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