Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
February 8, 1994 (January 24, 1995)
C-TEC CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 0-11053 23-2093008
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
105 Carnegie Center, Princeton, NJ 08540-6215
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(609) 734-3700
(Former name or former address, if changed since last report).
Item 2. Acquisition or Disposition of Assets
------------------------------------
C-TEC International, Inc., a wholly owned subsidiary of C-TEC
Properties, Inc, which in turn is a wholly owned subsidiary of C-TEC
Corporation, (collectively "C-TEC") purchased on January 24, 1995 a 40
percent equity position in Megacable, Mexico's second largest cable
television operator, for approximately $84 million in cash, subject to
adjustments. Under the agreement C-TEC's investment in Megacable is in
exchange for newly-issued capital stock. The funds will be used by
Megacable to pay off existing debt, for capital expenditures, and to create
a substantial cash reserve for further Megacable acquisitions and
telecommunications ventures in Mexico. In addition, C-TEC representatives
will hold six new seats on Megacable's Board of Directors and will have an
active role in setting the strategic direction of the company. Megacable
is privately held.
The investment amount in the transaction has taken into account the
impact of the peso devaluation over the past 60 days and its expected impact
on the telecommunications business in Mexico.
Megacable, with headquarters in Los Mochis, currently serves over
174,00 subscribers in twelve cities including Hermosillo, Navajoa, Diudad
Obregon, Culiacan, Mazatlan, and Pacific coast. In addition, Megacable owns
the Guadalajara franchise, Mexico's second largest city, which is only about
half cabled so far. Additionally, Megacable was recently awarded a new
franchise in Tepic and several smaller towns, adding 60,000 more potential
customers to its overall base of over 900,000 franchise homes.
The acquisition will be funded through C-TEC's working capital.
The required financial statements of Megacable and pro forma
financial information will be filed within sixty days after the required
filing date of this Form 8-K.
Item 7. Exhibits
--------
(c) Exhibits
10.1 Subscription Agreement among Megacable, S.A. DE CV and C-TEC
International, Inc.
99 Press release of C-TEC Corporation dated as of January 25,
1995 announcing the purchase of a forty percent equity
position in Megacable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto dully authorized.
C-TEC Corporation
By: /s/ Bruce Godfrey
--------------------
Name: Bruce Godfrey
Title: Executive Vice President
and Chief Financial Officer
Date: February 8, 1995
SUBSCRIPTION AGREEMENT
among
MEGACABLE, S.A. DE C.V.
and
C-TEC INTERNATIONAL, INC.
Dated as of January 19, 1995
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1. Definitions........................................... 2
ARTICLE II
ISSUANCE OF AND SUBSCRIPTION TO THE INITIAL SHARES
2.1. Issuance of and Subscription to the Initial
Shares..............................................13
2.2. Closing...............................................13
2.3. Closing Deliveries by the Company.....................14
2.4. Closing Deliveries by the Investor....................14
2.5. Subscription Price Adjustment.........................14
2.6. Exchange Rate Adjustment..............................16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. Corporate Existence and Power.........................17
3.2. Corporate and Governmental Authorizations.............18
3.3. Governing Documents...................................19
3.4. Capitalization........................................20
3.5. No Conflicts, etc.....................................21
3.6. Financial Information.................................21
3.7. Absence of Undisclosed Liabilities....................22
3.8. Absence of Certain Changes............................23
3.9. Compliance with Laws and Other Instruments;
Licenses............................................24
3.10. Taxes.................................................25
3.11. Stamp Taxes, etc......................................26
3.12. Litigation, etc.......................................27
3.13. The Systems...........................................27
3.14. Assets................................................29
3.15. Insurance.............................................30
3.16. Material Contracts....................................31
3.17. Employment Agreements and Benefits....................32
3.18. Intellectual Property.................................33
3.19. Brokers...............................................33
3.20. Affiliate Relationships...............................33
3.21. FECL Clearance........................................34
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
4.1. Existence and Power...................................34
4.2. Corporate and Governmental Authorizations.............35
4.3. Capitalization........................................35
4.4. No Conflicts, etc.....................................36
4.5. Litigation, etc.......................................37
4.6. Investment Purpose....................................37
4.7. Financial Ability to Perform..........................37
4.8. Brokers...............................................38
4.9. Other Agreements......................................38
4.10. FECL Clearance........................................38
ARTICLE V
CONDITIONS
5.1. Conditions to Obligations of the Investor.............39
5.2. Conditions to Obligations of the Company..............42
5.3. Conditions to Obligations of Both Parties.............44
ARTICLE VI
COVENANTS OF THE COMPANY
6.1. Financial and Other Information.......................46
6.2. Independent Accountants; Accounting
Practices...........................................48
6.3. Shareholder Agreement.................................48
6.4. Post-Closing Filings..................................49
ARTICLE VI
OTHER COVENANTS AND AGREEMENTS
7.1. Efforts to Consummate Transactions....................49
7.2. Conduct Pending Closing...............................49
7.3. Confidentiality.......................................51
7.4. Indemnification.......................................52
7.5. Indemnification Procedures............................57
7.6. Limitations on Indemnification........................59
ARTICLE VIII
MISCELLANEOUS
8.1. Termination...........................................61
8.2. Governing Law.........................................62
8.3. Arbitration...........................................65
8.4. Survival..............................................66
8.5. Amendment, Assignment, etc............................66
8.6. Notices...............................................66
8.7. Expenses..............................................67
8.8. Severability..........................................67
8.9. No Third Party Beneficiaries..........................68
8.10. Translation...........................................68
8.11. Integration; Section Headings;
Counterparts, etc...................................68
8.12. Further Assurances....................................69
EXHIBIT
Exhibit B Shareholder Agreement
SUBSCRIPTION AGREEMENT, dated as of January 19, 1995, between
MEGACABLE, S.A. DE C.V., a sociedad anonima de capital variable organized
under the laws of the United Mexican States (together with its successors and
permitted assigns, the "Company"), and C-TEC INTERNATIONAL, INC., a
corporation organized under the laws of Delaware (together with its successors
and permitted assigns, the "Investor").
RECITALS
A. C-TEC Corporation, a corporation organized under the laws
of Pennsylvania (together with its successors and permitted assigns, "C-TEC")
directly or indirectly owns 100% of the capital stock of the Investor.
B. The Company desires to issue to the Investor and the
Investor desires to subscribe to an aggregate of 37,000,000 newly-issued
shares representing 40% of the outstanding capital stock of the Company
(collectively, the "Initial Shares"), consisting of 9,250,000 Series B Shares
(as defined herein), 13,875,000 Series D-1 Shares (as defined herein) and
13,875,000 Series D-2 Shares (as defined herein), all upon the terms and
conditions set forth in this Agreement.
C. In order to meet the foregoing objectives and otherwise
to establish mutually beneficial arrangements for long-term cooperation, the
parties hereto desire to enter into this Agreement and into certain other
agreements, all upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. The following terms, as used in this
Agreement, have the following meanings (each such meaning to be equally
applicable to both the singular and plural forms of the respective terms so
defined):
Accounting: as defined in Section 2.5.
Adverse Effect: a material adverse effect on the financial
condition, properties, business or results of operations of the
Company and its consolidated subsidiaries, taken as a whole.
Affiliate: with respect to any Person, any other Person which,
directly or indirectly, controls or is controlled by or is under
common control with such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with
respect to any Person means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities or by contract or otherwise, and shall be deemed to exist
upon the ownership of 50% or more of any class of voting securities
or equity interest in such Person.
Banamex: Banco Nacional de Mexico, S.A.
Banamex Revolving Credit: the Contrato de Apertura de Credito
Revolvente con Garantia Predaria y Caucion Bursatil, dated December
28, 1993, among Banamex, the Company and certain pledgors and
guarantors listed therein, as amended and renewed on January 13,
1995, and as hereafter amended or modified from time to time.
Business Day: any day except a Saturday, Sunday or other day
on which commercial banks are required or authorized to close in New
York or Mexico City.
Capital Stock: any shares of capital stock of the Company that
may be authorized from time to time in the estatutos of the Company.
Claimant: as defined in Section 8.3.
Closing: the completion of the purchase of the Initial Shares
by the Investor.
Closing Date: the date on which the Closing occurs.
Company: as defined in the Heading.
Control Trust: the trust created under the Control Trust
Agreement.
Control Trust Agreement: the Contrato de Fideicomiso, dated
December 19, 1994, among the Control Trustee and certain persons
named as beneficiaries therein, substantially in the form of Exhibit
A, as amended or modified from time to time.
Control Trustee: Banamex, as trustee under the Control Trust
Agreement, and its successors in that capacity.
C-TEC: as defined in Recital A.
Demand: as defined in Section 8.3.
Exchange Rate Adjustment Amount: an amount, expressed in US$,
determined as follows: (1) in the event that the Fourth Quarter 1995
Exchange Rate is less than or equal to 3.45, the Exchange Rate
Adjustment Amount shall be US$ 35,884,554; (2) in the event that the
Fourth Quarter 1995 Exchange Rate is greater than or equal to 5.50,
the Exchange Rate Adjustment Amount shall be zero; and (3) in the
event that the Fourth Quarter 1995 Exchange Rate shall be greater
than 3.45, but less than 5.50, the Exchange Rate Adjustment Amount
shall be determined in accordance with the following formula:
ERAA = (.4/.6)((235,000,000*3.45)/(X) - 55,000,000)
- 84,115,456
Where:
ERAA = the Exchange Rate Adjustment Amount;
X = .5(ER + 3.45);
ER = the Fourth Quarter 1995 Exchange Rate.
Excluded Losses: as defined in Section 7.6(a).
Extraordinary Revocation: with respect to any Pre-Existing
System, the occurrence of all of the following events: (i) the
concession for such Pre-existing System is revoked, (ii) as a result
of such revocation, the Company is no longer permitted to provide
cable television service to customers of such Pre-Existing System and
(iii) the stated reasons for such revocation consist substantially of
one or more acts or omissions by the Company or its Subsidiaries
prior to the Closing Date (other than (1) acts or omissions of a type
not significantly at variance with customary business practices in
Mexico at the time of the act or omission in question that are not
unreasonable in relation to the practical requirements of conducting
a Cable Business in Mexico at such time, and (2) acts or omissions in
accordance with business practices followed by the Company or its
Subsidiaries after the Closing Date with the unanimous express
consent of the Management Committee constituted under the Shareholder
Agreement).
FECL: the Mexican Federal Economic Competition Law, as amended.
Final Net Recovery: as defined in Section 7.4(c).
Final Subscription Price: as defined in Section 2.5.
Financial Statements: as defined in Section 3.6.
Fourth Quarter 1995 Exchange Rate: the arithmetic average of
the daily rates of exchange for the payment of obligations in Mexico
in Mexico denominated in US$ published by the Central Bank of Mexico
in the Diario Oficial de la Federacion on each Business Day during
the fourth quarter of 1995 (expressed in terms of N$ per US$ and
rounded to two decimal places).
Incremental Liabilities: the US$ equivalent, as of the Closing
Date, of an amount equal to the sum, if positive, of (1) additional
indebtedness for borrowed money (other than refinancings, extensions
or rollovers of existing indebtedness) incurred by the Company or its
Subsidiaries after May 31, 1994 and prior to the Closing Date, minus
(2) the purchase price or acquisition cost of any tangible or
financial assets acquired by the Company or its Subsidiaries with the
proceeds of such additional indebtedness, plus (3) the amount of any
dividends and redemption proceeds paid by the Company or any
Subsidiary (other than the Company or another Subsidiary) after May
31, 1994 and prior to the Closing Date.
Indemnified Party: as defined in Section 7.5.
Indemnifying Party: as defined in Section 7.5.
Initial Shares: as defined in Recital B.
Investor: as defined in the Heading.
Investor's Percentage Interest: as defined in Section 7.4(a).
June 1994 Balance Sheet: the unaudited consolidated balance
sheet (including the notes thereto) of the Company and its
consolidated subsidiaries as of June 30, 1994.
Licenses: as defined in Section 3.9(b).
Lien: with respect to any asset, any mortgage, lien, pledge,
security interest, encumbrance or other adverse claim or interest
(other than Liens created pursuant to any Transaction Document).
Loss: as defined in Section 7.4(a).
Material Contract: as defined in Section 3.16.
Mexican GAAP: accounting principles generally accepted from
time to time in the United Mexican States.
N$: new Mexican Pesos after giving effect to the Mexican
currency reforms which became effective on January 1, 1993.
Net Recovery: with respect to any Extraordinary Revocation of
a Pre-Existing System, the sum of (i) the aggregate amount of any
payments or other consideration received by the Company and its
Subsidiaries from the Mexican Government, or any instrumentality or
political subdivision thereof, as compensation or payment for the
revocation of the concession in question and any related
confiscation, seizure or taking of assets used in connection with
such Pre-Existing System, plus (ii) the amount of any tax benefits or
insurance proceeds to the Company or its Subsidiaries resulting from
such Extraordinary Revocation, plus (iii) any other recovery received
by the Company or its Subsidiaries in connection with such
Extraordinary Revocation, including, without limitation, the net
sales proceeds of any assets used in connection with such Pre-Existing
System that are sold to any third party.
Objection Notice: as defined in Section 2.5.
1993 Balance Sheet: the unaudited consolidated balance sheet
(including the notes thereto) of the Company and its consolidated
subsidiaries as of December 31, 1993.
Per Subscriber Investment: as of any date of determination, as
amount equal to (1) the sum of (x) the Final Subscription Price plus
(y) the amount (if any) previously paid by the Investor to the Company
pursuant to Section 2.6; divided by (2) the number of Subscribers as
of the Closing Date.
Permitted Transferee: as defined in the Shareholder Agreement.
Person: an individual, corporation, partnership, association,
trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
Pre-Closing Period: all tax periods ending on or before the
Closing Date and, with respect to any tax period that includes but
does not end on the Closing Date, the portion of such period up to
but not including the Closing Date.
Pre-Existing System: any System owned or operated as of May 31,
1994 by the Company or any of its Subsidiaries.
Private Shareholders: as of any date of determination, each
Person named as, or deemed to be, a Private Shareholder under the
Shareholder Agreement as of such date, provided that prior to the
execution of the Shareholder Agreement, the term "Private
Shareholder" shall mean the Control Trust and each Person named in
Schedule 3.4.
Required Percentage: as of any date of determination, a
percentage equal to the lesser of (i) 70% of the percentage of the
outstanding shares of Capital Stock held by the Private Shareholders
as of such date and (ii) 25% of the outstanding shares of Capital
Stock, provided that if the Company shall issue additional shares of
Capital Stock after the Closing Date as part of a capital increase in
respect of which the Investor is entitled to exercise preemptive
rights, the number of such additional shares deemed to be
"outstanding" for purposes of calculating the Required Percentage as
of any subsequent date shall equal (P/P*)N, where P is equal to the
number of shares of Capital Stock acquired by the Investor, its
Permitted Transferees, C-TEC or their respective Affiliates in such
capital increase, whether by exercise of preemptive rights or
otherwise; P* is equal to the maximum number of shares of Capital
Stock that such Persons were entitled to purchase in such capital
increase; and N is equal to the total number of shares of Capital
Stock issued as part of such capital increase.
Respondent: as defined in Section 8.3.
Revocation Accounting: as defined in Section 7.4(c).
Revocation Objection Notice: as defined in Section 7.4(c).
Securities Act: as defined in Section 4.6.
Series B Shares: all shares of the Company's Series B ordinary
voting stock without par value, including Series B Shares authorized
after the date hereof.
Series D-1 Shares: all shares of Sub-series D-1 of the
Company's Series D preferred stock, including Series D-1 Shares
authorized after the date hereof.
Series D-2 Shares: all shares of Sub-series D-2 of the
Company's Series D preferred stock, including Series D-2 Shares
authorized after the date hereof.
Shareholder Agreement: the Shareholder Agreement among the
Investor and the Private Shareholders, substantially in the form of
Exhibit B, as amended or modified from time to time.
Subscriber: as of any date, those paying customers of the
basic service of a System who are not more than 60 days delinquent in
payment for any cable television services. In the case of bulk
billing arrangements, the number of "Subscribers" is the monthly
gross revenues on account of standard bulk billing arrangements
divided by the System's standard first outlet rate.
Subscription Price: as defined in Section 2.1.
Subscription Price Adjustment: as defined in Section 2.5.
Subsidiary: as defined in Section 3.1.
Support Agreement: the Support and Guaranty Agreement, dated
the date hereof, among the Company, the Private Shareholders and
C-TEC, substantially in the form of Exhibit C, as amended or modified
from time to time.
System: any of the multi-channel television distribution
systems operated or owned by the Company or any of its Subsidiaries.
Tax: any net income, alternative minimum, gross income, asset,
gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding, payroll, employment,
excise, stamp, property, environmental or windfall profit tax, duty,
governmental fee or other like assessment or charge, including
payments to the Instituto Mexicano del Seguro Social, the Sistema de
Ahorro Para el Retiro and the Instituto Nacional del Fondo de la
Vivienda de los Trabajadores, and any interest, fines, penalties or
additions attributable to or imposed on or with respect to any of the
foregoing.
Third Accountant: as defined in Section 2.5.
Transactions: the transactions contemplated by the Transaction
Documents, including the issuance of and subscription to the Initial
Shares.
Transaction Document: each of this Agreement, the Shareholder
Agreement, the Control Trust Agreement, the Support Agreement and any
certificate or instrument delivered pursuant to this Agreement.
US$: United States Dollars.
ARTICLE II
ISSUANCE OF AND SUBSCRIPTION TO THE INITIAL SHARES
2.1. Issuance of and Subscription to the Initial Shares.
Upon the terms and subject to the conditions set forth in this Agreement, the
Company will issue the Initial Shares to the Investor and the Investor will
subscribe to the Initial Shares from the Company for an aggregate subscription
price (the "Subscription Price") equal to the sum of (i) US$ 84,115,456 minus
(ii) the Subscription Price Adjustment, if any, divided by .6 and multiplied
by .4, plus (iii) interest on the amount calculated in the preceding clauses
(i) and (ii) at a rate per annum equal to 9% from (1) the later of January 24,
1995 or the fifth Business Day after the Company gives the Investor written
notice that the conditions to Closing set forth in Sections 5.1 and 5.3(l)
have been satisfied to (2) the Closing Date, payable in US$ and calculated on
the basis of a year of 365 days and the number of days elapsed.
2.2. Closing. The Closing shall take place at the offices of
Franck, Galicia, Duclaud y Robles, S.C. in Mexico City on the later of January
24, 1995 or the fifth Business Day following the date on which all of the
respective conditions to the Company's and the Investor's obligations
hereunder, as specified in Article V, have been satisfied or waived, or at
such other place and time as the parties hereto may agree.
2.3. Closing Deliveries by the Company. At the Closing, the
Company shall deliver, or cause to be delivered, the following to the
Investor:
(1) certificates representing all of the Initial Shares
registered in the name of the Investor; and
(2) the opinions, certificates and other documents required to
be delivered pursuant to Section 5. 1.
2.4. Closing Deliveries by the Investor. At the Closing, the
Investor shall deliver the following to the Company: (1) the
Subscription Price by wire transfer of immediately available
funds to an account or accounts of the Company designated not
less than two Business Days prior to the Closing by the
Company; and
(2) the opinions, certificates and other documents required
to be delivered pursuant to Section 5.2.
2.5. Subscription Price Adjustment. For purposes of Section
2.1, the "Subscription Price Adjustment" shall equal the Company's Incremental
Liabilities as of the Closing. The amount of Incremental Liabilities as of the
Closing shall be estimated in good faith by the Company and Investor, and the
Closing shall proceed on the basis of such estimate. Following the Closing,
the Company's accountants shall determine (the "Accounting") the actual amount
of Incremental Liabilities as of the Closing. The Investor's accountants
shall be entitled to have access to the Company's accountants' work papers and
other relevant data. The Company's accountants shall provide the Investor
with the results of the Accounting as soon as practicable, but in any event no
later than 45 days after the Closing Date. If the Investor objects to the
results of the Accounting, the Investor shall notify the Company's accountants
of its objection in writing (the "Objection Notice") within 10 Business Days
after receiving the results of the Accounting with copies of the Objection
Notice to all parties in accordance with Section 8.6, and the Investor and the
Company shall endeavor to resolve the open issues. If such issues are not
resolved within 30 days after the receipt by the Company of the Objection
Notice, the unresolved issues shall be submitted to a third public accountant
from Mancera, S.C. (the "Third Accountant"). Within 15 Business Days of its
appointment, the Third Accountant shall deliver a written report to the
Investor and the Company setting forth the final determination of the
Company's Incremental Liabilities at the Closing. The Third Accountant shall
be entitled to rely upon (but shall not be bound by) the work papers of the
Company's accountants in making a final determination of the issues. The
decision of the Third Accountant shall be final and binding on the Investor and
the Company. Each of the Company and the Investor shall bear the expense of
its respective accountants under this Section 2.5, and shall share equally the
expense of the Third Accountant, if any. Within 10 Business Days after the
Company's Incremental Liabilities as of the Closing Date have been finally
determined pursuant to this Section 2.5, the Subscription Price shall be
adjusted in accordance with this Section 2.5 (the "Final Subscription Price")
and (1) the Company shall pay to the Investor the amount, if any, by which the
Final Subscription Price is less than the Subscription Price actually paid by
the Investor at the Closing, or (2) the Investor shall pay to the Company the
amount, if any, by which the Final Subscription Price exceeds the Subscription
Price actually paid by the Investor at the Closing.
2.6. Exchange Rate Adjustment. The Exchange Rate Adjustment
Amount shall be calculated by the Company as of December 31, 1995 and the
Company shall promptly notify the Investor in writing of the result of such
calculation, setting forth in reasonable detail the basis therefor. In the
event that the Exchange Rate Adjustment Amount is greater than zero, the
Investor shall pay such amount to the Company, on or before the fifth Business
Day of 1996, in immediately available funds in US$ at a bank account to be
specified by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor as
follows:
3.1. Corporate Existence and Power. The Company is a
sociedad anonima de capital variable duly organized and validly existing under
the laws of the United Mexican States. Each of the Company's subsidiaries
(each, a "Subsidiary") is duly organized and validly existing under the laws
of its jurisdiction of incorporation or organization. The Company and each
Subsidiary is duly qualified to do business in each jurisdiction in which such
qualification is required. The Company and each of the Subsidiaries has full
corporate power and authority to carry on its business and operations as
presently conducted and as planned to be conducted and to own and lease its
properties. All of the Subsidiaries are listed in Schedule 3.1(a), which sets
forth the authorized and issued capital stock of each such Subsidiary and the
record and (to the extent known to the Subsidiary) beneficial ownership of the
capital stock of each such Subsidiary. The capital stock of each Subsidiary
listed in Schedule 3.1(a) as being owned of record by the Company or by
another Subsidiary is owned beneficially by the Company or such Subsidiary
free of all Liens, except for Liens granted pursuant to the Banamex Revolving
Credit. Except as set forth on Schedule 3.1(b) neither the Company nor any of
the Subsidiaries directly or indirectly owns or otherwise controls any capital
stock of, or has any ownership interest in, any corporation, partnership or
other entity, except for the Company's or the Subsidiaries' ownership of
shares of the Subsidiaries and temporary holdings of readily marketable
securities for cash management purposes.
3.2. Corporate and Governmental Authorizations. (a) The
Company has full corporate power and authority to issue and deliver the
Initial Shares as provided in this Agreement, to execute and deliver this
Agreement and the other Transaction Documents to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
Transactions. The execution, delivery and performance of this Agreement and
the other Transaction Documents to which the Company is a party and the
consummation of the Transactions have been duly authorized by all requisite
corporate action of the Company or its shareholders, including all required
consents of shareholders and effective waivers of preemptive nights in
connection with the issuance of the Initial Shares. This Agreement
constitutes, and the other Transaction Documents to which the Company is a
party, when executed and delivered by the Company, will constitute, legal,
valid and binding obligations of the Company, enforceable against the Company
in accordance with their respective terms.
(b) No consent or authorization of, or filing with, any Person
is required on the part of the Company or any Subsidiary in connection with
the Company's execution, delivery or performance of this Agreement and the
other Transaction Documents to which it is a party or the consummation of the
Transactions, except for (i) registration of the Company with the Registro
Nacional de Inversiones Extranjeras, which must be made within 40 Mexican
business days after Closing, (ii) filing, before the Public Registry of
Commerce, of the public deed evidencing the formalization of the minutes of
the meeting of the shareholders of the Company at which issuance of the Initial
Shares was authorized, which can only be effected after Closing, and (iii)
those consents, authorizations and filings listed on Schedule 3.2, all of
which have been obtained or made or will be obtained or made prior to Closing.
3.3. Governing Documents. The estatutos, as amended or
supplemented to date and as currently in effect, of the Company and each
Subsidiary are listed in Schedule 3.3. True and correct copies of such
documents have previously been made available to the Investor.
3.4. Capitalization. (a) The Company's authorized capital
stock consists of (i) 51,000,000 Series B Shares, of which 38,000,000 are
issued and outstanding, (ii) 25,000,000 Series D-1 Shares, of which 7,375,000
are issued and outstanding, and (iii) 24,000,000 Series D-2 Shares, of which
10,125,000 are issued and outstanding. The outstanding Series B Shares,
Series D-1 Shares and Series D-2 Shares are owned of record and beneficially
by the shareholders in the amounts set forth on Schedule 3.4. Except as
provided in the Transaction Documents, or as disclosed on Schedule 3.4, there
are no outstanding preemptive, conversion or other rights, options, warrants or
other agreements or arrangements of any kind, contingent or otherwise,
obligating the Company or any Subsidiary to issue or sell, or cause to be
issued or sold, any shares of the Company's capital stock, any shares of
capital stock of any Subsidiary or any securities convertible into or
exchangeable or exercisable for any such shares, and no authorization therefor
has been given. Except for, or as included in, the Transaction Documents,
there are no agreements among any of the Private Shareholders or between one
or more Private Shareholders and the Company relating to any Capital Stock.
(b) The Initial Shares, when issued, delivered and paid for
as contemplated by this Agreement, will be validly issued, fully paid and
nonassessable, and the Investor will acquire good, valid and marketable title
to the Initial Shares, free and clear of any Lien, including without
limitation any preference or preemptive rights in respect of the Initial
Shares in favor of any other Person, other than Liens created by the
Transaction Documents.
3.5. No Conflicts, etc. Neither the execution and delivery by
the Company of this Agreement and the other Transaction Documents to which it
is a party, nor the performance by the Company of its obligations hereunder
and thereunder, nor the consummation of the Transactions will (i) violate,
conflict with or result in the breach of, or constitute a default under, (A)
any provision of the estatutos sociales orother organizational documents of the
Company or any Subsidiary, (B) any provision of any law or regulation
applicable to the Company or any Subsidiary, or to which any of its assets is
subject, (C) any material order, judgment or award of any court, tribunal or
regulatory authority applicable to the Company or any Subsidiary, or to which
any of its assets is subject or (D) any material agreement or instrument to
which the Company or any Subsidiary is a party or by which any of its assets is
bound, or (ii) result in the creation of any material Lien upon any of the
assets of the Company or any Subsidiary.
3.6. Financial Information. (a) Schedule 3.6(a) sets forth
the financial statements relating to the Company and its Subsidiaries for
accounting periods commencing on or after January 1, 1992 that have been
furnished by the Company to the Investor (collectively, the "Financial
Statements"). The Financial Statements present fairly the consolidated
financial position and results of operations of the Company and its
Subsidiaries at the dates and for the periods to which they relate, are
consistent with the books and records of the Company and its Subsidiaries and
have been prepared in accordance with Mexican GAAP consistently applied
throughout the periods involved, subject to changes resulting from year-end
audit adjustments consistent with past practice or required by Mexican GAAP.
(b) The accounting books and records of the Company and its
Subsidiaries are complete and, in reasonable detail, accurately and fairly
reflect, in all material respects, the transactions undertaken by the Company
and its Subsidiaries.
3.7. Absence of Undisclosed Liabilities. Except as and to the
extent (i) reflected, disclosed or reserved against in the 1993 Balance
Sheet, (ii) incurred in the ordinary course of business consistent with past
practice since December 31, 1993 and not in the aggregate having an Adverse
Effect, or (iii) set forth on Schedule 3.7, the Company and its Subsidiaries
have no liabilities of any nature, whether known or unknown, accrued,
contingent or otherwise.
3.8. Absence of Certain Changes. Except as set forth on
Schedule 3.8 or as contemplated by the Transaction Documents, since December
31, 1993, (i) the Company and each Subsidiary has conducted and operated its
business only in the ordinary course in a manner consistent with past
practice, (ii) to the knowledge of the Company, no event has occurred which
has had or could reasonably be expected to have an Adverse Effect and (iii)
neither the Company nor any Subsidiary has:
(1) authorized, declared or paid any dividend or other
distribution in respect of its capital stock (other than dividends
paid by the Subsidiaries) or purchased or redeemed, directly or
indirectly, any shares of its capital stock;
(2) issued or sold, or committed to issue or sell, any shares
of its capital stock or any options, warrants, or other rights to
purchase any such shares or any securities or other instruments
convertible into or exchangeable or exercisable for any such shares;
(3) suffered any strike or other labor difficulty that,
individually or in the aggregate, has had or could reasonably be
expected to have an Adverse Effect;
(4) amended its estatutos sociales or any other organizational
documents;
(5) taken any other action that, if the Shareholder Agreement
had then been in effect, would have required the Investor's approval
or a Qualified Vote under Section 2.1 or 3.2(b) of the Shareholder
Agreement;
(6) entered into any agreement, commitment or transaction
(including, without limitation, any borrowing, capital expenditure or
capital financing) material to the business, operations or financial
condition of the Company and its Subsidiaries taken as a whole,
except agreements, commitments or transactions in the ordinary course
of business; or
(7) changed in any material respect its accounting or tax
practices, policies or principles.
3.9. Compliance with Laws and Other Instruments; Licenses.
(a) Neither the Company nor any Subsidiary is in violation or breach of, or in
default under, (i) any provision of its estatutos, (ii) any provision of any
law or regulation applicable to it or to which any of its assets are subject,
(iii) any order, judgment or award of any court, tribunal or administrative or
regulatory authority applicable to it or to which any of its assets are
subject, or (iv) any agreement or instrument to which it is a party or to
which any of its assets is bound, which violation, breach or default could
reasonably be expected to have an Adverse Effect.
(b) Schedule 3.9 lists for the Company and each Subsidiary all
material concessions, licenses, pole attachment agreements and other material
agreements with and approvals from governmental authorities and utilities
necessary to own and operate the Systems lawfully and in the manner in which
they are now operated (collectively "Licenses"). True and correct copies of
such Licenses have previously been made available to the Investor. Schedule
3.9 also sets forth information as to the expiration of, and geographical area
covered by, each License and the status of all applications for the grant,
extension or renewal of thereof. None of the Licenses may lawfully be revoked
except as provided therein. Except as described in Schedule 3.9 (which
described matters have not in the aggregate had, and would not reasonably be
expected in the aggregate to have, an Adverse Effect), there has been no
breach or violation, and there is no outstanding breach or violation, by the
Company or any Subsidiary of any License and all of the Licenses are in good
standing and are owned by the Company or its Subsidiaries free of any Liens.
3.10. Taxes. Except as set forth in Schedule 3.10: The
Company and each of the Subsidiaries has duly filed all Mexican income, asset
and value added tax returns and all other Mexican (federal, state and local)
and all non-Mexican (federal, state, and local) tax returns which are required
to be filed by the Company or any Subsidiary for any Pre-Closing Period. All
such tax returns were timely filed and, when filed, were complete and accurate
and complied in all material respects with applicable law and accurately set
forth the amount of all applicable taxes due. All Taxes (including without
limitation, withholding Taxes and Taxes attributable to the restructuring of
the ownership of the Company in 1993) shown on such tax returns or otherwise
payable by the Company or any Subsidiary have been timely paid as required by
law. No such return is the subject of any pending audit or any tolling or
similar agreement or any extension of applicable statutes of limitations.
There are no pending claims for Taxes for which the Company or any of the
Subsidiaries is or may become liable or which are or may result in a Lien upon
the assets of the Company or any of the Subsidiaries, other than (i)
assessments for Taxes not yet past due or in default or (ii) assessments being
contested in good faith by the Company or such Subsidiary and for which the
Company or such Subsidiary has properly reserved on its books and on the June
1994 Balance Sheet. The reserves on the books of the Company and the
Subsidiaries in respect of Taxes not yet due are adequate and consistent with
the reserves maintained by companies of established reputation similarly
situated.
3.11. Stamp Tax, etc. No stock exchange, stamp or other
issuance or transfer Taxes are payable by or on behalf of the Investor or the
Company to Mexico or any political subdivision or taxing authority thereof or
therein in connection with the initial issuance, sale and delivery of the
Initial Shares to the Investor by the Company.
3.12. Litigation, etc. Except as set forth on Schedule 3.12,
there is no action, proceeding or investigation pending or, to the knowledge
of the Company, threatened against the Company or any of the Subsidiaries
before any court or governmental authority, nor is there in effect any
judgment, order or decree of any such court or governmental authority
applicable to the Company, (i) which questions the validity of, or the
obligations of the Company under, this Agreement or any other Transaction
Document, or (ii) which seeks to impede, enjoin or invalidate the
Transactions, in whole or in part, or (iii) that, if determined adversely,
would have an Adverse Effect.
3.13. The Systems. (a) Schedule 3.13 lists the following:
(i) each System owned in whole or in part or operated by the
Company or any Subsidiary, specifying the nature and amount of such
interest if less than 100% ownership;
(ii) for each such System, as of November 30, 1994, (A) the
number of Subscribers for the System (exclusive of persons described
by the immediately following clause (B) of this sentence), (B) the
approximate number of persons and entities to whom cable service in
the System is provided at no charge or for a reduced charge, (C) the
number of kilometers of plant for such System and (D) the approximate
number of homes passed by fully completed and operational plant in
the System (in such proximity as to permit connection by installation
of a drop only). The Company has made available to the Investor the
standard form of Subscription Contract for each System. The
Subscribers for each System have executed and delivered Subscription
Contracts substantially in the forms made available to Investor.
(iii) for each such System, an accurate and complete listing and
description of the current channel alignments for the System,
including all broadcast and satellite services carried, cable channel
assignment, frequencies utilized and pilot carrier frequencies of the
System. The System has capability of distributing 300 mhz.
(b) Neither the Company nor any Subsidiary is conducting any
cable operations in any other location or through any person, or applying for
any franchises except as disclosed in Schedule 3.13 or 3.9. Schedule 3.13
sets forth a list of all annual plans submitted to the Secretaria de
Cominicaciones y Transportes by the Company since January 1, 1993 in
connection with any application for the grant, extension or renewal of any
License. The Company or a Subsidiary is duly authorized under applicable
Licenses to distribute to Subscribers all the signals presently being carried.
There are no obligations or liabilities to Subscribers or to other users of
the Company's or its Subsidiaries' cable television services which are
material, except (i) with respect to deposits made by Subscribers or such
other users, and (ii) the obligation to supply services to Subscribers in the
ordinary course of business. Schedule 3.13 contains a true, complete and
correct current statement of all subscriber rates, tariffs and other charges
for cable television or other services provided by the Company or its
Subsidiaries.
3.14. Assets. (a) The Company and each of its Subsidiaries
has good and marketable title to or, in the case of leased assets, a valid
leasehold interest in, all of its properties and other assets reflected on the
June 1994 Balance Sheet, except assets disposed of in the ordinary course of
business between such date and the Closing Date, in each case free and clear
of all Liens except for (i) Liens for current Taxes not yet due and payable or
the validity of which is being contested reasonably and in good faith by
appropriate proceedings and for which the Company has accrued adequate
reserves on the June 1994 Balance Sheet, (ii) Liens granted to Banamex by the
Company with respect to the stock of the Subsidiaries to secure certain
indebtedness of the Company to Banamex pursuant to the Banamex Revolving
Credit, (iii) Liens arising in the ordinary course of business that would not
materially interfere with the use or disposition of such assets by the Company
or any Subsidiary and (iv) such other Liens, if any, which will not, in the
aggregate, materially detract from the values of such assets and property or
materially interfere with the present uses thereof. Except as disclosed on
Schedule 3.14, all assets material to the operation of the Systems comply in
all material respects with applicable rules, regulations and standards
regarding their intended use. Except as disclosed on Schedule 3.14, all
tangible assets of the Company and its Subsidiaries reflected on the June 1994
Balance Sheet are in all material respects in good working condition for the
conduct of the business of the Company and its Subsidiaries, ordinary wear and
tear excepted.
(b) There exists no default by the Company or any Subsidiary,
or to the knowledge of the Company, by any third party, that materially and
adversely affects any lease of real property leased by the Company or any of
its Subsidiaries.
3.15. Insurance. Schedule 3.15 lists all insurance policies
and bonds of the Company and its Subsidiaries that relate in any way to the
ownership, use or operation of the Systems. Such policies are each
outstanding and in full force and effect on the date hereof, and insure the
assets of the Company and the Subsidiaries against loss or damage to the
extent and in the manner customary for Mexican companies engaged in similar
business or required by any of the Licenses. The Company and the
Subsidiaries have complied in all material respects with the provisions of
such policies and bonds. Since 1990, no insurance carrier has refused any
application for insurance by the Company or any of its Subsidiaries with
respect to any of their respective assets, except for applications for
insurance covering natural disasters, such as earthquakes, hurricanes and
floods.
3.16. Material Contracts. Schedule 3.16 sets forth a list of
the following types of contracts to which the Company or any of its
Subsidiaries is a party (each a "Material Contract"):
(1) contracts involving annual payments in excess of NP$
300,000;
(2) leases of real property;
(3) loan agreements, promissory notes, guarantees,
subordination, financial leasing, deferred purchase or similar type
agreements;
(4) programming agreements;
(5) any other contract not made in the ordinary course of
business that is material to the Company and its Subsidiaries taken
as a whole.
Neither the Company nor any of the Subsidiaries is in default under any
Material Contract which default could reasonably be expected to have an
Adverse Effect. There does not exist any default or event or condition which,
after notice or lapse of time or both, would constitute a default under any
Material Contract by the Company or any Subsidiary, or to the knowledge of the
Company, by any other party thereto, except defaults, events or conditions as
to which requisite waivers or consents have been obtained or which would not,
in the aggregate, reasonably be expected to have an Adverse Effect. Each
Material Contract is in full force and effect and enforceable against each
party thereto, except to the extent that any failure to be enforceable would
not have an Adverse Effect.
3.17. Employment Agreements and Benefits. (a) Except as set
forth in Schedule 3.17, the Company and each of the Subsidiaries has complied
in all material respects with all collective bargaining agreements or profit
sharing, pension, retirement, bonus, incentive compensation, stock option,
deferred compensation or other similar plans, trusts or funds for the benefit
of employees to which the Company or such Subsidiary is a party or by which it
is bound.
(b) There are not in existence or, to the knowledge of the
Company, threatened any (i) work stoppages respecting employees of the Company
or any Subsidiary, or (ii) grievance or arbitration proceedings arising out of
collective bargaining agreements to which the Company or any Subsidiary is a
party which could reasonably be expected to have an Adverse Effect.
3.18. Intellectual Property. The Company and its Subsidiaries
own or are licensed to use inventions, processes, know-how, formulas, trade
secrets, patents, trademarks, trade names, brand names and copyrights
sufficient to conduct, as presently conducted, their business and operations
as a whole without, to the knowledge of the Company, infringement of or
conflict with any asserted rights of third parties, except as set forth in
Schedule 3.18 or which would not reasonably be expected to have an Adverse
Effect. To the knowledge of the Company, no third party has infringed any
invention, process, know-how, formula, trade secret, patent, trademark, trade
name, brand name or copyright owned by the Company.
3.19. Brokers. Except for the Persons set forth on Schedule
3.19, whose fees will be paid by the Company, no investment banker, finder,
broker or other intermediary has been retained by or has acted for or on
behalf of the Company or any of its Affiliates who might be entitled to any
fee or commission from the Company upon the consummation of the transactions
contemplated by this Agreement or any other Transaction Document.
3.20. Affiliate Relationships. Except for ordinary cable
television services or otherwise as set forth in Schedule 3.20 or as disclosed
in writing to the Investor, neither the Company nor any Subsidiary, directly or
indirectly, is a party to or bound by any contractual obligation with, or owes
any money to, and is not purchasing or leasing any property from, or obtaining
services from, or transferring or leasing any property to, or providing
services to, or otherwise engaging in any transaction with, any officer,
director or shareholder of the Company or any Affiliate thereof.
3.21 FECL Clearance. The information provided by the Company
with respect to itself and its Affiliates to the Mexican Federal Economic
Competition Commission in connection with the filings contemplated by Section
5.3(1) does not contain any untrue statement of material fact or omit to state
a material fact necessary in order to make the information provided not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to the Company as
follows:
4.1. Existence and Power. (a) The Investor is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. The Investor has full corporate power and authority to carry on its
business and operations as presently conducted and as proposed to be conducted
and to own and lease its properties.
4.2. Corporate and Governmental Authorizations. (a) The
Investor has full corporate power and authority to execute and deliver this
Agreement and the other Transaction Documents to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
Transactions. The execution, delivery and performance of this Agreement and
the other Transaction Documents to which the Investor is a party and the
consummation of the Transactions have been duly authorized by all requisite
action of the Investor and C-TEC. This Agreement constitutes, and the other
Transaction Documents to which the Investor is a party, when executed and
delivered by the Investor, will constitute, legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance
with their respective terms.
(b) No consent or authorization of, or filing with, any Person
is required on the part of the Investor in connection with the Investor's
execution, delivery or performance of this Agreement and the other Transaction
Documents to which it is a party or the consummation of the Transactions.
4.3. Capitalization. The capital stock of the Investor is
owned of record and beneficially by the Persons and in the amounts set forth
on Schedule 4.3. Except in accordance with the provisions of this Agreement,
or as disclosed on Schedule 4.3, there are no outstanding preemptive,
conversion or other rights, options, warrants or other agreements or
arrangements of any kind, contingent or otherwise, obligating the Investor to
issue or sell, or cause to be issued or sold, any capital stock or other
equity interests in the Investor, or any instruments convertible into or
exchangeable or exercisable for any such interests, and no authorization
therefor has been given. The Investor is not a party to any contract or
agreement other than the Transaction Documents.
4.4. No Conflicts, etc. Neither the execution and delivery by
the Investor of this Agreement and the other Transaction Documents to which it
is a party, nor the performance by the Investor of its obligations hereunder
and thereunder, nor the consummation of the Transactions will (i) violate,
conflict with or result in the breach of, or constitute a default under, (A)
any provision of the certificate of incorporation or by-laws of the Investor,
(B) any provision of any law or regulation applicable to the Investor, or to
which any of its assets is subject, (C) any material order, judgment or award
of any court, tribunal or regulatory authority applicable to the Investor, or
to which any of its assets is subject or (D) any material agreement or
instrument to which the Investor is a party or by which any of its assets is
bound, or (ii) result in the creation of any material Lien upon any of the
assets of the Investor.
4.5. Litigation, etc. Except as set forth in Schedule 4.5,
there is no action, proceeding or investigation pending or, to the knowledge
of the Investor, threatened against the Investor (i) which questions the
validity of, or the obligations of the Investor under, this Agreement or any
other Transaction Document, or (ii) which seeks to impede, enjoin or
invalidate the Transactions, in whole or In part, or (iii) that, if determined
adversely, would have an Adverse Effect.
4.6. Investment Purpose. The Investor is buying the Initial
Shares for investment only and not with a view to resale in connection with
any distribution of the Initial Shares, except in compliance with the
Securities Act of 1933, as amended (the "Securities Act"), and all other
applicable securities laws. The Investor understands that the Initial Shares
have not been registered under the Securities Act and may be resold only if
registered pursuant to the provisions of the Securities Act or if an exemption
from registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Initial Shares.
4.7. Financial Ability to Perform. The Investor has
sufficient funds and credit arrangements to deliver the Subscription Price and
the other amounts payable by it hereunder at the Closing and to take such
other actions as may be required by it to consummate the transactions
contemplated hereby.
4.8. Brokers. No investment banker, finder, broker or other
intermediary has been retained by or has acted for or on behalf of the
Investor or any of its Affiliates who might be entitled to any fee or
commission from the Company or the Private Shareholders upon the consummation
of the transactions contemplated by this Agreement or any other Transaction
Document.
4.9. Other Agreements. Except for, or as included in, the
Transaction Documents, or otherwise as set forth in Schedule 4.9, neither the
Investor, nor C-TEC nor any of their respective Affiliates is a party to any
Conflicting Agreement.
4.10. FECL Clearance. The information provided by the
Investor and C-TEC with respect to themselves and their Affiliates in
connection with the Company's submissions to the Mexican Federal Economic
Competition Commission contemplated by Section 5.3(1) does not contain any
untrue statement of material fact or omit to state a material fact necessary
in order to make the information provided not misleading.
ARTICLE V
CONDITIONS
5.1. Conditions to Obligations of the Investor. The
obligations of the Investor to consummate the transactions contemplated by the
Closing shall be subject to the fulfillment (or waiver by the Investor), on or
prior to the Closing Date, of each of the following conditions:
(1) The representations and warranties of the Company
contained herein and of the Company and each Private Shareholder
contained in any other Transaction Document shall have been true and
correct in all material respects when made and shall be repeated and
be true and correct in all material respects as of the Closing Date.
(2) The Company shall have performed and complied in all
material respects with all agreements and conditions contained in
this Agreement and any Transaction Document to which it is a party
that are required to be performed or complied with by it prior to or
at the Closing Date.
(3) All authorizations and approvals of, or filings with, any
governmental authority or other Person required to be obtained or
made by the Company or any Subsidiary or Private Shareholder in
connection with the execution, delivery and performance by the
Company of the Transaction Documents (other than those referred to in
clauses (i) and (ii) of Section 3.2(b)) shall have been obtained or
made and shall be in full force and effect.
(4) Each of the Transaction Documents to which the Company or
any Private Shareholder is a party shall have been duly authorized,
executed and delivered by the Company or such Private Shareholder and
complete and correct copies thereof shall have been delivered to the
Investor, and the actions contemplated by Section 6.3 shall have been
completed.
(5) The Control Trust Agreement shall have been duly
authorized, executed and delivered by each party thereto.
(6) The Company shall have delivered to the Investor a
certificate executed by an authorized officer of the Company, dated
the Closing Date, to the effect that the conditions set forth in
paragraphs (1) through (3) of this Section 5.1 have been fulfilled and
setting forth the number of Subscribers for each System (exclusive of
persons described in clause (ii)(B) of Section 3.13(a)) as of the
last Business Day of the month immediately preceding the Closing Date.
(7) The Investor shall have received from Franck, Galicia,
Duclaud y Robles, S.C., Mexican counsel to the Company and the
Private Shareholders, an opinion dated the Closing Date,
substantially in the form of Exhibit D-1.
(8) The Company's estatutos sociales shall have been amended
and restated to read in their entirety substantially as set forth in
Exhibit A-1 to the Shareholder Agreement.
(9) The Investor shall have received written evidence that all
directors of the Company designated by the Investor pursuant to
Section 3.1 of the Shareholder Agreement shall have been elected at a
shareholders' meeting of the Company occurring on or prior to the
Closing Date.
(10) Since the date of this Agreement, there shall not have
been any material adverse change in the financial condition,
properties, business or results of operations of the Company and the
Subsidiaries, taken as a whole.
(11) All corporate and other proceedings of the Company in
connection with the transactions contemplated by this Agreement and
the other Transaction Documents, and all documents and instruments
incident to such corporate proceedings, shall be satisfactory in
substance and form to the Investor and its counsel, and the Investor
and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be
reasonably
5.2. Conditions to Obligations of the Company. The obligation
of the Company to consummate the transactions contemplated by the Closing
shall be subject to the fulfillment (or waiver by the Company), on or prior to
the Closing Date, of each of the following conditions:
(1) The representations and warranties of the Investor
contained herein and of the Investor and C-TEC contained in any other
Transaction Document shall have been true and correct in all material
respects when made and shall be repeated and be true and correct in
all material respects as of the Closing Date.
(2) Each of the Investor and C-TEC shall have performed and
complied in all material respects with all agreements and conditions
contained in this Agreement and any Transaction Document to which it
is a party required to be performed or complied with by it prior to
or at the Closing Date.
(3) All authorizations and approvals of, or filings with, any
governmental authority or other Person required to be obtained or
made by the Investor or C-TEC in connection with the execution,
delivery and performance by the Investor or C-TEC of the Transaction
Documents shall have been obtained or made and shall be in full force
and effect.
(4) Each of the Transaction Documents to which the Investor is
a party shall have been duly authorized, executed and delivered by
the Investor and complete and correct copies thereof shall have been
delivered to the Company.
(5) The Investor shall have delivered to the Company
certificates executed by authorized officers of the Investor and
C-TEC, as appropriate, dated the Closing Date, to the effect that the
conditions set forth in para- graphs ( 1) through (3) of this Section
5.2 have been fulfilled.
(6) Each of the Transaction Documents to which C-TEC is a
party shall have been duly authorized, executed and delivered by
C-TEC and complete and correct copies thereof shall have been
delivered to the Company.
(7) The Company shall have received from Swidler & Berlin,
counsel to the Investor and C-TEC, an opinion dated the Closing Date,
substantially in the form of Exhibit D-2.
(8) The Company shall have received from Ray Ostroski, Esq.,
General Counsel to C-TEC, an opinion dated the Closing Date,
substantially in the form of Exhibit D-3.
(9) All corporate and other proceedings of the Investor and
C-TEC in connection with the transactions contemplated by this
Agreement and the other Transaction Documents, and all documents and
instruments incident to such corporate proceedings, shall be
satisfactory in substance and form to the Company and its counsel,
and the Company and its counsel shall have received all such
documents and instruments, or copies thereof, certified if requested,
as may be reasonably requested.
5.3. Conditions to Obligations of Both Parties. The obligations
of the Company and the Investor to consummate the transactions contemplated by
the Closing shall be subject to the fulfillment (or waiver by both of the
parties), on or prior to the Closing Date, of each of the following conditions:
(1) The Company shall have submitted a notice to the Mexican
Federal Economic Competition Commission that is sufficient under the
FECL and either (i) all applicable statutory waiting periods shall
have expired without objection to consummation of the Transactions
on the part of the Mexican Federal Economic Competition Commission,
or (ii) the Company shall have received a written response conforming
to the requirements of the FECL from the Mexican Federal Economic
Competition Commission approving or not objecting to consummation of
the Transactions.
(2) There shall not exist (i) any provision of applicable law
or regulation, or any injunction, restraining order or similar order
issued by any court or governmental agency, preventing consummation
of the Transactions, questioning the legality or validity of the
Transactions, or otherwise alleging damage as a result of tile
Transactions, or (ii) any pending or threatened proceeding in which
any Person (other than a party seeking not to close hereunder or an
Affiliate of or other Person acting in concert with such party) seeks
or may take any such action. Neither party to this Agreement shall
have been notified of a present intention by any department, agency
or instrumentality of the United Mexican States, or the legal
representative of any state or political subdivision thereof, to
commence an action or proceeding to challenge or enjoin consummation
of the Transactions.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company hereby agrees, so long as the Investor or any of
its Affiliates owns any Shares (or, in the case of Section 6.1, until such
date as the Investor owns less than the Required Percentage of the outstanding
Capital Stock), as follows:
6.1. Financial and Other Information. (a) The Company shall
deliver to the Investor:
(i) As soon as available and in any event within 60 days after
the end of each fiscal year of the Company, an audited consolidated
balance sheet of the Company and the Subsidiaries as at the end of
such fiscal year, and the related audited consolidated statements of
income, stockholders' equity and changes in financial position of the
Company and the Subsidiaries for such fiscal year, setting forth in
each case in comparative form the figures, if available, for the
previous fiscal year, prepared in Spanish in accordance with Mexican
GAAP, consistently applied, and in reasonable detail, accompanied by a
report of Lebrija Alvarez y Cia., S.C. or other independent public
accountants selected by the Company in accordance with the
Shareholder Agreement and the auditor's management letter of such
firm;
(ii) As soon as available and in any event within 30 days
after the end of each of the first three quarters of each fiscal year
of the Company, an unaudited consolidated balance sheet of the
Company and the Subsidiaries as of the end of such quarter, and the
related unaudited consolidated statements of income, stockholders'
equity and changes in the financial position of the Company and the
Subsidiaries for such quarter and for the current fiscal year to date,
setting forth in each case in comparative form the figures for the
corresponding quarter in the previous fiscal year and the
corresponding portion of the Company's previous fiscal year, prepared
in Spanish in accordance with Mexican GAAP, consistently applied,
subject to changes resulting from year-end audit adjustments
consistent with past practice or required by Mexican GAAP, in
reasonable detail;
(iii) As soon as practicable after the filing thereof, copies of
all registration statements and annual, quarterly or monthly or other
reports which the Company or any Subsidiary shall have filed with the
Comision Nacional de Valores or the Bolsa Mexicana de Valores, S.A,
de C.V.; and
(iv) With reasonable promptness, such other information with
respect to the Company and the Subsidiaries as the Investor may from
time to time reasonably request.
(b) Subject to prior consultation with the Company, the
Investor and its authorized representatives shall be given access during
normal business hours to such properties, books and records of the Company and
the Subsidiaries and such officers and employees of the Company and its
Subsidiaries having knowledge of financial, operating and legal data as the
Investor may reasonably request, provided that the exercise by the Investor of
its rights under this Section 6.1(b) shall not disrupt the normal conduct of
business by the Company and its Subsidiaries.
(c) The Foregoing provisions shall not limit any rights which
the Investor may have as a shareholder of the Company under applicable Mexican
laws.
6.2. Independent Accountants; Accounting Practices. (a) The
Company shall, at all times, retain an accounting firm of recognized national
standing in Mexico as its independent public accountants, which shall certify
the Company's financial statements at the end of each fiscal year.
(b) The Company shall not make any significant change in its
accounting policies or practices other than any such changes as may from time
to time be required by Mexican GAAP.
6.3. Shareholder Agreement. Promptly following the execution
and delivery of the Shareholder Agreement, the Company shall (i) make all
appropriate notations and entries in its share registry to reflect that the
Capital Stock owned by the Private Shareholders and the Investor is subject to
certain transfer and other restrictions contained in the Shareholder
Agreement, and (ii) to the full extent of its powers under applicable law,
refuse to recognize any transfers of Capital Stock in violation of the terms
and conditions of the Shareholder Agreement.
6.4. Post-Closing Filings. The Company shall make the
registration and filing contemplated by clauses (i) and (ii) of Section 3.2(b)
in a timely manner and in a manner that complies with all applicable laws,
rules or regulations.
ARTICLE VII
OTHER COVENANTS AND AGREEMENTS
7.1. Efforts to Consummate Transactions. Each of the Company
and the Investor shall use their best efforts to cause the conditions to the
Closing contained in this Agreement to be satisfied as promptly as practicable
after the date hereof and otherwise to effect the transactions contemplated
hereby and by the other Transaction Documents.
7.2. Conduct Pending Closing. Until the Closing:
(a) The Company and its Subsidiaries shall conduct their
business in good faith and in the ordinary course, consistent with past
practices and in compliance with all applicable laws, rules and regulations,
and will not engage in any transaction, including, without limitation, entering
into or amending any material agreement or License, incurring any material
liability or obligation (absolute or contingent), or making any material
advance or expenditure, other than in the ordinary course of business.
(b) The Company shall keep proper books of record and account
in which appropriate entries shall be made of all transactions relating to its
business and activities, and will accurately maintain its minute books and
will close its stock transfer books until the Closing.
(c) The Company shall not declare or pay any dividends or
repurchase or otherwise acquire or retire any of its securities and, except as
necessary to consummate the Transactions, shall not amend its Estatutos.
(d) The Company shall deliver to the Investor all financial
statements, including balance sheets, statements of operations, shareholders
equity and changes in financial position, as are made available to the Company
in the ordinary course of business prior to the Closing, but in any event no
less frequently than monthly. Such delivery shall constitute a representation
and warranty by the Company, as if set forth in Article III, that such
financial statements comply with the second sentence of Section 3.6(a) of this
Agreement. Prior to Closing, the Company shall give the Investor access to
the Company's properties, books and records in the manner and to the extent
contemplated by Section 6.1(b) after the Closing.
(e) Prior to the anticipated Closing Date, representatives of
the Company and the Investor shall meet at a mutually agreed time and place in
order to review the conditions to closing in Article V and discuss the parties'
progress toward a timely Closing. At such meeting, the Company and the
Investor shall discuss whether to apply the proceeds to be received by the
Company at the Closing, in whole or in part, to the immediate repayment of the
Company's outstanding indebtedness under the Banamex Revolving Credit to
Banamex or, alternatively, to the repayment of such indebtedness at its
scheduled maturity or otherwise, provided that if the Company and the Investor
shall fall to reach agreement thereon, the Investor shall decide the matter.
7.3. Confidentiality. Each party hereto shall not use or
disclose to any third party (other than their respective financial advisors,
attorneys and other agents and representatives) any information relating to
this Agreement, any other Transaction Document, any of the transactions
contemplated hereby or thereby, or the respective businesses of the Company,
the Investor or any of their Affiliates except (i) information as is required
to be disclosed by applicable law or becomes generally available to the public
other than through a breach of this Agreement, (ii) in a registration
statement or other disclosure document filed with the United States Securities
and Exchange Commission, provided that (A) the Company shall have been
furnished with a draft of the proposed disclosure, insofar as it relates to
the Company or its Affiliates, not less than two Business Days before such
material is to be submitted to the Securities and Exchange Commission and (B)
the Company's comments on such draft disclosure are not unreasonably rejected,
and (iii) in a mutually approved press release in connection with the signing
of this Agreement ("Confidential Information"). Each party hereto shall, and
shall cause each of its Affiliates to, take such reasonable precautions as are
necessary to prevent use or disclosure of Confidential Information by or to
others.
7.4. Indemnification. (a) The Company shall indemnify and
hold harmless the Investor and its Affiliates and the directors, officers and
employees of each of the foregoing from, against and with respect to any and
all claims, liabilities, losses, damages, costs and expenses (including
interest, penalties and reasonable attorney's fees and disbursements), whether
or not resulting from third party claims (each of the foregoing being referred
to herein individually as a "Loss"), and whether or not suffered or incurred
directly by the Investor and its Affiliates (a "Direct Loss") or indirectly by
the Investor or its Affiliates through a reduction in the value of the Capital
Stock held by the Investor and its Affiliates (an "Other Loss"), arising out
of or as a result of (i) any breach by the Company of any covenant or
obligation of the Company in this Agreement or in any other Transaction
Document to which it is a party, or (ii) any breach by the Company of, or any
inaccuracy in, any representation or warranty made by the Company in this
Agreement or in any other Transaction Document to which it is a party (but in
all cases excluding any Losses arising out of or resulting from an
Extraordinary Revocation, for which the exclusive remedy shall be the payment
contemplated by Section 7.4(c)), in either case to the extent not expressly
waived in writing by the Indemnified Party. Subject to the foregoing, if the
Company suffers or incurs a Loss as a result of the facts underlying any
breach by the Company of, or inaccuracy in, any such representation (a
"Company Loss"), the Investor and its Affiliates will be deemed to have
suffered an Other Loss equal to the dollar amount of the Company Loss,
multiplied by the percentage interest of the Investor in the Capital Stock of
the Company, determined as of the time the Company Loss is incurred, expressed
as a decimal (the "Investor's Percentage Interest"). In the event that the
Company is required to indemnify the Investor pursuant to this Section 7.4(a)
with respect to any Loss (whether a Direct Loss or an Other Loss), the amount
of any such indemnification payment shall be the amount of such Loss divided
by I-X, where "X' is equal to the Investor's Percentage Interest in the
outstanding Capital Stock of the Company acquired by it in accordance with
the provisions of the Transaction Documents, determined as of the time such
payment is made, expressed as a decimal.
(b) The Investor shall indemnity and hold harmless the Company
and its Affiliates and the directors, officers and employees of each of the
foregoing from, against and with respect to any and all Losses arising out of
or as a result of (i) any breach by the Investor of any covenant or obligation
of the Investor in this Agreement or in any other Transaction Document to
which it is a party, (ii) any breach by the Investor of, or any inaccuracy in,
any representation or warranty made by the Investor in this Agreement or in
any other Transaction Document to which it is a party, in either case to the
extent not expressly waived in writing by the Indemnified Party, or (iii) the
Investor or any of its Affiliates having provided any information with respect
to the Company, its Subsidiaries or the Transactions to any actual or
potential source of financing of the Investor for the Transaction, but only to
the extent such information is inaccurate or misleading and is not consistent
with any information provided to the Investor by the Company regarding the
same subject matter.
(c) In the event of an Extraordinary Revocation of a
Pre-Existing System, the Company shall pay to the Investor an amount equal to
(i) the Per Subscriber Investment multiplied by the lesser of (x) the number of
Subscribers to such Pre-Existing System as of May 31, 1994, and (y) the number
of Subscribers to such Pre-Existing System whose business the Company or its
Subsidiaries shall have lost as a result of such Extraordinary Revocation,
minus (ii) 40% of the Net Recovery in respect of such Extraordinary
Revocation. For purposes of calculating the amount of any payment by the
Company to the Investor pursuant to this Section 7.4(c), the amount of any Net
Recovery in respect of an Extraordinary Revocation shall be estimated by the
Company and the Investor in good faith as of the time of such payment which
shall be made promptly following (i) the occurrence of such Extraordinary
Revocation and (ii) the estimation of any Net Recovery by the Company and the
Investor. Thereafter, within six months after all administrative, judicial
and other appeals and remedies with respect to such Extraordinary Revocation
have been exhausted, the Company's accountants shall determine (the
"Revocation Accounting") the actual amount of Net Recoveries in respect of
such Extraordinary Revocation. Projected Net Recoveries not yet realized by
the Company as of the date of the Revocation Accounting shall be estimated in
good faith by the Company's accountants for purposes of the Revocation
Accounting. If the Investor objects to the results of the Revocation
Accounting, the Investor shall notify the Company's accountants of its
objection in writing (the "Revocation Objection Notice") within 10 Business
Days after receiving the results of the Revocation Accounting with copies of
the Revocation Objection Notice to all parties in accordance with Section 8.6,
and the Investor and the Company shall endeavor to resolve the open issues. If
such issues are not resolved within 30 days after the receipt by the Company
of the Revocation Objection Notice, the unresolved issues shall be submitted
to the Third Accountant. Within 15 Business Days of its appointment, the Third
Accountant shall deliver a written report to the Investor and the Company
setting forth the final determination of the Net Recoveries in respect of the
Extraordinary Revocation in question. The Third Accountant shall be entitled
to rely upon (but shall not be bound by) the work papers of the Company's
accountants in making a final determination of the issues. The decision of the
Third Accountant shall be final and binding on the Investor and the Company.
Each of the Company and the Investor shall bear the expense of its respective
accountants under this Section 7.4(c), and shall share equally the expense of
the Third Accountant, if any. Within 10 Business Days after the Company's Net
Recovery with respect to an Extraordinary Revocation has been finally
determined pursuant to this Section 7.4(c) (the "Final Net Recovery"), (1) the
Company shall pay to the Investor the amount, if any, by which the Final Net
Recovery is less than the Net Recovery on the basis of which a payment was
made by the Company to the Investor pursuant to this Section 7.4(c), or (2) the
Investor shall pay to the Company the amount, if any, by which the Final Net
Recovery exceeds the Net Recovery on the basis of which a payment was made by
the Company to the Investor pursuant to this Section 7.4(c).
(d) Notwithstanding anything to the contrary in Section
7.4(c), in the event that (i) an Extraordinary Revocation is revoked,
rescinded, invalidated or otherwise rendered ineffective by subsequent
governmental, administrative, judicial or other action by any competent
authority in Mexico, or by the passage of time, or (ii) is affirmed or upheld
by such competent authority for stated reasons that do not consist
substantially of one or more acts or omissions by the Company within the scope
of clause (iii) of the definition of Extraordinary Revocation, then the
Investor shall forthwith pay to the Company an amount equal to the sum of all
amounts paid by the Company to the Investor pursuant to Section 7.4(c) in
respect of such Extraordinary Revocation, plus interest thereon at a rate per
annum of 9% from the date of each such payment by the Company to the Investor
to the date such amount is repaid by the Investor to the Company. The
limitations set forth in Sections 7.6(a) and 7.6(b) shall not apply to any
payment required to be made by the Company pursuant to Section 7.4(b).
7.5. Indemnification Procedures. For purposes of this Section
7.5, the party seeking indemnification shall be known as the "Indemnified
Party" and the party from whom indemnification is sought shall be known as the
"Indemnifying Party". As soon as reasonably practicable after receipt by an
Indemnified Party of notice of any Loss (if the Indemnified Party is the
Company) or Direct Loss (if the Indemnified Party is the Investor or any of its
Affiliates) in respect of which an Indemnifying Party may be liable under
Section 7.4, the Indemnified Party shall give notice thereof to the
Indemnifying Party, setting forth in reasonable detail the facts and
circumstances pertaining thereto. The Indemnifying Party shall pay for any Loss
promptly in cash once its responsibility has been established. In the case of
a Loss arising out of or resulting from a claim by a third party, the
Indemnified Party shall permit the Indemnifying Party, at its option and
expense, to assume the defense of such claim by counsel satisfactory to the
Indemnified Party and to settle or otherwise dispose of the same; provided
that the Indemnified Party may at its discretion at all times participate in
such defense by counsel of its own choice, but the fees, expenses and other
charges of such counsel will be at the expense of such Indemnified Party,
unless: (i) the employment of counsel by the Indemnified Party has been
authorized in writing by the Indemnifying Party, (ii) there is a conflict or
potential conflict (based on advice of counsel to the Indemnified Party
reasonably acceptable to the Indemnifying Party) between the Indemnified Party
and the Indemnifying Party, or (iii) the Indemnifying Party has not in fact
employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action; and provided further
that the Indemnified Party shall be entitled to control such defense jointly
with the Indemnifying Party in the case of any litigation referred to in
clause (ii) of the immediately preceding proviso to this sentence. The
Indemnifying Party shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party, enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant
or plaintiff in question to the Indemnified Party and its Affiliates a release
of all liabilities in respect of such claims.
7.6. Limitations on Indemnification. (a) Notwithstanding
anything to the contrary in this Article VII, the Company shall not be
required to indemnify the Investor against any Losses (excluding Losses
arising out of or resulting from (i) an Extraordinary Revocation or (ii) a
breach by the Company of, or any inaccuracy in, the representations and
warranties made by the Company in Section 3.10 and the fifth and sixth
sentences of Section 3.1 ("Excluded Losses")) unless the aggregate of all
Losses (other than Excluded Losses) in respect of which indemnity would
otherwise be due exceeds US$3,000,000, in which case the entire amount of such
nonexcluded Losses shall be indemnified as provided in this Article VII.
(b) Notwithstanding anything to the contrary in this Article
VII, the Company's aggregate indemnification obligations pursuant to Section
7.4(a) (other than with respect to Excluded Losses) shall not exceed US
$10,000,000. Notwithstanding anything to the contrary in this Article VII,
the amounts payable by the Indemnifying Party to the Indemnified Party with
respect to any Loss (if the Indemnified Party is the Company) or any Direct
Loss (if the Indemnified Party is the Investor or any of its Affiliates) shall
be reduced to the extent the amount of the Loss increased as a result of the
failure of the Indemnified Party to provide the Indemnifying Party notice of
Loss in accordance with Section 7.5 as soon as reasonably practicable
following the time at which the Indemnified Party discovered or reasonably
could have discovered such claim (except to the extent the Indemnifying Party
is not prejudiced by any delay in the delivery of such notice).
(c) Any indemnities payable under this Article VII shall be
limited to the amount of actual damages sustained by the Indemnified Party.
Accordingly, the amount of any Loss shall be calculated net of any insurance
proceeds or other recovery actually received by the Person suffering such
Loss. In the case of Loss suffered by the Company, the amount of the Loss
shall be calculated net of any tax benefits to the Company in respect of such
Loss. Except as expressly provided herein, the remedies provided herein shall
be cumulative and shall not preclude the assertion by any party hereto of any
other rights, or the seeking of any other remedies against any other party
hereto, provided that neither the Investor, the Company nor their respective
Affiliates shall be permitted duplicate recoveries, nor shall the Company's
indemnity obligations exceed the limits described in Section 7.6.
(d) Neither the Investor, the Company nor their respective
Affiliates shall be entitled to make any claim for indemnification under this
Article VII with respect to the breach of any particular representation or
warranty contained herein after the date on which such representation or
warranty ceases to survive pursuant to Section 8.4.
ARTICLE VIII
MISCELLANEOUS
8.1. Termination. This Agreement may be terminated at any
time prior to the Closing:
(1) By the written agreement of the Company and the Investor;
(2) Upon notice given by either the Company or the Investor if
the Closing has not occurred on or prior to February 28, 1995; or
(3) Upon notice given by the Investor if the Company breaches
any material covenant or agreement in any Transaction Document or if
any representation or warranty made by the Company or any of the
Company's current shareholders in or pursuant to any Transaction
Document is false in any material respect when made; or
(4) Upon notice given by the Company if the Investor or C-TEC
breaches any material covenant or agreement in any Transaction
Document or if any representation or warranty made by the Investor or
C-TEC in or pursuant to any Transaction Document is false in any
material respect when made; or
(5) Upon notice given by either the Company or the Investor
if consummation of the transactions contemplated hereby would
violate, in whole or in part, any nonappealable final order, decree
or judgment of any court or governmental body having competent
jurisdiction.
The provisions of Sections 7.3 through 7.6 and Sections 8.2 through 8.11 shall
survive any termination of this Agreement.
8.2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE UNITED MEXICAN STATES, WITHOUT
REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
8.3. Arbitration. (a) Any dispute, controversy or claim
arising out of or relating to this Agreement or the breach, validity or
termination thereof shall be finally settled by arbitration under the Rules of
Arbitration of the International Chamber of Commerce in effect on the date
hereof, except as modified herein or by mutual agreement of the parties. The
arbitration shall be held in Mexico City; provided that the arbitrators may
hold hearings in such other locations as the arbitrators determine to be most
convenient and efficient for all the parties under the circumstances. All
arbitrators shall be Persons who speak and read both Spanish and English. All
arbitration proceedings shall be conducted in English, but evidence may be
produced in either Spanish or English.
(b) The arbitration shall be conducted by three arbitrators.
The party initiating arbitration (the "Claimant") shall appoint its arbitrator
in its demand (the "Demand"). The other party (the "Respondent") shall appoint
its arbitrator within 20 Business Days of receipt of the Demand and shall
notify the Claimant of such appointment in writing. If the Respondent fails
to appoint an arbitrator within such period of 20 Business Days, the
arbitrator named in the Demand shall decide the controversy as a sole
arbitrator. Otherwise, the two arbitrators appointed by the parties shall
appoint a third arbitrator within 20 Business Days after the Respondent has
notified the Claimant of the appointment of the Respondent's arbitrator. When
the arbitrators appointed by the Claimant and the Respondent have appointed a
third arbitrator and the third arbitrator has accepted the appointment, the
two arbitrators shall promptly notify the parties of the appointment of the
third arbitrator.
(c) In addition to the authority conferred on the arbitration
panel by the rules specified above, the arbitration panel shall have the
authority to order such discovery and production of documents, including the
deposition of party witnesses, and to make such orders for interim relief,
including injunctive relief, as it may deem just and equitable. A request for
interim measures by a party to a court shall not be deemed incompatible with,
or a waiver of, this agreement to arbitrate.
(d) The foregoing agreement to arbitrate shall be
specifically enforceable. Any award rendered by the arbitrators shall be in
writing and shall be final and binding upon the parties, and may include an
award of costs, including reasonable attorneys' fees and disbursements.
Judgment upon the arbitration award rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of the award and an order of enforcement. The costs of the
arbitration and the enforcement of the award shall be an issue determined by
the arbitration panel.
(e) In order to facilitate the comprehensive resolution of
related disputes, and upon request of any party to the arbitration proceeding,
the arbitration tribunal may, within 90 days of its appointment, consolidate
the arbitration proceeding with any other arbitration proceeding involving any
of the parties hereto relating to this Agreement and to any other Transaction
Document. The arbitrators shall not consolidate such arbitrations unless they
determine that (i) there are issues of fact or law common to the two
proceedings so that a consolidated proceeding would be more efficient than
separate proceedings, and (ii) no party hereto or to such other Transaction
Document would be prejudiced as a result of such consolidation through undue
delay, conflict of interest or otherwise. In the event of different rulings
on this question by the arbitration tribunal constituted hereunder and the
tribunal constituted under any other Transaction Document, the ruing of the
panel under this Agreement shall control. In the case of a consolidated
proceeding, the arbitrators in that proceeding shall be named in the manner
set forth in clause (b) of this Section 8.3, except that in any such
consolidated proceeding the Company and the Private Shareholders shall be
deemed to constitute one party and shall jointly appoint a single arbitrator
so long as neither the Company nor the Private Shareholders will be prejudiced
as a result thereof and there is no conflict of interest between the Company
and the Private Shareholders.
8.4. Survival. The representations and warranties of the
parties hereto contained in this Agreement or in any other Transaction
Document, or otherwise made in writing in connection with the transactions
contemplated hereby and thereby (in each case as affected by the transactions
contemplated by the Transaction Documents) shall survive until 24 months after
the Closing, provided that the representations and warranties contained in
Section 3.4(b) and in the fifth and sixth sentences of Section 3.1 shall
survive indefinitely and those contained in Section 3.10 shall survive until
expiration of the applicable statue of limitations.
8.5. Amendment, Assignment, etc. Neither this Agreement nor
any term hereof may be amended, changed, waived, discharged or terminated
other than by an instrument in writing, signed by the party against which
enforcement of such amendment, change, waiver, discharge or termination is
sought. This Agreement shall be binding upon the respective successors and
permitted assigns of the parties hereto. This Agreement shall not be
assignable or otherwise transferable by a party without the prior written
consent of the other party and any attempt to so assign or transfer this
Agreement without such consent shall be void and of no effect.
8.6. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be in writing and
shall be deemed validly given upon personal delivery or one day after being
sent by telecopy or overnight courier service:
(a) if to the Company, at:
Megacable, S.A. de C.V.
Blvd. Rosales y Anatolio Ortega, Local #7
Colonia Scalley
Los Mochis, Sinaloa 81240 MEXICO
Telephone: 011-52-681-89262
Facsimile: 011-52-681-23290
Attn: Mr. Enrique Yamuni Robles
(b) if to the Investor, at:
C-TEC International, Inc.
105 Carnegie Center
Princeton, New Jersey 08540
Telephone: (609) 734-3700
Facsimile: (609) 951-8632
Attn: Mr. Mark Haverkate
with a copy to:
C-TEC International, Inc.
105 Carnegie Center
Princeton, New Jersey 08540
Telephone: (609) 734-3700
Facsimile: (609) 734-3830
Attn: Raymond B. Ostroski, General Counsel
or at such other address or telecopy number as any party hereto may designate
by written notice to the other parties hereto.
8.7. Expenses. Except as otherwise specifically provided in
this Agreement, each party hereto shall pay all its own costs and expenses
incident to this Agreement and the transactions contemplated hereby, including
legal and accounting fees and disbursements.
8.8. Severability. If any provision of this Agreement is held
to be unenforceable for any reason, it shall be adjusted rather than voided,
if possible, in order to achieve the intent of the parties to this Agreement to
the extent possible. In any event, the invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision, in
any other competent jurisdiction.
8.9. No Third Party Beneficiaries. Nothing in this Agreement
will be construed as giving any Person, other than the parties hereto and
their successors and permitted assigns, any right, remedy or claim under or in
respect of this Agreement or any provision hereof, except as specifically
provided for herein.
8.10. Translation. Should this Agreement be translated into
any language other than English, the English version shall control and prevail
on any question of interpretation or otherwise.
8.11. Integration; Section Headings; Counterparts; etc. This
Agreement (including the Schedules and Exhibits hereto) and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement of the parties and supersedes any and all prior
agreements, arrangements and understandings relating to the subject matters
hereof and thereof. The section headings of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same instrument. Neither this Agreement nor any Transaction
Document shall create the relationship of partners, joint venturers, or
principal and agent among the parties hereto or any of their respective
Affiliates. None of the parties hereto shall have any authority to represent
or to bind the other parties in any manner whatsoever.
8.12. Further Assurances. Each of the Company and the
Investors shall execute and deliver such additional documents and perform such
acts as are reasonably requested by the other party in order fully to effect
the intent of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
MEGACABLE, S.A. DE C.V.
By: /s/ JAVIER BOURS CASTELO
_______________________________
Name: Javier Bours Castelo
Title: Chairman of the Board of
Directors
By: /s/ ENRIQUE YAMUNI ROBLES
_______________________________
Name: Enrique Yamuni Robles
Title: Chief Executive Officer
C-TEC INTERNATIONAL, INC.
By: /s/ DAVID C. MCCOURT
_______________________________
Name: David C. McCourt
Title: Chairman and Chief
Executive Officer
Exhibit B
SHAREHOLDER AGREEMENT
among
MEGACABLE, S.A. DE C.V.,
C-TEC INTERNATIONAL, INC.,
and certain
PRIVATE SHAREHOLDERS
listed herein
Dated as of January __, 1995
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1. Definitions....................................................... 2
ARTICLE II
CORPORATE ACTIONS
2.1. Reserved Actions.................................................. 13
ARTICLE III
BOARD OF DIRECTORS
3.1. Board of Directors................................................ 14
3.2. Decisions by the Board of Directors............................... 15
ARTICLE IV
MANAGEMENT COMMITTEE; OFFICERS
4.1. Management Committee.............................................. 20
4.2. Duties of the Management Committee................................ 21
ARTICLE V
TRANSFER RESTRICTIONS
5.1. Restrictions on Transfer.......................................... 22
5.2. Permitted Transferees............................................. 24
5.3. Right of First Offer.............................................. 28
5.4. Tag-Along Rights.................................................. 30
5.5. Designated Purchaser.............................................. 32
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS
6.1. Exclusivity....................................................... 33
6.2. Initial Public Offerings.......................................... 35
6.3. Restriction on Acquiring Shares................................... 40
6.4. Conflicting Agreements............................................ 42
6.5. Independent Auditors.............................................. 43
ARTICLE VII
IRRECONCILABLE DIFFERENCES
7.1. General........................................................... 43
7.2. Impasse........................................................... 44
7.3. Resolution of Differences......................................... 45
7.4. Certain Related Matters........................................... 49
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1. Representations and Warranties of the Investor.................... 52
8.2. Representations and Warranties of Private Shareholders............ 53
8.3. Representations and Warranties of the Control Trustee............. 56
8.4. Representation and Warranties of the Company...................... 58
ARTICLE IX
MISCELLANEOUS
9.1. Governing Law..................................................... 59
9.2. Arbitration....................................................... 59
9.3. Injunctive Relief................................................. 62
9.4. Survival.......................................................... 63
9.5. Amendment, Assignment, etc........................................ 63
9.6. Notices........................................................... 63
9.7. Expense........................................................... 65
9.8. Severability...................................................... 65
9.9. No Third Party Beneficiaries...................................... 66
9.10. Translation....................................................... 66
9.11. Integration; Section Headings; Counterparts; etc.................. 66
SCHEDULES AND EXHIBITS
Schedule I Private Shareholders and
Stock Ownership of Private Shareholders
Exhibit A-I Estatutos of the Company
Exhibit A-2 English Translation of the Estatutos of the Company
SHAREHOLDER AGREEMENT, dated as of January __, 1995, among MEGACABLE,
S.A. DE C.V. a sociedad anonima de capital variable organized under the laws
of the United Mexican States (together with its successors and permitted
assigns, the "Company"), C-TEC INTERNATIONAL, INC., a corporation organized
under the laws of Delaware (together with its successors and permitted
assigns, the "Investor"), and each of the other persons listed on Schedule I
hereto (collectively, the "Private Shareholders").
RECITALS
A. The Investor has subscribed, pursuant to a Subscription
Agreement, dated as of January 19, 1995 (as amended or modified from time to
time, the "Subscription Agreement"), among the Company and the Investor, to
the Initial Shares (as defined in the Subscription Agreement).
B. Each of the Private Shareholders owns, beneficially and of
record, the number of shares of capital stock of the Company set forth
opposite the name of such Private Shareholder on Schedule I.
C. The estatutos of the Company currently in effect have been duly
adopted in the form attached as Exhibit A-1 (as amended from time to time, the
"Estatutos"), an unofficial English translation of which is attached as
Exhibit A-2.
D. The Company, the Investor and the Private Shareholders desire to
enter into this Agreement to set forth the parties' agreement as to certain
matters relating to the Company, including transfers of shares of Capital
Stock owned now or hereafter by the parties.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement
without definition shall have the respective meanings given them in the
Subscription Agreement. In addition, the following terms, as used in this
Agreement, have the following meanings (each such meaning to be equally
applicable to both the singular and plural forms of the respective terms so
defined):
Additional Shares: any shares of Capital Stock, other than the
Initial Shares, owned from time to time by the Investor and its
Eligible Subsidiaries.
Adjusted Subscription Price per Share: as defined in Section
6.2(f).
Affiliate: with respect to any Person, any other Person which,
directly or indirectly, controls or is controlled by or is under
common control with such Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities or by contract or otherwise, and shall be deemed to exist
upon ownership of 20% or more of any class of voting securities or
equity interest in such Person, provided that for purposes of Section
6.1 MFS Communications Company, Inc., a corporation organized under
the laws of Delaware, shall not be an "Affiliate" of the Investor.
Board of Directors: the Board of Directors of the Company.
Cable Business: (i) any cable television system, subscription
television system, multi-point distribution system, direct broadcast
satellite system, private operational fixed microwave system,
pay-per-view system or television receive-only sales or service
system; (ii) the business of developing programming for distribution
through any of the systems referred to in clause (i); (iii) any
business or for-profit activity engaged in, or in process of
development, by the Company as of the date of this Agreement; and
(iv) any Related Business, but only to the extent it can be supplied
using cable television transmission facilities.
Chairman: the Chairman of the Board of Directors of the Company.
Claimant: as defined in Section 9.2(b).
CNV: the Comision Nacional de Valores (the Mexican National
Securities Commission).
Company: as defined in the first paragraph of this Agreement.
Competing Business: with respect to any Person, any Related
Business conducted by such Person to the extent that (i) the Company
or any of its Affiliates is also engaged in such Related Business and
(ii) such Person is engaged in such Related Business in an authorized
service area in which the Company or its Affiliate also engages in
such Related Business.
Conflicting Agreement: any letter of intent, term sheet,
commitment, loan agreement, credit agreement, shareholder agreement,
indenture, mortgage, deed of trust, instrument, or agreement or
contract of any type to which the Investor, C-TEC or any of their
respective Affiliates is or shall become a party and pursuant to the
terms of which any one or more actions by the Company or its
Affiliates of a type requiring Investor consent under Section 2.1 or
a Qualified Vote under Section 3.2 could, if so consented to or
approved, result in a breach, default or violation thereof.
Consolidated Funded Debt: as of any date of determination, the
total of all Funded Debt of the Company and its consolidated
subsidiaries outstanding on such date, determined in accordance with
Mexican GAAP as of the date of determination.
Control Transfer: with respect to any Person, any proposed
Transfer of Capital Stock by such Person if, after giving effect to
such Transfer, the aggregate number of shares of full voting Capital
Stock owned, controlled or held with power to vote by the Control
Trust, the Investor and the Investor's Eligible Subsidiaries would
constitute 50% or less of the outstanding shares of full voting
Capital Stock.
Demand: as defined in Section 9.2(b).
Director: any member of the Board of Directors.
Eligible Subsidiary: with respect to any Person, a subsidiary
in which such Person owns, directly, beneficially and of record, at
least 80% of each class or series of such subsidiary's outstanding
capital stock.
Estatutos: as defined in Recital C.
Excess Series B Float: as of any date of determination, a
number of shares (rounded to the nearest whole number) equal to the
sum, if positive, of (i) the number of Series B Shares Transferred
pursuant to Sections 5.1(a)(3) or 5.1(a)(4) and notified to the
Company pursuant to Section 5.1(b), plus (ii) the number of Series B
Shares issued by the Company and sold to the public as part of any
bona fide public offering (but not including any Series B Shares
purchased by the Investor or any of its Affiliates pursuant to
Section 6.2(e) or otherwise in connection with any such public
offering), minus (iii) 20% of the number of Series B Shares
outstanding as of such date, minus (iv) the number of
Series B Shares purchased by the Investor or any of its Affiliates
pursuant to Section 6.3 and notified to the Company pursuant to
Section 6.3(b).
Excess Other Float: as of any date of determination, a number
of shares (rounded to the nearest whole number) equal to the sum, if
positive, of (i) the number of Other Shares Transferred pursuant to
Section 5.1(a)(3) or 5.1(a)(4) and notified to the Company pursuant
to Section 5.1(b), plus (ii) the number of Other Shares issued by the
Company and sold to the public as part of any bona fide public
offering (but not including any Other Shares purchased by the
Investor or any of its Affiliates pursuant to Section 6.2(e) or
otherwise in connection with any such public offering), minus (iii)
20% of the number of Other Shares outstanding as of such date, minus
(iv) the number of Other Shares purchased by the Investor or any of
its Affiliates pursuant to Section 6.3 and notified to the Company
pursuant to Section 6.3(b).
Final Offer: as defined in Section 7.3(e).
Funded Debt: with respect to any Person, all indebtedness for
borrowed money of such Person which by its terms or by the terms of
any instrument or agreement relating thereto matures, or which is
otherwise payable or unpaid, more than one year from, or is directly
or indirectly renewable or extendible at the option of the debtor to
a date more than one year (including an option of the debtor under a
revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year) from,
the date on which Funded Debt is to be determined.
Impasse: the occurrence of any of the following events:
(1) at two successive meetings of the Board of
Directors held after the 18-month anniversary of the Closing
either or both of the following events shall occur: (A) the
meeting shall lack a quorum, after having been duly called,
after notices thereof have been given in accordance with the
Estatutos and after actual notice thereof has been given to the
Investor Nominees, which meeting would have had a quorum but
for the absence of any Investor Nominee, and/or (B) the Board
of Directors does not approve any matter on the agenda for such
meeting that would have been approved but for the failure to
obtain a required Qualified Vote;
(2) at two successive meetings (ordinary or
extraordinary) of the shareholders of the Company held after
the 18-month anniversary of the Closing either or both of the
following events shall occur: (A) the meeting shall lack a
quorum, after having been duly called, after notices thereof
have been given in accordance with the Estatutos and after
actual notice thereof has been given to the Investor, which
meeting would have had a quorum but for the absence of the
Investor and/or (B) the holders of Restricted Shares do not
approve any matter on the agenda for such meeting that would
have been approved but for the failure to obtain the consent of
the Investor under Section 2.1;
(3) at a meeting of the Board of Directors at which an
action is to be considered, (i) the Investor Nominees state,
with express reference to this definition, that taking such
action, in the reasonable judgment of the Investor Nominees,
will have an Adverse Effect, (ii) all Investor Nominees vote
against such action, (iii) such action is nonetheless approved,
and (iv) the Company is thereafter notified in writing by the
Investor that the approval of such action, in the reasonable
judgment of the Investor, will have an Adverse Effect and,
therefore, the Investor is declaring an "Impasse";
(4) at a meeting (ordinary or extraordinary) of the
shareholders of the Company at which an action is to be
considered, (i) the Investor states, with express reference to
this definition, that taking such action, in the reasonable
judgment of the Investor, will have an Adverse Effect, (ii) all
of the Investor Shares are voted against such action, (iii)
such action is nonetheless approved, and (iv) the Company is
thereafter notified in writing by the Investor that the
approval of such action, in the reasonable judgment of the
Investor, will have an Adverse Effect and, therefore, the
investor is declaring all "Impasse"; or
(5) at any time after the 54-month anniversary of the
Closing, the Investor or the Private Shareholder Representative
shall deliver a written notice to the other party stating that
the Person delivering such written notice thereby declares the
existence of an "Impasse".
Initial Consultation Period: as defined in Section 7.2.
Initial Offer: as defined in Section 7.3(a).
Investor: defined in the first paragraph of this Agreement.
Investor Final Price: as defined in Section 7.3(c).
Investor Nominee: a member of the Board of Directors designated
by the Investor in the manner contemplated by clause (2) or (3) of
Section 3.1(a) or by Section 3.1(b).
Investor Shares: as of any date, the Initial Shares and
Additional Shares owned by the Investor and its Eligible Subsidiaries
as of such date, provided that any shares of Capital Stock acquired
by the Investor or its Eligible Subsidiaries in violation of Section
6.3 or held by any Eligible Subsidiary with respect to which there
has been a breach of Section 5.2(d) shall not constitute Investor
Shares.
Management Committee: as defined in Section 4.1(a).
Notice of Continuing Impasse: as defined in Section 7.2.
Offer: as defined in Section 5.3(a).
Offered Price: as defined in Section 5.3(a).
Offered Shares: as defined in Section 5.3(a).
Offered Shareholders: as defined in Section 5.3(a).
Offering Shareholder: as defined in Section 5.3(a).
Other Shares: shares of Capital Stock other than Series B
Shares.
Permanent 51/49 Structure: as defined in Section 6.2(c).
Permitted Transferee: a transferee pursuant to Section 5.2(a).
Private Shareholders: as defined in the first paragraph of this
Agreement.
Private Shareholders Final Price: as defined in Section 7.3(c).
Private Shareholder Representative: any Person appointed from
time to time by the technical committee constituted under the Control
Trust Agreement, for the purpose of representing the Control Trustee
and the other Private Shareholders in any action or proceeding under
Article VII.
Proposed Pricing Date: as defined in Section 6.2(d).
Qualified Vote: a vote by a majority of the Directors in
attendance at a duly convened meeting of the Board of Directors,
provided such vote includes the approval of at least one Investor
Nominee.
Related Business: (i) any Cable Business and (ii) any other
cable television, mass media, broadcasting, advertising, publishing,
telephony or other telecommunications business.
Respondent: as defined in Section 9.2(b).
Response: as defined in Section 7.3(b).
Restricted Shares: shares of Capital Stock that are (1) owned
by any party to this Agreement from time to time and (2) held subject
to the restrictions on transferability set forth in Article V.
Shareholder: any party to this Agreement, or Person bound by
the terms thereof.
Subscription Agreement: as defined in Recital A.
Transfer: with respect to any property, any sale, transfer,
assignment, pledge, mortgage, hypothecation or other disposition or
encumbrance of, or the granting of any option or other right to
acquire, such property or any interest therein, in each case whether
effected directly or indirectly.
ARTICLE II
CORPORATE ACTIONS
2.1. Reserved Actions. The Private Shareholders and the
Investor, in their capacity as shareholders, directors or officers of the
Company and as members of the technical committee of the Control Trust, as the
case may be, agree to take all actions necessary to ensure that, until such
date as the Investor Shares comprise less than the Required Percentage of the
outstanding Capital Stock, none of the actions listed in this Section 2.1 is
taken without the Investor's approval. Until such date as the Investor Shares
comprise less than the Required Percentage of the outstanding Capital Stock,
the Company shall not take (and shall not permit any of its Subsidiaries to
take) any such action except with the Investor's approval. The actions
requiring Investor approval are as follows:
(1) any change in Articles 18, 25, 26, 29 or 30 of the
Estatutos or any change therein adverse to the Investor (other
than changes pursuant to clause (i) or (ii)(x) of Section
6.2(c));
(2) any change in the business purpose of the Company;
(3) any liquidation, merger, dissolution, split-up or
similar transaction involving the Company;
(4) cancellation of the registration or listing of any
series of the Capital Stock, or any series of depositary
receipts or other securities Valores representing interests in
the Capital Stock, with the Seccion de Valores or Seccion
Especial of the Registro Nacional de Valores e Intermediarios
or any other international or foreign stock exchange on which
they may be registered or listed (other than registration
systems or other markets which are not organized as stock
exchanges);
(5) any change in the Company's independent auditors; or
(6) any removal or replacement of an Investor Nominee
appointed to the Management Committee pursuant to Section
4.1(b).
ARTICLE III
BOARD OF DIRECTORS
3.1. Board of Directors. (a) Pursuant to the Estatutos:
(1) The number of members of the Board of Directors shall be
fixed at fifteen (each of whom may have an alternate).
(2) Each shareholder owning, in the aggregate, a number of
Series B Shares that represent ten percent or more of the outstanding
Capital Stock will be entitled to nominate one Director for each ten
percent so owned.
(3) Each shareholder owning, in the aggregate, a number of
Other Shares that represent ten percent or more of the outstanding
Capital Stock will be entitled to nominate one Director for each ten
percent so owned.
(b) Pursuant to the terms of the Control Trust Agreement, (i)
for so long as the Private Shareholders, either directly or through the
Control Trust, are able to cause the election of at least eight Directors
(exclusive of the number of Directors nominated by the Investor and elected
pursuant to this Section 3.1(b)) and (ii) until such date as the Investor
Shares comprise less than the Required Percentage of the outstanding Capital
Stock, the Control Trust will vote the shares of Capital Stock held by it to
elect one or more Directors nominated by the Investor so that the number of
Directors so elected, together with the number of Directors that the Investor
is entitled to nominate pursuant to Section 3.1(a), is equal to six.
3.2. Decisions by the Board of Directors. (a) The Board of
Directors shall meet at least once in each fiscal quarter of the Company and
otherwise when duly convened in accordance with the Estatutos. Prior to each
meeting of the Board of Directors, the Chairman or the Secretary shall prepare
and furnish to each other Director an agenda for such meeting. The agenda for
each Board of Directors meeting shall include any item which any Investor
Nominee has delivered in writing to the Secretary of the Board of Directors at
least 5 days prior to the date scheduled for such meeting. Except as provided
in Section 3.2(b) or as required by Mexican law, all actions by the Board of
Directors shall be taken by vote of at least a majority of the Directors in
attendance at a duly convened meeting thereof. The Chairman shall have the
power to break ties in the event of a deadlock among the Directors, provided
that no action requiring a Qualified Vote under this Agreement shall be
approved without such a Qualified Vote.
(b) The Private Shareholders and the Investor, in their
capacity as shareholders, directors or officers of the Company and as members
of the technical committee of the Control Trust, as the case may be, agree to
take all actions necessary to ensure that, until such date as the Investor
Shares comprise less than the Required Percentage of the outstanding Capital
Stock, none of the actions listed in this Section 3.2(b) is taken or approved
by the Board of Directors, except pursuant to a Qualified Vote. Until such
date as the Investor Shares comprise less than the Required Percentage of the
outstanding Capital Stock, the Company shall not take (and shall not permit
any of its Subsidiaries to take) any such action except pursuant to a
Qualified Vote. The actions requiring a Qualified Vote are as follows:
(1) the introduction of any line of business that is not a
Related Business;
(2) the termination of any existing line of business which
represented more than 10% of the consolidated annual revenues of the
Company, as reported in the audited consolidated financial statements
for the Company and its Subsidiaries, prepared in accordance with
Mexican GAAP, for the most recent fiscal year of the Company for
which such audited consolidated financial statements are available;
(3) any acquisition of assets to be used in a line of business
other than a Related Business;
(4) any acquisition or disposition of assets or any series
of related acquisitions or dispositions of assets (other than assets
acquired in connection with capital expenditures within the scope of
Section 3.2(b)(8)) during any fiscal year comprising more than 15% of
the consolidated year-end assets of the Company, as reported in the
audited consolidated financial statements for the Company and its
Subsidiaries, prepared in accordance with Mexican GAAP, for the most
recent fiscal year of the Company for which such audited consolidated
financial statements are available;
(5) entering into or material modification of any supply,
purchase, service or other material contract with any Private
Shareholder or any Affiliate or relative of a Private Shareholder
(other than contracts constituting part or all of the compensation
package for the Company's executive officers);
(6) the initiation of bankruptcy, liquidation or similar
proceedings for the Company or any of its Subsidiaries;
(7) the incurrence of additional Funded Debt (other than
refinancings, extensions or rollovers of existing debt) in an
aggregate amount in excess of US$5 million during any fiscal year, if
after giving effect to the incurrence of such additional Funded Debt,
the Company's Consolidated Funded Debt (including such additional
Funded Debt) would exceed 25% of the sum of (i) such additional
Funded Debt, plus (ii) the Consolidated Funded Debt plus
shareholders' equity of the Company and its consolidated
Subsidiaries, as reported in the audited consolidated financial
statements for the Company and its Subsidiaries, prepared in
accordance with Mexican GAAP, for the most recent fiscal year of the
Company for which such audited consolidated financial statements are
available;
(8) any capital expenditure in a fiscal year if, after
giving effect to such capital expenditure, the Company's aggregate
capital expenditures during such fiscal year would exceed 120% of its
aggregate capital expenditures during the immediately preceding fiscal
year;
(9) make any loan or obligate the Company as guarantor or
surety of any indebtedness or other obligation of any third party,
except for (i) loans to and guarantees of obligations of
majority-owned Subsidiaries of the Company, and (ii) guarantees of a
portion of any indebtedness or obligation of minority- owned
Subsidiaries of the Company, provided that guarantees with respect to
minority-owned Subsidiaries are limited to the extent of the
Company's percentage ownership interest in such minority-owned
Subsidiaries;
(10) lease, mortgage, pledge, grant a security interest in or
otherwise encumber all or any material portion of the property or
assets of the Company or any Subsidiary (except in connection with
debt approved or not required to be approved pursuant to this Section
3.2(b));
(11) give notice pursuant to Section 6.1(c) that the Company
has determined not to pursue any business opportunity of which the
Company is notified by any Private Shareholder pursuant to Section
6.1.
(c) Notwithstanding anything to the contrary in this
Agreement, a Qualified Vote or Investor approval pursuant to Section 2.1 shall
not be required (i) to approve the pursuit of a business opportunity of which
the Company is notified by the Investor or any Affiliate of the Investor
pursuant to Section 6.1, (ii) to approve the pursuit of a business opportunity
of which the Company is notified by C-TEC or any of its Affiliates pursuant to
the Support Agreement, or (iii) to enter into any contract or arrangement with
or for the benefit of any Private Shareholder in connection with the financing
of any obligation of any Private Shareholder under Article VII.
(d) So long as the Control Trust shall own at least 26.01%
of the outstanding shares of Capital Stock, the Control Trust shall have the
right to designate the Chairman, and to replace such Chairman at any time by
notice to the Board of Directors and the other Shareholders.
ARTICLE IV
MANAGEMENT COMMITTEE; OFFICERS
4.1. Management Committee. (a) The Company shall have a
management committee (the "Management Committee") consisting of six voting
members selected from the Board of Directors and appointed by the general
ordinary shareholders' meeting of the Company as provided in the Estatutos.
The Chief Executive Officer of the Company shall be a non-voting member of the
Management Committee. The Management Committee shall convene not less than
once per calendar month, unless otherwise agreed by its members.
(b) The Private Shareholders and the Investor, in their
capacity as shareholders, directors or officers of the Company and as members
of the technical committee of the Control Trust, as the case may be, agree to
take all actions necessary to ensure that, for so long as the Investor Shares
comprise not less than the Required Percentage of the outstanding Capital
Stock, two Investor Nominees are appointed to the Management Committee.
4.2. Duties of the Management Committee. (a) The Management
Committee shall have the responsibility of:
(1) advising the senior management of the Company or the Board
of Directors, as the case may be, on key strategic decisions and
policies with respect to marketing, programming, technology and
finance;
(2) approving the Chief Executive Officer's selection of those
members of the Company's senior management who report directly to the
Chief Executive Officer;
(3) approving and overseeing the implementation of the annual
business plan, annual budget and significant capital expenditures;
(4) advising the Board of Directors with respect to the
business and financial prospects of the Company; and
(5) devising and implementing appropriate accounting
procedures, internal controls and procedures designed to bring to the
attention of the Management Committee material events relating to the
business of the Company and its Subsidiaries.
(b) All decisions of the Management Committee with respect
to the matters set forth in Section 4.2(a) shall be by unanimous vote of the
members in attendance among which shall be at least one Investor Nominee. Any
such matter as to which the Management Committee is unable to achieve a
unanimous vote shall be referred to the Board of Directors. The Management
Committee may take actions within its authority through written consent signed
by each member of the Management Committee.
ARTICLE V
TRANSFER RESTRICTIONS
5.1. Restrictions on Transfer. (a) No Shareholder may
Transfer any shares of Capital Stock or any interest therein to any Person
except:
(1) in the case of any Shareholder (other than a Shareholder
making a Transfer subject to Section 5.1(a)(5)), at any time
following the second anniversary of the Closing Date, upon compliance
with Section 5.3;
(2) to a Permitted Transferee of a Shareholder upon
compliance with Section 5.2;
(3) in the case of any Private Shareholder (other than the
Control Trust), in a secondary transaction as part of a bona fide
public offering, including the offering contemplated by Section 6.2;
(4) in the case of any Shareholder (other than the Control
Trust), pursuant to a bona fide open-market sale on the Bolsa
Mexicana de Valores, S.A. de C.V. or any other stock exchange or
automated quotation system on or through which the shares in question
are listed or quoted;
(5) in the case of any Control Transfer by the Control
Trust, the Investor or any Eligible Subsidiary of the Investor, upon
compliance with Sections 5.3 and 5.4, provided that the Control Trust
may not Transfer any shares of Capital Stock to any Person at any
time prior to the fifth anniversary of the execution of the Control
Trust Agreement, except (x) pursuant to Section 5.2(a)(2) and (y)
Transfers of beneficial interests in the Control Trust among its
beneficiaries in accordance with the Control Trust Agreement.
(b) Upon consummation of any Transfer pursuant to Section
5.l(a)(3) or 5.1(a)(4), the transferring Shareholder shall promptly notify the
Company as to the circumstances thereof, including the date of sale and the
number and series of shares of Capital Stock so sold.
(c) To the full extent of its powers under applicable law,
the Company will refuse to recognize any transfers of Capital Stock in
violation of the terms and conditions of this Agreement.
5.2. Permitted Transferees. (a) Subject to compliance with
the requirements of Section 5.2(c):
(1) a Private Shareholder (other than the Control Trust in the
case of clauses (i) through (iii) of this Section 5.2(a)(1)) may
Transfer any shares of Capital Stock to (i) his or her spouse,
sibling, uncle, aunt, nephew, niece, parent, adopted or natural child
or any other lineal descendant or immediate family member, (ii) a
trust the sole beneficiaries of which are one or more Private
Shareholders or any other Person referred to in the immediately
preceding clause (i), (iii) in the case of his death, by will or by
the laws of intestate succession to executors, administrators,
testamentary trustees, legatees or beneficiaries, or (iv) another
Private Shareholder;
(2) the Control Trustee may Transfer shares of Capital Stock
pursuant to a transfer of legal title to such shares resulting from
the resignation, removal or change of the Control Trustee, whether
voluntarily or involuntarily;
(3) shares of Capital Stock may be distributed from any estate
or trust (including the Control Trust, subject to the proviso in
Section 5.1(a)(5)) to the beneficiaries thereof; and
(4) any Shareholder (other than the Control Trust) may
Transfer shares of Capital Stock to any Eligible Subsidiary of such
Shareholder, provided that such Eligible Subsidiary, in the case of
shares being Transferred by a Shareholder that acquired such shares
pursuant to this Section 5.2(a)(4), is also an Eligible Subsidiary of
C-TEC International, Inc. or any Person named in Schedule I.
(b) The Investor or any Private Shareholder may pledge any or
all shares of Capital Stock now or hereafter owned by it or grant a security
interest therein to secure indebtedness of such Shareholder owing to a bank,
financial institution or institutional investor, provided that any transferee
pursuant to this Section 5.2(b) shall (except with the prior written consent
of the Company and, until such date as the Investor Shares comprise less than
the Required Percentage of the outstanding Capital Stock, the Investor)
acquire only a security interest in the shares entitling such transferee to
the proceeds from any sale of the shares pursuant to the terms of this
Agreement and not title to the shares or any other rights incident thereto.
(c) Notwithstanding the foregoing, any Transfer of shares of
Capital Stock made pursuant to Section 5.2(a) to a Permitted Transferee or to
a designated purchaser pursuant to Section 5.5 shall be permitted under the
terms of this Agreement only if (i) such Permitted Transferee or designated
purchaser shall agree in writing to be bound by the terms of this Agreement to
which the transferring Shareholder is subject, (ii) each party to this
Agreement is given reasonable notice of such Transfer and a copy of the
transferee's written agreement required by clause (i) above, and (iii) in the
case of a Transfer pursuant to Section 5.2(a)(4), each party to this Agreement
receives copies of any related instruments evidencing the transferee's status
as an Eligible Subsidiary of the transferring party. Each party hereto shall
be, and shall remain, obligated for the performance by any of such party's
transferees pursuant to this Section 5.2 of its obligations hereunder. With
respect to all shares of Capital Stock owned or held by any Eligible
Subsidiary, the Eligible Subsidiary shall be subject to the same obligations,
conditions and disabilities to which the transferor alone would have been
subject if the Transfer had not taken place, and the Eligible Subsidiary shall
vote all shares of Capital Stock owned or held by it in the same manner that
the transferor shall vote the shares of Capital Stock owned or held by it.
(d) In the event that a Shareholder shall transfer any shares
of Capital Stock to an Eligible Subsidiary pursuant to Section 5.2(a)(4), such
Shareholder will not (i) Transfer any shares of the Eligible Subsidiary's
capital stock, or (ii) permit such Eligible Subsidiary to issue to any Person
any shares of the Eligible Subsidiary's capital stock, or securities or other
instruments convertible into, or exchangeable or exercisable for, shares of
such capital stock, or rights to purchase such capital stock or any other
rights, voting or otherwise, applicable thereto, if, immediately after giving
effect to such Transfer or issuance (and assuming the immediate conversion,
exchange or exercise of any securities or instruments so issued), the Eligible
Subsidiary in question would cease to be an Eligible Subsidiary with respect
to such Shareholder.
(e) Upon execution and delivery of a writing meeting the
requirements of the first sentence of Section 5.2(c), the transferee shall be
deemed to be and shall have the rights of (i) a "Private Shareholder" if the
transferring party was a Private Shareholder, (ii) the "Control Trustee" in
the case of a Transfer pursuant to Section 5.2(a)(2) and (iii) the "Investor"
if the transferring party was the Investor.
(f) Notwithstanding anything to the contrary in this Article V
or in any other provision of this Agreement, no Shareholder may Transfer any
shares of Capital Stock to a Person if such Person or any of its Affiliates is
engaged in Mexico, directly or indirectly, in a Competing Business, other than
Transfers by Shareholders to their respective Permitted Transferees.
5.3. Right of First Offer. (a) In the event that any
Shareholder (the "Offering Shareholder") desires to Transfer any of its shares
of Capital Stock (the "Offered Shares") pursuant to clauses (1) or (5) of
Section 5.1(a), such Offering Shareholder shall first offer (the "Offer") the
Offered Shares to the other Shareholders (the "Offered Shareholders"), on a
pro rata basis in proportion to the shareholding interest of each Offered
Shareholder in the Company, at a price per share specified by such Offering
Shareholder (the "Offered Price").
(b) Each Offered Shareholder shall have 20 Business Days from
the date the Offer is given in which to notify the Offering Shareholder
whether it elects to purchase any of the Offered Shares set forth in such
Offer. In the event some but not all of the Offered Shareholders accept the
Offer, the Offering Shareholder shall retransmit the Offer with respect to
such remaining Offered Shares to those Offered Shareholders electing to accept
the Offer. Within 10 Business Days from the date such second offer is made,
each such Offered Shareholder will notify the other Offered Shareholders
whether it elects to purchase some or all of the remaining Offered Shares, it
being understood that if such Offered Shareholders together indicate an
intention to purchase such number of shares greater than the remaining Offered
Shares, such remaining Offered Shares shall be allocated pro rata among such
of the Offered Shareholders as accepted such second offer, in proportion to
their shareholding interests in the Company.
(c) After the completion of the foregoing procedures, (i) if
some or all of the Offered Shareholders agree to take up the Offer with
respect to all of the Offered Shares, such Offered Shareholders shall
consummate the purchase of such Offered Shares within 20 Business Days of such
agreement, by payment of cash in the amount of the Offered Price for such
shares against delivery by the Offering Shareholder of all documents necessary
to Transfer such Offered Shares, free and clear of all Liens, and (ii) if the
Offered Shareholders shall not have agreed to purchase all of the Offered
Shares, then the Offering Shareholder may, subject to the other provisions of
this Agreement, sell such Offered Shares to any other Person for cash at a
price equal to or greater than the Offered Price; provided that if such
Transfer (other than a Control Transfer) is not consummated within 60 days
following the completion of the procedures set forth in Section 5.3(b), then
the Offering Shareholder shall not be permitted to sell or Transfer any
Offered Shares pursuant to clause (ii) of this Section 5.3(c) without again
complying with the requirements of Section 5.3(a) and Section 5.3(b).
(d) Upon consummation of any sale by the Offering Shareholder
pursuant to Section 5.3(c), the Offering Shareholder shall promptly notify the
Offered Shareholders as to the circumstances thereof, including the date of
the sale, the price and the number of Offered Shares sold and the identity of
the purchaser.
5.4. Tag-Along Rights.
(a) In the event that the Control Trust desires to make a
Control Transfer to a third party, it shall first deliver written notice of
the proposed Control Transfer to the Investor setting forth the terms and
conditions of such Control Transfer. The Investor shall have the right to
participate on a pro rata basis (based on the number of shares of voting
Capital Stock then owned by the Investor and its Eligible Subsidiaries
compared with the number of shares of voting Capital Stock owned by the
Control Trust) in the Control Transfer to the third party at the same price
and on the same terms as those offered by the third party. The Investor may
exercise these tag-along rights by delivering written notice to the Control
Trust of its intention to do so no later than 10 Business Days after the date
of receipt of the notice from the Control Trust referred to in this Section
5.4(a).
(b) After completion of the procedures set forth in Section
5.4(a), if the Investor shall not have exercised its tag-along rights, then
the Control Trust shall be free to effect the proposed Control Transfer to the
third party specified in the notice from the Control Trust referred to in
Section 5.4(a) on terms no more favorable to the Control Trust than those
contained in such notice; provided that if such Control Transfer is not
consummated within 120 days following the completion of the procedures set
forth in Section 5.4(a), then the Control Trust shall not be permitted to
effect the proposed Control Transfer without again complying with the
requirements of Section 5.4(a).
(c) In the event that the Investor or any of its Eligible
Subsidiaries desires to make a Control Transfer to a third party, the Investor
shall first deliver written notice of the proposed Control Transfer to the
Control Trust setting forth the terms and conditions of such Control Transfer.
The Control Trust and the Private Shareholders shall have the
right to participate on a pro rata basis (based on the number of shares of
voting Capital Stock then owned by the Investor and its Eligible Subsidiaries
compared with the number of shares of voting Capital Stock owned by the
Control Trust and the Private Shareholders) in the Control Transfer to the
third party at the same price and on the same terms as those offered by the
third party. The Control Trust may exercise these tag-along rights by
delivering written notice to the Investor of its Intention to do so no later
than 10 Business Days after the date of receipt of the notice from the
Investor referred to in the immediately preceding sentence.
(d) After completion of the procedures set forth in Section
5.4(c), if the Control Trust shall not have exercised its tag-along rights,
then the Investor and its Eligible Subsidiaries shall be free to effect the
proposed Control Transfer to the third party specified in the notice from the
Control Trust referred to in Section 5.4(c) on terms no more favorable to the
Investor and its Eligible Subsidiaries than those contained in such notice;
provided that if such Control Transfer is not consummated within 120 days
following the completion of the procedures set forth in Section 5.4(a), then
the Investor and its Eligible Subsidiaries shall not be permitted to effect
the proposed Control Transfer without again complying with the requirements of
Section 5.4(c).
(e) The procedures set forth in this Section 5.4 shall cease
to have effect on such date as the Investor Shares comprise less than the
Required Percentage of the outstanding Capital Stock.
5.5. Designated Purchaser. If the Investor or any Private
Shareholder has a right to purchase any shares of Capital Stock pursuant to
the terms of this Agreement and it is not legally permitted to exercise its
right to purchase hereunder as a result of any applicable foreign investment
laws or provisions in the Estatutos, the parties shall use their best efforts
to obtain all consents required to permit such investment as quickly as
possible and in any event within 60 days. If all required consents have not
been obtained within such 60 days, the Investor or such Private Shareholder,
as the case may be, may, at its election, designate a third party purchaser
who may purchase the shares of Capital Stock in compliance with all applicable
laws and/or the Estatutos, as the case may be, without any need for
governmental consents and shall cause such third party purchaser to purchase
and pay for such Capital Stock within 30 days of the end of such 60 day
period. Notwithstanding the foregoing, the procedures set forth in this
Section 5.5 shall not be applicable to any sale of shares of Capital Stock
pursuant to Article VII.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS
6.1. Exclusivity. (a) The Investor hereby covenants and
agrees that it shall not, and shall cause its Affiliates not to, compete in
any manner with the Company or any of its Subsidiaries, by directly or
indirectly owning, managing, operating, controlling or being a consultant to,
engaging, participating or having any interest in, or being connected in any
manner with, the ownership, management, operation or control of any Cable
Business in Mexico, except directly or indirectly through the Company (i) at
any time while the Investor or any of its Affiliates owns, or has any interest
in, any Capital Stock; and (ii) for a period of two years following the date
on which the Investor and its Affiliates cease to own, or have any Interest
in, any Capital Stock.
(b) Each Private Shareholder shall not, and shall cause its
Affiliates not to, compete in any manner with the Company or any of its
Subsidiaries, by directly or indirectly owning, managing, operating,
controlling or being a consultant to, engaging, participating or having any
interest in, or being connected in any manner with, the ownership, management,
operation or control of any Cable Business in Mexico, except directly or
indirectly through the Company (i) at any time such Private Shareholder or any
of its Affiliates owns, or has any interest in, any Capital Stock; and (ii)
for a period of two years following the date on which such Private Shareholder
and any of its Affiliates ceases to own, or have any interest in, any Capital
Stock.
(c) Notwithstanding anything to the contrary in this Section
6.1, no party to this Agreement shall be prohibited from engaging,
participating or having an interest in, or being connected with, any business
opportunity if such party shall have made such business opportunity available
to the Company by written notice describing the business opportunity in
reasonable detail and either (i) in the case of a business opportunity made
available to the Company by the Investor or any of its Affiliates, the7
Company shall not have notified such party in writing within 30 days of
receipt of such notice that it wishes to pursue such business opportunity or
the Company, after providing such notice, shall fail diligently to pursue such
opportunity, or (ii) in the case of a business opportunity made available to
the Company by a Private Shareholder or any of its Affiliates, the Company
shall have notified such party in writing within 30 days of receipt of such
notice that it does not wish to pursue such business opportunity.
6.2. Initial Public Offerings. (a) Subject to the existence
of favorable market conditions, the Company shall use reasonable efforts to
cause, within 36 months of the Closing Date, all of the Series B Shares and
Other Shares authorized in the Estatutos to be listed on the Bolsa Mexicana
de Valores, S.A. de C.V., the Series B Shares and Other Shares to be eligible
for Subseccion "A" of the Seccion de Valores of the Registro Nacional de
Valores e Intermediarios, and the Series B Shares and Other Shares to be
considered as placed among the "great investing public" in accordance with
Article 77 and Article 151 of the Mexican Income Tax Law pursuant to a bona
fide public offering.
(b) In connection with the initial listing of Series B Shares
and Other Shares pursuant to Section 6.2(a), the Private Shareholders and the
Company shall sell or issue, as the case may be, a sufficient number of Series
B Shares and Other Shares to meet the requirements of the CNV for an initial
public offering by a Mexican company. Such sales or issuance shall be exempt
from the procedures specified in Article V.
(c) In effecting the public offering contemplated by this
Section 6.2, the Private Shareholders and the Investor agree that: (i) if the
CNV permits the Company to effect such public offering in such a manner that
the Series B Shares may be limited in the Estatutos to 51% of the Capital Stock
without requiring any additional measure or mechanism (such a conversion or
exchange feature) to increase the percentage of voting shares in the Company's
capital structure to a level greater than 51% of Capital Stock (a "Permanent
51/49 Structure"), then, prior to such public offering, the Private
Shareholders and the Investor shall convene a shareholders' meeting at which
they will vote their respective shares of Capital Stock to amend the Estatutos
as necessary in order to effect a reclassification of the Series D-1 Shares
and Series D-2 Shares into a single series of limited-voting or non-voting
stock representing 49% of Capital Stock and having other rights and
preferences to participate, on a per share basis, in the Company's earnings
and profits equivalent to the Series B Shares; and (ii) if the CNV does not
permit the Company to effect the public offering contemplated by this Section
6.2 with a Permanent 51/49 Structure, then, prior to such public offering, at
the option of the Control Trust, either (x) the Private Shareholders and the
Investor shall convene a shareholders' meeting at which they will vote their
respective shares of Capital Stock to amend the Estatutos as necessary in
order to effect a reclassification of the Series D-2 Shares into Series B
Shares and a reclassification of the Series D-1 Shares into a single series of
limited-voting or non-voting stock representing 25% of Capital Stock and having
other rights and preferences to participate, on a per share basis, in the
Company's earnings and profits equivalent to the Series B Shares; or (y) the
Private Shareholders and the Investor shall negotiate in good faith an
amendment to the Estatutos proposed by the Control Trust pursuant to which, if
permitted by the CNV, (1) Series B Shares may comprise at least 51% of Capital
Stock and the remaining percentage of Capital Stock will be represented by a
single series of limited-voting or non-voting stock having other rights and
preferences to participate, on a per share basis, in the Company's earnings
and profits equivalent to the Series B Shares and (2) such limited-voting or
non-voting stock will include a measure or mechanism (such a conversion or
exchange feature) pursuant to which the percentage of voting shares in the
Company's capital structure might be increased to a level greater than 51% of
Capital Stock at a future date, provided that notwithstanding such obligation
to negotiate in good faith, no Shareholder shall be required to approve any
amendment to the Estatutos that would (i) operate to deprive such Shareholder
of its contractual rights under Articles II, III or IV or this Agreement (it
being understood that the expiration or elimination of the Transitory Clauses
(Disposiciones Transitories) of the Estatutos shall be deemed not to deprive
any Shareholder of such rights) or (ii) require such Shareholder to convert or
exchange any of its then current holdings of Capital Stock for or into new
Capital Stock that ranks junior in right of liquidation or dividend preference
to such current Capital Stock (other than with respect to the dividend
preference set forth in Article Seventh of the Estatutos).
(d) The Company shall give the Investor advance written
notice of the first date on which the Company in good faith proposes to price
its initial public offering (the "Proposed Pricing Date"). Such notice shall
be delivered to the Investor at least five Business Days in advance of the
Proposed Pricing Date specified therein. Thereafter, until the 6-month
anniversary of the Proposed Pricing Date, the Company shall not effect its
initial public offering at a price per share to the public that is more than
10% below the Adjusted Subscription Price Per Share unless the Company obtains
the prior written consent of the Investor. In the event that the pricing of
the Company's initial public offering does not take place on the Proposed
Pricing Date specified in the notice delivered pursuant to the first sentence
of this Section 6.2(d), the Company shall not be required to deliver any
further such notice in connection with a subsequent pricing or proposed
pricing of its initial public offering.
(e) Notwithstanding anything to the contrary in Section
6.2(d), the Company shall not, at any time, effect its initial public offering
at a price per share to the public below the Adjusted Subscription Price Per
Share unless the Company shall have afforded the Investor an opportunity to
purchase additional shares of Capital Stock in such initial public offering to
the extent necessary so that the Investor's percentage interest in the
Company's outstanding Capital Stock is not diluted as a result of the initial
public offering. In connection with any such offering and in order to
minimize any adverse effect on the planning, timing, management or execution
of the offering, the Company may establish a reasonable deadline prior to the
closing of the offering on or before which the Investor must elect in writing
whether and to what extent it will exercise its rights under this Section
6.2(e).
(f) For purposes of this Section 6.2, the "Adjusted
Subscription Price Per Share" shall mean, as of any date of determination, an
amount equal to the sum of (1) the Final Subscription Price, plus (2) the
amount (if any) previously paid by the Investor to the Company pursuant to
Section 2.6(b) of the Subscription Agreement, such sum to be adjusted (in
accordance with accepted financial practice) to the extent appropriate in
order to compensate for the dilutive effects of any stock splits, stock
dividends or other transactions in respect of which anti-dilution adjustments
are customarily made in publicly issued warrants, but only to the extent such
transactions are effected by the Company after the Closing and prior to the
pricing of the Company's initial public offering.
6.3. Restriction on Acquiring Shares. (a) The Investor
agrees that it will not, directly or indirectly through Affiliates, nominees
or otherwise, acquire record or beneficial ownership of any Series B Shares or
Other Shares pursuant to open-market purchases, except as provided in this
Section 6.3, it being understood that for purposes of this Section 6.3 C-TEC
and its Affiliates shall be deemed Affiliates of the Investor.
(b) Not less than ten Business Days before the Investor or
any of its Affiliates proposes to acquire record or beneficial ownership of
any Series B Shares or Other Snares pursuant to this Section 6.3, the Investor
shall give written notice to the Company stating the number and series of
shares proposed to be so purchased and the date on which such purchase is to
take place. Within five Business Days of receipt of any such notice, the
Company shall calculate and notify the Investor of the Excess Series B Float
and Excess Other Float as of the date of the Investor's notice. Thereafter,
within 20 Business Days of the Investor's notice, the Investor (or its
Affiliates) may purchase on the open-market Series B Shares and Other Shares
in an amount not to exceed such Excess Series B Float or Excess Other Float, as
the case may be. Upon consummation of any such purchase, the Investor shall
promptly notify the Company as to the circumstances thereof, including the
date of purchase and the number and series of shares of Capital Stock so
purchased.
(c) The Company shall keep a register in which it shall
record the Excess Series B Float and Excess Other Float from time to time.
Upon receipt of any notice of Transfer pursuant to Section 5.1(b) or any
notice of purchase pursuant to Section 6.3(b), the Company shall recalculate
the Excess Series B Float and Excess Other Float as of the date of such
notice. The Company shall inform any Shareholder, upon request, of the
current Excess Series B Float and Excess Other Float.
6.4. Conflicting Agreements. (a) Neither the Investor
nor any of its Affiliates shall enter into a Conflicting Agreement unless the
Company and C-TEC shall have been given at least 20 Business Days' advance
written notice of the proposed Conflicting Agreement. Such notice shall
include a draft of the proposed Conflicting Agreement or, if no such draft is
then available, a summary of proposed terms.
(b) Within five Business Days of receipt of a notice
pursuant to Section 6.4(a), the Investor and the Company shall meet to discuss
the proposed Connecting Agreement. At such meeting, the party proposing to
enter into the Conflicting Agreement shall deliver an explanation, complete in
all material respects, of the manner in which the proposed Conflicting
Agreement could, following its execution, affect the ability of such party,
directly or through its Affiliates, to (i) give, or consent to the giving of,
consent to any matter requiring the Investor's approval under Section 2.1, or
(ii) approve, or consent to the giving of approval of, any matter requiring a
Qualified Vote under Section 3.2.
(c) If following such discussion, the Company shall object
to the proposed Conflicting Agreement, the Investor shall seek, or cause the
party proposing to enter into such Conflicting Agreement to seek, to negotiate
appropriate modifications thereto in good faith, with a view to curing the
objections raised by the Company. Such party shall keep the Company and the
Investor reasonably informed of the progress of such negotiations and, not
less than five Business Days prior to the date on which the proposed
Conflicting Agreement is to be entered into, shall meet with the Investor and
the Company to review the results of such negotiations. After the fifth
Business Day after such meeting, the party in question shall be free to enter
into the proposed Conflicting Agreement, substantially in the form presented
to the Company pursuant to this Section 6.4, irrespective of the outcome of
the discussions and negotiations contemplated by this Section 6.4.
6.5. Independent Auditors. The Private Shareholders agree
that they will take necessary action to replace Lebrija Alvarez y Cia., S.C.
as the Company's independent auditors if the Company receives a written request
for such replacement from the Investor prior to June 1, 1995.
ARTICLE VII
IRRECONCILABLE DIFFERENCES
7.1. General. The provisions of this Article VII shall
govern the manner in which the parties hereto seek to resolve any Impasse
occurring after the 18-month anniversary of the Closing, provided that this
Article VII shall cease to have effect, and no party shall have any further
rights hereunder, as of the earlier of (1) the date on which the Company shall
close the initial public offering contemplated by Section 6.2 and (2) the date
on which the Investor Shares shall cease to comprise at least the Required
Percentage of the outstanding shares of Capital Stock.
7.2. Impasse. In the event that an Impasse shall occur after
the 18-month anniversary of the Closing, the Private Shareholder
Representative and the Investor shall consult with each other in good faith on
a regular basis during the 60-day period following the occurrence of such
Impasse, subject to extension by mutual agreement of the Private Shareholder
Representative and the Investor (the "Initial Consultation Period"), in an
effort to resolve such Impasse. In the event such Persons are unable to
resolve the Impasse, (i) prior to the end of the Initial Consultation Period,
the Private Shareholder Representative and the Investor may mutually agree to
submit such matter to such non-binding mediation on such terms as they may
agree, or the Private Shareholder Representative or the Investor may give
written notice to the Investor or the Private Shareholder Representative,
respectively, of the continuance of such Impasse (a "Notice of Continuing
Impasse"), or (ii) if no such action is taken prior to the end of the Initial
Consultation Period, such Impasse shall be deemed immediately to terminate.
7.3. Resolution of Differences. (a) Within 15 days
following the delivery of a Notice of Continuing Impasse by any party, either
the Private Shareholder Representative or the Investor may deliver to the
other party an initial offer (the "Initial Offer"), setting forth in writing:
(i) in the case of an Initial Offer delivered by the Private Shareholder
Representative, (x) the price at which the Control Trust is willing to buy all
of the Restricted Shares held by the Investor, or (y) the price at which the
Private Shareholders are willing to sell all of the Restricted Shares held by
the Private Shareholders; or (ii) in the case of an Initial Offer delivered by
the Investor, (x) the price at which the Investor is willing to buy all of the
Restricted Shares held by the Private Shareholders, or (y) the price at which
the Investor is willing to sell all of its Restricted Shares to the Control
Trust.
(b) Upon receipt of an Initial Offer, the recipient thereof
must respond in writing within 30 days indicating its acceptance of the
Initial Offer or making a counteroffer (a "Response") setting forth in
writing: (i) in the case of a Response delivered by the Private Shareholder
Representative, (x) the price at which the Control Trust is willing to buy all
of the Restricted Shares held by the Investor, or (y) the price at which the
Private Shareholders are willing to sell all of the Restricted Shares held by
the Private Shareholders; or (ii) in the case of a Response delivered by the
Investor, (x) the price at which the Investor is willing to buy all of the
Restricted Shares held by the Private Shareholders, or (y) the price at which
the Investor is willing to sell all of its Restricted Shares to the Control
Trust. If no Response is given before the end of such 30-day period, the
Initial Offer shall be deemed to have been accepted.
(c) If the Initial Offer and the Response indicate that
(i)(A) the Control Trust wishes to buy and the Investor wishes to sell, or (B)
the Investor wishes to buy and the Private Shareholders wish to sell, then the
Private Shareholder Representative and the Investor shall continue
negotiations in good faith to reach a final agreement on price, or (ii) both
the Private Shareholders and the Investor wish to sell their Restricted
Shares, then the Private Shareholder Representative and the Investor shall
promptly meet to determine how to realize the maximum value for the Restricted
Shares owned by the Private Shareholders and the Investor in a mutually agreed
plan of disposition. If, in the case of clause (i) of the preceding sentence,
the parties have not reached final agreement on price or, in the case of clause
(ii) of the preceding sentence, they have not reached final agreement on a
plan of disposition, in either case within 30 days after delivery of the
Response, then either the Private Shareholder Representative or the Investor
may deliver to the other a final offer (the "Final Offer") setting forth in
writing: (i) in the case of a Final Offer by the Private Shareholder
Representative, the price per share at which, at the election of the Investor,
either (x) the Private Shareholders are willing to sell all of their Restricted
Shares to the Investor or (y) the Control Trust is willing to buy all of the
Restricted Shares held by the Investor (the "Private Shareholders Final
Price"); and (ii) in the case of a Final Offer by the Investor, the price per
share at which, at the election of the Private Shareholders, either (x) the
Investor is willing to buy all of the Restricted Shares held by the Private
Shareholders or (y) the Investor is willing to sell to the Control Trust all
of the Restricted Shares held by the Investor (the "Investor Final Price").
The Final Offer shall be irrevocable for a period of 30 days following
delivery by the Investor or the Private Shareholder Representative and shall
preempt the right of the other party to make a Final Offer.
(d) In the case of a Final Offer by the Investor, the
Private Shareholder Representative shall, within 30 days following receipt of
the Final Offer, notify the Investor In writing that either (i) the Control
Trust will purchase (or cause a nominee or nominees to be designated by the
Control Trust to purchase) all of the Investor's Restricted Shares at a price
per share equal to the Investor Final Price, or (ii) the Private Shareholders
will sell to the Investor (or a nominee or nominees to be designated by the
Investor) all of the Restricted Shares held by the Private Shareholders at a
price per share equal to the Investor Final Price. In the case of a Final
Offer delivered by the Private Shareholder Representative, the Investor shall,
within 30 days following receipt of the Offer, notify the Private Shareholder
Representative in writing that either (x) the Investor will sell to the
Control Trust (or a nominee or nominees to be designated by the Control Trust)
all of the Restricted Shares held by the Investor at a price per share equal
to the Private Shareholders Final Price, or (y) the Investor will purchase (or
cause a nominee or nominees to be designated by the Investor to purchase) all
of the Restricted Shares held by the Private Shareholders at a price per share
equal to the Private Shareholders Final Price. In the event that the
recipient of the Final Offer fails to make the election contemplated by this
Section 7.3(d) within such 30-day period, the party making the Final Offer
shall be entitled to make such election on behalf of the recipient through
written notice given to the recipient within 15 days after the end of such
30-day period.
(e) If the Initial Offer and the Response indicate that both
the Investor and the Control Trust wish to buy all of the others' Restricted
Shares, the Control Trust and the Investor shall begin a bidding process as
follows. The higher of the prices per share offered in the Initial Offer and
the Response shall be deemed to be the initial bid. Such initial bid and each
subsequent bid must be met in turn, within 30 days following delivery thereof,
by either acceptance or delivery of a counteroffer. In the case of any
counteroffer by the Investor, the price per share specified in the
counteroffer must be at least 5% higher than the most recent price per share
bid (or deemed to be bid) by the Private Shareholder Representative under this
Section 7.3(e). In the case of any counteroffer by the Private Shareholder
Representative, the price per share specified in such counteroffer must be at
least 5% higher than the most recent price per share bid (or deemed to be bid)
by the Investor under this Section 7.3(e). This bidding process shall
continue until acceptance, or failure to respond, within 30 days following
receipt of any bid. Any such failure to respond shall be deemed to constitute
acceptance.
7.4. Certain Related Matters. (a) For purposes of this
Article VII, all offers, bids, acceptances and counteroffers must be in
writing, in a form which is firm and binding and payable in United States
dollars in cash in immediately available funds.
(b) The closing of all sales and transfers made pursuant to
this Article VII shall be consummated within 120 days following the acceptance
or deemed acceptance of an offer or bid, and each Shareholder agrees to take
all actions necessary to conclude such sales and transfers as contemplated
hereunder. Shares of Capital Stock sold at any such closing shall be
delivered to the purchaser thereof free and clear of any Liens.
(c) In the event that the Investor either elects or is
required to purchase any Restricted Shares pursuant to this Article VII at a
time when it would not be permitted by applicable law to hold such additional
Restricted Shares, the Investor shall (i) be required to purchase all such
Restricted Shares that it may legally purchase, and (ii) within 120 days after
the acceptance or deemed acceptance of the related offer or bid and to the
extent permitted by applicable law, either cause a third party to acquire all
such remaining Restricted Shares or establish a satisfactory trust arrangement
that would permit the Investor to hold a beneficial interest in all such
remaining Restricted Shares.
(d) During the pendency of any Impasse or the procedures set
forth in this Article VII, the Parties shall cooperate to continue the
operations of the Company and its Subsidiaries in the ordinary course of
business and each party hereto shall cooperate in good faith with the other
parties in order to facilitate the arranging of financing (and causing the
Company to enter into any necessary agreements incidental thereto) for any
purchase of Restricted Shares hereunder (including any financing to be secured
by Capital Stock or by the Company's assets) and a due diligence investigation
by a prospective third party purchaser (upon receipt of a reasonably
satisfactory confidentiality agreement signed by such prospective third party
purchaser).
(e) Any Impasse may be terminated at any time by written
agreement of the Private Shareholder Representative and the Investor.
(f) The obligations of the Private Shareholders hereunder
shall be several in proportion to their ownership interests in the outstanding
Restricted Stock of the Company.
(g) In the event that the Investor or C-TEC shall breach any
of its material obligations under any Transaction Document, the Investor shall
thereafter no longer be entitled to deliver a Notice of Continuing Impasse
pursuant to Section 7.2, an Initial Offer pursuant to Section 7.3(a) or an
Initial Offer pursuant to Section 7.3(c). In the event that any Private
Shareholder shall breach any of its material obligations hereunder, the
Private Shareholder Representative shall thereafter no longer be entitled to
deliver a Notice of Continuing Impasse pursuant to Section 7.2, an Initial
Offer pursuant to Section 7.3(a) or a Final Offer pursuant to Section 7.3(c).
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1. Representations and Warranties of the Investor. The
Investor hereby represents and warrants to the Private Shareholders as follows:
(1) The Investor is a corporation duly organized, validly
existing and in good standing under the laws of Delaware.
(2) The Investor has full power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
requisite action of the Investor. This Agreement constitutes the
legal, valid and binding obligation of the Investor, enforceable
against the Investor in accordance with its terms.
(3) No consent or authorization of, or filing with, any Person
is required on the part of the Investor in connection with the
Investor's execution, delivery or performance of this Agreement or
the consummation of the transactions contemplated on the part of the
Investor in this Agreement.
(4) The execution, delivery and performance of this Agreement
by the Investor will not (i) violate, conflict with or result in the
breach of, or constitute a default under, (A) any provision of the
certificate of incorporation or by-laws of the Investor, (B) any
provision of any law or regulation applicable to the Investor, or to
which any of its assets is subject, (C) any material order, judgment
or award of any court, tribunal or regulatory authority applicable to
the Investor, or to which any of its assets is subject or (D) any
material agreement or instrument to which the Investor is a party or
by which any of its assets is bound, or (ii) result in the creation
of any material Lien upon any of the assets of the Investor.
(5) There is no action, proceeding or investigation pending or,
to the knowledge of the Investor, threatened against the Investor
before any court or governmental authority (A) which questions the
validity of, or the obligations of the Investor under, this
Agreement, or (B) which seeks to impede, enjoin or invalidate any of
the transactions contemplated by this Agreement.
8.2. Representations and Warranties of Private Shareholders.
Each Private Shareholder (other than the Control Trust) represents and
warrants to the Investor as follows:
(1) This Agreement has been duly executed and delivered by such
Private Shareholder and no further action is required for the valid
execution, delivery and performance of this Agreement by such Private
Shareholder. This Agreement constitutes the legal, valid and binding
obligations of such Private Shareholder, enforceable against such
person in accordance with its terms.
(2) No consent or authorization of, or filing with, any
Person on the part of such Private Shareholder is required in
connection with such Private Shareholder's execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated on the part of such Private Shareholder in this
Agreement.
(3) The execution, delivery and performance of this
Agreement by such Private Shareholder will not (i) violate, conflict
with or result in the breach of, or constitute a default under, (A)
any provision of any law or regulation applicable to such Private
Shareholder, or to which any of the assets of such Private
Shareholder is subject, (B) any material order, judgment or award of
any court, tribunal or regulatory authority applicable to such
Private Shareholder, or to which any of the assets of such Private
Shareholder is subject or (C) any material agreement or instrument to
which such Private Shareholder is a party or by which any of the
assets of such Private Shareholder is bound, or (ii) result in the
creation of any material Lien upon any of the assets of such Private
Shareholder.
(4) There is no action, proceeding or investigation pending
or, to the knowledge of such Private Shareholder, threatened against
such Private Shareholder before any court or governmental authority
(A) which questions the validity of, or the obligations of such
Private Shareholder under, this Agreement, or (B) which seeks to
impede, enjoin or invalidate any of the transactions contemplated by
this Agreement.
(5) Such Private Shareholder owns, beneficially and of
record, the number of shares of Capital Stock set forth opposite the
name of such person on Schedule 1, free and clear of any Lien (other
than any Lien created under the Transaction Documents), and such
shares of Capital Stock represents in each case the entire ownership
interest of such Private Shareholder in the Company. Except as set
forth on Schedule 1, there are no options, warrants, conversion,
preference, preemptive or other rights, agreements, or understandings
of any kind, contingent or otherwise, obligating such Private
Shareholder to sell, or cause to be sold, any shares of Capital
Stock, or any securities convertible or exchangeable for any such
shares, and no authorization therefor has been given, other than as
contemplated by this Agreement. Except as set
forth on Schedule 1, there are no outstanding contractual obligations
of such Private Shareholder to purchase or otherwise acquire any
shares of Capital Stock or other equity interests in the Company,
other than as contemplated by this Agreement.
8.3. Representations and Warranties of the Control Trustee.
The Control Trustee represents and warrants as follows:
(1) The Control Trustee is a bank duly organized and validly
existing under the laws of Mexico.
(2) In its capacity as Control Trustee, the Control Trustee
has full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action of the Control Trustee. This Agreement constitutes
the legal, valid and binding obligation of the Control Trust,
enforceable against the Control Trust in accordance with its terms.
(3) The Control Trust has been duly constituted under the laws
of Mexico and the Control Trust Agreement has been duly executed by
the Control Trustee and, to the Control Trustee's knowledge, the
other parties thereto.
(4) No consent or authorization of, or filing with, any Person
is required on the part of the Control Trustee in connection with the
Control Trustee's execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated on the
part of the Control Trustee in this Agreement, except for such
consents, authorizations and filings which have been obtained or made.
(5) The execution, delivery and performance of this Agreement
by the Control Trustee will not (i) violate, conflict with or result
in the breach of, or constitute a default under, (A) any provision of
the estatutos sociales of the Control Trustee or of the Control Trust
Agreement, (B) any provision of any law or regulation applicable to
the Control Trustee or the Control Trust, or to which any of the
assets of the Control Trustee or the Control Trust is subject, (C)
any material order, judgment or award of any court, tribunal or
regulatory authority applicable to the Control Trustee or the Control
Trust, or to which any of the assets of the Control Trustee or the
Control Trust is subject or (D) any material agreement or instrument
to which the Control Trustee or the Control Trust is a party or by
which any of the assets of the Control Trustee or the Control Trust
is bound, or (ii) result in the creation of any material Lien upon
any of the assets of the Control Trustee or the Control Trust.
8.4. Representation and Warranties of the Company. The
Company represents and warrants as follows:
(1) The Company is a corporation duly organized and validly
existing under the laws of Mexico.
(2) The Company has full corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action of the Company. This
Agreement constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
(3) No consent or authorization of, or filing with, any Person
is required on the part of the Company in connection with the
Company's execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated on the part of the
Company in this Agreement, except for such consents, authorizations
and filings which have been obtained or made.
(4) The execution, delivery and performance of this Agreement
by the Company will not (i) violate, conflict with or result in the
breach of, or constitute a default under, (A) any provision of the
Estatutos, (B) any provision of any law or regulation applicable to
the Company, or to which any of its assets is subject, (C) any
material order, judgment or award of any court, tribunal or
regulatory authority applicable to the Company, or to which any of
its assets is subject or (D) any material agreement or instrument to
which the Company is a party or by which any of its assets is bound,
or (ii) result in the creation of any material Lien upon any of the
assets of the Company.
ARTICLE IX
MISCELLANEOUS
9.1. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE UNITED MEXICAN STATES, WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW RULES THEREOF.
9.2. Arbitration. (a) Any dispute, controversy or claim
arising out of or relating to this Agreement or the breach, validity or
termination thereof shall be finally settled by arbitration under the Rules of
Arbitration of the International Chamber of Commerce in effect on the date
hereof, except as modified herein or by mutual agreement of the parties. The
arbitration shall be held in Mexico City; provided that the arbitrators may
hold hearings in such other locations as the arbitrators determine to be most
convenient and efficient for all the parties under the circumstances. All
arbitrators shall be Persons who speak and read both Spanish and English. All
arbitration proceedings shall be conducted in English but evidence may be
presented in either Spanish or English.
(b) The arbitration shall be conducted by three arbitrators.
The party initiating arbitration (the "Claimant") shall appoint its arbitrator
In its demand (the "Demand"). The other party (the "Respondent") shall appoint
its arbitrator within 20 Business Days of receipt of the Demand and shall
notify the Claimant of such appointment in writing. If the Respondent fails
to appoint an arbitrator within such period of 20 Business Days, the
arbitrator named in the Demand shall decide the controversy as a sole
arbitrator. Otherwise, the two arbitrators appointed by the parties shall
appoint a third arbitrator within 20 Business Days after the Respondent has
notified the Claimant of the appointment of the Respondent's arbitrator. When
the arbitrators appointed by the Claimant and the Respondent have appointed a
third arbitrator and the third arbitrator has accepted the appointment, the
two arbitrators shall promptly notify the parties of the appointment of the
third arbitrator.
(c) In addition to the authority conferred on the
arbitration panel by the rules specified above, the arbitration panel shall
have the authority to order such discovery and production of documents,
including the deposition of party witnesses, and to make such orders for
interim relief, including injunctive relief, as it may deem just and
equitable. A request for interim measures by a party to a court shall not be
deemed incompatible with, or a waiver of, this agreement to arbitrate.
(d) The foregoing agreement to arbitrate shall be
specifically enforceable. Any award rendered by the arbitrators shall be
in writing and shall be final and binding upon the parties, and may include
an award of costs, including reasonable attorneys' fees and disbursements.
Judgment upon the arbitration award rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of the award and an order of enforcement. The costs of the
arbitration and the enforcement of the award shall be an issue determined
by the arbitration panel.
(e) In order to facilitate the comprehensive resolution of
related disputes, and upon request of any party to the arbitration proceeding,
the arbitration tribunal may, within 90 days of its appointment, consolidate
the arbitration proceeding with any other arbitration proceeding involving any
of the parties hereto relating to this Agreement and to any other Transaction
Document. The arbitrators shall not consolidate such
arbitrations unless they determine that (i) there are issues of fact or law
common to the two proceedings so that a consolidated proceeding would be more
efficient than separate proceedings, and (ii) no party hereto or to such other
Transaction Document would be prejudiced as a result of such consolidation
through undue delay, conflict of interest or otherwise. In the event of
different rulings on this question by the arbitration tribunal constituted
hereunder and the tribunal constituted under any other Transaction Document,
the ruling of the panel under this Agreement shall control. In the case of a
consolidated proceeding, the arbitrators in that proceeding shall be named in
the manner set forth in Section 8.3(b) of the Subscription Agreement, except
that in any such consolidated proceeding the Private Shareholders shall be
deemed to constitute one party and shall jointly appoint a single arbitrator
so long as neither the Company nor the Private Shareholders will be prejudiced
as a result thereof and there is no conflict of interest between the Company
and the Private Shareholders.
9.3. Injunctive Relief. The parties acknowledge that money
damages may not be sufficient to compensate for the harm that would be
suffered if any of the obligations herein are breached and that in the event
of any such breach, the injured party shall be entitled, without limiting any
other remedy available under applicable law, to injunctive relief, including
specific performance, to enforce such obligations, without the posting of any
bond.
9.4. Survival. The representations and warranties of the
parties hereto contained in this Agreement or otherwise made in writing in
connection with the transactions contemplated hereby shall survive the
execution and delivery of this Agreement.
9.5. Amendment, Assignment, etc. Neither this Agreement nor
any term hereof may be amended, changed, waived, discharged or terminated
other than by an instrument in writing, signed by the party or parties against
which enforcement of such amendment, change, waiver, discharge or termination
is sought. This Agreement shall be binding upon the respective successors and
permitted assigns of the parties hereto; provided that neither this Agreement
nor any of the rights, obligations or interests hereunder may be assigned by
any party without the prior written consent of the other parties hereto; and
provided further that no assignment of this Agreement or any of the rights,
obligations or interests hereunder shall relieve the assignor of its
obligations under this Agreement.
9.6. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be in writing and
shall be deemed validly given upon personal delivery or one day after being
sent by telecopy or overnight courier service:
(a) If to the Investor, at:
C-TEC International, Inc.
105 Carnegie Center
Princeton, New Jersey 08540
Telephone: (609) 734-3700
Facsimile: (609) 951-8632
Attn: Mr. Mark Haverkate
with a copy to:
C-TEC International, Inc.
105 Carnegie Center
Princeton, New Jersey 08540
Telephone: (609) 734-3700
Facsimile: (609) 734-3830
Attn: Raymond B. Ostroski, General Counsel
(b) if to the Company, at:
Megacable, S.A. de C.V.
Blvd. Rosales y Anatolio Ortega, Local #7
Colonia Scalley
Los Mochis, Sinaloa 81240 MEXICO
Telephone: 011-52-681-89262
Facsimile: 011-52-681-23290
Attn: Mr. Enrique Yamuni Robles
(c) if to any Private Shareholder (other than the Control
Trust), at:
c/o Megacable, S.A. de C.V.
Blvd. Resales y Anatolto Ortega, Local #7
Colonia Scalley
Los Mochis, Sinaloa 81240 MEXICO
Telephone: 011-52-681-89262
Facsimile: 011-52-681-23290
Attn: Mr. Enrique Yamuni Robles
(d) if to the Control Trust, at:
Banco Nacional de Mexico, S.A.
Division Fiduciaria
Grupo Financiero Banamex Accival
Paseo de la Reforma 404, 14 piso
Col. Juarez
06600 Mexico, D.F.
Tel: 011-52-5-225-9275
Fax: 011-52-5-225-9745
Attn: Lic. Fernando Montes de Oca Peregrina
Lic. Ana Margarita Lopez Rosenzweig
or at such other address or telecopy number as any party hereto may designate
by written notice to the other parties hereto.
9.7. Expense. Except as otherwise specifically provided in
this Agreement, each party hereto shall pay all its own costs and expenses
incident to this Agreement and the transactions contemplated hereby, including
legal and accounting fees and disbursements.
9.8. Severability. If any provision of this Agreement is
held to be unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties to this
Agreement to the extent possible. In any event, the invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of this Agreement,
including that provision, in any Jurisdiction. The parties hereto shall take
such actions as are necessary under Mexican law or otherwise to give practical
effect to the rights of the parties set forth herein consistent with the
intent of the parties hereto, including, without limitation, using best
efforts to implement any modifications of the Estatutos of the Company that
may be necessary or desirable in connection with the foregoing.
9.9. No Third Party Beneficiaries. Nothing in this Agreement
will be construed as giving any Person, other than the parties hereto and
their successors and permitted assigns, any right, remedy or claim under or in
respect of this Agreement or any provision hereof.
9.10. Translation. Should this Agreement be translated
into any language other than English, the English version shall control and
prevail on any question of interpretation or otherwise. The unofficial English
translation of the Estatutos set forth as Exhibit A-2 is attached for
informational purposes only and in the event of any conflict between such
Exhibit and the Estatutos, the Estatutos shall prevail.
9.11. Integration; Section Headings; Counterparts; etc.
This Agreement (including the Schedules and Exhibits hereto, other than
Exhibit A-2) and the other documents delivered pursuant hereto constitute the
full and entire understanding and agreement of the parties and supersede any
and all prior agreements, arrangements and understandings relating to the
subject matters hereof and thereof. The section headings of this Agreement
are for convenience of reference only and are not to be considered in
construing this Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
C-TEC INTERNATIONAL, INC.
By: ______________________
Name:
Title:
MEGACABLE, S.A. DE C.V.
By: ______________________
Name:
Title:
By: ______________________
Name:
Title:
BANCO NACIONAL DE MEXICO, S.A.,
as Control Trustee
By: ______________________
Name:
Title:
PRIVATE SHAREHOLDERS
(other than the Control Trust)
_________________________
Jose Gerardo R. Bours Castelo,
individually and as attorney-in-fact
acting on behalf of:
Angel Robinson Bours Urrea
Martha Guadalupe Bours de Larraguibel
Marina Guadalupe Bours de Alvarado
Lucia Margarita Bours de Valenzuela
Antonio Robinson Bours Urrea
Roberto Robinson Bours Urrea
Alfonso Robinson Bours Almada
Javier Robinson Bours Almada
Juan Robinson Bours Almada
Idelfonso Fernandez Salido
Julian Aguilera Campoy
Julian Aguilera Urrea
Jesus Enrique R. Bours Munoz
Beatriz Marina R. Bours Munoz
Anabella R. Bours Munoz
Rossana R. Bours Munoz
Jesus Rodolfo R. Bours Munoz
Monica R. Bours Munoz
_________________________
Trigio Canedo Urias,
individually and as attorney-in-fact
acting on behalf of:
Daniel Fernando Ramos Cabello
Ernesto Echavarria Salazar
_________________________
Enrique Ruben Mazon Rubio,
individually and as attorney-in-fact
acting on behalf of:
Gustavo Alberto Mazon L.
Ricardo Mazon L.
Hector Ruben Mazon L.
Jose Oscar Mazon Rubio
Jorge Horacio Mazon Rubio
Luis Roberto Mazon Rubio
_________________________
Jose Gabriel Urquijo Beltran,
individually and as attorney-in-fact
acting on behalf of:
Manuel Urquijo Beltran
Manuela Beltran Gonzalez
_________________________
Sergio Mazon Rubio
_________________________
Enrique Yamuni Robles
Exhibit 99
"C-TEC Letterhead"
For Additional Information Contact:
National and International Press:
Gene Donati (Clark & Weinstock): (212) 953-2250
Trade Press:
Carrie Thorpe (C-TEC): (609) 734-3700
C-TEC PURCHASES 40% OF MEXICO'S MEGACABLE
U.S. Firm's Investment Signals a New Direction for Mexico's Telecommunication
Future
C-TEC Purchase is First Investment Since Peso Devaluation
---------------------------------------------------------
Princeton, New Jersey, January 25, 1995 -- C-TEC Corporation (NASDAQ:CTEX)
announced today that it has purchased a 40 percent equity position in
Megacable, Mexico's second largest cable television operator, for
approximately $84 million in cash, subject to adjustment. Under the agreement
signed and completed today, C-TEC's investment in Megacable is in exchange for
newly-issued capital stock. The funds will be used by Megacable to pay off
existing debt, for capital expenditures, and to create a substantial cash
reserve for further Megacable acquisitions and telecommunications ventures in
Mexico. In addition, C-TEC representatives will hold six new seats on
Megacable's Board of Directors and will have an active role in setting the
strategic direction of the company.
David McCourt, C-TEC's chairman and chief executive officer, said, "This
strategic partnership signals C-TEC's commitment to bring our unique expertise
into new markets, and our strong confidence in the future of
telecommunications in Mexico. I am very impressed by Megacable's owners and
management, and have high confidence that we will be excellent partners. I
think Megacable is now positioned for explosive growth and profitability."
Enrique Yamuni Robles, Megacable's chief executive officer added, "Megacable
is Mexico's fastest growing cable television company. With C-TEC as our
partner, we expect to accelerate our construction, improve our technology, and
expand into new markets. We believe we will be the market leader in both
cable television and in competitive local telephone. With changes in
regulation and the currency situation, one of our requirements for a partner
was a good phone company. C-TEC's performance with Commonwealth Telephone has
been impressive. They have consistently operated at a lower-cost basis than
perhaps any other major phone company in the world."
Javier Bours, chairman of Megacable, added, "Our association with C-TEC
positions Megacable to meet the future needs of our customers. Megacable's
objective has always been to provide first quality service; this venture will
allow us to improve our customer service levels even more. C-TEC shares with
Megacable a common vision for the future of telecommunications and cable in
Mexico and also brings new technologies an operational capability for us to
meet that future. I think C-TEC and Megacable will have a great partnership."
J.P. Morgan Securities, Inc. acted as C-TEC's advisor on the transaction.
According to Willard S. Boothby, Managing Director, "The Mexican
telecommunication market offers many attractive investment opportunities, and
in spite of the recent volatility in the country's currency market, the
sector's short and long term growth prospects remain quite positive. C-TEC
and Megacable's strategic partnership will deliver immediate benefits to both
companies, and also provides the basis for strong future growth."
The Chase Manhattan Bank, N.A., advised Megacable on the transaction.
"Attractive, high-growth segments of the Mexican market continue to offer
outstanding opportunities to strategic investors, despite the recent
volatility in the country's markets," said Brian O'Neill, Chase senior vice
president. "The strategic alliance with C-TEC demonstrates Megacable's
commitment to providing its subscribers with the highest quality service and
programming while positioning the company to continue its rapid expansion and
deployment of new technologies."
The investment amount in today's transaction has taken into account the impact
of the peso devaluation over the past 30 days and its expected impact on the
telecommunications business in Mexico. Megacable and C-TEC have had
discussions on and off again since last summer.
Megacable, with headquarters in Los Mochis, currently serves over 174,000
subscribers in twelve cities including Hermosillo, Navajoa, Ciudad Obregon,
Culiacan, Mazatlan, and Guadalajara. Megacable currently owns every cable
franchise for 800 miles along Mexico's Pacific coast. In addition, Megacable
owns the Guadalajara franchise, Mexico's second largest city, which is only
about half cabled so far. Megacable's customer base will hopefully double
over the next few years, McCourt and Yamuni said. Additionally, Megacable was
recently awarded a new franchise in Tepic and several smaller towns, adding
60,000 more potential customers to its overall base of over 900,000 franchise
homes.
All existing Megacable systems have at least 35 channel capacity, with new
construction being built to 60 channels. Megacable is also incorporating
fiber optic technology into current new service areas. Megacable has about
2,000 miles of distribution lines and 300 miles of trunk lines, all with
addressable technology. Megacable is privately owned.
C-TEC Corporation of Princeton, NJ is a diversified telecommunications and
high technology company which traces its origins to a telephone company
beginning operations in 1897. C-TEC through its subsidiary Commonwealth
Telephone Company, currently provides telephone service to about 220,000
access lines in Pennsylvania, making it the 20th largest telephone company in
the U.S. C-TEC is also the country's 30th largest cable television operator,
providing service to over 265,000 customers in New York, New Jersey, and
Michigan, as C-TEC Cable Systems. C-TEC Cable also recently announced the
pending acquisition of the largest competitive cable system in the U.S., Twin
County Cable in Allentown/Bethlehem/Easton, PA, and was also provided full
regulatory authority by the state of New York to offer telephone services over
the long distance telephone service provider, Commonwealth Communications,
Inc., an international engineering and technical services business, and C-TEC
International, Inc., the entity making the investment in Megacable.
