Exhibit K
UMBRELLA STOCK PURCHASE AGREEMENT
among
CONVERGENCE COMMUNICATIONS, INC.,
a Nevada Corporation,
TCW/CCI HOLDING II LLC,
a Delaware limited liability company,
TELEMATICA EDC, C.A.,
a Venezuelan compania anonima
XXXXXXXX XXXX,
an Argentine citizen,
XXXXXX XXXXXX XXXXXX XX XXXXX,
an Argentine citizen,
GLACIER LATIN-AMERICA LTD.,
a British Virgin Islands International Business Company,
and
XXXXXX CAPITAL MANAGEMENT III, LLC,
an Illinois limited liability company
Dated: February 7, 2001
TABLE OF CONTENTS
1. Definitions............................................................1
2. The Transactions.......................................................1
3. Representations and Warranties of Investors............................8
4. Representations and Warranties of the Company Concerning
the Company and its Subsidiaries......................................11
5. Pre-Closing Covenants.................................................22
6. Conditions to Obligations.............................................23
7. Indemnity.............................................................25
8. Termination...........................................................26
9. Equitable Adjustments.................................................28
10. Removal of Legend.....................................................28
11. Miscellaneous.........................................................28
UMBRELLA STOCK PURCHASE AGREEMENT
THIS UMBRELLA STOCK PURCHASE AGREEMENT (this "Agreement") is entered
into as of February 7, 2001, among CONVERGENCE COMMUNICATIONS, INC., a
Nevada corporation (the "Company"), TCW/CCI Holding II LLC, a Delaware
limited liability company ("TCW"), TELEMATICA EDC, C.A., a Venezuelan
compania anonima ("TELEMATICA"), Xxxxxxxx Xxxx, an Argentine citizen
("Priu"), Xxxxxx Xxxxxx Xxxxxx xx Xxxxx, an Argentine citizen ("Ostry"),
GLACIER LATIN-AMERICA LTD., a British Virgin Islands International Business
Company ("Glacier"), and Xxxxxx Capital Management III, LLC, an Illinois
limited liability company ("MCM III"). The Company, TCW, TELEMATICA, Priu,
Ostry, Glacier and MCM III are sometimes referred to collectively as the
"Parties" and singularly as a "Party". TCW, TELEMATICA, Priu, Ostry,
Glacier and MCM III are sometimes referred to collectively as the
"Investors" and singularly as an "Investor".
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 expand and further
develop such Telecommunications Business in the manner and to
the extent set out in the business plan and budget attached as
Exhibit A (the "Business Plan" and "Budget", respectively) to
the Company's disclosure letter addressed to all Investors and
dated February 7, 2001, previously delivered to them (the
"Disclosure Letter") and for such purposes requires additional
capital;
B. The Investors desire to participate in the Telecommunications
Business and toward that end intend to invest in the Company;
C. The Parties are entering into this 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 Agreement have the
meanings given to them in the Schedule of Definitions attached to
this 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 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 (the "Closing") to occur
within five Business Days following the satisfaction of the
conditions set out in Section 6:
(i) the execution and delivery, at the Closing, of identical
Stock Purchase Agreements between each Investor and the
Company substantially in the form of Exhibit A to this
Agreement (each an "Individual Stock Purchase Agreement"
and, collectively, the "Individual Stock Purchase
Agreements"), and the purchase and sale, pursuant to such
Individual Stock Purchase Agreements and the Option
described in Section 2(d), of Two Million Six Hundred
Forty-Three Thousand Six Hundred Thirty-Six (2,643,636)
shares in the aggregate of Series D Convertible Preferred
Stock of the Company, par value US$.001 per share ("Series
D Shares") having the rights and preferences set out in
Schedule 2 to this Agreement (the "Series D Shares Rights
and Preferences") for an aggregate purchase price, in cash
or other immediately available funds of Twenty-Four Million
Five Hundred Eighty-Five Thousand Eight Hundred Fifty
United States Dollars (US$24,585,850), such purchases and
sales of Series D Shares to occur as follows:
(A) the purchase by and sale to TCW of an aggregate of One
Million Seventy-Five Thousand Two Hundred Sixty-Eight
(1,075,268) Series D Shares for a purchase price per
share of Nine and 30/100ths United States Dollars
(US$9.30), being an aggregate purchase price of Ten
Million United States Dollars (US$10,000,000),
(B) the purchase by and sale to TELEMATICA of an aggregate
of One Million Seventy-Five Thousand Two Hundred
Sixty-Eight (1,075,268) Series D Shares for a purchase
price per share of Nine and 30/100ths United States
Dollars (US$9.30), being an aggregate purchase price of
Ten Million United States Dollars (US$10,000,000),
(C) the purchase by and sale to Priu, of an aggregate of
One Hundred Eighty-Two Thousand Seven Hundred
Ninety-Five (182,795) Series D Shares for a purchase
price per share of Nine and 30/100ths United States
Dollars (US$9.30), being an aggregate purchase price of
Xxx Xxxxxxx Xxxxx Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx
Dollars (US$1,700,000),
(D) the purchase by and sale to Ostry of an aggregate of
One Hundred Thirty-Nine Thousand Seven Hundred
Eighty-Four (139,784) Series D Shares for a purchase
price per share of Nine and 30/100ths United States
Dollars (US$9.30), being an aggregate purchase price of
Xxx Xxxxxxx Xxxxx Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx
Dollars (US$1,300,000);
(E) the purchase by and sale to Glacier of an aggregate of
Eighty-Six Thousand Twenty-One (86,021) Series D Shares
for a purchase price per share of Nine and 30/100ths
United States Dollars (US$9.30), being an aggregate
purchase price of Eight Hundred Thousand United States
Dollars (US$800,000),
(F) the purchase by and sale to MCM III of an aggregate of
Eighty-Four Thousand Five Hundred (84,500) Series D
Shares for a purchase price per share of Nine and
30/100ths United States Dollars (US$9.30), being an
aggregate purchase price of Seven Hundred Eighty-Five
Thousand Eight Hundred Fifty United States Dollars
(US$785,850),
(ii) the grant to each Investor of one or more internal rate of
return warrants in the form of Exhibit B-1 to this
Agreement (each an "IRR Warrant" and, collectively, the
"IRR Warrants"), providing for the issuance by the Company
of up to Three Hundred Ninety-Six Thousand Five Hundred
Fourty-Four (396,544) shares in the aggregate of Common
Stock, which number corresponds to approximately 15% of the
number of the Series D Shares to be acquired by the
Investors under Section 2(a)(i), such grants to occur under
the terms and conditions set forth therein:
(A) grants to TCW of up to One Hundred Sixty-One Thousand
Two Hundred Ninety (161,290) shares of Common Stock,
(B) a grant to TELEMATICA of up to One Hundred Sixty-One
Thousand Two Hundred Ninety (161,290) shares of Common
Stock,
(C) a grant to Priu of up to Twenty-Seven Thousand Four
Hundred Nineteen (27,419) shares of Common Stock,
(D) a grant to Ostry of up to Twenty Thousand Nine Hundred
Sixty-Seven (20,967) shares of Common Stock,
(E) a grant to Glacier of up to Twelve Thousand Nine
Hundred Three (12,903) shares of Common Stock, and
(F) a grant to MCM III of up to Twelve Thousand Six Hundred
Seventy-Five (12,675) shares of Common Stock;
(iii) the grant to each Investor of one or more performance
warrants in the form of Exhibit B-2 to this Agreement (each
a "Performance Warrant" and, collectively, the "Performance
Warrants"), providing for the issuance by the Company of up
to Three Hundred Ninety-Six Thousand Five Hundred
Fourty-Four (396,544) shares of Common Stock, which number
corresponds to approximately 15% of the number of the
Series D Shares to be acquired by the Investors under
Section 2(a)(i), such grants to occur under the terms and
conditions set forth therein:
(A) a grant to TCW of up to One Hundred Sixty-One Thousand
Two Hundred Ninety (161,290) shares of Common Stock,
(B) a grant to TELEMATICA of up to One Hundred Sixty-One
Thousand Two Hundred Ninety (161,290) shares of Common
Stock,
(C) a grant to Priu of up to Twenty-Seven Thousand Four
Hundred Nineteen (27,419) shares of Common Stock,
(D) a grant to Ostry of up to Twenty Thousand Nine Hundred
Sixty-Seven (20,967) shares of Common Stock,
(E) a grant to Glacier of up to Twelve Thousand Nine
Hundred Three (12,903) shares of Common Stock, and
(F) a grant to MCM III of up to Twelve Thousand Six Hundred
Seventy-Five (12,675) shares of Common Stock;
(iv) the grant to each Investor of a financing warrant in the
form of Exhibit B-3 to this Agreement (each a "Financing
Warrant" and, collectively, the "Financing Warrants"),
providing for the issuance by the Company of such number of
Series D Shares as shall be determined pursuant to the
terms and conditions provided therein;
(v) the execution and delivery, at the Closing, of a
Registration Rights Agreement among the Investors and the
Company in the form of Exhibit C to this Agreement (the
"Registration Rights Agreement") for the purpose of setting
out the rights of the Investors to require or join in the
registration of their Common Stock under U.S. Securities
Laws; and
(vi) the execution and delivery, at the Closing, of a
Shareholder Joinder Agreement among the Investors and the
Company in the form of Exhibit D to this Agreement (the
"Shareholder Joinder Agreement") for the purpose of setting
forth certain restrictions on the Investors to the transfer
of the equity securities in the Company acquired pursuant
to the terms of this Agreement.
(b) The Closing. Subject to the satisfaction or waiver by the
appropriate Party or Parties of the conditions set out in Section
6, the Closing shall take place at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx in New York, New York.
(c) Deliveries at the Closing. At the Closing, the Parties will
deliver or cause to be delivered the following agreements and
instruments, 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 TCW, TELEMATICA, Priu, Ostry, Glacier and MCM III
will deliver or cause to be delivered the following:
(A) to the Company, such Investor's Individual Stock
Purchase Agreement, duly executed and delivered by it,
together with
(1) in the case of TCW, Ten Million United States
Dollars (US$10,000,000) in cash or other
immediately available funds,
(2) in the case of TELEMATICA, Ten Million United
States Dollars (US$10,000,000), Five Million United
States Dollars (US$5,000,000) in cash or other
immediately available funds and Five Million United
States Dollars (US$5,000,000) through the delivery
of a duly executed promissory note in the form of
Exhibit D-1 hereto (the " TELEMATICA Note"),
(3) in the case of Priu, Xxx Xxxxxxx Xxxxx Xxxxxxx
Xxxxxxxx Xxxxxx Xxxxxx Dollars (US$1,700,000) in
cash or other immediately available funds,
(4) in the case of Ostry, Xxx Xxxxxxx Xxxxx Xxxxxxx
Xxxxxxxx Xxxxxx Xxxxxx Dollars (US$1,300,000) in
cash or other immediately available funds,
(5) in the case of Glacier, Eight Hundred Thousand
United States Dollars (US$800,000) in cash or other
immediately available funds,
(6) in the case of MCM III, Seven Hundred and
Eighty-Five Thousand Eight Hundred Fifty United
States Dollars (US$785,850) in cash or other
available funds. MCM III hereby agrees that, if a
bank check is used, the Company may, at its
election, not issue any Series D Shares to MCM III
until the Company receives good funds therefor;
(B) to the Company and each of the other parties thereto,
the Registration Rights Agreement, duly executed and
delivered by such Investor;
(C) to the Company and each of the other parties thereto,
the Shareholder Joinder Agreement, duly executed and
delivered by such Investor; and
(D) in the case of TELEMATICA, a security and pledge
agreement, duly executed by TELEMATICA, in the form of
Exhibit D-2 hereto (the "Security Agreement"), relating
to the pledge by TELEMATICA of a security interest in
and lien upon the Securities described in Sections
2(c)(ii)(A)(2), 2(c)(ii)(B)(2) and 2(c)(ii)(C)(2) as
being subject thereto;
(ii) the Company will deliver or cause to be delivered the
following:
(A) to each of the Investors, its corresponding Individual
Stock Purchase Agreement, duly executed and delivered
by the Company, together with certificates representing
Series D Shares as follows:
(1) to TCW, One Million Seventy-Five Thousand Two
Hundred Sixty-Eight (1,075,268) Series D Shares,
(2) to TELEMATICA, One Million Seventy-Five Thousand
Two Hundred Sixty-Eight (1,075,268) Series D Shares
(represented by two certificates for Five Hundred
Thirty-Seven Thousand Six Hundred Thirty-Four
(537,634) Series D Shares each, one such
certificate to be pledged to the Company pursuant
to the terms of the Security Agreement),
(3) to Priu, One Hundred Eighty-Two Thousand Seven
Hundred Ninety-Five (182,795) Series D Shares,
(4) to Ostry, One Hundred Thirty-Nine Thousand Seven
Hundred Eighty-Four (139,784) Series D Shares,
(5) Glacier, Eighty-Six Thousand Twenty-One (86,021)
Series D Shares, and
(6) to MCM III, Eighty-Four Thousand Five Hundred
(84,500) Series D Shares;
(B) to each of the Investors, IRR Warrants, duly executed
and delivered by the Company with respect to the
following number of shares of Common Stock:
(1) as to TCW, up to One Hundred Sixty-One Thousand Two
Hundred Ninety (161,290) shares of Common Stock,
(2) as to TELEMATICA, up to One Hundred Sixty-One
Thousand Two Hundred Ninety (161,290) shares of
Common Stock (represented by two IRR Warrants, each
for up to Eighty Thousand Six Hundred Forty-Five
(80,645) shares of Common Stock, one such IRR
Warrant to be pledged to the Company pursuant to
the terms of the Security Agreement),
(3) as to Priu, up to Twenty-Seven Thousand Four
Hundred Nineteen (27,419) shares of Common Stock,
(4) as to Ostry, up to Twenty Thousand Nine Hundred
Sixty-Seven (20,967) shares of Common Stock,
(5) as to Glacier, up to Twelve Thousand Nine Hundred
Three (12,903) shares of Common Stock, and
(6) as to MCM III, up to Twelve Thousand Six Hundred
Seventy-Five (12,675) shares of Common Stock
(provided, however, that the Company may, at its
election, delay delivery to MCM III of such IRR
Warrant until such time as the Company receives
good funds for the amounts delivered by MCM III
pursuant to Section 2(a)(i)E);
(C) to each of the Investors, Performance Warrants, duly
executed and delivered by the Company with respect to
the following number of shares of Common Stock:
(1) as to TCW, One Hundred Sixty-One Thousand Two
Hundred Ninety (161,290) shares of Common Stock,
(2) as to TELEMATICA, One Hundred Sixty-One Thousand
Two Hundred Ninety (161,290) shares of Common Stock
(represented by two Performance Warrants, each for
up to Eighty Thousand Six Hundred Forty-Five
(80,645) shares of Common Stock, one such
Performance Warrrant to be pledged to the Company
pursuant to the terms of the Security Agreement),
(3) as to Priu Twenty-Seven Thousand Four Hundred
Nineteen (27,419) shares of Common Stock,
(4) as to Ostry, Twenty Thousand Nine Hundred
Sixty-Seven (20,967) shares of Common Stock,
(5) as to Glacier, Twelve Thousand Nine Hundred Three
(12,903) shares of Common Stock, and
(6) as to MCM III, Twelve Thousand Six Hundred
Seventy-Five (12,675) shares of Common Stock
(provided, however, that the Company may, at its
election, delay delivery to MCM III of such
Performance Warrant until such time as the Company
receives good funds for the amounts delivered by
MCM III pursuant to Section 2(a)(i)F;
(D) to each of the Investors, a Financing Warrant, duly
executed and delivered by the Company pursuant to the
terms and conditions provided therein (provided,
however, that the Company may, at it's election, delay
delivery to MCM III of such Financing Warrant until
such time as the Company receives good funds for the
amounts delivered by MCM III pursuant to Section
2(a)(i)(F));
(E) to the Investors, the Registration Rights Agreement,
duly executed and delivered by the Company;
(F) to the Investors, the Shareholder Joinder Agreement,
duly executed and delivered by the Company;
(G) to the Investors, legal opinions of counsel in the form
of Exhibit E, addressed to all Investors and dated the
Closing Date; and
(H) to TELEMATICA, the Security Agreement, duly executed
and delivered by the Company;
(d) The Option. The Parties hereby agree that MCM III shall have an
option (the "Option") to acquire, during the ten (10) Business
Days following the Closing, up to an additional Four Hundred
Fifty-Three Thousand One Hundred and Thirty-Four (453,134) Series
D Shares, for the same price per Series D Share and under the
same conditions established under this Agreement, including but
not limited to the provisions of this Section 2 relating to the
IRR Warrant, Performance Warrant and Financing Warrant. MCM III
shall have the right, but not the obligation, to exercise the
Option in whole or in part, on one or more occasions during the
term of the Option, by delivering written notice to the Company
designating the number of Series D Shares it elects to purchase
at least two (2) Business Days prior to the closing date for such
exercise (the "Subsequent Closing"). Upon receipt by the Company
of the consideration by wire transfer or other immediately
available funds for the Series D Shares so exercised at the
Subsequent Closing, the Company shall deliver to MCM III a
certificate or certificates representing such Series D Shares,
together with IRR Warrant(s) for up to Sixty-Seven Thousand Nine
Hundred Seventy (67,970) shares of Common Stock, Financing
Warrant(s) and a Performance Warrant for up to Sixty-Seven
Thousand Nine Hundred Seventy (67,970) shares of Common Stock,
which final amounts shall be subject to the aggregate amount of
Class D Shares acquired by MCM III at the Subsequent Closing
pursuant to this Section 2(d).
Upon their issuance, the Series D Shares purchased pursuant to
the Option and the Securities issued under all of the IRR
Warrants, the Financing Warrants and the Performance Warrants
shall be immediately subject to the terms and conditions of the
Registration Rights Agreement and the Shareholder Joinder
Agreement. The representations and warranties of MCM III
hereunder will be true, correct and complete in all material
respects as of the Subsequent Closing.
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 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 Agreement and will be true,
correct and complete in all material respects as of the Closing Date.
Each such representation and warranty shall survive the Closing and
shall continue in force for a period of 24 months from the Closing
Date.
(a) Organization of the Investors. If the Investor is other than an
individual, it is duly organized, validly existing, and in good
standing under the laws of the place of its organization.
(b) Authorization of Transaction. He or it has full power and
authority to execute and deliver this Agreement and each
Transaction Document to which he or it is a party and to perform
his or its obligations hereunder and thereunder, and as of the
Closing Date, this Agreement and each such Transaction Document
delivered at the Closing shall have been duly authorized and
executed by him or it and shall constitute his or 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 he or it may execute, deliver and
consummate the transactions contemplated by this Agreement and
each other Transaction Document to which he or it is a party.
(c) Noncontravention. Neither the execution nor the delivery by him
or it of this Agreement or of any other Transaction Document to
which he or it is or becomes a party, nor the performance of his
or its obligations hereunder or thereunder will (i) violate any
Applicable Law to which he or it is subject or, in the case of an
Investor not an individual, any provision of its charter or other
organizational 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 he or it is a party or by which he or
it or any of his or its property may be bound.
(d) Brokers' Fees. Except as set forth in the Disclosure Letter, he
or 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 he or it is or becomes a party for
which any other Party could become liable.
(e) Investment Intent. He or it understands that the Series D Shares,
the IRR Warrant, the Performance Warrant and the Financing
Warrant (collectively sometimes referred to as the "Securities")
have not been registered under the United States Securities Act
of 1933, as amended (the "Securities Act"). He or 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. He or 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. He or 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. He or it understands that the certificate or
certificates evidencing his or its Series D 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.
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 SHAREHOLDER JOINDER AGREEMENT
DATED AS OF FEBRUARY 7, 2001 BY AND BETWEEN THE SHAREHOLDER,
THE CORPORATION AND CERTAIN OTHER HOLDERS OF 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 BOUND BY ALL THE PROVISIONS OF SAID
SHAREHOLDER JOINDER AGREEMENT. COPIES OF SUCH AGREEMENT MAY
BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION.
He or it understands the certificates or agreements
representing the Securities other than the Series D Shares
may bear legends in substantially the form of the second
paragraph set forth above.
(g) Accredited Investor. He or it is an "accredited investor," as
that term is defined in Regulation D promulgated under the
Securities Act, can bear the risk of his or its investment in the
Securities that he or it proposes to acquire, and has such
knowledge and experience in financial and/or business matters
that he or it is capable of evaluating the merits and risks of an
investment in such Securities.
(h) HSR Warranty. Each Investor represents that the Xxxx Xxxxx Xxxxxx
Antitrust Improvements Act of 1976, as amended, does not require
him or it to file any premerger notification and report form with
the Federal Trade Commission and the Antitrust Division of the
Department of Justice.
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 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 Agreement and will be true, correct and complete in all material
respects as of the Closing Date except, in the case of each such
representation, as set forth in the Disclosure Letter. Each such
representation and warranty shall survive the Closing and shall
continue in force and effect for a period of 24 months from the
Closing Date, 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, (iii) the
representations and warranties set out in clauses (c), (h) and (o)
below shall continue in force and effect through the expiration of
the statute of limitations for claims related thereto, and (iv) the
representations and warranties set out in clause (g) below with
respect to Taxes shall continue in full force and effect until the
six months anniversary after the expiration of the applicable Tax
statute of limitations (as the same may be extended).
(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 the failure to so qualify would
have a material adverse effect on the Telecommunications
Business, 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.
(b) Authorization of Transaction. The Company has full power and
authority to execute and deliver this 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, this Agreement and each such Transaction Document shall
have been duly authorized and executed by the 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. 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 the
Company may execute, deliver and consummate the transactions
contemplated by this 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 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).
Except as set forth in the Disclosure Schedule and other than the
IRR Warrants, the Performance Warrants and the Financing
Warrants, 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 the Company or any of the
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 D Shares, the IRR Warrants, the
Performance Warrants, the Financing Warrants and the Common Stock
and Series D 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 Individual Stock Purchase
Agreements, the IRR Warrants, the Performance Warrants and the
Financing Warrants, as appropriate, will be duly authorized and
validly issued, fully paid and non-assessable shares of the
capital stock of the Company and will not be issued in violation
of any preemptive rights. 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.
(d) Noncontravention. Neither the execution and delivery of this
Agreement or any Transaction Document to which the 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) with respect to the approval by the directors of
the 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 the Company,
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 describes or identifies all
Intellectual Property, owned by the Company or any of
its Subsidiaries and includes: 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, 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 Telecommunications 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 Xxx Xxxxxxx Xxxxxxxx
Xxxxxx Xxxxxx Dollars (US$100,000), 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 described 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.
(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 conducted and
as contemplated to 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 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 to the Knowledge of
the Company, 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 take measures
consistent with reasonable 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.
(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 except as set forth in the Disclosure
Letter, to develop and comply with the Business Plan
through the fiscal year 2001, 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. The Company has no 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 includes a list,
arranged by country, of all such licenses, permits,
concessions and other authorizations.
(f) Financial Statements; Financial Condition. Attached hereto as
Exhibit F are the Company's audited consolidated and
consolidating financial statements (including related statements
of income, changes in shareholders' equity and cash flow) for
tthe year ended December 31, 1999 and its unaudited consolidated
and consolidating financial statements for the nine months ended
September 30, 2000 (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 September 30, 2000, 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 provided for in the
Financial Statements or disclosed in any related notes thereto,
incurred in connection with this 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); (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 the Telecommunications 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, 1999,
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 has (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)
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;
there are no material liabilities (other than as is set forth in
the Financial Statements) for Taxes and there are no waivers,
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. Neither the Company nor any
Subsidiary has been subject to any Tax audit or has been notified
by any Governmental Authority that it may 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 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 Investors copies of those
employment agreements, all of which are valid and binding and are
in full force and effect. The transactions contemplated by this
Agreement shall not entitle any employee of the Company or any of
its Subsidiaries to any severance, termination, indemnity and
payments in lieu of notice or similar related payments.
(i) Environmental Laws and Regulations. To the Knowledge of the
Company, the business of the Company and each of the Subsidiaries
is and has been conducted in compliance with all Environmental
Laws. To the Knowledge of the Company, 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.
To the Knowledge of the Company, 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 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,
judgment 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 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 Financial Statements, 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. Except as set forth in the Disclosure Letter, 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 who requests a copy thereof, 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 Xxx Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars (US$100,000)
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 Xxx Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx
Dollars (US$100,000) 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, understandings 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, 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, (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. 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.
(q) Complete Statements. No representation or warranty of the Company
in this 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 and the Securities Exchange Act of 1934, as
amended. The Company has made available to each requesting
Investor each such report prepared by it since December 31, 1998,
including its Annual Reports on Form 10-KSB for the years ended
December 31, 1998 and 1999 in the form (including exhibits,
annexes and any amendments thereto) filed with the Securities and
Exchange Commission (the "SEC"), (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 notes and schedules) fairly presents in material respects
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 in such a capacity at
the direction of the Company or any of the Subsidiaries, 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 or Argentina,
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. Except as set forth in the Disclosure Letter,
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 Xxx Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars (US$100,000)
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 or
Financial Statements 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 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 accepted.
(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 Subsidiaries with coverage in excess of
One Million United States Dollars (US$1,000,000) is set forth in
the Disclosure Letter.
(z) IFC Policies. The Parties acknowledge that the International
Finance Corporation ("IFC") will be an indirect investor in the
Company pursuant to TCW's purchase of the Securities hereunder
and that, pursuant to the IFC's investment policies, the Company
has agreed to make certain representations regarding its
compliance with those polices. Accordingly, to the best of its
Knowledge, neither the Company nor any Subsidiary is in violation
of any of the policies set forth in Exhibit G (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.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period, if any, between the execution of this Agreement and the
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 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.
(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).
(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
representatives to verify the accuracy of the representations and
warranties contained herein, to verify that the covenants of this
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
the termination of this Agreement under the provisions of Section
8:
(i) any material adverse development that causes or is likely
to cause 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 material 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(a) is subject
to the satisfaction or waiver by it 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(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 Investors opinions of
counsel to the Company, in substantially the form(s) set
forth in Exhibit E, addressed to all Investors and dated as
of the Closing Date;
(v) no court or Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, 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;
(vi) the Company shall have received a preemptive rights and
warrant adjustment waiver, in the form of Exhibit H (the
"Preemptive Rights and Warrant Adjustment Waiver"), duly
executed by the parties thereto; and
(vii) there shall not have occurred any Material Adverse Change
in the business, condition, assets, operations, Taxes or
prospects of the Company or any Subsidiary or any change in
the laws of Guatemala, El Salvador, Venezuela, Costa Rica,
Panama, Mexico or Argentina which would likely result in a
Material Adverse Effect on the business, operations or
prospects of the Company or any Subsidiary, including
without limitation, any currency devaluation or foreign
exchange restriction or other governmental actions limiting
repatriation of capital or any Material Adverse Change in
the governmental or political climate of Guatemala, El
Salvador, Venezuela, Costa Rica, Panama, Mexico or
Argentina.
(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) 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, judgment, 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;
(iv) the receipt by the Company of the Preemptive Rights and
Warrant Adjustment Waiver, duly executed by all parties
thereto; and
(v) 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.
7. Indemnity.
(a) Company Indemnity. Subject to the terms and conditions set forth
herein, from and after the Closing Date, the Company agrees to
indemnify, defend and hold harmless the Investors, their
shareholders, directors, officers, employees, affiliates,
controlling persons, agents and representatives and their
successors and assigns (individually an "Indemnified Party" and
collectively, the "Indemnified Parties") from and against any and
all losses, claims, damages, liabilities, obligations, penalties,
judgments, awards, costs, expenses and disbursements (and any and
all actions, suits, proceedings and investigations in respect
thereof and any and all legal and other costs, reasonable
expenses or disbursements in giving testimony or furnishing
documents in response to a subpoena or otherwise), including,
without limitation, the costs, expenses and disbursements as and
when incurred, of investigating, preparing or defending any such
action, suit, proceeding or investigation (whether or not in
connection with litigation in which the party requesting
indemnification is a party) (collectively, "Losses"), directly or
indirectly, caused by, relating to, based upon, arising out of or
in connection with litigation in which the party requesting
indemnification in connection with (i) the breach of any
representation, warranty, agreement or covenant set forth in this
Agreement or any Transaction Document (provided, however, that
claims 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 the Indemnified Parties to the Company during
the period of validity of such representations and warranties, as
set forth in Section 4), or (ii) any order made or any inquiry,
investigation or proceeding commenced or threatened by any
governmental or securities regulatory authority against an
Indemnified Party in connection with the transactions
contemplated hereby. The Company shall not have any obligation to
indemnify any Indemnified Party to the extent that the Losses
suffered or claim made by the Indemnified Party results from the
breach of that party's representations, warranties or agreements
in this Agreement or the other Transaction Documents or the
Indemnified Party's gross negligence or willful misconduct.
(b) Disagreements. If there occurs a disagreement between any
Indemnified Party 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).
(c) Basket Amount. Notwithstanding anything to the contrary herein,
each of the Indemnified Parties shall be entitled to
indemnification hereunder only to the extent that the aggregate
amount of indemnifiable claims made by the Indemnified Parties
exceeds (i) US$100,000 in one single indemnifiable claim or (ii)
if several indemnifiable claims, when added to the losses
suffered by all Indemnified Parties by reason of several
different events as to which an indemnity pursuant to Section
7(a) has not been satisfied, exceeds US$250,000; provided,
however, that in the event the aggregate amount of indemnifiable
claims made by the Indemnified Parties exceed US$100,000 or
US$250,000, as the case may be, then the Indemnified Parties
shall be entitled to be indemnified for all such indemnifiable
claims from the first dollar thereof.
(d) Indemnification Procedure. The Indemnified Party seeking
indemnification shall give the Company prompt written notice of
any claim, assertion, event or proceeding concerning any
liability or damage as to which the Indemnified Parties may
request indemnification from the Company hereunder; provided,
however, that any failure by any Indemnified Party to notify the
Company shall not relieve the Company from its obligations
hereunder, or from any other obligation or liability that the
Company may have to the Indemnified Parties other than under this
Section 7. Upon written notice to the Indemnified Parties given
by the Company after receipt of notice of any such action or
proceeding, the Company may assume the defense thereof at its own
expense with counsel chosen by the Company; provided, however,
counsel retained by the Company shall be subject to the prior
approval of the Indemnified Parties. Notwithstanding the
foregoing, with respect to any action, suit, proceeding or
investigation to which any Indemnified Party is also a party, the
Indemnified Parties may assume the defense thereof with counsel
chosen by them, at the expense of the Company. In the
circumstances referred to in the immediately preceding sentence,
if the Indemnified Parties do not assume such defense, the
Company shall not, without the prior written consent of the
Indemnified Parties, settle or compromise any claim, or permit a
default or consent to the entry of any judgment in respect
thereof, unless such settlement, compromise or consent includes,
as an unconditional term thereof, the giving by the claimant to
the Indemnified Parties, of an unconditional release from all
liability in respect of such claim. If the Indemnified Parties
assume the defense of any such claim or proceeding pursuant to
this Section and propose to settle such claim or proceeding prior
to such a final judgment thereon or to forgo appeal with respect
thereto, then the Indemnified Parties shall give the Company
prompt written notice thereof and the Company, as the case may
be, shall have the right to participate in the settlement or
assume the defense of such claim or proceeding and no such claim
or proceeding shall be settled or compromised without the
approval of the Company, which approval shall not be unreasonably
withheld.
(e) Adjustment to the Purchase Price. Any payments made pursuant to
this Section shall be treated for all Tax purposes as adjustments
to the purchase price. No Party or any of its affiliates shall
take a position on a Tax Return or in any proceeding with any Tax
authority contrary to such treatment, unless otherwise required
by Applicable Law.
8. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) The Parties may terminate this Agreement as to all Parties
by mutual written consent;
(ii) Any Investor may terminate this 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 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
February 20, 2001 (unless the failure results primarily
from such Investor breaching any representation,
warranty, or covenant contained in this Agreement).
(iii) The Company may terminate this Agreement as to a given
Investor if
(A) (1) such Investor has breached any of its
representations, warranties, or covenants contained
in this 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
February 20, 2001 (unless the failure results primarily
from the Company itself breaching any representation,
warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 8(a) above, all rights and obligations of the
Party hereunder shall terminate without any liability of any
Party to any other Party, except for any liability of the
terminating Party resulting from a breach by it 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 of the 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 such Party.
(c) Specific Performance. Nothing in this Agreement shall be
interpreted to preclude any Party's right to seek and obtain
specific performance of the terms of this Agreement or any
equitable remedy.
9. Equitable Adjustments. If the Company issues Series D Shares after
the Closing of the transactions contemplated in this Agreement and
through May 2, 2001 for a purchase price that is lower than Nine and
00/000xxx Xxxxxx Xxxxxx Dollars (US$9.30) per Series D Share, then
the Investors will have the right to require the Company to issue to
them, within ten (10) Business Days after such issuance, such
additional number of Series D Shares as shall be necessary to adjust
the average purchase price for the Series D Shares acquired by them
pursuant to Section 2 and this Section 9, to an amount equal to the
purchase price for the Series D Shares paid by such purchasers of the
Series D Shares other than pursuant to the terms of this Agreement.
Further, if any subsequent issuance of Series D Shares is effected on
materially different terms than those contemplated by this Agreement,
then the Investors shall have the right, but not the obligation, to
require the Company to readjust the terms of this Agreement so that
the Investors are entitled to the same terms offered to such
subsequent purchasers.
10. Removal of Legend. 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 Agreement or any of the
Transaction Documents in order to comply with the requirements of
U.S. Securities Laws at such time as the legend is no longer required
thereby.
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 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 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 Agreement shall not confer any
rights or remedies upon any person or entity other than the
Parties, their related Indemnified Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. The English language version of this 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 Agreement shall be binding upon
and inure to the benefit of the Parties and their respective
successors and permitted assigns. No Party may assign either this
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
(such terms as defined in the Shareholder Joinder Agreement) is
made to a Related Party or otherwise free of the restrictions of
the Shareholder Joinder Agreement.
(e) Counterparts. This 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 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 Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this 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:
If to the Company:
Convergence Communications, Inc.
c/o Xxxx X'Xxxxxxxx
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Senior Vice President
Administration & Legal
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 TCW:
TCW/CCI Holding II LLC
c/o TCW/Latin America Private Equity Partners, L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx Xxxxx
Fax: (000) 000-0000
Copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to TELEMATICA:
TELEMATICA EDC, C.A.
Xxxxxxx Xxxxxxx, Xxx Xxxxxxxxxx - Xxxxxxxx 0000
Caracas, 1010-A-Venezuela
Attention: Xxxxxxxx Xxxxxxxx
Fax: 000-000-000-0000
Copy to:
TELEMATICA EDC, C.A.
Avenida Xxxxxxx, San Bernardino
Apartado 2299
Attention: Xxxxxx Xxxxxxx
Caracas, 1010-A-Venezuela
Fax: 000-000-000-0000
and
Xxxxxx & Xxxxxx
000 Xxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx X. Xxxxxx
Fax: (000) 000-0000
If to Priu:
Xxxxxxxx Xxxx
Xxxxxxx 000, Xxxx 0
X0000XXX- Xxxxxx Xxxxx
Xxxxxxxxx
Fax: 00-00-0000-0000
Copy to:
Xxxxx-Xxxxxx & Orts
Florida 000, Xxxx 0
X0000XXX - Xxxxxx Xxxxx
Xxxxxxxxx
Attention: Xxxxx Xxxx, Esq.
Fax: 00-00-0000-0000
If to Ostry:
Xxxxxx Xxxxxx Xxxxxx xx Xxxxx
Xxxxxxx 000, Xxxx 0
X0000XXX-Xxxxxx Xxxxx
Xxxxxxxxx
Fax: 00-00-0000-0000
Copy to:
Xxxxx-Xxxxxx & Orts
Florida 000, Xxxx 0
X0000XXX - Xxxxxx Xxxxx
Xxxxxxxxx
Attention: Xxxxx Xxxx, Esq.
Fax: 00-00-0000-0000
If to Glacier:
Glacier Latin-America, Ltd.
0000 XX 000 Xxxxxx, #000
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Plisach
Fax: (000) 000-0000
Copy to:
Loeb Block & Xxxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Attention: Xxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
If to MCM III:
Xxxxxx Capital Management III, LLC
c/o White Capital Equity Management
00 Xxxxx XxXxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
Copy to:
Xxxx & Xxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx
Attention: Xxxxxx X. Xxxxxx, Xx.
Fax: (000) 000-0000
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 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 Nevada
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 Agreement may be amended, extended
or modified by a writing signed by the Investors 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 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 Agreement and the transactions contemplated
hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this 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 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 respective successors or permitted assigns arising
under or relating to the transactions contemplated by this
Agreement or any other Transaction Documents. In the event
there is a dispute under this 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 conciliation 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
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 limitations 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. Except as required by law, each of the
parties to the dispute shall treat the existence and
results of the dispute as confidential and shall disclose
the same only to his or its legal and financial advisors.
(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 affect
the binding obligation of the Parties 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 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 D 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 2000 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 TCW for the benefit of the IFC.
(i) Within ninety (90) days after the end of each fiscal year,
the Company shall deliver to TCW, for the benefit of the
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 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 TCW, for the beneift of 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 of 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 TCW,
for the benefit of the IFC, informed of the on-going
implementation of those measures.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
CONVERGENCE COMMUNICATIONS, INC.
By: /s/ Xxxx X'Xxxxxxxx
------------------------------------
Its: Sr. Vice President
TCW/CCI HOLDING II LLC
By: /s/ Xxxxxx Xxxxxxxxxxx
------------------------------------
Its: Authorized Person
TELEMATICA EDC, C.A.
By: /s/ Xxxxxxxx Xxxxxxxx
------------------------------------
Its: Authorized Person
/s/ Xxxxx Xxxx, Attorney in Fact
---------------------------------------
XXXXXXXX XXXX
/s/ Xxxxx Xxxx, Attorney in Fact
---------------------------------------
XXXXXX XXXXXX XXXXXX XX XXXXX
GLACIER LATIN-AMERICA LTD.
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Its: Assistant Treasurer
XXXXXX CAPITAL MANAGEMENT III, LLC
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Its: President
EXHIBITS SCHEDULES
Exhibit A Individual Stock Purchase Schedule 1 Definitions
Agreement
Exhibit B-1 IRR Warrant Schedule 2 Series D Shares
Rights and
Preferences
Exhibit B-2 Performance Warrant
Exhibit B-3 Financing Warrant
Exhibit C Registration Rights Agreement
Exhibit D Shareholder Joinder Agreement
Exhibit D-1 TELEMATICA Note
Exhibit D-2 Security Agreement
Exhibit E Legal Opinions of Counsel
Exhibit F Financial Statements
Exhibit G IFC Policies
Exhibit H Preemptive Rights and Warrant
Adjustment Waiver
Schedule 1
INDEX OF DEFINITIONS.
For purposes of this Agreement and the other Transaction Documents,
the following words and phrases shall have the meanings identified as
follows (where a reference is to a Recital, Section or clause, the same
shall be taken to be to the corresponding provision of this Agreement
unless otherwise noted):
"Agreement" has the meaning set forth in the preamble.
"Applicable Law" means all published constitutions, statutes, rules,
regulations, orders, decrees, codes, rulings, charges, injunctions, or
judgments applicable to the entity or person in question with respect to a
relevant matter.
"Budget" shall have the meaning set forth in the recitals of this
Agreement.
"Business Day" means a day on which banks are open both in the State of New
York.
"Business Plan" shall have the meaning set forth in the recitals of this
Agreement.
"Closing" shall have the meaning set forth in Section 2(a).
"Closing Date" shall be the date on which the Closing occurs.
"Common Stock" means the shares of common stock of the Company with a par
value of $0.001 per share.
"Company" shall have the meaning set forth in the preamble.
"Control" (and, with correlative meaning, "Controlled by" and "under Common
Control with") means the possession, directly or indirectly, of the power
to direct the management of a Person through ownership of voting
securities, exercise of contract rights, or otherwise.
"Control Affiliate" of a party means a Person that directly or indirectly
Controls, is Controlled by or is under Common Control with the party in
question, or succeeds to all or substantially all of the business and
assets of the party in question.
"Country" shall mean El Salvador, Guatemala, Mexico and Venezuela.
"Disclosure Letter" shall have the meaning set forth in recital A.
"Environmental Law" shall mean the United States' and each Country's,
federal, provincial, state and local laws, regulations rules and
ordinances, relating to pollution or protection of the environment, and to
human health and safety including, without limitation, laws relating to
release, discharges, leaching, migration or disposal of hazardous, toxic,
or radioactive substances, oils, pollutants or contaminants into the indoor
or outdoor environment (including, without limitation, ambient air, surface
water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, transport or handling of such substances, oils, pollutants or
contaminants.
"Financial Statements" shall have the meaning set forth in Section 4(f).
"Financing Warrants" shall have the meaning set forth in Section 2(a)(iv).
"Force Majeure" event means (i) any strike or act of war (whether declared
or undeclared), invasion, armed conflict or act of foreign enemy, blockade,
embargo, or revolution; (ii) lightning, fire, earthquake, flood, storm,
cyclone, typhoon, drought or tornado; or (iii) epidemic or plague, in each
case which substantially affects the assets or business of the Company or
its Subsidiaries.
"GAAP" means generally accepted accounting principles and practices, as set
forth in the opinions and pronouncements adopted by a significant segment
of the accounting profession (including any generally recognized applicable
principles or standards boards, committees or professional organizations)
of the country in question (as such principles are applied in such country
as of the date of the financial statement or other documents with respect
to which the term is used) and, with respect to the United States, the
accounting principles and practices set forth in the opinions and
pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board.
"Glacier" shall have the meaning set forth in the preamble.
"Governmental Authority" shall mean any national or local government,
governmental, regulatory or administrative authority, agency or commission
or any court, tribunal or judicial body of United States, Guatemala, El
Salvador, Venezuela or Mexico.
"IFC" shall have the meaning set forth in Section 4(z).
"IFC Policies" shall have the meaning set forth in Section 4(z).
"Indemnified Parties" shall have the meaning set forth in Section 7(a).
"Individual Stock Purchase Agreements" shall have the meaning set forth in
Section 2(a)(i).
"Investors" shall have the meaning set forth in the preamble.
"IRR Warrants" shall have the meaning attributed to it in Section 2(a).
"IP License Agreements" shall have the meaning set forth in Section
4(e)(i)(c).
"Knowledge" means the knowledge of the Company or any of the Subsidiaries
and of each Person who is serving or who has at any time served as a
director or officer of the Company or any of the Subsidiaries and all
knowledge that any such Person could be expected to discover or otherwise
become aware of had he or she fulfilled his or her responsibilities as a
director or officer of the Company or any of the Subsidiaries, as the case
may be.
"Lien" as to any Person, shall mean any mortgage, lien, pledge, charge,
preferential payment arrangement, security interest, other encumbrance, or
preferential agreement having the effect of constituting a security
interest, including without limitation, any equivalent interest or right
created or arising under the laws of any country where the person owns
property.
"Losses" shall have the meaning set forth in Section 7(a).
"Material Adverse Change" or "Material Adverse Effect" shall mean any
change or effect that either individually or in the aggregate with all
other such changes or effects is, or is reasonably likely to be materially
adverse to (x) the business as presently conducted, condition (financial or
otherwise), prospects, operations, liabilities, assets or properties of the
Company and the Subsidiaries, taken as a whole, (y) the ability of the
applicable Party to consummate the transactions contemplated hereby or to
perform its obligations under this Agreement within the time frame
contemplated herein or (z) the validity or enforceability of this Agreement
or the rights and remedies of the Parties hereunder, and the terms
"material" and "materially" shall have correlative meanings.
"MCM III" shall have the meaning set forth in the preamble.
"Option" shall have the meaning attributed to it in Section 2(d).
"Ostry" has the meaning set forth in the preamble.
"Performance Warrants" shall have the meaning set forth in Section 2(a).
"Person" means a natural person, corporation, society, partnership, joint
venture, unincorporated association or other entity, including any
governmental, multilateral or quasi-public entity.
"Preemptive Rights and Warrant Adjustment Waiver" shall have the meaning
set forth in Section 6(a).
"Priu" has the meaning set forth in the preamble.
"Registration Rights Agreement" shall have the meaning set forth in Section
2(a)(v).
"Related Party" shall have the meaning set forth in the Shareholder Joinder
Agreement.
"Reports" shall have the meaning set forth in Section 4(r).
"SEC" shall have the meaning set forth in Section 4(r).
"Securities" shall have the meaning set forth in Section 3(e).
"Securities Act" shall have the meaning set forth in Section 3(e).
"Security Agreement" shall have the meaning set forth in Section
2(c)(i)(D).
"Series D Shares" shall have the meaning set forth in Section 2(a)(i).
"Series D Shares Rights and Preferences" shall have the meaning set forth
in Section 2(a)(i).
"Series D Warrants" shall mean, collectively, the IRR Warrants, the
Financing Warrants and the Performance Warrants.
"Shareholder Joinder Agreement" shall have the meaning set forth in Section
2(a)(vi).
"Subsequent Closing" shall have the meaning attributed to it in Section
2(d).
"Subsidiary" shall mean any Person that is Controlled by the Company. The
Persons listed in clause 1(b) of Section 4(c) of the Disclosure Letter
shall be included within the meaning of the term "Subsidiary".
"Tax" or "Taxes" shall mean all Federal, state, local and foreign taxes,
and other assessments of a similar nature (whether imposed directly of
through withholding), including any interest, additions to tax, or
penalties applicable thereto.
"TCW" shall have the meaning set forth in the preamble.
"Telecommunications Business" shall have the meaning set forth in the
recitals.
"TELEMATICA" shall have the meaning set forth in the preamble.
"TELEMATICA Note" shall have the meaning set forth in Section
2(c)(A)(z).
"Trade Secrets" shall have the meaning set forth in Section 4(e)(i)(A).
"Transaction Documents" shall have the meaning set forth in Section 2(a).
"U.S. Securities Law" means the Securities Act and all other federal
securities laws of the United States and the securities laws of its
separate states, together with the regulations issued pursuant thereto.
Schedule 2
CERTIFICATE ESTABLISHING AND DESIGNATING
THE RIGHTS, PREFERENCES AND RESTRICTIONS OF SHARES OF
SERIES D CONVERTIBLE PREFERRED STOCK OF
CONVERGENCE COMMUNICATIONS, INC.
We, XXXX X'XXXXXXXX, Vice President, and XXXXXXX XXXXXXX, Secretary,
of Convergence Communications, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Laws of the State of
Nevada, in accordance with the provisions of ss. 78.195 of the Nevada
Revised Statutes, DO HEREBY CERTIFY:
That, in accordance with the authority expressly vested in the Board
of Directors of the Corporation, the Board of Directors, at a meeting duly
held and convened on January 18, 2001, adopted, fixed and determined the
voting rights, designations, preferences, qualifications, privileges,
limitations, restrictions, options and other special or relative rights of
a series of the Corporation's preferred stock ("Preferred Stock"),
hereinafter designated as the "Series D Convertible Preferred Stock,"
consisting of 10,000,000 shares of the Corporation's 25,000,000 shares of
authorized Preferred Stock, by adopting the following resolution:
RESOLVED, that pursuant to the authority expressly vested in the
Board of Directors of the Corporation and pursuant to the provisions of the
General Corporation Law, the Board of Directors hereby fixes and determines
the relative voting rights, designations, preferences, qualifications,
privileges, limitations, restrictions and other special or relative rights
of the Series D Convertible Preferred Stock, which shall consist of
10,000,000 shares of the Corporation's preferred stock (the "Series D
Preferred Stock"), as follows:
1. Voting Rights. Each share of Series D Preferred Stock shall
entitle the holder thereof to the right to cast one vote on every matter
duly brought before the holders of shares of common stock, $.001 par value
per share, of the Corporation ("Common Stock"). Except as otherwise
provided by law, the holders of Series D Convertible Preferred Stock, the
holders of the Series C Convertible Preferred Stock, par value $.001 per
share (the "Series C Preferred Stock") and the holders of Common Stock
shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
2. Retired Shares. Any Series D Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever (including
by reason of the conversion of such Series D Preferred Stock into shares of
Common Stock) shall be retired and canceled promptly after the acquisition
thereof. All such shares shall, upon their cancellation, become authorized
but unissued preferred stock without any further action by the Board of
Directors and may be reissued as part of a new series of Preferred Stock to
be created by resolution or resolutions of the Board of Directors.
3. Liquidation, Dissolution or Winding Up.
(a) Upon a Liquidation Event (as hereinafter defined), the holders
of the shares of Series D Preferred Stock shall be entitled, before any
distribution or payment is made upon any Common Stock or any other class or
series of stock ranking junior to the Series D Preferred Stock as to
distribution of assets upon liquidation, to be paid an amount equal to the
greater of (A) the sum of (i) $9.30 per share (as adjusted for
Reclassification Events (as hereinafter defined)) and (ii) all accrued and
unpaid dividends to such date and (B) the amount which would be received if
all shares of Series D Preferred Stock had been converted to Common Stock
prior to such Liquidation Event (collectively, the "Liquidation Payments").
A "Liquidation Event" means the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary. If upon any Liquidation
Event the remaining assets of the Corporation available for distribution to
its stockholders shall be insufficient to pay the holders of shares of
Series D Preferred Stock the full amount to which they shall be entitled,
the holders of shares of Series D Preferred Stock and any class or series
of stock ranking upon a Liquidation Event on a parity with the Series D
Preferred Stock shall share ratably in the distribution of the entire
remaining assets and funds of the Corporation legally available for
distribution in proportion to the respective amounts which would otherwise
be payable in respect of such shares held by them upon such distribution if
all amounts payable on or with respect to such shares were paid in full.
(b) Upon any Liquidation Event, after the holders of Series D
Preferred Stock shall have been paid in full the Liquidation Payments, the
remaining assets of the Corporation may be distributed ratably per share in
order of preference to the holders of Common Stock and any other class or
series of stock ranking junior to the Series D Preferred Stock as to
distribution of assets upon liquidation. The order of preference shall be
as follows: holders of Series C Preferred Stock, holders of Series D
Preferred Stock, and holders of Common Stock.
(c) Written notice of a Liquidation Event, stating a payment date,
the amount of the Liquidation Payments and the place where said Liquidation
Payments shall be payable, shall be given by mail, postage prepaid, not
less than thirty (30) days prior to the payment date stated therein, to
each holder of record of Series D Preferred Stock at his address as shown
by the records of the Corporation.
4. Redemption. The Series D Preferred Stock shall not be redeemable.
5. Conversion. The holders of the Series D Preferred Stock shall have
the following conversion rights:
(a) Mandatory Conversion. Each share of Series D Preferred Stock
shall be converted automatically into fully paid and nonassessable shares
of Common Stock at the "conversion rate" (as defined in paragraph (c)
below) in effect preceding the occurrence of either of the following
events:
(i) all of the holders of the outstanding Series D Preferred
Stock, acting together, transfer their equity securities (including their
Series D Preferred Stock and any options, warrants or other rights they may
hold to acquire the Corporation's equity securities) for cash consideration
or for securities of another entity that are registered and are freely
tradable pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and where the class of securities so
registered are listed or admitted for trading on the New York Stock
Exchange, the American Stock Exchange or the National Association of
Securities Dealers Automated Quotation System Nation Market (each a
"Recognized Exchange"); or
(ii) the effective date of a registration statement for an
underwritten registered public offering of the Corporation's securities
under the Act, pursuant to which the class of the shares so registered is
approved for listing on a Recognized Exchange, the Corporation receives net
proceeds from the offering of not less than $75 million, and the offering
is managed by a lead underwriter of international standing (a "Qualified
Public Offering").
(b) Optional Conversion. Each share of Series D Preferred Stock
shall be convertible at any time, at the option of the holder of record
thereof, into fully paid and nonassessable shares of Common Stock at the
conversion rate then in effect upon notice of conversion and surrender to
the Corporation or its transfer agent of the certificate or certificates
representing the Series D Preferred Stock to be converted, as provided
below, or if the holder notifies the Corporation or its transfer agent that
such certificate or certificates have been lost, stolen or destroyed, upon
the execution and delivery of an agreement satisfactory to the Corporation
to indemnify the Corporation from any losses incurred by it in connection
therewith.
(c) Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 5 shall be the "conversion rate" in effect at
the time of conversion (for mandatory conversions under the provision of
(a) above, or at the time of notice and surrender (for optional conversions
under the provisions of (b) above), which for the purposes hereof shall
mean the number of shares of Common Stock issuable for each share of Series
D Preferred Stock surrendered for conversion under this Section 5 based on
the conversion price then in effect. The conversion price shall be $9.30
per share of Common Stock, as adjusted pursuant hereto, and the conversion
rate shall be $9.30 divided by the conversion price then in effect. If any
fractional interest in a share of Common Stock would be deliverable upon
conversion of Series D Preferred Stock, the Corporation shall pay in lieu
of such fractional share an amount in cash equal to the conversion price in
effect at the close of business on the date of conversion, multiplied by
such fractional share (computed to the nearest one hundredth of a share).
Any shares of Series D Preferred Stock which have been converted shall be
canceled and all dividends on converted shares shall cease to accrue, and
the certificates representing shares of Series D Preferred Stock so
converted shall represent only the right to receive (i) such number of
shares of Common Stock into which such shares of Series D Preferred Stock
are convertible, plus (ii) cash payable for any fractional share plus (iii)
any accrued but unpaid dividends relating to such shares through the
immediately preceding dividend payment date. Upon the conversion of shares
of Series D Preferred Stock as provided in this Section 5, the Corporation
shall promptly pay all then accrued but unpaid dividends to the holder of
the Series D Preferred Stock being converted. The Board of Directors of the
Corporation shall at all times reserve a sufficient number of authorized
but unissued shares of Common Stock to be issued in satisfaction of the
conversion rights and privileges aforesaid.
(d) Mechanics of Conversion. In the case of any mandatory
conversion, the Series D Preferred Stock shall automatically, and without
further action by the holder thereof, convert into shares of Common Stock
and, upon surrender of the certificate or certificates thereof at the
office of the Corporation or its transfer agent for the Series D Preferred
Stock, the Corporation shall, as soon as practicable thereafter, issue and
deliver to such holder, or to the nominees or nominee of such holder, a
certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled as aforesaid. In the case of an
optional conversion, before any holder of Series D Preferred Stock shall be
entitled to convert the same into shares of Common Stock, it shall
surrender the certificate or certificates therefore, duly endorsed, at the
office of the Corporation or its transfer agent for the Series D Preferred
Stock, shall give written notice to the Corporation of the election to
convert the same and shall state therein the name or names in which the
certificates or certificates for shares of Common Stock are to be issued
and, upon the Corporation's receipt of such certificates, election to
convert and information regarding the names in which the shares of Common
Stock are to be issued, such shares of Series D Preferred Stock shall be
deemed converted. The Corporation shall, as soon as practicable thereafter,
issue and deliver to such holder of Series D Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. A certificate or certificates will be issued for the remaining
shares of Series D Preferred Stock in any case in which fewer than all of
the shares of Series D Preferred Stock represented by a certificate are
converted. Upon any conversion of Series D Preferred Stock into Common
Stock, all declared but unpaid cash dividends on the converted Series D
Preferred Stock shall be paid in cash.
(e) Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of shares of Common Stock on
conversion. If a holder of shares surrendered for conversion specifies that
the shares of Common Stock to be issued on conversion are to be issued in a
name or names other than the name or names in which such surrendered shares
of record, the Corporation shall not be required to pay any transfer or
other taxes incurred by reason of the issuance of such shares of Common
Stock to the name of another, and if the appropriate transfer taxes shall
not have been paid to the Corporation or the transfer agent for the Series
D Preferred Stock at the time of surrender of the shares involved, the
shares of Common Stock issued upon conversion thereof may be registered in
the name or names in which the surrendered shares were registered, despite
the instructions to the contrary.
6. Adjustment of Conversion Price and Conversion Rate. The conversion
price and the conversion rate shall be subject to adjustment from time to
time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this Certificate:
(i) The term "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued, or deemed to be issued by the
Corporation pursuant to paragraph (g) of this Section 6, after the Original
Issue Date, as defined below, except:
(A) shares of Common Stock issuable upon conversion of, or
distributions with respect to, Series C Preferred Stock or Series D
Preferred Stock now or hereafter issued by the Corporation, or pursuant to
the terms of any options or warrants to acquire Common Stock or the Series
D Preferred Stock to be delivered in connection with the Corporation's
anticipated sale of shares of Series D Preferred Stock, warrants to acquire
Common Shares with respect to the Series C Preferred Stock financing
completed by the Corporation in October, 1999 (including those warrants
approved in January 2001 by the Board of Directors of this Corporation for
issuance to the investors in such financing) and warrants to purchase
shares of Common Stock under the terms of that certain proposed Umbrella
Stock Purchase Agreement among the Corporation and certain accredited
investors (the "Purchase Agreement"); and
(B) shares of Common Stock issuable upon the exercise of
any options or warrants outstanding or approved by the Board of Directors
prior to the Original Issue Date; and
(C) the grant of options either prior to or after the
Original Issue Date to officers, directors, employees and agents to
purchase up to an aggregate of 10% of the shares of Common Stock
outstanding, as determined on the basis of the assumed exercise of all
outstanding warrants and options and the conversion of all Preferred Stock
of the Corporation into Common Stock.
(ii) The term "Convertible Securities" shall mean any evidence
of indebtedness, shares (other than Series C Preferred Stock or Series D
Preferred Stock) or other securities convertible into or exchangeable for
Common Stock.
(iii) The term "Fair Market Price" shall mean with respect to
a share of Common Stock, (a) if the shares are listed or admitted for
trading on any Recognized Exchange, the last reported sales price as
reported on such exchange or market; (b) if the shares are not listed or
admitted for trading on any Recognized Exchange, the average of the last
reported closing bid and asked quotation for the shares as reported on
NASDAQ or a similar service if NASDAQ is not reporting such information;
(c) if the shares are not listed or admitted for trading on any national
securities exchange or included in The Nasdaq National Market or Nasdaq
SmallCap Market or quoted by NASDAQ or a similar service, the average of
the last reported bid and asked quotation for the shares as quoted by a
market maker in the shares (or if there is more than one market maker, the
bid and asked quotation shall be obtained from two market makers and the
average of the lowest bid and highest asked quotation). In the absence of
any available public quotations for the Common Stock, the Board of
Directors of the Corporation shall determine in good faith the fair value
of the Common Stock, which determination shall be set forth in a
certificate by the Secretary of the Corporation, and such fair value shall
be deemed the Fair Market Price.
(iv) The term "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.
(v) The term "Original Issue Date" shall mean May 2, 2001.
(b) Reorganization, Reclassification. In the event of a
reorganization, share exchange or reclassification other than a change in
par value, or from par value to no par value, or from no par value to par
value, or a transaction described in subsection (c) or (d) below each share
of Series D Preferred Stock shall, after such reorganization, share
exchange or reclassification (a "Reclassification Event"), be convertible
at the option of the holder into the kind and number of shares of stock or
other securities or other property of the Corporation which the holder of
Series D Preferred Stock would have been entitled to receive if the holder
had held the Common Stock issuable upon conversion of such share of Series
D Preferred Stock immediately prior to such reorganization, share exchange
or reclassification.
(c) Consolidation Merger. In the event of a merger or
consolidation to which the Corporation is a party, each share of Series D
Preferred Stock shall, after such merger or consolidation, be convertible
at the option of the holder into the kind and number of shares of stock
and/or other securities, cash or other property which the holder of such
share of Series D Preferred Stock would have been entitled to receive if
the holder had held the Common Stock issuable upon conversion of such share
of Series D Preferred Stock immediately prior to such merger or
consolidation.
(d) Subdivision or Combination of Shares. In case outstanding
shares of Common Stock shall be subdivided, the conversion price shall be
proportionately reduced as of the effective date of such subdivision, or as
of the date a record is taken of the holders of Common Stock for the
purpose of so subdividing, whichever is earlier. In case outstanding shares
of Common Stock shall be combined, the conversion price shall be
proportionately increased as of the effective date of such combination, or
as of the date a record is taken of the holders of Common Stock for the
purpose of so combining, whichever is earlier.
(e) Stock Dividends. In case shares of Common Stock are issued as
a dividend or other distribution on the Common Stock (or such dividend is
declared), then the conversion price shall be adjusted, as of the date a
record is taken of the holders of Common Stock for the purpose of receiving
such dividend or other distribution (or if no such record is taken, as of
the earliest of the date of such declaration, payment or other
distribution), to that price determined by multiplying the conversion price
in effect immediately prior to such declaration, payment or other
distribution by a fraction (i) the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to the declaration
or payment of such dividend or other distribution, and (ii) the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately after the declaration or payment of such dividend or other
distribution. In the event that the Corporation shall declare or pay any
dividend on the Common Stock payable in any right to acquire Common Stock
for no consideration, then the Corporation shall be deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to acquire
Common Stock.
(f) Issuance of Additional Shares of Common Stock. If the
Corporation shall issue any Additional Shares of Common Stock (including
Additional Shares of Common Stock to be issued pursuant to paragraph (g)
below) after the Original Issue Date (other than as provided in the
foregoing subsections (b) through (e)), for no consideration or for a
consideration per share less than the greater of (i) the Fair Market Price
in effect on the date of and immediately prior to such issue or (ii) the
conversion price in effect on the date of and immediately prior to such
issue (such applicable consideration per share being the "Applicable
Price"), then in such event, the conversion price shall be reduced,
concurrently with such issue, to a price equal to the prior conversion
price multiplied by the quotient obtained by dividing (A) an amount equal
to (x) the total number of shares of Common Stock outstanding immediately
prior to such issuance or sale, plus (y) the number of Additional Shares of
Common Stock deemed issued for the aggregate consideration received or
deemed to be received by the Corporation upon such issuance or sale based
on the Applicable Price, by (B) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
For purposes of the formulas expressed in paragraph 6(e) and 6(f),
all shares of Common Stock issuable upon the exercise of outstanding
Options or issuable upon the conversion of the Series D Preferred Stock or
outstanding Convertible Securities (including Convertible Securities issued
upon the exercise of outstanding Options), shall be deemed outstanding
shares of Common Stock both immediately before and after such issuance or
sale.
(g) Deemed Issue of Additional Shares of Common Stock. In the
event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities
then entitled to receive any such Options or Convertible Securities, then
the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein designed to
protect against dilution) of Common Stock issuable upon the exercise of
such Options, or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall
be deemed to be Additional Shares of Common Stock issued as of the time of
such issue of Options or Convertible Securities or, in case such a record
date shall have been fixed, as of the close of business on such record date
for the consideration determined pursuant to paragraph 6(h)(ii), provided
that in any such case in which Additional Shares of Common Stock are deemed
to be issued:
(i) no further adjustments in the conversion price shall be
made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or the issue of Common Stock
upon the conversion or exchange of such Convertible Securities;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or increase or
decrease in the number of shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof, the conversion price computed
upon the original issuance of such Options or Convertible Securities (or
upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, upon any such increase or decrease
becoming effective, shall be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities (provided, however, that no such
adjustment of the conversion price shall affect Common Stock previously
issued upon conversion of the Series D Preferred Stock);
(iii) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not
have been exercised, the conversion price computed upon the original issue
of such Options or Convertible Securities (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
(A) in the case of Options or Convertible Securities, the
only Additional Shares of Common Stock issued were the shares of Common
Stock, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the
Corporation (x) for the issue of all such Options, whether or not
exercised, plus the consideration actually received by the Corporation upon
exercise of the Options or (y) for the issue of all such Convertible
Securities which were actually converted or exchanged plus the additional
consideration, if any, actually received by the Corporation upon the
conversion or exchange of the Convertible Securities; and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether or
not exercised, plus the consideration deemed to have been received by the
Corporation upon the issue of the Convertible Securities with respect to
which such Options were actually exercised.
(iv) No readjustment pursuant to clause (ii) or (iii) above
shall have the effect of increasing the conversion price to an amount which
exceeds the lower of (x) the conversion price on the original adjustment
date or (y) the conversion price that resulted from any issuance or deemed
issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(v) In the case of any Options which expire by their terms not
more than 30 days after the date of issue thereof, no adjustment of the
conversion price shall be made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in the same manner
provided in clause (iii) above.
(h) Determination of Consideration. For purposes of this Section
6, the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the aggregate
amount of cash received by the Corporation; and
(B) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of the issue, as determined
by the vote of 66-2/3% of the Corporation's Board of Directors or if the
Board of Directors cannot reach such agreement, by a qualified independent
public accounting firm, other than the accounting firm then engaged as the
Corporation's independent auditors, agreed upon by the Corporation on the
one hand and the holders of 66-2/3% of the outstanding shares of Series D
Preferred Stock on the other hand.
(ii) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to paragraph (g) above, relating to
Options and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without
regard to any provision contained therein designed to protect against
dilution) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case
of Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) issuable upon the
exercise of such Options or conversion or exchange of such Convertible
Securities.
(i) Other Provisions Applicable to Adjustment Under this Section.
The following provisions will be applicable to the adjustments in
conversion price and conversion rate as provided in this Section 6:
(i) Treasury Shares. The number of shares of Common Stock at
any time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Corporation or any
shares or securities subject to purchase or acquisition by the Corporation
pursuant to any executory contract of purchase.
(ii) Other Action Affecting Common Stock. In case the
Corporation shall take any action affecting the outstanding number of
shares of Common Stock other than an action described in any of the
foregoing subsections 6(b) to 6(g) hereof, inclusive, which would have an
inequitable effect on the holders of Series D Preferred Stock, the
conversion price shall be adjusted in such manner and at such time as the
Board of Directors of the Corporation on the advice of the Corporation's
independent public accountants may in good faith determine to be equitable
in the circumstances.
(iii) Minimum Adjustment. No adjustment of the conversion
price shall be made if the amount of any such adjustment would be an amount
less than one percent (1%) of the conversion price then in effect, but any
such amount shall be carried forward and an adjustment with respect thereof
shall be made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate an increase or decrease of one percent (1%) or
more.
(iv) Certain Adjustments. The conversion price shall not be
adjusted upward except in the case of a combination of the outstanding
shares of Common Stock into a small number of shares of Common Stock, or in
the event of a readjustment of the conversion price pursuant to Section
6(g)(ii) or (iii).
(j) Notices of Adjustments. Whenever the conversion rate and
conversion price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted conversion rate and conversion price
in accordance with the foregoing provisions and shall prepare a written
certificate setting forth such adjusted conversion rate and conversion
price and showing in detail the facts upon which such adjustment is based,
and such written instrument shall promptly be delivered to the record
holders of the Series D Preferred Stock.
7. Ranking. The Series D Preferred Stock shall rank prior to the
Common Stock and all other classes or series of the Preferred Stock other
than the Series C Preferred Stock authorized by the Corporation's Board of
Directors and established pursuant to a filing with the Nevada Secretary of
State's office in October 1999.
8. Fractional Shares. Series D Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion of such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
the holders of Series D Preferred Stock.
9. Dividends and Distributions. The holders of Series D Preferred
Stock shall be entitled to receive dividends and other distributions of
cash or property when, as and if declared by the Board of Directors out of
funds legally available for such purposes. If at any time the Corporation
declares any dividend or other distribution on its Common Stock and there
are shares of its Series D Preferred Stock issued and outstanding, then a
dividend or other distribution shall also be declared on the Series D
Preferred Stock, payable at the same time and on the same terms and
conditions, entitling each holder of Series D Preferred Stock to receive
the dividend or distribution such holder would have received had such
holder converted the Series D Preferred Stock as of the record date for
determining stockholders entitled to receive such dividend or distribution.
10. Information Rights. From and after the date hereof until such
time as the Series D Preferred Stock has been converted into shares of
Common Stock, the Corporation will furnish to holders of Series D Preferred
Stock copies of the following financial statements, reports and
information:
(a) a copy of the Corporation's consolidated annual report
(including audited balance sheets, statements of operations, statements of
stockholders' equity and statements of cash flow) for the Corporation and
each subsidiary of the Corporation for such fiscal year, prepared in
accordance with generally accepted accounting principles ("GAAP")
consistent with the preceding year, certified by the Corporation's
independent public accountant. During such period as the Corporation is
subject to the periodic reporting requirements of either Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, such report and
financial statements shall be delivered to the holders of Series D
Preferred Stock at such time as the Corporation files with the Securities
and Exchange Commission its annual report on Form 10-K or 10-KSB (but in no
event later than 105 days after the end of each fiscal year of the
Corporation). During such period as the Corporation is not subject to the
periodic reporting requirements of either Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, such report and financial
statements shall be delivered to the holders of Series D Preferred Stock as
soon as available and in any event within 90 days after the end of each
fiscal year of the Corporation.
(b) a consolidated balance sheet, statement of operations and
statement of cash flow for the Corporation and its subsidiaries, as of the
end of, and for, each such quarter, prepared in accordance with GAAP
consistently applied (subject to the absence of notes and to customary and
reasonable year-end adjustments), certified by the Corporation's chief
financial officer as fairly and accurately representing the financial
condition of the Corporation and its subsidiaries as of the end of, and
for, the period covered thereby. During such period as the Corporation is
subject to the periodic reporting requirements of either Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, such report and
financial statements shall be delivered to the holders of Series C
Preferred Stock at such time as the Corporation files with the Securities
and Exchange Commission its quarterly report on Form 10-Q or 10-QSB (but in
no event later than 60 days after the end of each fiscal quarter of the
Corporation). During such period as the Corporation is not subject to the
periodic reporting requirements of either Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, such report and financial
statements shall be delivered to the holders of Series C Preferred Stock as
soon as available and in any event within 45 days after the end of each
fiscal quarter of the Corporation; and
(c) such other information with respect to the financial condition
and operations of the Corporation and its subsidiaries and affiliates as
the holders of Series D Preferred Stock may reasonably request or as the
Corporation may be required to provide the holders of the Common Stock
under the Nevada General Corporation Laws.
11. Preemptive Rights.
(a) Subsequent Offerings. Each of the holders of Series D
Preferred Stock shall have a right to purchase its pro rata share on a
fully-diluted basis of all Equity Securities that the Corporation may, from
time to time, propose to sell and issue after the Original Issue Date,
other than the Equity Securities excluded by Section 11(f) hereof. Each
such holder's "pro rata share on a fully-diluted basis" for purposes of
this Section shall be defined as the ratio of (A) the number of outstanding
shares of Common Stock of such holder (based on the shares of Common Stock
issued or issuable upon conversion, exchange or exercise of all outstanding
shares of Series D Preferred Stock and any other then outstanding Equity
Security of the Corporation acquired by such holder as a result of his or
its purchase of such Series D Preferred Stock into shares of Common Stock)
to (B) the total number of outstanding shares of Common Stock (including
all shares of Common Stock issued or issuable upon conversion of
outstanding shares of Preferred Stock into shares of Common Stock or upon
the exercise of any outstanding options and warrants immediately prior to
the issuance of the Equity Securities. As used herein, "Equity Security"
shall mean any equity security of the Corporation, including, but not
limited to (i) any shares of Common Stock or shares of Preferred Stock
(including any option or warrant to purchase any shares of Common Stock or
shares of Preferred Stock), (ii) any security convertible, with or without
consideration, into shares of Common Stock, shares of Preferred Stock or
other equity securities of the Corporation (including any option or warrant
to purchase such a convertible security), (iii) any right to subscribe to
or purchase shares of Common Stock, shares of Preferred Stock or other
equity security of the Corporation or (iv) any security carrying such
right.
(b) Exercise of Rights. If the Corporation proposes to issue any
Equity Securities (the "Offered Securities"), it shall give the holders of
Series D Preferred Stock written notice of its intention, describing the
Equity Securities, the price thereof and the terms and conditions upon
which the Corporation proposes to issue the same. Each such holder of
Series D Preferred Stock shall have the right, for a period of fifteen (15)
business days from the receipt of such notice, to deliver notice to the
Corporation agreeing to purchase its pro rata share on a fully-diluted
basis of the Equity Securities for the price and upon the terms and
conditions specified in the Corporation's notice, stating therein the
quantity of Offered Securities to be purchased and its agreement to close
the purchase of such Equity Securities concurrently with the Corporation's
sale of the Equity Securities to other parties. Notwithstanding the
foregoing, the Corporation shall not be required to offer or sell such
Equity Securities to any such holder of Series D Preferred Stock who would
cause the Corporation to be in violation of applicable securities laws by
virtue of such offer or sale.
(c) Issuance of Equity Securities to Other Person. Following the
fifteen (15) day notice period set forth in Section 11(b) hereof, the
Corporation shall have one hundred twenty (120) days thereafter to issue
the Equity Securities in respect of which the holders of Series D Preferred
Stock rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than
specified in the Corporation's notice to the holders of Series D Preferred
Stock pursuant to Section 11(b) hereof. If the Corporation has not sold
such Equity Securities within such 120-day period set forth in this Section
11(c), the Corporation shall not thereafter issue or sell any Equity
Securities without first offering such securities to the holders of Series
D Preferred Stock in the manner provided above.
(d) Termination of Preemptive Rights. The preemptive rights
established by this Article 11 shall not apply to, and shall terminate
immediately prior to the effective date of the registration statement
pertaining to, a Qualified Public Offering.
(e) Transfer of Preemptive Rights. The preemptive rights of the
holders of Series D Preferred Stock under this Article 11 may not be
transferred; provided, however that the preemptive rights of the holders
may be transferred to a "Related Party" of a holder, as that term is
defined in that certain Shareholder Joinder Agreement contemplated to be
executed among this Corporation and purchasers of the Series D Preferred
Stock prior to the Original Issue Date.
(f) Excluded Securities. The preemptive rights established by this
Article 11 shall have no application to any of the following Equity
Securities:
(i) shares of Common Stock (and/or options or other shares of
Common Stock purchase rights issued pursuant to such options or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to, the Corporation or any subsidiary, pursuant to
stock purchase or stock option or other plans or other arrangements that
are approved by the Board of Directors;
(ii) any Equity Securities issued in connection with the
Corporation effectuating or entering into: (1) a merger, consolidation,
amalgamation, acquisition or similar business combination approved by the
Board of Directors; or (2) a joint venture, commercial transaction
(including, without limitation, equipment lessors or other persons
guaranteeing the obligations of the Corporation to equipment lessors) or
other commercial relationship approved by the Board of Directors; or
(iii) any Equity Securities described in Section 6(a)(i)(A) or
Section 6(a)(i)(B); or
(iv) shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Corporation.
12. Amendment. The rights, designations, preferences, qualifications,
privileges, limitations and restrictions set forth herein may be modified
or amended by a writing executed by the Corporation and the holders of 66
2/3% of the outstanding Series D Preferred Stock.
* * * *
IN WITNESS WHEREOF, the undersigned hereby certify that the foregoing
resolution was duly and unanimously adopted by the Board of Directors of
the Corporation on January 17, 2001, and have caused this Certificate to be
executed this __day of January, 2001.
/s/ Xxxx X'Xxxxxxxx
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Xxxx X'Xxxxxxxx, Xx. Vice President
/s/ Xxxxxxx Xxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxx, Secretary
STATE OF NY )
) ss.
COUNTY OF NY )
The foregoing instrument was acknowledged before me this __day of
January, 2001, by Xxxx X'Xxxxxxxx and Xxxxxxx Xxxxxxx, the Vice President
and Secretary, respectively, of Convergence Communications, Inc.
/s/ Xxxxx X. XxXxxx
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Notary Public
My Commission Expires: Residing at: 000 Xxx 00 Xx., 00-X
0-00-00 Xxxxxxxx, XX 00000
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