the
Subsequent Closing Date; and
(E) To FondElec, Three Million Eight Hundred
Sixty Four Thousand Five Hundred Twenty-Nine
United States Dollars (US$3,864,529).
(F) to CCI Salvador, an acknowledgment by WCI in
the form of Exhibit M of the contribution to
capital of Nine Hundred One Thousand Seven
Hundred and Sixty United States Dollars
(US$901,760) by means of the capitalization
and conversion of inter-company debt owing
by CCI Salvador to WCI;
3. Representations and Warranties of Investors. Each Investor, as to
itself, represents and warrants to the Company and to each other
Investor, with the understanding that the Company and each other
Investor is being induced into entering into this Participation
Agreement and the other Transaction Documents in reliance on such
representations and warranties, that the statements contained in this
Section 3, with respect to such Investor only, are true, correct and
complete in all material respects as of the date of this Participation
Agreement and will be true, correct and complete in all material
respects as of the Closing Date and, if such Investor participates in
the Subsequent Closing, that the statements contained in Sections 3(e),
3(f) and 3(g) will be true, correct and complete in all material
respects as of the date of the Subsequent Closing. Each such
representation and warranty shall survive the Closing and the
Subsequent Closing, as appropriate, and shall continue in force for a
period of 24 months from the Closing Date.
(a) Organization of the Investors. It is duly organized, validly
existing, and in good standing under the laws of the place of
its organization.
(b) Authorization of Transaction. It has full power and authority
to execute and deliver this Participation Agreement and each
Transaction Document to which it is a party and to perform its
obligations hereunder and thereunder, and as of the Closing
Date, and this Participation Agreement each such Transaction
Document delivered at the Closing and as of the date of the
Subsequent Closing, each such Transaction Document, if any,
delivered at the Subsequent Closing, shall have been duly
authorized and executed by it and constitute its valid and
legally binding obligation, enforceable under Applicable Law
in accordance with its terms, except as may be limited by
bankruptcy, reorganization, moratorium, fraudulent conveyance
and insolvency laws and by other laws affecting the rights of
creditors generally and except as may be limited by the
availability of equitable remedies. There is no requirement of
Applicable Law that any notice be given, nor any filing,
authorization, consent, or approval of any governmental
authority be obtained in order that it may execute, deliver
and consummate the transactions contemplated by this
Participation Agreement and each other Transaction Document to
which it is a party, except that if the representing and
warranting
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Investor is Telematica or TCW, it excepts from the foregoing
representation and warranty the filing and waiting period
requirements applicable pursuant to the HSR Act for the
transactions contemplated to be performed or caused to be
performed by it at the Subsequent Closing.
(c) Noncontravention. Neither the execution nor the delivery by it
of this Participation Agreement or of any other Transaction
Document to which it is or becomes a party, nor the
performance of its obligations hereunder or thereunder will
(i) violate any Applicable Law to which it is subject or any
provision of its charter or other organization documents or
bylaws or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material
contract to which it is a party or by which it or any of its
property may be bound.
(d) Brokers' Fees. It has not incurred any liability or obligation
to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated hereunder or
under any other Transaction Document to which it is or becomes
a party for which any other Party could become liable.
(e) Investment Intent. It understands that the Series C Shares,
the Series C Warrants and the Option, and in case of the
representations being made by Telematica, the Salvador Shares,
and, in the case of the representations being made by FondElec
or Internexus, the FondElec/Internexus Warrants (collectively
sometimes referred to as the "Securities") have not been
registered under the United States Securities Act of 1933, as
amended (the "Securities Act"). It is acquiring the Securities
without a view to or for sale in connection with any
distribution thereof inside the United States within the
meaning of Regulation S under the Securities Act or other
exemptions from the registration requirements of the
Securities Act. It understands that the Securities will
constitute "restricted securities" under the Securities Act,
and may not be resold without registration under, or the
availability of an exemption from, the registration
requirements of the Securities Act and similar state laws. It
is familiar with Securities and Exchange Commission Regulation
S and Rule 144, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act.
(f) Restrictive Legend. It understands that the certificate or
certificates evidencing the Series C Shares may bear legends
in substantially the following form:
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF
STOCK. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO THE
HOLDER OF THIS CERTIFICATE UPON REQUEST THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF THE
CORPORATION'S STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
-11-
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE IN
THE UNITED STATES IN VIOLATION OF THE SECURITIES ACT AND MAY
NOT BE SOLD, MORTGAGED, PLEDGED OR HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES
ACT OR THE DELIVERY TO THE CORPORATION OF AN OPINION OF
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A SHAREHOLDERS' AGREEMENT DATED OCTOBER 15, 1999
BY AND BETWEEN THE SHAREHOLDER, THE CORPORATION AND CERTAIN
OTHER HOLDERS OF COMMON AND PREFERRED STOCK OF THE CORPORATION
WHICH PROVIDES RESTRICTIONS ON THE TRANSFERABILITY OF THE
SHARES REPRESENTED BY THIS CERTIFICATE. BY ACCEPTING ANY
INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE,
THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO
AND SHALL BE BOUND BY ALL THE PROVISIONS OF SAID SHAREHOLDERS'
AGREEMENT. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
It understands the certificates or agreements representing the
Securities other than the Series C Shares may bear legends in
substantially the form of the second and third paragraphs set
forth above.
(g) Accredited Investor. It is an "accredited investor," as that
term is defined in Regulation D promulgated under the
Securities Act, can bear the risk of its investment in the
Securities that it proposes to acquire, and has such knowledge
and experience in financial and/or business matters that it is
capable of evaluating the merits and risks of an investment in
such Securities.
-12-
(h) HSR Warranty. The premerger notification and report form, and
any and all appendices and attachments thereto, filed or to be
filed by it, if any under the HSR Act ("HSR Form") with the
Federal Trade Commission ("FTC") and the Antitrust Division of
the Department of Justice, was prepared and assembled in
accordance with the instructions issued by the FTC. To the
best of its knowledge, the information contained in the HSR
Form is true, correct and complete in accordance with the HSR
Act and its regulations. Each Investor, other than Telematica
and TCW, represents that the HSR Act does not require it to
file an HSR Form.
4. Representations and Warranties of the Company Concerning the Company
and its Subsidiaries. The Company represents and warrants to each
Investor, with the understanding that each of them is being induced to
enter into this Participation Agreement and the other Transaction
Documents to which such Investor is a party in reliance on such
representations and warranties, that the statements contained in this
Section 4 are true, correct and complete in all material respects as of
the date of this Participation Agreement and will be true, correct and
complete in all material respects as of the Closing Date and that the
statements contained in Sections 4(a), 4(b), 4(c), 4(d), 4(f) (except
as approved by budget or action taken by the Board of Directors), 4(j),
4(k), 4(t) and 4(z) will be true, correct and complete in all material
respects as of the Subsequent Closing except, in each case, as
otherwise set out in the Disclosure Letter. Each such representation
and warranty shall survive the Closing (and as to those made as of the
Subsequent Closing, the Subsequent Closing), and shall continue in
force and effect for a period of 24 months from the Closing Date (and
as to those made as of the Subsequent Closing), except that (i) the
representations and warranties set out in clause (j) below with respect
to claims or lawsuits shall not expire, (ii) the representations and
warranties set out in clause (i) below with respect to environmental
claims shall continue in force and effect for a period of 60 months
from the Closing Date, and (iii) the representations and warranties set
out in clauses (c), (g), (h) and (o) below shall continue in force and
effect through the expiration of the statute(s) of limitation for
claims related thereto.
(a) Organization, Qualification and Corporate Power. Each of the
Company and its Subsidiaries is a corporation duly organized,
validly existing, and in good standing under the laws of the
place of its organization, and each of the Company and the
Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such
qualification is required, and has all requisite corporate
power and authority to own and operate its properties and to
carry on its business as now conducted and as contemplated to
be conducted in the Business Plan. The articles of
incorporation, bylaws and any other organizational documents
of the Company and its Subsidiaries that the Company
previously delivered to each Investor were true, correct and
complete as of the date of delivery, and are true, correct and
complete as of the date hereof, and will be true, correct and
complete as of the Closing Date and as of the Subsequent
Closing Date.
-13-
(b) Authorization of Transaction. Each of the Company, CCI
Salvador and CCI Venezuela (together sometimes referred to
herein as the "CCI Companies", and individually as a "CCI
Company") has full power and authority to execute and deliver
the Participation Agreement and each Transaction Document to
which it is a party and to perform its obligations hereunder
and thereunder, and as of the Closing Date and as of the
Subsequent Closing Date this Participation Agreement and each
such Transaction Document shall have been duly authorized and
executed by the appropriate CCI Company and constitute its
valid and legally binding obligation, enforceable in
accordance with its terms, except as may be limited by
bankruptcy, reorganization, moratorium, fraudulent conveyance
and insolvency law and by other laws affecting the rights of
creditors generally and except as may be limited by the
availability of equitable remedies. Other than with respect to
the Company's filing under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), there is
no requirement of Applicable Law that any notice be given, nor
any filing, authorization, consent, or approval of any
governmental authority be obtained by the Company or its
Subsidiaries in order that each CCI Company may execute,
deliver and consummate the transactions contemplated by this
Participation Agreement and each other Transaction Document to
which it is a party.
(c) Capitalization. All of the authorized and outstanding shares
of the capital stock of the Company and each Subsidiary and
the ownership thereof (including, without limitation, the
ownership interests of FondElec and Internexus in the Company)
are described in the Disclosure Letter. All of the issued and
outstanding shares of stock of the Company and of each of the
Subsidiaries have been duly authorized, are validly issued,
fully paid, and are non-assessable, are owned by the Company
(with respect to the stock of the Subsidiaries), and the
holders thereof (with respect to the stock of the Company),
free of claims, charges or encumbrances, and were not issued
in violation of any preemptive rights. Other than the Series C
Warrants, the FondElec/Internexus Warrants and the options
provided for in the Option Agreement, there are no outstanding
or authorized options, warrants, purchase rights, preemptive
rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require
any CCI Company or any of their respective subsidiaries to
issue, sell, or otherwise cause to become outstanding any
additional or other capital stock. Neither the Company nor any
Subsidiary is under any obligation (contingent or otherwise)
to repurchase or otherwise acquire, redeem or retire any of
its equity interests or any warrants, options or other rights
to acquire its equity interests. Neither the Company nor any
of its Subsidiaries is a party or subject to any agreement or
understanding, and, to the best of their Knowledge, there is
no agreement or understanding between any Persons that affects
or relates to the voting or giving of written consents with
respect to any security or the voting by a director of the
Company or any of its Subsidiaries. The Series C Shares, the
Series C Warrants, the FondElec/Internexus Warrants, the
Options and the Common Stock and Series C Shares to be issued
upon the exercise of those Securities, when issued, sold and
delivered by the Company in accordance with the terms of the
CCI Stock Purchase Agreements, the Series C Warrant, the
FondElec/Internexus Warrant or
-14-
the Option Agreement, as appropriate, will be duly authorized
and validly issued, fully paid and non-assessable shares of
the capital stock of the Company with the rights, preferences
and privileges described in Schedule 1 of the CCI
Shareholders' Agreement. Upon issuance, sale or delivery, each
Investor will receive good and marketable title to the
Securities, free and clear of all claims and Liens, other than
those arising under the Transactions Documents. The Salvador
Shares, when issued, sold and delivered by CCI Salvador in
accordance with the terms of the Salvador Subscription
Agreement, will be duly authorized and validly issued, fully
paid and non-assessable shares of capital stock of CCI
Salvador with the rights, preferences and privileges described
in Schedule 1 thereto, and will be free and clear of all
adverse claims other than those arising under the Transaction
Documents.
(d) Noncontravention. Neither the execution and delivery of this
Participation Agreement or any Transaction Document to which
any CCI Company is a party, nor the performance of its
obligations hereunder or thereunder, will (i) violate any
Applicable Law to which the Company or any of its Subsidiaries
is subject or any provision of the charter or organizational
document of the Company or any of its Subsidiaries or (ii)
conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice under any Material Contract to which it is a party
or by which it or any of its property may be bound, or (iii)
will with respect to the approval by the directors of such
company of the transactions contemplated by the Transaction
Documents to which it is a party constitute a violation by any
such director of any fiduciary duty that it owes to such
company or to a third party, as a consequence of which the
Company or any of its Subsidiaries is obligated to indemnify
such director, (iv) give rise to any claims against the
Company or the Subsidiaries, or (v) result in the creation of
any Lien on the Securities (other than as created by the
Transaction Documents) or any assets of the Company or its
Subsidiaries.
(e) Intellectual Property; Permits and Licenses.
(i) Intellectual Property.
(A) The Disclosure Letter sets forth for all
Intellectual Property, as defined
hereinafter, owned by the Company or any of
its Subsidiaries: a complete and accurate
list of all U.S. and foreign (i) patents and
patent applications; (ii) trademark and
servicemark registrations (including
internet domain registrations), trademark
and servicemark applications, and material
unregistered servicemarks and trademarks;
and (iii) copyright registrations, copyright
applications, and material unregistered
copyrights. As used herein, the term
"Intellectual Property" means all
trademarks, service marks, trade names,
internet domain names, designs, logos,
slogans and general intangibles of like
nature, together with goodwill,
registrations and affiliations relating to
the foregoing,
-15-
registered and unregistered patents;
copyrights (including registrations and
applications of any of the foregoing);
Software (as defined below); confidential
information, technology, know-how,
inventions, processes, formulae, algorithms,
models and methodologies (collectively
"Trade Secrets") in each case used in the
Telecommunication Business as conducted or
contemplated to be conducted, and any
licenses to use any of the foregoing;
"Software" means any and all (i) computer
programs, including any and all software
implementation of algorithms, models and
methodologies, whether in source code or
object code, (ii) databases and
computations, including any and all data and
collections of data, (iii) all
documentation, including user manuals and
training materials, relating to any of the
foregoing, and (iv) the content and
information contained in any web site.
(B) The Disclosure Letter lists all material
Software, other than off-the-shelf or
commercially available software purchased
for less than Twenty-Five Thousand United
States Dollars (US$25,000), which is owned,
licensed, leased, or otherwise used by the
Company or any of its Subsidiaries, and
identifies which Software is owned,
licensed, leased, or otherwise used, as the
case may be.
(C) The Disclosure Letter sets forth a complete
and accurate list of all agreements granting
or obtaining any right to use or practice
any rights under any Intellectual Property
other than off-the-shelf or commercially
available software set forth in paragraph
(B) above, to which the Company or any of
its Subsidiaries is a party or otherwise
bound, as licensee or licensor thereunder,
including license agreements, settlement
agreements, and covenants not to xxx
(collectively, the "IP License Agreements").
(D) The Company or its Subsidiaries own or have
the right to use all Intellectual Property,
free and clear of all liens, claims,
charges, encumbrances or security interests,
except that the acquisition of the assets of
Metrotelecom, S.A., a Guatemalan corporation
("Metrotelecom") or of its subsidiaries has
not been consummated by the Company or any
Subsidiary, the rights of the Company or its
Subsidiaries in connection with Metrotelecom
being as set out in the Disclosure Letter.
(E) Any Intellectual Property owned or, to the
Knowledge of the Company or any Subsidiary,
used, by the Company or its Subsidiaries is
valid and subsisting in full force and
effect and has not been cancelled, expired
or abandoned.
(F) To the Knowledge of the Company or any
Subsidiary, the Telecommunications Business
as currently and as contemplated to
-16-
be conducted does not infringe on any
Intellectual Property of any third party.
(G) The consummation of the transactions
contemplated hereby by the Company and its
Subsidiaries will not result in the loss or
impairment of the Company or any of its
Subsidiaries' rights to own or use any of
the Intellectual Property, nor will it
require the consent of any third party,
including for the avoidance of doubt any
Governmental Authority, in respect of any
Intellectual Property.
(H) The IP License Agreements are valid and
binding obligations of all parties thereto,
enforceable in accordance with their terms,
and there exists no event or condition which
will result in a violation or breach of, or
constitute a default by any party under any
such IP License Agreement.
(I) The Company and each of its Subsidiaries
takes measures consistent with commercial
practices to protect the confidentiality of
Trade Secrets, including requiring its key
employees and other key parties having
access thereto to execute written
non-disclosure agreements. To the Knowledge
of the Company, no Trade Secret has been
disclosed and the Company has not authorized
the disclosure to any third party other than
pursuant to a non-disclosure agreement in
favor of the Company and the applicable
Subsidiary with respect to such Trade
Secrets.
(J) To the Knowledge of the Company or any
Subsidiary, no third party is
misappropriating, infringing, diluting or
violating any Intellectual Property owned by
the Company or any of its Subsidiaries, the
misappropriation, infringement, dilution or
violation of which would have a material
adverse effect on the Company's operation or
its Subsidiaries, either individually or in
the aggregate.
(K) Year 2000. (a) As of the date of this
Agreement; all Date Data and Date-Sensitive
Systems owned by the Company and its
Subsidiaries is Year 2000 Compliant (as
defined below). As used herein, "Date Data"
means any data of any type that includes
date information or which is otherwise
derived from, dependent on or related to
date information. "Date-Sensitive System"
means any Software, microcode or hardware
system or component, including any
electronic or electronically controlled
system or component, that uses or processes
any Date Data and that is installed, in
development or on order by the Company or
any of its Subsidiaries for their internal
use or for the use of third parties, or
which the Company or any of its Subsidiaries
sell, lease, license, assign or
-17-
otherwise provide to any third party. "Year
2000 Compliant" means (i) with respect to
Date Data, that such data is in proper
format and accurate for all dates, including
for those before, on and after December 31,
1999 and (ii) with respect to Date-Sensitive
Systems, that each such system accurately
processes all Date Data, including for dates
before, on and after December 31, 1999,
without loss of any functionality or
performance, including but not limited to
calculating, comparing, sequencing, storing
and displaying such Date Data (including all
leap year considerations), when used as a
standalone system or in combination with
other Software or hardware.
(ii) Permits and Licenses. The Company or its Subsidiaries
own and possess all licenses, permits, concessions
and other authorizations required by law in
connection with carrying out the Telecommunications
Business as conducted as of the Closing Date and all
of such licenses, permits, concessions and other
authorizations are in full force and effect, and no
violations are or have been recorded in respect
thereof, nor is any proceeding pending which
threatens to suspend, revoke or limit any such
license, permit, concession or other authorizations,
and no such licenses, permits, concessions or
authorizations will be adversely affected by this
Participation Agreement or by the Transaction
Documents. No CCI Company has the Knowledge of any
circumstance, event or set of facts that constitute
(or, with the passage of time or the giving of
notice, or both, would constitute) a violation of or
a breach or default under any such license, permit,
concession or authorization. The Disclosure Letter
sets forth a list, arranged by country, of all such
licenses, permits, concessions and other
authorizations.
(f) Financial Statements; Financial Condition. Attached hereto as
Exhibit N are the Company's audited consolidated and
consolidating financial statements (including related
statements of income, changes in shareholders' equity and cash
flow) for the year ended December 31, 1998 and its unaudited
consolidated and consolidating financial statements for the
six months ended June 30, 1999 (together, the "Financial
Statements"). The Financial Statements have been prepared in
accordance with United States GAAP (except in certain
instances for the absence of footnotes, and with respect to
the unaudited portions of the Financial Statements, except for
normal year end audit adjustments consistent with prior
Company practice), present fairly the financial condition of
the Company as of the dates set forth therein and the results
of operations for such periods, and are correct and complete
in all material respects.
Since June 30, 1999, neither the Company nor any of its
Subsidiaries has done any of the following or permitted any of
the following to occur: (i) suffered any material adverse
change in its assets or liabilities, business, financial
condition, results of operations or prospects; (ii) incurred
any material liabilities (other than liabilities disclosed in
the Financial Statements and Disclosure Letter, adequately
-18-
provided for in the Financial Statements or disclosed in any
related notes thereto, incurred in connection with this
Participation Agreement or the other documents described
herein, or incurred in the ordinary course of business
consistent with past practices without the occurrence of a
material adverse consequence) or (iii) altered its assumptions
underlying or methods of calculating, any bad debt,
contingency or other reserves; (iv) entered into any
settlement to avoid or terminate a judicial dispute; (v)
written down the value of any material inventory, notes or
accounts receivable; (vi) canceled any material debts or
waived any material rights; (vii) sold, transferred, or
otherwise disposed of any of its material properties or
rights, or breached or permitted the breach (or suffered to
occur any event which with the passage of time or the giving
of notice would constitute a breach) of any contract material
to its business as presently being conducted; (viii) granted
any material increase in the compensation or benefits of
officers or employees; (ix) made any material capital
expenditure or commitment for additions to property, plant,
equipment or intangible capital assets; (x) declared any
dividend in respect of shares of the Company or any of its
Subsidiaries; (xi) made any change in any method of accounting
or accounting practice; or (xii) entered into any agreement
with any shareholder of the Company or of any Subsidiary or
any affiliate of such shareholder or agreed to take any action
described in this paragraph. Since December 31, 1998, the
Company has not, directly or indirectly, declared, paid or set
aside for payment any dividend or any other transactions
similar to a dividend involving a distribution on any of its
securities of any class, or, directly or indirectly, redeemed,
purchased or otherwise acquired any of its shares or
securities or agreed to do any of the foregoing.
(g) Taxes. The Company and each Subsidiary have (i) duly filed all
tax reports and returns required to be filed by any of them in
accordance with Applicable Law and all such reports and
returns are true, complete and accurate in all material
respects and (ii) has duly paid all taxes and other charges
due by it to federal, state, local or foreign taxing
authorities, including, without limitation, those due in
respect of the properties, income, licenses, sales or payrolls
of any of them; the reserves for taxes reflected in the
Financial Statements are adequate in conformity with United
States GAAP; there are no tax liens upon any property or
rights of the Company or any of its Subsidiaries; and there
are no material liabilities (other than as is set forth in the
Financial Statements) for taxes and there are no extensions or
claims or to the Knowledge of the Company, audits or
investigations pending with regard to the Company's or its
Subsidiaries' tax liabilities. The acquisition by the Company
or a Subsidiary of the assets of Metrotelecom or its
subsidiaries will not cause the Company or any Subsidiary to
become liable for any tax or other liabilities of Metrotelecom
or its subsidiaries for, or arising with respect to, any
period prior to such acquisition. Neither the Company nor any
Subsidiary has been subject to any tax audit or has been
notified by any Governmental Authority that it will be subject
to any tax audit.
(h) Employees and Labor Contracts. There are no labor or
employment proceedings against the Company or any of its
Subsidiaries pending in any labor court or other body or
authority and no unsatisfied labor judgments against any of
them, and
-19-
each is in compliance with all material applicable laws
regarding hiring, employment and employment termination
practices, including, without limitation, laws, regulations,
and judicial and administrative decisions relating to wages,
hours, conditions of work, conditions of employment (including
applicable discrimination statutes, laws and regulations)
collective bargaining, health and safety, payment of social
security, payroll, withholding and other taxes, workers'
compensation, and insurance requirements. Neither the Company
nor any Subsidiary is a party to or bound by any employment
contract, deferred compensation agreement, bonus plan,
consulting agreement, incentive plan, profit sharing plan,
retirement agreement or other employee compensation agreement,
except as set forth on the Disclosure Letter. The Company has
entered into written employment contracts with the persons set
forth in the Disclosure Letter and has previously provided the
Investor copies of those employment agreements, all of which
are valid and binding and are in full force and effect. The
transactions contemplated by this Participation Agreement
shall not entitle any employee of the Company or any of its
Subsidiaries to any severance, termination, indemnity,
payments in lieu of notice or similar related payments.
(i) Environmental Laws and Regulations. The business of the
Company and each of the Subsidiaries is and has been conducted
in compliance with all Environmental Laws. The operations of,
and the buildings and property owned, leased or used by the
Company and each of the Subsidiaries comply with all such
Environmental Laws. There is no existing practice, action or
activity of the Company or any Subsidiary and no existing
condition relating to any of the properties or assets owned or
used by the Company or any Subsidiary which might require
clean up or remediation or give rise to any civil or criminal
liability under, or violate or prevent compliance with, any
such Environmental Laws or any health or occupational safety
or other applicable statute, regulation, ordinance or decree.
Neither the Company nor any Subsidiary has received any notice
from any governmental authority revoking, canceling,
materially modifying or refusing to renew any permit, license
or authorization or providing written notice of violations
under any such Environmental Laws.
(j) Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of the Company,
threatened (or any basis therefor known to the Company) which,
either in any case or in the aggregate, might result in a
material adverse change or in any impairment of the right or
ability of the Company or any Subsidiary to carry on their
respective businesses as now conducted or as proposed to be
conducted or in any liability on the part of the Company or
any Subsidiary, either individually or taken as a whole and
none which questions the validity of this Participation
Agreement or any Transaction Document or any action taken or
to be taken in connection herewith. Neither the Company nor
any of the Subsidiaries is a party or subject to the
provisions of any order, injunction, judgement or decree of
any court or government agency or instrumentality (other than
government decrees of general applicability) which might
adversely affect their respective businesses; and there is no
action suit, proceeding or investigation by the Company or any
Subsidiary currently pending or which the Company or
-20-
any Subsidiary intends to initiate which may reasonably be
expected to materially adversely affect their respective
businesses.
(k) Bankruptcy. Neither the Company nor any Subsidiary has filed
any voluntary petitions admitting its bankruptcy or requesting
a reorganization, nor have any petitions alleging insolvency
been filed against the Company or any Subsidiary, nor have any
of them been judicially declared to be bankrupt or insolvent,
nor is any of them insolvent or in the state of being
liquidated or dissolved.
(l) Ordinary Course. Since the date of the Offering Memorandum, as
defined below, the Company and each Subsidiary has carried on
its business in the ordinary course in substantially the same
manner as reflected in the Reports, following operations and
investment policies consistent with past practices, and will
continue to do so until the Closing.
(m) Brokers. Neither the Company nor any of its Subsidiaries will
be liable directly or indirectly to pay any brokerage fee,
commission, finder's fee or financial advisory or similar fee
by reason of the transactions contemplated by any Transaction
Document to any person claiming such compensation by reason of
any agreement or relationship with the Company or any of its
shareholders or any affiliate thereof or with any Subsidiary
or any of its shareholders or any affiliate thereof.
(n) Contracts. Except for those agreements listed in the
Disclosure Letter, true, correct and complete copies of which
have been delivered to each Investor (and made available to
FondElec and Internexus), none of the Company or any
Subsidiary is a party to (i) any agreement, arrangement,
understanding or contract, whether formal or informal, written
or oral, requiring payment of an amount in excess of
Twenty-Five Thousand United States Dollars (US$25,000) per
annum (or its equivalent in other currencies), (ii) any
license, distribution, confidentiality or similar agreements,
(iii) any employment or consulting agreements requiring a
payment of an amount in excess of Fifty Thousand United States
Dollars (US$50,000) per annum (or its equivalent in other
currencies), (iv) any collective bargaining, severance or
similar agreements or other agreements with labor unions, (v)
any agreements with suppliers or customers not in the ordinary
course of business, or (vi) any agreement not in the ordinary
course of business or not made at arm's length or which would
otherwise be material in any respect to any aspect of the
Company's or any Subsidiary's business or operations. All
agreements, arrangements, understanding and contracts listed
in the Disclosure Letter are valid and binding obligations, in
full force and effect in all respects and are being performed
by the Company or its Subsidiary, as appropriate, and, to the
Knowledge of the Company by all other parties thereto, in
accordance with their terms in all material respects.
(o) Compliance with Laws. The Company and the Subsidiaries have
operated and are operating their business in compliance in all
material respects with all Applicable Laws, and neither the
Company nor any Subsidiary is in violation of,
-21-
or in default under, any term of its organizational documents
or of any judgment, decree, writ, statute, governmental rule
or regulation applicable to the Company or any of its
Subsidiaries or to which they or any of them is bound, except
to the extent that such violations or defaults would not (i)
affect the validity or enforceability of any Transaction
Document, or (ii) impair the ability of the Company to perform
any material obligation which the Company has under any
Transaction Document, or (iii) have any material adverse
effect in its assets, liabilities, business, financial
condition, result of operations or prospects.
(p) Business Plan and Use of Proceeds. The Business Plan was
prepared by the Company in good faith, and is based on
assumptions, projections, expressions of opinion and estimates
for which the Company believes there was a reasonable basis in
light of existing market conditions, political and economic
conditions, technology, demographics, competition and
regulatory environment. The purchase price received by the
Company for the Series C Shares sold to Investors will be used
by the Company only for the purposes set forth in the Use of
Proceeds Summary attached in Schedule 3 to this Participation
Agreement.
(q) Complete Statements. No representation or warranty of the
Company in this Participation Agreement contains any untrue
statement of a material fact, and the representations and
warranties of the Company (together with the Disclosure Letter
and the Reports), taken as a whole, do not omit any statement
necessary in order to make any material statements or
descriptions contained herein or therein in light of the
circumstances in which they were made, not misleading or
incomplete.
(r) Reports. The Company has made all filings required of it under
the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended. The Company has made
available to each Investor each such report prepared by it
since December 31, 1998, including its Annual Report on Form
10-KSB for the year ended December 31, 1998 in the form
(including exhibits, annexes and any amendments thereto) filed
with the Securities and Exchange Commission (the "SEC"), as
well as its private offering memorandum (the "Offering
Memorandum") dated April, 1999 (collectively, but not
including any such reports filed subsequent to the date
hereof, its "Reports"). As of their respective dates, the
Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in
light of the circumstances in which they were made, not
misleading and no statement of material fact that was true and
not misleading as of the date of the Report in which it was
made is untrue or misleading as of the date hereof in light of
events or changes in circumstances occurring since the date of
the Report which are not otherwise disclosed in the Reports or
the Disclosure Letter. Each of the consolidated balance sheets
included in or incorporated by reference into the Reports
(including the related notes and schedules) fairly presents
the consolidated financial position of the Company and its
Subsidiaries as of its date and each of the consolidated
statements of income and of cash flows included in or
incorporated by reference into its Reports (including any
related
-22-
notes and schedules) fairly presents the consolidated results
of operations, retained earnings and cash flows, as the case
may be, of it and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to
notes and normal year-end audit adjustments that will not be
material in amount or effect), in each case in accordance with
United States GAAP consistently applied during the periods
involved, except as may be noted therein.
(s) Related Party Transactions. No officer, director, or
stockholder of the Company and its Subsidiaries or any
affiliate thereof, or any member of their immediate families
is directly or indirectly interested in any contract,
agreement, arrangement or transaction with the Company or any
Subsidiary.
(t) Foreign Corrupt Practices Act. None of the Company nor any of
the Subsidiaries or any of their respective officers,
employees, directors, representatives or agents acting at the
direction of the Company or any of the Subsidiaries, acting in
such a capacity, has taken any action in violation of any
anti-bribery, anti-corruption or criminal laws of the United
States, Guatemala, El Salvador, Venezuela, Costa Rica, Panama,
Mexico, Argentina or New Zealand, including the Foreign
Corrupt Practices Act of 1977 of the United States, as
amended, and including, but not limited to, the making of
improper payments, directly or indirectly, in the form of cash
or otherwise, to officials of any governmental authority.
(u) No Bank Regulation. Neither of the Company nor any Subsidiary
is a bank subject to regulation as a bank or entered into
agreements with any governmental authority charged with the
supervision or regulation of banks or bank holding companies
or engaged in the insurance of bank deposits.
(v) Property; Assets.
(i) The Disclosure Letter sets forth a complete and
accurate list of (i) all of the real property owned
by the Company or a Subsidiary (the "Owned Real
Property") and (ii) all of the real property leased
or subleased by the Company or a Subsidiary from a
third party requiring a payment in excess of Fifty
Thousand United States Dollars (US$50,000) per year
(the "Leased Real Property" and, together with the
Owned Real Property, the "Real Property"). The
Company or its Subsidiaries have (i) (A) good and
marketable title to its interest in the applicable
Owned Real Property and (B) a valid leasehold
interest in the Leased Real Property as provided in
the applicable lease agreements (the "Real Property
Leases") and (ii) with respect to any other material
property and assets, good and marketable title to its
interest in such property and assets, in each case,
free and clear of all Liens, except for (A) Liens,
encumbrances, defects, exceptions, easements, rights
of way, restrictions, covenants, claims or other
similar charges listed or identified in the
Disclosure Letter with respect to the applicable Real
Property and (B) Liens, encumbrances, defects,
easements, rights of way, restrictions, covenants,
claims or other similar charges, whether or not of
record, which do not, individually or in the
-23-
aggregate, materially impact the use or operation of
the Real Property in connection with the
Telecommunications Business consistent with the
current use thereof.
(ii) All of the Real Property, machinery, fixtures,
vehicles, equipment and other personal property owned
or leased by the Company or any Subsidiary is in
satisfactory repair and operating condition, ordinary
wear and tear excepted.
(iii) With respect to the Leased Real Property, neither the
Company nor any of its Subsidiaries has received a
written notice of (i) any monetary default or other
material default thereunder or (ii) non-compliance
with any Applicable Laws.
(iv) Neither the Company nor any Subsidiary has received
any written notice from any Governmental Authority
with respect to the Real Property of any violations
of any Applicable Laws, which violation is not in the
process of being cured or contested in good faith
(w) Employee Benefits. Except as set forth in the Disclosure
Letter, neither the Company nor any Subsidiary has any
employees in the United States. With respect to all of the
employee benefit plans of the Company and its Subsidiaries (a)
such plans are in material compliance with any Applicable
Laws, including relevant tax laws, and the requirements of any
trust deed under which they are established, (b) all employer
and employee contributions to each such plan required by law
or by the terms of such plan have been made, or, if
applicable, accrued, in accordance with normal accounting
practices; and (c) the fair market value of the assets of each
funded plan, the liability of each insurer for any plan funded
through insurance or the book reserve established for any
plan, together with any accrued contributions, is sufficient
to procure or provide for the accrued benefit obligations with
respect to all current and former participants in such plan.
(x) U.S. Employee Plans. No employee benefit plan, policy,
arrangement or agreement is maintained for the benefit of any
US employee of the Company (each, a "Plan"), no Plan is
intended to be "qualified" within the meaning of Section
401(a) of the Internal Revenue Code, no Plan is subject to
Title IV of Employee Retirement Income Security Act ("ERISA")
and no liability under Title IV of ERISA has been incurred by
the Company that has not been satisfied in full, and no
condition exists that presents a material risk to the Company
of incurring a material liability thereunder.
(y) Insurance. The Company and each of the Subsidiaries is insured
with respect to the matters set forth in the Disclosure
Letter. All such insurance is in full force and effect, and
neither the Company nor any of the Subsidiaries is in default
thereunder and all claims thereunder have been correctly filed
in a due and timely manner. A list of all insurance policies
held by the Company and each of the
-24-
Subsidiaries with coverages in excess of One Million United
States Dollars (US$1,000,000) is set forth in the Disclosure
Letter.
(z) IFC Policies. To the best of its Knowledge, neither the
Company nor any Subsidiary is in violation of any of the
policies set forth in Exhibit O (the "IFC Policies") and
neither the Company nor any Subsidiary has received or is
aware of any complaint, order, directive, claim, citation or
notice from any Governmental Authority with respect to any
matter of the Company's or such Subsidiary's compliance with
the relevant environmental, health and safety laws and
regulations in effect in any Country such as, without
limitation, air emissions, discharges to surface water or
ground water, noise emissions, solid or liquid waste disposal,
or the use, generation, storage, transportation or disposal of
toxic or hazardous substances or wastes.
(aa) HSR Warranty. The HSR Form filed or to be filed by the Company
under the HSR Act with the FTC and the Antitrust Division of
the Department of Justice, was prepared and assembled in
accordance with instructions issued by the FTC. To the best of
its Knowledge, the information contained in the HSR Form is
true, correct and complete in accordance with the HSR Act and
its regulations, subject to the recognition that reasonable
estimates have been made because books and records do not
provide the required data.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period, if any, between the execution of this Participation Agreement
and the Closing Date and, if appropriate, the Subsequent Closing Date:
(a) General. Each of the Parties will use its reasonable best
efforts to take all actions and to do all things necessary in
order to consummate the transactions contemplated by this
Participation Agreement (including the satisfaction, but not
the waiver, of the closing conditions set forth in section 6
below) and the other Transaction Documents.
(b) Notices and Consents. Each of the Parties will give any
notices, make any filings and use its reasonable best efforts
to obtain any authorizations, consents, and approvals
necessary to consummate the transactions described herein.
Each of TCW, Telematica, and the Company shall use its best
efforts to make a proper filing, and to cause the waiting
period to expire or terminate under the HSR Act, and to take
all other actions necessary to permit the consummation of the
transactions contemplated by the Participation Agreement and
the other Transaction Documents under the HSR Act.
(c) Operation of Business. The Company will not, and will not
cause or permit any Subsidiary to, prior to the Closing,
engage in any practice, take any action, or enter into any
transaction outside the ordinary course of business. Without
limiting the generality of the foregoing, the Company will
not, and will not cause or permit any Subsidiary, to take any
action described in clauses (ii) through (xii), or the last
sentence of the second paragraph, of Section 4(f).
-25-
(d) Preservation and Conduct of Business. The Company will keep
its business and properties substantially intact, including
each Subsidiary's present operations, physical facilities,
working conditions, and relationships with lessors, licensors,
suppliers, customers, subscribers and employees and operate
and carry on the Telecommunications Business in the ordinary
course of business.
(e) Full Access. The Company will permit, and the Company will
cause each of the Subsidiaries to permit, representatives of
the Investors to have full and complete access at all
reasonable times, and in a manner so as not to interfere with
the normal business operations of such entities, to all
premises, properties, personnel, books, records (including tax
records), contracts, and documents of or pertaining to each of
such entities for the purpose of enabling the Investors or
their representations to verify the accuracy of the
representations and warranties contained herein, to verify
that the covenants of this Participation Agreement have been
complied with and to determine whether the conditions to
Investors' performance set forth herein have been satisfied.
(f) Notice of Developments. The Company will give prompt written
notice to the Investors of any of the following that occur
prior to the Subsequent Closing or the termination of this
Agreement under the provisions of Section 8:
(i) any material adverse development causing or
potentially causing a breach of any of the
representations and warranties set forth in Section 4
above,
(ii) any event which constitutes a material default in any
of the terms, conditions or provisions of any
Material Contract, or
(iii) any other event or condition which could reasonably
be expected to have a material adverse effect on the
assets, operations, operating results, customer or
employee relations, business or financial condition
or prospects of the Company or of any Subsidiary.
Each Investor will give prompt written notice to the other
Parties of any material adverse development that occurs prior
to the Closing and causes a breach of any of its own
representations and warranties in Section 3 above. No
disclosure by any Party pursuant to this Section 5(f),
however, shall be deemed to amend or supplement the Disclosure
Letter or prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
6. Conditions to Obligations.
(a) Conditions to Obligations of Each Investor at the Closing. The
obligation of each Investor to consummate or cause to be
consummated the transactions to be performed at the Closing as
described in the appropriate clauses of Section 2(c) is
subject to the satisfaction or waiver by it of the following
conditions:
-26-
(i) Each other Party shall consummate or cause to be
consummated the transactions contemplated in the
appropriate clauses of Section 2(c) to be performed
at the Closing;
(ii) the representations and warranties of the Company set
forth in Section 4, and the representations and
warranties of each other Investor set forth in
Section 3, shall have been true and correct at the
execution hereof and shall be true and correct in all
respects at and as of the Closing Date as if made on
the Closing Date;
(iii) the Company and each other Investor shall have
performed and complied with all of its covenants
hereunder in all material respects through the
Closing Date;
(iv) there have been received by the Investor opinions of
counsel to the Company, in substantially the form(s)
set forth in Exhibit J, addressed to all Investors
and dated as of the Closing Date; and
(v) no court or Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any
law, statute, ordinance, rule, regulation, judgement,
decree, injunction or other order (whether temporary,
preliminary or permanent) that continues in effect
and restrains, enjoins or otherwise prohibits
consummation of the transactions to be performed at
the Closing.
(b) Conditions to Obligations of the Company at the Closing. The
obligation of the Company to consummate or cause to be
consummated the transactions to be performed at the Closing as
described in Section 2(c)(v) is subject to the satisfaction or
waiver of the following conditions:
(i) each Investor shall consummate or cause to be
consummated the transactions contemplated in the
appropriate clauses of Section 2(c) to be performed
by it at the Closing;
(ii) the representations and warranties set forth in
Section 3 above shall be true and correct in all
material respects as to each Investor at and as of
the Closing Date;
(iii) no court or Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any
law, statute, ordinance, rule, regulation, judgement,
decree, injunction or other order (whether temporary,
preliminary or permanent) that continues in effect
and restrains, enjoins or otherwise prohibits
consummation of the transactions to be performed at
the Closing; and
(iv) each Investor shall have performed and complied with
all of its respective covenants hereunder in all
material respects through the Closing Date as if made
on that Closing Date.
-27-
(c) Conditions to Obligations at the Subsequent Closing. The
obligation of any Party (the "Performing Party") to consummate
or cause to be consummated the transaction to be performed at
the Subsequent Closing as described in Section 2(d) is subject
to the satisfaction or waiver by such Party of the following
conditions:
(i) each other Party shall consummate or cause to be
consummated the transactions contemplated in the
appropriate clauses of Section 2(d) to be performed
by it at the Subsequent Closing;
(ii) no court or Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any
law, statute, ordinance, rule, regulation, judgement,
decree, injunction or other order (whether temporary,
preliminary or permanent) that continues in effect
and restrains, enjoins or otherwise prohibits
consummation of the transactions to be performed at
the Subsequent Closing;
(iii) any filing and waiting period requirements applicable
pursuant to the HSR Act to the transactions
contemplated to be performed or caused to be
performed by the Performing Party shall have expired
or been terminated; and
(iv) the representations and warranties of each other
Party made as of the Subsequent Closing Date, (i)
with respect to the Investors, in connection with
Sections 3(e), 3(f), and 3(g), and (ii) with respect
to the Company in connection with Sections 4(a),
4(b), 4(c), 4(d), 4(f) (except as approved by budget
or action taken by the Board of Directors), 4(j),
4(k), 4(t) and, to the extent the condition relates
to the IFC's obligations at the Subsequent Closing,
4(z), shall be true, correct and complete at and as
of the Subsequent Closing Date as if made on the
Subsequent Closing Date.
7. Indemnity. If any of the representations and warranties of the Company
in this Participation Agreement or any Transaction Document is untrue
or inaccurate as of the Closing Date or as of the date of the
Subsequent Closing, or if any claim or lawsuit described in the
Disclosure Letter is not settled as described therein, or if the
Company or any of its Subsidiaries becomes a party to litigation
arising out of events occurring before the Closing Date (any of the
foregoing here referred to as an "Indemnity Event"), the provisions of
Section 7(a) and, if appropriate, Section 7(b) shall apply:
(a) If, as a result of the Indemnity Event, the Company or any
Subsidiary incurs a liability or otherwise suffers a loss in
value, and such liability or loss in value is not fully offset
by the value of any asset or benefit received by the Company
or a Subsidiary in connection with the Indemnity Event (the
extent to which not so offset being referred to herein as the
"Negative Delta") then, subject to the limitations set out in
Sections 7(d) and 7(e), the Company shall issue to each
Investor, as an indemnity, an additional number of shares of
the Company's stock having the same rights and preferences as
the Series C Shares or, if any of
-28-
the Series C Shares acquired pursuant to this Participation
Agreement have been converted by such Investor, an additional
number of shares of Common Stock, ("Indemnity Shares")
calculated as follows:
(i) first, each Investor shall receive by way of
indemnity a number of Indemnity Shares determined by
multiplying the Negative Delta by the Investor's
percentage of the equity of the Company acquired in
the transactions contemplated by this Agreement
(being the Series C Shares acquired at the Closing or
the Subsequent Closing, those acquired or subject to
acquisition in the exercise of the rights granted
under the Option Agreement, and those issued or
issuable to it pursuant to the Series C Warrants or
the FondElec/Internexus Warrants), and dividing the
sum by the Fair Value (taking into account the
issuance of the Indemnity Shares) of a share of
Common Stock;
(ii) second, each of FondElec and Internexus shall receive
by way of indemnity a number of additional Indemnity
Shares determined by multiplying the Negative Delta
by its percentage of the equity of the Company
obtained by it prior to the Closing or in the
exercise of rights obtained by it prior to the
Closing as reflected in Schedule 1 to the CCI
Shareholders' Agreement, and dividing that product by
the Fair Value (taking into account the issuance of
the Indemnity Shares) of a share of Common Stock;
(iii) third, each Investor shall receive by way of
indemnity such a number of additional Indemnity
Shares as shall be required to restore the Investor
to the percentage ownership of the Company that it
would have had if no shares had been issued pursuant
to clause (ii) above; and
(iv) fourth, each of FondElec and Internexus shall receive
by way of indemnity such a number of additional
Indemnity Shares as shall be required to restore it
to the percentage ownership of the Company that it
would have had if no shares had been issued pursuant
to clause (i) above.
An example of the foregoing indemnity calculations is set out in
Exhibit P, and the Parties acknowledge that the method implicit in that
example is to be used in making the calculations called for above. It
is the Parties' intention and agreement that the indemnity to FondElec
and Internexus be in lieu of the indemnities extended to them in
connection with their various transactions with the Company prior to
the Closing, and each of FondElec and Internexus (on behalf of itself
and all parties which could claim by or through it) hereby waives all
rights to make, and releases the Company from, indemnity obligations
under all prior indemnity agreements or provisions.
(b) To the extent the Indemnity Event is not manifested in the
Company, or any of its Subsidiaries, incurring a liability or
suffering a loss in value not fully offset by the value of
assets or benefits received in connection with the Indemnity
Event, but nonetheless an Investor or any of its directors,
officers, employees,
-29-
agents or representatives (each, an "Indemnitee") suffers a
loss or incurs liability as a result of the Indemnity Event,
then the Company shall, subject to the limitations set out in
Sections 7(d) and 7(e), indemnify such Indemnitee for the loss
by making a payment to it in cash equal to the amount of the
loss.
(c) If there occurs a disagreement between any Indemnitee and
the Company as to the application of this Section 7, the
matter shall be the subject of dispute resolution in the
manner set out in Section 11(n).
(d) Claims under this Section 7 that are based on a breach of
the Company's representations and warranties may be made only
if notice of such breach is given by any Investor to the
Company during the period of validity of such representations
and warranties as set out in Section 4. No claim may be made
pursuant to Section 7(a) with respect to a given Indemnity
Event, unless either (i) the Negative Delta resulting from
such event exceeds One Hundred Thousand Dollars (US$100,000),
or (ii) such Negative Delta, when added to the Negative Delta
resulting from earlier events as to which an indemnity
pursuant to Section 7(a) has not been satisfied, exceeds Two
Hundred Fifty Thousand Dollars (US$250,000). No claim may be
made pursuant to Section 7(b) with respect to a given
Indemnity Event unless either (i) the loss suffered by all
Indemnitees by reason of such Indemnity Event for which a
claim may be made under Section 7(b) exceeds One Hundred
Thousand Dollars (US$100,000), or (ii) if such loss, when
added to the losses suffered by all Indemnitees by reason of
Indemnity Events as to which an indemnity pursuant to Section
7(b) has not been satisfied, exceeds Two Hundred and Fifty
Thousand Dollars (US$250,000).
(e) The Company shall not have any obligation to indemnify an
Indemnitee, whether under Section 7(a) or Section 7(b), to the
extent that the loss suffered by the Indemnitee results from
the breach of the relevant Investors' representations,
warranties or agreements in the Participation Agreement or any
other Transaction Document, or the Indemnitees' gross
negligence or willful misconduct. The Company's obligations to
issue stock by way of indemnity as set out in Section 7(a)
shall constitute the sole remedy for breach of contract
available to the Indemnitees by reason of the happening of any
Indemnity Event, except to the extent Section 7(b) is
applicable.
(f) At such time as the Company is obligated to indemnify any
Indemnitee under Section 7(a) or Section 7(b), the Company
shall also reimburse such Indemnitee for its reasonable
attorney's fees and other out-of-pocket expenses of the
Indemnitee, if any, incurred in enforcing its rights under
Section 7.
8. Termination.
(a) Termination of Agreement. The Parties may terminate this
Participation Agreement as provided below:
-30-
(i) The Parties may terminate this Participation
Agreement as to all Parties by mutual written
consent;
(ii) Any Investor may terminate this Participation
Agreement as to itself if,
(A) prior to the Closing,
(1) the Company or any other Investor
has breached any of its
representations, warranties, or
covenants contained in this
Participation Agreement in any
material respect,
(2) such Investor has notified the
Company and each other Investor of
the breach prior to the Closing,
and
(3) the breach has continued without
cure for a period of two business
days after the notice of breach, or
(B) if the Closing shall not have occurred on or
before October 28, 1999, or, with respect to
the Subsequent Closing only, if the
Subsequent Closing shall have not occurred
on or before January 18, 2000; (unless the
failure results primarily from such Investor
breaching any representation, warranty, or
covenant contained in this Participation
Agreement); or
(C) this Participation Agreement has been
terminated as to any other Investor.
(iii) The Company may terminate this Participation
Agreement as to a given Investor if
(A) (1) such Investor has breached any of
its representations, warranties, or
covenants contained in this
Participation Agreement in any
material respect,
(2) the Company has notified the
Investor of the breach, and
(3) the breach has continued without
cure for a period of two business
days after the notice of breach, or
(B) if the Closing shall not have occurred on or
before October 28, 1999, or, with respect to
the Subsequent Closing only, if the
Subsequent Closing shall have not occurred
on or before January 18, 2000 (unless the
failure results primarily from the Company
itself breaching any representation,
warranty, or covenant contained in this
Participation Agreement).
(b) Effect of Termination. If any Party terminates this
Participation Agreement pursuant to Section 8(a) above, all
rights and obligations of the Party hereunder
-31-
shall terminate without any liability of any Party to any
other Party, except for any liability of the terminating Party
resulting from a breach that occurs prior to the termination.
A termination as to a given Investor as contemplated in clause
(ii) or clause (iii) of Section 8(a) shall not have the effect
of removing such Investor's performance from among the
conditions precedent to any other Party's obligation hereunder
as set out in Section 6, and each other Parties shall be
obligated to proceed with its respective transactions
contemplated hereunder only if and when all of the conditions
to their obligations set out in Section 6 are either fully
performed, or expressly waived by the Party.
(c) Specific Performance. Nothing in this Participation Agreement
shall be interpreted to preclude any Party's right to seek and
obtain specific performance of the terms of this Participation
Agreement or any equitable remedy.
9. D'Ambrosio Participation. Subject to the satisfaction or waiver of the
conditions to the Company's obligation to consummate the transactions
contemplated hereby as set forth in Section 6(b), each of the
D'Ambrosios agrees to execute and deliver the CCI Shareholder's
Agreement at the Closing. Each D'Ambrosio hereby represents and
warrants to the Company and each Investor that (i) he or it has full
power and authority to execute and deliver the CCI Shareholders'
Agreement and to perform his or its or obligations thereunder, (ii) the
CCI Shareholders' Agreement, when executed and delivered by him or it,
will constitute his or its legally binding obligation, enforceable in
accordance with its terms, except as may be limited by bankruptcy,
reorganization, moratorium, fraudulent conveyance and insolvency laws
and by other laws affecting the rights of creditors generally, and
except as may be limited by the availability of equitable remedies,
(iii) there is no requirement of Applicable Law that any notice be
given, nor any filing, authorization, consent or approval or any
governmental agency be obtained in order that he or it may execute and
deliver the CCI Shareholders' Agreement, and (iv) neither the execution
nor the delivery by him or it of the CCI Shareholders' Agreement will
violate any Applicable Laws to which he or to which it is subject or
conflict with, result in the breach of, constitute a default under,
result in the acceleration of or create in any party the right to
accelerate, terminate, modify or cancel, any agreement to which he or
to which it is subject.
10. Removal of Legend;Use of Proceeds.. The Company agrees to remove, at
the request of an Investor, any legend placed on the Investor's
certificate covering any securities issued pursuant to this
Participation Agreement or any of the Transaction Documents in order to
comply with the requirements of U.S. Securities Laws at such time as no
longer required thereby. The Company agrees that the purchase price
received by the Company for the Series C Shares sold to Investors will
be used by the Company only for the purposes set forth in the Use of
Proceeds Summary attached in Schedule 3 to the Participation Agreement.
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to
the subject matter of this
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Participation Agreement without the prior written approval of
each other Party; provided, however, that any Party may make
any public disclosure it believes in good faith that it is
required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the
disclosing Party will advise the other Parties and afford such
Parties a reasonable opportunity under the circumstances to
comment prior to making the disclosure).
(b) No Third Party Beneficiaries. This Participation Agreement
shall not confer any rights or remedies upon any person or
entity other than the Parties, their related Indemnitees and
their respective successors and permitted assigns.
(c) Entire Agreement. The English language version of this
Participation Agreement and other Transaction Documents
(including the documents referred to herein) constitutes the
entire agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among the
Parties, written or oral (including, specifically, any letter
of intent or letter or understanding between the Parties), to
the extent they relate in any way to the subject matter
hereof.
(d) Succession and Assignment. This Participation Agreement shall
be binding upon and inure to the benefit of the D'Ambrosios
and the Parties and their respective successors and permitted
assigns. Neither any D'Ambrosio nor any Party may assign
either this Participation Agreement or any of its rights,
interests, or obligations hereunder without the prior written
approval of the other Parties, except to a Person to whom a
Transfer of Company Equity is made free of the restrictions of
Sections 2 and 3 of the CCI Shareholders' Agreement.
(e) Counterparts. This Participation Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the
same instrument. For purposes of this Participation Agreement,
the delivery of a counterpart signature by telephonic
facsimile transmission shall be deemed the equivalent of the
delivery of an original counterpart signature.
(f) Headings. The section headings contained in this Participation
Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Participation Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall
be deemed duly given when actually received, whether
personally delivered, transmitted by fax or sent by reputable
air courier (such as Federal Express or DHL) and addressed to
the intended recipient as set forth below:
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If to the Company:
Convergence Communications, Inc.
c/o Xxxxx X'Xxxxxxxx
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Fax: (000) 000-0000
Copy to:
Xxxxxxx Xxxxx & Xxxxxxx
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
If to Telematica:
Telematica EDC, C.A.
Xxxxxxx Xxxxxxx, Xxx Xxxxxxxxxx - Xxxxxxxx 0000
Caracas 1010-A-Venuezala
Attention: Xxxxxxxx Xxxxxxxx
Fax: 000-000-000-0000
Copy to:
Angel Xxxxxxx Xxxx
Viso Rodriguez Cottin Xxxxxx Xxxxxxx & Associados
Torre Banvenez
Xx. Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxx
Xxxxxxx 0000, Venezuela
Fax: 000-000-000-0000
Xxxxxx & Xxxxxx
000 Xxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxx X. Xxxxx
Fax: (000) 000-0000
If to TCW:
TCW/CCI Holding LLC
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
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Copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx Xxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to IFC:
International Finance Corporation
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000 XXX
Attention: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to Glacier:
Glacier Latin-America Ltd.
0000 XX 000 Xxxxxx, #000
Xxxxxxxx, XX 00000
Attention: Xx. Xxxxxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to FondElec:
FondElec Essential Services Growth Fund, L.P.
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxx Rua
Fax: (000) 000-0000
If to Internexus:
Xxxxx Xxxxxxxxxx and/or
Xxxxx Xxxxxxxx
Internexus X.X.
Xxxxx 000, Xxxx 0
X0000XXX Xxxxxx Xxxxx
Xxxxxxxxx
Fax: 5411-4320-7560
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Copy to:
Xxxxx-Xxxxxx & Orts
Florida 000-Xxxx 0
X0000XXX-Xxxxxx Xxxxx
Xxxxxxxxx
Fax: 5411-4325-3564
Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the
address set forth above using any other means (including
personal delivery, messenger service, telecopy, telex,
ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed
to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the
address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
(h) Governing Law. This Participation Agreement shall be governed
by and construed in accordance with the domestic laws of the
state of New York, United States of America, without giving
effect to any choice or conflict of law provision or rule
(whether of the state of Utah or any other jurisdiction) that
would cause the application of the laws of any jurisdiction
other than the state of New York.
(i) Amendments and Waivers. This Participation Agreement may be
amended, extended or modified by a writing signed by the
Investors, the D'Ambrosios and the Company. No waiver shall be
deemed to have been made unless in writing, nor shall any
waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional
or not, be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of
any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Participation
Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in
connection with this Participation Agreement and the
transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Participation Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Participation Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring
-36-
or disfavoring any Party by virtue of the authorship of any of
the provisions of this Participation Agreement. The Parties
intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any
Party has breached any representation, warranty, or covenant
contained herein in any respect, the fact that there exists
another representation, warranty, or covenant relating to the
same subject matter (regardless of the relative levels of
specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(m) Incorporation of Attachments and Exhibits. The Schedules and
Exhibits identified in this Participation Agreement are
incorporated herein by reference and made a part hereof.
(n) Disputes.
(i) The provisions of this Section 11(n) shall be the
sole and exclusive method for resolving disputes
between the Parties or their successors or assigns
arising under or relating to the transactions
contemplated by this Participation Agreement or any
other Transaction Documents. In the event there is a
dispute under this Participation Agreement or any
Transaction Documents, the Parties shall meet with
one another and diligently attempt to resolve their
disagreements. If they are unable to do so, then upon
request of any Party to the dispute, they will
conciliate the dispute, utilizing a single
conciliator pursuant to the ICC Rules of Optional
Conciliation in a proceeding to take place in New
York, New York, and carried out in the English
language. If, after 60 calendar days, the mediation
is not successful, then any Party to the dispute may
bring arbitration to resolve the dispute as
contemplated in this Section 11(n).
(ii) Assuming negotiations and mediation are unsuccessful,
any Party to the dispute may submit the disagreement
to binding arbitration by making a written demand for
arbitration. The arbitration shall occur before a
panel of three arbitrators in New York, New York, and
shall be governed by the Rules of Arbitration of the
International Chamber of Commerce including, in the
event of more than two Parties to the dispute,
Article 10 of such rules. To assure predictability,
the arbitrators shall be persons selected by the
Parties with experience in telecommunication issues
and commercial transactions. The arbitrators shall
base their decision on the terms and conditions of
this Participation Agreement, and shall not vary the
same, New York statutory law, and judicial precedent,
and will include in the award findings of fact and
conclusions of law upon which the award is based.
Subject to the limitation set out in the Indemnity
clause above, the arbitrators may grant such legal or
equitable relief as they deem to be appropriate,
including money damages, specific performance and
injunctive relief.
-37-
(iii) Questions of whether the dispute is subject to
arbitration shall also be decided by the panel of
arbitrators.
(iv) Any Party may request and obtain from a court of
competent jurisdiction provisional or ancillary
remedies for relief such as an injunction or the
appointment of a receiver, but the institution of a
judicial proceeding will not constitute a waiver of
the right of such Party to submit a dispute to
arbitration. Judgment upon an arbitration award may
be entered in any court having jurisdiction. Subject
to the award of the arbitrators, each Party shall pay
an equal share of the arbitrators' fees, except the
arbitrators shall have the power to award all
expenses (including attorney's fees, costs and expert
witness fees) to the prevailing Party, as determined
by the arbitrators. All matters relative to the
arbitration, including the result thereof, shall be
maintained as confidential by all Parties to this
Participation Agreement, except as required to obtain
judgment upon an arbitration award or otherwise as
required by law.
(o) Special IFC Covenants.
(i) The Company and its Subsidiaries shall design,
construct, operate, maintain and monitor all of their
sites, plant, equipment and facilities:
(A) in accordance with the IFC Policies;
provided, however, that such obligation
shall not be deemed to require the Company
or any Subsidiary to perform an
environmental assessment of projects
proposed nor shall the IFC have the right to
approve or disapprove any proposed operation
of the Company or any Subsidiary;
(B) in compliance with the environmental
mitigation and management measures, as well
as applicable environmental, indigenous
peoples, involuntary resettlement, cultural
property protection, occupational health and
safety requirements, and any child labor and
forced labor laws, rules and regulations
(including any international treaty
obligations; if any) of the Governmental
Authority of any Country;
(ii) Neither the Company nor its Subsidiaries shall use
the proceeds of the sale of the Series C Shares to
IFC in the territories of any country other than
less-developed countries in which IFC is actively
pursuing operations (as described in its 1999 annual
report) or for reimbursements of expenditures in
those territories or for goods produced in or
services supplied from any such country.
(p) Reporting to IFC.
(i) Within ninety (90) days after the end of each fiscal
year, deliver to IFC an annual monitoring report,
confirming compliance with the applicable national or
local requirements, the IFC Policies, the
environmental mitigation and management measures and
Section (o)(i) or, as the case
-38-
may be, detailing any non-compliance together with
the action being taken to ensure compliance.
(ii) As soon as possible but no later than five (5) days
after its occurrence, notify IFC of any incident or
accident involving the Company or any of its
Subsidiaries which has or may reasonably be expected
to have an adverse effect on the environment, health
or safety, including, without limitation, explosions,
spills or workplace accidents which result in death,
serious or multiple injury or major pollution,
specifying, in each case, the nature of the incident
or accident, the on-site and off-site impacts arising
or likely to arise therefrom and the measures the
Company or such Subsidiary is taking or plans to take
to address those impacts; and keep IFC informed of
the on-going implementation of those measures.
-39-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CONVERGENCE COMMUNICATIONS, INC.
By:________________________________________
Its:_______________________________________
TELEMATICA EDC, C.A.
By:________________________________________
Its:_______________________________________
TCW/CCI HOLDING LLC
By:________________________________________
Its:_______________________________________
INTERNATIONAL FINANCE CORPORATION
By:________________________________________
Its:_______________________________________
GLACIER LATIN-AMERICA LTD.
By:________________________________________
Its:_______________________________________
FONDELEC ESSENTIAL SERVICES
GROWTH FUND, L.P.
By: FondElec E.S.G.P. Corp.
Its: General Partner
By:________________________________________
Its:_______________________________________
INTERNEXUS S.A.
By:________________________________________
Its:_______________________________________
JOINDER FOR PURPOSES OF SECTION 9:
___________________________________________
Xxxxx X'Xxxxxxxx
___________________________________________
Xxxx X'Xxxxxxxx
ESTATE OF XXXXXX X. X'XXXXXXXX
By:________________________________________
Its:_______________________________________
EXHIBITS SCHEDULES
-------- ---------
1. Exhibit A CCI Stock Purchase Agreement 1. Schedule 1 Definitions
2. Exhibit B Option Agreement 2. Schedule 2 Rights and Preferences of
Series C Shares
3. Exhibit C Series C Warrant 3. Schedule 3 Use of Proceeds Summary
4. Exhibit D FondElec/Internexus Warrant
5. Exhibit E CCI Shareholders' Agreement
6. Exhibit F Registration Rights Agreement
7. Exhibit G Salvador Subscription Agreement
8. Exhibit H Salvador Shareholders' Agreement
9. Exhibit I Colombia Letter of Intent
10. Exhibit J Closing Opinions
Exhibit J-1 Xxxxxx Xxxx & Priest LLP Enforceability Opinion
Exhibit J-2 Xxxxxxx Xxxxx & Xxxxxxx Estate Opinion
Exhibit J-3 Xxxxxxx Xxxxx & Xxxxxxx Corporate Opinion
11. Exhibit K Partial Release of the Salvador Note
12. Exhibit L Subsequent Closing Opinion
13. Exhibit M CCI Salvador's Acknowledgment of Capitalization
of Inter-company Receivable
14. Exhibit N Financial Statements
15. Exhibit O IFC Policies
16. Exhibit P Example of Indemnity Calculations
